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T-1.8.1 Details of Assessment Term and Year T2 2017 Time allowed Week 2, 3, 4, 5, 6, 7, 8 Assessment No 1 Assessment Weighting 60% Assessment Type Written Response Due Date Week No. 8 Room 609 Details of Subject Qualification FNS40611 Certificate IV in Accounting Subject Name Accounting and Budgeting Details of Unit(s) of competency Unit Code (s) and Names FNSACC404 Prepare financial statements for non-reporting entities FNSACC402 Prepare operational budgets Details of Student Student Name College Student ID Student Declaration: I declare that the work submitted is my own, and has not been copied or plagiarised from any person or source. Assessor's Name Signature: ___________________________ Date: _______/________/_______________ Details of Assessor AshrafulMinhaz / Tanim Khan Assessment Outcome Results Competent Notyet competent Marks / 60 FEEDBACK TO STUDENT Progressive feedback to students, identifying gaps in competency and comments on positive improvements: ______________________________________________________________________________________ ______________________________________________________________________________________ ______________________________________________________________________________________ ______________________________________________________________________________________ Accounting & Budgeting, Assessment No. 1 v1.0, Last updated on 12/04/2016 Page 1 T-1.8.1 Student Declaration: I declare that I have been assessed in this unit, and I have been advised of my result. I also am aware of my appeal rights and reassessment procedure. Signature: ____________________________ Date: ____/_____/_____ Assessor Declaration: I declare that I have conducted a fair, valid, reliable and flexible assessment with this student, and I have provided appropriate feedback Student did not attend the feedback session. Feedback provided on assessment. Signature: ____________________________ Date: ____/06/ 2017 Assessment/evidence gathering conditions Each assessment component is recorded as either Competent (C) or Not Yet Competent (NYC). A student can only achieve competence when all assessment components listed under \"Purpose of the assessment\" section are recorded as competent. Your trainer will give you feedback after the completion of each assessment. A student who is assessed as NYC (Not Yet Competent) is eligible for re-assessment. Resources required for this Assessment All documents must be created in Microsoft Word Upon completion, submit the assessment printed copy to your trainer along with assessment coversheet. Refer to the notes on eLearning to answer the tasks Any additional material will be provided by Trainer Instructions for Students Please read the following instructions carefully This assessment has to be completed In class The assessment is to be completed according to the instructions given by your assessor. Feedback on each task will be provided to enable you to determine how your work could be improved. You will be provided with feedback on your work within two weeks of the assessment due date. All other feedback will be provided by the end of the term. Should you not answer the questions correctly, you will be given feedback on the results and your gaps in knowledge. You will be given another opportunity to demonstrate your knowledge and skills to be deemed competent for this unit of competency. If you are not sure about any aspects of this assessment, please ask for clarification from your assessor. Please refer to the College re-assessment for more information (Student Handbook). Accounting & Budgeting, Assessment No. 1 v1.0, Last updated on 12/04/2016 Page 2 T-1.8.1 Week 02 - Accounting (2.5 Marks) Instruction for student: This is an individual task with written response. You need to prepare answers from the materials available at elearnings or you may use any web materials. The trial balance of V Emery does not balance. The owner has asked for your help. After looking at the business records you find: some items in the trial balance are on the wrong side the goodwill account with a balance of $20000 has been omitted the balance of accounts payable control should be $37 600, and there is a balance for the accounts receivable control but the amount is not clear (balancing figure) TrialBalanceofV.Eme ry As at30June20X8 Unadjusted Accounts Debit Inventory 64800 Accounts receivable control 940 Bank (debit balance) 13600 Petty cash Land and buildings Accumulated depreciation buildings Accounting & Budgeting, Assessment No. 1 v1.0, Last updated on 12/04/2016 Credit Debit Credit ? Allowance for doubtful debts GST paid Adjusted 1000 2000 137000 2700 Page 3 T-1.8.1 Goodwill Accounts payable control 36700 GST collected Income received in advance 6100 3700 Capital 268000 Sales 194000 Rent income 10400 Bad debts recovered Cost of goods sold 1900 120600 Advertising 3600 Salaries and wages 39800 General expenses 17200 Donations 1800 440,940 Accounting & Budgeting, Assessment No. 1 v1.0, Last updated on 12/04/2016 484,900 Page 4 T-1.8.1 Week 03 - Accounting (2.5 Marks) Instruction for student: This is an individual task with written response. You need to prepare answers from the materials available at elearnings or you may use any web materials. Use the information in adjusted Trial Balance (in Week 2), prepare an Income Statement and a Balance Sheet. V.Emery Income Statement For the year ending 30 June 20X8 $ Accounting & Budgeting, Assessment No. 1 v1.0, Last updated on 12/04/2016 $ $ Page 5 T-1.8.1 V.Emery Balance Sheet As at 30 June 20X8 $ Accounting & Budgeting, Assessment No. 1 v1.0, Last updated on 12/04/2016 $ $ Page 6 T-1.8.1 Week 04 - Accounting (2.5 Marks) Instruction for student: This is an individual task with written response. You need to prepare answers from the materials available at elearnings or you may use any web materials. Prepare a Statement of Cash Flow of ABA Trading for the year ended 30 June 2012 from the following information: Cash Sales 20,000 Credit Sales 150,000 Repayment of Mortgage- Principal 50,000 - Interest 2,000 Wages and salaries 50,000 Other Operating Expenses paid 20,000 Payments to Accounts Payable 30,000 Discount Received 1,000 Depreciation expense 5,000 Receipts from Accounts Receivable 160,000 Dividends received on share investments 500 Proceeds from sale of Office Equipment 2,000 New Capital introduced by the owner 40,000 Bad Debts written off 3,000 Drawings by the owner 20,000 Purchase of Office Equipment 5,500 Cash at Bank 1/7/2011 5,000 Cash at Bank 30/6/2012 ? Accounting & Budgeting, Assessment No. 1 v1.0, Last updated on 12/04/2016 Page 7 T-1.8.1 Solution: Accounting & Budgeting, Assessment No. 1 v1.0, Last updated on 12/04/2016 Page 8 T-1.8.1 Week 05 - Accounting (2.5 Marks) Instruction for student: This is an individual task with written response. You need to prepare answers from the materials available at elearnings or you may use any web materials. Financial Statement Analysis: You are given the following financial statements for Huffington Post Trading: Income Statement for the year ended 30June 2013 $ $ Sales (all credit) Less, Cost of Goods Sold inventories (1/7/2012)Purchases Goods available for sale Less, Inventories 30/6/2013 Gross Profit Other Income Total Operating Income Less, Operating Expenses Net Profit 480,000 54,500 331,800 Balance Sheet as at 30 June 2013 $ Current Assets Accounts Receivable Less, Allowance for Doubtful Debts Inventories Prepaid Expenses Accrued revenue Non-Current Assets Land Buildings(net) Plant & Equipment (net) Accounting & Budgeting, Assessment No. 1 v1.0, Last updated on 12/04/2016 $ 78,000 3,000 386,300 69,500 $ 75,000 69,500 500 1,000 316,800 163,200 5,000 168,200 110,600 57,600 $ 146,000 100,000 54,000 80,000 Page 9 T-1.8.1 Motor Vehicles 20,000 (net) Total Assets Current Liabilities BankOverdraft Accounts Payable Accrued Expenses 25,000 52500 2500 Non-Current Liabilities Mortgage Loan 254,000 400,000 80000 80000 Total Liabilities 160000 Net Assets (Net Asset - Total Liabilities 240000 Owner's Equity Capital-(1/7/2012) Add, Net Profit for the year Less, Drawings Owner's Equity 222400 57600 40000 240000 Other Information: 30/06/2012 Industry Average 33.00% Gross Profit Rate 37.00% Net Profit Rate 9% 12.00% Current Ratio 1.6:1 2:1 Liquid Ratio 1.3:1 1.2:1 Accounting & Budgeting, Assessment No. 1 v1.0, Last updated on 12/04/2016 30/06/2013 Page 10 T-1.8.1 inventory Turnover Rate Average Collection Period 5.8times 5times 50days 45days Required: 1. Calculate for the year ended 30 June 2013: Gross Profit Rate Net Profit Rate Current Ratio Liquid Ratio Inventory Turnover Rate Average Collection Period 2. Based on the ratios you have calculated and the other information given, comment briefly on each of the following for Bowman's business: Profitability Business Activity Liquidity 3. Advise the company of possible reasons for any unsatisfactory situations that exist in relation to the business and suggest actions that may be taken to improve them. Accounting & Budgeting, Assessment No. 1 v1.0, Last updated on 12/04/2016 Page 11 T-1.8.1 Week 06 - Accounting (5 Marks) Instruction for student: This is an individual task with written response. You need to prepare answers from the materials available at elearnings or you may use any web materials. Short questionnaire 1. What is the difference between current assets and non-current assets? Accounting & Budgeting, Assessment No. 1 v1.0, Last updated on 12/04/2016 Page 12 T-1.8.1 2. Explain revenue and revenue recognition. 3. What does it mean to capitalize expenditure? 4. Explain the differences between gross margin, gross profit and net profit and net profit margin. 5. What supporting charts, diagrams or data may be useful to be presented with the financial statements? Accounting & Budgeting, Assessment No. 1 v1.0, Last updated on 12/04/2016 Page 13 T-1.8.1 6. Describe the difference between data and knowledge. 7. What do information systems capture and why are they important? 8. What steps should you take to check accuracy and consistency of invoices? 9. What role does double entry accounting have in checking financial data for consistency and accuracy? Accounting & Budgeting, Assessment No. 1 v1.0, Last updated on 12/04/2016 Page 14 T-1.8.1 10. What approach would you take if you were required to make a presentation about profit and loss over the last financial period? 11. Consider the following scenario. While preparing bank reconciliation you have noticed several inconsistencies that have been made by one of your managers in accounts. It is not fraudulent but charges have been wrongly allocated which has resulted in inaccurate information. What would you do in this scenario? Accounting & Budgeting, Assessment No. 1 v1.0, Last updated on 12/04/2016 Page 15 T-1.8.1 Week 07 - Accounting (5 Marks) Instruction for student: This is an individual task with written response. You need to prepare answers from the materials available at elearnings or you may use any web materials. Partnership: 1. On 1 January 2014 A and B agreed to go into a business partnership contributing $50,000 and $30,000 respectively as capital. Prepare general journal entries to record the capital contributions of A and B. Date Particulars Debit Credit 2. M and N agreed to form a partnership on the 15 January 2014. M will provide the business premises valued at $250,000 and Motor Vehicle $33,000 as his capital contribution. N is to bring in an equivalent amount in cash $280,000. Market value of motor vehicle is $30000. Prepare general journal entries to record the capital contributions of M and N. Date Particulars Debit Credit 3. On 31 December 2013, A and B agreed to combine their businesses and operate as Happy Traders. The balance sheets of the respective businesses are as follows: A Balance sheet as at 31 Dec 2013 Asset Bank 8,000 Accounting & Budgeting, Assessment No. 1 v1.0, Last updated on 12/04/2016 B Balance sheet as at 31 Dec 2013 Asset Inventory 12,000 Page 16 T-1.8.1 Accounts receivable Inventory Liability Accounts Payable Net Asset 10,000 12,000 30,000 Owner's Equity Capital - A Premises Delivery Van 20,000 16,000 48,000 12,000 Liability Overdraft 15,000 18,000 Net Asset 33,000 18,000 Owner's Equity Capital - B 33,000 The agreed values of A's and B's businesses are $25,000 and $40,000 respectively. The agreed value of A's inventory and accounts receivable are $10,000 and $7000 respectively. The agreed value of B's premises and delivery van are $22,000 and $6,000 respectively. The agreed value of all other items was at their book value. Prepare general journal entries to record the capital contributions of A and B. Date Particulars Debit Credit Not for profit entities The following balances have been extracted from the ledger of the Amateur Sailors Club for its operations for the year to 30 June 2013: $ Subscription Revenue Printing of Club Journal Wages - General Depreciation - Club Equipment Telephone Accounting & Budgeting, Assessment No. 1 v1.0, Last updated on 12/04/2016 25,500 2,500 15,050 1,250 1,200 Page 17 T-1.8.1 Genera l Expenses Interest received Joining Fees Electricity Treasurer's Honorarium Postage Maritime museum Tours - Receipt Maritime museum Tours - Expenses Surplus from Refreshments Trading 750 2,500 500 300 500 600 2,000 1,000 4,000 Required: 1. Prepare Income and Expenditure account 2. Prepare Income and Expenditure statement Answer: Amateur Sailors Club Income & Expenditure Account for the year ended 30 June 2013 Accounting & Budgeting, Assessment No. 1 v1.0, Last updated on 12/04/2016 Page 18 T-1.8.1 Amateur Sailors Club Income & Expenditure Statement for the year ended 30 June 2013 $ Accounting & Budgeting, Assessment No. 1 v1.0, Last updated on 12/04/2016 $ Page 19 T-1.8.1 Week 08 - Accounting (5 Marks) Instruction for student: This is an individual task with written response. You need to prepare answers from the materials available at elearnings or you may use any web materials. On 01 July 2012, ABC Ltd purchased a truck for a total cost of $132000 cash including GST. In addition, delivery charges of $2750 including GST and registration and insurance of $4500 including GST were paid on same day. The useful life of the truck was estimated to be five years, with a salvage value of $2000 excluding GST. The company calculates annual depreciation using the straight-line method. Accounting & Budgeting, Assessment No. 1 v1.0, Last updated on 12/04/2016 Page 20 T-1.8.1 You are required to: I. II. Calculate the annual depreciation, using the straight-line method Calculate annual depreciation at 30% Reducing Balance Method Activity 01 - Budgeting (10 x 0.50 = 5 Marks) Instruction for student: This is an individual task with written response. Briefly explain the following questions, you can get relevant information from lecture material and also you can browse internet to gather further information, if you needed . Scenario 01 Accounting & Budgeting, Assessment No. 1 v1.0, Last updated on 12/04/2016 Page 21 T-1.8.1 A new member of the staff-Sally has been working with you for two months as Accounts Clerk. She is new to budgeting and forecasting. She needs a clear understanding of organisational policy, aims, projects and forecasts to prepare different budgets. She studied budgeting in the Accounting study, but she has forgotten most of what she learnt. You are given a job by your supervisor to provide a comprehensive orientation on budgeting, particularly focusing in the following areas related to the purpose & policy statement of your company's budget policy. You are required to read these two issues of budget policy and answer all questions carefully. " 1. Purpose When identifying the purpose of the policy, consider how it might apply to your organisation's activities. Your organisation may have a need for separate budgets for different activities for monitoring or reporting purposes and may need to report to external bodies on different budgets for accountability purposes. 3. Policy statement If you are adopting the policy statement in the template, consider whether there are any additional commitments your organisation wants to make. In identifying the actions your organisation will take to implement this policy, you should include the following: developing an annual budget for the organisation for approval by the board or management committee monitoring income and expenditure against the budget on a regular basis reporting to the board or management committee on the budget position taking action when there is a significant variation between projected and actual figures reviewing and adjusting the budget on a regular basis." 1. Define the term 'budgeting'. Accounting & Budgeting, Assessment No. 1 v1.0, Last updated on 12/04/2016 Page 22 T-1.8.1 2. List objectives of the budget policy. 3. According to Policy Statement, list your duties. 4. According to Policy Statement, who will approve the annual budget? Accounting & Budgeting, Assessment No. 1 v1.0, Last updated on 12/04/2016 Page 23 T-1.8.1 5. List the activities involves in budgeting process. 6. List the benefits of budgeting. List the limitations of budgets. Accounting & Budgeting, Assessment No. 1 v1.0, Last updated on 12/04/2016 Page 24 T-1.8.1 7. \"Budgetary control refers to how well managers utilise budgets to monitor and control costs and operations in a given accounting period. In other words, budgetary control is a process for managers to set financial and performance goals with budgets, compare the actual results, and adjust performance, as it is needed." Give 2 examples of each budgetary control. a) A control technique whereby actual results are compared with budgets. b) Any differences (variances) are made the responsibility of key individuals who can either exercise control action or revise the original budgets. Accounting & Budgeting, Assessment No. 1 v1.0, Last updated on 12/04/2016 Page 25 T-1.8.1 8. Match the budget type with the appropriate description. Budget type Description a. Static i. Budgets prepared for a set period (e.g. July - September), which are not renewed until the next period b. Flexible ii. Budgets continually updated so that they always reflect plans for the same budget length of time. c. Period iii. Budgets prepared in a manner that shows expected results for a range of levels of operation d. Rolling iv. Budgets prepared on the assumption of one level of activity only Write the correct order: Accounting & Budgeting, Assessment No. 1 v1.0, Last updated on 12/04/2016 a iv, b............, c..............., d............... Page 26 T-1.8.1 9. Describe 2 budgeting forecasting techniques. 10. Explain the principles of double entry bookkeeping. Accounting & Budgeting, Assessment No. 1 v1.0, Last updated on 12/04/2016 Page 27 T-1.8.1 Activity 02 - Budgeting (10 x 0.50 = 5 Marks) Instruction for student: This is an individual task with sales budget. You can get relevant information from lecture material and also you can browse internet to gather further information, if you needed. Please answer all questions 1. You are employed by a white goods distributor and have been asked to prepare a list of controllable and uncontrollable factors that might affect the sales of refrigerators in the coming year. Prepare a list for the next management meeting. 2. At January 1, Arrant Ltd. had 1,100 32 GB USB on hand. Its policy is to maintain an ending inventory equal to 15% of units needed for the next month's sales. Arrant estimates it will sell 8,000 USBs during the first month with a 5% increase in sales each subsequent month. Each USB is sold for $16. Required: Prepare a sales budget for the March. Solution: 32 GB USB Expected Sales (units) Accounting & Budgeting, Assessment No. 1 v1.0, Last updated on 12/04/2016 Page 28 T-1.8.1 Selling Price per unit ($) Expected Sales ($) 3. Orient Trading Co. sells products B and C. Sales for February were 1500 units of B at $40 and 1000 units of C at $50. A price rise of $5 per unit will be effective from March 1 on both products. It is expected that this will result in a 10% fall in the number of units of product B sold, and a 20% fall in the number of units of C sold during March compared with February. Required: Prepare a Sales Budget for Orient Trading Co. for March. Solution: Product B Product C Total Expected Sales (units) Selling Price per unit ($) Expected Sales ($) 4. Apple glassware sells four basic styles of glass. A wine, beer, scotch and juice glass. The prices per glass are as follows: Wine $7.00. Beer $5.50, Scotch $6.25, Juice 4.50. Expected Sales for March were 1,400 wine, 1,200 beer, 1,100 scotch and 1,320 juice. Required: Prepare a Sales Budget for March showing expected sales by product and in total. Solution: Apple Glassware Wine Beer Scotch Juice Total Sales units Price $ Accounting & Budgeting, Assessment No. 1 v1.0, Last updated on 12/04/2016 Page 29 T-1.8.1 Sales $ 5. Sales Budgets by Period Angelina on the Affleck Electronics Ltd provides the following figures and asks that you prepare sales budget for the quarter ending 31 July. January February March Average number of Electrical goods 560 495 520 Average bill $ 140 110 90 March Total Solution:Angelina on the Affleck Electronics Ltd January February Sales $ 6. Sales Budgets by Area Archie Clothing Warehouse have stores in Sydney, Melbourne and the Gold Coast. The sales manager has supplied the sales figures for October, November and December. Sydney $ Melbourne $ Gold Coast $ Total $ October 46,000 31,000 54,000 131,000 November 68,000 48,000 76,000 192,000 December 53,000 42,000 66,000 161,000 $167,000 $121,000 $196,000 $484,000 Accounting & Budgeting, Assessment No. 1 v1.0, Last updated on 12/04/2016 Page 30 T-1.8.1 Those figures were achieved during a relatively cool summer. This year is expected to be warmer and sales are budgeted to increase by 14% in Sydney, 6% in Melbourne and 26% on the Gold Coast. Required: Prepare a projected sales budget for the same period next year. Solution: Sydney $ Melbourne $ Gold Coast $ Total $ October November December 7. Gillard's books sells year end hampers for $90.50 each. Based on last years' figures the sales department has budgeted for the following sales this year. No. Of Sales NSW VIC QLD SA WA NT TAS 4,150 3,420 3,790 2,600 2,900 1,150 880 $90.50 Required: Prepare a sales budget for this year's year end hampers. Solution: Gillard's books hampers NSW VIC Accounting & Budgeting, Assessment No. 1 v1.0, Last updated on 12/04/2016 QLD SA WA NT TAS Page 31 T-1.8.1 Sales $ 8. Fees Budget CMDP's Accountants have four accountants in the business. Charlie who charges $60 per hour, Mary $45 per hour, Dickson $80 per hour and Peter $58 per hour. In the month of June the hours charged were expected to be: Charlie 140, Mary 160, Dickson 80 and Peter 120. Required: Prepare a Fees budget for June. Solution: Charlie Mary Dickson Peter Total Hours $ per hour Income $ 9. BMW financial advisers provide service by the hour and charge a separate fee for preparing a financial plan. During January, hours charged are expected to be 1,210 and 62 financial plans are expected to be prepared. Cost per hour is $44 and each plan costs $1,600. Required: Prepare a Fees Budget for January. Solution: BMW Financial Advisors Charged Hours Financial Plans Total Hours / Plans (units) Accounting & Budgeting, Assessment No. 1 v1.0, Last updated on 12/04/2016 Page 32 T-1.8.1 Price per Hour / Plan ($) Fees / Income ($) 10. The Jamie Oliver conducts one hour cooking lesions. The lesson for the last three months was as follows: January February March No. $ No. $ No. $ Connoisseur 50 10 30 10 60 10 Epicure 60 15 60 15 80 15 Gourmet 70 20 70 20 90 20 For the following three months a 10% increase in Connoisseur lessons, and a 5% decrease in Epicure lessons and no change for Gourmet lessons. The cost of Connoisseur lessons will increase by 4%, and a 5% increase in Epicure lessons and 6% for Gourmet lessons. Required: Prepare a fees income budget for the next three months and the quarter ending 30th June. Solution: The Jamie Oliver April No. May $ No. June $ No. $ Connoisseur Epicure Gourmet Revenue Accounting & Budgeting, Assessment No. 1 v1.0, Last updated on 12/04/2016 Page 33 T-1.8.1 Revenue for the Quarter $ Activity 03 - Budgeting . (10 x 0.50 = 5 Marks) Instruction for student: This is an individual task with sales budget. You can get relevant information from lecture material and also you can browse internet to gather further information, if you needed. 1. Purchase Budget by Product Sandra Retail Co. purchase products A and B. Purchases for September were 400 units of A at $25 and 800 units of B at $45. A price rise of $5 per unit will be effective from October 1 on both products. It is expected that this will result in a 5% fall in the number of units of product A purchased and a 10% fall in the number of units of C purchased during October compared with September. Required: Prepare a Purchase Budget in dollars and units for Sandra Retail Co. for October. Solution: Sandra Retail Co. Product A Expected Units Product B Total Purchases Purchase Price per unit $ = Expected Purchases $ 2. Local fruit shop purchase four types of fruits: Strawberry, Banana, Orange and Kiwi. The prices per 6 litre container are as follows: Strawberry $7.00, Banana $5.50, Orange $6.25 and Kiwi $4.50. Expected purchases for January were 1,400 Strawberry, 1,200 Banana, 1,100 Orange and 1,320 Kiwi. Required: Prepare a Purchase Budget in dollars and units for January showing expected purchases by product and in total. Solution: Strawberry Accounting & Budgeting, Assessment No. 1 v1.0, Last updated on 12/04/2016 Banana Orange Kiwi Total Page 34 T-1.8.1 Purchase Units Price $ Purchase $ 3. Purchase Budget by Period Igloo Ice cream Co has the following purchase figures for the quarter ended December, 2013 Macadamia nuts Chocolate chips Chocolate October $18,000 $36,000 $12,000 November 20,000 44,000 8,000 December 29,500 52,000 24,000 $67,500 $132,000 $44,000 Purchases are expected to increase next year, especially in December. The increases expected are: Macadamia nuts: 4.0% in October, 7.0% in November and 14.0% in December Chocolate chips: 2.0% in October, 3.0% in November and 8.0% in December Chocolate: 1.5% in October, 4.0% in November and 5.0% in December Required: Prepare a purchases budget for Igloo Ice cream Co for the December quarter 2013. Solution: Macadamia nuts Chocolate chips Chocolate October November December Total Accounting & Budgeting, Assessment No. 1 v1.0, Last updated on 12/04/2016 Page 35 T-1.8.1 4. Purchase Budget by Area The following data is provided for Rivers Retail. Budgeted Sales $ Jan Feb March April 9,600 9,000 7,500 9,000 Closing inventory is budgeted at 200% of the following month's expected cost of sales requirements. All items sell for $60, which is a 50% mark-up on cost. Required: Prepare a purchases budget for the Rivers Retail for the three months to 31 March. Solution: Jan Feb March Total April Budgeted sales $ Budgeted cost of sales $ +Closing Inventory $ = Available $ - Opening Inventory $ = Required Purchases $ Required Purchases Units 5. Calculate cost of sales for each of the following: a) Goods are sold at a mark up of 60% on cost. Sales are $400,000 b) Sales are $250,000. Cost of goods sold is 75% c) 600 pens are sold for $4,500. Profit on each pen is $1.50 d) Sales are $45,000. The margin on sales is 45% e) Gadget X costs $8 and sells for $12.50. Sales total $6,500 Accounting & Budgeting, Assessment No. 1 v1.0, Last updated on 12/04/2016 Page 36 T-1.8.1 6. Cost of goods sold budget From the following information, provided by Dymocks Books store, prepare cost of goods sold budget and a budgeted trading statement for the three months ending 30 September. Budgeted purchases: Inventory Balances: Budgeted Sales: $35,000 01/07 (actual) 40,000 30/09 (budgeted) 30,000 250,000 Solution: Dymocks Books store Cost of goods sold budget for the three months ending 30 September Inventory 01/07 + Budgeted purchases - Budgeted inventory 30/09 = Budgeted cost of goods sold Budgeted Trading statement for the three months ending 30 September Budgeted sales - Budgeted cost of goods sold = Budgeted Gross Profit Accounting & Budgeting, Assessment No. 1 v1.0, Last updated on 12/04/2016 Page 37 T-1.8.1 7. Expense budget The estimated expenses of Footprint Supplies comprise: Advertising $1,200 per month plus 1% of sales Sales wages $4,000 per month as salaries and 5% of sales as commission Office salaries $5,000 per month General expenses $850 per month Rent $1,600 per month Discounts allowed 2.5% of sales Depreciation $24,000 per annum Sales for July $60,000 Required: Prepare an expense budget for July. Solution: Expense budget for July Marketing Expenses $ $ Advertising ($1,200 + $60,000*0.01) Sales wages salaries Commission (60,000*0.05) Administration Expenses Office Salaries General expenses Rent Depreciation (24,000/12) Financial Expenses Discounts allowed Budgeted Total Expenses Accounting & Budgeting, Assessment No. 1 v1.0, Last updated on 12/04/2016 Page 38 T-1.8.1 8. Individual Expense budget Fizz Up Drinks expect to incur the following marketing expenses in the moth of September on sales of $80,000: $ Advertising 14,720 Sales salaries 18,110 Sales commissions 6% of Sales Depreciation on delivery vehicles 680 Maintenance on delivery vehicles 480 Delivery charges 1,550 Required: Prepare a marketing expenses budget for September. Solution: Marketing expenses budget $ Advertising Sales salaries Sales commissions Depreciation on delivery vehicles Maintenance on delivery vehicles Delivery charges Total = 9. Budgeted Income Statement Accounting & Budgeting, Assessment No. 1 v1.0, Last updated on 12/04/2016 Page 39 T-1.8.1 Tellytube Co. operates a small consultancy firm. Last year's figures were: Consultancy fees $315,000 Travel expenses $11.900 Other income 62,000 Other admin expenses 2,800 Other wages 40,000 Insurance 31,000 Stationery 800 Rent 14,200 Telephone 3,100 Interest paid 6,800 Marketing expenses 24,200 Next year's budgeted figures will be based on the following: Consultancy fees are expected to rise by 8% Other income is expected to fall by 4% Office wages, stationery, telephone, marketing, travel and other admin expenses will rise by 2% Insurance will rise by 8% Rent will fall by 2% Interest paid will rise by 0.5% Solution: Accounting & Budgeting, Assessment No. 1 v1.0, Last updated on 12/04/2016 Page 40 T-1.8.1 Fees income Other income Less expenses Office wages Stationery Telephone Marketing expenses Travel expenses Other expenses admin Insurance Rent Interest paid = Net profit Activity 04 - Budgeting (5 Marks) Instruction for student: Accounting & Budgeting, Assessment No. 1 v1.0, Last updated on 12/04/2016 Page 41 T-1.8.1 This is an individual task with sales budget. You can get relevant information from lecture material and also you can browse internet to gather further information, if you needed. 1. The following have been made available by Sans Sarsi Manufacturing to enable the preparation of appropriate budgets for the year ended 30 June. Product Expected Units Sales Sale unit Price per Material kg Required A B 4 X 79,000 $4.00 2 Y 40,000 $5.50 4 Z 102,000 $1.60 2 Required inventory levels (in units) of finished product and raw materials are: Beginning Inventory Ending Inventory ProductX 5,000 6,000 ProductY 4,000 4,000 ProductZ 10,000 8,000 Item A 10,000 12,000 Item B 12,000 15,000 Raw material A and B can be purchased for 40 cents per kg and 20 cents per kg respectively. Product X, Y and Z are manufactured in batches of 1,000 units and require 50, 125 and 20 direct labour hours respectively per batch. Labour is charged at $12.00 per hour. Variable factory overhead is costed at $8.00 per direct labour hour. Additionally, fixed factory overhead of $60,000 is allocated one-third to each product. Required: Prepare for the year ended 30 June: a) A sales budget, by product and in total (1 Mark) b) c) d) e) A production budget (in units), by product (1 Mark) A raw materials cost budget, by product and in total (1 Mark) A materials purchases budget (in kg and $), by item and in total ( 0.50 Mark) A direct labour cost budget, by product and in total ( 0.50 Mark) Accounting & Budgeting, Assessment No. 1 v1.0, Last updated on 12/04/2016 Page 42 T-1.8.1 f) A factory overhead budget, by product and in total ( 0.50 Mark) g) A cost of production budget, by product and in total ( 0.50 Mark) Solution: Sans Sarsi Manufacturing a) Sales Budget for the Year Ending 30 June Product X Y Z Total Y Z Expected Sales Units Sale Price per unit $ Budgeted Sales $ b) Production Budget for the Year ending 30 June Product X Budgeted Sales Units + Closing Inventory Units - Opening InventoryUnits = Budgeted Production Units c) Raw Material Cost Budget for the Year ending 30 June Product X Y Z Total Y Z Total Budgeted production Units Material required for production Item A kg Item B kg Budgeted Raw Material Cost $ X Item A @ $0.40 per kg + Item B @ $0.20 per kg Accounting & Budgeting, Assessment No. 1 v1.0, Last updated on 12/04/2016 Page 43 T-1.8.1 = Budgeted Raw Material Cost $ d) Material Purchases Budget for the year ending 30 June Material Material required for Production A B Total kg + Closing Inventory kg - Opening Inventory kg = Required Purchases kg Purchase Cost per kg $ = Required Purchases $ e) Direct Labour cost budget for the year ending 30 June Product X Y Z Total Budgeted production Units No of production batches/1000 Direct labour hours per batch Budgeted direct labour hours = Budgeted direct labour cost @ $12 per DLH ($) f) Factory overhead budget for the year ending 30 June Product X Y Z Total Budgeted Direct labour Hours Accounting & Budgeting, Assessment No. 1 v1.0, Last updated on 12/04/2016 Page 44 T-1.8.1 Budgeted variable overhead @$8 per DLH ($) Budgeted fixed overhead = Budgeted factory overhead g) Cost of production / Manufacturing budget for the year ending 30 June Product X Y Z Total $ $ $ $ Budgeted Raw Material cost + Budgeted direct labour cost = Budgeted prime cost Budgeted factory overhead: Variable Fixed = Budgeted production cost of Activity 05 - Budgeting (5 Marks) Instruction for student: This is an individual task with sales budget. You can get relevant information from lecture material and also you can browse internet to gather further information, if you needed. 1. Budgeted Income Statement (2.50 Marks) Accounting & Budgeting, Assessment No. 1 v1.0, Last updated on 12/04/2016 Page 45 T-1.8.1 The budget department of MNM Pty Manufacturing Co. has compiled the following estimates for the 2012/103 year: $ Sales Budget: Estimated Sales 430,000 Production Budget: Raw Materials 100,000 Direct Labour 150,000 Factory Overhead 30,000 Selling and Administration Expenses: Fixed 50,000 Variable 10% of Sales Inventories Finished Goods: 01/07/2012 actual 45,000 Finished Goods: 30/06/2013 budgeted 50,000 Required: Prepare a projected Income Statement for the year ending 30 June. Include a supporting schedule showing the calculation of COGS. Solution: Budgeted Income Statement MNM Pty Manufacturing Co. Budgeted Income Statement for the year ending 30 June 2013 $ Sales Accounting & Budgeting, Assessment No. 1 v1.0, Last updated on 12/04/2016 Page 46 T-1.8.1 Less Cost of Goods Sold: Opening Inventory Plus cost of goods manufactured: Raw materials Direct labour Factory overhead Goods available for sale Less closing inventory = Gross Profit Less Selling and Administration expenses Fixed Variable = Net Profit 2. Budgeted Balance Sheet (2.50 Marks) Patrick Stuart provides the following Balance sheets and additional information: Patrick Stuart's Balance Sheet as at 30 June 2012 $ $ $ Current Assets Bank 8,500 Accounts receivable 14,000 Inventories 12,500 Prepayments 1,200 36,200 Non-Current Assets Vehicles 54,000 Less Accumulated Depreciation Vehicles (19,400) 34,600 Accounting & Budgeting, Assessment No. 1 v1.0, Last updated on 12/04/2016 Page 47 T-1.8.1 Equipment 28,000 Less Accumulated Depreciation Equipment (11,200) 16,800 51,400 Total Assets 87,600 Current Liabilities Accounts payable 15,000 Accrued expenses 850 15,850 37,000 37,000 Non-Current Liabilities Bank Loan Total Liabilities 52,850 Net Assets 34,750 Owner's Equity Capital 01/07/2011 25,400 Net Profit 51,350 Drawings (42000) 76,750 34,750 Projections for the year ended 30 June, 2013 are: Sales (all credit): $322,000 Cost of Goods Sold: 55% of sales Marketing expenses: 5% of sales Interest on loan: $1,500 Administrative expenses (incurred): $54,000 Depreciation on equipment: $6,200 Depreciation on motor vehicles: 20% of cost Other information: Accounting & Budgeting, Assessment No. 1 v1.0, Last updated on 12/04/2016 Page 48 T-1.8.1 Expected receipts from accounts receivable $320,500 Accounts payable to be reduced 5% Inventory to be increased by 10% Accruals balance 30/06/2013 $1,100 Drawings by the proprietor to amount to $45,000 The bank loan to be reduced by $5,000 Prepayments balance 30/06/2013 $1,300 Purchases of new equipment $2,500 Solution: Budgeted Income Statement and Balance Sheet $ Sales (credit) Less Cost of Goods Sold: Opening Inventory Purchases Goods available for sale Less closing inventory = Gross Profit Less Expenses Marketing Administration Financial = Net Profit General Ledger: Accounts Receivable Opening Balance $ 14,000 Bank (Receipts) $ 320,500 Sales $ 322,000 Closing Balance $ $336,000 Accounting & Budgeting, Assessment No. 1 v1.0, Last updated on 12/04/2016 $336,000 Page 49 T-1.8.1 Accounts Payable Bank (Payments) $ Opening Balance $ Closing Balance $ Purchases $ $ $ Cash Expenses Opening Prepaid Bal. $ Payments Closing Accrued Opening Accrued $ Bal. $ Bal. $ Profit & Loss $ Closing Bal. Prepaid $ $ $ Vehicle Opening Balance $ Closing Balance $ $ $ Accumulated Depreciation - Vehicle Closing Balance $ Opening Balance $ Depreciation $ $ $ Equipment Opening Balance $ Bank $ Closing Balance $ $ $ Accumulated Depreciation - Equipment Closing Balance $ Accounting & Budgeting, Assessment No. 1 v1.0, Last updated on 12/04/2016 Opening Balance $ Page 50 T-1.8.1 Depreciation $ $ $ Cash at Bank Opening Balance $ Accounts payable $ Accounts Receivable $ Marketing expense $ Administration expense $ Loan interest $ Loan $ Equipment $ Drawings $ Closing Balance $ $ $ Budgeted Balance Sheet as at 30 June 2013 $ $ $ Current Assets Bank Accounts receivable Inventories Prepayments Non-Current Assets Vehicles Less Accumulated Depreciation Vehicles Equipment Accounting & Budgeting, Assessment No. 1 v1.0, Last updated on 12/04/2016 Page 51 T-1.8.1 Less Accumulated Depreciation Equipment Total Assets Current Liabilities Accounts payable Accrued expenses Non-Current Liabilities Bank Loan Total Liabilities Net Assets Owner's Equity Capital 01/07/2012 Net Profit Drawings Accounting & Budgeting, Assessment No. 1 v1.0, Last updated on 12/04/2016 Page 52 T-1.8.1 Activity 06- Budgeting (5 Marks) Instruction for student: This is an individual task with sales budget. You can get relevant information from lecture material and also you can browse internet to gather further information, if you needed. 1. Flexible Budgeting for Service Operations (2 Marks) The following information relates to the budget of operations for the coming year for D & D Design Co. Average Charge out Rate per Hour $50 Variable Costs per Charge out Hour Labour costs $19 Other Variable costs (telephone calls) 1 $20 Fixed Costs per annum Rent Office Accounting & Budgeting, Assessment No. 1 v1.0, Last updated on 12/04/2016 $19,000 Page 53 T-1.8.1 Other Fixed Costs (telephone rental & Insurance) $6,000 $25,000 Required: Based on the information above, prepare an Income Statement Budget using flexible techniques, assuming the company has chargeable hours of: a) 10,000 hours and b) 15,000 hours. Solution: G& G Design Co. Income Statement Flexible Budget Forecasts - Levels of Activity Chargeable Hours Rate per Hour Total Revenue Less Variable Costs Labour Costs Other Variable Costs Total Variable Cost Fixed Costs Rent Office Other Total Fixed Cost Total Costs (Variable + Fixed) Net Income Accounting & Budgeting, Assessment No. 1 v1.0, Last updated on 12/04/2016 Page 54 T-1.8.1 2. Flexible Budgeting for Trading Operations (2 Marks) Franklin Bicycle Shop sells new and used bicycles as well as bicycle accessories. Each year in December, the accountant for the business sets budget schedules detailing financial expectations for the coming year, based on information provided by management. The following estimates have been provided for the business: Sales: Pessimistic Forecast Most Likely Forecast Optimistic Forecast $400,000 $520,000 $600,000 Costs and expenses, classified according to their behaviour in relation to sales as either Variable or Fixed: Variable Costs Cost of Sales: 60% of sales revenue Freight Costs: 2% of sales revenue Sales Commissions: 3% of sales revenue Sales Discounts: 5% of sales revenue Fixed Costs Salaries & Wages: $40,000 Sales Promotion Expenses: $43,000 Required: Prepare a detailed Income Statement budget using flexible budgeting techniques. Solution: Franklin's Bicycle Shop Income Statement - Flexible Budget Forecasts Expected Sales Accounting & Budgeting, Assessment No. 1 v1.0, Last updated on 12/04/2016 Page 55 T-1.8.1 Pessimistic Forecast $ Most Likely Optimistic Forecast $ Forecast $ Sales Less Variable Costs % of sales Cost of Sales 60% Freight Costs 2% Sales Commissions 3% Sales Discounts 5% Fixed Cost Salaries & Wages Sales Expenses Promotion Total Costs (Variable + Fixed) Net Income 3. Determine manufacturing cost using Flexible Budgets (1 Mark) At a production level of 40,000 units, Pran Pty Ltd had the following manufacturing costs: Prime costs (Direct Material plus Direct Labour $340,000 Variable Factory Overhead $100,000 Fixed Factory Overhead $60,000 Required: What is the expected total cost of production if 50,000 units are produced? Accounting & Budgeting, Assessment No. 1 v1.0, Last updated on 12/04/2016 Page 56 T-1.8.1 Solution: Cost Unit per 40,000 Units 50,000 Units Prime Cost Variable Overhead Fixed Cost Expected Costs Accounting & Budgeting, Assessment No. 1 v1.0, Last updated on 12/04/2016 Page 57