Accounting for Managers

ASSIGNMENT

Please read the assignment questions and expectations very carefully. There are two questions in the assignment.

ASSIGNMENT EXPECTATIONS

You should note the following requirements relating to the assignments in this topic:

• Where appropriate, show detailed workings / calculations. In some cases, part-marks may be available for incorrect final answers (for example, this would apply when calculating depreciation, inventory etc).

• Presentation will be taken into account in determining your final grade for the assignment. Assignments must be typed, using a word and/or excel type of application. You must keep a copy of the final version of all assignments you submit. Remember, your assignment must be submitted in .pdf format in one document.

• Plagiarism and other forms of academic dishonesty are treated as serious offences by the University and are subject to harsh penalties, which may include expulsion from the University. Ensure that you have read and understood the University's policy on academic dishonesty, as contained in the 2014 Student related Policies and Procedures Manual.

• Students are welcome to discuss the assignment concepts amongst themselves. However, it should be written on your own. There should be no sharing of files or completion of the assignment together. You need to be able to understand these concepts - understanding is often generated through discussion with other people - but it must be demonstrated by you alone.

• Students are welcome to ask suitable questions about the assignment on the Discussion board, where there should be only ONE topic running on this. I will not answer questions about the assignment by individual email - all students should be able to see all such discussion about the assignment.

• Extensions are automatically granted an extension for the number of working days shown on a sick certificate submitted with their assignment. Ensure you add this as the first document in your single .pdf file submission.

• No extensions are granted for other reasons. No extensions can be granted beyond the return date or Monday 12th October, whichever is the earlier.

Please see over for questions.

ASSIGNMENT DETAILS

Question 1

Greg's Golf Carts is a retail business that re-sells secondhand golf carts. The Statement of Financial Position as at 30th June 2015 is given below. Transactions for the month of July 2015 are also given.

Required:

1. Record the following transactions for July 2015 in a spreadsheet. Remember to add columns as necessary for additional assets, liabilities, owner's equity, revenue and expense accounts that may be necessary.

2. Prepare an Income statement (Statement of Financial Performance) for the month ending 31 July 2015.

3. Prepare a Classified Balance Sheet (Statement of Financial Position) in the vertical format, as at 31 July 2015.

Greg's Golf Carts

Statement of Financial Position as at 30th June 2015

$ ASSETS

Current assets

Cash 15 500

Accounts receivable

Inventory 8 000

12 000

Prepaid rent 2 000

37 500

Non-current assets

Furniture & Fittings 45 000

Less: Accumulated Depreciation 5 000

40 000

Motor Vehicles 25 000

Less: Accumulated Depreciation 10 000

15 000

Total assets 92 500

EQUITY AND LIABILITIES

Current liabilities

Accounts payable 5 300

Accrued expenses 1 200

Non-current liabilities

Bank loan 6 500

40 000

Total liabilities

Equity 46 500

Greg, Capital

Retained profits

Total equity

Total Liabilities and Owners' Equity

40 000

6 000

46 000

92 500

Transactions for July 2015

July 2015

1- Some furniture originally costing $5,000 on the 1st July 2014 was sold $3,500 cash

2- Credit sale of two golf carts for $9,000. (Opening inventory is 6 golf carts bought at $2,000 each)

3- Greg goes to an auction and pays cash for 6 used golf carts, each costing $2,500

4- Greg pays $3,000 off his personal credit card

5 Credit sale of 5 golf carts for $23,000. Two of these were from his opening inventory and the other three were golf carts he'd bought at auction.

6- Paid $3,000 off his accounts payable

7- Bought two new computers for $4000 in total on credit

8- Cash sale of one golf cart for $5,000 from the carts bought at auction

9 Greg buys 2 golf carts on credit from a dealer for $3000 each

10- Received invoice for electricity of $500

11- Paid rent in advance for August, September and October of $6,000

12- Paid wages for his shop staff of $2,500

13- Paid $1,000 interest expense for the month and $1,000 off the loan principal

14- Greg sells 2 golf carts on credit for $9,000. One was bought at auction, the other was from the dealer.

15- Paid $500 for advertising.

16- Received $6,000 of his Accounts Receivable.

17- Paid cash $400 for monthly clean of premises.

18- Greg crashes one of the carts from the opening inventory. It is no longer sellable.

19- Greg receives an online order for 2 golf carts for $6,000. The customer has paid. The golf carts have not been delivered.

At the end of the month, Greg reviews the accounts and makes these observations.

• The Prepaid rent at the end of June was the prepayment of rent for July 2015.

• He owes his workers $800 in unpaid wages, which will be paid next week.

• There are no other expenses that have not been recorded.

• He reviews his accounts receivable, and notes that $1,000 invoice outstanding will not be paid and he thinks possibly another $3,000 might be uncollectible.

• Depreciation -:

Car: residual value zero. 50% reducing balance method.

Furniture & fittings: residual value zero, straight line depreciation over 5 more years.

Computer: residual value $400. Straight line depreciation over 3 years.

Question 2

Explain the effect on the profit, and on the Balance Sheet accounts for July 2015 if -:

1) Depreciation was not allocated for the month.

2) Bad debts were not written-off when they occurred.

3) An allowance for doubtful debts was not made.

4) Unearned revenue was recognised as revenue in the period it was received.

5) Expenses were incurred but not paid in cash nor an invoice received, and they were not accrued at the end of the period.

6) Prepaid expenses were not appropriately accrued in the period.

In total, what would be the effect on the financial statements.