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Accounting Solutions

Answer to Question No 1 (Week 6)

Fiona uses several journals for her business-like purchase journal, cash payments journal, sales journal, cash receipts journal and a general journal. Following transactions were done by her and same should be recorded in the respective journals:

  1. Purchased inventory on credit: This must be recorded in purchases journal as it is purchased on credit.
  2. Sales of inventory on credit: This must be recorded in sales journal as sales is on credit.
  3. Received payment of a customer’s account: This must be recorded in cash receipts journal as its cash received from customer.
  4. Payment of monthly rent by cheque: This must be recorded in General journal as rent was paid on credit.
  5. End of period closing entries: Month end closing entries has to be recorded in all journals and then books should be closed. (AccounitngForManagement, 2020)

Answer to Question No 2 (Week 7)

Part a)

Total Cash Receipts for June

Amount

Cash Receipts as per Cash Receipts Journal

$292,704

Add: - Credit for an electronic transfer from a customer

$644

Add: - Interest earned

$44

Less: - Dishonoured Cheque

($136)

Total Cash Receipts Journal

$293,256

Total Cash Payments for June

Amount

Cash Payments as per Cash Payments Journal

$265,074

Add: - Account and transaction fees

$120

Total Cash Payments Journal

$265,194

Part b)

Cash at Bank ledger

Amount

Cash at Bank as on 31st May

$21,200

Add: - Total cash receipts as per cash receipt journal

$293,256

Less: - Total cash payments as per cash payments journal

(265,194)

Cash at Bank as on 30th June

$49,262

Part c)

Bank Reconciliation Statement

Amount

Bank balance as per Bank statement

$41,184

Add: - Cash receipts not included in bank statement

$10,090

Less: - Outstanding cheque no’s 3456, 3457, 3460 and 3462

($2,012)

Cash at Bank as on 30th June

$49,262

Part d)

Cash amount which needs to be reported in the 30th Balance Sheet will be $49,262. (accountingtools, 2020)

Answer to Question No 3 (Week 8)

Part a)

Journal entries for all the four transactions are given below:

Accounts Receivable A/c …………………………………. DR

$1,195,000

To Revenue A/c………………………………………...CR

$1,195,000

(being revenue earned on credit)

Sales Return A/c ……………………………………………. DR

$24,100

To Accounts Receivable A/c……………………………CR

$24,100

(being sales return recorded)

Bank A/c …………………………………………………… DR

$1,400,000

To Accounts Receivable A/c……………………………CR

$1,400,000

(being accounts receivable collected)

Allowance for Doubtful Debt A/c …………………………..DR

$15,851

To Accounts Receivable A/c……………………………CR

$15,851

(being amount written off as uncollectable)

Allowance for Doubtful Debts

Amount

Balance as on 1st June

$12,100

Add: - Accounts written off as uncollectable

$15,851

Less: - Amounts which must be written back

($14,451)

Balance as on 30th June

$13,500

Part b)

Accounts Receivable

Amount

Balance as on 1st June

$849,555

Add: - revenue earned on credit

$1,195,000

Less: - sales return

($24,100)

Less: - accounts receivable collected

($1,400,000)

Less: - accounts written off as uncollectable

($15,581)

Add: - amount which must be written back as its collectable now

$14,451

Balance as on 30th June

$619,325

In the Balance Accounts Receivable should appear as $619,325 and Allowance for doubtful debt should appear as $13,500. (corporatefinanceinstitut, 2020)

Accounts Receivable

1/30 Balance $619,325

Allowance for Doubtful Debts

1/30 Balance $13,500

Part c)

Journal entry for Kim Lt’s account which paid in full is given below:

Bank A/c …………………………………………………… DR

$2,400

To Kim Ltd A/c…………………………………………CR

$2,400

(Amount paid by Kim Ltd)

Kim Ltd A/c …………………………………………………DR

$2,400

To Allowance for Doubtful Debts A/c…………………...CR

$2,400

(Amount adjusted with allowance for doubtful debts)

Answer to Question No 4 (Week 9)

Part a)

Inventory record for Product EF5089 for June is given below:

Date

Units

Purchases

Sales

Inventory Balance

June 1

6,100

Beginning Balance

6,100*2.2 = $13,420

June 4

4,600

4,600 *2.25 = $10,350

6,100 * 2.2 = $13,420

4,600 * 2.25 = $10,350

June 9

(4,100)

4,100 * 2.2 =$9,020

2,000 * 2.2 = $4,400

4,600 * 2.25 = $10,350

June 12

4,100

4,100 * 2.4 = $9,840

2,000 * 2.2 = $4,400

4,600 * 2.25 = $10,350

4,100 * 2.4 = $9,840

June 21

(6,000)

2,000 * 2.2 = $4,400

4,000 * 2.25 = $9,000

600 * 2.25 = $1,350

4,100 * 2.4 = $9,840

June 26

3,100

3,100 * 2.5 = $7,750

600 * 2.25 = $1,350

4,100 * 2.4 = $9,840

3,100 * 2.5 = $7,750

Total

7,800

$27,940

$22,420

$18,940

June 30

(100)

Stock loss

500 * 2.25 = $1,135

4,100 * 2.4 = $9,840

3,100 * 2.5 = $7,750

Final Bal

7,700

$27,940

$22,420

$18,725

Final Inventory units and balance as on 30th June was $7,700 units and $18,725 respectively.

Part b)

Income Statement for the year ended 30th June

Sales (10,100 units @ 5 per unit)

$50,500

Less: - Cost of Goods sold

($22,420)

Less: - abnormal loss

(225)

Gross Profit

$27,855

Answer to Question No 5 (Week 10)

Part a)

Depreciation needs to be calculated based on all the three methods i.e. straight-line method, diminishing balance method and units of production method.

  • Straight-line Method: under this method depreciation is calculated based on useful life. The delivery van has a useful life of 4 years. (accountingtools, accountingtools.com, 2020)

Depreciation = (Purchase Value – residual value)/ useful life

Depreciation = ($52,000 - $12,000)/4

Depreciation = $40,000/4

Depreciation for FY 2019-20 = $10,000

  • Diminishing Balance Method: under this method depreciation is calculated based on the depreciation factor. In this case depreciation % is given as 31%. Calculation is given below:

Depreciation = (Purchase Value – residual value) * depreciation factor

Depreciation = ($52,000 - $12,000) * 31%

Depreciation = $40,000 * 31%

Depreciation for FY 2019-20 = $12,400

  • Units of Production method: Under this method depreciation is calculated based on the no of units used. Calculation is given below: (readyratios.com, 2020)

Depreciation = (Purchase Value – residual value) * units used/ production capability

Depreciation = ($52,000 - $12,000) * 78,000/200,000

Depreciation = $40,000*78,000/200,000

Depreciation = $40,000 * 0.39

Depreciation for FY 2019-20 = $15,600

Part b)

Depreciation for Year 1 i.e. for the year ended 30th June 2020 was calculated above i.e. $12,400

Calculation of depreciation for the year ended 30th June 2021 is given below:

Depreciation = ($40,000 - $12,400) *31%

Depreciation = $27,600 * 31%

Depreciation for FY 2020-21 = $8,556

Journal entry for depreciation for year ended 30th June 2021 is given below:

Depreciation A/c ……………………………………………. DR

$8,556

To Accumulated Depreciation……………………………CR

$8,556

(being depreciation for the year 30th June’21 booked)

Part c)

Using the straight-line method depreciation for year 1 and 2 will be $10,000 per year.

Particulars

Amount

Purchase value of Van

$52,000

Less: - Depreciation for year ended 30th June 2020

($10,000)

Value of van as on 30th June 2020

$42,000

Less: - Depreciation for year ended 30th June 2021

($10,000)

Value of van as on 30th June 2021

$32,000

References

AccounitngForManagement. (2020, June 23rd). AccounitngForManagement.org. Retrieved from AccounitngForManagement.org: https://www.accountingformanagement.org/first-in-first-out-method-fifo-method-perpetual/

accountingtools. (2020, June 23rd). accountingtools.com. Retrieved from accountingtools.com: https://www.accountingtools.com/articles/2017/5/5/cash-receipts-journal

accountingtools. (2020, June 23rd). accountingtools.com. Retrieved from accountingtools.com: https://www.accountingtools.com/articles/2017/5/15/straight-line-depreciation

corporatefinanceinstitut. (2020, June 23rd). corporatefinanceinstitute.com. Retrieved from corporatefinanceinstitute.com: https://corporatefinanceinstitute.com/resources/knowledge/accounting/bad-debt-expense-journal-entry/

readyratios.com. (2020, June 23rd). readyratios.com. Retrieved from readyratios.com: https://www.readyratios.com/reference/accounting/units_of_production_method_of_depreciation.html

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