Part B

1)The following is a list of amounts taken from the records of Don's Dents, a second-hand car sales yard operating in Taranaki, for the year to 31/12/20X1.

Accounting Fees expense

6,000

Cost of Goods Sold

210,000

Bad Debts

5,000

Buildings (purchased 2001)

120,000

Capital (buildings) contributed by the owner

60,000

Bank Loan (6-month term) obtained from BNZ

120,000

Capital, start

45,000

Cash Drawings

70,000

Cash receipts from customers

410,000

Cash - Bank balance, start of year

3,500

in funds

Depreciation - Building

11,000

Discount (from suppliers for prompt payment)

5,000

Discount (to customers for prompt payment)

7,000

Dividends revenue

12,000

Dividends received in cash

10,000

Interest expense

23,000

Interest paid

20,000

Interest received in cash

8,000

Interest revenue

9,000

Mortgage obtained from BNZ

35,000

Mortgage part-repayment (principal)

49,000

Payments to Suppliers

270,000

Postage & Stationery expense

2,400

Purchase of shares in Telecom for cash

15,000

Purchase of New Buildings for cash (current year)

160,000

Sale of Toyota shares for cash

75,000

Sale of Old Buildings for cash

55,000

Sales

600,000

Wages expense

78,000

Wages paid

72,000

a)Present fully classified Cash Flow Statement for the year ending 31 December 20X1. (Note: some items listed are not cash flow items.)

b)Comment on Don's cash flows, in regard to operating, investing and financing activities, the ending cash bank balance, and any items you consider are relevant.

c)Assume Don's net profit on his Income Statement is $210,000. Compare this with the final net operating cash flow for the business, and suggest reasons for the difference.

d)Make 3 recommendations to Don in regard to his cash flows and cash position.

2)The following is a list of amounts taken from the records of Lilly Lavender's, a flower sales and arranging service, for the year to 31/12/20X1.

Advertising expense

21,000

Buildings (purchased 2005)

220,000

Capital (buildings) contributed by the owner

110,000

Capital, start

78,000

Cash invested by Lilly from inheritance

35,000

Cash Drawings

90,000

Cash Receipts from Customers

785,000

Cash - Bank balance, start of year

6,000

overdrawn

Commission Revenue

29,000

Commission received in cash

19,000

Cost of Goods Sold

333,000

Depreciation - Building

24,000

Depreciation - Equipment

4,000

Discount (from suppliers for prompt payment)

8,000

Equipment (purchased 2005)

50,500

Interest expense

40,000

Interest paid

35,000

Interest received in cash

14,000

Interest revenue

15,700

Loan (6 months) obtained from ANZ

10,000

Loan (6 months) repaid to ANZ

10,000

Mortgage obtained from BNZ

65,000

Mortgage repaid (principal)

165,000

Other operating expenses

34,000

Payments to Suppliers

373,000

Purchase of New Buildings for cash (current year)

280,000

Purchase of shares in Telecom for cash

26,000

Sale of Jones Ltd shares for cash

131,000

Sale of Old Buildings for cash

96,000

Sales

900,000

Tax expense

112,000

Tax paid

123,000

Term Deposit (opened mid-year)

20,000

Wages expense

85,000

Wages paid

80,000

a)Present a fully classified Cash Flow Statement for the year ending 31 December 20X1. (Note: some items listed are not cash flow items.)

b)Comment on Lilly's cash flows, in regard to operating, investing and financing activities, the ending cash bank balance, and any items you consider are relevant.

c)Assume Lilly's net profit on her Income Statement is $240,000. Compare this with the final net operating cash flow for the business, and suggest reasons for the difference.

d)Make 3 recommendations to Lilly in regard to her cash flows and cash position.

Part D

1)Gary Gilmour began business on 1 January 20X1, with a 31 December balance date. All figures are GST-exclusive.

On that day he purchased a new factory machine for making canned soup for

$42,000 from McWaters Ltd.

Freight of $900 and installation expenses of $1,100 were paid to get the machine into Gary's factory and ready for use.

Gary had to employ a repairman to get the machine operating correctly, as it was found to have been dropped accidentally by one of his employees on delivery, and needed a few things fixing and replaced as a result. The repairs and parts replaced cost $1,000.

The machinery has an estimated life of 20,000 hours.

The hours the machinery is estimated to be used annually are: Year 12,000 hours

Year 22,500 hours

Year 33,000 hours

Year 44,500 hours

Year 54,000 hours

Gary also had a Nissan Maxima turbo vehicle, which he decided to register as a business vehicle, at a cost of $40,000 on 1 January 20X1.

a)Show the appearance of the Fixed assets section of the Balance Sheet as at 31 December 20X5, assuming:

actual usage equals estimated usage for the machine

the units of use method is used

the vehicle is depreciated at 20% diminishing value.

Round all amounts to the nearest whole dollar. Include any relevant subtotals.

b)Show the appearance of the relevant section of the Income Statement for 31 December 20X5, assuming that:

actual usage equals estimated usage

Gary uses only one 'Operating expenses' section for all depreciation amounts

other operating expenses are: Power $12,000, Materials $4,000, and Factory wages $45,000, which remain constant each year.

Include any relevant subtotals.

c)Suppose Gary had the option of choosing the diminishing value method for the machinery depreciation at a rate of 20%, or straight line depreciation with an estimated residual value of $5,000 and a useful life of 10 years. Recalculate annual depreciation for years 20X1-20X5, and the accumulated depreciation as at the end of year 31/12/20X5.

d)Assuming that any of the 3 depreciation methods (units of use, diminishing value, and straight line) as above are acceptable for tax purposes, state 1 advantage of using each of the 3 methods.

2)Dale Cooper began business on 1 January 20X1, with a 31 December balance date. All figures are GST-exclusive.

On that day he purchased a new factory machine for making dog food for

$48,000 from Wind River Ltd.

Freight of $600 and installation expenses of $400 were paid to get the machine into Dale's factory and ready for use.

Dale had to employ a repairman to get the machine operating correctly, as it was found to have been dropped accidentally by one of his employees on delivery, and needed a few things fixing and replaced as a result. The repairs and parts replaced cost $1,000.

The machinery has an estimated life of 25,000 hours.

The hours the machinery is estimated to be used annually are: Year 12,000 hours

Year 23,000 hours

Year 34,000 hours

Year 45,000 hours

Year 54,500 hours

Dale also had a Nissan Maxima turbo vehicle, which he decided to register as a business vehicle, at a cost of $35,000 on 1 January 20X1.

a)Show the appearance of the Fixed assets section of the Balance Sheet as at 31 December 20X5, assuming:

actual usage equals estimated usage for the machine

the units of use method is used

the vehicle is depreciated at 20% diminishing value.

Round all amounts to the nearest whole dollar. Include any relevant subtotals.

b)Show the appearance of the relevant section of the Income Statement for 31 December 20X5, assuming that:

actual usage equals estimated usage

Dale uses only one 'Operating expenses' section for all depreciation amounts

other operating expenses are: Power $15,200, Materials $6,500, and Factory wages $40,000, which remain constant each year.

Include any relevant subtotals.

c)Suppose Dale had the option of choosing the diminishing value method for the machinery depreciation at a rate of 20%, or straight line depreciation with an estimated residual value of $5,000 and a useful life of 10 years. Recalculate annual depreciation for years 20X1-20X5, and the accumulated depreciation as at the end of year 31/12/20X5.

d)Assuming that any of the 3 depreciation methods (units of use, diminishing value, and straight line) as above are acceptable for tax purposes, state 1 advantage of using each of the 3 methods.