Financial Accounting - Desklib Online Library

This study material from Desklib covers financial accounting, including journal entries, trial balance, adjusted entries, income statement, balance sheet, cash flow statement, and ratio calculation. It also includes a list of references.

Running head: FINANCIAL ACCOUNTING
Financial Accounting
Name of the Student:
Name of the University:
Author Note:

1FINANCIAL ACCOUNTING
Table of Contents
Answer to a......................................................................................................................................2
Answer to b......................................................................................................................................3
Answer to c......................................................................................................................................5
Answer to d......................................................................................................................................6
Answer to e......................................................................................................................................7
Answer to Q f...................................................................................................................................8
Answer to g......................................................................................................................................9
(I).................................................................................................................................................9
(II)................................................................................................................................................9
(iii).............................................................................................................................................10
(IV)............................................................................................................................................10
Answer to h....................................................................................................................................11

2FINANCIAL ACCOUNTING
Answer to a
In the books of Great Barrier Reef Company for the year 2018
General Journal
Date Details Debit Credit
1-Jan Cash
$
800,000
To Common Stock
$
800,000
( Being business operations started)
1-Jan Prepaid Rent
$
48,000
To Cash
$
48,000
( Being office rent paid for two years)
15-
Feb Supplies
$
3,500
To Cash
$
3,500
( Being supplies purchased and paid in cash)
1-
Apr Cash
$
60,000
To Borrowings
$
60,000
(Bing cash borrowed from FNB@6% interest)
1-
May Inventory
$
310,000
To Bank
$
310,000
(Being inventory purchased on account)
1-Jul Computer System
$
95,000
To Cash
$
95,000
(Being Computer System purchased and paid in cash)
5-Jul Accounts Payable
$
75,000
To Inventory
$
75,000
(Being accounts payable paid from inventory)
1-
Aug Inventory
$
540,000
To Sales $

3FINANCIAL ACCOUNTING
540,000
(Being inventory sold on account of $200,00)
1-Sep Salaries
$
50,000
To Cash
$
50,000
(Being employee salary paid in cash)
9-Sep Cash
$
254,000
To Accounts Receivables
$
254,000
(Being cash collected from accounts receivables)
5-Oct Inventory
$
225,000
To Sales
$
225,000
(Being inventory of $75000 sold on account)
2-
Nov Dividend
$
25,000
To Cash
$
25,000
( Being cash dividends paid to its stockholders)
Answer to b
Inventory
Debit Credit
Date
Amount(
$)
Dat
e
Amount(
$)
5-
Jul 75000
1-May 310000
1-Aug 200,000
5-Oct 75000
Total 585000 75000
Balanc
e 510000
Accounts Payable
Debit Credit
Date Amount($ Date Amount($

4FINANCIAL ACCOUNTING
) )
5-Jul 75000
Balance 75000
Accounts Receivable
Debit Credit
Date
Amount(
$)
Dat
e
Amount(
$)
9-
Sep 254000
Balanc
e 254000
Borrowings
Debit Credit
Date
Amount(
$)
Dat
e
Amount(
$)
1-
Apr 60000
Balanc
e 60000
Supplies
Debit Credit
Date
Amount(
$)
Dat
e
Amount(
$)
15-
Feb 3500
31-
Dec $1,000
Balanc
e $2,500
Bank
Debit Credit
Date Amount( Dat Amount(

5FINANCIAL ACCOUNTING
$) e $)
1-
Ma
y 310000
Balanc
e 310000
Computer System
Debit Credit
Date
Amount(
$)
Dat
e
Amount(
$)
1-Jul 95000
31-
Dec 9000
Balanc
e 86000
Cash
Debit Credit
Date
Amount(
$)
Dat
e
Amount(
$)
1-Jan 800000
1-
Jan 48000
1-Apr 60000
15-
Feb 3500
9-Sep 254000
1-
Jul 95000
31-
Dec 24000
1-
Sep 50000
2-
Nov 25000
Total 1138000 221500
Balanc
e -916500
Salary
Debit Credit
Date
Amount(
$)
Dat
e
Amount(
$)
1-Sep 50000
31-
Dec $50,000

6FINANCIAL ACCOUNTING
Balanc
e $50,000
Answer to c
Trial Balance
as on 31.12.18
Account Name Debit Credit
Inventory
$
310,000
Accounts Payable
$
75,000
Accounts Receivable
$
254,000
Prepaid Rent
$
48,000
Interest
$
3,600
Cash
$
800,000
Supplies
$
3,500
Borrowings
$
60,000
Depreciation
$
18,000
Salary
$
50,000
Sales
$
765,000
Computer System
$
95,000
Suspense
$
2,228,900
Total
$
2,355,500
$
2,355,500
Answer to d
Adjusted Entries
31- Interest Expenses $2,700

7FINANCIAL ACCOUNTING
Dec
To Interest Payable $2,700
( Being accrued interest recorded)
31-
Dec Depreciation Expense $ 9,000
To Accumulated Depreciation $ 9,000
( Being depreciation recorded)
31-
Dec Salary Expense $50,000
To Salary Payable $50,000
(Being accrued salaries recorded.)
31-
Dec Prepaid Rent $ 24,000
To Cash $ 24,000
(Being current year rent credited to prepaid rent)
31-
Dec Supplies Expense $1,000
To Office Supplies $1,000
(Being supplies, expenses recorded.)
Answer to e
Prepaid Rent
Debit Credit
Date
Amount(
$)
Dat
e
Amount(
$)
1-Jan 48000
31-
Dec 24000
Balanc
e 24000
Interest
Debit Credit
Date
Amount(
$)
Dat
e
Amount(
$)
31-
Dec $2,700
Balanc
e $2,700

8FINANCIAL ACCOUNTING
Expenses
Debit Credit
Date
Amount(
$)
Dat
e
Amount(
$)
31-
Dec $2,700
31-
Dec 9000
31-
Dec $50,000
31-
Dec $1,000
Balanc
e $62,700
Depreciation
Debit Credit
Date
Amount(
$)
Dat
e
Amount(
$)
31-
Dec 9000
201
9 $18,000
Balanc
e $9,000
Sales
Debit Credit
Date
Amount(
$)
Dat
e
Amount(
$)
1-
Aug 540000
5-
Oct 225000
Balanc
e 765000

9FINANCIAL ACCOUNTING
Answer to f
Adjusted Trial Balance
as on 31.12.18
Account Name Debit Credit
Inventory
$
510,000
Accounts Payable
$
75,000
Accounts Receivable
$
254,000
Prepaid Rent
$
24,000
Interest
$
2,700
Cash
$
-
Supplies
$
2,500
Borrowings
$
60,000
Expenses
$
62,700
Depreciation
$
9,000
Salary
$
50,000
Sales
$
765,000
Computer System
$
86,000
Bank
$
310,000
Suspense
$
1,892,900
Total
$
2,051,900
$
2,051,900

10FINANCIAL ACCOUNTING
Answer to g
(I)
Barrier Reef Company
Income Statement for the year end 31.12.18
Particulars Amount($) Amount($)
Sales Revenue 765000
Less- Selling Expenses
Supplies Expenses $1,000
Administrative Expenses
Depreciation 9000
interest expenses $2,700
office salary $50,000
Rent 24000
Other income and Expenses
Dividend 25000
sale of inventory 490000
$601,700
income from operations $163,300
interest $2,700
Net income $160,600
Number of shares 50,000
EPS $3.21
(II)
Barrier Reef Company
Statement of Changes in equity Share for the year ended 31.12.2018
Particulars
Share
Capital
Retained
Earnings
Total
Equity
$ $ $
Issue of Share Capital
Income for the year
$
160,600
$
160,600
Dividends 25000 25000
Balance at 31st December
2018
$
185,600
$
135,600

11FINANCIAL ACCOUNTING
(iii)
Barrier Reef Company
Balance Sheet for the year ended 31.12.2018
ASSETS $ LIABILITIES $
Current Assets Current Liabilities
Cash
-
91650
0 Accounts Payable 75000
Bank
31000
0 Interest Payable 2700
Accounts Receivables
25400
0 Total Current liabilities 77700
Inventory
51000
0 Long-term liabilities
Supplies 2500 Borrowings 60000
Prepaid Rent 24000
Total long-term
Liabilities 60000
Total Current Asset
18400
0 Total Liabilities 137700
Property Plant & Equipment STOCKHOLDERS` EQUITY
Computer Software 95000 Common Stock 800000
Less- Accumulated
depreciation 9000 Retained Earnings
$160,60
0
PPE -net 86000 Change in equity
$135,60
0
Total Assets
27000
0
Total Stockholders`
equity 960600
Net Assets
82830
0 Total Liabilities & Stock 1098300
(IV)
Barrier Reef Company
Cash flow Statement for the year ended 31.12.2018
$ $
Cash flow from Operating Activities
Net Income $160,600
Adjustments
Depreciation Expense 9000
Increase of Accounts Receivable 254000
Gain in sale of inventory 490000

12FINANCIAL ACCOUNTING
Increase in Prepaid Rent 24000
Net cash provided by Operating Activities ($616,400)
Cash Flows from Investing Activities
Purchase of computer system 95000
Purchase of inventory 310000
Sale of inventory 275000
Net cash used in Investing Activities 130000
Cash flows from Financing Activities
Borrowings from FNB 60000
Payment of Cash Dividend 25000
Net Cash used in Financing Activities 85000
Answer to h
Barrier Reef Company
Ratio Calculation
Current Ratio 2.37
Working Capital
13230
0
Acid test ratio -8.53
Gross Profit percentage 4.68
Inventory Turnover and days to collection 1.5
Inventory days to collection 243.33
Receivable Turnover and days to collection 3.01
Receivable days to collection 121.19
Debt to Equity 0.075

13FINANCIAL ACCOUNTING
Reference:
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Economic Review, 104(3), 793-831.
Lim, F. P. C. (2013). Impact of information technology on accounting systems. Asia-pacific
Journal of Multimedia Services Convergent with Art, Humanities, and Sociology, 3(2),
93-106.
Omar, N., Koya, R. K., Sanusi, Z. M., & Shafie, N. A. (2014). Financial statement fraud: A case
examination using Beneish Model and ratio analysis. International Journal of Trade,
Economics and Finance, 5(2), 184.
Taipaleenmäki, J., & Ikäheimo, S. (2013). On the convergence of management accounting and
financial accounting–the role of information technology in accounting
change. International Journal of Accounting Information Systems, 14(4), 321-348.