TACC602 Accounting for Business Term 1, 2022
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TACC602 Accounting for Business
Term 1, 2022
Final Exam Revision Questions
Vol. 1 – Financial Accounting – Chapter 3
Preparation of journal entries
The following information is provided for the first month of operations for Legal Services Inc.:
A. The business was started by selling $100,000 worth of common stock.
B. Six months’ rent was paid in advance, $4,500.
C. Provided services in the amount of $1,000. The customer will pay at a later date.
D. An office worker was hired. The worker will be paid $275 per week.
E. Received $500 in payment from the customer in “C” .
F. Purchased $250 worth of supplies on credit.
G. Received the electricity bill. We will pay the $110 in thirty days.
H. Paid the worker hired in “D” for one week’s work.
I. Received $100 from a customer for services we will provide next week.
J. Dividends in the amount of $1,500 were distributed.
Prepare the necessary journal entries to record these transactions. If an entry is not required for any of these transactions, state this and explain why.
Vol. 1 – Financial Accounting – Chapter 4
Preparation of adjusting journal entries
Prepare adjusting journal entries, as needed, considering the account balances excerpted from the unadjusted trial balance and the adjustment data.
(a) The actual count of supplies at year end was $6,500.
(b) Remaining unexpired insurance at year end was $6,000.
(c) The unearned service revenue at year end was $1,200.
(d) Salaries still owed to employees at year end was $2,400.
(e) Depreciation on property plant and equipment for the year was $18,000.
Preparation of financial statements
Shown below are the balances extracted from the ledger accounts of Shining Star Ltd, a company providing maintenance services, for the year ended 30 June 20XX after the adjusting journal entries have been completed. The account names are listed in alphabetical order and each account shown had a normal balance.
|
$ |
Accounts payable |
6,500 |
Accounts receivable |
7,000 |
Building |
125,000 |
Cash |
??? |
Common Stock |
30,000 |
Dividends |
48,000 |
Land |
50,000 |
Long-term notes payable |
20,000 |
Maintenance revenue |
175,000 |
Maintenance supplies |
1,200 |
Rent expense |
6,000 |
Retained Earnings |
68,700 |
Supplies expense |
21,500 |
Unearned maintenance fees |
4,000 |
Wages expense |
$36,000 |
Required:
(a) Prepare an Adjusted Trial Balance as at 30 June 20XX and calculate the ending balance of the
Cash account.
(b) Prepare an Income Statement for the year ended 30 June 20XX.
(c) Prepare a Statement of Retained Earnings for the year ended 30 June 20XX.
(d) Prepare a Balance Sheet as at 30 June 20XX.
Vol. 2 – Managerial Accounting – Chapter 3
Cost-volume-profit (CVP) analysis
Geelong Gardening Tools Ltd (GGT) manufactures a line of electric garden tools that are sold in general hardware stores. The company's accountant, Tim Brown, has just received the sales forecast for the coming year for GGT's three products: A, B and C.
GGT has experienced considerable variation in sales volumes and variable costs over the past two years, and Brown believes that the forecast should be carefully evaluated from a CVP viewpoint. The preliminary budget information for the coming year is as follows:
|
Product A |
Product B |
Product C |
Sales units |
50,000 |
50,000 |
100,000 |
Selling price per unit |
$84 |
$108 |
$144 |
Variable manufacturing cost per unit |
$39 |
$36 |
$75 |
Variable selling cost per unit |
$15 |
$12 |
$18 |
For the coming year, GGT's fixed manufacturing overhead is budgeted at $6,000,000, and the company's fixed selling and administrative costs are estimated at $1,800,000. GGT pays a tax rate of 40 per cent.
Required:
(a) Determine GGT's budgeted net profit for the coming year.
(b) Assuming the sales mix remains as budgeted, determine how many units of each product GGT
must sell in order to break even in the coming year.
(c) After preparing the original estimates, management would like to keep the current selling prices and review the break-even situation by revising the following estimates:
• Variable manufacturing cost of Product C would increase by 20 per cent.
• Variable selling cost of Product B could be expected to increase by $3.00 per unit.
• Product C is highly valued by customers in the market and the management expects to sell three times as many Product C as each of their other products.
For the above changes of estimates, determine how many units of each product GGT would have to sell in order to break even in the coming year.
Vol. 2 – Managerial Accounting – Chapter 6
Product costs based on traditional and activity-based costing systems
Sydney Equipment Ltd manufactures two products, basic and superior, and applies overhead on the basis of direct labour hours. For the next accounting period, the estimated total amount of manufacturing overhead is $1,920,000. Information about the two products is available as follows:
Superior
Estimated production volume Direct material cost
Direct labour hours
Direct labour rate
3 000 units
$50 per unit
3 hours per unit
$24 per hour
4 000 units
$80 per unit
4 hours per unit
$24 per hour
The estimated manufacturing overhead can be identified with three major activities: order processing ($360,000), machine processing ($1,344,000) and product inspection ($216,000). These activities are driven by number of orders processed, machine hours worked and inspection hours, respectively. Below is the activity data relevant to the two products:
Superior
Orders processed
Machine hours worked
Inspection hours
330
19,800
2,200
220
24,200
8,800
The top management is very concerned about declining profitability despite a healthy increase in sales volume after recent plant renovation and automation with significant investments.
Required:
(a) Using traditional costing method applying manufacturing overhead to production based on direct
labour hours, calculate the product costs per unit of the two products.
(b) Using activity-based costing method, calculate the product costs per unit of the two products.
(c) Based on your calculations in (a) and (b) above, explain which product is overcosted and which product is undercosted AND briefly discuss the impact of overcosting and undercosting to the organisation.
Vol. 2 – Managerial Accounting – Chapter 12
Financial and non-financial performance measurements for companies/divisions
Quality Products Ltd has three divisions being operated autonomously and independently. Their extracted summary of financial results for the year just ended were as follows:
|
East |
West |
International |
Sales revenue |
$30,000,000 |
$40,000,000 |
$50,000,000 |
Cost of goods sold |
15,000,000 |
25,000,000 |
37,000,000 |
Profit before tax |
4,500,000 |
4,750,000 |
5,000,000 |
Total assets |
30,000,000 |
30,500,000 |
31,000,000 |
Current liabilities |
5,000,000 |
7,500,000 |
4,000,000 |
The company's desired minimum rate of return is 15%. The tax rate is 20%. The weighted average cost of capital (WACC) of the company is 16%.
Required:
Calculate the following financial performance indicators for each division: (a) Return on investment (ROI) showing return on sales and investment turnover. (b) Residual income (RI)
(c) Economic value added (EVA)
2022-06-01