AIM Homework Solutions Week 2

7/28/2019 AIM Homework Solutions Week 2

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200101Autumn 2012

Homework Solutions Week 2

Copyright The University of Western Sydney, 2012

No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, includingphotocopying, recording, or by any information storage and retrieval system, without the prior written permission from the He ad of

School, School of Accounting. Copyright for acknowledged materials reproduced herein is retained by the copyright holder.All readings in this publication are copied under licence in accordance with Part VB of the Copyright Act 1968.


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200101 Accounting Information for Managers Autumn 2012

Page 2 Accounting Program, School of Business

Contact DetailsMrs Susan Green (Unit Administrator)

Building EQ Parramatta Campus

Phone: 9685 9207 Fax: 9685 9593 Email: [email protected] [Sue is normally in the office each week on Monday to Thursday inclusive]

Unit Coordinator

Graeme Mitchell: Vernon Bldg (ED), Room ED.G.212 Parramatta Campus; Email:

[email protected]; Phone: 9685 9215 Mob: 0419 291 606

vUWS Coordinator

Simon Lenthen: Vernon Bldg (ED), Room: ED.G.11 Parramatta Campus; Email:

[email protected]: 9685 9476 Mob: 0414 325 676
mailto:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]


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Spring 2011 200101 Accounting Information for Managers

School of Accounting, College of Business Page 3

Schedule of learning activities

Week No.

Date

Text Reference / Lecture Topic/ Learning

Outcomes (LO)

Tutorial Homework*

127 February-2March

Introduction to accounting (Chapter 1).Business structures (Chapter 2).

Read learning guide and unit outline.Complete handout in class for Week 1.

25-9 March

Ethics and corporate governance(Chapter 3).Business transactions (Chapter 4).

Study guide: Chapter 1 (C2, C3, C4) andChapter 2 (E1, E4, E5).Textbook: Chapter 1 (D1.7) and Chapter2 (E2.15, E2.16a, E2.17a, P2.7).

312-16 March

Business transactions (Chapter 4). Study guide: Chapter 3 (C3, E1, E4) andChapter 4 (C3).Textbook: Chapter 3 (D3.10, D3.12,D3.27) and Chapter 4 ( P4.3).

419-23 March

The balance sheet (Chapter 5, pp. 138-163).

Study guide: Chapter 4 (E1, E5 a-e).Textbook: Chapter 4 (E4.7, E4.8, P4.4,P4.12).

526-30 March

Note: No lectures or tutorials this week.Staff will be available for additionalconsultation see vUWS for details.

Due: Mid-semester examination onSaturday, 31 March 2012.Note: Check vUWS site closer to thedate for further details.

62-6 April

The balance sheet cont. (Chapter 5, pp.164-174).

Study guide: Chapter 5 (C1, E2a-c).Textbook: Chapter 5 (E5.10, E5.11,E5.13, E5.14).

79-13 April

Income statement and statement ofchanges in equity (Chapter 6).Time available in tutorial to work ongroup assignment.

Study guide: Chapter 5 (MC1-15, E4,E5).Textbook: Chapter 5 (D5.9, D5.10, P5.2,P5.5).

816-20 April INTRA SESSION BREAK INTRA SESSION BREAK

923-27 April

The cash flow statement (Chapter 7). Study guide: Chapter 6 (complete thesentence activity on p. 106, C2, E1).Textbook: Chapter 6 (D6.5, D6.8, E6.1,E6.2, E6.5, E6.11, P6.2).

1030 April-4 May

Financial statement analysis (Chapter 8,pp. 303-22)Due: Group assignment.

Study guide: Chapter 7 (MC1-15, C2).Textbook: Chapter 7 (D7.2, D7.6, E7.2,E7.3, E7.9, E7.20, P7.2).

117-11 May

Financial statement analysis (Chapter 8,pp. 322-42).

Study guide: Chapter 8 (C1, C2, E1).Textbook: Chapter 8 (D8.3, D8.10, E8.6,E8.10, P8.1).

1214-18 May

Budgeting (Chapter 9). Study guide: Chapter 8 (MC1-15, E3,E4, E5).Textbook: Chapter 8 (D8.8, E8.7, E8.14,P8.7).

1321-25 May

Cost-volume-profit analysis (Chapter10).

Study guide: Chapter 9 (C2, E1, E2).Textbook: Chapter 9 (D9.7, D9.8, E9.2,E9.9, P9.7).

1428 May-1 June

Review lecture. Study guide: Chapter 10 (C2, C3, C4,E1).Textbook: Chapter 10 (D10.2, E10.2,E10.3, E10.7, E10.13, P10.5).

Refer to learning outcomes on page 3 * Ch = Chapter, MC= Multiple Choice, C = Classification questions, D =Discussion questions, E = Exercises, P = Problems


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Week 2 In-Class Seen Solutions

Ch2E2.15,P2.7

E2.15 Using the information shown in exercise 2.14, producean income statement for the period ended 30 June 2010.

BABEROGLOU CITY

Income Statementfor the period ending 30 June 2010

Service revenue 12 000

Less expensesRent expense 1 100Petrol expense 2 800Advertising expense 4 000Repair expense 300Insurance expense 400 8 600

Profit $ 3 400


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P2.7 Preparing an income statement

The directors of Pfahlert Ltd provide you with the following

financial information for the period ended 31 December

2010: selling expenses $39 000; interest expense $15 000;legal fees $2500, administrative expense $31 000; income tax

expense $16 000; cost of sales $190 000; ordinary share

capital (20 000 shares issued) $80 000; sales revenue $310

000; other revenue $7500; dividends declared (for current

period) $8000. Retained earnings at the beginning $116 000.

Required

(a) Prepare an income statement for Pfahlert Ltd for theperiod ended 31 December 2010.

(b) Determine the closing balance of retained earnings at31 December 2010.


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a)

PFAHLERT LTD

Income Statement

for period ending 31 December 2010

Income

Sales 310 000

Less Cost of Goods Sold 190 000

Gross Profit 120 000

Other Revenue 7 500

Total Income 127 500

Less ExpensesSelling Expenses 39 000

Interest Expenses 15 000

Legal Fees 2 500

Administrative Expenses 31 000

Total Expenses 87 500

Net Profit before Tax 40 000

Income Tax Expense 16 000

Net Profit after tax 24 000

b) Closing balance of retained earnings =

$116 000 + 24 0008 000 = $132 000


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Week 2 Other Textbook Homework Solutions

Chapter 1

1.7 What are three limitations on the usefulness of accounting information?

Instructors note: There are several limitations of the usefulness of accounting information, theseinclude:

1. Time Lag (often 3 months plus) between the end of the reporting period and when thisinformation (e.g. financial reports) is distributed to the users, although electronic transmissionsvia the internet has reduced this time problem.

2. Historical data used information in financial reports is based on past transactions and onequestions the reliability of these reports in providing forecast information.

3. SubjectivityAlthough accounting information is prepared under the guidelines of GAAPthere is a considerable amount of subjective reporting allowed e.g. method and amount of

depreciation; amount reported for doubtful debts; goodwill reporting and different reportingmethods used between countries. The introduction of global harmonisation has assisted inreducing this limitation.

4. Local Government plans e.g. any plans to create bypass roads moving traffic away from theshop location? Any plans to encourage more businesses to the region?

Chapter 2

E2.16 Refer to the JB Hi-Fi Ltd income statement in figure 2.2 on pages 55-6 to answer the following

questions.

a. What is the major difference between the format of this statement and that of a sole trader

or partnership?

There are several differences between a company report and a sole trader and partnership report. Some ofthe differences could include:

the standardised format

tax

profit before tax and profit for the year

profit attributable to equity holders of the parent

the basic and diluted calculations for earnings per share down the bottom of the statement

E2.17 Refer to the JB Hi-Fi consolidated balance sheets in figure 2.3 on pages 56-7 to answer the

following questions.

a. What is the major difference between the format of this statement and that of a sole traderor partnership?

The major difference between the format of the balance sheet for the sole trader, partnership and thecompany JB Hi-FI is the Equity section. For a sole trader, the section will be entitled Owners Equity.For a partnership Partners Equity and for a company Shareholders Equity or just Equity. Thissection for JB Hi-Fi contains a number of items including issued capital, reserves and retained earnings.Additionally, company profit is reported under retained earnings, whereas for a sole trader or partnershipthe profit will be added to the owners equity account.

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AIM Homework Solutions Week 2