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Assignment 1

Task

Question 1 [20 marks]

Preparation of accounting records – using spreadsheets

During July 2019, the following transactions took place:

Date Detail

1-Jul Purchased a tool trailer for $4,200.  Pete took out a business loan to pay for the trailer (repayable within 12 months).  Interest is charged at 8% p.a. to the loan account, and monthly repayments are $400, due on the last day of each month.  

2-Jul Paid $300 owing to a supplier in relation to June 2019 expenses, from the bank account.

4-Jul Provided handyman services to Mrs Jones on credit, for $700.

7-Jul Received $500 in the bank from a customer in relation to services provided in June 2019.

8-Jul Provided handyman services to Mrs Smart for $600.  Mrs Smart had paid for these services in June 2019.

9-Jul Purchased supplies from Bunnings for $350 (paid from the bank account).

10-Jul Provided handyman services to Mr Budd on credit, for $1,300.

12-Jul Withdrew $2,500 from the bank account for personal expenses.

14-Jul Provided handyman services to Mrs Hunt for $1,250. Mrs Hunt paid by electronic funds transfer.

15-Jul Purchased fuel for the business vehicle, for $80 (paid from the bank account).

16-Jul Received $1,300 in the bank from Mr Budd in relation to services provided on 10 July.

22-Jul Provided handyman services to Mr Diaz on credit, for $500.

23-Jul Received $2,600 from a customer, Mr Hatter, for services to be provided in August.

23-Jul Entered into a contract with Hit Radio, for radio advertising for August - October, for $1,200. $1,200 was paid from the bank account.

23-Jul Received $700 in the bank from Mrs Jones in relation to services provided on 4 July.

26-Jul Withdrew $2,500 from the bank account for personal expenses.

26-Jul Provided handyman services to Mr Catt for $280. Mr Catt paid by electronic funds transfer.

30-Jul Paid $320 for business insurance, for the month of August.

31-Jul Interest is charged on the business loan, and the $400 loan repayment for July is paid from the bank account.

31-Jul Received an invoice from Mower Repairs Ltd, for repairs to equipment, for $320. The due date for payment 14 August.

31-Jul Received an invoice from Telstra, for July telephone, for $150. The due date for payment 20 August.

Additional information as at 31 July 2019:

• Depreciation to be recognised for July is $80 for the equipment, and $100 for the vehicle.

• There were supplies on hand on 31 July of $260.

• In June 2019, $300 was paid for insurance relating to the month of July 2019.

• Ignore any GST.

Required:

i) Prepare journal entries for July 2019 transactions listed above (including any adjusting entries).  Include dates, references and narrations.

ii) Prepare T-accounts in an Excel spreadsheet, and enter the opening balances from the Trial Balance from 30 Jun 2019.  Post all of the above journal entries to the T-accounts.  Include dates and references for each entry.  Total all of the T-accounts to determine their balances at the end of the July 2019.  You are not required to prepare closing entries.

iii) Prepare the ‘Adjusted Trial Balance’ in an Excel spreadsheet as at 31st July 2019.  Use formulas to generate all of the figures in the ‘Adjusted Trial Balance’ from the balances in the T-Accounts.

iv) Prepare the income statement, balance sheet, and statement of changes in equity in Excel. Use formulas to generate all of the figures in the financial statement reports from the ‘Adjusted Trial Balance’.  When preparing the balance sheet, classify assets and liabilities as current or non-current.

v) Calculate and evaluate the business’s current ratio and debt ratio.  

Please also refer to the 'Requirements' section below for additional submission and spreadsheet requirements.

Question 2 [10 marks]

History of accounting - essay

Accounting is considered to be one of the world’s oldest professions.  

Prepare an essay discussing the origins of accounting, and how accounting practices have changed over time. (Word count: Approximately 1,400 - 1,800 words in total).

Question 3 [10 marks]

Ethics in accounting

Chartered Accountants Australia and New Zealand (CAANZ) and Certified Practising Accountants Australia (CPAA) have a joint code of ethics for professional accountants, issued through the Accounting Professional and Ethical Standards Board (APESB).  

Required:

i) List and explain each of the ethical principles in the code of ethics.  In your discussion, provide an illustrative example of how each of these principles would be applied by accountants in a particular scenario.

ii) When faced with an ethical dilemma, what should accountants do?  (You will need to undertake some research to answer this).  Provide an example of an ethical dilemma that an accountant might be faced with, and explain what steps should be taken to resolve it.)

Online submission via Turnitin is required for this assignment. Details will be provided by your subject lecturer.

Question 2 [10 marks]

History of accounting - essay

Accounting is considered to be one of the world’s oldest professions.  

Prepare an essay discussing the origins of accounting, and how accounting practices have changed over time. (Word count: Approximately 1,400 - 1,800 words in total).

Question 3 [10 marks]

Ethics in accounting

Chartered Accountants Australia and New Zealand (CAANZ) and Certified Practising Accountants Australia (CPAA) have a joint code of ethics for professional accountants, issued through the Accounting Professional and Ethical Standards Board (APESB).  

Required:

i) List and explain each of the ethical principles in the code of ethics.  In your discussion, provide an illustrative example of how each of these principles would be applied by accountants in a particular scenario.

ii) When faced with an ethical dilemma, what should accountants do?  (You will need to undertake some research to answer this).  Provide an example of an ethical dilemma that an accountant might be faced with, and explain what steps should be taken to resolve it.)

Assignment 2

Task 

Assessment conditions:  This is an individual assessment task (not a group assessment task).

Complete the 4 questions given below.  A total of 50 marks are allocated to the questions below, which will then be converted to a mark out of 20%.

All workings, where appropriate, must be shown to substantiate your answers.

Question 1 [15 marks]

Retail operations and retail inventory

‘Little Red Riding’ began business on 1 June 2019.  The business is a partnership, between Mr Wheeler and Mrs Wheeler.  The business will sell children’s bicycles at the local markets.  The business is not registered for GST.  The following transactions occurred during June 2019:

Mr and Mrs Wheeler have come to you for assistance, as they would like to use the perpetual inventory system and the First-in-first-out (FIFO) costing method, but are not sure how to set this up.  

Required:

i) Prepare an Excel worksheet for each of the bicycle lines for June (one for the small bicycles, and one for the large bicycles) using the FIFO costing method to keep track of the number of bicycles purchased, bicycles sold, bicycles on hand, cost of goods sold and gross profit made.

ii) Prepare journal entries (including any adjusting entries) for all of the business’s transactions for June (using the perpetual inventory system and FIFO costing method).  Include dates, references and narrations.

iii) Prepare T-accounts in an Excel spreadsheet, and post all of the above journal entries to the T-accounts.  Include dates and references for each entry.  Total all of the T-accounts to determine their balances at the end of the June 2019. 

iv) Prepare the ‘Adjusted Trial Balance’ in an Excel spreadsheet as at 30th June 2019.  Use formulas to generate all of the figures in the ‘Adjusted Trial Balance’ from the balances in the T-Accounts.

v) The business has a year-end of 30th June.  Prepare the closing entries as at 30th June 2019.

Please also refer to the 'Requirements' section below for additional submission and spreadsheet requirements.


Question 2 [10 marks]

Bank reconciliations and cash

This question continues on from question 1 above.

It is now September 2019, and two months have passed since you first met with Mr and Mrs Wheeler to assist them with implementing their inventory system and preparing their accounting records.

They have come to you for some assistance as the balance in the ‘bank’ T-account at the end of August 2019 doesn’t agree with the closing balance on the August bank statement... and they are not sure what they have done wrong.

Required:

i)Prepare a letter to Mr & Mrs Wheeler, explaining why the bank balance in the ledger account (or T-account) won’t always equal the balance on the bank statement on a particular date and common reasons for differences.  Also, provide an introduction and overview of bank reconciliations – What is bank reconciliation? What is its purpose? How is it prepared?

ii) Prepare the bank reconciliation for Little Red Riding at 31 August 2019.

iii) Prepare the journal entries to correct any errors made by Little Red Riding, and to record transactions that have not yet been entered into the business’s accounting records.  (Note: The correction of any errors relating to the recording of cheques or EFT payments should be made to ‘Accounts payable’.  The correction of any errors relating to deposits (other than interest received) should be made to ‘Accounts receivable’.)

iv) Prepare the ‘bank’ T-account account for August 2019, in order to determine the balance in the ledger account after the above journal entries have been recorded and posted.

Question 3 [15 marks]

Internal controls

This question continues on from question 1 and question 2 above.

It is now July 2020, and Mr and Mrs Wheeler have been very successful in growing the business of Little Red Riding.  The business now operates at 3 markets in the region and employs 4 employees (Mr and Mrs Wheeler sell bicycles at one local market each week, and 2 employees are assigned to sell bicycles at the Bidgee Markets, and 2 employees are assigned to sell bicycles at the Junee markets).

Mr and Mrs Wheeler have come to you for advice, as they appear to be having problems with their inventory and/or cash receipts.  They have been keeping track of inventory using the two worksheets that you showed them (in Question 1(i) above). They really like how it keeps track of inventory on hand, and they tell you how much they love not having to count inventory each and every week after the markets to see what inventory is left.  

When they completed the stocktake on 30 June 2020, the closing balance of inventory in each worksheet didn’t match with the actual number of small and large bicycles on hand.  The worksheets showed that the closing inventory was 58 small bicycles and 46 large bicycles.  The stocktake showed that the business actually had 42 small bicycles and 30 large bicycles. 

You review their inventory worksheets, and there are no errors in their worksheets... so it appears that cash takings and/or some bicycle have been stolen.  You also review the three cash receipt books (one used at each of the three markets), and the number of cash takings banked for the year was $300 less than the takings as per the cash receipt books.

Mr and Mrs Wheeler are unsure of what has happened.  

Required:

Undertake some research on internal controls and employee theft.  

Prepare a business report on internal controls for Mr and Mrs Wheeler.  In your business report:

• Explain what internal controls are, and the importance of implementing internal controls to safeguard the business’s assets;

• Discuss the risk of employee theft, and how big of a problem employee theft is in Australia; 

• Explain three possible ways that employees could have stolen cash and/or bicycles from the business without Mr and Mrs Wheeler realising;

• Discuss three controls/procedures that Mr and Mrs Wheeler should implement in their business to help prevent employee theft.  

(Word guide: 1,500 – 2,000 words)


Question 4 [10 marks]

Property, plant and equipment

This question continues on from question 1, 2 and question 3 above.

Little Red Riding purchased a 3 tonne Isuzu truck on 1st July 2020, for $45,000, funded via a bank loan.  The truck will be used to store and transport bicycles to and from each of the weekly markets.  Mr and Mrs Wheeler have contacted you to find out how they need to account for depreciation.  They would like to use the cost model but don’t have any understanding of the straight-line method, units-of-production method and reducing balance method. The truck has an estimated useful life of ten years (300,000 kilometers), and the estimated residual value is $10,000.

Mr and Mrs Wheeler estimate that the truck will travel 20,000km/year in years 1 – 3, 30,000km/year in years 4 – 7, and 40,000km/year in years 8 – 10.

Required:

Prepare a memo to Mr & Mrs Wheeler, explaining what depreciation is, and how depreciation is calculated under each of the three methods.  To illustrate the differences in the annual depreciation expense to Mr & Mrs Wheeler, prepare a depreciation schedule (for the entire useful life of the truck) using each of the three methods.  When preparing the depreciation schedule using the reducing balance method, use 2 times the straight-line rate.  Ignore any GST.  Show all relevant workings. 

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