Question 21 (6 marks)

On 1 July 20x2 (the first day of the financial year), Large Mart decides to start selling electric bicycles (e-bikes). Initially, Large Mart places an order for 10 e-bikes (for $500 per e-bike), and the first e-bikes arrive at Large Mart on 5 July 20x2. Following an advertising campaign, the e-bikes become a big seller and Large Mart makes the following sales and purchase transactions during the year ended 30 June 20x3:

Sale (10 August 20x2) of 3 e-bikes for a price of $1,200 per e-bike

Purchase (1 September 20x2) of 6 e-bikes for $700 per e-bike

Sale (5 September 20x2) of 8 e-bikes for $1,100 per e-bike

Sale (12 November 20x2) of 4 e-bikes for $1,000 per e-bike

Large Mart accounts for its inventory using the first-in-first-out cost flow assumption and the perpetual inventory system.

Required:

a) Calculate the cost of all e-bikes sold during the year ended 30 June 20x3, AND outline all necessary calculations (2 marks)

b) Calculate the value of all e-bikes that remain in the inventory account on 30 June 20x3, AND outline all necessary calculations (2 marks)

c) Calculate the amount of revenue that the e-bikes have generated for Large Mart during the year ended 30 June 20x3, AND outline all necessary calculations (2 marks)

Question 19 (9 marks)

On 1 July 20x2, Large Mart signs a four (4) year lease contract for a photo copier for its office. Large Mart is not able to cancel the lease during the contract period. At the end of the lease period Large Mart will have the option to purchase the photo copier for $500 (but the expected fair value of the photo copier at the end of the lease term is $1,000). As a result, Large Mart is planning to exercise the purchase option in the lease contract. Large Mart expects that the useful life of the photo copier is five (5) years.

The lease contract requires Large Mart to make the following payments: $1,000 when the contract is signed (1 July 20x2), and $2,000 at the end of each year (30 June) during the lease term. The Large Mart accounting department has determined that the interest rate implicit in the lease is 10%. Large Mart leased the photo copier (instead of purchasing it) because the price of the photo copier at the time the lease contract was signed was $8,900 and Large Mart did not have sufficient cash to purchase the photo copier directly.

Required:

a) Calculate the present value of the minimum lease payments (2 marks)

b) Determine if the lease is a finance lease or an operating lease, and provide a DETAILED explanation for your decision (2 marks)

c) Provide all journal entries that are necessary in the books of Large Mart to account for the signing of the lease contract (if any are necessary), AND all lease payments that Large Mart makes during the financial year ended 30 June 20x3 (if any are necessary), (5 marks)

Question 20 (4 marks)

The statement of cash flows is an important part of every financial report.

Required:

a) Outline why the information provided by the statement of cash flows is different from the information that is provided in a statement of comprehensive income (2 marks)

b) Outline the difference between cash flow from investing activities and cash flow from operating activities (2 marks)

Question 17 (6 marks)

On 21 June 20x1, the Large Mart store in Armidale ordered a new company car for its customer service department (called the "Nerd Herd") from a car dealer in Brisbane. The car was delivered to Large Mart on 25 June 20x1. Before Large Mart starts using the car, a magnetic (and removable) "Large Mart" sign is added to the outside of the car.

During June 20x1, Large Mart received the following invoices for the car:

Brisbane Car Dealer

List price of the car $25,000

Payment discount (if payed by 30 June 20x1) $ 5,000

Delivery Company

Transport of car to Armidale $ 1,000

Large Mart will use the new car for 5 years and depreciate the car using straight-line depreciation. Large Mart expects that the car will have a residual value of $1,000 at the end of its useful life. Large Mart will pay the invoice from the car dealer and the delivery company by 29 June 20x1.

Required:

a) Determine if the payment discount and transport of the car to Armidale influence the cost of the car (1 mark)

b) Provide all journal entries that are necessary in the books of Large Mart to account for the purchase of the car during June 20x1 (1 mark)

c) Identify the day on which the depreciation for the car starts (2 marks)

d) Provide all journal entries that are necessary in the books of Large Mart to account for the depreciation of the car for the month of June 20x1, AND provide an outline of your calculations (2 marks)

Question 18 (6 marks)

On 1 July 20x1, Large Mart purchases a new building (and the associated land) in Sydney. Large Mart paid $700,000 for the land and $500,000 for the building.

Large Mart will use the building for 30 years, after which time the building will have a residual value of zero. All Large Mart buildings are depreciated using the declining balance method, and the yearly depreciation percentage for this building will be 6.67%.

On 1 July 20x4, Large Mart decides to revalue the building to its fair value of $550,000.

Required:

a) Calculate the yearly amount of depreciation for the building for the year ended 30 June 20x4, AND provide an outline of your calculations (2 marks)

b) Provide all journal entries that are necessary to record the revaluation of the building on 1 July 20x4 (4 marks)

Question 15 (4 marks)

At the end of April 20x1, Large Mart pre-paid Armidale Cleaners (AC) for 100 hours cleaning services, which will be used during May and June 20x1.

Required:

a) State whether the prepayment of cleaning services at the end of April created an asset, a liability, income, an expense or equity in financial accounts of Large Mart (1 mark)

b) Explain your decision based on the criteria that the conceptual framework uses to define the item that is created by the prepayment, and describe how each criterion is fulfilled by the outlined situation (3 marks)

Question 16 (4 marks)

On 1 June 20x1, Large Mart purchases a computer which is used to track the inventory in its warehouse in Armidale. The computer costs $5,000 and creates an asset for Large Mart.

Required:

a) State whether the depreciation of the computer for the month of June 20x1 creates an asset, a liability, income, an expense or equity in the Large Mart financial statements for the year ended 30 June 20x1 (1 mark)

b) Explain your decision based on the criteria that the conceptual framework uses to define the item that is created by the depreciation of the asset, and describe how each criterion is fulfilled by the outlined situation (3 marks)

Assets 100-1990 Number Account Name Current Assets 101 Cash at Bank 102 Accounts Receivable 103 Lease Receivable 110 Bank Trust 120 Inventory Trade/Sales 120.1 Freight in (Trade/Sales) 120.2 Trade Discounts Received (Trade/s 121 Inventory Components 121.1 Freight in (Components) 121.2 Trade Discounts Received (Components 130 Office Supplies 131 Prepaid Rent current No nt Assets 150 Deferred Ta x Asset 161 Prepaid Rel 163 Motor V ehicles 163.1 Acc. Dep. Motor Vehicles 164 Machinery/Equipment 164.1 Acc. Dep. Machinery/Equipment 65 Buildings 165.1 Acc. Dep. Buildings 166 Warehouse Shelving 166.1 Acc. Dep. Warehouse Shelvin 167 Computers 167.1 Acc Dep. Computers 170 Distribution Rights 170.1 Acc. Amort. on Rights 190 Land Liabilities 200 299 Number Account Name Current Liabilites 202 Accounts Payable 204 W Payable ages 205 Rent Payable 206 Interest Payable 207 Dividends Payable 208 Taxes Payable 215 Share Applications 216 Deben Applications Non-Cu ent Liabilities 230 Provision for Warranty 235 Provision for Remediation 250 Deferred Tax Liability 260 Lease Liability 270 Bank Loan 280 Debenture Liability owners Equity (300- 399 Number Account Name 300 Share Capital 320 Retained Earnings 320.1 Dividends 330 General Reserve 350 Income Summary 360 Revaluation Surplus 390 Forfeited Shares Revenue (400-499) Number Account Name 401 Sales Revenue 401.1 Sales Returns/Allowances 420 Lease Revenue 423 In erest Revenue 425 Executory Expense Recoupment 441 Discount Received -Payment 450 Reversal of Loss on Revaluation 455 Reversal of Impairment Loss 460 Gain on Sale 490 Income Tax Revenue Cost of Good Sold (500-599 Number Account Name 500 Cost of Goods Sold Expenses (600-699 Number Account Name 611 Depreciation Expense 612 Amortisation xpense 615 Inventory Write Down Expense 620 Lease Expense 621 Rent Expense 622 Office Supplies Expense 623 In erest Expense 624 Wage Expense 625 Executory Expenses 630 Warranty Expense 641 Discount Given Payment 650 Loss on Revaluation 655 ment Loss mpa 660 Loss on Sale 690 Income Tax Expe