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.

Start your answer here:

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)               

Start your answer here:

  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.  

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