A5.      Warbler Ltd purchased a hi-tech Machine for $15 000, net of GST.   Originally it had

an estimated useful life of 4 years and a residual value of $3 000.   The straight-line method was used. At the start of the third year of usage Warbler Ltd revised the life of the Machine. It now has a further life of 6 years, but the estimated residual value has been amended to nil. Depreciation method remains unchanged. What depreciation expense should be recorded for the Machine for year 3?

A6.      Longueville Pty  Ltd  has  an  old machine that originally cost  $220 500 and has so far

had accumulated  depreciation of $102 900 charged in the books , on the  date of its disposal. If it is traded-in for $110 250 on a new  machine and the balance of $147 000 was paid in cash, what is the profit or loss on disposal of the old machine? (Ignore GST).

A7.      The statement of profit or loss shows interest revenue for the year of $12 000 and the

balance sheet show interest receivable at the beginning of the year of $5 000 and at the end of the year of $8 000. The amount of interest received in cash for the year is:

(a)        $13 000.

A8.      In its mostrecent financial year, Boomerang Ltd reported that accounts payable increased

$8 000; inventory decreased $12 000; profit was $68 000 and depreciation expense was $4 000. Using the indirect approach, what is the net cash flow from operating activities that will be reported in the statement of cash flows:

(a)        $92 000

A9.      The  method  that  gives  the  highest  profit  and  the  highest  ending  inventory  when

inventory  prices are rising is:

(a)        LIFO

A10.    The implication of the qualitative characteristic of comparability is that:

(a)       Users will be informed of the accounting policies used, plus any changes to those policies and the effects of those changes.

(b)       It will allow different users of the information to come to a consensus.

(c)       It will be used to predict outcomes of past, present or future events.

(d)       If there is a choice of accounting methods, one method should be chosen and then applied throughout the life of the entity.

(e)       None of the above.

PART B: SHORT ANSWER QUESTIONS (85 marks)

Please note: Narrations are not required for all questions.

QUESTION B1                                                                                                  (23 marks)

ABC Ltd’s financial year ends on 31 Dec. The company uses the straight-line depreciation method. The following transactions occurred in 2019. Ignore GST.

(1) On 3 Jan, ABC Ltd replaced a machine’s major operating parts at a cost of $9 600, after

which the machine has a useful life of 4 more years and a revised residual value of $4 000. The carrying amount of the parts replaced was $400. This machine was purchased on 2 Jan 2015 at a cost of $36 000 with a useful life of 5 years and a residual value of $6 000.

(2) On 30 March, ABC Ltd scrapped a machine that cost $32 000 and had accumulated depreciation of $28 000. Disposal costs of $500 were incurred.

(3) On 1 July, ABC Ltd exchanged a machine that had a cost of $92 000 and accumulated depreciation to the date of exchange of $62 000 for a new similar machine. A trade-in  allowance of $25 000 was received for the old machine and $60 000 was paid in cash.

(4) On 1 Sep, ABC Ltd sold a machine for $45 000 cash. The machine was purchased at a cost of $105 000 on 31 August 2014. The machine had a useful life of 6 years and a residual

value of $9 000 when purchased.

Required: Prepare journal entries arrations are not required

QUESTION B2 (8 marks)

Practical Products Ltd uses allowance method to account for bad debts, and its financial year ends on 30 June. Practical Products Ltd’s Allowance for Doubtful Debts account has a debit  balance of $500 on 1 July 2020.

On 30 June 2021, Practical Products Ltd estimated that 1.5% of its net sales of $400,000 will

become uncollectable. On 11 November, Practical Products Ltd determined that Jack

Champion's account was uncollectable and wrote off $1,100. On 12 December 2021 Jack Champion paid the amount previously written off.

Required: Prepare the journal entries are not required

QUESTION B3 (14 marks)

The following information relates to Oxford Frames Ltd during the month of September, 2016: September    1       Beginning Inventory    40 units @ $10

4       Purchased                      45 units @ $12

10     Sold                                55 units

13     Purchased                      45 units @ $14

22     Sold                               40 units

28     Sold                                15 units

Oxford Frames Ltd uses a Perpetual Inventory system. (Assume there is no GST on these goods).

1. Assuming Moving Average method is use. (7 marks)

(1) What is the amount of Cost of the Closing Inventory?

(2) What is the amount of Cost of Sales?

(3) Complete the following table for Moving Average method (round unit cost to the nearest cent)

2. Assuming First-In-First-Out (FIFO) method is use. (7 marks)

(1) What is the amount of Cost of the Closing Inventory?

(2) What is the amount of Cost of Sales?

(3) Complete the following table for FIFO method (round unit cost to the nearest cent).

QUESTION B4                                                                                              (18 marks)

Laymon Boat Company’s Cash at Bank account had a debit balance of $4,667 on 30

September. The company's bank statement for the month of September showed a credit balance of $7,000. Other information is as follows:

(1)   The bank statement showed a credit of $2,060, which was to collect a debtor’s payment by the bank for the company.

(2)   The company’s cash receipt journal showed a cash receipt of $5,000 on 30 September but this was not on the bank statement.

(3)   The total amount of unpresented cheques on 30 September amounted to $5,800. (4)   Cheque No. 108 was correctly written and paid by the bank for $429. The cash

payment journal reflected an entry for Cheque No. 108 as a debit to Accounts Payable and a credit to Cash in Bank for $492.

(5)   The bank statement showed a debit of $60 for bank charges.

(6)   The bank returned a dishonoured cheque from a customer for $530.

Required: