Financial Statement Analysis

This assignment focuses on analyzing financial statements using provided data. It covers calculating net payments to suppliers, expenses paid, tax expenses paid, and changes in capital. The solution includes detailed breakdowns and calculations to illustrate the financial analysis process.

ACCT 1008
Accounting for Business, SP 5 2017
Assignment Part B
76 marks - Weighting 15%
Due 8 pm Adelaide time (ACST) on Monday 23rdOctober, 2017
Please aim to complete the assignment a few days before the due date to allow for any unforeseen circumstances
such as illness, family issues, work commitments etc. You may submit the assignment early if you have other
commitments around the due date.
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responsibility to ensure you factor in any time difference between Adelaide (South Australia) and your location
when submitting your assignment.
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Developing knowledge and skills in the assignment
The Assignment is a further opportunity to apply the knowledge and skills that you are developing in
the course. The Assignment also develops learning outcomes which are highly valued by the
employers of accounting graduates: Knowledge, Judgement, Application skills, and Communication
skills. Learning outcomes are the knowledge and skills that graduates are expected to know,
understand and be able to do as a result of their learning. Go to the Commerce home page to find
out more about these important learning outcomes and as you work on the Assignment remember
that they are sought after by business and accounting employers.
Communication skills
Employers want graduates who are good communicators. Communication skills consistently rank in
the most important selection criteria that employers use to recruit graduates (Source: Graduate
Careers Australia). The following three aspects of your written communication skills development
will be assessed in the assignment to a maximum of 6 marks:
 Paraphrasing,
 Being relevant and the art of selection, and
 An introduction to writing for a professional business audience.
Please refer to the resource Developing written communication skills in Accounting for Business on
the course learnonline page. It has information about the three aspects of your written
communication skills development and links to resources that will assist you develop your skills. As
you use the resources in your assignment, remember that your studies is the perfect time to start
working on these skills and appreciating their importance in your career.

QUESTION1: Balance Day Adjustments (25 marks)
Debit ($) Credit ($)
The Chilli Blast Restaurant
Trial Balance
30 June 2017
Water Expense 34 581
Delivery Van 39 000
Cash at Bank 59 349
Gas Expense 35 863
Sales Returns & Allowances 11 889
Interest Expense 40 029
Electricity Expense 38 229
Marcelo, Capital 275 284
Accounts Receivable 17 480
Inventory (1 July 2016) 69 779
Prepaid Rent 52 800
Chef’s Wages Expense 52 288
Insurance Expense 10 829
Purchases 263 829
Advertising Expense 35 529
Office Cleaning Expense 30 829
Office Supplies 13 179
Marcelo, Drawings 68 894
Cooking Oil Disposal Expense 23 512
Repairs and Maintenance Payable 21 579
Accumulated Depreciation – Refrigeration
Equipment
43 454
Refrigeration Equipment 74 829
Discount Allowed 12 129
Prepaid Insurance 3 840
Shop Cleaning Expense 69 229
Shop Furniture 40 829
Discount Received 13 409
Loan 366 714
Shop Staff Wages Expense 59 919
Accounts Payable 23 332
Sales 424 521
Deep Fryer 29 200
Unearned Sales 19 570
Totals 1 187 863 1 187 863
(Continued on the next page)

Marcelo has emailed you the following list of account information related to the year ended
30 June 2017:
1. On 30 June, Marcelo estimated 2.5% of Accounts Receivable will not be collected as
this amount has been outstanding for 270 days.
2. The Office Supplies on hand at 30 June 2017 was $1 843.
3. The deep fryer was purchased on 1 April 2017 and will be depreciated at 15% per
annum and will have no residual value (calculate and record the depreciation
expense for the year).
4. The Refrigeration Equipment is expected to have a useful life of six years and have a
$2 829 scrap value (calculate and record the depreciation expense for the year).
5. The bank has approved an overdraft facility for $20 500 for The Chilli Blast
Restaurant.
6. Rent was paid on 1 July 2016 for a two year period ending 30 June 2018.
7. $18 670 of Unearned Sales represent receipts for catering at the Chillian Music
Festival which was catered for on the 23rd June 2017.
8. The Shop Furniture is expected to have a useful life of five years and have a residual
value of $829 (calculate and record the depreciation expense for the year).
9. Chef’s wages payable but not recorded as at 30 June are $3 570.
10. The 6 month Insurance policy (policy #25223) of $3 840 was paid on February 1
2017.
11. The Delivery Van was purchased on 1 October 2016 and is expected to have a
useful life of eight years and have a residual value of $2 000 (calculate and record
the depreciation expense for the year).
** If your calculation results in an answer with decimal places please round to the nearest
dollar i.e. 1.5 will become 2, 1.4 will become 1.
REQUIRED:
a. It is now the end of the financial year and Marcelo requires you to prepare the
Balance Day Adjustment Journals for The Chilli Blast Restaurant where
required.Marcelo has provided you with the General Journal document (overpage)
and he has specifically asked you to include narration (explanation) for each journal

entry.
(25marks)
Date Details Debit ($) Credit ($)
30-Jun-
1
7
Bad debts expenses $ 437
Accounts Receivable $ 437
(bad debts recorded)
30-Jun-
1
7
Office supplies expenses $ 11,336
Office supplies $ 11,336
(office supplies expenses recorded)
30-Jun-
1
7
Depreciation expenses- deep fryer $ 4,380
Accumulated depreciation- deep fryer $ 4,380
(Depreciation expenses recorded)
30-Jun-
1
7
Depreciation expenses- Refrigeration
Equipment
$ 12,000
Accumulated depreciation- Refrigeration
Equipment
$ 12,000
(Depreciation expenses recorded)
30-Jun-
1
7
Cash $ 20,500
Bank overdraft $ 20,500
(Bank overdraft recorded)
30-Jun-
1
7
Rent expenses $ 26,400
Prepaid rent $ 26,400
(Rent expenses recorded)
30-Jun-
1
7
Unearned revenue $ 18,760
Revenue $ 18,760
(revenue recorded)
30-Jun-
1
7
Depreciation expenses-Shop furniture $ 8,000

Accumulated depreciation- Shop
furniture
$ 8,000
(Depreciation expenses recorded)
30-Jun-
1
7
Wages expenses $ 3,570
Wages payable $ 3,570
(Wages expenses recorded)
30-Jun-
1
7
Insurance expenses $ 3,200
prepaid Insurance $ 3,200
(Insurance expenses recorded)
30-Jun-
1
7
Depreciation expenses-Delivery Van $ 3,469
Accumulated depreciation- Delivery
Van
$ 3,469
(Depreciation expenses recorded)
QUESTION 2: Financial Statement (20 marks)
.
ARABELLA’S APOTHECARY SHOP - TRIAL BALANCE
AS AT 30 JUNE 2017
Debit ($) Credit ($)
Shop Shelving 255000
Delivery Van 120000
Sales 1560000
Purchases 576000
Insurance Expense 19500
Allowance for Doubtful Debts 4932
Accounts Receivable 82200
Bank Overdraft 3000
Shop Water Expense 12000
Discount Received 6000
Interest Expense 12300
Office Water Expense 4140
Loan (repayable 1 Oct 2018) 138000
Discount Allowed 3450

Bookkeepers Wages 75 000
Shop Staff Wages 256386
Accumulated Depreciation – Office
Furniture & Fittings
18900
Accounts Payable 23 268
Doubtful Debts 4932
Freight Inwards Expense 6450
Advertising Expense 14100
Shop Rent Expense 196 000
Office Cleaning Expense 35400
Depreciation – Shop Shelving 36000
Interest Received 4500
Unearned Revenue 3600
Depreciation - Delivery Van 30000
Accumulated Depreciation – Shop
Shelving
72000
Arabella, Capital (1 July 2015) 400650
Depreciation – Office Furniture & Fittings 18900
Inventory (1 July 2016) 157200
Office Furniture and Fittings 96000
Office Rent 53 750
Freight Out 22260
Electricity Expense 29100
Purchase Returns and Allowances 18600
Arabella, Drawings 108000
Sales Returns & Allowances 2850
Shop Cleaning 21600
Additional Information:
 The electricity expense is allocated as 40% to the office and 60% to the shop
 The insurance expense is allocated as 30% to the office and 70% to the shop
 The inventory stocktake revealed a closing stock balance at 30/6/17 as $54,900
REQUIRED:
Prepare a fully classified Income Statementusing the partially prepared Trial Balance
provided in the question.

QUESTION 3: Accounting Concepts (10 marks)
The Special – LEGO World Shop
Income Statement (Extract)
For the year ending 30 June 2017
$ $
Sales 450,000
Opening Inventory 250,000
add: Purchases 120,000
less: Closing Inventory 280,000 90,000
Gross Profit 360,000
Dragons and Vikings Toy Shop
Income Statement (Extract)
For the year ending 30 June 2017
$
Sales 468,000
Cost of Sales 90,000
Gross Profit 378,000
Required
(i) You are a graduate working in an accounting firm and the Audit Manager has
requested that you answer the following in a letter format which he will then keep on
file regarding these two entities which are to be audited later in the year. In the letter
identify the two methods of recording inventory and what inventory method each
business is using. Explain how you can determine this from the above information.
(3
marks)
(ii) Briefly explain which of the two methods provides:
 the higher gross profit figure when recording the same transactions?
 the most information for control purposes and identify two ways in which the
method you have chosen provides more information for control purposes.
(3 marks)
(iii) Why do businesses that use the perpetual inventory system continue to perform a
physical inventory stocktake at least once each accounting period? (2 marks)
(iv) When the periodic inventory system is used, what does the balance of the inventory
account (during the accounting period) represent? (2 marks)

ARABELLA’S APOTHECARY SHOP

INCOME STATEMENT
AS AT 30 JUNE 2017
Sales $ 1,560,000.00
Less: Cost of goods sold
Opening stock $ 157,200.00
Add: Purchases $ 576,000.00
Less: Purchase rerun $ (18,600.00)
Less: closing stock $ (54,900.00)
Cost of goods sold $ 659,700.00
Gross profit $ 900,300.00
Less: Operating expenses
Selling expenses
Advertising Expense $ 14,100
Depreciation - Delivery Van $ 30,000
Freight Out $ 22,260 $ 66,360
Financing expenses
Discount Allowed $ 3,450
Interest Expense $ 12,300 $ 15,750
Office expenses
Electricity Expense $ 11,640.00
Insurance expanses $ 5,850.00
Office Cleaning Expense $ 35,400
Depreciation – Office Furniture &
Fittings
$ 18,900
Office Rent $ 53,750
Office Water Expense $ 4,140 $ 129,680
Shop expenses
Electricity Expense $ 17,460.00
Insurance expanses $ 13,650.00
Shop Rent Expense $ 196,000
Depreciation – Shop Shelving $ 36,000
Shop Cleaning $ 21,600
Shop Water Expense $ 12,000
Shop Staff Wages $ 256,386 $ 553,096
Other expenses
Freight Inwards Expense $ 6,450
Bookkeepers Wages $ 75,000
Doubtful Debts $ 4,932 $ 86,382
Total expenses $ 851,268.00
Net income $ 49,032.00

QUESTION 4: Cash Flow Statement (15 marks)
You are provided with the following financial information for Savvy Surfware:
SAVVY SURFWARE
COMPARATIVE BALANCE SHEETS
AS AT DECEMBER 31
Current Assets
2017 2016
Cash on Hand $1 200 $4 000
Cash at Bank - 1 009
Accounts Receivable (net) 5 200 4 500
Inventory 28 000 18 000
Prepaid Expenses 1 650 $29 250 650 $28 300
Non Current Assets
Plant & Equipment 83 500 64 000
less Acc. Depreciation (23 000) 60 500 (17 600) 46 400
Total Assets 96 550 74 559
Current Liabilities
Bank Overdraft 6 402 -
Accounts Payable 4 000 2 800
Expenses Payable 780 790
Tax Payable 890 12 072 1 200 4 790
Non Current Liabilities
Bank Loan 20 000 20 000
Total Liabilities 32 072 24 790
Net Assets $64 478 $49 769
Equity
Capital 64 478 49 769
$64 478 $49 769
(continued over page)
SAVVY SURFWARE
INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31 2017

Net Sales $107 000
Cost of Sales 45 200
Gross Profit: 61 800
Other Revenue:
Discount Received $280
Interest Revenue 40 320
62 120
Expenses:
Selling & Admin Expense 16 500
Doubtful Debts Expense 354
Depreciation Expense 5 400
Interest Expense 3800 26 054
Profit before tax 36 066
Income Tax Expense 3 378
Profit $32 688
ANSWER THIS QUESTION ON THE PRO FORMA PROVIDED
REQUIRED:
a. Prepare a Statement of Cash Flows in the pro forma providedbelow and show
all calculations (an answer without supporting calculations will receive zero)
(15 marks)
SAVVY SURFWARE
Cash Flow Statement
for the year ended 31 December 2017

Cash Flows from Operating Activities
Receipts from customers $ 105,946.00
Payments to suppliers & employees $ (71,230.00)
Cash generated by operations $ 34,716.00
Interest paid $ (3,800.00)
Income tax paid $ (3,688.00)
$ 27,228.00
Cash Flows from Investing Activities
Interest received $ 40.00
Payment for plant and equipment $ (19,500.00)
$ (19,460.00)
Cash Flows from Financing Activities
Bank over draft $ 6,402.00
Drawings paid $ (17,979.00)
$ (11,577.00)
Net increase / decrease in cash held $ (3,809.00)
Cash at the beginning of the year $ 5,009.00
Cash at the end of the year $ 1,200.00
Notes
Receipts from customers
Opening receivables $ 4,500.00
Add: sales $ 107,000.00
Less: Closing receivables $ (5,200.00)
Less: Doubtful debts expenses $ (354.00)
Receipts from customers $ 105,946.00
Payments to suppliers & employees
Cost of sales $ 45,200.00
Add: Closing inventory $ 28,000.00
Less: Opening inventory $ (18,000.00)
Purchases $ 55,200.00
Add: Opening accounts payables $ 2,800.00
Less: Closing acconts payables $ (4,000.00)
Payments to suppliers $ 54,000.00
Discount received $ (280.00)
Net Payments to suppliers $ 53,720.00
Add: Selling & Admin Expense $ 16,500.00
Opening expenses payable $ 790.00
Add: Closing prepaid expenses $ 1,650.00
Less :Opening prepaid expenses $ (650.00)
Less: Closing expenses payable $ (780.00)
Expenses paid $ 17,510.00

Opening tax expenses payable $ 1,200.00
Add: Tax Expense $ 3,378.00
Less: Closing tax expenses payable $ (890.00)
Tax Expenses paid $ 3,688.00
Opening capital $ 49,769.00
Add: Net income $ 32,688.00
Less: Closing capital $ (64,478.00)
Drawings paid $ 17,979.00
The following aspects of students’ written communication skills development are also awarded a
totalof 6 marks.
PARAPHRASING
 Presenting ideas and information that student read in their own words,
 Not simply taking what someone else has written and changing a few words. It is about
translating another person’s ideas into the student’s own words.
Mark (maximum 2):
BEING RELEVANT
Does what is written contribute to answering the question(s)
 Setting out to specifically answer the question(s) by using relevant information,
 Staying ‘on track’ with answers,
 Avoiding straying from the question and going off on irrelevant tangents.
Mark (maximum 2):
WRITING FOR A PROFESSIONAL BUSINESS AUDIENCE (including good presentation)
 The written work is clear and understandable,
 Where applicable, the written work is based on the facts and available evidence,
 Exaggeration and bold statements which are not supported by the facts and evidence are
avoided.
Good presentation
 The written work contains no spelling and grammatical errors. Obvious evidence of editing
displayed. (Where the work contains any spelling and grammatical errors, it cannot be awarded
6 marks),
 Any headings and sub-headings display properly, and are used consistently throughout the
document,
 Page numbering is used. It is usual for page numbering to commence on page 2 of a business
document as “2”,
 Font size and font style are used consistently throughout the document,
 If applicable, requested templates are used.

Mark (maximum 2):
TOTAL WRITTEN COMMUNICATION SKILLS MARK (maximum 6)