Surinder singh - EAB2928

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University of Peshawar, Peshawar *

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Accounting

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Nov 24, 2024

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1 Assessment Task – Tutorial Questions Unit Code: HI5001 Unit Name: Accounting for Business Decisions Assignment: Tutorial Questions STUDENT NAME: SURINDER SINGH STUDENT ID: EAB2928

2 Contents QUESTION 1: ........................................................................................................................................... 3 QUESTION 2: ........................................................................................................................................... 4 QUESTION 3: ........................................................................................................................................... 5 QUESTION 4: ........................................................................................................................................... 7 QUESTION 5: ........................................................................................................................................... 8 QUESTION 6: ........................................................................................................................................... 9

3 QUESTION 1: a. General Journal Entry Date Accounts Ref Debit Credit July 1 st Prepayments Rent 3,600 $ Cash at hand 3,600 $ July 1 st Prepayment Insurance 1,560 $ Cash at hand 1,560 $ July 10 th Cash at hand 2,800 $ Unearned Revenue 2,800 $ July 15 th Cleaning Supplies 2,340 $ Cash at hand 2,340 $ July 28 th Wages Expense 5,320 $ Cash at hand 5,320 $ b. Adjustment Entries July 31 st Rent Expense 600 $ Prepayments Rent 600 $ 31 st Insurance Expense 130 $ Prepayment Insurance 130 $ 31 st Unearned Revenue 840 $ Service Revenue 840 $ 31 st Supplies Expense 2,380 $ Cleaning Supplies 2,380 $ 31 st Wages Expense 760 $ Wages Payable 760 $

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4 QUESTION 2: a. M&N Windows LTD Bank Reconciliation Statement Bank statement balance Add: Deposits in Transit Less: unpresented cheque $ $ 101,160 12,540 --------------- - 113,700 (37,407) --------------- 76,293 __________ Cash Book Balance Add: Interest on balance maintained Customer payment received Writing error while recording Less: Bank service Charges Dishonored Cheque $ 75 3,864 540 150 3,900 $ 75,864 4,479 80,343 4,050 76,293 b. The factor as to why this is still relevant to check deduction made by bank or interest added by the bank in the account. Unauthorized transaction check and balance due to increase in cyber-crime. Tracking payments made by customers and their realization.

5 QUESTION 3: a. Net Credit Sales Method Date Description DR CR 30/06/2019 Bad Debt Expense 47,700 $ 47,700 $ Calculate allowance doubtful debts by Net Credit sales Method Sales on Credit 2,100,000 $ Less: Returns (80,000) $ Net Sales on Credit 2,020,000 $ Estimation doubtful debt – 2.5% of Net Sales on Credit 50,500 $ Bad debt expense = 50,500 $ – 2,800 $ = 47,700 $ ii. Aging Account Receivable Method Date Description DR CR 30/06/2019 Bad Debt Expense 42,112 $ Allowance for doubtful debt 42,112 $ Days Due Account Receivable % Allowance Amount Not yet due 351,200 $ 1 3,512 $ Overdue days: 10-30 92,000 $ 3 2,760 $ Overdue days: 31-60 78,000 $ 10 7,800 $ Overdue days: 61-120 40,800 $ 30 12,240 $ Over 120 31,000 $ 60 18,600 $ Total 593,000 $ 44,912 $ Bad Debt = 44, 912 -2,800 = 42,112 b. Net Credit Sale Method Doubtful Debt Allowance $ Opening Balance Bad Debt Expense $ 2,800 50,500 53,500

6 Aging Account Receivable Method: Doubtful Debt Allowance $ Opening Balance Bad Debt Expense $ 2,800 42,112 44,912 c. Based on Assumption: Allowance for unrecoverable Add: Previous Balance of Debt Bad Expense $ 44,912 980 45,892 d. The estimated doubtful debt differs under different methods. That is the reason why bad debts have different balances.

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7 QUESTION 4: a. Inventory Scorecard (FIFO Method) Stock Available for Sale Cost of Goods Sold Ending stock Date Unit Unit Cost Total Cost Unit Unit Cost Total Cost Unit Unit Cost Total Cost Jun 1 1050 18.00 $ 18,900 $ 75 18.00 $ 1,350 $ 975 18 $ 17,550 $ Jun 10 750 18.90 $ 14,175 $ 750 18.90 $ 14,175 $ Jun 15 450 19.80 $ 8,910 $ 450 19.80 $ 8,910 $ Jun 23 750 21.00 $ 15,750 $ 750 21.00 $ 15,750 $ 975 18 $ 17,550 $ 3000 57,735 $ 2025 40,185 $ 975 17,550 $ b. Income Statement: Description Amount Revenue 101,250 $ Less: Cost of Goods Sold Opening stock 18,900 $ Purchases 38,835 $ Less Closing stock (17,550) $ Gross Profit/loss 61.065 $ c. The perpetual inventory system dictates that the inventory of the company is updated on continuous basis. It will basically include all add and subtracts made with the inventory.

8 QUESTION 5: a. Straight Line Depreciation: Description Sound System Lighting System Cost of asset 39,500 $ 55,000 $ Lifecycle 8 years 5 years Residual Value 500 $ 0 $ Depreciation Charged 1,625 $ 3,667 $ Carrying Value 37,875 $ 51,333 $ b. Reducing Balance Method: Description Sound System Lighting System Cost of asset 39,500 55,000 Lifecycle 8 years 5 years Residual Value 500 0 Rate of Depreciation Charged 42.08% 100% Depreciation Charged 5,541 18,333 Carrying Value 33,959 36,667 So, reducing balance has more impact on profit as it charges more depreciation to the asset which reduces profit in income statement as compare to use straight line method. c. The first entry is of 900$ and it should be recorded as revenue expenditure because it was repairs made to asset. While $6500 was used to enhance the asset, which is capital expenditure. This should be added to the asset account as it increases the value of an asset as well.

9 d. The deprecation method can be opted keeping in mind rules and regulation of the accounting standards. The method theory is that use the method that best reflects the environment of the organization the asset is been used in. The method should locate depreciation cost in a systematic and logical manner to the accounting system of the company. QUESTION 6: The three elements in the liability are:  Economic Obligation  Long term and short-term debt  Payables. a. Yes, it is liability as it is an estimated time and money a repair or replacement might come for the goods sold under warranty. b. Yes, it is liability as it is the amount owed to customer for the goods and services that are yet to be delivered. c. Yes, it is liability as it is the amount the company owes in terms of tax to the government as per rules and regulation of Company Act. d. Yes, it is liability as it is the amount that believed that it might not be recovered from the account receivables to whom goods and services are sold on credit. e. Yes, it is liability as the outcome of the case is unknown.

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