chapter 2 questions.docx - Financial Reports for Decision...

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Financial Reports for Decision Making Exercise 2.1 PREPARING A BALANCE SHEET LO 4 Financial items for George Karatsis IT Services on 31 May 2016 are presented below in alphabetical order. Accounts payable Accounts receivable Building Cash at bank $ 64 000 70 000 520 000 61 000 Land Mortgage payable Office equipment Office supplies $250 000 710 000 180 000 34 000 Required A. Prepare a balance sheet similar to the one in figure 2.2 . ( Note that a major item is missing in the list.) B. Reformat the statement to present it in narrative form as in figure 2.3 . Exercise 2.2 INCOME STATEMENT AND ANALYSIS LO 1, 3, 5 During the year ended 30 June 2016, Skilled Services, a provider of temporary secretary personnel, had collected receipts from clients for a total value of $250 000. Wages of $136 000 had been paid to the temporary workers, rental of office space and electricity costs were $12 000 and $13 700 respectively for the year, and the owners withdrew $20 000 for their personal use. Required A. Prepare an income statement for the year for Skilled Services. B. Skilled Services is a sole proprietor. Compare the liability of a sole proprietor owner with that of a company shareholder. Exercise 2.3 ANALYSIS OF EQUITY LO 5 Sarah Hodge is a self-employed piano teacher operating her business from home. She keeps her accounting records for business activities completely separate from her records for personal activities. At 30 June 2015, Sarah had business assets and liabilities worth $62 500 and $41 000 respectively. At 30 June 2016, Sarah had business assets and liabilities worth $56 000 and $38 000 respectively. Required A. Assuming Sarah did not contribute to or withdraw from the business during the financial year, determine the profit/loss for the year. B. Assuming Sarah had withdrawn $15 000 during the year, determine the profit/loss for the year. C. Assuming Sarah had contributed $20 000 and withdrawn $12 000, prepare a statement of changes in equity for the year. Exercise 2.4 DETERMINING PROFIT FROM EQUITY BALANCES LO 5 Equity balances for Sen Widyaya appearing in the balance sheets of Widyaya’s Window Washing Services as at 30 June 2016, 2015 and 2014 are set out below: 1 | P a g e
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Financial Reports for Decision Making During 2014–15, Sen withdrew $25 000 for personal use and also contributed additional capital of $8000. During 2015–16, he withdrew $10 000 capital from the business, and withdrew $15 000 cash for his own use in anticipation of profits. Required Determine the profit/loss earned by the business in each of the 2 years ended 30 June 2016 and 30 June 2015. Exercise 2.5 OPERATING, INVESTING AND FINANCING ACTIVITIES LO 3, 5 Classify each of the following activities as being either operating, investing or financing for the purpose of preparing a statement of cash flows. Indicate whether there is an inflow [I] or outflow [O] of cash: (a) sale of land and buildings for cash (b) payment of wages to employees (c) withdrawal of cash by the owner (d) repayment of a bank loan (e) cash purchase of a truck by a manufacturing company (f) lease payment for a fleet of motor vehicles by a courier business (g) borrowing of money from a finance company on a long-term basis
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