Questions and Answers of Financial Accounting 6th Edition

Here are some account changes that have occurred to Lotus Ltd. For each of the items, write in a few words what would have caused the changes and write a journal entry to account for them.1 Cash up
Summarised cash flow statements for the year ended 30 June 2016.Comment on the cash flow of the three companies.
UL started business on 1 July 2016, and had the following transactions on 1 July: a. Issued 300 000 shares of $1 for $300 000 cash.b. Bought equipment for $200 000, paying cash. The equipment has a
The abridged balance sheet for Roche Ltd at 31 August 2016 was as follows:The following transactions occurred during September: a. Paid $ 100 000 of accounts payable, b. Received $300 000 from
South Shore Manufacturing Ltd had this balance sheet:During July 2016, South Shore Manufacturing experienced the following transactions: a. An amount of $10 000 of the shareholders' loan was
Choose five transactions and show both the resource effect and the source effect.
During the year ended 30 June 2016, the following information was recorded in the company's accounts of Borg Limited.a. Issue share capital of $500 000. b. Credit sales, $300000. c. Cash sales, $12
Why does an increase in expenses result in a decrease in shareholders' equity? What other part of the accounting equation is likely to be affected?
Below is the abridged balance sheet for Newcombe Ltd as at 31 May 2016.The following transactions occur during June: a. Received $23 000 from accounts receivable, b. Additional shares worth $80 000
This book mentions the web pages for many companies. Increasingly, corporations and other organisations are putting out detailed information about themselves on the internet. But how good is that
Refer to the extracts of the annual report of Woolworths Limited in this book's appendix. All questions relate to the consolidated accounts.1. What period is covered by the income statement?2. List
Flashy Fashions Ltd is a small company in a coastal town. It rents its premises and its sales are all on credit. It has only three expenses: cost of goods sold, rent and income tax. At the end of its
As has been indicated several times so far, managers of businesses and other organisations are very concerned about how the balance sheet reflects their management of the enterprise. This is very
Is revenue earned from the following transactions? Give reasons for your answers.1. Goods costing $6000 are sold for $9500.2. Goods costing $6000 are sold for $6000.3. Goods costing $6000 are sold
Explain why the difference between current and noncurrent liabilities is important to a company.
Calculate the total expenses for the month of February 2016, given the following transactions.1. Paid salaries of $20 000; $5000 related to work carried out in January and $ 15 000 related to
Calculate the total revenue for the month of February 2016, given the following transactions.1. Credit sales of $100 000 made in February; 50 per cent to be collected in February.2. Cash sales of
Write a paragraph in which you identify a non-accounting career you or someone you know may pursue, and explain the interest in balance sheet information that this career might entail. If you really
State whether or not an asset should be recorded in the balance sheet of XYZ Ltd as at 30 June 2016 in each of the following situations. State the amount (if any) of the asset, and any assumptions
Using the notations 'increase', 'decrease' and 'no effect', indicate the effect on assets, liabilities, shareholders' equity and net profit before tax of failing to record
What is the effect on assets, liabilities and shareholders' equity of each of the following transactions? Use the notations 'increase', 'decrease' or 'no effect'.1. Owners of the company contribute
Gold Coast Customs was organised on 1 July 2016. At the end of the first year of operations the owner prepared the following summary of its activities.1. Customised car services performed for
List four liabilities that can be either current or noncurrent liabilities. What determines their categorisation?
From the following information, prepare an appropriately classified balance sheet as at 30 June 2016 for MSPO Limited. Share capital Cash Accounts payable Retained profits Receivables ($1 549 000 due
Scallops Galore Ltd is a seafood eatery specialising in shellfish and soups. The premises are rented and all sales are for cash, so the company has only a few balance sheet accounts. The accounts, as
The following transactions occurred during 2016.1. Issued shares to investors for cash.2. Provided services to customers, receiving part in cash and the rest on credit.3. Incurred advertising
Read the following extract.Required:1. What is meant by a share buyback?2. What is meant by a debt rating? Why is it important?3. What role does the balance sheet play in the decisions for Telstra
From the following information, prepare a balance sheet, appropriately classified, as at 30 June 2016 for PSM Limited. Share capital Cash Accounts payable Investments ($3371 000 held for short-term
1. 'Qantas Airways … launching a $500 million capital raising to strengthen its balance sheet and continue funding a fleet upgrade before conditions worsen … "A strong balance sheet for us will
Assume this is the first year of operations for the company. Using the following information calculate net profit before tax. Credit sales Cash sales Cash received from accounts receivable Cost of
Define the following terms in your own words: a. Revenue b. Expense c. Net profit d. Dividend e. Retained profits f. Shareholders' equity.
Given the following balances, prepare an income statement for the year ended 30 June 2016 for Bush Traders. Sales Cost of goods sold Wages Electricity Travel Advertising $ 48 000 21000 8 000 4000
Gomez Limited has the following assets and liabilities.1. Classify each balance as an asset2. Calculate shareholders' equity. Loan Cash Accounts payable Accounts receivable Equipment 180000 90000
Below are some of the accounts of Money Making Ltd:1. Wages payable2. Share capital3. Cash and cash equivalents4. Inventory5. Borrowings6. Provision for employee entitlements (current portion)7.
Discuss the examples of ethical problems given at the end of section 1.4. What ethical issues do you see? What do you think the chief accountant, the auditor and the general manager should do?Data
Kelly opened a photography business in a small shop that she rented from a large retailer, Eastfield Limited. She paid the first month's rent of $400 by writing a cheque from her personal account.
The Framework for the Preparation and Presentation of Financial Statements examines the characteristics of accounting information that make this information useful for decision-making. It also points
Consider the following statements relating to how we might account for certain transactions or events. What accounting assumption or principle underlies each?1. 'Inventory is recorded at cost unless
1. Given the following balances, prepare a balance sheet as at 30 June 2016 for Bricks Ltd. Bank loan Share capital Accounts payable Taxes payable Inventory Cash Land and buildings Retained profits
Given the following information, prepare an income statement for Gerke Ltd for the year ended 30 June 2016. Rent expense Cost of goods sold Sales Wages Advertising Training expense $ 30000 100 000
Mr Smiles opened his fruit shop at the beginning of last year. By the end of that year he had the following assets and liabilities:1. What is Mr Smiles' shareholders' equity in his fruit shop at the
Do you think lecturers should have the right to use their own judgement in determining subject grades, or should those grades be based on objectively set exams administered by someone other than
Listed below are balances for 2016.1. Classify each account as an asset, liability, revenue, expense or equity.2. Prepare an income statement for the period ending 31 December 2016. Accounts
Fred Jones started a consulting business on 1 March 2016. During the period up to 30 June 2016, the following transactions occurred:1. Fred put $10 000 of his own money into the business.2. He
Which of the following terms would you see in financial statements prepared under (a) Accrual accounting and(b) Cash accounting: accounts payable, accounts receivable, cash and inventory?
Who uses accrual accounting?
Kingsford Customs was founded on 1 July 2016. At the end of first year's operations, the following summary of its activities has been prepared by the owner.1. Borrowed cash of $60 000 from CAA
What does an audit achieve?
1. During the year ended 30 June 2016, French Horn Ltd made cash sales of $100 000, credit sales of $200 000 ($50 000 of which were still to be collected at year-end), and received $25 000 owing from
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Brick Limited made cash sales of $550 000 and credit sales of $370 000 ($220 000 of which had been collected by year-end). It paid $410 000 in expenses and owed $230 000 at year-end. What was the
Read the following extract.The overall objective of the financial statement audit is to add credibility to management’s financial reports …Essential Component Every financial market, and
Given the following information relating to Penguin Ltd, what is the balance of shareholders' equity? Property, plant and equipment Accounts receivable Cash Inventory Bank loan Wages payable $ 1 500
Wings Ltd is an airline services company with a plant near Sydney Airport and service centres in several states. It provides meals, serviettes and other food-related items, cleaning, interior
1. During the accounting period, Green Limited received $750000 from sales and paid out $580000 in wages and other expenses. However, an extra $260000 worth of sales were made during the year but the
Refer to the extracts of the 2014 annual report of Woolworths Limited in the book's appendix. All questions relate to the consolidated accounts.1. Provide indicators that Woolworths uses accrual
Listed below are balances at 30 June 2016.1. Classify each account as an asset, liability, revenue, expense or equity.2. Prepare an income statement for the period ending 30 June 2016.3. Prepare a
John Smith set up his own catering business on 1 July 2015. During the 12 months up to 30 June 2016 the following transactions occurred:1. John put $10000 of his own money into the business.2. He
1. Given the following balances, prepare a balance sheet as at 30 June 201 6 for Palm Tree Limited.2. The company did not declare any dividends during the year. Its balance in retained profits at the
Briefly describe what each of the following groups would like to know from the financial statements of the Swans Football Club.1. The CEO2. The players3. The supporters4. The suppliers of meat pies
Who are the main parties that comprise the social setting of accounting?
Consider the list of accounts given and categorise them as an asset, liability or shareholders' equity item that would appear on the balance sheet or a revenue or expense that would appear on the
On January 1, Neddar purchases $800,000 of 6% bonds, due in 10 years, with interest receivable semiannually on June 30 and December 31 each year. The bonds were purchased at face amount.Required:1.
What is the “flip side” of an investment in equity securities?
Gator Shoes, Inc., manufactures a line of stylish waterproof footwear. The following transactions relate to investments in common stock during 2024.March 1 Purchases 3,000 shares (10%) of Power Drive
On December 29, 2024, Adams Apples purchased 1,000 shares of General Electric common stock for $19 per share. On December 31, the market value of the stock increased to $20 per share. On January 24,
Refer to the transactions in ED–4, but now assume the 1,000 shares are sold on February 1, 2025, for $80 per share.Data from in ED-4Gator Shoes, Inc., manufactures a line of stylish waterproof
On December 29, 2024, Adams Apples purchased 1,000 shares of General Electric common stock for $19 per share. On December 31, the market value of the stock increased to $20 per share. On January 24,
During 2018, Noval Company sells 270 units of inventory for $100 each. The company has the following inventory purchase transactions for 2018.Required:1. Calculate ending inventory, cost of goods
During 2018, Fueltronics spends $200,000 on several different research projects to gain new knowledge about the use of alternative fuels to operate motorized vehicles. Because one of the projects
Presented below is a partial amortization schedule for a three-year installment note requiring monthly payments of $1,128.11.1. What is the principal amount of the note?2. What is the total number of
On January 1, 2024, Splash City issues $500,000 of 9% bonds, due in 20 years, with interest payable semiannually on June 30 and December 31 each year.Required:Assuming the bonds issue for $500,000,
On January 1, 2024, White Water issues $600,000 of 7% bonds, due in 10 years, with interest payable semiannually on June 30 and December 31 each year. The market interest rate on the issue date is 6%
Tony’s favorite memories of his childhood were the times he spent with his dad at camp. Tony was daydreaming of those days a bit as he and Suzie jogged along a nature trail and came across a
On January 1, 2024, Corvallis Carnivals borrows $30,000 to purchase a delivery truck by agreeing to a 5%, five-year loan with the bank. Payments of $566.14 are due at the end of each month, with the
On January 1, 2024, Gundy Enterprises purchases an office for $360,000, paying $60,000 down and borrowing the remaining $300,000, signing a 7%, 10-year mortgage. Installment payments of $3,483.25 are
On January 1, 2024, Stoops Entertainment purchases a building for $610,000, paying $110,000 down and borrowing the remaining $500,000, signing a 9%, 15-year mortgage. Installment payments of
On January 1, 2024, Beaver Tours financed the purchase of a new building by borrowing $600,000 from the bank using a 30-year, 6% note payable. Payments of $3,597.30 are due at the end of each month,
On January 1, 2024, Tropical Paradise borrows $50,000 by agreeing to a 6%, six-year note with the bank. Loan payments of $828.64 are due at the end of each month with the first installment due on
On January 1, 2024, Strato Corporation borrowed $2 million from a local bank to construct a new building over the next three years. The loan will be paid back in three equal installments of $776,067
On January 1, 2024, Monster Corporation borrowed $9 million from a local bank to construct a new highway over the next four years. The loan will be paid back in four equal installments of $2,657,053
On January 1, 2024, Jalen Company purchased land costing $800,000. Instead of paying cash at the time of purchase, Jalen plans to make four installment payments of $215,221.64 on June 30 and December
On September 1, 2024, a company decides to lease office space in a building. The building’s owner offers the company the following options, with the first monthly payment beginning September 30,
On September 1, 2024, a company decides to lease a new delivery truck for three years. The truck dealership offers the company the following options, with the first monthly lease payment beginning
A company purchases a small office building as its new headquarters. The building cost $750,000. To purchase the building, the company issues a 15-year installment note with 5% interest. The company
On January 1, 2024, Mitchell Company purchases new equipment for $700,000. Mitchell is required to make a down payment of $100,000 and issue an installment note for the remaining balance of $600,000.
Using EDGAR (Electronic Data Gathering, Analysis, and Retrieval system), find the annual report (10-K) for Six Flags Entertainment Corporation for the year ended December 31, 2019. Locate the
On April 1, 2024, Primer Corp. signs a five-year lease to use office space. The present value of the monthly lease payments is $100,000. Record the lease.
A company decides to obtain a small-business loan of $200,000. The financial institution from which the company borrows offers two options:a. Borrow $200,000 at 6% with monthly payments of $3,866.56
On January 1, 2024, Twister Enterprises, a manufacturer of a variety of transportable spin rides, issues $600,000 of 8% bonds, due in 20 years, with interest payable semiannually on June 30 and
Viking Voyager specializes in the design and production of replica Viking boats. On January 1, 2024, the company issues $3,000,000 of 9% bonds, due in 10 years, with interest payable semiannually on
The Tony Hawk Skate Park was built in early 2024. The construction was financed by a $3,000,000, 7% note due in six years, with payments of $51,147 required each month. The first year has not been as
On January 1, 2024, Vacation Destinations issues $40 million of bonds that pay interest semiannually on June 30 and December 31. Portions of the bond amortization schedule appear below:Required:1.
Temptation Vacations issues $60 million in bonds on January 1, 2024, that pay interest semiannually on June 30 and December 31. Portions of the bond amortization schedule appear below:Required:1.
Adrenaline Entertainment is struggling financially and its CFO, David Plesko, is starting to feel the heat. Back on January 1, 2020, Adrenaline Entertainment issued $100 million of 6% bonds, due in
On June 1, 2024, Florida National leased a building. The lease agreement calls for Florida National to make lease payments of $3,618.18 each month for the next two years, with the first lease payment
Pretzelmania, Inc., issues 7%, 10-year bonds with a face amount of $70,000 for $70,000 on January 1, 2024. Interest is paid semiannually on June 30 and December 31.1. Record the bond issue on January
Super Splash issues $1,000,000, 7% bonds on January 1, 2024, that mature in 15 years. The market interest rate for bonds of similar risk and maturity is 6%, and the bonds issue for $1,098,002.
On January 1, 2024, Universe of Fun issues $900,000, 8% bonds that mature in 10 years. The market interest rate for bonds of similar risk and maturity is 9%, and the bonds issue for $841,464.
On June 30, 2024, Exploration Inc. signs a lease requiring quarterly payments each year for the next five years. Each of the 20 quarterly payments is $29,122.87, with the first lease payment

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