Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Funfair Limited a retailer specialised in selling kid toys. The company was established in 2002 in Bristol and has now been among the top three

Funfair Limited a retailer specialised in selling kid toys. The company was established in 2002 in Bristol and has now been among the top three largest toy retailers in the South-West of England. It experienced a rapid growth in the past five years with two new stores being opened in Cardiff and Bath. Besides, the company gradually expands to receive online orders through its website and app. The board of directors reports that the company achieves an average growth rate of 4% per annum and predicts this figure to increase to 5.2% in the next five years. While it is hard to compete with large suppliers in London and the surroundings, Funfair Limited targets customers living in the South-West of England where it finds more young families with kids at different ranges of age than in the North.
To maintain its continuous operation, Funfair Limited has strategic trading relationship with two overseas toy manufacturers: CoCo Limited, based in Shanghai, China, and Lucky Luke Limited, based in Barcelona, Spain. Thanks to a good credit history, the company is offered a 2-month credit and frequently receives discounts from these suppliers for bulk orders. Meanwhile, Funfair gives customers an average of 1 month credit and those paying within 14 days receive a 5% discount.
Funfair’s expenses are mainly attributed to rent and wages. It is currently paying rent for three stores located in Bristol, Cardiff and Bath, and two warehouses in Bristol. The company is also responsible for maintenance and insurance of the properties. Other expenses come from office stationery, electricity bills, telephone bills and general expenses.
The task:
You have been working as an accountant for Funfair since it was established. You are assigned to help Peter, an apprentice accountant, who joined Funfair in early October. Peter’s task is to enter transactions during November into the company books and then report to you. Following are the transactions occurred in November.
On 1st November, the opening balances of bank and cash accounts were £12,500 and £1,200 respectively. The account receivable balance of customer Newgen brought forward from October was £940. The account payable balance of supplier CoCo Limited brought forward from October was £1,400. Opening capital balance was £13,240.
On 5th November, Funfair bought supplies from CoCo Limited for £3,900 and from Lucky Luke for £2,000 on credit and paid rent for £6,450 by cheque.
On 8th November, it purchased a new office equipment from Intel Limited for £4,000 by cheque and sold £1,700 to Newgen and £960 to Little Tiger on credit.
As the company needs more capital to open a new store early next year, Funfair has applied a five-year bank loan in September. The bank has approved the loan application and sent £10,000 to the bank account on 12th November. On the same day, Newgen returned £250 goods to Funfair.
After checking the order from CoCo Limited on 5th November, Funfair identified some faulty products and returned £350 goods to CoCo on 15th November.
On 20th November, Funfair paid wages for £7,400 by cheque and £800 general expenses in cash. Newgen cleared its balance by cheque and received 5% discount.
On 22nd November, Funfair made another credit purchase order from CoCo Limited for £6,200.
Funfair sold £5,000 goods by cheque and £2,500 goods for cash on 26th November. On the same day, the owner withdrew £1,000 from the business bank account for his personal use.
On 29th November, Funfair paid November telephone bill in cash for £580. It also cleared the balance with Lucky Luke and received a 3% discount.
Peter’s book entries were as follows:
Debit Credit
5th November CoCo £3,900 Purchases £3,900
Rent £6,450 Bank £6,540
8th November Purchases £4,000 Bank £4,000
Newgen £1,700 Sales £1,700
12th November Bank £10,000 Bank loan £10,000
Returns in £250 Newgem £250
15th November CoCo £350 Returns out £300
20th November Wages £7,400 Bank £7,400
General expenses £800 Bank £800
22nd November Purchases £6,200 Bank £6,200
26th November Bank £5,000 Sales £5,000
Cash £2,700 Sales £2,500
Capital £1,000 Bank £1,000
29th November Cash £580 Telephone £580
A shortage of £160 was found on the credit side of the trial balance.
Requirements:
.
i. Identify the errors that caused the trial balance unequal. For each error, using your understanding of the double-entry technique to explain the type of error and how to correct it in T-accounts.
ii. After correcting the errors, balance off all accounts.
iii. Show Peter the correct trial balance for the month ended 30th November.
iv. Do you agree or disagree with the statement: “A sale is made when the order for goods and services is received”? Explain with your own examples.

Guidance:
Please read the case study carefully before you start. Irrelevant discussion to the case study will not get marks.
For this assessment you should make use of the following formative activities that you have already completed. These activities have been designed to support this summative assessment:
• Week 2-3-4-5-6-7 in-class activities and homework;
• Progress test 1 & 2.
Please note: This is an individual assessment so you must not work with any other student.

Structure:
Each requirement must be included in a separate section plus an introduction and a conclusion. Following is a suggested structure:
Section 1 Accounting entry errors – max 300 words – approximately 50 words to explain each error and how to correct (Words in tables for T-accounts are not counted); balance off the accounts;
Section 2 Trial balance (under form of a table so word limit is not needed);
Section 3: Discussion of a given statement – max 200 words;
Theory and/or task resources required for the assessment:
Your report must be based on the learning content covered in Themes 1-4 of the module. You should provide your own examples to illustrate your understanding of accounting concept(s). In your own words, you must explain the reasons for your accounting entries regarding requirement iv). The application of accounting concepts/technique must be relevant to the case study.

Assessment reference style:
You should refer to a minimum of 2 relevant sources in your report, which should include the core textbook. Using internet sources or copying from lecture PowerPoints and workbooks will be treated as plagiarism.
You must include an UWE Harvard style reference list at the end of your report. A full bibliography is NOT required.

Expected word count:
You are expected to write between 1,000 and 1,500 words, following the specific structure outlined above and use the template report for more guidance. Words in tables and graphs are not included in this limit.

Learning Outcomes Assessed:

The following learning outcomes are assessed in this task:
• Understand the role and nature of accounting, and concerns of stakeholders in the financial information;
• Describe the main contexts in which accounting operates, and the accounting concepts used in the preparation of financial statements;
• Prepare, analyse and interpret financial reporting information for specified entities;
• Use double entry accounting techniques to maintain accounting records.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Intermediate Accounting

Authors: Kin Lo, George Fisher

3rd Edition Vol. 1

133865940, 133865943, 978-7300071374

More Books

Students also viewed these Accounting questions

Question

Where do you see yourself in 5/10 years?

Answered: 1 week ago