Accounting Solutions

Answer to Question No 1 (Week 6)

Fiona uses several journals for her business-like purchase journal, cash payments journal, sales journal, cash receipts journal and a general journal. Following transactions were done by her and same should be recorded in the respective journals:

Purchased inventory on credit: This must be recorded in purchases journal as it is purchased on credit.
Sales of inventory on credit: This must be recorded in sales journal as sales is on credit.
Received payment of a customer’s account: This must be recorded in cash receipts journal as its cash received from customer.
Payment of monthly rent by cheque: This must be recorded in General journal as rent was paid on credit.
End of period closing entries: Month end closing entries has to be recorded in all journals and then books should be closed. (AccounitngForManagement, 2020)

Answer to Question No 2 (Week 7)

Part a)

Total Cash Receipts for June	Amount
Cash Receipts as per Cash Receipts Journal	$292,704
Add: - Credit for an electronic transfer from a customer	$644
Add: - Interest earned	$44
Less: - Dishonoured Cheque	($136)
Total Cash Receipts Journal	$293,256

Total Cash Payments for June	Amount
Cash Payments as per Cash Payments Journal	$265,074
Add: - Account and transaction fees	$120
Total Cash Payments Journal	$265,194

Part b)

Cash at Bank ledger	Amount
Cash at Bank as on 31^st May	$21,200
Add: - Total cash receipts as per cash receipt journal	$293,256
Less: - Total cash payments as per cash payments journal	(265,194)
Cash at Bank as on 30^th June	$49,262

Part c)

Bank Reconciliation Statement	Amount
Bank balance as per Bank statement	$41,184
Add: - Cash receipts not included in bank statement	$10,090
Less: - Outstanding cheque no’s 3456, 3457, 3460 and 3462	($2,012)
Cash at Bank as on 30^th June	$49,262

Part d)

Cash amount which needs to be reported in the 30^th Balance Sheet will be $49,262. (accountingtools, 2020)

Answer to Question No 3 (Week 8)

Part a)

Journal entries for all the four transactions are given below:

Accounts Receivable A/c …………………………………. DR	$1,195,000
To Revenue A/c………………………………………...CR	$1,195,000
(being revenue earned on credit)

Sales Return A/c ……………………………………………. DR	$24,100
To Accounts Receivable A/c……………………………CR	$24,100
(being sales return recorded)

Bank A/c …………………………………………………… DR	$1,400,000
To Accounts Receivable A/c……………………………CR	$1,400,000
(being accounts receivable collected)

Allowance for Doubtful Debt A/c …………………………..DR	$15,851
To Accounts Receivable A/c……………………………CR	$15,851
(being amount written off as uncollectable)

Allowance for Doubtful Debts	Amount
Balance as on 1^st June	$12,100
Add: - Accounts written off as uncollectable	$15,851
Less: - Amounts which must be written back	($14,451)
Balance as on 30^th June	$13,500

Part b)

Accounts Receivable	Amount
Balance as on 1^st June	$849,555
Add: - revenue earned on credit	$1,195,000
Less: - sales return	($24,100)
Less: - accounts receivable collected	($1,400,000)
Less: - accounts written off as uncollectable	($15,581)
Add: - amount which must be written back as its collectable now	$14,451
Balance as on 30^th June	$619,325

In the Balance Accounts Receivable should appear as $619,325 and Allowance for doubtful debt should appear as $13,500. (corporatefinanceinstitut, 2020)

Accounts Receivable

1/30 Balance $619,325

Allowance for Doubtful Debts

1/30 Balance $13,500

Part c)

Journal entry for Kim Lt’s account which paid in full is given below:

Bank A/c …………………………………………………… DR	$2,400
To Kim Ltd A/c…………………………………………CR	$2,400
(Amount paid by Kim Ltd)

Kim Ltd A/c …………………………………………………DR	$2,400
To Allowance for Doubtful Debts A/c…………………...CR	$2,400
(Amount adjusted with allowance for doubtful debts)

Answer to Question No 4 (Week 9)

Part a)

Inventory record for Product EF5089 for June is given below:

Date	Units	Purchases	Sales	Inventory Balance
June 1	6,100	Beginning Balance		6,100*2.2 = $13,420
June 4	4,600	4,600 *2.25 = $10,350		6,100 * 2.2 = $13,420 4,600 * 2.25 = $10,350
June 9	(4,100)		4,100 * 2.2 =$9,020	2,000 * 2.2 = $4,400 4,600 * 2.25 = $10,350
June 12	4,100	4,100 * 2.4 = $9,840		2,000 * 2.2 = $4,400 4,600 * 2.25 = $10,350 4,100 * 2.4 = $9,840
June 21	(6,000)		2,000 * 2.2 = $4,400 4,000 * 2.25 = $9,000	600 * 2.25 = $1,350 4,100 * 2.4 = $9,840
June 26	3,100	3,100 * 2.5 = $7,750		600 * 2.25 = $1,350 4,100 * 2.4 = $9,840 3,100 * 2.5 = $7,750
Total	7,800	$27,940	$22,420	$18,940
June 30	(100)	Stock loss		500 * 2.25 = $1,135 4,100 * 2.4 = $9,840 3,100 * 2.5 = $7,750
Final Bal	7,700	$27,940	$22,420	$18,725

Final Inventory units and balance as on 30^th June was $7,700 units and $18,725 respectively.

Part b)

Income Statement for the year ended 30^th June
Sales (10,100 units @ 5 per unit)	$50,500
Less: - Cost of Goods sold	($22,420)
Less: - abnormal loss	(225)
Gross Profit	$27,855

Answer to Question No 5 (Week 10)

Part a)

Depreciation needs to be calculated based on all the three methods i.e. straight-line method, diminishing balance method and units of production method.

Straight-line Method: under this method depreciation is calculated based on useful life. The delivery van has a useful life of 4 years. (accountingtools, accountingtools.com, 2020)

Depreciation = (Purchase Value – residual value)/ useful life

Depreciation = ($52,000 - $12,000)/4

Depreciation = $40,000/4

Depreciation for FY 2019-20 = $10,000

Diminishing Balance Method: under this method depreciation is calculated based on the depreciation factor. In this case depreciation % is given as 31%. Calculation is given below:

Depreciation = (Purchase Value – residual value) * depreciation factor

Depreciation = ($52,000 - $12,000) * 31%

Depreciation = $40,000 * 31%

Depreciation for FY 2019-20 = $12,400

Units of Production method: Under this method depreciation is calculated based on the no of units used. Calculation is given below: (readyratios.com, 2020)

Depreciation = (Purchase Value – residual value) * units used/ production capability

Depreciation = ($52,000 - $12,000) * 78,000/200,000

Depreciation = $40,000*78,000/200,000

Depreciation = $40,000 * 0.39

Depreciation for FY 2019-20 = $15,600

Part b)

Depreciation for Year 1 i.e. for the year ended 30^th June 2020 was calculated above i.e. $12,400

Calculation of depreciation for the year ended 30^th June 2021 is given below:

Depreciation = ($40,000 - $12,400) *31%

Depreciation = $27,600 * 31%

Depreciation for FY 2020-21 = $8,556

Journal entry for depreciation for year ended 30^th June 2021 is given below:

Depreciation A/c ……………………………………………. DR	$8,556
To Accumulated Depreciation……………………………CR	$8,556
(being depreciation for the year 30^th June’21 booked)

Part c)

Using the straight-line method depreciation for year 1 and 2 will be $10,000 per year.

Particulars	Amount
Purchase value of Van	$52,000
Less: - Depreciation for year ended 30^th June 2020	($10,000)
Value of van as on 30^th June 2020	$42,000
Less: - Depreciation for year ended 30^th June 2021	($10,000)
Value of van as on 30^th June 2021	$32,000

References

AccounitngForManagement. (2020, June 23rd). AccounitngForManagement.org. Retrieved from AccounitngForManagement.org: https://www.accountingformanagement.org/first-in-first-out-method-fifo-method-perpetual/

accountingtools. (2020, June 23rd). accountingtools.com. Retrieved from accountingtools.com: https://www.accountingtools.com/articles/2017/5/5/cash-receipts-journal

accountingtools. (2020, June 23rd). accountingtools.com. Retrieved from accountingtools.com: https://www.accountingtools.com/articles/2017/5/15/straight-line-depreciation

corporatefinanceinstitut. (2020, June 23rd). corporatefinanceinstitute.com. Retrieved from corporatefinanceinstitute.com: https://corporatefinanceinstitute.com/resources/knowledge/accounting/bad-debt-expense-journal-entry/

readyratios.com. (2020, June 23rd). readyratios.com. Retrieved from readyratios.com: https://www.readyratios.com/reference/accounting/units_of_production_method_of_depreciation.html