4.5 Assessment Opportunity Thinking like an accountant: Business scenarios Assessment

Task 1

State and explain the procedure that needs to be used in each of the following scenarios using a word processing software.

1. On Friday of every week, K. Chiarelli deposits the week's cash received.
2. Lisetta was instructed by her manager to pay for a purchase invoice for merchandise, $500, with cash from the cash register.
3. James is the sales clerk in a small retail business. Each day, he records the cash received and issues sales slips to customers.
4. Theo owns a convenience store. He checks support documents against cash received when he has timeat least once a week.

Task 2

At the end of August, R. Johnson Co. has a balance of $2,240.00 in its ledger cash account. The statement received from their bank shows a balance of $1,574.75.

The bank statement contains a deduction of $10.60 for service charges. A comparison of the cheques issued in the journal and the cheques paid on the statement indicates that Cheque 72 for $48.60, Cheque 86 for $250, and Cheque 89 for $46.75 are outstanding. A deposit made on August 30 for $1,000 was not shown on the bank statement.

prepare a bank reconciliation statement dated August 31, using a spreadsheet to complete the task.

Task 3

You are a loan manager and have received an application for a loan from J. Truman Ltd. From the financial statements provided by J. Truman, the following data have been calculated. Using the same word processing file as from Task 1, answer the following questions.

	Year 1	Year 2	Year 3	Year 4
Current Ratio	3:1	3:1	2:1	1.5:1
Quick Ratio	0.9:1	1:1	0.8:1	1:1
Debt Ratio	40%	45%	50%	45%
Equity Ratio	60%	55%	50%	55%

1. Explain the trend from Year 1 to Year 4 for each ratio.
2. Considering the data provided, would you grant the loan? Give two reasons for your answer.

Task 4

Using the following condensed balance sheet, calculate the working capital, current ratio, quick ratio, debt ratio, and equity ratio for the company. Again, use the same word processing file.

Carmichael and Sons Limited Condensed Balance Sheet December 31, 20--- (in thousands of dollars)
Assets
Current Assets
Cash	$85,000
Accounts Receivable	350,000
Merchandise Inventory	400,000
Prepaid Expenses	80,000
Total Current Asset	915,000
Fixed Assets	1,300,000
Total Assets		$2,215,000
Liabilities and Owner's Equity
Current Liabilities	$400,000
Long-term Liabilities	900,000
Total Liabilities	1,300,000
Owner's Equity	915,000
Total Liabilities an Owner's Equity		$2,215,000

utilize a table like this one to analyze the liquidity and borrowing capacity of the company.

Ratio	Your Answer
Working Capital
Current Ratio
Quick Ratio
Debt Ratio
Equity Ratio

Task 5

Using the following partial trial balance and a spreadsheet, prepare an income statement for the company for the year ending on December 31, 20--.

Akhtar Law Firm Trial Balance December 31, 20--
Accounts	Debit	Credit
Fees Revenue		$415,000
Interest Revenue		4,500
Administrative Expense	42,000
Courier Expense	8,000
Maintenance Expense	17,000
Miscellaneous Expense	3,750
Rent Expense	40,000
Salaries Expense	170,000