Financial Accounting Assignment - Course FINC101 - Solutions

This document presents a comprehensive solution to a financial accounting assignment, addressing multiple questions and concepts. The assignment covers a wide array of topics, including bad debts, depreciation methods (straight-line, reducing balance, and units of output), asset accounting, income statements, balance sheets, inventory valuation (FIFO, LIFO, and AVCO), and cash flow statements. It also explores ratio analysis, providing insights into profitability, liquidity, and efficiency. Detailed calculations, journal entries, and financial statements are included to demonstrate the application of accounting principles. The solutions provide a thorough understanding of financial accounting concepts and their practical application.

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

1FINANCIAL ACCOUNTING ASSIGNMENT
Table of Contents
Answer to Question 25.11A.........................................................................................................2
Answer to Question 26.10A.........................................................................................................4
Answer to Question 27.3A...........................................................................................................5
Answer to Question 27.21A.........................................................................................................8
Answer to Question 28.10A.........................................................................................................9
Answer to Question 28.12A.......................................................................................................11
Answer to Question 29.3A.........................................................................................................13
Answer to Question 34.4A.........................................................................................................14
Answer to Question 39.2A.........................................................................................................14
Answer to Question 47.11A.......................................................................................................15
Answer to Question 47.14A.......................................................................................................15
References..................................................................................................................................17

2FINANCIAL ACCOUNTING ASSIGNMENT
Answer to Question 25.11A
Bad
Debts
Expens
e a/c
Date Particulars Amoun
t
Date Particulars Amou
nt
31.12.20
12
To Allowance for Doubtful
Debts
2100
To Allowance for Doubtful
Debts
1395 31.12.20
12
Balance c/d 3495
3495 3495
1.1.2013 To Bal b/d 3495
31.12.20
13
To Allowance for Doubtful
Debts
750
31.12.20
13
To Allowance for Doubtful
Debts
1867.5 31.12.20
13
By Bal c/d 6112.5
6112.5 6112.5
Date Particulars Amou
nt
Date Particulars Amou
nt
31.12.20
12
By Bad Debts
Expense
2100
By Bad Debts
Expense a/c
1395
31.12.20
12
To Bal c/d 3495
3495 3495
1.1.2013 By Bal b/d 3495

3FINANCIAL ACCOUNTING ASSIGNMENT
31.12.20
13
To Balance c/d 6112.5 31.12.20
13
By Bad Debts
Expense a/c
2617.5
6112.5 6112.5
31.12.20
14
To Bal c/d 6112.5 1.1.2014 By Bal b/d 6112.5
6112.5 6112.5
b)
Accounts Receivable -
B. Roke
Date Particulars Amount Date Particulars Amo
unt
31.12.2
012
To Allowance for
doubtful debts
70 31.12.2
012
By Profit and
Loss a/c
70
70 70
Accounts Receivable -
H.A. Ditt
Date Particulars Amount Date Particulars Amo
unt
31.12.2
012
To Allowance for
doubtful debts
42 31.12.2
012
By Profit and
Loss a/c
42
42 42

4FINANCIAL ACCOUNTING ASSIGNMENT
Answer to Question 26.10A
Cost of Non- Current Asset 100000
Anticipated Life (in years) 4
Residual Value 20000
Sale Value of Asset 45000
Rate of Depreciation under Reducing Balance
Method
33%
Sale Price 45000
Using Straight Line Method
Year 2009 2010 2011 2012
Opening Value 100000 80000 60000 40000
Less: Annual Depreciation 20000 20000 20000 -
Closing Value 80000 60000 40000 40000
Using Reducing Balance Method
Year 2009 2010 2011 2012
Opening Value 100000 73600 49312 33039
Less: Annual Depreciation 26400 24288 16273 -
Closing Value 73600 49312 33039 33039
b)
Profit or Loss on Disposal of Assets Under
SLM
Under
Reducin
g
Balance
Profit/(Loss) 5000 11961

5FINANCIAL ACCOUNTING ASSIGNMENT
Answer to Question 27.3A
Machiner
y a/c
Date Particulars Amount(
Dr.)
Date Particulars Amount (Cr.)
1.1.201
2
To Cash 2800 31.12.20
12
By
Balance
c/d
2800
2800 2800
1.1.201
3
To Balance b/d 2800
1.10.20
13
To Cash 3500
31.12.20
13
By
Balance
c/d
6300
6300 6300
b)
Fixtures
a/c
Date Particulars Amount(
Dr.)
Date Particulars Amount (Cr.)
1.1.201
2
To Cash 290
1.7.201
2
To Cash 620

6FINANCIAL ACCOUNTING ASSIGNMENT
31.12.20
12
By
Balance
c/d
910
910 910
1.1.201
3
To Balance b/d 910
1.12.20
13
To Cash 130
31.12.20
13
By
Balance
c/d
1040
1040 1040
c)
Provision for Depreciation for Machinery a/c
Date Particulars Amount Date Particulars Amount
31.12.2012 To Balance
c/d
420 31.12.201
2
By Depreciation
Expense
420
420 420
1.1.2013 By Balance b/d 420
31.12.2013 To Balance
c/d
1365 31.12.201
3
By Depreciation
Expense
945
1365 1365
Provision for Depreciation for Fixtures a/c
Date Particulars Amount Date Particulars Amount

7FINANCIAL ACCOUNTING ASSIGNMENT
31.12.201
2
By Depreciation
Expense
45.5
31.12.2012 To Balance
c/d
45.5
45.5 45.5
1.1.2013 By Balance b/d 45.5
31.12.201
3
By Depreciation
Expense
49.725
31.12.2013 To Balance
c/d
95.225
95.225 95.225
d)
Non-Current Assets Section of Balance Sheet on
31.12.2012
Particulars Amount
Machinery at cost 2800
Less: Prov. For Depreciation 420
2380
Fixtures at Cost 910
Less: Prov. For Depreciation 45.5
864.5
Total Non-current Assets 3244.5
Non-Current Assets Section of Balance Sheet on 31.12.2013
Particulars Amount
Machinery at cost 6300
Less: Prov. For Depreciation 1365
4935

8FINANCIAL ACCOUNTING ASSIGNMENT
Fixtures at Cost 1040
Less: Prov. For Depreciation 95.225
944.775
Total Non-current Assets 5879.78
Answer to Question 27.21A
a) i) Depreciation
Under the
SLM basis
Year Annual Depreciation
2011 450
2012 450
2013 450
2014 450
a)ii) Under Diminishing Balance Method at 60% per annum
Year Annual Depreciation
2011 1080
2012 432
2013 173
2014 69
a)iii) Depreciation Under the Units of Output Method
Year Annual Depreciation
2011 350
2012 450
2013 450
2014 550

9FINANCIAL ACCOUNTING ASSIGNMENT
b) Laser Printer Account for 2014
Date Particulars Amount Date Particulars
Amoun
t
1.1.201
4 To Balance b/d 1800 1.7.2014
By Asset Disposal
Account 1800
1800 1800
Provision
for
Depreciatio
n a/c
Date Particulars Amount Date Particulars
Amoun
t
1.7.201
4 To Asset Disposal 1719
1.1.201
4 By Balance b/d 1685
1.7.201
4 By Depreciation Expense 35
1719 1719
Asset
Disposa
l a/c
Date Particulars Amount Date Particulars
Amoun
t
1.7.201
4 To Machinery 1800
1.7.201
4
By Provision For
Depreciation 1719
To Profit and Loss 119 By Bank 200
1919 1919
Answer to Question 28.10A
Income Statement for the year ending 31 March 2012
Particulars Amount Amount
Sales Revenue 123759
Cost of Sales:
Opening Inventory 7940

10FINANCIAL ACCOUNTING ASSIGNMENT
Add: Purchases 60064
68004
Less: Closing Inventory 6805
61199
Gross Profit 62560
Other Income 62
Total Income generated by business 62622
Total Expenditure of the business
Wages and Salaries accrued 3500
Office Expenses 335
Rent and Insurance 8270
Allowance for Doubtful Debts 110
Depreciation on Fixtures and Fittings 190
Depreciation on Van 1400
Carriage Outwards 3210
Discount Allowed 2480
Total Expenditure of the business 19495
Profit earned during the year 43127
Statement of Financial Position as on 31.3.2012
Particulars Amount Amount
Current Assets
Cash 140
Inventory 6805
Prepaid Wages and Salaries 35700
Accounts Receivable 12418
Less: Allowance for Doubtful Debts 740 11678
Prepaid Rent 600
Total Current Assets 54923
Non-Current Assets
Fixtures and Fittings 1900
Less: Depreciation 190 1710
Van 5600
Less: Depreciation 1400 4200
Total Assets 60833
Current Liabilities

11FINANCIAL ACCOUNTING ASSIGNMENT
Bank Overdraft 2490
Office Expenses Payable 16
Non-Current Liabilities
Accounts Payable 11400
Total Liabilities 13906
Net Assets 46927
Capital at the beginning of the year 25200
Add: Profit during the year 43127
Less: Drawings made during the year 21400
Capital at the end of the year 46927
Answer to Question 28.12A
Particulars Amount Amount
Income Earned during the
year
Sales 138078
Less: Cost of Sales
Inventory as on 1 June 2011 11927
Add: Purchases 84561
Less: Closing Inventory 13551 82937
Gross Profit Earned 55141
Expenditure
Carriage Outwards 2933
Rent, Rates and Insurances 5742
Postage and Stationary 3001
Advertising 1330
Salaries and Wages 26420
Allowance for bad debts 170
Bad Debts 877
Depreciation on Equipment 8700
Total Expenditure 49173

12FINANCIAL ACCOUNTING ASSIGNMENT
Profit earned during the year 5968
Statement
of
Financial
Position as
on 31 May
2012
Particulars
Amoun
t Amount
Current Assets
Prepaid Rates 880
Cash in Hand 177
Cash at Bank 1002
Inventory 13551
Total Current Assets 15610
Non-current Assets
Equipment 58000
Less: Provision for Depreciation 27700
30300
Accounts Receivable 12120
Less: Allowance for Doubtful
Debts 300
11820
Total Non-Current Assets 42120
Total Assets 57730
Total Liabilities
Accounts Payable 6471
Total Liabilities 6471
Net Assets 51259
Capital of the business 53091
Add: Profit during the year 5968
Less: Drawings during the year 7800
51259

13FINANCIAL ACCOUNTING ASSIGNMENT
Answer to Question 29.3A
i)
Using FIFO
Method
Month Quantity Change
Actual Unit
Cost
Actual Total
Cost
January 120 16 1920
April 80 18 1440
June -125
October 150 19 2850
November -210 25
Closing Inventory-in-
Trade 375
Using LIFO
Method
Month Quantity Change
Actual Unit
Cost
Actual Total
Cost
January 120 16 1920
April 80 18 1440
June -125
October 150 19 2850
November -210 25
Closing Inventory-in-
Trade 240
Using AVCO
methods on a
perpetual
inventory basis
Date Purchases Sales
Balanc
e
Units Unit Cost Total Units
Unit
Cost Total Units
January 120 16 1920 120
April 80 18 1440 200
June 125 19 2375 75
October 150 19 2850 210

14FINANCIAL ACCOUNTING ASSIGNMENT
November 210 25 5250 15
Closing Inventory-in-
Trade 274
Answer to Question 34.4A
Categor
y X
Categor
y Y
Given, Sales to public at list price 9000 24000
Trade Discount/Gross Profit
Margin 15% 18%
a) Cost of Goods Sold 7650 19680
b) Gross Profit 1350 4320
c) Total Expenses 1260 3360
d) Net Profit 90 960
e) Average Inventory at Cost 765 1230
Answer to Question 39.2A
Statement of Cash Flow for the period ended 31 December
2013
Particulars
Amoun
t
Amoun
t
Net Profit during the year 21160
Adjustments for:
Depreciation on Van
Depreciation on Fixtures
21160
Increase in Inventory -6800
Increase in Accounts Receivable -1800
Decrease in Accounts payable -3294
Net Cash from Operating Activities
926
6
Cash flow from Investing Activities
Purchase of Fixtures -400
Purchase of Van -5500
Net cash used in investing activities -
590

15FINANCIAL ACCOUNTING ASSIGNMENT
0
Cash Flows From Financing
Activities
Capital Issued during the year 15500
Loan 5000
Bank Overdraft 94
Drawings -21600
Cash Introduced -1480
Bank -900
-
338
6
-20
Opening Cash Balance 220
Closing Cash Balance 200
Answer to Question 47.11A
Particulars
Spreadlight
Ltd. EasyLawn Ltd.
i) Gross profit percentage 17% 27%
ii)
Net profit as a percentage of
sales 7% 11%
iii) Expenses as Percentage of Sales 11% 16%
iv) Inventory Turnover 0.892241379 0.84783
v) Rate of Return 45% 76%
vi) Current Ratio 2.111111111 5.23684
vii) Acid Test Ratio 0.947089947 1.02632
viii)
Accounts Receivable/Sales
Ratio 4% 2%
ix)
Accounts Payable /Purchases
Ratio 9% 3%
In this case, EasyLawn Ltd. is doing better than Spreadlight Ltd. in terms of profitability.
This may be due to the better and efficient management of the resources and the personnel by the
entity. However, the entity needs to improve in terms of managing its receivables and making the
payments to the creditors. This can happen through better inventory management by the
organisation (Robinson et al. 2015).

16FINANCIAL ACCOUNTING ASSIGNMENT
Answer to Question 47.14A
Particulars
Amoun
t
Gross Profit as a percentage of Sales 25%
Rate of Inventory Turnover 16
Net Profit as a percentage of Sales 20%
Net Profit as a percentage of Capital
Employed 27%
Current Ratio 2
Quick Ratio 1
AB Engineering Supplies had a better business year because it was able to generate more profits
both through the sales and in terms of the net amount available to the shareholders. The current
ratio and quick ratio of the entity are also good, which means it is doing well in terms of
liquidity. The percentage of returns generated on the investment is also quite high (Gitman,
Juchau and Flanagan 2015).

17FINANCIAL ACCOUNTING ASSIGNMENT
References
Gitman, L.J., Juchau, R. and Flanagan, J., 2015. Principles of managerial finance. Pearson
Higher Education AU.
Robinson, T.R., Henry, E., Pirie, W.L. and Broihahn, M.A., 2015. International financial
statement analysis. John Wiley & Sons.