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business
intermediate accounting

Questions and Answers of Intermediate Accounting

A. Prepare a table setting out the average credit/collection costs both in total dollars and as a percentage of net credit sales.B. Prepare a table to show the cost of
The information on the next page has been extracted from the financial statements of Crystal Craft Ltd.201520162017Cash at bankMarketable securitiesAccounts receivableSales revenue (all sales on
The following information has been extracted from the annual reports of Lilydale Ltd and Monbulk Ltd.Lilydale LtdMonbulk LtdSales (net credit) revenue for yearAllowance for Doubtful Debts,
Barrett’s Boots Ltd has traditionally made sales for cash and on credit only. Management has resisted accepting credit cards on the basis that the business would lose on average a credit card fee
Norwood Ltd received the following bills during the last 3 months of the financial year ended 30 June.Date of billAmount of debtTerm of billInterest rateDate of discountDiscount rate1. April
The accountant for Debbie’s Dance Ltd prepared an ageing analysis of accounts receivable balances at 30 June 2015 as set out below. The percentages of each age group are based on past experience
All transactions below relate to Biancardi Construction Ltd’s uncollectable accounts for the financial year ended 30 June 2015. The company is registered for GST.July 18Wrote off the
Cathy Smythe, who trades as Cathy’s Corner, uses the following journals in her business: general, cash receipts, cash payments, sales and purchases. The control account for the accounts receivable
Great Outdoors Ltd sells outdoor furniture settings on credit. The accounting records at 30 June 2015 reveal the following. Ignore GST.Credit sales (for year)Credit sales returns and allowances (for
On 1 June, McLean, Roberts and Associates had Accounts Receivable and Allowance for Doubtful Debts accounts as set out below. The firm is registered for the GST.Accounts Receivable1/6Balance847
On 1 June, Mason and Boyce had Accounts Receivable and Allowance for Doubtful Debts accounts as below. Ignore GST.Accounts Receivable1/6Balance849 555Allowance for Doubtful Debts1/6Balance12
Karen Broderick commenced business on 1 July 2014. On 30 June 2015, she found that she had written off debts amounting to $1875. In addition, she found it necessary to create an allowance for
The following transactions relate to the business of Richmond Raleigh Ltd.1. A bill dated 6 July provided for payment after 90 days of $4000 plus interest at 10% p.a. was received on 6
Cameron’s Cleaning Services Ltd has overdue fees receivable from L. Shore for $10 000. On 22 May, Shore requested a 90-day extension of the payment date, and the company agreed to accept a 90-day,
While accounting for accounts receivable for Easy DVD Ltd, the following information became available to the accountant. At 1 July 2014, the Allowance for Doubtful Debts account balance was $8100.
The information in the following table relates to the accounts receivable and allowance for doubtful debts of Prime Moving Ltd. Ignore GST. The company policy is to provide an allowance for doubtful
Refer to the data in exercise 18.6. Assume that the firm is registered for the GST, i.e. consulting fees owing will be $517 000 (including GST) and debts to be written off are $10 010 (including
The following details were obtained from the accounting records of Civil Construction Consultants at the end of the financial year.Consulting fee owingAllowance for doubtful debtsDebts to be written
On 30 June, the end of its financial year, Burnside Consulting completed an age analysis of its accounts receivable and determined that an allowance for doubtful debts of $12 320 was needed in order
The following transactions relate to the business of Penrith Produce Ltd. Ignore GST.June 30Based on past experience, it was estimated that 1% of the year’s net credit sales revenue of $330
The following transactions relate to the gardening maintenance business of Steve Jones. The balance in the Allowance for Doubtful Debts account on 1 July 2014 was $7440. The bad debts during the year
Refer to the information in exercise 18.1. Complete requirements A and B but this time include the impact of a 10% GST.If GST is introduced the information extracted from the accounting records would
Centenary Ceramics deals in ceramic pots and figurines. All sales are conducted on a credit basis and no cash discounts are given. Ignore GST. The following information was extracted from the
‘Control over receivables is not quite as important as control over cash.’ Discuss.
'Classification of receivables as current or non-current is not that important. The money is received eventually anyway, so what’s the big deal?’ Discuss.
Several months ago, R. James, a trade debtor for $6600, had his account written off as a bad debt. A cheque has just been received in the post from James for $6600 and the assistant accountant made
A. Prepare a budgeted income statement for each month during the May to July period. (Assume no expenses owing from previous period.)B. Prepare a cash budget for each month
Advantage Manufacturing is preparing a master budget for the quarter ending 30 September 2017, and has compiled the data shown overleaf.1. The firm sells a single product at a price of $60 per
The following actual balance sheet was prepared for Martin’s Musical Supplies Ltd as at 30 September 2017.Martin’s musIcal supplies LtdBalance Sheetas at 30 September 2017Cash at bankAccounts
1. The firm sells a single product at a price of $24 per unit. The sales forecast (in units) prepared by the marketing department for the quarter ending 31 March 2017 and the first 7 months of the
Prue Williamson Marketing Services is preparing a budget for the quarter year ended 31 December 2017. The information available for the budget is as follows:1. Prue’s hourly charge-out rate
Bristol Brights purchases and installs sky lights. The entity’s estimated sales and expenses for the first 4 months of 2017
Fab and Fast Ltd buys and sells motor vehicle accessories. The firm’s estimated sales and expenses for the first 4 months of 2017
The following actual balance sheet was prepared for Colombo Clocks Ltd as at 31 March 2017.Cash at bankAccounts receivable (net)InventoryPrepaid rentFurniture & equipmentAccumulated
KK Pty Ltd is a small manufacturing business. For the year ending 30 June 2016, the company achieved sales of $2772000 and a gross profit margin of 30%. Although satisfied with this result,
Perfect Printers Ltd provides high volume offset colour and black and white printing for newspapers. It applies factory overhead to jobs on the basis of machine hours. The budgeted fixed overhead
Sami Stitches Ltd produces two types of sewing machines, a standard model and a deluxe model. The budgeted factory overhead costs for the production operation during 2017 are as follows:Variable
Gasmania Pty Ltd produces patio heaters for household use. The following information has been gathered so that a production budget, a direct materials budget and a direct labour budget for part of
Sheds Ahead Ltd produces outdoor sheds for domestic use. The manager in charge of production has been asked to prepare a production budget, a direct materials budget and a direct labour budget for
Stanmore Stationery is preparing a quarterly budget covering the 3 months ending 30 June 2017. The information available for the budget is as follows:1. Cash sales represent 30% of all monthly
EBZ Fashion is preparing a quarterly budget covering the 3 months ending 30 September 2017. The information available for the budget is as follows:1. Cash sales represent 80% of all monthly
Cooler Rooms Ltd manufactures airconditioning units designed for apartment use. The company markets this line in two geographic areas, one with a humid climate and the other with a dry climate.
Contex Cables manufactures digital fibre optic cables designed for telecommunications use. The company markets this product to commercial contractors engaged in government projects. Contex Cables has
The Cloudlands Spa Resort has 100 residential villas to accommodate guests. The accountant for the resort has asked you, the marketing manager, to prepare a budget for expected relaxation treatment
Jane, a student of accounting, posed the following question: ‘When one looks at the disposal of accounts receivable, there are three different accounting methods for what is essentially the same
A business student was heard to make the following remark: ‘With the advent of credit cards and the existence of factor businesses, it now possible for business entities to offer extensive credit
‘The determination of the appropriate amount of the allowance for doubtful debts is a fairly complicated and onerous process. The method of determining the amount of the allowance by using a
A basic difference between the direct write-off and the allowance method of recording bad debts is that of timing. Explain.
Discuss how the Allowance for Doubtful Debts account might have a debit balance before the end-of-period adjustment is made.
Refer to the latest financial report of JB Hi-Fi Limited on its website, www.jbhifi.com.au, and answer the following questions.1. From the nature of the report, JB Hi-Fi Limited is a reporting
Visit the websites of the IASB (www.ifrs.org), the FASB (www.fasb.org) and the AASB (www.aasb.com.au).RequiredA. Discuss what influence politics has on the establishment of accounting
Based on the Conceptual Framework and IAS 18/AASB 118 Revenue, decide whether and when revenue exists, and decide on the appropriate time for this revenue to be recognised in the accounts of Brian
Dampier Dirtworks Company Ltd (DDC) was floated by public subscription on 1 July 2017. The entity so formed engaged in a number of revenue-earning activities which had been previously administered by
Carl Caldersmith owns 80% of the issued shares of Caldersmith Commercial Cleaning Ltd (CCC), a distributor of cleaning equipment for industrial purposes. During the annual audit of CCC, the firm’s
Cambridge Ltd is a public company supplying different types of packaging for the food and bev¬erage industry. Among its products are labels for beer bottles, soft-drink bottles and jam jars and
Marshall Manufacturing Ltd is a manufacturer of fuel injection systems for the automotive industry. At the beginning of the current financial year, Marshall Manufacturing Ltd entered an agreement
Read the following extract from an article about Bob Jane’s latest business venture:He may have turned 80 but there’s no stopping Bob Jane from wheeling and dealing. He recently signed a heads of
Read the following extract:Museum and art gallery annual general-purpose financial reports may amount to misrepresentations if they include heritage and art collections that are not assets, as
Landsdale Leasing Ltd (LLL) is the owner–lessor of some high-quality apartment blocks, which have pleasant surroundings of parks and gardens and are only a short walk to a busy shopping centre and
Celebrity Monthly is a glossy monthly magazine that has been on the market for nearly 2 years. It currently has a circulation across several countries of 1.6 million copies per month. Currently,
Dowden Machinery Ltd (DML), a reporting entity which distributes heavy-duty equipment to industrial entities, has had a significant increase in sales over the last few years to government
Land and Water Waste Disposal Ltd (LAWWD) is a public company providing waste disposal services to private homeowners and to customers in the commercial, industrial and public sectors. Because of its
A legal wrangle developed between the Australian Taxation Office (ATO) and Box Hill Ltd con¬cerning the treatment of certain disputed income tax payments. This prompted ASIC to seek a formal ruling
Martindale Ltd uses the historical cost system. While reviewing the business activities of the company, you discover that the following transactions and events were recorded. Ignore
After conducting an audit of the accounts of Parramatta Ltd, you discover that the following transactions and events were recorded during the current year. Parramatta Ltd uses the historical cost
A well-known Australian airline has placed a non-cancellable order for a new Airbus A380. The price between the airline and the manufacturer is fixed, and delivery is to occur in 24 months with full
Hampton Housing Ltd (HHL) is a land development company trading in the construction of residential house and land packages in Sydney’s western suburbs. The company is currently developing a
Wyoming Wines Ltd has suffered a significant reduction in profitability, as a result of the current economic downturn and doubts about the quality of certain boutique wines. The company’s profit
Brunswick Ltd is seeking your advice on how to account for the following transactions, in line with the Conceptual Framework and other relevant documents. Discuss and explain your recom¬mended
For several seasons, Megan Gale and Jennifer Hawkins have been employed by David Jones Limited and Myer Limited respectively in order to attract more fashion-conscious customers to their stores. This
The following items occurred in Mitcham Ltd for the year ended 30 June 2017:(a) Some of Mitcham Ltd’s plant and equipment is situated in an area which, on average, is flooded every 15 years. The
Greenvale Ltd sold some property to Thornleigh Ltd for $1 000 000 cash in June 2017, recording a profit of $200 000. A further element of the sale was that Greenvale Ltd gave Thornleigh Ltd an option
Outline whether you would recognise each item below as a liability, justifying your answer by reference to the Conceptual Framework’s liability definition and recognition criteria: (a) Your
State the amount of revenue that should be recognised by Whitehall Ltd in the year ended 31 December 2017 for each item below, justifying your answer by reference to the revenue definition and
Telecommunications company, Toronto Ltd, signed a 15-year deal to sell capacity on its cable net¬work to a rival company for $200 million. The deal was completed on the last day of Toronto Ltd’s
Randwick Medical Laboratory Ltd, RMLL, a medical research entity, has discovered a cure for a previously incurable disease. RMLL is protecting the drug’s formula by keeping it secure in the company
Explain whether you would recognise each item below as an asset, justifying your answer by ref¬erence to the Conceptual Framework’s asset definition and recognition criteria:(a) A trinket of
Described below are several transactions and events for Chisholm Insurance Ltd for the year ended 30 June 2016.1. The company issued a 1-year insurance policy to Boronia Ltd on 1 March 2016, costing
Several independent situations are described below.1. The owner of the business included his personal dental expenses in the entity’s income statement.2. The company spent $40 000 on computer
A major step in the framework project being undertaken by the regulators is the measurement of assets and liabilities. Some accountants argue that this will lead to a re-emergence of the current
Outline and compare the revenue recognition criteria required by accounting standards for the sale of goods, the provision of services, contributions, and government grants. Are there any
‘I find the distinction between income, revenue and gains confusing.’ This is a student’s statement overheard in a corridor. Help this student by discussing the major issues involved.
‘Accounting profit is determined by recognising the income earned by the entity, and associating with that income the costs incurred in generating it.’This statement describes the way in which
Outline the definitions of a liability and equity as provided in the current Conceptual Framework. Provide and discuss examples of situations where there is confusion in determining whether a
‘To determine whether an entity should classify its costs either as an asset or an expense, accounting standards must contain definitions of these terms.’ With reference to the above statement,
The Conceptual Framework discusses ‘essential’ and ‘non-essential’ characteristics of an asset. Consider which characteristics of an asset are ‘essential’, explaining why you regard other
From the current Conceptual Framework, outline the qualitative characteristics of financial information to be included in general purpose financial reports.
Specify the objectives of general purpose financial reporting, the nature of users, and the information to be provided to users in order to achieve the objectives, as provided in the Conceptual
Briefly explain the nature of the Conceptual Framework for Financial Reporting, and discuss the perceived advantages and disadvantages of having a conceptual framework.
‘One of the major changes in both corporations legislation and accounting standards is the adoption of the reporting entity concept.’This comment was made in a presentation at an accounting
What is meant by an entity’s financial position and performance? To whom and for what purpose are the financial position and performance appropriate sources of information?
Refer to the consolidated financial statements in the latest financial report of JB Hi-Fi Limited on its website, www.jbhifi.com.au, especially the statement of changes in equity, and answer the
Recyclers Ltd was formed for the purpose of collecting and recycling household garbage in Australia’s capital cities. The company has been in operation for 5 years and has managed to be profitable
A. Answer all the questions for the three partners.B. Should they proceed with incorporation? Are there other factors which they should consider?Fifteen years ago, John Kerr worked as a production
The trial balance of Victoria Ltd at 30 June 2016 is shown .There was no movement in share capital for the year. The following adjustments are required.1. Record income tax expense of
The accounts in the ledger of Zetland Ltd as at 30 June 2017 had balances.The Share Capital account represents 30000000 shares fully paid at $1 and 50 000 000 shares issued at $1 but called to 75c
Swansea Ltd prepared the unadjusted trial balance as at 30 June 2016.The following information and events are yet to be recorded by the company on 30 June 2016.1. Inventory on hand after a
The equity of Lochinvar Ltd at 30 June 2016 was:Share capital50000 10% cumulative preference shares — fully paid100000 ordinary shares — fully paid$ 50000 200000Revaluation
In January 2015, the management of Branxton Ltd decided on a program of expansion for the business. On 1 July 2015, the company had $900 000 in retained earnings, and another reserve totalling $600
A trial balance taken from Galston Ltd’s accounting records at 30 September 2016 showed the following account balances:Galston LTDTrial Balanceas at 30 September 2016AccountDebitCreditShare capital

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