# BFA526 Financial Accounting for Managers

### Question:

#### Question 1: Concepts and Principles (5 marks)

The following transactions are from Sunny Ltd. during 2020-2021 financial year.

1. Merchandise inventory with a cost of \$75,000 is reported at its market value of \$89,000
2. The owner of Sunny Ltd., Mr Sunshine Coast purchased a car for personal use and charged it to his company’s expense account.
3. Sunny Ltd. Wants to make its 2021 profit look better, so it has delayed recording an expense that incurred on 30 June 2021 to 10 July 2021
4. There has been a fire in one of the company’s warehouses near Lakes Entrances in December 2020, however Sunny Ltd decided not to disclose this information
5. A contract for delivery of \$5,000 inventories in August 2021 was recorded as sales revenue for the 2020-2021 period.

Note: the financial year starts from 1 July 2020 to 30 June 2021.

#### Required:

In each transaction above, identify the accounting assumption or principle that has been violated, if any, and discuss what should have been done.

 Principle/ assumption being violated Explanation Correct accounting treatment

#### Question 2: Ratio Analysis (9 marks)

The comparative financial highlights of Telstra Ltd. for 2021, 2020 and 2019 is provided.

 FY 2021 \$m FY 2020 \$m FY 2019 \$m Current Assets 7,114 6,534 7,303 Non- Current Assets 35,411 37,869 35,286 Current Liabilities 10,424 10,094 9,553 Non-Current liabilities 16,826 19,162 18,506 Total Equity 15,275 15,147 14,530 Net cash provided by operation activates 7,231 7,010 6,683 Revenue 21,558 23,710 25,259 Profit 1,902 1,839 2,149

#### Required

1. For financial year 2021 and 2020, calculate the following ratios: (6 marks)
• Liquidity ratios: Current ratio and Working capital
• Profitability ratios: Return on Assets and Profit margin
• Solvency ratios: Debt to total assets ratio and Cash debt coverage

Note: Students must show formula and workings of calculation to get full marks

1. Using the ratios calculated in part a), comment on the performance of Telstra Ltd., over the last 2 years? (3 marks)

1. Calculate ratios:
 Ratios Formula 2021 2020 Current ratio Working capital Return on Assets Profit margin Debt to total assets Cash debt coverage
1. Comment on performance of Telstra over the last 2 years

Question 3: Recording transactions, Inventory, and GST (10 marks)

Transactions for BeMom Pty Ltd. for the month of September 2021 are presented below.

 1-Sept Investors invested in the business \$90,000 cash to start the business 2-Sept Paid \$1,320 (GST included) insurance policy covering period from 1 Sept 2021 to 30 Aug 2022 3-Sept Paid \$4,400 (GST included) for 1 month office rent 8-Sept Purchase inventories from BabyWorld, \$44,000 (GST included), on account, term 2/7 n/30 12-Sept Made a sale of \$17,600 (GST included) to Victorian Mother Club. Inventories cost \$10,000. Customer paid 100% by cash. 14-Sept Paid \$4,000 salaries for 2 staff. 15-Sept Paid the account owed to BabyWorld and receive the discount. 20-Sept Made a sale of \$24,200 (GST included) on account, term 2/7 n/30. Inventories cost \$16,000 26-Sept Customer paid the balance for the sales made on 20 Sept, a discount of 2% granted to customer 30-Sept Customer paid in advanced for inventories to be shipped next month, value \$5,500 (GST included)

BeMom Pty Ltd. uses perpetual inventory accounting. GST is 10%. The company uses two accounts GST Paid and GST Collected to record GST for all GST related transactions.

#### Required

Journalise each transaction. Narrations are required.