Accounting Principles and Practices Final Assessment - HA1020 T2 2021

HA1020
ACCOUNTING PRINCIPLES AND PRACTICES
FINAL ASSESSMENT
Assessment Weight: 50 total marks
Instructions:
 All questions must be answered by using the answer boxes
provided in this paper.
 Completed answers must be submitted to Blackboard by the
published due date and time.
Submission instructions are at the end of this paper.
Purpose:
This assessment consists of six (6) questions and is designed to assess your
level of knowledge of the key topics covered in this unit
HA1020 Final Assessment T2 2021

Question 1
(7 marks)
Miss Nancy started a lawn moving business in Gold Coast, Queensland,
Australia. For this purpose, she purchased a group of new lawn mowers for $20
000. The accountant of Miss Nancy told her that she must have to decide the
useful life and residual value of these new lawn mowers. After an initial
consultation with the stakeholders, she decided that the mowers to last five years
and have negligible resale value at that point. The business plan projects cutting
5000 lawns over five years. The yearly projection is as follows:
 1st Year: 500 lawns,
 2nd Year: 1 000 lawns,
 3rd Year: 1 200 lawns,
 4th Year: 1 800 lawns, and
 5th Year: 500 lawns.
Required:
1. Calculate the accumulated depreciation balance at the end of the second
year using each of the following depreciation bases: (a) straight-line [1.5
Marks]; (b) reducing balance (25 per cent rate) [2 Marks]; and (c) units-of-
production [1.5 Marks].
2. Based on your calculations, which depreciation basis would produce the
highest retained profits at the end of the second year? (2 Marks)
ANSWER: ** Answer box will enlarge as you type
1)
a) Straight line method of depreciation
20000 / 5
= 4000
Accumulated depreciation: 8000 (4000 * 2)
b) Residual balance method
40000 / 5000 * 1500
= 12000
2)
Residual balance method of depreciation accounting support the highest level of
product margin to the business venture. As the residual method of depreciation
work on the concept that assume that the depreciation will not be fixed for all the
financial years. It will keep on changing and fluctuating on the basis of the level of
use deliver of the asset. The concept of depreciation indicate the fact that this is a
value of the property that is consumed during the respective time period. The
value denoted as the proportion of asset that is consumed in context the overall
capability of the respective asset. Depreciation is a concept involve that in context
to the fixed asset the entire asset or property do not get fully consumed in one
particular financial year (Rinta-Kahila and et.al., 2018). It takes plenty of years for
the property to get fully demolished or consumed based on its expected life or
time period of the property. In accounting term depreciation is a mandatory
requirement which needed to fulfil by the venture. This is a non cash expenditure
HA1020 Final Assessment T2 2021

associated with the organisation. The expense do not get to bear by the business
entity in liquidity format but have to charge in against of the profitability of the
respective financial year. The residual balance method is a concept involve in
depreciation accounting that motivate the organisation to record only the value of
depreciation that can denote the overall use of the property or asset during the
respective financial year. This is a proportion of property that is consumed by the
organisation in the one year of time frame. In general situation the rate is fixed for
the depreciation. The difference between residual method and straight line
technique is that in case of the straight line method of depreciation the value
remain same throughout the life of the property.
In the current situation the depreciation for two financial years are calculated with
straight line method denote the value as 8000 and on the other hand the value
with the weighted average method is 12000. This clearly indicate with the fact that
straight line method of depreciation accounting demonstrate the value to be the
minimum in nature. In case of the residual method technique of depreciation
accounting the respective value goes to 12000 of two financial years. This clearly
indicate the fact that in context to the firm profitability and revenue the straight line
method or technique of monitoring depreciation is the most favourable one in
comparison to other residual method technique of depreciation valuation (Cugova
and Cug, 2020). This method allows the business unit to sustain a burden of
depreciation in all the year of useful life in the same proportion. Whereas, the
residual method technique allow the consumption of depreciation on the basis of
the particular use of the asset during the respective time period. The role of the
depreciation is very significant in the business accounting as this involve
analysing the need of the asset in term of utilising the property. In case the
organisation utilises the straight-line method of depreciation than the maximum
amount of retained profit will be consumed by the organisation. On the other hand
in case the business entity utilise the residual method of depreciation accounting
than the less profit will be generated in against to utilise the asset for the whole
year. The difference in both the method is such that straight line technique allow
the venture to sustain a same burden over all the financial year involve in the
useful life of the asset. In context to the residual method technique the asset that
is already utilised will not be involved in the further valuation of the depreciation
against the asset or property. Hence the straight line technique involve less value
of depreciation in comparison to the residual method of depreciation accounting.
Question 2 (7 marks)
We have discussed the accounting for liabilities in Week 10 and 11. Based on this
discussion, please explain the relationship between liabilities and expenses.
Provide five examples where they both increase at the same time (4 Marks). Why
are some liabilities interest-bearing and others are not (3 Marks). [Words Limit:
Up to 100 Words]
ANSWER:
Liabilities are the mandatory requirements which needed to meet by the business
venture. This is an obligation that the business venture needed to bear. The
liability is mandatory need and requirements require to mitigate by the
organisation in against to deliver the business operations. On the other hand
expenses are the one that is against operating various functional responsibilities
HA1020 Final Assessment T2 2021

by the organisation. This is about to operate the business functions. For example
if thee operations or sales of company is increased than the expenses of
operations will increase and also the result of this liability of taxation will further be
increased. The another example is when instalment of loan is not paid and also
the interest is not paid. In such a case the liability of loan get increase and also
the expense of interest get to increase (Pozdnyakov, Zoryana and Tetiana, 2020).
The one more example is such that in case of depreciation is charge against to
the residual value method. Then the expense of depreciation and the liability both
get increased. One more situation is when the causalities arise at the work place
this cause to increased expense and the liability. All these are the core examples
of the respective practices.
Question 3 (11 marks)
The accountant of ABC Limited has prepared the following unadjusted trial balance of
ABC Limited on 30th June 2021.
Yellow Limited
TRIAL BALANCE
AS AT 30th JUNE 2021
Accounts Debit ($) Credit ($)
Cash at bank 13 985
Account receivables 26 200
Prepaid insurance 3 900
Office Supplies 4 680
Office equipment 14 100
Accumulated depreciation - equipment 2 850
Accounts payable 315
Salary payable
Unearned service revenue 1 230
Loan payable 10 500
Capital 33 300
Drawings 60 000
Service revenue 159 270
Salary expenses 66 000
Depreciation expenses - equipment
Miscellaneous expenses 18 600
TOTAL 207 465 207 465
The following additional information is available at the end of June for
adjustments:
 Mr Emmanuel is working as the inventory clerk. He performs the physical
count of the office supplies on 30th June 2021. This physical count reveals
that the unused office supplies of $550 are on hand.
 The rate of depreciation for the office equipment is 15% per annum and
ABC Limited used the straight-line method of depreciation.
 Of the $1230 unearned service revenue, $300 is still unearned
HA1020 Final Assessment T2 2021