BUS285
Technology & Accounting Processes
Revision Questions
Semester 1, 2018
Question 1
Information about the cash position for Cavanagh’s Charter Tours Pty Ltd for the
month of June is presented below:
1. The general ledger Cash at Bank account had a balance of $6,300 on 31 May.
2. The cash receipts journal showed total cash receipts of $22,898 for June.
3. The cash payments journal showed total cash payments of $24,576 for June.
4. The June bank statement reported a bank balance of $4,032 CR on 30 June.
5. Outstanding cheques at the end of June were: no. 864, $60; no. 866, $73; and no. 870, $111.
6. Cash receipts of $1,200 for 30 June were placed in the bank’s overnight safe on 30 June and
were not included in the June bank statement.
7. Comparison of the presented cheques with the entries in the cash payments journal
disclosed that cheque no. 842 for $354, for rent expense, had been wrongly recorded as
$345.
8. Included on the bank statement were:
a. A total credit for $734, indicating an electronic transfer of $680 plus interest earned,
which the bank credited to the account
b. A dishonoured cheque written by Vinko Ltd, a client, for $327
c. Account and transaction fees, $32.
Required:
1. Enter any necessary adjustments in the general journal
2. Prepare a bank reconciliation statement as at 30 June
GENERAL JOURNAL
Date Details Debit Credit
Bank Reconciliation Statement
Question 2
At 31 December2016, the trial balance of Lexington Pty Ltd contained the following amounts
before adjustment:
Accounts Receivable $400,000 Dr
Sales 950,000 Cr
Allowance for doubtful debts 1,000 Cr
Required
a) Based in the information given, which method of accounting for bad debts is Lexington
Ltd using?
b) Prepare the adjusting entry at 31 December 2016, for bad debts expense assuming that the
ageing schedule indicates that $11,750 of accounts receivable will be uncollectable.
c) During the next month, a $5,000 accounts receivable is written off as uncollectible.
Prepare the journal entry to record the write-off.
d) Repeat part c) assuming that Lexington uses the direct write-off method in accounting for
uncollectible accounts receivable
e) How does the Allowance for doubtful debts affect how accounts receivable is reported on
the statement of financial position at the end of the accounting period?
WORKINGS:
GENERAL JOURNAL
Date Details Debit Credit
Question 3
Toy Ltd has the following land and buildings in its accounts as at 30 June 2015:
$000
Land in Wellington at cost 100
Land in Auckland at valuation 2,000
Buildings on land in Auckland at valuation 2012 1,000
Accumulated depreciation (150)
At 30 June 2015, the balance of the Revaluation Surplus is $750,000, of which $700,000
relates to the land in Auckland and $50,000 relates to the buildings. An independent valuation
carried out on this day determined the following fair values: land in Wellington $1,500,000,
land in Auckland $2,400,000, buildings $750,000. The estimated remaining useful life of the
buildings is 15 years with nil residual.
Required
a) Record all entries relating to the revaluation of the assets at 30 June 2015. Ignore
narrations.
WORKINGS:
GENERAL JOURNAL
Date Details Debit Credit
Question 4
Raquet Cave Ltd had the following selected transactions during July 2014. All purchases and
sales were on account. The cost of all inventory sold was 70% of the sales price. Raquet Cave
Ltd is registered for GST and the transactions below are inclusive of GST.
July 1 Purchased inventory from Tennis Australia Ltd for $8,800.
2 Received invoice for freight inwards from Johnson Shipping on Tennis Australia
purchase of $550.
3 Made sales to Squash Club Ltd $1,980 and to Teeny Tennis Ltd $2,200.
5 Purchased inventory from Grant and Sons $5,500.
8 Received credit on inventory returned to Grant and Sons $550.
13 Purchased store supplies from Raquet Supplies $990.
15 Purchased inventory from Tennis Australia Ltd $3,960 and from Lepa Ltd $3,190.
16 Made sales to Martin Ltd $3,795 and to Teeny Tennis Ltd $1,507.
18 Received invoice for advertising from Dennisen Advertisements $594.
21 Sales were made to Squash Club Ltd $310 and to Randee Ltd $3,080.
22 Granted allowance to Squash Club Ltd for inventory damaged in shipment $55.
24 Purchased inventory from Grant and Sons $3,960.
26 Purchased equipment from Raquet Supplies $330.
28 Received an invoice for freight from Johnson Shipping on Grant purchases of 24 July,
$462.
30 Sales were made to Martin Ltd $4,290.
Required:
Journalise the transactions above in the special journals and the general journal
provided.
Purchases Journal
Date Account Inventory Freight GST Paid Accts Pay
Sales Journal
Date Account Sales GST Collect Accts Rec COGS/Inv
GENERAL JOURNAL
Date Details Debit Credit
Question 5
On 1 July 2015, Button Ltd had purchased 3 machines for different purposes. On 30 June
2016, there was an indication that the machines could be impaired due to a fall in demand, so
Dragon Ltd calculated the recoverable amount of the machines. Button Ltd uses straight-line
depreciation over an 8-year period. Assume that all 3 machines had nil residual value at the
end of their lives.
Machine Cost Value in use Net selling
price
1 54,000 45,000 49,000
2 38,000 27,000 30,000
3 24,000 16,000 20,000
116,000
Required:
Record all entries related to these assets for the years ended 30June 2016 and 2017. Ignore
narrations.
WORKINGS:
General Journal
Date Account Titles and Explanation Debit Credit
Question 6
The condensed financial data of Alaska Ltd is provided below:
Alaska Ltd
Statement of financial position
as at 31 December 2016
Assets 2016 2015
Cash 92,700 33,400
Accounts receivable 80,800 37,000
Inventory 121,900 102,650
Investments (long term) 84,500 107,000
Plant and equipment 310,000 205,000
Accumulated depreciation (49,500) (40,000)
Total 640,400 445,050
Liabilities and equity
Accounts payable 62,700 48,280
Accrued expenses payable 12,100 18,830
Bonds payable 140,000 70,000
Contributed equity 250,000 200,000
Retained earnings 175,600 107,940
Total 640,400 445,050
Alaska Ltd
Statement of profit or loss
as at 31 December 2016
$
Sales 297,500
Gain in sale of plant assets 5,000
302,500
Less:
Cost of sales 99,460
Operating expenses 14,670
Depreciation expense 35,500
Income tax 7,270
Interest expense 2,940 159,840
Profit 142,660
Additional information:
1. Plant and equipment was purchased for cash during the year.
2. Investments were sold at cost.
3. Plant and equipment costing $36,000 were sold for cash.
4. A cash dividend was declared and paid during the year.
Required
a) Prepare a statement of cash flows for Alaska Ltd, using the direct method.
Cash Flow Statement
for the year ending December 31, 2016
