Past Year Question/Practice Q- Preparing Financial Statements

Question 1 (ACW1000 Year 2015 Semester 2 Q2)

The following account balances for the year ended 31st December 2014, relate to Tan Pty
Ltd.

Dividends paid $250,000

Taxation payable 520,000
Administrative expenses 1,900,000
Interest expense $80,000
Taxation expense $520,000
Equipment (at valuation) $12,000,000
Accumulated depreciation – equipment $5,000,000
Share capital $2,500,000
Cash at bank $350,000
Fees $6,000,000
Retained profits (1 January) $780,000
Revaluation reserve $300,000

Additional information at 31 December 2014:

 Fees of $200,000 included in the above balance of $6,000,000 are an advance

payment for a job that will be started in January 2015.
 Equipment has not yet been depreciated for 2014. It has a useful life of six years
and is depreciated on a straight-line basis.
 Tan Pty Ltd is a non-reporting entity and its accounting reports are prepared for
internal use only.

REQUIRED:

Prepare for Tan Pty Ltd:

a) An income statement for the year ended 31 December 2014.

b) A statement of changes in equity for the year ended 31 December 2014.

c) The shareholder’s equity section of the balance sheet as at 31 December 2014.

(Total 7 + 4 + 4 = 15 marks)

(You are not required to prepare the complete balance sheet.)

Question 2 (ACW1000 Year 2014 Sem 1)

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The following account balances for the year ended 30 th June 2013, relate to Endeavour
Enterprises.

Wages and salaries $88,000

Debtors $45,000
Drawings $21,000
Other operating expenses $4,000
Rent expense $14,000
Computer operating expenses 7,100
Interest on loan $2,000
Loan from bank (payable 30 October 2015) $50,000
Inventory on hand (at cost) $23,000
Equipment (cost) $40,000
Accumulated depreciation – equipment $10,000
Depreciation – equipment $5,000
Capital - 1 July 2012 $37,800
Bank $52,000
Sales $280,000
Cost of sales $75,000
Creditors $1,800

Additional information at 30 June 2013:

 Wages and salaries of $88,000 include an amount of $2,500 prepaid to employees for
July 2013.

 Rent expense of $14,000 does not include an amount of $1,000 owing as at 30 June 2013.

 Sales of $280,000 include $5,000 which is an advance payment for a job which had not
been started on 30 June 2013.

Question 2 (cont’d)

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Required:

(a) Prepare an income statement for Endeavour Enterprises for the year ending 30 June
2013 using the accrual approach.

(b) (i) A machine is purchased for $120,000. It is estimated that it has a useful life of
five years and will then be sold for $10,000. Using the straight-line method
calculate the amount of depreciation to be charged each year and the carrying
value of the machine at the end of the second year of its life.

(ii) Explain the difference between depreciation and accumulated depreciation.

(iii) If, due to an oversight, interest revenue of $2,500 has been earned but has not
been received in cash and is not recorded at the end of the accounting period,
what is the effect on net profit and current assets or liabilities of this omission?

(iv) If equity at the beginning of the accounting period was $110,000 and at the
end of the period $185,000, and drawings by the owner during the period
were $40,000, calculate the amount of net profit that was earned during the
period.

(9 + (2+4+1+2) = 18 marks)

ACW1000 Year 2013 Sem 2

Question 3

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 Unadjusted Trial Balance for Swan Jet Ski Hire As At 30 June 2013

Debit Credit

Cash at bank $8,950

Accounts receivable 6,915
Prepaid insurance 5,685
Marine supplies 1,235
Jet Skis 121,500
Accumulated depreciation – jet skis $48,000
Office equipment 3,150
Accumulated depreciation – office equipment 1,335
Accounts payable 8,895
Bank loan 37,500
Unearned rental revenue 1,260
D Swan, capital 47,535
D Swan, drawings 12,450
Rental revenue 54,405
Salaries expense 22,800
Repairs and maintenance expense 3,945
Marine supplies expense 10,200
Utilities expense 2,100

Totals 198,930 198,930

Additional information:

1. Depreciation on the jet ski fleet for 1 year is $13,000. Depreciation on the office equipment
is $600.
2. Expired insurance amounted to $4,950
3. A physical stocktake has determined that marine supplies on hand amounted to $600.
4. The balance in the unearned rental revenue account includes $253 for services provided on
27 June 2013.
5. Salaries which have been earned but not paid amounted to $1,720.
6. Accrued interest on the bank loan is $3,560
7. Repairs on one jet ski performed in June for $850 have not yet been paid or recorded.
8. Utilities for June of $275 have not been paid for or recorded at 30 June 2013.

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Question 1 (cont’d)

Required:

(a) Prepare an Income Statement for the year ended 30 June 2013 (7 marks)
(b) Prepare a Statement of Financial Position as at 30 June 2013 (8 marks)
(c) In the above example, why is the profit (or loss) not equal to the bank balance of $8,950.
Explain this using examples
(5 marks)
(Total 20 marks)

ACW1000 Year 2013 Sem 1

Question 4

Unadjusted Trial Balance of Sarvesh PLC. as at 30 June 2012

Dr Cr
$ $
Bank and cash in hand 20 300
Account Receivable 45 200
Inventory 180 300
Prepaid Insurance 3 500
Land at cost 700 000
Office and Equipment at cost 120 000
Accumulated Depreciation:
Office and Equipment 75 000
Account Payable 30 300
Unearned Revenue 52 300
Equity 810 000
Drawings 63 300
Sales Revenue 675 000
Cost of Goods Sold 392 000
Salaries and wages 77 000
Rent 33 000
Utilities Expense 5 200
Miscellaneous Expenses 2 800
-------------- ----------------
1 642 600 1 642 600
======== =========
Additional Information:

1. Depreciation for the year had not been provided for.

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 Depreciation for Office and Equipment is provided at 25% using the straight line method. $
20 000 of the Office and Equipment was acquired on 1 April 2012. The balance of the Office
and Equipment was acquired when the company was started.
2. The owner had taken $500 per week from the bank account to pay for personal expenses. (It
is assumed that there are 52 weeks in the reporting year)
3. Insurance unexpired amounted to $2,000 as at year end
4. The rental for June 2012 has not been paid by 30 June 2012. The rent will only be paid on 5
July 2012.Rent is charged at $11 000 per month
5. By year end a week’s wages are owing to employees to be paid at the end of the fortnight
ending on 8 July 2012. The amount owing for the wages is $13 200

6. Goods with an original cost of $20 000 were returned by the customers. The returned goods
were damaged and could not be sold. They were originally sold on credit for $42 000

For all adjustments the normal treatment of prepaid expenses and unearned revenue prevails
in this question, ignore the treatment that is implied by the alternative treatment of prepaid
expenses and unearned revenue. (The alternative treatment of prepaid expenses treats the full
amount prepaid as an expense and the full amount of unearned revenue as revenue)

Required:

(a) Prepare the necessary journal entries for the year ended 30 June 2012. Narrations and date
are not required (8marks)
(b) Prepare an Income Statement for the year ended 30 June 2012. (8 marks)
(c) Prepare a Balance Sheet as at 30 June 2012. (7 marks)
(Total = 23 marks)

ACW1000 Year 2012 Sem 1

Question 5

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Mr Wayne Rooney is a retailer whose primary business is selling sports equipment and other sporting
merchandise. His accounting year ends on 30 June 2011. He has extracted a Trial Balance, before
producing his final accounts. He has presented them to you and needs your support to help him prepare
the adjusting accounting entries and post them into the ledger. Below are some of the balances extracted
from the Trial Balance:
$
(1) Accounts Payables No.310 35,642
(2) Prepaid Insurance No.121 579
(3) Motor Vehicles at cost No.105 18,428
(4) Accumulated provision for depreciation of
motor vehicle at 1st July 2011 No.110 7,290
(5) Repairs to motor vehicles No.316 1,087
(6) Rental expense No. 324 270
(7) Insurance expense No. 333 117
(8) Inventory No. 174 3,590
(9) Depreciation account No. 399
(10) Accrued Repairs to Motor Vehicles account No. 300

The following information is also available:

(a) The Prepaid Insurance Account was charged with $25 which relates to rental expense for the
period
(b) The Prepaid Insurance Account includes a premium of $144 for a 12 months period that ends
on 30 September 2011.
(c)  Total suppliers owed by Mr Wayne Rooney as at 30 June 2011 totalled $32,875. The
differences from the Account Payables were accounted for by purchases returns. These had
been correctly dealt with in the suppliers personal accounts but have not been entered in the
Account Payables.
(d) Depreciation of $3,300 is to be provided on the motor vehicles for the year ended 30 June 2011.
(e) During the year, the local garage repaired one of Mr Wayne Rooney’s motor vehicles for $595.
No payment has been made for this work.

Required:
In the books of Mr Wayne Rooney open the ten Ledger Accounts as stated above. Enter the balances
given and post the adjusting entries. Finally, close and balance the accounts.. (Total 12 marks)

Question 6

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The Trial Balance of EMERALD at Sept 30, 2014, follows:
EMERALD
TRIAL BALANCE
SEPT 30, 2014
BALANCE
ACCOUNT DEBIT $ CREDIT$
Cash 4,300
Accounts Receivable 15,100
Prepaid Insurance 2,300
Inventory - Supplies 1,000
Plant and Machinery 30,600
Accumulated Depreciation 3,900
Accounts payable 6,400
Bonus payable
Unearned service revenue 9,800
Emerald, Capital 23,000
Emerald, Drawing 4,100
Service revenue 17,300
Salary expense 3,000
Rent expense
Supplies expense
60,400 60,400

Adjusting entries at Sept 30, 2014:

i) Unearned service revenue still unearned, $500
ii) Prepaid insurance still in force, $2,000
iii) Supplies used during the month, $800
iv) Depreciation for the month, $400
v) Accrued bonus expense, $600
Required:
a) Journalize adjusting journal entries (5 marks)
b) Enter the trial balance on a worksheet and complete the worksheet of Emerald
(12 marks)
c) Prepare Income statement and Statement of owner’s equity. (3 marks)
(Total = 20 marks)