Lecture-6---wrap-up---student(ppt文档).ppt

Fundamentals of AccountingLinda HicksonLecture 6Wrap up&extended examples1Lecture contentLectures 1&2(Monday)Introduction to accounting&accounting conventionsLecture 3(Tuesday)-Accruals&PrepaymentsLecture 4(Wednesday)-Irrecoverable Debts and Allowance for ReceivablesLecture 5(Thursday)-Introduction to DepreciationLecture 6(Friday)Wrap up23Basic accounting transactions e.g.issuing equity,borrowing,receiving revenue,incurring expensesAccounting concepts e.g.going concern,accruals,prudenceAccounting for bad debtsAccounting for capital expenditure and associated transactions e.g.depreciation and disposalsSo,what do we know?4It is important as an accountant that you can carry out a variety of transactions to show the overall picture.This may be a series of transactions relating to one aspect e.g.a particular job or project or the financial statements for a given period of time.This lecture will look at the specimen exam for this module,including a selection of the knowledge gained so far,and suggest appropriate techniques for dealing with the information presented.For ease of following the lecture,you should use these slides alongside the published specimen exam.Putting it all together.Preparation for examDuration 1.5 hoursFormat 50 marks,made up of:10 x 1 mark multiple choice questions(10 marks)2 x 20 mark extended exercise(40 marks)5Specimen examPlease use the specimen exam provided alongside these lecture slides6Section AQuestion 1 Which of the following IS NOT a correct variation of the accounting equation?A.Assets=liabilities+equity+(income expenses)B.Assets liabilities=expenses+equity+retained earningsC.Assets+expenses=liabilities+equity+retained earningsD.Assets=liabilities+equityQuestion 2 If a company pays cash dividends,which of the following transactions is taking place?A.Asset source transactionB.Asset exchange transactionC.Asset use transactionD.Contra transaction7Question 3 “Formally recording an economic item or event in thefinancial statements”is a valid definition for which of the below?A.Going concernB.AccrualC.RecognitionD.RealisationQuestion 4 Skidmore company received a$300 bill for utilities for financial year 2016 that will be paid in financial year 2017.What type of transaction does this represent?A.AccrualB.PrepaymentC.Going concernD.Contra8Question 5 Evas accounting year ends on 30 April.In calendar year 2016,Evas electricity bill was$36,000.In calendar year 2017 the electricity increases to$42,000.What is the amount of Evas electricity expense for the financial year ended 30 April 2017?A.$36,000B.$38,000C.$39,000D.$42,000Cost=8/12 x$36,000+4/12 x$42,000=$24,000+$14,000=$38,000Question 6 Assuming the full invoice has already been allocated to the expense account,what would be the double entry transaction for a prepayment of telephone bills?A.DR prepayments CR telephone billsB.DR telephone bills CR prepaymentsC.DR accrued expenses CR telephone billsD.DR telephone bills CR accrued expenses9Question 7 “.are created when companies have sales to customers on open accounts”.What is being described?A.Accounts receivableB.Notes receivableC.Trade receivablesD.Nontrade receivablesQuestion 8 What type of allowance should be provided for the following situation:A company provided services to a client who is refusing to pay,claiming the service was not fully provided?A.Provisional allowanceB.Specific allowance C.General allowanceD.No allowance should be provided 10Question 9 Which of the following DOES NOT represent depreciationA.An application of the accruals basis of accountingB.A deduction from the cost of a non-current asset charged as an expense in the income statement each yearC.A method of saving up for a replacement assetD.An allocation of the cost of non-current assets to the periods benefiting from their useQuestion 10 Matilda Co.sells a piece of factory machinery.It was purchased for$150,000 and has accumulated depreciation of$93,000.It was sold for$46,600.What was the profit/loss on the disposal?A.Profit$46,400B.Loss$46,400C.Profit$10,400D.Loss$10,400Proceeds from sale Net Book Value=$46,600 ($150,000-$93,000)=($10,400)11Question 11-AlisonAlison runs an online gift shop,trading for cash with individual customers and offering trading on credit terms to businesses.She is preparing her 2016 year-end accounts but is unsure how to deal with certain elements.She presents you with the following account balances for the year ended 31 December 2015 to assist with the preparation,as well as some additional information:$Acc.depn.on racks,shelving&office furniture 14,650Racks,shelving and office furniture at cost 33,600Accumulated depreciation on computers 13,850Cash52,315Computer equipment at cost20,77512Question 11-Alison$Sale of existing computer equipment at end of 20165,000Purchase of new computer equipment at start of 2016(5 years useful life,20%reducing balance)30,000Cash transactions which increase the cash balance by$8,900(not including the sale and purchase transactions made above)8,900Depreciation on existing computer equipment is at 20%reducing balance and this has not yet been recorded for 2016Depreciation on racks,shelving and office furniture is on a straight-line basis.The useful life is 10 years and residual value is estimated to be$4,300Transactions in 2016:13Question 11-AlisonRequiredUsing the above information,provide all the double entry accounts,showing the balances on each account at the end of 2016.State what the income statement and balance sheet entries will be for the year-ended 31 December 2016(25 marks)Consideration:How much time do I have for the question?25 marks=25%of the exam,which is 90 minutes long.25%x 90 minutes=22.5 minutes14Question 11-AlisonFirstly consider all of the transactions which need to be made:Current year depreciation(not yet done)Sale of assets(and associated gain/loss)Purchase of assets(and associated depreciation)Cash transactions15Question 11-AlisonFor each transaction,consider which T-accounts will be needed:Current year depreciation depreciation expense,accumulated depreciation Sale of assets(and associated gain/loss)-depreciation expense,accumulated depreciation,non-current asset,cash,disposalsPurchase of assets(and associated depreciation)-depreciation expense,accumulated depreciation,non-current asset (2 different accounts),cash,Cash transactions cash,double entry unknown.16Question 11-AlisonProduce T-accounts and input the opening balancesAccumulated depreciation$DRCRcomputers 13,850Shelving 14,650Depreciation expense$DRCRComputers$DRCRCost 20,775 Shelving$DRCRCost 33,600Cash$DRCRBal b/f 52,315Disposals$DRCR17Question 11-AlisonCarry out transactions in sensible order(e.g.depreciation must be applied before disposal calculation):1.Current year depreciation-Firstly calculate values:Computer:20%reducing balance on net valueNet value=cost accumulated depreciation =$20,775-$13,850=$6,925Depreciation=20%x$6,925=$1,385 Shelving:straight-line balance Depreciation=($33,600$4,300)/10=$2,930 18Question 11-AlisonCarry out transactions in sensible order(e.g.depreciation must be applied before disposal calculation):1.Current year depreciation Now make t-account entries:Accumulated depreciation$DRCRcomputers 13,850Shelving 14,650computers 1,385Shelving 2,930Comp c/f 15,235Shelving c/f 17,580Depreciation expense$DRCRComputers 1,385Shelving 2,930Note:at this point it makes sense to balance the accumulated depreciation account as it will be needed for the disposal transaction19Question 11-AlisonCarry out transactions in sensible order(e.g.depreciation must be applied before disposal calculation):2.Sale of assets although this takes place later than the purchase of new assets,it is easier,under exam conditions,to do this transaction first.The transactions needed in the T accounts are:Eliminate costEliminate accumulated depreciationAccount for sales proceeds20Question 11-AlisonAccumulated depreciation$DRCRcomputers 15,235Shelving 17,580Disposals 15,235Depreciation expense$DRCRComputers$DRCRDisposals 20,775Cost 20,775 Shelving$DRCRCost 33,600Cash$DRCRBal b/f 52,315Disposal 5,000Disposals$DRCRAcc.Depn.15,235Cash 5,000Loss on disposal 540Computer 20,775Eliminate costEliminate accumulated depreciationAccount for sales proceedsComputers 1,385Shelving 2,93021Question 11-AlisonCarry out transactions in sensible order(e.g.depreciation must be applied before disposal calculation):3.Purchase of assets(and associated depreciation)“Purchase of new computer equipment at start of 2016(5 years useful life,20%reducing balance)”($30,000)Depreciation calculation:$30,000 x 20%=$6,00022Question 11-AlisonAccumulated depreciation$DRCRShelving 17,580Computers 6,000Depreciation expense$DRCRComputers$DRCRShelving$DRCRCost 33,600Cash$DRCRComputers 30,000Bal b/f 52,315Disposal 5,000Disposals$DRCRAcc.Depn.15,235Cash 5,000Loss on disposal 540Computer 20,775Computers 1,385Shelving 2,930Computers 6,000Purchase computersAccount for depreciationCash 30,00023Question 11-AlisonCarry out transactions in sensible order(e.g.depreciation must be applied before disposal calculation):3.Cash transactions“Cash transactions which increase the cash balance by$8,900(not including the sale and purchase transactions made above)”Note:we do not know the double entry for this as the cash may have come from a number of sources.I will just refer to it as increase in the T-account24Question 11-AlisonAccumulated depreciation$DRCRShelving 17,580Computers 6,000Depreciation expense$DRCRBal c/f 10,315Computers$DRCRShelving$DRCRCost 33,600Cash$DRCRComputers 30,000Bal c/f 36,215Bal b/f 52,315Disposal 5,000Increase 8,900Disposals$DRCRAcc.Depn.15,235Cash 5,000Loss on disposal 540Computer 20,775Computers 1,385Shelving 2,930Computers 6,000Purchase computersAccount for depreciationCash 30,00025All transactions are now done,so all that is left is to show the entries in the financial statements Balance sheet$Current assetCash and cash equivalents 36,215Non-current assetsComputers($30,000 cost-$6,000 accumulated depreciation)24,000Shelving ($33,600 cost-$17,580 accumulated depreciation)16,020 Income statement$ExpensesDepreciation charge for the year on non-current assets 10,315Loss from sale of land and equipment 540Question 11-Alison26Pearl E.White Dentist is a specialist cosmetic dentist.Her accounting year end is 31 December.During 2016,Pearl provided services on account of$590,000.Of this amount,$80,000 remained receivable at the end of the year.An ageing schedule as at 1 January 2017 is provided below:Question 12 Pearl E.White27Required:a)Calculate the general allowance for receivables (5 marks)b)Calculate the 1 January 2017 adjustment,assuming the current balance on the allowance for receivables account is$5,000 CR.Show the adjustment using T-accounts.Note:assume the irrecoverable debt expense account was cleared down to the income statement at the end of 2016(i.e.it would have a zero balance at 1 Jan 2017).(7 marks)c)On 19 July 2017,a customers account balance of$8,000 is written off as uncollectible.Record the transaction,using T-accounts.Note:You should also display the trade receivables account balance to date (5 marks)d)On 30 September 2017,the customer,whose account was written off in requirement c above,unexpectedly pays the full amount.Record the transaction using T-accounts.(5 marks)e)Following the transaction at requirement d above,explain whether an adjustment may now be required to the allowance for receivables.Provide your reasoning.(3 marks)28Approach to question:Note that this time the question is split into a number of sub-parts.With questions like this,the answer to one part often depends on the answer to a previous part.Therefore you should attempt the parts in order.If you cannot do one part,dont give up;give it your best attempt.Other parts will follow the“Own Figure Rule”(OFR)i.e.if the next part is correct using the figures you previously gave,then you will gain full credit for this.You only lose the marks the first time you calculate something incorrectly.Question 12 Pearl E.White29This uses the ageing approach.Although it was not used as a lecture exercise it was shown in lecture 4.Question 12 Requirement a30This uses the second part of the adjustments calculation(as the first part is for the purposes of calculating a general adjustments calculation using a single percentage)Allowance required17,950Existing allowance(provision for impairment of receivables)(5,000)Increase/(decrease)required 12,950Question 12 Requirement b31This is a specific write-off.Note that no specific provisions were given.Question 12 Requirement c32This is a recovery of a write-off.It uses a slightly different approach to that used in lectures as we recovered a provision.Hence the transactions are simpler.Question 12 Requirement d33This requires you to analytically consider the effects of your actions.Question 12 Requirement e34Other potential question stylesThe longer questions in section B may contain a variety of different requirements and different styles of questions.In the“additional questions”document,we can look at a few of those styles.The following would all be“part”questions of a bigger scenario35Additional Question 1A machine was purchased for$360,000 on 1st January 2014.Its estimated useful life is 9 years and residual value is expected to be$50,000.Required:Assuming a depreciation rate of 12%,calculate the depreciation to be charged on the machine for the three years ended 31st December 2014,2015 and 2016 using the reducing balance method (5 marks)36Additional Question 2 The following transactions are July activities of Craigs Bowling,Inc.,which operates several bowling centres(for games and equipment sales).a.Craigs collected$15,000 from customers for games played in July.b.Craigs sold bowling merchandise inventory from its pro shop for$8,000;received$3,000 in cash and customers owed the rest on account.Do not consider cost of goods sold for this question.c.Craigs received$4,000 from customers who purchased merchandise in June on account.d.The mens and ladies bowling leagues gave Craigs a deposit of$2,500 for the next season.Required:For each of the above transactions,complete the accounting equation(where appropriate)in a summary table.If you feel no entry is necessary,explain why.The first transaction is provided as an example.(5 marks)37Additional Question 3 Briefly describe the three categories of users of accounting information and provide one example of each.(5 marks)38Additional Question 4 In 2016,Lee Inc.invoiced its customers$62,000(1)for services performed.The company collected$51,000(2)of the amount billed.Lee incurred$39,000(3)of other operating expenses on account.Lee acquired$40,000 cash(4)from the issue of common stock.The company invested$21,000 cash(5)in the purchase of land,which was not depreciated in the year.Required:Of the 5 events details above,provide a list of the events which:a)Affect the cash balanceb)Are asset source transactionsc)Affect the profit shown on the income statementNote:event