ACCT101 Foundations of Accounting | My Assignment Tutor

Canterbury Institute of Management (CIM) ACCT101 Foundations of AccountingFinal Examination(Semester 3, 2020)Read the instructions below together with the more detailed Final Examinations Instructions available on the Course Hub under the ‘Assessments’ tab.Instructions Download and save this paper. Type your answers in the answer spaces/boxes provided. Save your paper as you go. Submit your completed paper to the drop box within the allocated time.   This is an ‘open book’ examination.  You may refer to your online course materials, your textbook, and a dictionary. You may use a calculator or spreadsheet if necessary.  You must not ‘Google’ or otherwise use the internet when completing this examination.  You must not collaborate with anyone, directly or indirectly, whether in person, by telephone or via the internet, while completing this examination. This examination is worth 50 per cent of your final grade in this course. You have 2 hours and 10 minutes to complete this examination, inclusive of reading time.Answer ALL questions.Question 1 (15 marks) Double entry accountingWrite the appropriate journal entries in the Books of Account of Wondabyne Pty Ltd for the following.Gozzie Pty. Ltd. paid their rent in arrears of $1,500. Account Dr Cr Rent payable $1500Cash/Bank$1500 Gozzie Pty. Ltd. paid $500 wages owing. Account Dr Cr Cash/Bank $500Wages payable$500 Gozzie Pty. Ltd. purchased $2,000 of inventory using cash from a supplier. GST. Account Dr Cr Purchases/Inventory $2000Cash$2000 Gozzie Pty. Ltd. was granted a Loan of $1,000,000. Account Dr Cr Bank $1,000,000Bank loan$1,000,000 Gozzie Pty. Ltd. paid $2,000 to an outstanding electricity account. Account Dr Cr Electricity payable $2000Cash$2000 Gozzie Pty. Ltd. received $50,000 from the Owner. Account Dr Cr Cash $50000Capital$50000 Gozzie Pty. Ltd. recorded a Bad Doubtful Debt Provision of $20,000. Account Dr Cr Bad debt expense $20000Allowance for doubtful debts$20000 Gozzie Pty. Ltd. has a Debt to Equity Ratio of 1:5. Would you be likely to invest in the company? CommentYes, lesser debt means lesser risk for the company due to lesser fixed interest payment. it means 66.6% business is owned by equity holders remaining Is owned by debt holdersGozzie Pty. Ltd. has a return on investment ratio of 4:1 whilst a competitor has a ratio of 2:1. As an investor which company would you invest in? CommentYes because it means more return.Gozzie Pty. Ltd. received a Dividend of $5,000. Why would investors consider this a important decision on whether to invest in the company? CommentEach investor wants a certain % of return on their Investment. So, dividend pays an important role here r more return, more investors would be attractedQuestion 2 (15 marks) Journal EntriesWrite the appropriate journal entries in the Books of Currawong Pty. Ltd. for the following.Currawong Pty. Ltd. received $50,000 from the bank. Account Dr Cr Cash $50000Bank$50000 Currawong Pty. Ltd. created a provision for Annual Leave of $10,000. Account Dr Cr Annual leave expense $10000Provision for annual leave$10000 Currawong Pty. Ltd. paid $12,000 Insurance for the year ahead. Account Dr Cr Prepaid Insurance $12000Cash$12000 Currawong Pty. Ltd. discovered inventory of $10,000 inventory missing in their annual Stocktake. Account Dr Cr Loss on inventory $10000Inventory$10000 Currawong Pty. Ltd. purchased a Truck for $20,000 on credit. Account Dr Cr Truck$20000Accounts payable$20000Currawong Pty. Ltd. recorded depreciation on Truck $1000. Account Dr Cr Depreciation expense $1000Accumulated depreciation-truck$1000 Currawong Pty. Ltd. purchased inventory for $50,000 on credit. GST to be recorded. Account Dr Cr Purchases/Inventory $50000Accounts payable50000 Currawong Pty. Ltd. recorded Cash Sales of $20,000. Account Dr Cr Cash $20000Sales revenue$20000 Currawong Pty Ltd. earned Interest Income of $5,000. Account Dr Cr Cash $5000Interest income$5000 Currawong Pty. Ltd. paid a Dividend $10,000 to Shareholders. Account Dr Cr Dividend expense $10000Cash$10000Question 3 (20 marks) Cost and Management AccountingFrom the following information, you are required to post to the ledger accounts and balance off the accounts of South Asia Company.The following information relates to its production for the month ($): Raw material purchased on credit 50,000 Raw material issued to production 25,000 Raw material issued as indirect material 1,000 Direct labour charged to production 30,000 Indirect labour 3,000 Factory labour payroll was 40,000 in total with PAYG tax payable10,000 Factory costs paid 30,000 Depreciation on factory machinery 10,000 Factory overhead charged to production 50,000 Cost of goods sent to finished goods store 40,000 Goods sold on credit: Sales price 60,000 Cost price 40,000Required: Complete the required journal entries.Account Dr Cr(Amounts in $)Raw material/Inventory 50000Accounts payable50000WIP Inventory 25000Raw material/Inventory25000Manufacturing overhead 1000Raw material/Inventory1000WIP Inventory 30000Direct labour payable30000Manufacturing overhead 3000Factory payroll3000Wages expense PAYG Cash 4000010000 30000Manufacturing overhead 30000Cash30000Manufacturing overhead10000Accumulated Depreciation10000Work in Process Inventory 50000Manufacturing Overhead50000 Cost of goods sold Finished goods inventory 4000040000Accounts receivables Cost of goods sold Profit on sale 6000040000 20000Question 4. (10 marks) Cash BudgetingUse the information below to prepare a cash payments budget for Kangaroo for the months of January, February, and March.Actual net purchases were:   November December $10,000 $20,000 respectively    Budgeted net purchases are:   January February March $30,000 $40,000 $50,000 respectively  Purchases are 50% credit and 50% cash.   Interest paid $15,000 in March  Electricity account of $5,000 received in February to be paid in March.  Depreciation each month is $5,000.   Kangaroo budgets to pay accounts payables as follows:   • 50% in the month of purchase.   • 30% in month after purchase.   • 20% in second month after purchase.    Required: Prepare the Cash Budget for January, February, March Particulars Jan Feb March             Cash payments:                   Purchases         Cash 15,000.00 20,000.00 25,000.00   Credit         Jan   7,500.00 4,500.00   Feb     10,000.00   Mar         Nov 1,500.00 1,000.00     Dec 5,000.00 3,000.00 2,000.00             Interest     15,000.00   Electricity     5,000.00             Total cash payments 21,500.00 31,500.00 61,500.00            Question 5 (15 marks) Cost Volume ProfitTilly Devine has the following costs and revenues for the year:   Total revenues $5,000,000   Total fixed costs $1,000,000   Total variable costs $2,000,000   Total units produced and sold 500,000   Required:Calculate the breakeven in units. Break even in units FC/(Contribution1000000/(5000000-2000000)/500000166667 UnitsCalculate the quantity that would produce an operating profit of $500,000.       Units to be sold   Revenues 25,00,000.00 2,50,000.00   Less: VC 10,00,000.00     Less: FC 10,00,000.00             Operating profit 5,00,000.00            Calculate the quantity that would produce an operating profit of $1,000,000.     Units to be sold   Revenues 33,33,333.33 3,33,333.33   Less: VC 13,33,333.33  Or 333334   Less: FC 10,00,000.00             Operating profit 10,00,000.00            Calculate the breakeven quantity if fixed costs increase to $1,500,000.1500000/(5000000-2000000)/500000250000Calculate the operating margin if 600,000 units are sold.    Revenues 60,00,000.00 Less: VC 24,00,000.00 Less: FC 10,00,000.00     Operating profit 26,00,000.00    Question 6 (10 marks) Management Decision MakingThe management of the Bhatti business requests assistance from its economic analyst in arriving at a decision whether to continue manufacturing a certain part of an assembly or to buy it from an outside supplier who has been quoting a price of $20.00 per unit.    The company’s annual requirement is 50,000 units and the costs accumulated for their manufacture are:  Direct Materials $20,000  Direct Labour $10,000  Indirect Labour $10,000  Electricity $1,000  Factory Rent $5,000  If the parts are purchased outside, present machinery used to make the parts could be sold and its book value would be realised ($30,000).  This would reduce total machinery depreciation by $10,000.  The change would increase insurance by $20,000.  If the parts were purchased from an outside supplier, the following additional costs would be incurred:  • Freight: $ 0.50 per unit.  • Compensation: $25,000. Required:  Prepare an advice to management detailing the reasons whether they should make or buy the product?  Ensure you include all calculations and the basis for your decision. Particulars Make Buy           Purchase price   10,00,000.00   DM 20,000.00     DL 10,000.00     IL 10,000.00     Electricity 1,000.00     Rent 5,000.00     Insurance 20,000.00 20,000.00   Savings in Depreciation   -10,000.00   Sale of machinery   -30,000.00   Freight   25,000.00   Compensation   25,000.00           Total cash outflows 66,000.00 10,30,000.00    Since the cash outflows under Make option is lower, the product must be manufactured in house      Question 7 (15 marks) Audit.The figures in the General Purpose Financial Statements (Balance Sheet, Income Statement, Cashflow) are subject to the professional judgement and choices made by the management of the company. Identify the 5 accounts you consider to be the most at risk of misstatement by the company and why.Comment: the following are the 5 accounts: Sales because this is the major source of revenue for the business and hence there is a higher chances of material misstatement Cash because this is the major funding of business operations for the business and hence there is a higher chances of material misstatement Receivables because there Is a chance of misappropriation Inventory because there Is a higher chance of theft Expenses because misstating expenses would mean more income

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