Question 1 Study the following transactions of Bluebells Ltd The company delivered a product worth $270,000 on 30 June 2019 65 of the selling price was received on the same day, but another 35 will be received in July 2019 Products worth $500,000 were delivered to a customer on 28 June 2019 20 of the price was received on 2 May 2019 as a deposit Another 80 will be received on 3 July 2019 Salary incurred for June was $150,000 and was paid in cash on 5 July 2019 Rent for June and July 2019 was paid on 1 June 2019 Each months rent amount is $50,000 TASK 1 For each transaction, using the accrual accounting principle, determine the amount of revenues or expenses that should be recognised in the income statement for the month ended 30 June 2019 Make sure that you indicate if the amount is revenue or expense TASK 2 For each transaction, using the cash accounting principle, determine the amount of cash received or paid that should be reported in the statement of cash flows for the month ended 30 June 2019 Make sure that you indicate if the amount is an inflow or outflow 8 marks The application of the accrual accounting principle and the cash accounting principle in recognising revenues and expenses could result in the amount of profit reported in a period to be different from the total cash in the period Explain why this difference could happen TASK Explain your answer by using one of the transactions in part A above as an example 5 marks Banks always need an audited financial statement to be submitted together with the application for a loan Explain why the banks require the audited financial statements in assessing the loan applications TASK Explain your answer 4 marks Shareholders of a limited liability company have a limited risk of losing their investment during the difficult financial situation The maximum amount of money they could lose is the amount of their investment in the company If there is only a limited amount of money resources available in the limited liability company, how could the companys creditors recover the debts if the company is going to be closed down TASK Explain your answer 4 marks It is a common occurrence that a large company is owned by a group of people who are not the managers of the company In this situation, how to ensure that the management always serve the best interest of the owners TASK Explain your answer 4 marks Total 25 marks

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Question 1 Study the following transactions of Bluebells Ltd. The company delivered a product worth $270,000 on 30 June 2019. 65% of the selling price

Question 1

Study the following transactions of Bluebells Ltd.

The company delivered a product worth $270,000 on 30 June 2019. 65% of the selling price was received on the same day, but another 35% will be received in July 2019.
Products worth $500,000 were delivered to a customer on 28 June 2019. 20% of the price was received on 2 May 2019 as a deposit. Another 80% will be received on 3 July 2019.
Salary incurred for June was $150,000 and was paid in cash on 5 July 2019.
Rent for June and July 2019 was paid on 1 June 2019. Each months rent amount is $50,000.

[TASK 1] For each transaction, using the accrual accounting principle, determine the amount of revenues or expenses that should be recognised in the income statement for the month ended 30 June 2019. Make sure that you indicate if the amount is revenue or expense.

[TASK 2] For each transaction, using the cash accounting principle, determine the amount of cash received or paid that should be reported in the statement of cash flows for the month ended 30 June 2019. Make sure that you indicate if the amount is an inflow or outflow.

[8 marks]

The application of the accrual accounting principle and the cash accounting principle in recognising revenues and expenses could result in the amount of profit reported in a period to be different from the total cash in the period. Explain why this difference could happen.

[TASK] Explain your answer by using one of the transactions in part A above as an example.

[5 marks]

Banks always need an audited financial statement to be submitted together with the application for a loan. Explain why the banks require the audited financial statements in assessing the loan applications.

[TASK] Explain your answer.

[4 marks]

Shareholders of a limited liability company have a limited risk of losing their investment during the difficult financial situation. The maximum amount of money they could lose is the amount of their investment in the company. If there is only a limited amount of money/resources available in the limited liability company, how could the companys creditors recover the debts if the company is going to be closed down?

[TASK] Explain your answer.

[4 marks]

It is a common occurrence that a large company is owned by a group of people who are not the managers of the company. In this situation, how to ensure that the management always serve the best interest of the owners?

[TASK] Explain your answer.

[4 marks]

[Total: 25 marks]