BUSN1002 Practice Question 1 - Statement of Cash Flows The Comparative Balance Sheet of Wilson Ltd as at 30 June 2017 and 2018 are presented below, together with the Income Statement for the Year Ended 30 June 2018. Additional information for the question is also provided below. Required: Prepare the statement of cash flows for Wilson Ltd for the year ended 30 June 2018 using the direct method. Show all workings. Wilson Ltd Comparative balance sheet as at 30 June 2018 Assets 2017 2018 Cash $ 31 200 5 55 200 Accounts receivable 79 200 57 600 Inventory 64 800 48 000 Prepaid expenses 31 200 48 000 96 000 96 000 540 000 480 000 ( (162 000) (120 000) Land Property, plant and equipment Less: Accumulated depreciation Total assets Liabilities and Shareholders' Equity. Accounts payable $680 400 $664 800 544 400 521 600 Accrued expenses payable 18 000 22 800 Interest payable 3 600 2 400 4 800 7 200 Income taxes payable Bonds payable 192 000 120 000 Share capital 252 000 295 200 Related dig 105 000 195 000 Total liabilities and shareholders' equity $680 400 5664 800 Liabilities and Shareholders' Equity $ 44 400 $ 21 600 Accounts payable Accrued expenses payable Interest payable 22 800 18 000 3600 2 400 Income taxes payable 4800 7200 192 000 120 000 Bonds payable Share capital 252 000 295 200 165 600 195 600 Retained earnings Total liabilities and shareholders' equity $680 400 $664 800 Wilson Ltd Income Statement For the Year Ended 30 June 2018 $1 440 000 6 000 $1 446 000 Income Sales revenue Gain on sale of PPE assets Less: Expenses Cost of goods sold Other expenses Interest expense Income tax expense Net profit 1 200 000 162 000 12 000 21 600 1 395 600 $ 50 400 1. 2. Additional information: Property Plant and Equipment assets were sold at a sales price of $150 000. Additional equipment was purchased at a cost of $144 000. The other expense category includes depreciation. All sales and purchases of inventory were on credit. 3. 4. Question 3 Partnership - formation and operation Tom and Jerry decide to enter into a partnership agreement from 1 July 2018. Assets and liabilities brought into the partnership are shown below. Tom Carrying Amount Jerry Fair Value Carrying Amount Fair Value 19,200 5,000 5,000 Cash 19,200 Inventory 4,000 3,800 3,800 3,800 Accounts Receivable 3,000 2,500 1,500 1,500 Equipment 65,000 55,000 30,000 000 800 Accum. Depreciation 5,500 5,000 Accounts payable 800 Bank loan 50,000 50,000 Because of Jerry's exceptional talent it is agreed that his capital amount will be credited with $50,000 in total. During the year ended 30/6/19 the following details apply: The partners use method 1 in their accounting Tom will receive a salary of $50,000 p.a. and Jerry a salary of $28,000 p.a. Partners will receive 8% p.a. interest on their opening capital balances Partners will be charged 9% p.a. on any drawings Tom makes drawings of $20,000 on 1 January 2019 Jerry makes drawings of $15,000 on 1 March 2019 Residual profits will be distributed Tom and Jerry on the ratio of 1:2. Profit for the year was $76,000 Financial year ends 30 June 2019 Required: Prepare the general journal entries upon the formation of the partnership. a. BI Enter your journal entries to the table below: Date Description Debit Credit Jerry makes drawings of $15,000 on 1 March 2019 Residual profits will be distributed Tom and Jerry on the ratio of 1:2. Profit for the year was $76,000 Financial year ends 30 June 2019 Required: Prepare the general journal entries upon the formation of the partnership. a. = 2 Enter your journal entries to the table below: Date Description Debit Credit 4 b. Prepare a table showing calculation of distribution of profit to the partners as at 30 June 2019 answered out of B 1 : ch Question 4 Part A - Bills Payable On the 1st of March 2018 Adelaide Ltd sold goods worth $40,000 on credit to Perth Ltd (terms 20 days). By the 31st of March 2018, Pert Ltd has still not repaid the amount and on the 1st of April 2018 agrees to convert the amount to a 180-day, 8% bill. Required: Record the entries to reflect these events (the acceptance of the bill, the adjusting entry and the payment of the bill at the maturity date). 44 BI iii Enter your journal entries to the table below: Description Date Debit Credit Question 4 Part B. Debentures On 1st July 2015 X Ltd issues $200 000 in 5-year debentures that pay interest annually at a coupon rate of 4%. At the time of issuing the securities, the market requires a rate of return of 6%. The interest expense is determined using the effective interest rate method. Required: This question has three parts. Answer Questions 4(i), 4(ii) and (ii) below: Question 4(1): Determine the issue price and prepare the relevant general journal entries for the issue. BI !!! Question 4(i) Part B - Debentures Prepare a table to assist with calculating interest expense and prepare the general journal entries for interest at the end of year 2 and 3. B1 Fill in the details in the table below: Question 4 (iii) Part B - Debentures Prepare the general journal entries for the redemption of the 5-year debentures. B 1 !!! om 45 * Enter your journal entries to the table below: Date Description Debit Credit BUSN1002 Practice Question 1 - Statement of Cash Flows The Comparative Balance Sheet of Wilson Ltd as at 30 June 2017 and 2018 are presented below, together with the Income Statement for the Year Ended 30 June 2018. Additional information for the question is also provided below. Required: Prepare the statement of cash flows for Wilson Ltd for the year ended 30 June 2018 using the direct method. Show all workings. Wilson Ltd Comparative balance sheet as at 30 June 2018 Assets 2017 2018 Cash $ 31 200 5 55 200 Accounts receivable 79 200 57 600 Inventory 64 800 48 000 Prepaid expenses 31 200 48 000 96 000 96 000 540 000 480 000 ( (162 000) (120 000) Land Property, plant and equipment Less: Accumulated depreciation Total assets Liabilities and Shareholders' Equity. Accounts payable $680 400 $664 800 544 400 521 600 Accrued expenses payable 18 000 22 800 Interest payable 3 600 2 400 4 800 7 200 Income taxes payable Bonds payable 192 000 120 000 Share capital 252 000 295 200 Related dig 105 000 195 000 Total liabilities and shareholders' equity $680 400 5664 800 Liabilities and Shareholders' Equity $ 44 400 $ 21 600 Accounts payable Accrued expenses payable Interest payable 22 800 18 000 3600 2 400 Income taxes payable 4800 7200 192 000 120 000 Bonds payable Share capital 252 000 295 200 165 600 195 600 Retained earnings Total liabilities and shareholders' equity $680 400 $664 800 Wilson Ltd Income Statement For the Year Ended 30 June 2018 $1 440 000 6 000 $1 446 000 Income Sales revenue Gain on sale of PPE assets Less: Expenses Cost of goods sold Other expenses Interest expense Income tax expense Net profit 1 200 000 162 000 12 000 21 600 1 395 600 $ 50 400 1. 2. Additional information: Property Plant and Equipment assets were sold at a sales price of $150 000. Additional equipment was purchased at a cost of $144 000. The other expense category includes depreciation. All sales and purchases of inventory were on credit. 3. 4. Question 3 Partnership - formation and operation Tom and Jerry decide to enter into a partnership agreement from 1 July 2018. Assets and liabilities brought into the partnership are shown below. Tom Carrying Amount Jerry Fair Value Carrying Amount Fair Value 19,200 5,000 5,000 Cash 19,200 Inventory 4,000 3,800 3,800 3,800 Accounts Receivable 3,000 2,500 1,500 1,500 Equipment 65,000 55,000 30,000 000 800 Accum. Depreciation 5,500 5,000 Accounts payable 800 Bank loan 50,000 50,000 Because of Jerry's exceptional talent it is agreed that his capital amount will be credited with $50,000 in total. During the year ended 30/6/19 the following details apply: The partners use method 1 in their accounting Tom will receive a salary of $50,000 p.a. and Jerry a salary of $28,000 p.a. Partners will receive 8% p.a. interest on their opening capital balances Partners will be charged 9% p.a. on any drawings Tom makes drawings of $20,000 on 1 January 2019 Jerry makes drawings of $15,000 on 1 March 2019 Residual profits will be distributed Tom and Jerry on the ratio of 1:2. Profit for the year was $76,000 Financial year ends 30 June 2019 Required: Prepare the general journal entries upon the formation of the partnership. a. BI Enter your journal entries to the table below: Date Description Debit Credit Jerry makes drawings of $15,000 on 1 March 2019 Residual profits will be distributed Tom and Jerry on the ratio of 1:2. Profit for the year was $76,000 Financial year ends 30 June 2019 Required: Prepare the general journal entries upon the formation of the partnership. a. = 2 Enter your journal entries to the table below: Date Description Debit Credit 4 b. Prepare a table showing calculation of distribution of profit to the partners as at 30 June 2019 answered out of B 1 : ch Question 4 Part A - Bills Payable On the 1st of March 2018 Adelaide Ltd sold goods worth $40,000 on credit to Perth Ltd (terms 20 days). By the 31st of March 2018, Pert Ltd has still not repaid the amount and on the 1st of April 2018 agrees to convert the amount to a 180-day, 8% bill. Required: Record the entries to reflect these events (the acceptance of the bill, the adjusting entry and the payment of the bill at the maturity date). 44 BI iii Enter your journal entries to the table below: Description Date Debit Credit Question 4 Part B. Debentures On 1st July 2015 X Ltd issues $200 000 in 5-year debentures that pay interest annually at a coupon rate of 4%. At the time of issuing the securities, the market requires a rate of return of 6%. The interest expense is determined using the effective interest rate method. Required: This question has three parts. Answer Questions 4(i), 4(ii) and (ii) below: Question 4(1): Determine the issue price and prepare the relevant general journal entries for the issue. BI !!! Question 4(i) Part B - Debentures Prepare a table to assist with calculating interest expense and prepare the general journal entries for interest at the end of year 2 and 3. B1 Fill in the details in the table below: Question 4 (iii) Part B - Debentures Prepare the general journal entries for the redemption of the 5-year debentures. B 1 !!! om 45 * Enter your journal entries to the table below: Date Description Debit Credit