Solution Test 3 Semester 1 2014
Question 1
Part a) 4 marks
Date
31/05/2013
Bank Reconciliation
Accounts titles
Bank charges
Bank
(Bank charges on credit card)
10 Marks
Dr
Cr
17
17
Bank
Interest Revenue
(Interest revenue received on term
deposit)
590
Bank Charges
Bank
(Transaction fees)
12
Accounts Payable
Bank
(Correction of error)
*860-680
√=1 mark, total 4 marks
180
√
590
√
12
√
180
√
Part b)
Bank
Date
Details
May 31
31
31
31
31
Opening Balance
Bank charges
Interest Revenue
Credit card transaction fee
Error correction
Dr
Cr
17
590
Balance
5,582
5,565
6,155
6,143
5,963
Dr √
Dr
Dr
Dr
Dr √
12
180
√
√
½ marks for O/B;1/2 for debit amount;1/2 for credit amount;1/2 for C/B. Total 2 marks
Part c )
Yang Limited
Bank Reconciliation as at 31 May 2013
$
Balance per bank statement
5,670 Cr √
Add: Outstanding deposits
750
√
6,420
Less: Unpresented cheques
457
√
Adjusted cash balance per bank account
5963 Dr √
√=1/2mark,total 2 marks
1
Part d)
One of the identified problems is that the accountant handles all cash receipts, keeps the accounting
records, and prepares the monthly bank reconciliations.
The principle of independent internal verification has been violated because the accountant received
cash and prepared the bank reconciliation.
or
The principle of segregation of duties has been violated because the accountant had access to the
accounting records and also prepared the bank reconciliation. √
Internal control such as:
Employ another staff to prepare accounting records/handle cash
Introduce electronic funds transfer system
√
√=1 full mark, total 2 marks
Question 2
a)
Accounts Receivable
10 Marks
Allowance for Doubtful Debts:
Opening Balance
Less Bad Debt written off
Balance
4,300.00
- 600.00
3,700.00
Cr
Dr
Cr
Increase to Allowance for DD
2,800.00
Cr
Closing Balance required
6,500.00
Cr
2
Date
Dec 31
Dec 31
Dec 31
Accounts
Allowance for Doubtful Debts
GST
Accounts Receivable--Huang
Write off Mr Huang’s debt as a bad debt
Ref
Debit
Credit
690.00

Accounts Receivable
Bad Debts Recovered
GST
To reinstate accounts receivable previously
written off
1,265.00
Bank
1,265.00
1,100.00
165.00

Accounts Receivable
To receive payment of Bad Debt reinstated
above
Dec 31
Ticks
600.00
90.00
1,265.00

Doubtful Debts expense (IS)
Allowance for Doubtful Debts (BS)
To increase the Doubtful Debts Allowance
for ye 31 Dec to $6,500.
2,800.00
2,800.00

=2 marks, total 8 marks
b)
Balance Sheet of Busy Wheels Ltd
as at 31 December 2013
Current Assets 
Accounts Receivable
Less Allowance for Doubtful Debts
Net Accounts Receivable
88,780.00
6,500.00
=1/2 mark , total 2 marks
3


82,280.00
Question 3
Perpetual Inventory Systems 14 Marks
a)
Date
Purchases
@
Total
Q
5
40
Cost of Goods Sold
Q @
Total
Q
30.00 1,200.00
13
15
25.00
375.00
15
(2)
25.00
(50.00)
20 (11) $30.00
(330.00)
28
27
3
25.00
30.00
675.00
90.00
COGS
Purchases
$870.00
40
40
40
25
40
27
40
27
29
26
Balance
@
Total
25.00
1,000.00
25.00
1,000.00
30.00
1,200.00
25.00
625.00
30.00
1,200.00
25.00
675.00
30.00
1,200.00
25.00
675.00
30.00
870.00
30.00
$1,090
780.00
Closing
Stock
$780.00






=1 full mark, total 6 marks
b)
Date Accounts
5
Inventory
GST
Accounts Payable—Racquet Sports
13
Ref
Bank
Debit
1,200.00
180.00
15
15
20
1,380.00

600.00
90.00

375

92

50

690.00
Sales (15 x $46 / 1.15)
GST
13
Credit
Cost of Goods Sold
Inventory (15 x $25)
375
Sales Returns and Allowance
GST
Bank
80
12
Inventory
Cost of Goods Sold
50
Accounts Payable—Racquet Sports
379.50
4
Inventory (11 x $30)
GST
28
28
Accounts Receivable—Richard Lee
Sales (30 x $48)
GST
330.00
49.50

1,440.00
216.00

765.00

1,656.00
Cost of Goods Sold
Inventory
765.00
=1 full mark, total 8 marks
Question 4
a)
Non-Current Assets
Invoice Amount
Transport
Installation and test
Repair
Capital cost
$ 32,700
800
500
1,000
 $ 35,000
GST
$ 5,250
General Journal
2010
July 1 Filling Machine
GST
Accounts Payable
=1 full mark, total 2 marks
b)
12 Marks
35,000
5,250
40,250
Delivery Van
Year Ending
31 March 2011
31 March 2012
31 March 2013
31 December 2013
Depreciation
Expense
10,000
7,500
5,625
3,164.06
Accumulated
Depreciation
10,000
17,500
23,125
26,289.06
=1/2 mark , total 2 marks
c)
Filling Machine:
Annual Depreciation Expense = $ 35,000 - $5,000
5 years
= $6,000 / year
Depreciation expense for period ending 31 March 2011
=
$6,000 x 9/12
=
$4,500

Depreciation expense for period ending 31 March 2012
=
$6,000

=1 full mark, total 2 marks
5
Carrying Amount
(Cost: $40,000)
30,000
22,500
16,875
13,710.94
d)
Auckland Star
Balance Sheet as at 31 March 2013(extract)
Property, Plant and Equipment (cost)
75,000
Less: Accumulated depreciation
39,625 
35,375
(Accumulated Depreciation for Filling Machine as at 31 march 2013:
4,500+6,000+6,000=$16,500;
Accumulated Depreciation for Delivery Van as at 31 march 2013:$ 23,125)
=1 full mark, total 2 marks
e)
Date
31
2013
General Journal
Accounts
Dec Accumulated
Depreciation—
Delivery Van
Bank
Loss on Disposal
Delivery Van
GST
Debit
26,289.06
Credit
11,500
3,710.94
40,000
1,500

=4 marks
Question 5 Partnerships and Other Accounting Entities
14 Marks
a)
Date
1 April 2013
1 April
1 April
Accounts
Land
Capital--Don
Loan
Ref
Debit
200,000
Motor Vehicle
Computer
Capital--Ellen
47,000
3,000
Bank
Capital--Don
--Ellen
200,000
=1 full mark, total 3 marks
6
Credit
150,000
50,000

50,000

50,000
150,000

b)
Partnership of Don and Ellen
Trading as D&E Hardware Shop
Income Statement for Year Ending 31 March 2014
Sales
$
571,700
Less: Cost of Goods Sold
191,600
Gross Profit
380,100
Less: Operating Expenses
85,700
Profit for the period
294,400
=1/2 mark, total 4 marks
C)
Partnership of Don and Ellen
Trading as D&E Hardware Shop
Appropriation Statement for Year Ending 31 March 2014
$
Profit for the period
less Salaries
Don
Ellen
30,000
35,000 
less interest on Capital
Don
Ellen
20,000
20,000
Profit for the period
Don
Ellen
94,700
94,700
$
294,400
65,000
229,400
40,000
189,400
189,400
- 0 -
=1 /2 mark, total 3 marks
d)
Sole Trader
Owner’s Equity:
Opening Capital, plus capital introduced, plus profit for the period (less loss for the period),
less drawings made during period. 
Partnership
Owners’ Equity
Capital account balance for each partner and current account for each partner
7
Not-for-profit Organisation
Accumulated Funds (Members Fund)
Opening balance of Accumulated Funds (Members’ Fund) plus surplus, less deficit, to give
closing balance. 
Company
Shareholders’ Equity
Share capital; Retained Earnings and Asset Revaluation Reserve. 
=1 full mark, total 4 marks
8