Financial Accounting Review and Problems

School: La Trobe University - Course: MKT 102 - Subject: Accounting

Review Questions 2. How does revenue differ from other income? 3. 'Expenses for a period are always the same as costs.' Discuss the truth of this statement, using examples to illustrate your argument. 6. In what circumstances would it be inappropriate to recognise a cost as either an expense or an asset? Problems for Discussion and Analysis 3. Calculate the missing amounts for each independent case in the following table. Assume in case (d) that the assets are twice the amount of the liabilities and the expenses are 80 per cent of revenue. CaseTotal assets($)Totalliabilities($)Owners'equity ($)Totalrevenue ($)Totalexpenses($) Net profit (Loss) ($) a100 000?50 00032 000?6 000 b?27 000(100)7 0008 000? c32 00016 000??10 0003 000 d50 000????3 000 8. Jimmy Jones receives a $200 000 legacy from his great-aunt. As he has some knowledge of the textile industry he decides to go into business manufacturing garments. He commences trading on 1 July 20X1 and uses all of the $200 000 as capital. Unfortunately, because he does not have an accounting background, he does not keep adequate records. At the end of the financial year, he realises that he will have to prepare financial accounts so he can ascertain whether or not he has made a profit, and whether he is liable for tax on any such profit. From the information given below, prepare, in good form, a statement of comprehensive income for the year and a balance sheet at 30 June 20X2. Note that all figures given are for a full year and the owner, Jimmy Jones, withdraws amounts periodically from the business to cover his expenses. Accounts receivable $50 000, inventory $100 000, bank loan (due 1 January 20X6) $80 000, machinery $80 000, total current assets $160 000, sales $127 800, rent $5000, motor vehicles $40 000, wages $42 100, motor vehicle expenses $8230, total non-current assets $132 500, electricity expense $2500, council rates $2500, total liabilities $117 600, advertising expense $2022, cost of goods sold $84 070, cash at bank?, office equipment?, total expense?, total assets?, net assets?, accounts payable?, gross profit?, capital?, retained earnings?, total owners' equity?