University Murdoch University (MU)
Subject Accounting for Managers

Question 1

  • The following balances are taken from the books of Silver Company for December 2019:
$
Cash19,600
Prepayment400
Trade Receivables102,000
Opening Inventory24,000
Machinery640,000
Accumulated depreciation240,000
Trade payables124,000
Accruals53,600
Returns outwards18,000
Purchases176,180
Sales345,600
Distribution Costs75,000
Depreciation expense26,640
Administrative expenses84,200
Carriage inwards26,400
Returns inwards5,980
Bank Overdraft64,000
Capital335,200

Required:

Prepare a Trial Balance for Silver Company as of December 2019.

  • On 1 January 2019, Orange Ltd purchased a machine for $600,000. After using the machine for 2 years, the company sold it for $492,800. The accumulate depreciation of the at the end of the 2nd year was $340,000

Required:

Calculate the gain or loss on the disposal of the machine at the end of the 2nd year.

  • Strawberry Limited bought equipment costing $460,000 on 1 January 2019. The estimated useful life of the equipment is 6 years. The scrap value at the end of the useful life is $10,000. The total capacity of the equipment is 10,000 machine

The following machine hours for the first three years:

Year 1              800 hours

Year 2             1,200 hours

Year 3            2,500 hours

Required:

Calculate the annual depreciation for 2 years using the following methods:

  • Straight Line Method
  • Units of use Method

Question 2

  • Star Investments plans to develop a cinema. In the first quarter, they spent the following amounts:
    Acquisition of land$1,500,000
    Legal fees$41,200
    Transport cost to visit the site before purchasing the land$2,800
    Parking offense when signing visiting lawyers to sign the legal documents$3,000
    Land clearing$29,000
    1. Calculate the amount to be capitalized as Land cost.
    2. Calculate the amount to be expensed in the income statement.
  • From the list given below, you are required to classify ‘Capital Expenditure’ and ‘Revenue
    1. Photocopy papers bought for administrative purposes
    2. Christmas Bonus is given to employees
    3. Purchase of Machinery for production in a factory
    4. Software Development Costs for long term use
    5. Cost of renovation for office and factory premises
    6. Cost of installation expenses relating to machinery
  • Define the following terms with relevant examples:
    1. Capital Expenditure
    2. Revenue Expenditure

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Question 3

  • For each of the following unrelated cases, identify the relevant accounting concept, and explain how the accounting concept is to be applied using the facts of the cases.
    1. Tera runs a handphone Business called ‘Tera Trading’. She purchased $190,000 worth of new S10 Supersonic Brand of mobile phones for her business and one mobile phone worth $1,500 as a gift for her younger sister. Which one of the two purchases should be recorded in the books of Tera Trading and why?
    2. Comfort Furniture Company sold a Sofa Set for $100,000 to a customer on 25 December 2018. By mistake, the item was recorded as sold in January 2019. Comfort Furniture Company closes its accounts on 31 December every year. How are the sales figures for the years 2018 and 2019 affected by the wrong recording?
    3. Sayo Comfort Ltd had bought a used plasma Television Set [TV] for $19,000 from Hillary Electronics for her café. Her friend offered to buy it from her for $21,000. At what value should the Television Set [TV] be recorded in the books of Sayo Comfort Ltd? Explain why the other value is not used.
  • The following are a list of Evan Ltd transactions for the month ended 31 January
    1. Evan, the owner of Evan Ltd, invested $190,000 cash in his business.
    2. Evan bought goods on credit from Apple Ltd for $23,000.
    3. The business sold goods for $90,850
    4. The business billed a client, Mango Ltd, for $194,000 for the goods sold on credit.
    5. Evan drew $5,000 cash from the business for his personal use.

Required:

Prepare the journal entries for the above transactions.

Question 4

The following Trial Balance has been extracted from the books of Venus Limited for the year ended 30 September 2018:

DR $CR $
Opening Inventory1,400
Purchases10,200
Return outwards160
Carriage inwards80
Sales45,620
Return inwards180
Carriage outwards150
Salary and wages1,302
Rent830
Commission80
Insurance160
Utilities164
Repairs to Property64
Postage and Stationery48
Transportation50
Share Capital22,800
Trade Payables500
Bank1,000
Land18,000
Motor vehicles6,000
Fixtures and fittings28,000
Trade Receivables872
Cash in hand500
69,08069,080

Additional information:

(i)Prepaid Insurance for the year is $20.
(ii)Utility expenses outstanding as at 30 September 2018 $14.
(iii)The company provides a 15% depreciation on the cost of Motor vehicles.
(iv)The company decided to provide a 5% allowance on trade receivables.
(v)The company provides 10% depreciation on the cost of Fixtures and Fittings
(vi)Closing Inventory as at 30 September 2018 was $1,200

Required:

  • Prepare an Income Statement for the year ended 30 September
  • Prepare a Statement of Financial Position as at 30 September
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