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ACCT10002 Tutorial 3 in-class Exercises (1)

The document outlines the exercises for ACCT10002 Tutorial 3, focusing on accounting concepts, adjusting entries, and financial statements preparation. It includes specific questions related to accounting principles, trial balance adjustments, and journal entries for various scenarios. Students are expected to prepare answers prior to the tutorial, demonstrating their understanding of key accounting concepts and practices.

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5 views

ACCT10002 Tutorial 3 in-class Exercises (1)

The document outlines the exercises for ACCT10002 Tutorial 3, focusing on accounting concepts, adjusting entries, and financial statements preparation. It includes specific questions related to accounting principles, trial balance adjustments, and journal entries for various scenarios. Students are expected to prepare answers prior to the tutorial, demonstrating their understanding of key accounting concepts and practices.

Uploaded by

d2701home
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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ACCT10002: Tutorial 3 In-class Exercises

This tutorial provides exercises relating to the following areas of study:

Accounting concepts Pre and post-closing trial balance entries


Adjusting entries Preparation of Income Statement and Balance Sheet

Students are required to prepare for all the questions prior to attending the tutorial.

1. (E3.4)

Presented below are the concepts, principles and criteria used in this and previous chapters.

1. Accounting entity concept.


2. Going concern principle.
3. Monetary principle.
4. Accounting period concept.
5. Full disclosure principle.
6. Revenue recognition criteria.
7. Expense recognition criteria.
8. Cost principle.
9. Materiality test.

Required

Identify by number the accounting concept, principle or criteria that describes each of these
situations. Do not use a number more than once.

9 (a) Repair tools are expensed when purchased.

7 (b) Recognises an expense for unpaid salaries.

3 (c) Assumes that the dollar is the measuring unit used to report financial
information.

4 (d) Separates financial information into time periods for reporting purposes.

8 (e) Market value changes subsequent to purchase are not recorded in the accounts.
(Do not use the revenue recognition criteria.)

1 (f) Indicates that personal and business record keeping should be separately
maintained.

5 (g) Ensures that all relevant financial information is reported.

6 (h) Requires recognition of revenues when an entity has completed a performance obligation and it
is probable that the consideration to which the entity is entitled to in
exchange for the goods will be collected.
2. What does ‘going concern’ mean according to AASB101?
Company’s lifespan is indefinite. No plans to liquidate in the near future.

3. (Question 3.1)

(a) How does the accounting period concept, revenue recognition and expense recognition
criteria affect an accountant’s analysis of accounting transactions?

(b) Explain the term financial year.

4. (Question 3.7)

Distinguish between the two categories of adjusting entries and identify the types of ad-
justments applicable to each category.

5. (E 3.10)

This is a partial adjusted trial balance of Darcy Designs Pty Ltd.

DARCY DESIGNS PTY LTD


Adjusted Trial Balance (partial)
as at 31 July 2016
No. Account name Debit Credit
110 Supplies $ 1500
112 Prepaid Insurance 2400
212 Salaries Payable $1500
213 Service Revenue Received in Advance 1 125
400 Service Revenue 3 000
500 Salaries Expense 7300
505 Supplies Expense 1220
515 Insurance Expense 800

Required

Answer these questions, assuming the year begins on 1 July:

(a) If the amount in Supplies Expense is the 31 July adjusting entry, and $1320 of supplies
was purchased in July, what was the balance in Supplies on 1 July? 1500-(1320-
1220)=1400

(b) If the amount in Insurance Expense is the July adjusting entry, and the original insurance
premium was for 1 year, what was the total premium and when was the policy purchased?
800*12=9600
End of oct/Beginning of nov 2015

(c) If $7500 of salaries was paid in July, what was the balance in Salaries Payable at 30 June
2016?
1700
(d) There were no additional amounts of revenue received in advance during July. An amount
of $2400 was received for services performed in July. What was the amount of Service
Revenue Received in Advance at 1 July 2016/30 June 2016?
1700
(Hint: Reconstruct the T accounts to help answer these questions.)

6. (E 3.13)

A review of the ledger of Monkey Ltd at 30 June 2016 produced the following data relating
to the preparation of annual adjusting entries.

1. Prepaid Insurance $37 260: the entity has separate insurance policies on its buildings and
its motor vehicles. Policy B4564 on the building was purchased on 1 January 2015 for
$33 300. The policy has a term of 3 years. Policy A2958 on the vehicles was purchased on
1 July 2015 for $9510. This policy has a term of 2 years.

2. Subscription Revenue Received in Advance $135 200: the entity began selling magazine
subscriptions on 1 April 2016 on an annual basis. The selling price of a subscription is
$130. A review of subscription contracts reveals the following.

Subscription start date Number of subscriptions


1 April 200
1 May 300
1 June 540
1040

The annual subscription is for 12 monthly issues. The June magazine for all of the
subscriptions had been delivered to the subscribers at 30 June 2016.

3. Bank Loan $100 000: the loan was taken out on 1 April at an annual interest rate of 6%.

4. Salaries Payable: There are seven salaried employees. Salaries are paid every Friday for
the current week. Four employees receive a salary of $1050 each per week, and three
employees earn $1350 each per week. 30 June is a Tuesday. Employees do not work on
weekends. All employees worked the last 2 days of June.

Required

(a) Prepare the adjusting journal entries at 30 June 2016.


Date Account and description Dr Cr

(b) Explain why the business would not recognise the full subscription revenue when the
customers sign up for the magazines and pay for the subscription.

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