Vce Accounting Unit 4

Cambridge VCE Accounting Units 3 & 4 Teacher CD-ROM

Unit 4 Outcome 1: Assessment task A

VCE Accounting – Unit 4

Outcome 1a

Question Book

Name:

All answers should be written in the Answer Book provided.

Question 1

Maddy Mercurio owns and operates a small trading business called Scoresby Frames which sells picture frames and mirrors. Maddy maintains a perpetual stock recording system and all stock movements are recorded using the FIFO method of cost assignment. Maddy maintains control accounts for Debtors, Creditors and Stock.

1.1 The following information relates to transactions for August 2010:

Cash Receipts Journal

Date / Details / Rec. No. / Bank / Disc.
Exp. / Debtors / Cost of sales / Sales / GST / Sundries
Totals / $ / 14 540 / 220 / 6 000 / 3 700 / 7 600 / 760 / 400

Cash Payments Journal

Date / Details / Ch. No. / Bank / Disc.
Rev. / Creditors / Stock / Wages / GST / Sundries
Aug. 2 / Stock Control / 3 300 / 3 000 / 300
6 / CU Prints / 665 / 35 / 700
11 / Electricity / 154 / 14 / 140
16 / Wages / 600 / 600
23 / McWilliams Inc. / 2 375 / 125 / 2 500
27 / Stock Control / 1 100 / 1 000 / 100
30 / Wages / 500 / 500
Totals / $ / 8 694 / 160 / 3 200 / 4 000 / 1 100 / 414 / 140

Sales Journal

Date / Debtor / Invoice number / Cost of sales / Sales / GST / Total Debtors
Totals / $ / 2 100 / 4 500 / 450 / 4 950

Purchases Journal

Date / Creditor / Invoice
number / Stock / GST / Total Creditors
Aug. 4 / McWilliams Inc. / MB103 / 800 / 80 / 880
13 / CU Prints / 104 / 900 / 90 / 990
20 / Top Grade Timber Products / x340 / 200 / 20 / 220
28 / McWilliams Inc. / MB185 / 350 / 35 / 385
Totals / $ / 2 250 / 225 / 2 475

General Journal

General
Ledger / Subsidiary
Ledger
Date / Details / Debit
$ / Credit
$ / Debit
$ / Credit
$
Aug. 22 / Creditors Control / 132
Creditor – CU Prints / 132
Stock Control / 120
GST Clearing / 12

Required

1.1.1 Post the journals to the Stock Control and GST Clearing accounts in the General Ledger of Scoresby Frames.

5 + 5 marks

1.1.2 Post the journals to the account of CU Prints in the Creditors Ledger of Scoresby Books.

3 marks

1.1.3 State the source document that would have verified the transaction recorded in the General Journal on 22 August 2010.

1 mark

1.1.4 State one benefit CU Prints would derive by accepting returns from customers who change their mind.

1 mark

1.2 Maddy has provided the following partially complete stock card for Mirrors (gold-framed):

Stock Item: / Mirror (gold-framed) / Location:
Stock Code: / Supplier:
IN / OUT / BALANCE
Date / Details / Qty / Unit cost / Value
$ / Qty / Unit cost / Value
$ / Qty / Unit cost / Value
$
Sept. 1 / Balance / 3 / 90 / 270
10 / 100 / 1 000
7 / Rec. 45 / 3 / 90 / 270
1 / 100 / 100 / 9 / 100 / 900

The following transactions relating to the mirrors have not yet been recorded:

Sept. 11 Maddy purchased 8 mirrors from Visage Mirrors for $120 plus $12 GST each (Inv. D34).

15 A debtor – Country Gifts – returned 1 mirror, and was issued Credit Note 31 for $250 plus $25 GST.

Required

1.2.1 Record the transactions in the stock card for Mirrors (gold-framed).

2 marks

1.2.2 Record the transactions on 11 and 15 September 2010 in the appropriate journals.

(Narrations are not required.)

2 + 4 marks

1.2.4 Calculate Cost of sales for Mirrors (gold-framed) for September 2010.

2 marks

25 marks

Question 2

Greg Elsom owns Elsom IT which sells computers and other IT equipment. The business uses the accrual method of recognising transactions, and records stock through a perpetual recording system. The movement of goods is recorded through stock cards using the First-in, first-out method (FIFO).

2.1 The following invoice accompanied the purchase of CP140 printers:

Tax Invoice / ClearPrint
Printers and Copiers
ABN: 20 433 564 997 / Invoice: 142
Original
Net 30 days
Charge to: / Elsom IT, Coburg 3058
ABN: 12 341 220 945
Date / Details / Qty / Unit Price
$ / Total
$
July 16 / CP 140 printer / 10 / 250 / 2 500
Packaging and handling / 500

Sub total

/ / 3 000
GST (10%) / 300
Total / $A / 3 300

Additional information:

· All stock is delivered to Elsom IT by Gold Deliveries. Total freight charges for July 2010 amounted to $600.

· As at 31 July 2010, 8 CP140 printers were still on hand.

Required

2.1.1 Calculate the cost price of one CP140 printer.

1 mark

2.1.2 Referring to your answer to 2.1.1, explain your treatment of:

· Packaging and handling

· Freight charges.

2 + 2 marks

2.1.3 Explain the effect on Net profit for July 2010 if Freight charges was treated as a period cost rather than a product cost.

3 marks

2.2 In December 2010, Elsom IT had 6 fax machines in stock which it had purchased for $80 plus $8 GST each. Greg has stated that the fax machines can only be sold for $100 (plus $10 GST) each, and this would require spending $150 to advertise a clearance sale (Memo 12).

Required

2.2.1 Define the term ‘Net Realisable Value’.

1 mark

2.2.2 Calculate the Net Realisable Value of each fax machine.

2 marks

2.2.3 Suggest two reasons why the Net Realisable Value of the fax machines has fallen below its Historical cost.

2 marks

2.2.4 Referring to one Accounting principle, explain why the fax machines must be written down to the lower of cost and Net Realisable Value.

3 marks

2.2.5 Record the stock write down in the stock card for fax machines.

1 mark

2.2.6 Show the General Journal entries to record the stock write down.

3 marks

2.3 Greg has provided the following extract from the firm’s Post-adjustment Trial Balance as at 31 January 2010:

Elsom IT

Post-adjustment Trial Balance (extract) as at 31 January 2010

Account / Debit
$ / Credit
$
Accrued wages / 740
Accumulated depreciation of office furniture / 19 100
Bank / 3 700
Cost of sales / 28 000
Creditors Control / 32 000
Debtors Control / 12 800
Delivery to customers / 520
Discount revenue / 130
Drawings / 2 000
Insurance of stock / 1 200
Office furniture / 23 000
Sales / 45 000
Sales returns / 3 000
Stock Control / 43 000
Stock write down / 190

Required

2.3.1 Prepare a Profit and Loss Statement for Elsom IT for January 2010 which shows Gross profit and Adjusted Gross profit. (A full Profit and Loss Statement is not required.)

3 marks

2.3.2 State whether Insurance of stock was treated as a product cost or period cost. Justify your answer.

2 marks

25 marks

Cambridge VCE Accounting Units 3 & 4 Teacher CD-ROM

Unit 4 Outcome 1: Assessment task A

VCE Accounting – Unit 4

Outcome 1a

Answer Book

Name:

Question 1

1.1.1 General Ledger

Stock Control

Date / Cross-reference / Amount
$ / Date / Cross-reference / Amount
$
Aug. 1 / Balance / 5 000 / Aug. 31 / Cost of sales / 1 3 700
31 / Bank / 1 4 000 / Cost of sales / 1 2 100
Creditors Control / 1 2 250 / Creditors Control / 1 120

GST Clearing

Date / Cross-reference / Amount
$ / Date / Cross-reference / Amount
$
Aug. 31 / Bank / 1 414 / Aug. 1 / Balance / 780
Creditors Control / 1 225 / 31 / Bank / 1 760
Debtors Control / 1 450
Creditors Control / 1 12

5 + 5 marks

1.1.2 Creditors Ledger

CU Prints

Date / Cross-reference / Amount
$ / Date / Cross-reference / Amount
$
Aug. 6 / Bank / Discount revenue / 1 700 / Aug. 1 / Balance / 700
22 / Stock Control / GST Clear. / 1 132 / 13 / Stock Control / GST Clear. / 1 990

3 marks

1.1.3

Document / Credit note

1 mark

1.1.4

Benefit / May generate greater sales / customer loyalty

1 mark

1.2.1

2 marks

1.2.2

Purchases Journal

Date / Creditor / Invoice
number / Stock / GST / Total Creditors
Sept. 11 / Visage Mirrors / D34 / 1 960 / 1 96 / 1 056

General Journal

General
Ledger / Subsidiary
Ledger
Date / Details / Debit
$ / Credit
$ / Debit
$ / Credit
$
Sept. 15 / Sales returns / 1 250
GST Clearing / 1 25
Debtors Control / 1 275
Debtor – Country Gifts / 275
Stock Control / 1 100
Cost of sales / 100

2 + 4 marks

1.2.4

Calculation
(270 + 100) 1 – (100) 1
= / 270
Cost of sales / $ 270

2 marks

25 marks

Question 2

2.1.1

Calculation
$3 000 ÷ 10 printers
= / $300 per printer
Cost price of one CP140 printer / $ 300

1 mark

2.1.2

Packaging and handling

Explanation / Treated as a product cost 1 as it is incurred to get the stock ready for sale and can be
allocated to each individual printer on a logical basis 1

Freight charges

Explanation / Treated as a period cost 1 as although it is incurred to get the stock ready for sale, it
cannot be allocated to each individual printer on a logical basis 1

2 + 2 marks

2.1.3

Explanation / Cost of sales will be overstated 1 by $400 1 (8 printers @ $50 packaging each), so
Net profit will be understated 1 by $400.

3 marks

2.2.1

Definition / Estimated proceeds from sale less all direct marketing, selling and distribution costs

1 mark

2.2.2

Calculation
Estimated proceeds less direct selling, marketing, distribution expenses
= / $100 1 – $25 1 ($150 / 6 fax machines)
Net Realisable Value of each fax machine / $ 75

2 marks

2.2.3

Reason 1 / Damage
Obsolescence
Reason 2 / Deliberate strategy to sell below cost
Fall in demand

2 marks

2.2.4

Accounting principle / Conservatism 1
Explanation / Losses should be recognised when probable 1 so that assets are not overstated 1 –
i.e. it is probable that the assets will be sold for less than their Historical cost.

3 marks

2.2.5

Stock Item: / Fax machine / Location:
Stock Code: / Supplier:
IN / OUT / BALANCE
Date / Details / Qty / Unit cost / Value
$ / Qty / Unit cost / Value
$ / Qty / Unit cost / Value
$
Dec. 31 / Balance / 6 / 80 / 480
Memo 12 / 6 / 5 / 30 / 6 / 75 / 450

1 mark

2.2.6

General Journal

General
Ledger / Subsidiary
Ledger
Date / Details / Debit
$ / Credit
$ / Debit
$ / Credit
$
Dec. 31 / Stock write down / 1 30
Stock Control / 1 30
Write down of stock to lower of cost and
Net Realisable Value (Memo 12) 1

3 marks

2.3.1 Elsom IT

Profit and Loss Statement (extract) for January 2010

Revenue
Sales / 45 000
less Sales returns / 3 000 / 1 42 000
less Cost of Goods Sold
Cost of sales / 28 000
Insurance of stock / 1 200 / 1 29 200
Gross profit / 12 800
less Stock write down / 1 190
Adjusted Gross profit / $12 610

3 marks

2.3.2

Product / Period cost / Period cost 1
Justification / It has been recorded in its own ledger account 1
(rather than in the Stock Control account).

2 marks

25 marks