Week 1 1B2013s2 WK1 HANDOUT

Calculate total cash received from customers for the

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Unformatted text preview: otal cash received from customers for the year ending 31 December 2010. Use the traditional method for T-accounts (i.e. not the short-cut method) where applicable. Show all workings. [3 marks] DO NOT WRITE OUTSIDE THE BOX 3 (b) Write the journal entries to recognise bad debts expense and any bad debt writeoff. [2 marks] DO NOT WRITE OUTSIDE THE BOX (c) With reference to the accounting concept of the matching principle, explain the rationale for creating a contra account (i.e. allowance for doubtful debts) for accounts receivable. [1 marks] DO NOT WRITE OUTSIDE THE BOX (d) With reference to the accounting concept of conservatism, explain the rationale for creating a contra account (i.e. allowance for doubtful debts) for accounts receivable. [1 marks] DO NOT WRITE OUTSIDE THE BOX 4 Lecture!Workshop! AFM 1A Revision: T-Accounts Assets = Liabilities + Equity T-Accounts and Journal Entries • Closing balance last year was 19,000. • During the current year: sold inventory with a cost of 20,000 for 40,000 on credit. • During the current year: collected 30,000 cash from credit sales. Required: Write down the journal entries to record the sale on credit and collection of cash and complete the T-Account for Accounts Receivable. Journal Entries: T-Account: Accounts Receivable !! ! ! ! !! !! !! !! !! !! !! !! !! !! !! !! ! ! ! !! !! ! 5 ! ! ! !! !! ! !! ! AFM 1A Revision Question: Journal Entries Required: (a) Prepare journal entries for each of the following transactions, and (b) indicate the effect (increase, decrease, or no effect) of each transaction on net profit. Assume perpetual inventory system. Do not consider tax implication. (1) Issued $30,000 shares. [1 mark] (a) Journal entry: (b) Effect on net profit: DO NOT WRITE OUTSIDE THE BOX (2) Inventory worth $40,000 is bought on account. [1 mark] (a) Journal entry: (b) Effect on net profit: DO NOT WRITE OUTSIDE THE BOX (3) Sold inventory of $30,000 at $40,000 on account. [1 mark] (a) Journal entry: (b) Effect on net profit: DO NOT WRITE OUTSIDE THE BOX (4) At the end of the month: $2,000 wages are owing for work completed for the month. [1 mark] (a) Journal entry: (b) Effect on net profit: DO NOT WRITE OUTSIDE THE BOX 6 2010 Session 2 Mid-semester Exam (Adapted) QUESTION 5 (4 MARKS) The following is the balance sheet of OhNo Ltd: OhNo Ltd Balance Sheet as at 30 June 2010 ($’000) Cash 5,000 (1) Accounts Payable 10,000 Accounts Receivable 20,000 Bonds 20,000 Less Allowance for Doubtful Debts (1,000) Bond discount (1,000) 19,000 19,000 Inventory 10,000 Share Capital 10,000 Retained Land and Building 20,000 Earnings 14,000 Less Accumulated Depreciation (1,000) (Purchased 10 years ago) 19,000 (2) 53,000 53,000 Required: Discuss the Relevance and Reliability of the value of each of the items enumerated above (i.e. 1 mark each for relevance and reliability for each indicated item): (1) [2 marks] DO NOT WRITE OUTSIDE THE BOX (2) [2 marks] DO NOT WRITE OUTSIDE THE BOX 7 FINANCIAL STATEMENTS AND REPORTING C...
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