FINM7409 Tutorial 3
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FINM7409
Tutorial 3
AE3.3
Provide answers in the shaded cells.
a)
|
Jan |
Feb |
Mar |
Apr |
Rent expense |
$100 |
|
$100 |
$150 |
Prepaid Rent - start of month |
$300 |
$200 |
$100 |
|
Prepaid Rent - end of month |
$200 |
$100 |
|
$750 |
Rent paid |
|
$0 |
$0 |
$900 |
b)
|
Jan |
Feb |
Mar |
Apr |
Wage expense |
$100 |
|
$100 |
$150 |
Wages payable - start of month |
$300 |
$200 |
$100 |
|
Wages payable - end of month |
$200 |
$100 |
|
$350 |
Wages paid |
|
$250 |
$0 |
$0 |
Note: In your textbook, there is an error in part (b) above:
1 The wages paid in February should be $250 instead of $0 and and for April they should be $0.
1 Wages payable at the end of April should be $350.
AE3.4
a)
It is three months before the end of the financial year, and Leo Murphy, owner and operator of Murph’s Trucking, has just purchased a new truck for his cattle and hay hauling business.
Costs incurred are as indicated below:
Dealer charge |
$240,000 |
Installation of GPS, safety devices, etc. |
$3,360 |
Delivery chargers |
$2,400 |
Import taxes |
$4,800 |
Fuel cost (first fill-up) |
$500 |
Leo estimated a useful life for the truck of 10 years, at which time it could be sold for $20,000 he reckons. His plan, however, is to upgrade to a new model in two years. He estimated resale value in two years to be $100,000.
Calculate Murph’s straight-line depreciation expense for the current year.
b)
It is now the end of the next financial year after purchase of the new truck. That is, Murph’s been using the new truck for 15 months. Nothing’s changed, but now Leo wants to see how the truck will be shown on the balance sheet.
Show how Murph’s truck will appear on the balance sheet after 15 months’ use. Remember that he is using straight-line depreciation.
AE3.5
Following on from Application Exercise AE 3.4 above, Leo is expanding his business and has just bought another truck (see details below).
Dealer charge |
$290,000 |
Installation of GPS, safety devices, etc. |
$4,060 |
Delivery charges |
$2,900 |
Import taxes |
$5,800 |
Leo has been talking to some of his trucking buddies, and has been advised that he should be using “km driven” as the basis for determining his depreciation expense. Leo estimates that he’ll get 500,000 km from the truck, at which time he’ll be able to sell it for $10,000.
1) Calculate the depreciation charge for 80,000 km of use in year 1.
2) Calculate the depreciation charge for 100,000 km of use in year 2.
3) Show how Murph’s truck will appear on the balance sheet at the end of year 2.
AE3.8
Spratley Ltd is a builders’ merchant. On 1 September, the business had 20 tonnes of sand in stock at a cost of $18 per tonne, a total cost of $360. During the first week in September, the business purchased the following amounts of sand:
September |
Tonnes |
Cost per tonne |
2 |
48 |
$20 |
4 |
15 |
$24 |
6 |
10 |
$25 |
On 7th September, the business sold 60 tonnes of sand to a local builder.
Calculate:
a) The cost of goods sold based on perpetual inventory and FIFO cost allocation.
b) The closing inventory based on periodic inventory and weighted average cost allocation.
AE3.9
Calculate depreciation expense for each asset group for the year ended 30 June 2020.
Asset |
Delivery trucks |
Office equipment |
Computers |
Building |
Acquisition cost |
$250,000 |
$16,000 |
$14,200 |
$300,000 |
Useful life/units (km for trucks, years for rest) |
200,000 |
10 |
3 |
30 |
Estimate residual value |
$45,000 |
$3,000 |
$2,000 |
$45,000 |
Depreciation method |
Units of production# |
Straight-line |
Reducing- balance* |
Straight- line |
Depreciation expense |
$? |
$? |
$? |
$? |
# The trucks were driven 24,500km during the year.
* The company uses an approximated reducing-balance rate of 60%. One year of depreciation has been recorded prior to the current year.
AE3. 11
The following is a statement of financial position of WW Associates as at 31 December 2019.
2022-08-31