VCAA 2012 Suggested SolutionsFINAL

7/23/2019 VCAA 2012 Suggested SolutionsFINAL

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ConnectEducation2012

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VCEAccounting-VCAAUnit32012SuggestedSolutions

PreparedbySamKothari

Pleasenote:thisismerelyasuggestedsetofsolutionscreatedtogiveVCE

Accountingstudentsfeedbackaboutthe2012VCAAexam.Itisinnowayendorsed

byVCAAandshouldonlybeusedasaguide.

1a)

GeneralLedger SubsidiaryLedger

Date Details Debit$ Credit$ Debit$ Credit$

Feb1 StockControl 15000

ComputerSystem 3000

CreditorsControl 4000

CreditorBoxNursery 4000

Capital 14000

SomedebateaboutincludingtheLoan:Usually,receiptsofloansarerecordedinthe

CashReceiptsJournal,notintheGeneralJournal.However,commencingentries

(especiallyfromsingle-todouble-entryaccountingsystems)requireyoutoinclude

allaccountsinordertoopenbalancesintheGeneralLedger.Notethatinthiscase

thebusinessisstartingoperation,notchangingsystems.


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1b)

AccountingPrinciple:HistoricalCost

QualitativeCharacteristics:RelevanceandReliability

TheHCprinciplerequiresthatalltransactionsberecordedattheiroriginalpurchaseprice;thiswouldimplythatthecomputersystemshouldberecordedat$5000.This

wouldalsosatisfyReliability,whichrequiresthatalltransactionsbefreefrombias.

However,bothHCandReliabilityareunderminedandoverlookedindeferenceto

Relevance.Thisrequiresthatonlyinformationusefulfordecisionmakingbe

includedinreports.Therefore,thecomputersystemshouldbe(andwas)recorded

atitsagreedvalueof$3000,asthiswillhelptoensurethatdecisionsmadein

relationtothisasset(suchaswhentoreplaceit,depreciationetc.)arenotadversely

affectedandremainrelevant.

1c)

Thebankoverdraftwouldbetreatedasacurrentliabilityifthebusinesstook

advantageofthecreditfacility,asitwouldrepresentapresentobligationofthe

entity,asaresultofpastevents,thesettlementofwhichwillresultinanoutflowof

economicbenefitswithin12months.Onthefacts,itisunclearwhetherthe

businessscashbalancehasfallenbelowzero.

2a)

CostofSales=9000/1.5=$6000

Sundries=26000111009000900=$5000


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2b)

SalesJournal

Date Debtor Inv.

Number

Costof

Sales

Sales GST Total

Debtors

May

28

KafeKool 232 2000 3000 300 3300

CashReceiptsJournal

Date Details Rec.

No.

Bank Disc.

Exp

Debtors Costof

Sales

Sales GST Sundries

May

31

KafeKool 872 3201 99 3300

CashPaymentsJournal

Date Details Chq.

No.

Bank Disc.

Rev

Creditors Stock

Control

GST Sundries

May

29

PrepaidRent

Expense

872 8250 750 7500


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2c)

Accountsmustbebalancedtogetfullmarks.

STOCKCONTROL(A)

Date

Cross-reference

Amount

Date Cross-reference Amount

May.1 Balance ???? May.31 CostofSales 6000

May.31 CreditorsControl 6000 CostofSales 10000

CREDITORSCONTROL(L)

Date Cross-reference Amount Date Cross-reference Amount

May.31 Bank 15000 May.1 Balance ????

StockControl/GST

Clearing

6600

2d)

Reportedasacurrentasset.

Theprepaidrentrepresentsaresourcecontrolledbytheentityasaresultofpast

events,whichwillprovideShadeDesignswithfutureeconomicbenefits(the

availabilityofthepremises)within12months.


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2e)

Discuss:

Controlaccountsandsubsidiaryledgersinvolvemaintaininganoverallcontrolledger

accountthatcontainsthetotalsoftheindividualsubsidiaryledgeraccounts(oneiscreatedforeachindividualdebtorandcreditor).

Benefits:o Doublecheckingmechanism(Schedules)o Asingleamountreportedinthebalancesheeto Allocationofresponsibility

Cost:o Timeconsumingo Financiallycostly(additionalsetofrecordsmaycreatehigher

administrativecosts)

Itshouldbenotedthatthebusinessonlyhasonesupplier.Thismeansthatitwould

notrequireacontrolaccountandsubsidiaryrecords,asitwouldmerelyincreasethe

timetakentopreparerecordswithoutaddinganyofthebenefitsobtainedwhen

havingmultipledebtorsorcredits.ShadeDesignsshouldprobablyonlyhavea

controlaccountsysteminplacefordebtors.


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3a)

StockItem:Jazz16GBUSB Location:

StockCode: Supplier:DZSystems

IN

OUT

BALANCE

Date

Details

Qty Unit

cost

Value

$

Qty Unit

cost

Value

$

Qty Unit

cost

Value

$

Jun.1 Balance 132

150

11

12

3252

11 Inv.895 100 11 1100 32150

1112

2152

16 Inv.896 32

36

11

12

784

114

12

1368

22 Memo6 4 12 48 110 12 1320

26 Memo9 45 12 540 65 12 780

30 Memo10 5 12 60 60 12 720

3b)



June30 Drawings 48

StockControl 48

AdvertisingExpense 540

StockControl 540


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3c)

Sales=100x20+68x22=$3496

CostofSales=1100+784=$1884

GrossProfit=34961884=$1612

AdjustedGrossProfit=161260=$1552

3d)

Itisverydifficultforbusinessestoactivelytraceanddetectthecostpriceofeach

individualunitofstock,especiallyifthebusinessresellsstockwithrelativelylowcost

pricesandexperienceshighvolumes(asisthecasewithUSBs).Therefore,

businessesusetheFIFOmethodforstockvaluation:FIFOstockvaluationassumesthatthefirststockpurchasedbythebusinessisthefirststockthatissoldbythe

business.Thiscostassignmentmethodremovestheneedtolabeleachstockitem

withitscostprice(aprocesswhichisbothtediousandcostly).

3e)

EffectsonIncomeStatementofMemo9(Advertising)

AsaresultofthefailuretorecordMemo9,NetProfitwouldnotbeeffected.Thisis

becausewhileadvertisingexpensewouldbeunderstatedby$540,stocklosswould

beoverstatedby$540.Thebusinesswoulddetectamuchlargerstockloss.Overall:noeffect.

4a)

AdvertisingPaid:2x1200+10x1440=$16800

4b)

AdvertisingExpense:3x1200+9x1440=$16560

4c)

ReportingPeriod:

Profitshouldbecalculatedbymatchingrevenuesearnedagainstexpensesincurred.

Thebusinessisprepayingitsadvertisingexpenseamonthinadvance.Thismeans

thattheeffectoftheincreaseinadvertisingexpenseby20%isdelayedbyamonth

(affectsthemonthimmediatelytheincrease).


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5a)

IncomeStatement:notappropriate.ThiswouldrequirethePost-AdjustmentTrial

Balance,asthePre-Adjustmentdoesntincludechangestoaccountsasaresultof

balancedayadjustments,whichcanhaveasignificanteffectonNetProfit.

CashFlowStatement:appropriate.Balancedayadjustmentswillnotaffectthecash

balance.

6a)



June30 StockControl 2080

StockGain 2080

CartageOutwards 900

GSTClearing 90

DiscountRevenue 990

DepreciationofComputer

System

4920

Acc.Depnof

ComputerSystem

4920

RentExpense 22600

PrepaidRentExpense 22600

6b)

IncomeStatement:Overstatedby$4920

CashFlowStatement:Noeffect

BalanceSheet:AssetsandOwnersEquityoverstatedby$4920


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6c)

IncomeStatement

$ $

Revenue

Sales

448000

less CostofGoodsSold

CostofSales 251180

FreightInwards 3090 254270

GrossProfit

193730

add StockGain 2080

AdjustedGrossProfit

195810

add OtherRevenue

DiscountRevenue 2390

198200

less OtherExpenses

Wages 161500

AdvertisingExpense 21400

RentExpense 22600

DepreciationofComputerSystem 4920

CartageOutwards 5400 215820


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NetProfit

$ (17620)

6d)

Currentliabilities $ $

CreditorsControl 51300

GSTClearing 3360

BankOverdraft 16000

LoanMCBFinance 27600 98260

Non-currentliabilities

LoanMCBFinance 47400

TotalLiabilities 145660

6e)

DiscountRevenue:representsasavingsinoutflowofeconomicbenefitsintheform

ofadecreaseinliabilities(CreditorsControl)thatleadstoanincreaseinowners

equity.

SalesRevenue:representsaninflowofeconomicbenefitsintheformofanincrease

inassets(usuallyBankorDebtorsControl)thatleadstoanincreaseinowners

equity.


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7a)

PROFT/LOSSSUMMARY

Date

Cross-reference

Amount

Date Cross-reference Amount

June30 Expenses 16500 June30 Revenues 38500

Capital 22000

38500 38500


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8a)

CashFlowStatementforthemonthofMay2012

$ $

OPERATINGACTIVITIES

ReceiptsfromDebtors 9100

GSTReceived 2700

CashSales 27000 38800

PaymentstoCreditors (10800)

PurchaseofStock (13500)

GSTPaid (2770)

Wages

(8600)

GSTSettlement (1900)

Advertising (4800) (42370)

NetOperatingCashFlows (3570)

8b)

Melisincorrect.OperatingCashFlowshavesufferedashortfallinfact,reducedthe

overallcashbalanceby$3750.Theonlyreasonthebusinesshadanincreaseinits

cashpositionwasduetothecapitalcontributionof$15000(theloanseemstohave

correlatedtothepurchaseofadditionalshopfittings).Thisindicatesthatthe

businessisheavilyreliantonfundsfromtheowner,andisstrugglingtogenerate

cashfromitsday-to-daytradingactivities;allinall,itisinaprecariouscashposition.


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9a)

Assets:Decrease(Bank)$19600

Liabilities:Decrease(DecreaseAccruedWages)$2800

OwnersEquity:Decrease(IncreaseWagesExpense)$16800

AbigthankyoutoeveryoneonAtarNotesforprovidingmewithacopyoftheexam,

andalsocontributinginansweringthequestions!

VCAA 2012 Suggested SolutionsFINAL

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