国际财会案例练习题.pdf

1 International Accounting Supplemental Cases payment is due August 10 2 Paid Marine Service Center for repairs to boats performed in June In June Satka Fishing Expeditions Inc had received and properly recorded the invoice for these repairs 3 Collected the full amount due from a credit customer for a fishing expedition provided in June 4 Received a bill from Baldy s Bait Shop for bait purchased and used in July Payment is due August 3 5 Purchased a new fishing boat on July 28 paying part cash and issuing a note payable for the balance The new boat is first scheduled for use on August 5 6 Declared and paid a cash dividend on July 31 Indicate the effects that each of these transactions will have upon the following six total amounts in the company s financial statements for the month of July Organize your answer in tabular form using the column headings shown and use the code letters I for increase D for decrease and NE for no effect The answer to transaction 1 is provided as an example 2 Income statement Balance sheet Transaction Revenue Expenses Net Income Assets Liabilities Owner s Equity 1 I NE I I NE I 2 3 4 5 6 3 The following transactions were carried out during the month of May by M Palmer and Company a firm of design architects For each of the five transactions you are to state whether the transaction represented revenue to the firm during the month of May Give reasons for your decision in each case a M Palmer and Company received 25 000 cash by issuing additional shares of capital stock b Collected cash of 2 400 from an account receivable The receivable originated in April from services rendered to a client c Borrowed 12 800 from Century Bank to be repaid in three months d Earned 83 interest on a company bank account during the month of May e Completed plans for guest house pool and spa for a client The 5 700 fee for this project was billed to the client in May but will not be collected until June 25 4 During March the activities of Evergreen Landscaping included the following transactions and events among others Which of these items represented expenses in March Explain a Purchased a copying machine for 2 750 b Paid 192 for gasoline purchases for a delivery truck during March c Paid 2 280 salary to an employee for time worked during March d Paid an attorney 560 for legal services rendered in January e Declared and paid an 1 800 dividend to shareholders 5 Arrowhead Optis Arrowhead Optis employed you as the consultant You are now assisting the company in preparing its profit and loss statement for the purpose of applying for a loan of 1 000 000 from Kansas National Bank Arrowhead sells optical fiber telephone systems to large enterprises Arrowhead 3 purchases this system from Santa Fe Communication Electronics The purchases in the first year of the operation of the company are summarized as follows Month Units purchased Unit cost Total cost November 1 000 1 500 1 500 000 February 5 000 1 400 7 000 000 April 4 000 1 200 4 800 000 May 2 000 1 100 2 200 000 The ending inventory at the end of the accounting year of the company on 31 May is 3 500 units Because this is the first year of its operation Arrowhead has not yet decided which inventory valuation method is to be used The total sales revenue of the year is 14 800 000 with a total operating expense of 1 700 000 Instructions 1 Prepare a profit and loss statement by using the FIFO LIFO and Weighted Average method respectively under the periodic inventory system rounding the weighted average cost into dollars 2 Which inventory valuation method would you suggest Arrowhead to use when it applies to the bank for loans Why 3 Suppose the income tax rate of Arrowhead is 40 for taxation purpose which inventory valuation method would you suggest Arrowhead to use Why 4 Case 2 The Northshore Sailing Association NSA 5 6 Case 3 Joan s Fishing Tackle Shop Joan Robbins the owner of Joan s Fishing Tackle Shop marks up the goods in her shop by 30 per cent Figures for the past financial year 20X0 are outlined below Sales 1 550 000 Less cost of goods sold Opening inventory 168 000 Purchases 1 218 000 1 386 000 Closing inventory 178 500 1 207 500 Gross profit 342 500 Less operating expenses 340 000 Net profit 2 500 Joan has given no discounts during the 20X0 period and has kept turnover constant so her inventories have moved quickly Nevertheless she is unhappy with the year s results and asks you for your advice on the following 1 Is it possible to determine from the figures whether there has been any theft by staff and or customers 2 On the assumption that theft has occurred can it be determined from the figures whether it was cash or inventory that was taken 3 A perpetual inventory control system could be established at a cost of 21 000 per year to monitor the more expensive goods in the shop Would you recommend such a measure 4 On the assumption that Joan is able to detect future theft would you advise her to embark on a 21 000 advertising campaign if sales would rise by 210 000 leaving all other expenses unchanged Case 6 Starting a bakery in Melbourne and Sydney Two brothers are planning to start a bakery in Melbourne and Sydney They are contemplating the purchase of two stores currently owned by the same company and used as retail outlets for shoes For this reason the buildings and fixtures for both shops have the same cost residual value and useful lives They also plan to purchase the same type of equipment The following schedule provides details of the assets Cost of each Residual value Useful life of each Building 408 000 8 000 40 years Fixtures 40 000 5 000 5 years Equipment 34 000 2 000 8 years In addition each building will need to be renovated at a cost of 40 000 The 7 estimated statements of comprehensive income for the first year for the two shops have been separately determined by each brother and are shown in the schedule below Sydney Projected statement of comprehensive income for year ended 31 December 20X1 Melbourne Projected statement of comprehensive income for year ended 31 December 20X1 Sales Cost of goods sold Gross profit on sales Operating expenses Salaries expense Building renovation Other expenses Depreciation expenses Building Fixtures Equipment Total expenses Profit for year Other comprehensive income Total comprehensive income for the year 60 000 40 000 8 000 20 400 16 000 8 500 10 400 380 000 200 000 180 000 152 900 27 100 0 27 100 Sales Cost of goods sold Gross profit on sales Operating expenses Salaries expense Other expenses Depreciation expenses Building Fixtures Equipment Total expenses Profit for year Other comprehensive income Total comprehensive income for the year 60 000 8 000 11 000 7 000 4 000 380 000 200 000 180 000 90 000 90 000 0 90 000 The brother who plans to open a store in Sydney does not understand how his projected profits can be so much lower than his brother s when they are projected to make the same sales employ the same number of people and spend about the same amount for other necessary operating items Required a Which depreciation method has each elected to use for their buildings fixtures and equipment Show the calculations of depreciation for each of the assets b How did each brother account for the 40 000 cost of renovation Which is correct c Based on the projected statement of comprehensive income which shop would you invest in Lend money to 8 Case 7 Singapore Airlines SIA Profit Due to Depreciation By Paul Thompson I refer to your article SIA hints net profit may be above 200m by Andrea Tan BT April 20 First may I say that for the sake of the hardworking staff I certainly hope it is true They would then stand a good chance of getting previously implemented wage cuts restored Second may I bring to investors attention if they are not already aware that SIA is engaging in earnings management much like their peers in Europe and North America SIA s earnings management makes it difficult for me to get excited about the mildly bullish sentiment surrounding SIA While things are indeed looking up for SIA it is worth noting that the primary reason it stands any chance of making any profit at all for the year ended March 31 2002 boils down to what some might call an accounting sleight of hand I hold SIA in high regard SIA is a high flier in the word of aviation It offers impeccable service far better than any other flag carrier I have flown in It is also one of the world s most profitable airlines and unlike many like the big US flag carriers and British Airways it appears to have avoided a free fall into financial losses and it has averted slashing staff numbers the latter achievement is especially commendable The main reason however it has managed to steer clear of reporting losses for the past financial year announcement is due in early May but SIA for sure already knows the score is through a timely change in its accounting policy on the depreciation of fixed assets Depreciation is a major expense for airlines whose balance sheets are bulging with an expensive aircraft fleet In its half year report issued last October soon after the terrorist attack on the World Trade Center SIA said Commencing this financial year the company changed its depreciation rate for passenger aircraft spares and spare engines from 10 years to 20 per cen