Hello, dear friend, you can consult us at any time if you have any questions, add WeChat: daixieit 


Semester One 2021

Final Exam

ACC1100

Introduction to Financial Accounting


Question 1 (23 marks)

The following selected transactions relate to Busby Ltd in the month of July 2021. The opening balance of the inventory is $20,000.

July

1 Purchased 100 units of inventory from Bucks Ltd for $500 each on credit, terms 2/10, n/30.

8 Paid Bucks Ltd the amount owed from the 1 July purchase.

14 Sold 30 units of inventory to Kings Ltd for $750 each on credit, terms 2/7, n/60.

16 Kings Ltd returned 10 of the units sold on 14 July.

19 Received payment in full from Kings Ltd.

27 Purchased 50 units of inventory from Trafford Ltd for $500 each. Busby Ltd paid for the purchase on the same day.

31 Busby Ltd conducted a physical stocktake at the end of the month. The stockcount revealed an inventory balance of $85,000.

Required:

(a) Using the periodic/physical inventory system, prepare the general journal entries for the above transactions of Busby Ltd. Include any journal entries required to determine COGS and closing inventory. Assume no GST. Narrations are NOT required. (20 marks)

(b) Calculate the total cost of goods sold for the month of July 2021. (3 marks)

Question 2 (26 marks)

On 1 July 2020, York Ltd leased a machine from Jersey Ltd. The following represents the key term of the lease agreement.

The lease term is for 4 years, starting on 1 July 2020.

The lease is non-cancellable.

Present value of minimum lease payment is $219,361.

Initial lease payment at commencement of lease (1 July 2020) is $50,000.

Annual lease payment due at 30 June each year is $50,000

Residual value of the machine is $60,000.

Estimated useful life of the machine is 6 years.

Interest rate implicit in the lease is 7%.

York Ltd intends to buy the machine at the end of the lease term.

York Ltd uses the straight-line method for depreciation.

Required:

(a) Complete a lease schedule for the four years up to and including 30 June 2024. (5 marks)

(b) Prepare the general journal entries relating to the lease for the financial years ending 30 June 2021 (i.e., from 1 July 2020 to 30 June 2021) and 30 June 2022 (i.e., from 1 July 2021 to 30 June 2022). Justify your entries by reference to the appropriate accounting standard AASB 16 Leases. Narrations are NOT required. (15 marks)

(c) Prepare the Income Statement extract for the year ended 30 June 2023. (2 marks)

(d) Prepare the Balance Sheet extract as at 30 June 2023. (4 marks)

Question 3 (15 marks)

Edwards Ltd purchases a new machine on 1 July 2020 for $70,000 cash. Residual value and useful life were estimated to be $10,000 and 6 years, respectively. Edwards Ltd adopts the cost model for the machine and uses the straight-line method for depreciation.

On 30 June 2021, the value in use of the asset was estimated to be $55,000. The asset’s fair value less cost to sell on this date is $56,000.

Required:

(a) Briefly explain about the cost model in relation to the subsequent measurement of non-current asset. In your answer, include a discussion on carrying amount and recoverable amount. (3 marks)

(b) Prepare the necessary general journal entries to record the transactions for the financial year ending 30 June 2021 (i.e., from 1 July 2020 to 30 June 2021). Narrations are NOT required. (12 marks)

Question 4 (20 marks)

Ferguson Ltd purchased a new equipment on 1 July 2018 for $800,000 cash. Useful life and residual value were estimated to be 10 years and zero, respectively. The company uses the straight-line method for depreciation and adopts the fair value model for equipment.

On 30 June 2019, an independent valuer estimated the fair value of equipment to be $855,000.

On 30 June 2020, the equipment was assessed to have a fair value of $595,000.

On 30 June 2021, there was no revaluation required.

Required:

Prepare the necessary general journal entries to record the transactions for the financial years ending:

(a) 30 June 2019 (i.e., from 1 July 2018 to 30 June 2019). (10 marks)

(b) 30 June 2020 (i.e., from 1 July 2019 to 30 June 2020). (8 marks)

(c) 30 June 2021 (i.e., from 1 July 2020 to 30 June 2021). (2 marks)

Justify your answer in accordance with appropriate accounting standards regarding the test of materiality. Narrations are NOT required.

Question 5 (16 marks)

Williams Ltd is a wholesale distribution business that sells ceramic vases. Williams Ltd uses the periodic inventory system. The following information relates to the business’s activities during the financial year ending 30 June 2021:

1 July 2020 – Opening balance 10,000 vases (purchase price $35 per vase)

1 September 2020 – Purchased 20,000 vases (purchase price $37 per vase)

1 February 2021 – Purchased 30,000 vases ($40 per vase)

30 June 2021 – Closing inventory as per physical stocktake is 44,000 vases

Additional information:

(i) Williams Ltd adopts the FIFO cost-flow method.

(ii) Transportation from supplier to Williams Ltd costs $8 per vase. Transportation from Williams Ltd to the retailer costs $10 per vase. Williams Ltd pays all of the transportation costs.

(iii) 4,000 of the vases in the closing inventory are damaged and can only be sold to the retailer for $20 per vase. These vases were originally purchased on 1 February 2021. Transportion cost to the retailer of $10 per vase still applies.

(iv) The latest selling price for the ceramic vases is $90 per vase.

Required:

(a) Calculate the value of inventory in the Balance Sheet of Williams Ltd at 30 June 2021 in accordance with AASB 102 Inventories. Justify your answer and show all workings. (14 marks)

Identify costs which attach to inventory

 

 

 

Determine cost of product on the basis chosen

 

 

 

 

Determine NRV for each product

 

 

 

 

Compare cost vs NRV and select the lower value

 

 

 

 

 

(b) Calculate the inventory write-down, if any, for the financial year ending 30 June 2021. Show your workings. (2 marks)