Financial Accounting Homework Answers (Doc)

Financial
Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
Question 1...............................................................................................................................1
Question 2...............................................................................................................................1
Question 3...............................................................................................................................2
Question 4...............................................................................................................................2
Question 5...............................................................................................................................4
Question 6...............................................................................................................................4
CONCLUSION................................................................................................................................5
REFERENCES................................................................................................................................6

INTRODUCTION
Financial accounting is special branch of accounting that applied by the different
companies to track of financial transactions (Barth, 2015). These transactions are summarized
into different types of financial statements such as income statement, cash flow and balance
sheet that record that company's operating performance over a specific period. This report is
based on the case study where Large Mart develop “student pillow” that allow students to upload
study material into their brain whilst sleeping. After some time, Large Mart recognised that an
American company called Bpple already develop this type of device. As a result, Large Mart
decided to sell out product of Bpple which is called iSleep. This report focuses on the Large Mart
accountancy books to record journal entries and calculate cost of expenditure. Additionally,
calculate cost of goods sold and of car lease.
MAIN BODY
Question 1
Journal entries is used by the business to record daily basis transactions as per the
accounting concepts and rules (Beatty and Liao, 2014). This method applied by the companies to
record individual financial transaction into journal. In general way, it is defined as day to day
accounting written in the journal for each business event.
Date Particular LF Debit Credit
30, June Rent expenses a/c 621 500
To Rent Payable a/c 205 500
(To pay rent expenses for open new
store)
Explanation – As per the above table it is defined that Large Mart paid rent at the end of
the quarter like (April, May and June) So paid in the end of the month of June. Larger mart open
store from May 1 and start their business. So in the end of quarter paid amount of the rent $500
of May and June because contract start from May, 1.
1

Question 2
Date Particular LF Debit Credit
May, 31 Wage Expenses a/c 624 $1860
To cash at bank a/c 101 $860
To inventory Components a/c $1000
Payment of wages of Morgan – Large Mart hire a UNE student (Morgan) for the
management an iSLEEP fan cite on Facebook. He is working 2 hours every day of the week even
he is also working on Sunday. Large amount will be paid amount of wage $30 per hour in a week
(De Waegenaere, Sansing and Wielhouwer, 2015). In the end of the month Morgan receives a
flat screen TV (with a value of $1000) from the stores of inventory and different of the wage
paid in cash. Here is calculate payment of wage of Morgan -
Per day wages = $30*2 = $60
A week amount - $60*7 = $420
In a month - $60*31 = $1860
Difference of cash – $1860 – $1000 = $860
Question 3
To calculate cost of bed, add the amount of director's visit for Melbourne because it is
part of manufacturing of bed. When bed was produced in Melbourne, the director of the Large
Mart sales department arrived the design/producing team to approve the final design of the bed
before the start of production procedure. The director made this trip as specific reason to approve
the design of manufacturing bed. If there is getting any error so, provide suggestions to change as
per the requirement. So calculate the cost of bed there is also including amount of director's trip
due to apply historical accounting. According to this accounting assets should be valued on
purchase price and actual money paid for assets. GAAP requires that assets be recorded at
historical cost on balance sheet.
Cost of Bed
Manufacturing of bed = 40000
Director's trip = 2000
Total cost of bed = ($40000 + $2000) = $42000
2

Question 4
Perceptual inventory System
It is different from periodic inventory system where a company maintains its stock
through physical counts on a definite schedule and reoccurring basis (Gassen, 2014). It provides
highly detailed view of changes in stock with immediate reporting of the price of stock and
accurately presents the level of items on hand.
Date Particular LF Debit Credit
June, 1 Inventory – Trade/sales a/c 120 8000
To Accounts payable a/c 202 8000
(Purchased goods on credit from Bpple)
June, 5 Inventory – Trade/sales a/c 120 30000
To Sales Revenue a/c 401 30000
(Sold 15 iSLEEP to UNE at credit)
June 6, Cash at bank a/c 101 30000
To Inventory – Trade/sales a/c 120 30000
(To paid amount to Bpple via bank transfer)
June, 6 Accounts payable a/c 202 8000
To cash at bank a/c 101 8000
(To paid amount to Bpple via bank transfer)
June, 7 Inventory – Trade/sales a/c 120 27600
To Trade discount Received (Components) a/c 121.2 600
3

To Trade discount received (Trade/sales) 120.2 1350
To cash at bank a/c 101 25650
(To purchase iSleep from Bpple and received
discount)
June, 8 Sales return a/c 401.1 4000
To Cash at bank a/c 101 4000
(To sales return of inventory from UNE)
June, 12 Cash at bank a/c 101 8000
To Sales Revenue a/c 401 8000
(Being sale out goods to Wright college)
As per the above table record all the transactions that was related to purchase and sales in
direct manner. All the amounts are recorded into appropriate accounts.
Question 5
Cost of goods sold = Opening stock + Purchase – Closing stock
In the starting iSLEEP Nil
Purchase 8000 + 25650 33650
Closing Stock 25650 + 800 26450
Cost of the goods sold Nil + 33650 - 26450 7200
The value of all iSLEEP in the end of the year (the 30 June 201x)
Here is calculating the amount of iSLEEP in the end of the year that are remaining in the
company such as = 60 iSLEEP @ 460 + 2 ISLEEP @ 2000
= 25650 + 8000
4

= 33650
Total Amount of revenue that collect through the sales during the year ended 30 June 201x
There is calculate amount of the revenue that earn by the Large mart through iSLEEP
such as -
Total Sales = Wright college (600*5) + UNE (15*2000) = 33000
Question 6
On the date of July, 1 Large Mart takes a car on lease and sets the duration of lease of 6
years and the car has expected life about 8 years. At the time of contract paid amount $3000 and
signed for the lease. The payment is done by the bank after that at the end of the lease period,
Large mart will able to keep the car without pay any additional amount. There is set the amount
of lease about 12%. Larger Mart has been decided to create lease agreement rather than of
purchasing due to high price of the car which would have been about $40500. Large mart did not
have enough amount to purchase this car (Hoyle, Schaefer and Doupnik, 2015).
From the case study of car lease it is analysed that it is a type of finance lease because at
the end ownership has been transferred. According to this lease, the legal owner of the assets for
the duration of the lease, on the other hand, the lessee not only has operating control over the
assets but also has some share of the economic risks and returns from the modification in the
valuation of the underlying assets.
There is also applied AASB 16 for the exemption from a lease, as per the accounting
policy all leased assets valued at or below $10000 qualify for the low-value lease exemption. It is
based on the short term and long term valuation.
CONCLUSION
As per the above report it has been concluded that financial accounting important part of
any organisation that presents financial information in front of management as well as outsider to
present actual situation of company. There is applied financial accounting to present all
information and take effective decision. There are calculating purchase and sales amount to
recognise revenue of the company. There are applied perceptual inventory system to record all
transaction of sales and purchase. To sale out product apply the First in first out method
respectively. There are Large Mart apply AASB 16 to get exemption for the lease of car.
5

REFERENCES
Books and Journal
Barth, M. E., 2015. Financial accounting research, practice, and financial accountability. Abacus.
51(4). pp.499-510.
Beatty, A. and Liao, S., 2014. Financial accounting in the banking industry: A review of the
empirical literature. Journal of Accounting and Economics. 58(2-3). pp.339-383.
De Waegenaere, A., Sansing, R. and Wielhouwer, J. L., 2015. Financial accounting effects of tax
aggressiveness: Contracting and measurement. Contemporary Accounting Research.
32(1). pp.223-242.
Gassen, J., 2014. Causal inference in empirical archival financial accounting
research. Accounting, Organizations and Society. 39(7). pp.535-544.
Harrison Jr, W. T., Horngren, C. T. and Thomas, C. W., 2014. Financial accounting. Pearson
Education..
Hoyle, J. B., Schaefer, T. and Doupnik, T., 2015. Advanced accounting. McGraw Hill.
Kieso, D. E., Weygandt, J. J. and Warfield, T. D., 2016. Intermediate Accounting, Binder Ready
Version. John Wiley & Sons.
Lovell, H., 2014. Climate change, markets and standards: the case of financial
accounting. Economy and Society. 43(2). pp.260-284.
Narayanaswamy, R., 2017. Financial accounting: a managerial perspective. PHI Learning Pvt.
Ltd..
Nobes, C., 2014. International classification of financial reporting. Routledge.
Phillips, F., Libby, R. and Libby, P., 2015. Fundamentals of Financial Accounting. McGraw-Hill
Education.
Schaltegger, S. and Burritt, R., 2017. Contemporary environmental accounting: issues, concepts
and practice. Routledge.
6