Accounting Answers

Maria Sanchez, an accountant by trade, moonlights as a personal trainer. Maria is curious about her cash inflows and outflows from her personal work for the month of February. Using the following information, prepare a statement of cash flows for Maria.

Cash for Supplies Inventory

$500

Cash for Advertising

$400

Cash Paid for Equipment

$900

Cash Received from Bank Loan

$1,000

Cash Paid for Insurance

$700

Cash Received from Customers

$2,200

Cash Paid for Taxes

$400

Cash Balance, 2/1

$500

Ramond Company has hired you to prepare financial statements for the year ending 12/31. On your first day of work, your assistant comes to you with several items that could be classified as expenses or could be classified as assets. Based on your knowledge of accounting so far, determine whether the following items should be recorded as an expense or an asset.

1.

On 12/31, Ramond paid $14,000 to rent office space for the next twelve months.

2.

On 10/1, Ramond paid $40,000 for insurance that covered the company’s property for the last quarter of the year.

3.

On 6/1, Ramond purchased $27,000 in supplies, all of which were used by 12/31.

4.

On 12/31, Ramond purchased $5,000 worth of supplies for the coming month.

Costello Corporation uses a perpetual inventory system. At the end of the year, the inventory balance

221 Financial Accounting

reported by its system is $45,270. Costello performs an inventory count and determines that the actual ending inventory is $39,780.

1.

Discuss why a company that uses a perpetual inventory system would perform a physical inventory count.

2.

Why might the ending balance in inventory differ between the perpetual inventory system and physical inventory count?

3.

Assume that Costello determines that the difference is due to a part of its inventory being damaged when a warehouse worker backed into a shelf with his forklift. What journal entry should Costello make?

4.

Assume that Costello believes the difference is due to errors made by its accounting staff. The staff failed to transfer inventory to cost of goods sold when sales were made. Record the journal entry Costello should make in this case.

 Prepare journal entries to record the following selected transactions that occurred during the company's operations: (4 marks)

1.     On January 30, 2017, Candlestick, Inc. sells $100,000, five-year, 10 % bonds for 92.639% of face value.

2.     Company sells $100,000, five-year, 10 % bonds for 108.111% of face value on July 1, 2017. 

1). Examine the role of accounting concepts in the preparation of financial statements. Do you find any of the accounting concepts conflicting

with each other? Give examples.

2). Discuss briefly the basic concepts and conventions of accounting?

3). Why should accounting practices be standardised? Explain.

1). Examine the role of accounting concepts in the preparation of financial statements. Do you find any of the accounting concepts conflicting

with each other? Give examples.

A company is considering two capital expenditure proposals. Both proposals are for similar products andboth are expected to operate for four years. Only one proposal can be accepted.The following information is available.Profit/(loss)

Proposal A Proposal B

Initial investment $45,000 $ 46,000

Year 1 6,500 4,500

Year 2 3,500 2,500 Year 3 13,500 4,500 Year 4 Loss (1,500) profit14,500 Estimated scrap value

at the year end 4 4,000 4,000 Depreciation is charged on the straight line basis

Calculate the following for both proposals

I) The payback period to one decimal place

ii) The average rate of return on initial investment to the decimal place

Mr. Aslam is considering investing in a poultry farm. The project will require an initial investment of $ 250000 and is expected to generate the following cash flows thereafter

year $

1 (50000)

2 80000

3 130000

4 110000

5 (100000)

6 160000

7 200000

Required. Calculate the payback period and comment on your answer

Mr. Aslam is considering investing in a poultry farm. The project will require an initial investment of $ 250000 and is expected to generate the following cash flows thereafter

year $

1 (50000)

2 80000

3 130000

4 110000

5 (100000)

6 160000

7 200000

Required. Calculate the payback period and comment on your answer