TQ_Ans_Wk4

Business School ACCT1501 Accounting and Financial Management 1A Session 1 2016

TUTORIAL WEEK 4 Solutions to Tutorial Questions Tutorial Questions: DQ 3.3, 3.6, 3.9, P3.6, P3.12, P3.20

DQ3.3 Revenues increase profit, and profit increases retained profits, which is a part of shareholders’ equity. It is likely that revenues (sales) also increase an asset, such as cash, or accounts receivable. DQ3.6 • Assets normally have a debit balance, whilst liabilities and equity normally have a credit balance. Revenues have a credit balance, and expenses have a debit balance • Therefore, some examples of accounts that normally have a debit balance are: – Cash – Accounts receivable – Inventory – Furniture, fittings & fixtures – Land & buildings – Investments – Intangibles – Prepayments • Some liability accounts that normally have a credit balance are: – Accounts payable – Loan – Other payables (income tax, wages, etc.) – Revenue received in advance (unearned revenue) – Mortgage – Provisions • Some equity accounts that normally have a credit balance are: – Share capital – Retained profits – Reserves • Some revenue accounts that have a credit balance are: – Sales – Dividends received from investments – Other revenue • Some expense accounts that normally have a debit balance are: – Electricity expense – Income tax expense – Salaries and wages expense – Rent expense 1

– Sundry expenses – Depreciation expense DQ3.9 a. Woolworths – cost of goods sold, transport expense, wages b. Commonwealth Bank – interest expense, rent expense c. Red Cross Charity – telephone costs, wages (e.g. counsellors, administration) d. Australian Navy – fuel, maintenance P3.6 Retained profits 30/6/16

Liabilities 1/7/15

Assets 30/6/16

= = = = = = = = =

Retained profits 1/7/15 + Net profit –Dividends 200 + 150 – 50 300 Assets – (Share capital + Retained profits) 600 – (180 + 200) 220 Liabilities + (Share capital + Retained profits) 300 + (190 + 300) 790

P3.12 1 Revenue Sales Interest Revenue

$ 70,000 8,000 78,000

2 Expense Depreciation (50% *200,000* 20%) Rent Interest (200,000*10%*50%) COGS Salaries (10,000 + 3,000)

20,000 4,000 10,000 30,000 13,000 77,000

P3.20 Dragons Ltd Journal entries 1 Dr Cr

Accounts receivable Sales revenue

Dr Cr

Cash Sales revenue

Dr Cr

Cash Accounts receivable

200,000 200,000

2 6,000 6,000

3 150,000 150,000

2

4 Dr Cr

Inventory Accounts payable

70,000

Dr Cr

Accounts payable Cash

50,000

Dr Cr

COGS Inventory

80,000

Dr Cr

Wages expense Wages payable

90,000

Dr Cr

Wages payable Cash

22,000

Dr Cr

Tax payable Cash

Dr Cr

Retained Profits Cash

70,000

5 50,000

6 80,000

7 90,000

8 22,000

9 6,000 6,000

10 20,000 20,000

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Dragons Ltd Income Statement for the year ended 30 June 2016 Sales revenue Less: Cost of goods sold Gross profit

$ 206,000 (80,000) 126,000

Less: Other expenses Wages expense Net profit

(90,000) 36,000

Dragons Ltd Note of changes to retained profits for the year ended 30 June 2016 $ Retained profits, 1 July 2015 34,000 Net profit after tax 36,000 70,000 Dividends declared (20,000) Retained profits, 30 June 2016 50,000 Dragons Ltd Balance Sheet as at 30 June 2016 $ Current assets Cash Accounts receivable Inventory

72,000 86,000 32,000

Total assets

190,000

Current liabilities Accounts payable Income tax payable Wages payable Total liabilities

32,000 0 68,000 100,000

Shareholders’ equity Share capital Retained profits Total shareholders' equity Total liabilities and shareholders’ equity

40,000 50,000 90,000 190,000

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