ACW1100 - Introduction to Financial Accounting - Accounting & Finance Assignment Help

Assignment Task

Question 1
a) Flora & Co is a retailer and its financial year ends on June 30. The following information relates to the cost of goods sold in the month of June 2017:

2017                                                $
Inventory on hand as at 1 June 360 000
Inventory purchased on credit from supplier during June 180 000
Inventory purchased on cash during June 20 000
Returns of inventory to suppliers during June 9 000
Cash paid to suppliers during June 49 200
Discounts received from suppliers during June 3 600
Sales made on credit to customers during June 324 000
Cost price of sales during June 198 000
Sales returns by customers during June 36 000
Cost price of sales returns during June 27 000
Cash received from customers during June 270 000
Discounts allowed to customers during June 5 400
Inventory on hand as at June 30 (as per stocktake) 342 000
 

Required:

(i) Show the ‘Cost of Goods Sold’ (COGS) ledger account for June 2017 using the Perpetual Inventory method of accounting for inventory.

(ii) Show the ‘Cost of Goods Sold’ (COGS) ledger account for June 2017 using the Periodic Inventory method of accounting for inventory.

(iii) Compare the COGS of June 2017 arrived at using Perpetual Inventory method with the COGS derived using the Periodic Inventory method. What is the reason for the difference? Show all your workings clearly

Question 2 (a) Future Fashion received a sum of $3,500 in advance from a customer, Nicholas, in January 2018 for a set of costumes. The costs of material and labour to complete the costumes amounted to $2,000. The designer completed and delivered the costume set to the customer in the month of May 2018.

Required: Explain whether you would recognise $3,500 as revenue in the statement of profit or loss of Future Fashion for the year ended April 30, 2018.

Question 3
Chill Ltd’s financial year ends on June 30 and commenced its business from July 1, 2015. The accountant, Ms Worry, is uncertain as to whether to value the company assets using the cost or revaluation basis in accordance with AASB 116 Property, Plant and Equipment. She wishes to compare the impact to the profit before tax for the year ending on June 30, 2016 and June 30, 2017 using both methods for a new machine. Chill Ltd acquires a machine at a cost of $925,000 for cash on July 1, 2015. The company uses the straight-line method of depreciation and the useful life of the machinery is 5 years with zero residual value. Ms Worry estimates the following value as at June 30, 2017:
                      $
Fair value 570,000
Cost to sell 30,000
Value in use 545,000

Required:
a) Prepare the necessary journal entries of Chill Ltd for financial years 2016 and 2017 including annual depreciation.
(i) Cost basis
(ii) Fair Value basis

b) Compare the impact of both valuation methods on the profit before tax of Chill Ltd for both financial years 2016 and 2017. Show all your workings clearly.

c) Assuming you are the Chief Financial Officer of Chill Ltd and Ms Worry has presented to you the results in (b). Which method would you prefer to use to value the machinery and why? Give one reason to support your decision.

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