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Semester Two 2020

Exam - Alternative Assessment Task

ACC1100

Introduction to Financial Accounting

Question 1

Ratten  is a retailer in the fashion industry which pays its rent annually. On 1 August 2019, the business paid $72,000 cash for rent for the period 1 August 2019 to 31 July 2020.

(a) Assuming Ratten uses the expense approach to record expenses paid in advance, prepare the general journal entries (including narrations) required at:

(i) 1 August 2019

(ii) 30 June 2020 (adjusting entry at end of period)

(b) Assuming Ratten uses the asset approach to record expenses paid in advance, prepare the general journal entries (including narrations) required at:

(i) 1 August 2019

(ii) 30 June 2020 (adjusting entry at end of period)

(c) Explain the purpose of a closing entry at 30 June 2020 in relation to rent. Would the closing entry be different under each approach (expense approach or asset approach)? Explain briefly.

(d) Ratten has computer equipment purchased 2 years earlier at a cost of $52,500. It has an estimated residual value of $7,500 at the end of its 5 year life. It is being depreciated using the straight-line method.

(i) Prepare the general journal entry to record depreciation of the computer equipment for the month of June 2020.

.

(ii) Explain whether you believe that the straight-line depreciation method is appropriate for the computer equipment.

Question 2

The owner of  Saints Ltd performs the bank reconciliation procedure at the end of each month. She is in the process of preparing the statement for the month of December 2019, and has gathered the following information:

Saints Ltd Bank Reconciliation Statement as at 30 November 2019 $

Balance as per bank statement                   595.77 Cr

Add deposits not credited 2,105.00

2,700.77

Less unpresented cheques #5153 (335.87)

Balance as per bank ledger account            2,364.90 Dr

Required:

(a) Prepare the bank ledger account for December 2019.

Bank account

(b) Prepare the Bank Reconciliation Statement as at 31 December 2019 for Saints Ltd.