2021 Semester One Deferred & Supplementary

Exam - Alternative Assessment Task

STUDENT ID: 32022646

SURNAME: Gan

GIVEN NAME: Zheng Wei

UNIT CODE: ACW1120

UNIT TITLE: Financial Accounting 1

ASSESSMENT DURATION: 2 hours 40 minutes (includes reading,

downloading, and uploading time)

 This is an individual assessment task.

 All responses must be included within this document and under

individual questions.

 Students are required to answer ALL questions.

 This assessment accounts for 50% of the total in the unit and has a hurdle
requirement of 45% to pass the unit.

 Upon completion of this assessment task, please upload this document to

Moodle using the assignment submission link.

 Your submission must occur within 2 hours 40 minutes of the official

commencement of this assessment task (Australian Eastern Standard
Time).

Please read the next page carefully and sign and date the Student
Statement before commencing the assessment task.

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Intentional plagiarism or collusion amounts to cheating under Part 7 of the Monash
University (Council) Regulations

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the work.

Where there are reasonable grounds for believing that intentional plagiarism or collusion
has occurred, this will be reported to the Associate Dean (Education) or delegate, who may
disallow the work concerned by prohibiting assessment or refer the matter to the Faculty
Discipline Panel for a hearing.

Student Statement:
 I have read the university’s Student Academic Integrity Policy and Procedures.
 I understand the consequences of engaging in plagiarism and collusion as described in
Part 7 of the Monash University (Council) Regulations
https://www.monash.edu/legal/legislation/current-statute-regulations-and-related-
resolutions
 I have taken proper care to safeguard this work and made all reasonable efforts to
ensure it could not be copied.
 I have not used any unauthorised materials in the completion of this assessment task.
 No part of this assessment has been previously submitted as part of another unit/course.
 I acknowledge and agree that the assessor of this assessment task may for the purposes
of assessment, reproduce the assessment and:
i. provide to another member of faculty and any external marker; and/or
ii. submit it to a text-matching software; and/or
iii. submit it to a text-matching software which may then retain a copy of the
assessment on its database for the purpose of future plagiarism checking.
 I certify that I have not plagiarised the work of others or participated in unauthorised
collaboration when preparing this assessment.

Signature: GAN ZHENG WEI (Type your full name)

Date: 9/8/2021

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MARKS ALLOCATED TO THE QUESTIONS WITHIN THIS ASSESSMENT TASK

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Question 1 2 3 4 5 Total
Allocated Marks 20 20 20 20 20 100

Office use only

Mark received

Second marking

Question 1

Part A

Ken owns and runs a high quality Japanese restaurant in the central district of Kuala
Lumpur. He has received a number of offers from potential buyers but is not sure of the
price he wants to sell it for.

The value of the business including land and buildings which is worth $2.5 million and
the value of restaurant and kitchen fittings is worth $700,000. However, Ken feels that
his restaurant is worth more than this. He has many loyal and regular customers and
more importantly, he has two excellent chefs who have won awards on Masterchef.
Added to this, his waiters and waitresses are well trained and highly regarded. All these
factors have contributed to the restaurant receiving glowing reports in the magazines
and newspaper.

After many rounds of negotiations, Ken decides to sell his restaurant to Jasmine
Enterprise at $4 million, with an additional value of RM800,000 paid over its tangible
assets.

By referring to the DEFINITION and RECOGNITION criteria of Assets outlined in the

AASB Conceptual framework for Financial Reporting, please advise Jasmine Enterprise
whether this additional value of RM800,000 should be recorded in the financial
statement and explain why.

(7 marks)

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Question 1 (con’t)

Part B

An extract of account balances from the ledger of Cheerful Ltd. for the year ended June
30, 2021 is given below:

Accounts Dr ($) Cr ($)

Accounts receivable 355,000
Allowance for doubtful debts (unadjusted balance) 50,000

The aging analysis of accounts receivable on June 30, 2021 (with the comparatives) is as
follows:

Balance as Balance as
at at Percentage
Period 30/6/2021 30/6/2020 considered
Outstanding Amount Amount doubtful
< 30 days 180,000 212,000 2%
31-60 days 75,000 80,000 5%
61-90 days 42,000 88,000 10%
91-180 days 34,000 85,000 15%
> 181 days 24,000 55,000 40%
355,000 520,000

There is no major change in sales volume nor cyclical pattern from year to year.

After examining the balances of accounts receivable, Cheerful Ltd decided to write off a
further debt from Missing & Co of $6,000, which were dated January 15, 2018. The
owner Mr. Missing cannot be traced for payment.

Required:

(i) Construct the ‘Allowance for Doubtful Debts’ account for Cheerful Ltd as at June
30, 2021.
( 7 marks)

(ii) Analyse and comment on the change of ageing schedule of debts aged for more
than 60 days from 2020 to 2021.

Include in your answer two possible reasons causing such change.

(6 marks)

(Total =7 + 7 + 6 = 20 marks)

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 Answer to Question 1 (20 marks)
Write your answer to this question in the space below
Use as much space needed to write your answer

Part A
Ken's decision to sell his restaurant to Jasmine for a higher price than the worth of the tangible
assets is due to his restaurant's "Goodwill". Ken already has a dedicated client base, so Jasmine
won't have any trouble promoting the restaurant because it's already well-known, and future
revenue is expected to be equivalent to or larger than Ken's previous revenue. Jasmine is willing to
pay a sum above the business's value because of Ken's restaurant's goodwill. The recognition criteria
which are an expectation that future economic benefits will flow into the organisation and the cost
can be measured reliably. So both these conditions are satisfied, because of Ken's restaurant's loyal
client base, future economic gains in the form of money are certain to arrive without any effort,
which would not have been the case if Jasmine had opened her own restaurant. Other than that, it is
signifying Goodwill because the cost is RM 800,000 which is over its tangible assets. Therefore, the
additional value of Rm800,000 will recorded in Jasmine’s Balance Sheet under the head Intangible
Assets as “Goodwill”.

Part B
i) Allowance for Doubtful debts

Accounts Receivable 6,000 Opening balance 50,000

Closing Balance 23,850 Bad debt expense
29,850 29,850

Provision of bad debts ending balance at June 30, 2021

180,000 x 2% + 75,000 x 5% + 42,000 x 10% + 34,000 x 15% + (24,000-6,000) x 40%
=3,600+3,750+4,200+5,100+7,200
=$23,850

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Question 2

As an accounts executive of Fantastic Trading, one of your monthly routine tasks is to

prepare a bank reconciliation statement. For the month of August 2020, you have
collected the following information:

1. The opening (1 August 2020) ‘Cash at XYZ Bank’ account balance is $20,000
(Overdraft).

The bank statement as at 31 August 2020 showed a debit balance of $12,550.

The total debits and credits in the ‘Cash at XYZ Bank’ account for the month of
August 2020 are:

Total debits (receipts) $186,520

Total credits (payments) $135,420

2. There have been errors detected by both Fantastic Trading and the banker. The
‘Cash at XYZ Bank’ account had overstated a receipt from a customer by $2,200
and the banker had wrongly included a cheque deposit amounting to $5,400 in
Fantastic Trading’s bank account.

3. Deposits banked in but not shown in the bank statement are amounted to
$68,260.

4. The following cheques issued by Fantastic Trading to its suppliers have not been
presented for payments:
Cheque No: $
2158 9,130
2164 6,280

5. Fantastic Trading has given a standing instruction to XYZ Bank for monthly

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 rental of $7,500 and insurance premium of $1,500. These transactions have not
been recorded in the cash book (ledger) yet as you were on vacation from August
22 for 2 weeks.

6. Bank charges not recorded in the cash book (ledger) is amounted to $360.

7. It has been noted that there were two credit transfers during the month. A
customer Mary Trading transferred $8,960 directly into Fantastic Trading’s bank
account at XYZ Bank without informing you. Similarly, a dividend of $6,400 from
an investment was credited directly to its bank account.

Required:

(a) Prepare the ‘Cash at XYZ Bank’ ledger account for the month of August 2020 by
including all updates and corrections. Show the opening balance of September
2020.
(11 marks)
(b) Prepare the bank reconciliation statement as at August 31, 2020.
(9 marks)
(Total = 11 + 9 = 20 marks)

Answer to Question 2 (20 marks)

Write your answer to this question in the space below
Use as much space needed to write your answer

a) Cash at Bank

2020 RM 2020 RM
Aug 1 Opening Balance 20,000 Aug 31 Total payments 135,420
31 Total receipts 186,520 Accounts Receivable 2,200
Accounts Receivable 8,960 Rent expense 7,500
Dividend Revenue 6,400 Insurance expense 1,500
Bank Charges 360
Balance 74,900
221,880 221,880
Sep 1 Balance 74.900

b) Bank Reconciliation Statement

$ $
Balance as per bank statement 12,550
Add: Deposit banked in 68,260
55,710
Less: Unpresented cheques (9,130+6,280) 15,410
Banker’s error 5,400 20,810
Balance as per cash at bank ledger account 34,900

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Question 3

PART A
Excellent Ltd’s financial year ends on June 30 and commenced its business from July 1,
2019. The company is using the Fair Value basis to value the company assets in
accordance with AASB 116 Property, Plant and Equipment.
On July 1, 2019, Excellent Ltd purchased a machine for a total cost of $50,000. The
estimated residual value of the machine at the end of its useful life is $2,000. Excellent
Ltd depreciates its non-current assets using the straight-line method at 25% per annum.

These are the estimates of the following values as at June 30, 2021:

$
Fair value 30,000
Cost to sell 1,000
Value in use 33,000

The residual value of the machine remains at $2,000 after the revaluation.

Required:

(i) Prepare the necessary journal entries of Excellent Ltd for the financial year 2021
including the annual depreciation using the Fair Value basis.
Show all your workings. Narrations are NOT required.
(9 marks)

(ii) Compute the depreciation charge for the machine for the financial year 2022.
Show your workings.
(3 marks)

(iii) The accountant, Mr Smart wishes to change to Cost basis to value the company
asset but he is uncertain.
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 Assuming you are the Financial Controller of Excellent Ltd, which method would
you prefer to value the machinery and why? Give one reason to support your
decision.

(2 marks)

Question 3 (con’t)

PART B

Success Ltd. had the following equity balances as at July 1, 2019:

Equity
Share Capital (issued at $2 per share) $100,000,000
Retained earnings 5,600,000
General reserve 1,200,000

Total equity $106,800,000

A final dividend of two (2) cents per share for the 2019/2020 financial year had been
declared on June 30, 2020 and will be paid on August 10, 2020.

Losses after income tax for the year ended June 30, 2020 was $500,800.

Required:

Prepare a statement of changes in equity for the year ended June 30, 2020. Show the
movement for each of the equity items.

(6 marks)

(Total =(9 + 3 + 2) + 6 = 20 marks)

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 Answer to Question 3 (20 marks)
Write your answer to this question in the space below
Use as much space needed to write your answer

Part A
i) 1/7/2019 Dr Machinery 50,000
Cr Cash at Bank 50,000

30/6/2020 Dr Depreciation 12,500

Cr Accumulated Depreciation-Machinery 12,500

30/6/2021 Dr Depreciation 12,500

Cr Accumulated Depreciation-Machinery 12,500

Carrying amount = cost 50,000 – Accumulated depreciation 12,500 x 2 (25,000) = 25,000

Use Fair value - $30,000 to compare
Revaluation increment = 30,000 – 25,000 = 5,000

30/6/2021 Dr Accumulated Depreciation-Machinery 25,000

Cr Machinery 25,000
30/6/2021 Dr Machinery 5,000
Cr Asset Revaluation Reserve 5,000

ii) 50,000-12500-12500-12500
=$12,500
iii)Yes

Part B
Success Ltd
Statement of Changes in Retained Earnings
For the year ended 30 June 2020

Retained earnings 1 July 2019 5,600,000

Less:
Final dividend (100,000,000x0.02) (2,000,000)
Income tax (500,800)
Retained earnings 30 June 2016 3,099,200

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Question 4

Part A

Below is the extract of the mortgage schedule of Needmoney Ltd for a $100,000 loan
obtained in Jan 2019 to purchase a property that has been offered as a security for the
loan. Interest payable is 12% per annum with quarterly payment of $10,000.

Quarter Beginning Payment Interest Reduction Closing

ending balance (Quarterly) of principal balance

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 31.3.2019 100,000 10,000 3,000 7,000 93,000

30.6.2019 93,000 10,000 2,790 7,210 85,790

30.9.2019 85,790 10,000 2,574 7,426 78,364

31.12.2019 78,364 10,000 2,351 7,649 70,715

31.3.2020 70,715 10,000 2,121 7,879 62,836

30.6.2020 62,836 10,000 1,885 8,115 54,721

30.9.2020 54,721 10,000 1,642 8,358 46,363

31.12.2020 46,363 10,000 1,391 8,609 37,754

31.3.2021 37,754 10,000 1,133 8,867 28,887

30.6.2021 28,887 10,000 867 9,133 19,754

Required:

(i) What portion of the mortgage liability should be classified as a current

liability on June 30, 2020? Show your workings.
(3 marks)

(ii) What portion of the mortgage liability should be classified as a non-

current liability on June 30, 2020? Show your workings.
(1 mark)

Question 4 (con’t)

Part B

The balance of the following account is as follow:

Account Name: Unearned Revenue

Balance as at 1/6/2021 : $8,000 (Normal balance)

Balance as at 30/6/2021 : $3,000 (Normal balance)

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Required:

How much cash was collected from unearned revenue in the month of June 2021 if the
amount recognised as revenue in the month is $6,000?

Construct the ‘Unearned Revenue’ T-account and show the workings. Include the
opening balance of July 2021.

(9 marks)

Part C

Greatcook Ltd. offers a 12-month warranty to its customers with the ovens that it sells.
Warranty liabilities are estimated at 10% of sales for the previous 12 months.

On July 1, 2020, the balance of the Warranty Provision account was $38,000 (Normal
balance).

During the year ended June 30, 2021, warranty expense is $30,000. All warranty claims
are in the form of inventory of spare parts.

Revenue from the sales of ovens in the current financial year is $360,000.

There have been no changes in suppliers, product quality or prices.

Required:

Construct the ‘Warranty Provision’ account. Show your working.

Do you think the warranty provision of July 1, 2020 of $38,000 is adequate to cover the
warranty claims for year? Give reason for your answer.
(7 marks)

(Total = (3 + 1) + 9 + 7 = 20 marks)

Answer to Question 4 (20 marks)

Write your answer to this question in the space below
Use as much space needed to write your answer

Part A
i) The current portion of the mortgage liability is $34967
54,721-19,754 = 34,967

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 ii) The non-current portion is $19,754. This is the loan balance at June 30 2021.

Part B

Part C
Warranty Provision Account
Spare parts inventory+ $30,000 2020 Beginning balance 38,000
Labour (amount of
warranty claims)
Closing balance 36,000 Warranty Expense 28,000
66,000 66,000
2021 Beginning balance 36,000

A provision of $38,000 (opening balance) was demonstrated to be adequate as warranty claims is

amounted to $30,000 only. The provision account had a credit balance prior to adjusting entries on
30 June 2021.

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Question 5

Surfboard Ltd. sells surfboards and uses a perpetual inventory system.

On March 1, 2021 Surfboard had 200 surfboards that cost $300 each.

On March 3, 2021, Surfboard purchased 140 surfboards at $320 each on credit.

On March 5, Surfboard sold a total of 150 surfboards for cash at $400 each and on
March 20 a total of 120 surfboards for credit at $380 each.

On March 31, 2021, a physical stock count revealed that there were 65 surfboards left in
the company. The selling price as at March 31, 2021 is at $350.

In order to sell a set, Surfboard has to pay transportation costs of $40 per surfboard to
deliver the goods to customers.

Required:

(a) Construct the ‘Inventory’ T-account for the month of August 2021 using the
First-in-First-Out (FIFO) cost flow method.

(7 marks)

(b) Determine the cost of ending inventory using the weighted average cost flow
method.
(4 marks)

(c) Determine the reported value of ending inventory under AASB 102
“Inventories”, using the ‘First-In-First-Out (FIFO)’ method.
(4 marks)
(d) Prepare all necessary journal entries for any stock gain/losses or write-down
using the ‘First-In-First-Out (FIFO)’ method. Show workings and include
narrations.
(5 marks)

Show all your workings.

(Total = 7 + 4 + 4 + 5 = 20 marks)

END OF EXAMINATION

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 Answer to Question 5 (20 marks)
Write your answer to this question in the space below
Use as much space needed to write your answer

a)

Inventory Account
1/3 Opening balance (200 x 300) 60000 5/3 COGS (150 x 300) 45000
3/3 Cash (140 x 320) 44800 20/3 COGS (50 x 300+70 x 320) 37400
31/3 Inventory loss (5 x 320) 1600
31/3 Closing balance (65 x 320) 20800
104800 $104800
1/4 Opening balance 20800
b) COGS (from (a)) $45,000 + $37,400 = $82,400

c) The reporting value should be $20,800 using cost.

This is due to the principle of lower of cost (20,800) or NRV (22,750) in
accordance with AASB102. Using the lower of cost and net realisable value
would reflect more accurate value of inventory at the end of the accounting
period.

d) 3/3 Inventory (140x320) 44,800

Cash 44,800

5/3 Cash (400x150) 60,000

Inventory 45,000

Profit and loss 15,000

20/3 Bank (120 x 380) 45,000

Inventory 37,400

Profit and loss 7,600

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