Major Assignment

PRBA001 –Accounting Principles

Semester 1, 2015

Maximum Marks: 45

Instructions:

Prepare your calculations in worksheet formats. If you create your worksheets in excel, please copy and paste them into MSWord.

Points are given for the quality of your calculation formats even if your final calculations are not correct.

Once you have completed the assignment, it needs to be lodged through Safe Assign in the Assessments section of Learnline with an appropriate CDU cover sheet. Your assessments must be lodged using MSWord. PDF, Excel or paper copies will not be accepted.

Required:
Attach (copy) a CDU cover page at the beginning of your assignment.

Make sure your entire assignment can be readily printed on A-4 paper in portrait (preferred) or landscape format with appropriate page breaks. Do not have a portion of a “wide” worksheet expand beyond 1 page.

Make sure your name and student number are on every page of your submission.

Suggestions:

Prepare your worksheets in Excel. Excel may aid you in your calculations.

Copy your worksheets and schedules and paste them into MSWord.

Ethics:

This is not a group assignment; it is an individual assessment. Your solutions will likely be different from other students. If portions of your assignment are copied or very close to copying, all parties will be penalised for copying. Copying would be considered plagiarism and CDU has strict policies. It is up to you to keep your assessment confidential.

Q.1 Suppose you are considering investing in two businesses, Toby Salmon Inc. & Warwick Inc. The two businesses are virtually identical, and both began operations in January 2014 in Adelaide. During the year, each business purchased inventory as follows:

Jan 2 10,000 units @ $5.00 each

Mar 6 6,500 units @ $ 5.60 each

Sept 15 8,000 units @ $6.10 each

Dec 10 9,500 units @ 7.20 each

During the year, both businesses sold 26,000 units of inventory.

In early January, both purchased equipment costing $150,000. The equipment was expected to be useful for 10 years, at the end of which it would be disposed for $20,000. Toby uses the inventory and depreciation methods that maximises reported profit while Warwick uses inventory and depreciation methods that minimises taxes.

The trial balance of both businesses on 31 December 2014 included the following items:

Sales Revenue
$375,000
Operating Expenses
$ 95,000

Required:

Prepare Income Statements for both businesses in functional format.

Which business appears to be more profitable? Which business has more cash to invest? Which business would you prefer to invest? Why? Give reasons for each of your answers in your own words.

Please show your workings & calculations clearly.

Note: The reducing balance rate is calculated at 1.5 times the straight line rate.

Marks : 15

Q.2 Tom’s Trucks completed the following transactions during the first ​month of its operations for July 2014:

The business began the operations by receiving $7,000 cash & a truck valued at $12,500 from Tom Smith.

Paid 350 cash for supplies

Prepaid insurance, $750

Performed delivery service for a customer & received $900 cash.

Completed a large delivery job & invoiced the customer $1,700.

Paid employee wages $750.

Received $12,500 cash for performing various delivery services.

Collected $700 in advance for delivery service to be performed later.

Collected $1,700 cash from a customer on account.

Purchase fuel for the truck, paying $750 with a business credit card.

Performed delivery services on credit, $1,050.

Paid office rent for the month $700.

Paid $750 on account.

Tom withdrew cash of $2,900.

Required:

Record each transaction in the journal. Explanations are not required.

Prepare T accounts for the following accounts:

Cash
Tom S, capital

Prepare a worksheet showing unadjusted trial balance, adjusting entries

adjusted trial balance. Complete the worksheet using the adjustment data given at 31 July 2014:

Accrued salary expense, $750

Depreciation expense, $210

Prepaid insurance expired, $250

Supplies on hand, $210

Unearned service revenue earned during July, $200

Prepare Tom’s Trucks income statement and statement of changes in equity for month ending 31 July 2014 & classified balance sheet at that date. On the income statement list expenses in decreasing order by amount.

Journalise adjusting entries.
Journalise closing entries.
Prepare post-closing trial balance at 31 July 2014.
Marks : 30