110.109 Introductory Financial Accounting

110.109

Introductory Financial Accounting

Assessment 3 Booklet

Distance and Internal

Semester 2 – 2024

IMPORTANT INFORMATION

This  is an electronic assessment and must  be completed  in the “Assessment  3 Answer Workbook” – Excel templates, to be downloaded from Stream, completed by you, and then uploaded back to Stream before the due date.

To enable your assessment to be marked, you must NOT alter the Excel templates in any way that compromises the green columns dedicated to marking and the formulas in these columns that add back to the ‘Marking Summary’ sheet.

You are advised to use formulas to pull data from one sheet to another, but this is not a requirement for this assessment, and using formulas will not attract any marks.

Assessment 3 contributes 15% towards your final grade. It consists of three (3) questions: Q1: Accounting Cycle, Q2: Inventories, and Q3: Statement of Cash Flows.

Please note that Assessment 3 is due by 11 PM, New Zealand time on 27 September.

Assessment 3 covers material from weeks 1 to 8 inclusive and mainly relates to the following learning outcomes:

1.   Demonstrate  an  understanding  of  the  financial   reporting  framework  for  general purpose financial statements for commercial enterprises.

2.   Identify,  measure,  record  and  communicate  economic  transactions  and  events  of commercial enterprises’ operations using fundamental accounting concepts, including the double-entry accounting system.

3.  Apply basic measurement theory, and principles and concepts of accounting, to the valuation of assets.

Before  attempting  this  assessment,  it  is  strongly  recommended  that  you  read  both  the Assessment  Information  and Assessments  2  and 3  General  Instructions  (e.g.  extensions, submissions,  return  of  marked  assessments,  etc.)  on  the  course  Stream  site  and  the assessment details on the following pages thoroughly. You should also study the relevant material in the textbook and make sure you understand the concepts covered by practising the weekly exercises and workshop questions before or as you complete this assessment.

Please feel free to keep in touch with the 110.109 teaching team regarding this assessment, preferably through the Assessment Forum on Stream. That way all students benefit and often we have found that the best way of learning is through discussion with your peers as well as teaching staff.

Please remember that all 110.109 assessments must be your own work. Discussion on Stream or in study groups is fine but comparing or suggesting answers on Stream or in study groups as opposed to concepts may lead to marks being deducted to the extent of receiving zero marks if answers are too similar. Therefore, please do NOT discuss your answers or ask public queries with suggested answers on the course Stream forums. If you are unsure about this issue, you are welcome to use the Private Conversations on the course Stream site.

There are a large number of students with whom the teaching staff and myself are involved in this course, but that does not mean that you are not each individually very important to us. We value each student and will try to provide appropriate guidance to the best of our ability.

All the best with your assessment.

Yuan Yuan on behalf of the 110.109 teaching team

ASSESSMENT 3 DETAILS

Complete all three (3) questions in the “Assessment 3 Answer Workbook” . Name your workbook as “SurnameID#” for submission, where ID# is your student ID number (e.g., Smith12345678). Before submitting, complete the first worksheet of the Answer Workbook – Cover Sheet, with your current details.

Question 1: Accounting Cycle

Below is the unadjusted trial balance of Lee Ltd as at 30 June 2024. The company’s financial year ends on 30 June.

Lee Ltd.

Unadjusted Trial Balance as at 30 June 2024

Account Title	Debit $	Credit $
Cash at Bank	24,000
Accounts Receivable	32,000
Inventory	22,710
Supplies (asset)	2,500
Prepaid Insurance	235
Equipment (cost)	62,000
Vehicle (cost)	82,000
Cost of Sales	52,000
Sales Returns and Allowances	1,870
Discount Allowed	1,500
Electricity Expense	3,000
Insurance Expense	2,585
Sales Salaries Expense	20,500
Selling Expense	7,570
Dividends Paid	2,000
Accumulated Depreciation - Equipment		2,500
Accounts Payable		14,085
PAYE Payable		1,600
Bank Loan (10% interest p.a.)		30,000
Share Capital		110,000
Retained Earnings		42,700
Sales		114,930
Discount Received		655
	316,470	316,470

Additional data as at 30 June 2024:

(a)    Supplies on hand on 30 June 2024 are $2,300.

(b)   Annual insurance premium of $2,820 was paid on  1 July 2023. Adjustments to Prepaid Insurance have been made until and including 31 May 2024.

(c)    June’s electricity bill of $500 was received and is payable on 15 July 2024. This bill has not yet been recorded in the account. Use Accounts Payable to record the electricity bill.

(d)    Sales salaries accrued but not paid as of 30 June 2024 are $3,000 (Gross). PAYE (10% of Gross) is payable on the 10th  of the first month of each quarter.

(e)    No depreciation has been charged since the last financial year. Depreciation is to be charged at the following rates:

Equipment: The straight-line method at a rate of 10% is used for all the equipment. Note: Some equipment was purchased on 1 January 2023; while the remaining equipment was bought on 1 April 2024, at a cost of $12,000. No residual value is assigned to any of the equipment.

Vehicle: The company vehicle was purchased on 1 September 2023 and has a useful  life  of  5  years.  The   estimated  residual  value   is  $4,000.   Straight-line depreciation method is used for the vehicle.

(f)     The bank loan of $30,000 was taken out on 1 July 2023 for five years. A payment of $12,000, including both principal and interest, is due annually. The interest is charged at a rate of 10% p.a. and is not compounded.

(g)    The company includes Supplies, Electricity, Insurance and Depreciation Expenses under administration expenses. Interest Expense is listed separately under financial expenses.

(h)    Due to an economic downturn, all profits will be retained at the end of the financial year.

Required:

For the purpose of this question, please ignore GST and Income Tax. Show ALL your workings.  Narrations for journals are NOT required.

i.       Journalise the adjusting entries on 30 June 2024 for Lee Ltd, in the General Journal. (Note: Closing entries are NOT required). (23 marks)

ii.       Complete the Worksheet for the year ended 30 June 2024 for Lee Ltd. (6 marks)

iii.       Prepare a Classified Statement of Profit or Loss for Lee Ltd for the year ended 30 June 2024, as per Textbook Figure 4.6 (p. 204). Your answer should clearly identify Net Sales, Gross Profit, and Net Profit (Loss) Before Tax. (11 marks)

iv.       Prepare a Statement of Changes in Equity for Lee Ltd for the year ended 30 June 2024. (3 marks)

v.       Prepare a Classified Statement of Financial Position for Lee Ltd as at 30 June 2024. (7 marks) [Total Q1 = 50 marks]

Question 2: Inventories

Kinney Ltd specialises in homemade feijoa bottled juice, which enjoys great popularity in the local market. The company uses the perpetual inventory system for recording its cost of sales. The inventories and purchases for the month of December are as follows:

December		Purchases		Sales
		Quantity	Cost per unit	Quantity
1	Beginning inventory	100 units	$1.00
3	Purchase	200 units	$1.30
7	Sales			220 units
9	Purchase	200 units	$1.80
14	Sales			280 units
18	Purchase	300 units	$2.00
21	Sales			200 units
30	Purchase	100 units	$2.20

During the month, units were sold for $3.50 per unit.

Required:

For the purpose of this question, please ignore GST. Show ALL your workings.

i.       Calculate the Cost of Goods Available for Sale for December, as per Textbook Figure 5.7 (p.244). (3 marks)

ii.       Calculate the Cost of Sales for 14 December using the FIFO method, as per Textbook Figure 5.18 (p.253). (2 marks)

iii.       Calculate the Cost of Sales for 14 December using the LIFO method, as per Textbook Figure 5.19 (p.254). (2 marks)

iv.       Calculate  the  Cost  of  Sales  for  14  December  using  the  weighted  average  cost method, as per Textbook Figure 5.20 (p.254). (4 marks)

v.       Using the weighted average cost method, calculate the dollar amount ($) assigned to the  inventory on  hand on 31  December and the  cost of sales for the  month of December. (4 marks)

[Total Q2 = 15 marks]