ACC1AIS

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La Trobe University
Semester 1 Assessment Period 2020
RESTRICTED USE
Student ID:

Subject code: ACC1AIS Paper number: 1
Reading time: 30 minutes minutes
Writing time: 240 minutes minutes
Number of pages: 11 (including cover sheet)

AssignmentTutorOnline

Campus:

☐ Albury-Wodonga ☐ Bendigo ☒ Bundoora ☐ City ☐ Mildura ☐ Shepparton ☒ Sydney

Instructions to candidates:

1. The examination consists of seven (7) questions, some questions have multiple parts.
2. The examination is marked out of 60. The exam is worth 60% of your final mark.
3. Candidates should attempt all the questions.
4. Questions 1 to 4 must be attempted using the Xero accounting software platform.
5. All answer files must be submitted to the Turnitin on the subject’s LMS.

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SCHEDULE OF MARKING
Please do not write on this page.
This is intended for the calculation of your marks by examiners.
RESULTS

Question Marks
Possible
Marks
Allocated
1 13
2 8
3 4
4 3
5 6
6 15
7 11
Total 60

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Question 1 – Inventories 13 marks
Journal entries – Perpetual inventory system/GST
The Business for which you will be working on in this Exam using the XERO software is a retailer of electronic
appliances that commenced business on 1st March 2020. You will be recording transactions for the month of March
2020.
Use XERO to establish a business that is titled as Question 1, Student ID Number and your Name as the Business
name (e.g. Question1_1234567_Alireza_Vafaei) and record one-month inventory transactions.
The business uses the perpetual inventory system and FIFO inventory cost flow method. On 1st March the company
commenced business with the following ledger balances:

Account Name Balance $
Cash at Bank $350,000
Capital $350,000

The business buys and sells electronic appliances at prices described below. All prices include GST.

Item Code Item Buy Price (Incl. GST) Sell Price (Incl. GST)
WM Washing Machine $585 $933
MO Microwave Oven $468 $737
RE Refrigerator $1,375 $2,245
DW Dishwasher $849 $1,199
AC Air Conditioner $632 $857
ST Smart TV $1,495 $2,395
DC Desktop Computer $929 $1,359

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During March the following transactions occurred.

Mar. 1 Purchased 30 Washing Machines, 20 Dishwashers and 15 Air Conditioners from
Fishery Washers for cash.
Mar. 2 Paid freight of $209 to Fast Delivery Ltd on purchase from Fishery Washers.
Mar. 2 Purchased 16 Desktop Computers and 21 Smart TV from Storetech Ltd on accounts,
terms n/30.
Mar. 4 Returned 1 Desktop Computer and 3 Smart TVs to Storetech Ltd and received credit
of $5,414 including GST.
Mar. 9 Sold 12 Washing Machines and 5 Air Conditioners to Jacks Laundry on accounts,
terms 3/15 or n/30.
Mar. 10 Granted credit of $2,723 including GST to Jacks Laundry for the return of 2 Washing
Machines and 1 Air Conditioner.
Mar. 13 Purchased 23 Microwave Ovens, 17 Dishwashers and 12 Refrigerators from Ultra
Clean Energy Suppliers on accounts, terms n/30.
Mar. 18 Paid Storetech Ltd the balance due to settle the accounts.
Mar. 21 Received payment from Jacks Laundry for settlement of account less discount.
Mar. 27 Sold 8 Smart TVs, 10 Microwave Ovens and 2 Refrigerators to Lyndale Primary School
on accounts, terms n/30. Lyndale Primary School paid 20% deposit and agreed to pay
the outstanding balance on 12th April 2020.

Required
Record the March inventory transactions in the xero software.
Once all the transactions have been entered into the xero software then attach the Journal Report from 1 March
to 31 March 2020 in PDF format.
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Question 2 – Accounting for Current Assets 8 marks
Run an Aged Receivables report as at 31 March 2020 and you will be using this data to answer the following
questions.
Use XERO to establish a business that is titled as Question 2, Student ID Number and your Name as the Business
name (e.g. Question2_1234567_Alireza_Vafaei) and record one-month inventory transactions.
Required
a) Assume that the business uses the allowance-method for accounting for bad debts and decides to
estimate its bad debts expense based on 6% of the Accounts Receivable. Use the journal entry screen and
prepare the journal entry required to bring in the required allowance for doubtful debts as at 31 March
2020.
b) Prepare the adjusting journal entry on 31 March 2020 required to bring in the required allowance for
doubtful debts assuming the Allowance for Doubtful Debts has a credit balance of $365.50 at 29 February
2020.
c) Assume the same facts as in part (b), except that there is a debit balance of $180.30 in the Allowance for
Doubtful Debts at 29 February 2020. Prepare the journal entry on 31 March 2020 required to bring in the
required allowance for doubtful debts.
d) Assume that the business writes-off bad debts amounting to $489.50 including GST and estimates an
allowance for doubtful debts of 7% of Accounts Receivable is required at 30 April 2020. Prepare the journal
entry required to bring in the required allowance for doubtful debts for next month at 30 April 2020 after
the bad debts have been written off.
Once all the transactions have been entered into the Xero software then attach the Journal Report from 1 March
to 30 April 2020 in PDF format.
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Question 3 – Accounting for Non-Current Assets 4 marks
Use Xero to establish a business that is titled as Question 3, Student ID Number and your Name as the Business
name (e.g. Question3_1234567_Alireza_Vafaei) and record one-month inventory transactions.
Required
a) The business purchased office fittings costing $48,950 including GST from Light Fixtures Ltd on 8th March
2020 and paid for it by using the bank account. It is expected to have a residual value of $3,000 at the end of
its useful life of 10 years. The business uses the straight-line method to calculate its depreciation.
i. Use the journal entry screen to record the asset purchase on 8th March 2020.
ii. Create the month end journal entry to record the depreciation expense on the Office Fittings for March.
b) The business also purchases a Computer Server from Digital World on 11th March 2020 which is to be used
for the business. The total expenditure on the Computer Server amounted to $12,430 including GST and was
paid from the bank account. The estimated useful life of the Computer Server is 6 years and will be worth
$2,800 at the end of the 6 years. Computer is depreciated using the diminishing balance method and the
rate of depreciation is 21%. The Computer Server was sold for $11,440 including GST on 28th March 2020.
i. Use the journal entry to record the purchase of the computer on 11th March 2020.
ii. Record the journal entry for the sale of the Computer Server on 28th March 2020.
Once all the transactions have been entered into the xero software then attach the Journal Report from 1 March
to 31 March 2020 in PDF format.
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Question 4 – Accounting for Liabilities 3 marks
The business borrows $550,000 from NAB Bank on 3rd March 2020 to finance the Store Building to be used for the
retail business. The loan is a 7-year secured business loan, with an interest rate of 8.5% per annum and monthly
repayments of $8,830 recorded on the 25th of each month. Therefore, interest is charged to the loan monthly on 25th
of each month and payments of $8,830 will be made monthly on the 25th day of each month. The loan is an GST
exempt transaction.
Use Xero to establish a business that is titled as Question 4, Student ID Number and your Name as the Business
name (e.g. Question4_1234567_Alireza_Vafaei) and record one-month inventory transactions.
Required
1. Use the journal entry screen to record proceeds from a business loan you received from the NAB Bank on
3rd March 2020.
2. Create a journal entry to record the monthly loan payment and the interest paid at 25th March 2020.
3. Create the month end journal entry to accrue the interest payable on the loan for March.
(Make sure you create all the necessary accounts required).
Once all the transactions have been entered into the Xero software then attach the Journal Report from 1 March
to 31 March 2020 in PDF format.
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Question 5 – Inventories 6 marks
Assume you are opening a new store. To finance the business, you need a $500 000 loan, and your banker requires a
set of forecasted financial statements. Assume you are preparing the statements and must make some decisions
about how to do the accounting for the business.
Required
1. Which type of inventory system will you use for better inventory management? Perpetual or periodic?
Give your reason.
2. How often do you plan to do a physical count of inventory on hand? What will the physical count
accomplish? You are required to justify the frequency of physical stocktake.
3. Inventory costs are rising. Which inventory costing method would have the effect of maximising net
profit? Explain.
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Question 6 – Internal Control and Governance 15 marks
The following purchase order (Figure 6.1) was sent by Giddy Up Pty Ltd to Stable Supplies Ltd. The second copy of
the purchase order (Figure 6.2) from Giddy Up was sent to the receiving department and was stamped and signed
when the goods were received.
Required
a) Identify and explain four control features that are followed in the purchase order sent to the vendor
(Figure 6.1).
b) Identify and explain four control features that are followed in the Copy of purchase order routed to the
receiving department (Figure 6.2).
c) Discuss four advantages of those control features followed in the purchase order sent to the vendor
(Figure 6.1).
d) Discuss four advantages of those control features followed in the copy of purchase order routed to the
receiving department (Figure 6.2).
e) What controls could have been present when the purchase requisition details (not shown) were entered
into the computer and the purchase order generated? Discuss two controls that should have been followed
when purchase requisition entered into the computer.
Figure 6.1 Purchase order sent to vendor
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Figure 6.2 Copy of purchase order routed to the receiving department
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Question 7 – Reporting & Analysing Equity 11 marks
Dianaton Ltd is considering a risky investment in offshore drilling. To finance the ongoing working capital needs of
the project over 15 years, $10 million will be needed if it continues to be successful. Several suggestions for finance
have been put before the board of directors:
1. Issue more shares to the public or by private placement.
2. Borrow the required cash.
3. Establish another company (in which Dianaton Ltd will be the only shareholder) and use that company to borrow
the money, relying on the limited liability principle if the project fails.
Assume that the expected returns on ordinary shareholders’ equity are the same for all options.
Required
a) How should Dianaton Ltd’s board of directors rank the first two options? Identify and explain two factors that the
board of directors require to consider when making decision about the first two options.
b) What are the advantages and disadvantages of the third option? Should the board undertake the third option?
Consider multiple stakeholders in your answer.
End of Examination Paper

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