Acct1101 Assignment Of Contract

ASSIGNMENT OF CONTRACT

FOR VALUE RECEIVED,____________________________, the undersigned Assignor ("Assignor") hereby assigns, transfers and sets over to ____________________________ ("Assignee") all rights, title and interest held by the Assignor in and to the following described contract:




The Assignor warrants and represents that said contract is in full force and effect and is fully assignable.

The Assignee hereby assumes and agrees to perform all the remaining and executory obligations of the Assignor under the contract and agrees to indemnify and hold the Assignor harmless from any claim or demand resulting from non-performance by the Assignee.

The Assignee shall be entitled to all monies remaining to be paid under the contract, which rights are also assigned hereunder.

The Assignor warrants that the contract is without modification, and remains on the terms contained.

The Assignor further warrants that it has full right and authority to transfer said contract and that the contract rights herein transferred are free of lien, encumbrance or adverse claim.

This assignment shall be binding upon and inure to the benefit of the parties, their successors and assigns.

Signed this _________ day of ______________________________, 20_____.



____________________________
Assignor's Signature



____________________________
Assignor's Printed Name




____________________________
Assignee's Signature



____________________________
Assignee's Printed Name


Solutions Manual to accompany Financial Accounting 9e by Hoggett et al Exercise 11.12 Budgeted cash receipts from sales Kay’s Hardware Ltd’s budgeted monthly sales for January to June 2016 are given below. About 70% of the monthly sales are expected to be on credit. Approximately 60% of the credit sales are collected in the month of sale, 30% in the month following the sale, and 5% in the second month following the sale; 5% are never collected and are written off. The budgeted gross sales including GST of 10% by month are: January $115 000 February 162 000 March 139 000 April 125 000 May 150 000 June 130 000 Required Prepare a schedule of expected cash receipts from sales for April, May and June 2016 KAY’S HARDWARE LTD Budgeted Cash Receipts from Sales April From cash sales in same month [1] $37 500 [30% × current month] [1] [2] [3] [4] May $45 000 June $39 000 From credit sales same month [70% × current month × 60%) [2] 52 500 63 000 54 600 From preceding month’s sales [70% × 30% × preceding month] [3] 29 190 26 250 31 500 From second preceding month [70% × 5% × second preceding month] [4] 5 670 4 865 4 375 $124 860 $139 115 $129 475 30% of monthly sales are for cash. 70% of monthly sales are for credit. 60% of monthly credit sales are collected in month of sale. 30% of monthly credit sales are collected in the next month. 5% of monthly credit sales are collected two months later. © John Wiley & Sons Australia, Ltd 2015 11.0 Solutions Manual to accompany Financial Accounting 9e by Hoggett et al Problem 18.5 Statement of cash flows, direct and indirect methods The simplified financial statements of Titanium Ltd appear below: TITANIUM LTD Statement of Financial Position as at 30 June 2017 ASSETS Cash Accounts receivable Inventory Plant and equipment Accumulated depreciation – plant and equipment LIABILITIES AND EQUITY Accounts payable Current tax liability Loan payable Share capital Retained earnings 2018 $ 37 200 33 600 30 000 72 000 (26 400) $146 400 $ 15 600 16 800 42 000 93 600 (28 800) $139 200 $ 32 400 6 000 32 400 41 600 34 000 $146 400 $ 27 600 9 600 37 200 41 600 23 200 $139 200 TITANIUM LTD Income Statement as at 30 June Sales Cost of sales GROSS PROFIT Selling expenses Administrative expenses Interest expense Profit before tax Income tax expense PROFIT $264 000 216 000 48 000 $16 800 9 600 1 200 27 600 20 400 4 800 $ 15 600 Additional information 1. Dividends declared and paid were $26 400. 2. During the year equipment was sold for $10 200 cash. The equipment cost $21 600 and had a carrying amount of $10 200 at the time of sale. 3. Depreciation expense is included as a selling expense in the income statement. 4. All sales and purchases are on credit. Required A. Prepare a statement of cash flows using the indirect method. B. Prepare a statement of cash flows using the direct method. © John Wiley & Sons Australia, Ltd 2015 11.1 Solutions Manual to accompany Financial Accounting 9e by Hoggett et al A. TITANIUM LTD Statement of Cash Flows for the year ended 30 June 2018 Cash flows from operating activities Profit for the period Depreciation expense Changes in assets and liabilities Decrease in accounts receivable Increase in inventory Decrease in accounts payable Increase in current tax liability $15 600 13 800 16 800 (12 000) (4 800) 3 600 Net cash flows from operating activities Cash flows from investing activities Sale of plant and equipment Purchase of plant and equipment 33 000 10 200 (43 200) Net cash flows from investing activities Cash flows from financing activities Proceeds from loans Dividends paid 3 600 (33 000) 4 800 (26 400) Net cash flows from financing activities (21 600) Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year (21 600) 37 200 $15 600 © John Wiley & Sons Australia, Ltd 2015 11.2 Solutions Manual to accompany Financial Accounting 9e by Hoggett et al Workings: Purchase of plant and equipment Plant and Equipment 72 000 Depreciation Carrying amount of equipment sold 43 200 Balance c/d 115 200 Balance b/d Purchase Accumulated Depreciation – Plant and Equipment Depreciation of equipment sold 11 400 Balance b/d Balance c/d 28 800 Depreciation for current period 40 200 11 400 10 200 93 600 115 200 26 400 13 800 40 200 Dividends paid Dividends paid Balance c/d Retained Earnings 26 400 Balance b/d 23 200 Profit for the period 49 600 34 000 15 600 49 600 B. TITANIUM LTD Statement of Cash Flows for the year ended 30 June 2018 Cash flows from operating activities: Cash receipts from customers Cash paid to suppliers and employees Cash generated from operations Interest paid Income taxes paid Net cash from operating activities $280 800 (245 400) 35 400 (1 200) (1 200) $33 000 Cash flows from investing activities: Sale of plant and equipment Purchase of plant and equipment Net cash used in investing activities 10 200 (43 200) Cash flows from financing activities: Proceeds from loans Dividends paid Net cash used in financing activities 4 800 (26 400) Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year © John Wiley & Sons Australia, Ltd 2015 (33 000) (21 600) (21 600) 37 200 $15 600 11.3 Solutions Manual to accompany Financial Accounting 9e by Hoggett et al Workings: Cash receipts from customers Accounts Receivable 33 600 Cash from customers 264 000 Balance c/d 297 600 280 800 16 800 297 600 Balance b/d Purchases Inventory 30 000 Cost of Goods sold 228 000 Balance c/d 258 000 216 000 42 000 258 000 Cash paid Balance c/d Accounts Payable 232 800 Balance b/d 27 600 Purchases 260 400 32 400 228 000 260 400 Balance b/d Sales Cash paid to suppliers Cash payments for purchases Cash paid to suppliers and employees = $232 800 (inventory) + $16 800 (selling expense) + $9 600 (administrative expense) - $13 800 (depreciation) = $245 400 Income tax paid Cash paid Balance c/d Current Tax Liability 1 200 Balance b/d 9 600 Income tax expense 10 800 © John Wiley & Sons Australia, Ltd 2015 6 000 4 800 10 800 11.4 Solutions manual to accompany Financial Accounting 9e by Hoggett et al Problem 12.4 Doubtful debts — net credit sales and ageing methods Great Outdoors Ltd sells outdoor furniture settings on credit. The accounting records at 30 June 2015 reveal the following. Ignore GST. Credit sales (for year) Credit sales returns and allowances (for year) Accounts receivable (balance 30 June 2015) Allowance for doubtful debts (credit balance 30 June 2015) $1 070 000 90 000 326 500 1 500 In the past, the company’s yearly bad debts expense had been estimated at 2% of net credit sales revenue. It was decided to compare the current method with an ageing of the accounts receivable method. The following analysis was obtained with respect to the accounts receivable: % estimated Balance uncollectable 1 Accounts not yet due $175 600 2 Accounts overdue: 10–30 days 61 000 2 31–60 days 44 000 10 61–120 days 25 400 25 20 500 121 days and over 40 $326 500 Required A. Prepare the journal entries to adjust the Allowance for Doubtful Debts at 30 June 2015 under: 1. the net credit sales method 2. the ageing of accounts receivable method. B. Determine the balance in the Allowance for Doubtful Debts account under both methods. C. Assume that the allowance account had a debit balance of $850 at 30 June 2014. Show the journal entries to record the allowance for doubtful debts at 30 June 2015 under: 1. the net credit sales method 2. the ageing of accounts receivable method. D. Using the journal entries from requirement C, determine the balance in the allowance account under both methods. E. Explain, with reference to requirements B and D, why the two different methods result in different balances. A. 2015 1. June 30 Bad Debts Expense $19 600 Allowance for Doubtful Debts $19 600 Allowance made on 2% of net credit sales ($1 070 000 – $90 000) 2. June 30 Bad Debts Expense Allowance for Doubtful Debts Allowance made on ageing of accounts receivable. 19 548 19 548 Solutions manual to accompany Financial Accounting 9e by Hoggett et al Required allowance is $21 048 – $1500 = $19 548 B. 1. Allowance for Doubtful Debts 2015 30/6 30/6 Balance c/d $21 100 30/6 Balance $1 500 Adjusting 19 600 $21 100 $21 100 30/6 Balance b/d $21 100 2. Allowance for Doubtful Debts 2015 30/6 30/6 Balance c/d $21 048 30/6 Balance $1 500 Adjusting 19 548 $21 048 $21 048 30/6 Balance b/d $21 048 C. 1. June 30 Bad Debts Expense $19 600 Allowance for Doubtful Debts $19 600 Allowance made on 2% of net credit sales. 2. Bad Debts Expense 21 898 Allowance for Doubtful Debts 21 898 Allowance made on ageing of accounts receivable. Required allowance $21 048 + $850 D. 1. Allowance for Doubtful Debts 30/6 Balance $850 30/6 30/6 Balance c/d Adjusting $19 600 18 750 $19 600 $19 600 30/6 Balance b/d $18 750 2. Allowance for Doubtful Debts 30/6 Balance $850 30/6 30/6 Balance c/d Adjusting $21 898 21 048 $21 898 $21 898 30/6 Balance b/d © John Wiley & Sons Australia, Ltd 2015 $21 048 12.1 Solutions manual to accompany Financial Accounting 9e by Hoggett et al E. The net credit sales method and the ageing of accounts receivable method both calculate a different balance for the Allowance for Doubtful Debts. The net credit sales method calculates the adjusting entry for Bad Debts Expense as a percentage of net credit sales. The calculation forms the basis of the adjusting entry. The ageing of an accounts receivable calculates a required ending balance for the Allowance for Doubtful Debts. The adjusting entry for Bad Debts Expense is calculated by taking into account any opening balance in the allowance account to achieve the desired ending balance. Since the two methods involve calculations based on different amounts the resulting balances on Allowance for Doubtful Debts accounts will be different, and hence the net accounts receivable disclosed in the balance sheet will also be different. © John Wiley & Sons Australia, Ltd 2015 12.2 Solutions manual to accompany Financial Accounting 9e by Hoggett et al Problem 13.1 Inventory cost flow methods — periodic inventory system The following information relates to the inventory of Margaret’s Megamart Ltd during December. 1/12 Beginning inventory 10/12 Purchase (excluding GST) 15/12 Purchase (excluding GST) 23/12 Purchase (excluding GST) Totals Units 700 500 300 500 2000 Unit cost $3.00 3.15 3.30 3.50 Total cost $2100 1575 990 1750 $6415 Margaret’s Megamart Ltd uses the periodic inventory system. During the month, 1300 units were sold for $5525 plus GST. A physical count on 31 December verified that 700 units were on hand. Required A. Prepare an income statement down to gross profit for December, using each of the following costing methods: 1. specific identification, assuming that 400 units were sold from the beginning inventory, 400 units were sold from the first purchase, 200 units were sold from the 15 December purchase, and the remainder from the 23 December purchase. 2. FIFO 3. LIFO 4. weighted average. B. Which cost flow method(s) resulted in the highest gross profit on sales? the highest ending inventory? Explain your results. C. Prepare an income statement down to gross profit for December, using the FIFO and LIFO costing methods and assuming that the 23 December purchase had been delayed until January. D. The management of Margaret’s Megamart Ltd expects the unit cost to increase to $3.90 excluding GST early in the next period. In anticipation of the price increase, a purchase of 600 additional units was made on 29 December at a unit cost of $3.65 excluding GST. Prepare an income statement down to gross profit for December, using the FIFO and LIFO costing methods. E. Compare your results obtained in requirements A, C and D. Explain why your results are or are not the same. A.1. Specific Identification Cost of sales 400 units @ $3.00 400 units @ $3.15 200 units @ $3.30 300 units @ $3.50 1 300 units $1 200 1 260 660 1 050 $4 170 Ending inventory 300 units @ $3.00 100 units @ $3.15 © John Wiley & Sons Australia, Ltd 2015 $900 315 12.3 Solutions manual to accompany Financial Accounting 9e by Hoggett et al 100 units @ $3.30 200 units @ $3.50 700 units 2. 330 700 $2 245 FIFO: Goods available (per question) Ending inventory (700 units): 500 units @ $3.50 200 units @ $3.30 Cost of sales 3. $6 415 (500) (200) 1 300 (1 750) (660) $4 005 Units 2 000 $6 415 (700) 1 300 (2 100) $4 315 Units Unit Cost $3.00 $3.15 $3.30 $3.50 Amount LIFO: Goods available Ending inventory (700 units): 700 units @ $3.00 Cost of sales 4. Units 2 000 Weighted average: Beginning inventory 10/12 Purchase 15/12 Purchase 23/12 Purchase Goods available $6415 ÷ 2000 = $3.21 per unit (rounded) 700 500 300 500 2 000 Goods available Ending inventory Cost of sales (rounded) 2 000 (700) 1 300 $3.21 $3.21 $6 415 (2 247) $4 168 FIFO LIFO $5 525 2 100 4 315 6 415 2 410 4 005 1 520 $5 525 2 100 4 315 6 415 2 100 4 315 1 210 W’ted Av. $5 525 2 100 4 315 6 415 2 247 4 168 1 357 Sales Beginning inventory Purchases Goods available for sale Ending inventory Cost of sales Gross profit Income Statement Spec. Ident. $5 525 2 100 4 315 6 415 2 245 4 170 1 355 © John Wiley & Sons Australia, Ltd 2015 $2 100 1 575 990 1 750 $6 415 12.4 Solutions manual to accompany Financial Accounting 9e by Hoggett et al B. The highest gross profit was reported using FIFO. FIFO also reported the highest ending inventory balance since it is valued at the most recent higher prices. This is a result of the direct relationship between inventory values and profit. The higher the value placed on ending inventory, the higher the reported gross profit. C. Income Statement Sales Beginning inventory Purchases Goods available for sale Ending inventory (200 units) Cost of sales Gross profit FIFO $5 525 2 100 2 565 4 665 660 4 005 $1 520 LIFO $5 525 2 100 2 565 4 665 600 4 065 $1 460 FIFO $5 525 2 100 6 505 8 605 *4 600 4 005 $1 520 LIFO $5 525 2 100 6 505 8 605 **4 005 4 600 $925 D. Income Statement Sales Beginning inventory Purchases Goods available for sale Ending inventory (1300 units) Cost of sales Gross profit * FIFO 200 @ 3.30 = $ 660 500 @ 3.50 = 1 750 600 @ 3.65 = 2 190 $4 600 E. **LIFO 700 @ 3.00 = $2 100 500 @ 3.15 = 1 575 100 @ 3.30 = 330 $4 005 FIFO reported the same cost of sales and gross profit in all cases. This is because the increases and decreases in ending inventory were offset by the same increases and decreases in purchases. LIFO reported three different cost of sales and gross profit results. This is shows that ending inventory and cost of sales valuations can be altered (manipulated) by recent purchases or non-purchases using LIFO assumptions. © John Wiley & Sons Australia, Ltd 2015 12.5 Problem 14.3 Cost of various assets Mason’s Manufacturing Ltd began operations during 2015. The company had a building constructed and acquired manufacturing equipment during the first 6 months of the year. Manufacturing operations began early in July 2015. The company’s accountant, who was unsure how to treat property, plant and equipment transactions, opened a Property, Plant and Equipment account and debited (credited) that account for all the expenditures and receipts involving assets as shown on the next page (all costs are net of GST). $ 113 400 1. Cost of real estate purchased: Land 35 000 Old building 15 000 2. Paid for the demolition of the old building to prepare the site for a new one. 6 700 3. Paid for taxes in arrears on the property in (1) 600 4. Paid fee for title search on property in (1) (4 600 ) 5. Received for sale of salvaged materials from old building 40 000 6. Paid architect for designing new building 23 300 7. Paid for a temporary fence around the construction site 84 000 8. Paid excavation costs for new building 225 000 9. Partial payment to building contractor 15 700 10. Paid for construction of parking spaces and installation of parking area lights 18 000 11. Paid interest on building loan during construction 275 000 12. Made final payment to building contractor 84 000 13. Paid for manufacturing equipment 1 600 14. Paid freight on manufacturing equipment 2 900 15. Paid installation costs of manufacturing equipment 1 300 16. Paid for removal of temporary fencing around construction site (500 ) 17. Received for temporary fencing materials salvaged 800 18. Paid for repair of manufacturing equipment that was damaged during installation Property, Plant and Equipment account balance $ 937 200 Required A. Prepare a schedule similar to the one below. Analyse each transaction and enter the payment (receipt) in the appropriate column. Total the columns. Item no. B. C. Land Land improvements Building Manufacturing equipment Other Prepare a general journal entry to close the $937 200 balance in the Property, Plant and Equipment account and allocate the transactions to their appropriate accounts. Prepare an entry to record depreciation expense for half the year to 31 December 2015 on land improvements, building and manufacturing equipment using straight-line depreciation. Useful lives and residual values are: Land improvements Building Manufacturing equipment Useful life 10 years 20 years 8 years Residual value $— $46 100 7 500 Solutions manual to accompany Financial Accounting 9e by Hoggett et al A. Item no. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. Total Land $148 400 15 000 6 700 600 (4 600) Land improvements Building Manufacturing equipment Other $40 000 23 300 84 000 225 000 $15 700 $18 000 275 000 $84 000 1 600 2 900 1 300 (500) $166 100 $15 700 $648 100 $88 500 800 $18 800 B. Land Land Improvements Buildings Manufacturing Equipment Damage to Machinery Loss Interest on Building Loan Expense Property Plant and Equipment To reallocate cost of acquisition. 166 100 15 700 648 100 88 500 800 18 000 937 200 C. Depreciation Expense – Land Improvements Depreciation Expense – Buildings Depreciation Expense – Equipment Accumulated Depreciation – Land Improvements Accumulated Depreciation – Buildings Accumulated Depreciation – Equipment To record depreciation expense. 785 15 050 5 063 Land Improvements = $15 700/10  6/12 = Buildings = $648 100 – $46 100 = $602 000/20  6/12 = Equipment = $88 500 – $7500 = $81 000/8  6/12 = 785 15 050 5 063 © John Wiley & Sons Australia, Ltd 2015 785 15 050 5 063 14.1 Solutions manual to accompany Financial Accounting 9e by Hoggett et al Problem 15.10 Revaluation, depreciation, disposal On 1 January 2014, Nicolaidis Ltd purchased two identical new machines at a total cost of $700 000 plus GST. It was estimated that the machines would have a useful life of 10 years and a residual value of $50 000 each. Nicolaidis Ltd uses the straight-line method of depreciation for all of its equipment. The company’s end of reporting period is 31 December. Required A. Record the purchase of the trucks on 1 January 2014. B. Record the depreciation expense on the trucks for 2019. C. Assume that early in 2020 the company revalued the machines upwards by $80 000 each and assessed that the machines would last 6 more years instead of 4 but that the residual value would be $80 000. Record all journal entries for the trucks in 2020. D. Make the necessary entries to record the sale of one of the machines on 31 December 2020. The machine was sold for $200 000 plus GST. (Assume that the two machines had the same carrying amount, which equalled their fair values at this date.) E. How much depreciation expense would be recorded on the second machine during 2025 if it were still being used and if its residual value were still $50 000? Why? A. 2014 Jan. 1 Machinery GST Receivable Cash at Bank Purchase of two machines. 700 000 70 000 770 000 B. 2019 31 Dec Depreciation – Machinery Accumulated Depreciation – Machinery Depreciate trucks ([$700 000 – $100 000]  10) 60 000 60 000 C. 2020 Jan Accumulated Depreciation – Machinery Machinery Write back accumulated depreciation on revaluation $60 000  6 360 000 Machinery Gain on Revaluation – Machinery (OCI) Revalue Machinery. 160 000 © John Wiley & Sons Australia, Ltd 2015 360 000 160 000 14.2 Solutions manual to accompany Financial Accounting 9e by Hoggett et al OR Accumulated Depreciation – Machinery Machinery Gain on Revaluation – Machinery (OCI) (i.e. previous two entries combined.) Dec. 31 Depreciation Expense – Machinery Accumulated Depreciation – Machinery Depreciate trucks. ([$500 000 – $80 000]  6) 360 000 200 000 160 000 70 000 70 000 D. Dec. 31 Cash at Bank GST Payable Proceeds from Sale of Machinery Sale of machine. 220 000 Carrying Amount of Machinery Sold Accumulated Depreciation – Machinery Machinery Write off machine sold. 215 000 35 000 20 000 200 000 250 000 For the year ended 31 December 2025, there would be no depreciation on the machine. The depreciation per annum is $35 000, but by the end of 2024, the machine will have been fully depreciated. If the machine is being used still in 2025, then there will need to have been a revision of the machine’s useful life prior to 2025, as it is impossible to charge depreciation once the asset’s carrying amount has been written down to its residual value. Early 2020 value of one machine = $250k. Depreciation $35k/year. 31/12/2020 25035k=215k31/12/2021 $215k-35k=$180k 31/12/2022 $180k-35k=$145k 31/12/2023 $145k-35k=$110k 31/12/2024 $110k-35kk=$75k Depreciation in year ended 31/12/2025 is $25k to leave a residual of $50k. © John Wiley & Sons Australia, Ltd 2015 14.3 Solutions manual to accompany Financial Accounting 9e by Hoggett et al Exercise 16.9 Debentures issued at nominal value The following information relates to a debentures issue of Justice Ltd dated 1 January 2017: Date issued Nominal value Stated interest rate Interest payment dates Term to maturity Cash received from the issue 1 January 2017 $1000 8% 30 June and 31 December 8 years $500 000 The company’s financial year-end is 30 June. Required A. Prepare general journal entries to record: 1. the issue of the debentures 2. the 30 June and 31 December 2017 interest payments 3. the 30 June 2018 interest payment. B. Calculate the interest expense for the year ended 30 June 2018, and prepare the entry to close the Interest Expense account to the Profit or Loss Summary account. C. Show how the debentures will be reported at 30 June 2018. A.1. 2017 Jan. 1 Cash Trust Application – Debentures To record money received on application. 500 000 Cash at Bank Cash Trust To record transfer of cash on allotment 500 000 Application – Debentures Debentures To record allotment of 500 debentures 500 000 500 000 500 000 500 000 2. June 30 Dec. 31 Debenture Interest Expense Cash at Bank To record half-yearly interest on 8% debentures 20 000 Debenture Interest Expense Cash at Bank To record half-yearly interest on 8% debentures 20 000 Debenture Interest Expense Cash at Bank To record half-yearly interest on 8% debentures 20 000 20 000 20 000 3. 2018 June 30 © John Wiley & Sons Australia, Ltd 2015 20 000 16.1 Solutions manual to accompany Financial Accounting 9e by Hoggett et al B. 2018 June 30 Profit or Loss Summary Debenture Interest Expense To transfer debenture interest expense. 40 000 40 000 C. Statement of Financial Position (extract) as at 30 June 2018 NON-CURRENT LIABILITIES Debentures – 8% $500 000 © John Wiley & Sons Australia, Ltd 2015 16.2 Solutions manual to accompany Financial Accounting 9e by Hoggett et al Problem 16.1 Calculations and journal entries for a payroll The following information is used to calculate Cleaning Capers Ltd’s payroll for the week ending 30 June 2018. Salary sacrifice Employee Gross pay — donations V. Gribben 952 20 D. Mitchell 1 240 40 F. Speight 2 180 50 P. Aiken 1 230 30 Employees’ superannuation contribution is 9% of their gross pay. PAYG tax is taken out at 30% after subtracting the donations and superannuation. All employees also have the following deductions from their after-tax pay: 3.5% life insurance and 10% medical insurance. Required A. Calculate ‘take-home’ pay for each employee. B. Prepare a general journal entry to accrue the payroll and associated deductions. C. Prepare a cash payments journal entry to record the payment of wages. D. Assume that, on 6 July 2018, the company forwarded cheques to cover amounts withheld from employees’ wages for the month of June. Total income tax deductions were $6040. Other deduction liabilities were four times the total weekly deductions. Prepare a cash payments journal entry to record these payments. A. Employee V. Gribben D. Mitchell F. Speight P. Aiken Gross Pay 952 1 240 2 180 1 230 Salary Sacrifice – Donations 20 40 50 30 Super PAYG After Tax 85.68 111.60 196.20 110.70 253.90 326.52 580.14 326.79 592.42 761.88 1353.66 762.51 Life Ins Medical Ins 20.73 26.67 47.38 26.69 59.24 76.19 135.37 76.25 Take Home Pay 512.45 659.02 1170.91 659.57 B. Wages Expense Taxation Office Life Insurance Donations Payable Superannuation Payable Medical Insurance Payable Wages Payable 5 602 1487.35 121.47 140.00 504.18 347.05 3001.95 C. Wages Payable Cash at Bank © John Wiley & Sons Australia, Ltd 2015 3 001.95 3 001.95 16.3 Solutions manual to accompany Financial Accounting 9e by Hoggett et al D. Cash Payments Journal (extract) Debits Chq Other Accounts No. Accounts Payable Date Accounts Debited July 6 Taxation Office Life Insurance Donations Payable Superannuation Payable Medical Insurance Payable xx xx xx xx xx 6 040.00 485.88 560.00 2 016.72 1388.20 © John Wiley & Sons Australia, Ltd 2015 Credits Cash at Discount Bank Received 6 040.00 485.88 560.00 2 016.72 1388.20 16.4 Solutions manual to accompany Financial Accounting 9e by Hoggett et al Problem 17.3 Reserves, dividends, statement of profit or loss and other comprehensive income, statement of changes in equity The equity of Fiorente Ltd at 30 June 2018 was: Share capital 500 000 5% cumulative preference shares issued at $1 each 1 000 000 ordinary shares issued at $2 each Total share capital General reserve Retained earnings $ 500 000 2 000 000 2 500 000 350 000 (200 000) 3 650 000 $ Additional information During the year ended 30 June 2019, the following transactions occurred: 2018 Oct. 1 Fiorente Ltd settled a long standing civil lawsuit for $125 000 (significantly less than had been expected). The directors had previously placed $350 000 into a general reserve in anticipation of the potential costs. The board has now decided that the general reserve can be discontinued. Dec. 1 The directors had not paid the preference shareholders their dividend for 2018, given the lack of retained earnings. They now declare and pay the dividend. 2019 Feb. 1 The profits for the half year were such that the directors declare and pay 15c per share interim dividend for ordinary shareholders. June 30 The profit before tax for the year was $1 264 000. The directors decided to recommend a final dividend of 30c per share for ordinary shareholders. Assume the tax rate is 30% for estimating income tax expense. In determining the profit before tax of $1 264 000 the following items were taken into account: Sales Cost of sales Selling, distribution and administrative expenses Damages on lawsuit Revaluation down of land Profit on sale of investment in government bonds Bad debts expense $ 7 510 000 5 760 000 61 000 125 000 351 000 585 000 220 000 Required A. Prepare general journal entries for all dated transactions in the additional information. B. Prepare a statement of profit or loss and other comprehensive income for the reporting period ended 30 June 2019 in accordance with current accounting standards. C. Prepare a statement of changes in equity for Fiorente Ltd for the reporting period ended 30 June 2019. D. Discuss the nature and purpose of the general reserve. © John Wiley & Sons Australia, Ltd 2015 16.5 Solutions manual to accompany Financial Accounting 9e by Hoggett et al A. 2018 1 Oct 1 Dec 2019 1 Feb Damages on Lawsuit Expense Cash at Bank To pay damages under lawsuit. 125 000 General Reserve Retained Earnings To discontinue contingencies reserve. 350 000 Retained Earnings Cash at Bank Retained Earnings Ordinary Dividend Payable 125 000 350 000 25 000 25 000 150 000 150 000 (Ordinary = 15c per share on 1 000 000 shares) To declare dividends. 30 June Ordinary Dividend Payable Cash at Bank To pay dividends. 150 000 Income Tax Expense Current Tax Liability To recognise current tax on profit of $1 578 000 473 400 Income and Expenses Profit or Loss Summary Closing entry. 150 000 473 400 1 104 600 1 104 600 No entry for final dividend recommended on ordinary shares. * included damages on lawsuit expense B. FIORENTE LTD Statement of Profit or Loss and Other Comprehensive Income For the year ended 30 June 2019 Note 2019 Revenue* $7 510 000 Other income** 585 000 Expenses excluding finance costs (6 517 000) Finance costs (0) Profit before income tax 1 578 000 Income tax expense (473 400) Profit for the period 1 104 600 Other comprehensive income for the period, net of tax 0 TOTAL COMPREHENSIVE INCOME FOR THE $1 104 600 YEAR © John Wiley & Sons Australia, Ltd 2015 2018 $x (x) (x) X (x) X X x 16.6 Solutions manual to accompany Financial Accounting 9e by Hoggett et al * Revenue consists of: Sales revenue ** Other income represents the gain on sale of government bonds © John Wiley & Sons Australia, Ltd 2015 $7 510 000 585 000 16.7 Solutions manual to accompany Financial Accounting 9e by Hoggett et al Balance at 1 July 2017 Changes in equity for year Dividends Total comprehensive income for the year Balance at 30 June 2018 Changes in equity for the year Dividends Paid Total comprehensive income for the year Transfer from General Reserve Balance at 30 June 2019 D. FIORENTE LTD Statement of Changes in Equity For the year ended 30 June 2019 Share Capital Share Capital Ordinary Preference X x 500 000 500 000 Retained Earnings x 2 000 000 (200 000) 2 000 000 (175 000) 1 104 600 350 000 1 079 600 General Reserve x Total Equity X 350 000 2 650 000 (350 000) 0 (175 000) 1 104 600 0 3 579 600 The general reserve can be seen to represent a transfer from retained profits to retain funds within the business to meet losses from future uncertainties. It effectively quarantines retained earnings and signals to shareholders that this will not be paid out as dividends as it may be required to meet some other need. In Fiorente’s case this transfer appears to relate to the lawsuit. © John Wiley & Sons Australia, Ltd 2015 16.8

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