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June2014 Solution2 PDF
June2014 Solution2 PDF
Debit Credit
Inventories 10000
Cash 10000
The company has paid for a purchase of goods. Perpetual method of inventory accounting is used. “Cost of
goods” sold will be debited to reduce the stocks in the inventories account every time there is a sale. The company does
not need to adjust inventories at year-end because of the perpetual method, so the “variation in inventories” account is
not used in the perpetual method- however, “variation in inventories” has to be used to update the amount of stocks if
the periodic inventory system is used.
Debit “Accumulated impairment account” and credit “Impairment reversal revenue” account by €15,000. (0.3
points)
Debit Credit
Accumulated impairment 15000
Impairment reversal revenue 15000
The assets of the company have recovered from a loss in value which took place in the past but we thought it
could be recoverable in the future. The company accounts for that value recovery.
3. Indicate if the following sentences are T (True) or F (False) (0.6 points), according to the Spanish
General Accounting Plan
__F__Companies can offset a liability with an asset if they are related to the same entity.
__T__Uniformity and prudence are included among the six accounting principles .
__F__Revenues are defined as the difference between assets and liabilities.
__F_In the Spanish General Accounting Plan the cash flow statement shows the equity of the company and its
evolution
4. Indicate the two types of accounting users and give at least 6 examples of users ( 6 examples in total
separating by type of users) (0,6 points)
2/8
Management accounting: managers, owners, members of the Board…
Financial accounting: customers, banks, creditors, potential investors, press, Government…
5. Indicate the accounting standards that Zara uses to prepare its annual accounts and the standards
followed by Inditex consolidated accounts (0,3 points). Why are they different? (0.3 points)
Zara: Spanish Plan General Contable, Inditex: IFRS since 2005. They follow different standards because Inditex
is a listed group so it has to follow IFRS in its consolidated accounts according to the 2002 EU Regulation. Zara is an
individual company that belongs to the Inditex group so it has to follow Spanish GAAP according to Spanish Law.
6. Assuming Accounts receivable in year 2012 has an opening normal balance of € 100,000 and a closing
normal balance of € 10,000, that during the 2012 accounting year total sales were €600,000, half cash and half on 30
days credit . Indicate the amount of cash received from customers during 2012 (0.3 points)
Amount received from customers= 600.000 + 100.000 (beginning balance of acc receiv) -10.000 (ending
balance of acc receiv) = 690.000
7. Explain why the following sentence can be true or false (0,6 points): “Net income is debited in the
closing entry”. Is that account debited or credited in the opening entry of the following accounting cycle?
Net income is debited in the closing entry if the company has made a profit. On the contrary, if the company has
had a loss for the year then net income is credited in the closing entry. Net income is credited (or debited) in the
opening entry of the following accounting cycle if the company made a profit (or a loss)
8. Indicate whether the following sentences are true (T) or false (F) (0.6 points):
__F__ The accounting cycle takes place every five years
___T_ Once the accounting cycle finishes, the company issues its annual accounts
___F_ The ledger and the journal are used only in the first phase of the accounting cycle
___F_ The income tax payable has to be credited in the closing entry
(5.5 points) Company GAMMA ‘s trial balance at 30th of December 20X2 is as follows:
Journalize the following transactions that are still unrecorded (0.3 points each):
1. Sold inventories on credit for €30.000 (VAT 21 % not included). Our company pays the transport expenses
for €500 (VAT 21 % not included) by bank transfer.
Debit Credit
Sales 30.000
2. Our company buys some goods for €6.000 (VAT 21 % not included) on credit. Our company pays the
transport expenses for €200 (VAT 21 % not included) by bank transfer.
Debit Credit
3. December 1st the company signs a yearly insurance contract. The company pays in advance €2.400 (VAT 21
% not included) corresponding to the period December 20X2 until November 20X3 by bank transfer.
4. Sold on credit all the furniture for €1.000 (21% VAT not included) at November 1st. Its accumulated
depreciation at the beginning of the year was €8.000. (Straight-line method. Useful life 10 years, €200
residual value.)
Furniture 12.200
5. The company discounts one more note in the bank for €1.000. The bank charges €30 for interest and €10
commission.
Debit Credit
Discounted notes 1.000
Notes receivable 1.000
Debit Credit
Bank account 960
Interest expense 30
Commission expense 10
Accounts payable due to discounted notes 1.000
6. The bank informs us that one note we discounted for €7.000 has been paid by our costumer.
7. The payroll corresponding to December is as follows (the net amount is paid through the bank account):
Gross Salaries: 30.000,00
Withholding tax: 20%
Social Security payable by employees: 6%
Company Social Security contribution: 26%
8. The company prepares the VAT return corresponding to the last quarter.
Debit Credit
Debit Credit
Held for trading shares bought for €3000 in July 20X0 have a market value of €3500 on the 31st
December 20X2.
Held for trading investments (3500-3450) 50
Revenues from shares 50
The bank loan has to be repaid as follows: €3.100 in November 20X3, €3.100 in November 20X4 and
€3.100 in November 20X5.
Debit Credit
Long term loan 3.100
Short term loan 3.100
6/8
Record the entries to obtain net income if income tax rate is 30% of the income before taxes (1 point).
Debit Credit
Net income 340.140
Purchases (145.000+6200) 151.200
Sales Returns and Allowances 3.600
Interest expense (1.500+30) 1.530
Rent expense 7.500
Wages expense (95.600+30.000) 125.600
Social Security contribution of the company 41.800
(34.000+7.800)
Freight/transport 500
Depreciation (1.000+5.000) 6.000
Loss on the sale of the furniture 2.200
Insurance expense 200
Commission expense 10
Sales (396.550+30.000) 426550
Purchases returns and Allowances 2200
Other services revenue 1100
Variation in Inventories (20000-10000) 10000
Revenues from shares 50
Net income 439.900
Tax expense (30% (439900-340.140) 29.928
Tax payable 29.928
Net income 29.928
Tax expense 29.928
Net Income =69.832
Prepare the balance sheet as at 31st, December, 20X2, classify the accounts in current / non-current assets, as
well as current / non-current liabilities and equity (0,6 points).
Record the entry to be made on the 1st June 20X3 when the company decides to distribute the profit for 20X2
as follows: 10% to the legal reserve, 20% to the voluntary reserves and the rest will be paid to shareholders as
dividends) (0,3 points).
Debit Credit