Answer all questions in the TEST ANSWER BOOKLET. Marks for this test total 100. Total weighting towards the overall course mark from this test is 25%. It is your responsibility to ensure your Test Answer Booklet is successfully submitted on Canvas on time, and that the answer booklet format is not changed. Ensure it is downloadable and readable by the ACCTG 211 markers. Only one submission, of your Test Answer Booklet, is allowed. Your Test Answer Booklet will be automatically uploaded to Turnitin, for a plagiarism review, when you submit on Canvas.
QUESTION
READ THESE INSTRUCTIONS BEFORE COMMENCING:
- Answer all questions in the TEST ANSWER BOOKLET.
Don't use plagiarized sources. Get Your Custom Essay on
Answer all questions in the TEST ANSWER BOOKLET. Marks for this test total 100. Total weighting towards the overall course mark from this test is 25%. It is your responsibility to ensure your Test Answer Booklet is successfully submitted on Canvas on time, and that the answer booklet format is not changed. Ensure it is downloadable and readable by the ACCTG 211 markers. Only one submission, of your Test Answer Booklet, is allowed. Your Test Answer Booklet will be automatically uploaded to Turnitin, for a plagiarism review, when you submit on Canvas.
Just from $13/Page
- Marks for this test total 100. Total weighting towards the overall course mark from this test is 25%.
- It is your responsibility to ensure your Test Answer Booklet is successfully submitted on Canvas on time, and that the answer booklet format is not changed. Ensure it is downloadable and readable by the ACCTG 211 markers.
- Only one submission, of your Test Answer Booklet, is allowed. Your Test Answer Booklet will be automatically uploaded to Turnitin, for a plagiarism review, when you submit on Canvas.
- Where necessary, always round amounts up or down to the nearest whole dollar.
- You have a 24 hour window in which to submit your completed Test Answer Booklet on Canvas. The 24 hour window starts at NZT 8 am on Friday 1 May 2020 and finishes at NZT 8 am on Saturday 2 May 2020. Do not submit at exactly 8 am on Saturday 2 May; Canvas will recognise it as a late submission, i.e., your test will not be accepted for marking.
- By submitting this test, you are confirming that:
- You will complete your test with integrity and honesty and will not commit any academic misconduct (i.e. cheating, plagiarism, assisting others to cheat or copy, engaging the use of third party assistance including from your fellow classmates, families or friends).
- Your submission represents your individual effort and does not contain plagiarised material. You are responsible for ensuring that no one copies your test.
QUESTION 1
Rona Ltd requires a Statement of Cash Flows to be prepared for the year ended 31 March 2020; the following general ledger balances have been provided.
| As at 31 March: | 2019 | 2020 |
| Cash | $76 000 | $39 000 |
| Accounts receivable | 220 000 | 280 000 |
| Less Allowance for doubtful debts | 30 000 | 40 000 |
| Inventory | 90 000 | 117 600 |
| Plant and equipment | 900 000 | 1 104 000 |
| Less Accumulated depreciation | 80 000 | 100 000 |
| Accounts payable | 80 000 | 70 000 |
| Bank overdraft | 1 000 | 20 000 |
| Interest payable | – | 200 |
| GST payable | 10 000 | 15 000 |
| Operating expenses payable | 15 000 | 47 800 |
| Dividends payable | – | 17 600 |
| Share capital | 500 000 | 520 000 |
| Retained earnings | 570 000 | 680 000 |
| Asset revaluation surplus | – | 30 000 |
| For the year ended 31 March: | 2020 | |
| Sales – credit | $873 000 | |
| Sales – cash | 12 000 | |
| Less expenses: | ||
| COGS | 240 000 | |
| Depreciation expense | 90 000 | |
| Doubtful debts expense | 40 000 | |
| Interest expense | 900 | |
| Operating expenses | 220 000 | |
| Loss on sale of equipment | 4 000 | |
| Repairs and maintenance expense | 3 000 | |
| Income tax expense | 77 000 | |
| Profit after tax | 210 100 | |
| Revaluation gain | 30 000 | |
| Total Comprehensive Income | $240 100 |
Question 1 continued:
Additional information:
(i) During the year ended 31 March 2020 equipment, that originally cost $100 000, was sold.
(ii) Rona Ltd uses the direct method for presenting cash flows from operating activities.
(iii) Classify any dividends paid as a cash flow from financing activities.
(iv) Some items of plant and equipment were revalued, for the first time, during the current financial year.
(v) Classify any interest paid as a cash flow from operating activities.
(vi) Rona Ltd requires this Statement of Cash Flows to be prepared urgently so it has provided you with the general ledger accounts on pages three to six.
Allowance for DD
| AR | 30 000 | Open balance | 30 000 |
| Closing balance | 40 000 | DD expense | 40 000 |
| 70 000 | 70 000 |
Interest payable
| Cash | 700 | Opening Balance | – |
| Closing Balance | 200 | Interest expense | 900 |
| 900 | 900 |
ARS
| Revaluation gain | 30 000 | ||
Question 1 continued:
Accumulated depreciation
| P and E | 70 000 | Opening Balance | 80 000 |
| Closing Balance | 100 000 | Depreciation expense | 90 000 |
| 170 000 | 170 000 |
Retained earnings
| Dividends declared | 100 100 | Opening balance | 570 000 |
| Closing balance | 680 000 | PAT | 210 100 |
| 780 100 | 780 100 |
Accounts receivable
| GST inclusive | GST exclusive | GST | GST inclusive | ||
| Open balance | 220 000 | Allow for DD and GST | 34 500 | ||
| Sales and GST | 1 003 950 | Cash | 790 826 | 118 624 | 909 450 |
| Closing balance | 280 000 | ||||
| 1 223 950 | 1 237 950 |
Inventory
| Opening balance | 90 000 | COGS | 240 000 |
| AP | 267 600 | Closing balance | 117 600 |
| 357 600 | 357 600 |
Question 1 continued:
Operating expenses payable
| Cash | 187 200 | Opening Balance | 15 000 |
| Closing Balance | 47 800 | Operating expenses | 220 000 |
| 235 000 | 235 000 |
Dividends payable
| Cash | 82 500 | Opening Balance | – |
| Closing Balance | 17 600 | Dividends declared | 100 100 |
| 100 100 | 100 100 |
Share capital
| Opening balance | 500 000 | ||
| Cash | 20 000 | ||
| 520 000 |
Accounts payable
| GST exclusive | GST | GST inclusive | GST inclusive | ||
| Cash | 276 296 | 41 444 | 317 740 | Opening balance | 80 000 |
| Closing balance | 70 000 | Inventory and GST | 307 740 | ||
| 387 740 | 387 740 |
Question 1 continued:
Plant and Equipment
| Open balance | 900 000 | AD, Cash, Loss | 100 000 |
| Cash | 274 000 | ||
| Revaluation gain/ARS | 30 000 | Closing balance | 1 104 000 |
| 1 204 000 | 1 204 000 |
GST payable
| AR | 4 500 | Opening Balance | 10 000 |
| AP | 40 140 | AR | 130 950 |
| Cash | 83 110 | Cash | 1 800 |
| Closing Balance | 15 000 | ||
| 142 750 | 142 750 |
| Journal entry: | Dr | Cr |
| Dr AD | ||
| Dr Cash | ||
| Dr Loss on sale | ||
| Cr Plant and equipment |
Required:
Prepare a Statement of Cash Flows for Rona Ltd, for the year ended 31 March 2020, in accordance with NZ IAS 7 Statement of Cash Flows. A reconciliation is required to be prepared.
(Total marks for Question 1: 30 marks)
QUESTION 2
Entity Ltd is unsure of the requirements of NZ IFRS 16 Leases and wishes to see the effect of applying NZ IFRS 16 Leases on their financial statements for the current financial year and the following three financial years. Entity Ltd is both a lessee and a lessor.
Entity Ltd has provided you with some details about their three PPE lease contracts:
| Lease 1 | Lease 2 | Lease 3 | |
| Entity Ltd is the: | Lessee | Lessor | Lessor |
| Commencement date | 1 April 2019 | 1 April 2019 | 1 April 2019 |
| FV of underlying asset at commencement date: | – | $1 006 373 | $280 000 |
| Lease classification: | – | Finance lease | Operating lease |
| Lease term | Five years | Four years | Three years |
| Economic life of asset | Seven years | Eight years | Eight years |
| Interest expense SCF classification | CFOA | – | – |
| Interest income SCF classification | – | CFIA | – |
| PPE item leased out sold on 1April 2022 for: | – | – | $200 000 |
You prepared journal entries, workings and tables and printed them out on pages seven to nine. Unfortunately you tripped and the pages became muddled.
| Table | Lease payments | Interest expense 8% | Liability reduction | Lease liability balance |
| Commencement of lease on 1 April 2019 | $649 041 | |||
| 31/3/2020 | 160 000 | 51 923 | 108 077 | 540 964 |
| 31/3/2021 | 160 000 | 43 277 | 116 723 | 424 241 |
| 31/3/2022 | 160 000 | 33 939 | 126 061 | 298 180 |
| 31/3/2023 | 160 000 | 23 854 | 136 146 | 162 034 |
| 31/3/2024 | 160 000
and 15 000 |
12 966 | 162 034 | – |
| $815 000 | $165 959 | $649 041 | ||
| Journal entry: | |||
| 1/4/2019 | Dr Finance lease receivable | $1 006 373 | |
| Cr PPE | $1 006 373 |
Question 2 continued:
| Journal entries: | ||||||
| At 31/3/20 | At 31/3/21 | At 31/3/22 | ||||
| Dr Cash | 30 000 | 30 000 | 36 000 | |||
| Dr/Cr Operating lease income receivable | 2 000 | 2 000 | 4 000 | |||
| Cr Operating lease income | 32 000 | 32 000 | 32 000 | |||
Calculation of depreciation:
ROU-at cost $664 121/5 years = $ 132 824 (rounded) per annum
PPE item being leased out $280 000/ 8 years = $35 000 per annum
| Journal entry: | |||
| 1/4/2019 | Dr ROU asset | $664 121 | |
| Cr Lease liability | 649 041 | ||
| Cr Cash | 12 000 | ||
| Cr IDC payable | 3 080 |
| Table | Lease receipts
and UGRV |
Interest income 7% | Finance lease receivable reduction | Finance lease receivable balance |
| Commencement of lease on 1 April 2019 | 1 006 373 | |||
| 31/3/2020 | 189 000 | 70 446 | 118 554 | 887 819 |
| 31/3/2021 | 189 000 | 62 147 | 126 853 | 760 966 |
| 31/3/2022 | 189 000 | 53 268 | 135 732 | 625 234 |
| 31/3/2023 | 189 000 | 43 766 | 145 234 | 480 000 |
| 31/3/2023 | 180 000 RVG and 300 000 UGRV | – | 480 000 | – |
| $1 236 000 | $229 627 | $1 006 373 | ||
Question 2 continued:
| Journal entry: | |||
| 31/3/2024 | Dr Accumulated depreciation | 664 121 | |
| Cr ROU asset – at cost | 664 121 | ||
| Journal entry: | |||
| 31/3/2023 | Dr PPE | 460 000 | |
| Dr Cash | 20 000 | ||
| Cr Finance lease receivable | 480 000 |
Required:
Prepare the financial statements for Entity Ltd, for the financial years ended 31 March 2020, 2021, 2022 and 2023, to reflect the effect of each of the three leases separately.
(Total marks for Question 2: 55 marks)
QUESTION 3
(i) An entity may report an accounting loss and still report a positive net cash flow from its operating activities. Explain how this could happen. Assume the direct method was used to determine the CFOA. [150 word limit answer]
(ii) NZ IAS 7 Statement of Cash Flows allows an entity to choose how to report cash flows from operating activities. Do you consider one method to be more useful than the other? Why? [150 word limit answer]
(iii) When a lessee incurs initial direct costs in establishing a lease agreement, how are these costs to be accounted for? [30 word limit answer]
(iv) Why does NZ IFRS 16 Leases allow exemptions, from capitalising lease assets and lease liabilities, to a lessee? [150 word limit answer]
(v) Why should the carrying amount of a lease asset typically reduce more quickly than the carrying amount of a lease liability? [150 word limit answer]
(Total marks for Question 3: 15 marks)
ANSWER
Calculator
Our features
We've got everything to become your favourite writing service
Money back guarantee
Your money is safe. Even if we fail to satisfy your expectations, you can always request a refund and get your money back.
Confidentiality
We don’t share your private information with anyone. What happens on our website stays on our website.
Our service is legit
We provide you with a sample paper on the topic you need, and this kind of academic assistance is perfectly legitimate.
Get a plagiarism-free paper
We check every paper with our plagiarism-detection software, so you get a unique paper written for your particular purposes.
We can help with urgent tasks
Need a paper tomorrow? We can write it even while you’re sleeping. Place an order now and get your paper in 8 hours.
Pay a fair price
Our prices depend on urgency. If you want a cheap essay, place your order in advance. Our prices start from $11 per page.