Accounting Information for Managers

200101
Autumn 2012

Homework Solutions Week 2

Copyright The University of Western Sydney, 2012 No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or by any information storage and retrieval system, without the prior written permission from the He ad of School, School of Accounting. Copyright for acknowledged materials reproduced herein is retained by the copyright holder. All readings in this publication are copied under licence in accordance with Part VB of the Copyright Act 1968.

200101 Accounting Information for Managers

Autumn 2012

Contact Details
Mrs Susan Green (Unit Administrator) Building EQ Parramatta Campus Phone: 9685 9207 Fax: 9685 9593 Email: business.courses@uws.edu.au [Sue is normally in the office each week on Monday to Thursday inclusive] Unit Coordinator Graeme Mitchell: Vernon Bldg (ED), Room ED.G.212 Parramatta Campus; Email: g.mitchell@uws.edu.au; Phone: 9685 9215 Mob: 0419 291 606 vUWS Coordinator Simon Lenthen: Vernon Bldg (ED), Room: ED.G.11 Parramatta Campus; Email: s.lenthen@uws.edu.au Phone: 9685 9476 Mob: 0414 325 676

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Accounting Program, School of Business

Spring 2011

200101 Accounting Information for Managers

Schedule of learning activities

Week No. Date 1 27 February-2 March 2 5-9 March Text Reference / Lecture Topic/ Learning Outcomes (LO) Introduction to accounting (Chapter 1). Business structures (Chapter 2). Ethics and corporate governance (Chapter 3). Business transactions (Chapter 4). Business transactions (Chapter 4). Tutorial Homework* Read learning guide and unit outline. Complete handout in class for Week 1. Study guide: Chapter 1 (C2, C3, C4) and Chapter 2 (E1, E4, E5). Textbook: Chapter 1 (D1.7) and Chapter 2 (E2.15, E2.16a, E2.17a, P2.7). Study guide: Chapter 3 (C3, E1, E4) and Chapter 4 (C3). Textbook: Chapter 3 (D3.10, D3.12, D3.27) and Chapter 4 ( P4.3). Study guide: Chapter 4 (E1, E5 a-e). Textbook: Chapter 4 (E4.7, E4.8, P4.4, P4.12). Due: Mid-semester examination on Saturday, 31 March 2012. Note: Check vUWS site closer to the date for further details. Study guide: Chapter 5 (C1, E2a-c). Textbook: Chapter 5 (E5.10, E5.11, E5.13, E5.14). Study guide: Chapter 5 (MC1-15, E4, E5). Textbook: Chapter 5 (D5.9, D5.10, P5.2, P5.5). INTRA SESSION BREAK Study guide: Chapter 6 (complete the sentence activity on p. 106, C2, E1). Textbook: Chapter 6 (D6.5, D6.8, E6.1, E6.2, E6.5, E6.11, P6.2). Study guide: Chapter 7 (MC1-15, C2). Textbook: Chapter 7 (D7.2, D7.6, E7.2, E7.3, E7.9, E7.20, P7.2). Study guide: Chapter 8 (C1, C2, E1). Textbook: Chapter 8 (D8.3, D8.10, E8.6, E8.10, P8.1). Study guide: Chapter 8 (MC1-15, E3, E4, E5). Textbook: Chapter 8 (D8.8, E8.7, E8.14, P8.7). Study guide: Chapter 9 (C2, E1, E2). Textbook: Chapter 9 (D9.7, D9.8, E9.2, E9.9, P9.7). Study guide: Chapter 10 (C2, C3, C4, E1). Textbook: Chapter 10 (D10.2, E10.2, E10.3, E10.7, E10.13, P10.5).

3 12-16 March

4 19-23 March 5 26-30 March

The balance sheet (Chapter 5, pp. 138163). Note: No lectures or tutorials this week. Staff will be available for additional consultation see vUWS for details. The balance sheet cont. (Chapter 5, pp. 164-174). Income statement and statement of changes in equity (Chapter 6). Time available in tutorial to work on group assignment. INTRA SESSION BREAK The cash flow statement (Chapter 7).

6 2-6 April 7 9-13 April

8 16-20 April 9 23-27 April

10 30 April-4 May 11 7-11 May 12 14-18 May

Financial statement analysis (Chapter 8, pp. 303-22) Due: Group assignment. Financial statement analysis (Chapter 8, pp. 322-42). Budgeting (Chapter 9).

13 21-25 May 14 28 May-1 June

Cost-volume-profit analysis (Chapter 10). Review lecture.

Refer to learning outcomes on page 3 * Ch = Chapter, MC= Multiple Choice, C = Classification questions, D = Discussion questions, E = Exercises, P = Problems

School of Accounting, College of Business

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200101 Accounting Information for Managers

Autumn 2012

Week 2 In-Class Seen Solutions

Ch2 E2.15, P2.7 E2.15 Using the information shown in exercise 2.14, produce an income statement for the period ended 30 June 2010.

BABEROGLOU CITY Income Statement for the period ending 30 June 2010 Service revenue Less expenses Rent expense 1 100 Petrol expense 2 800 Advertising expense 4 000 Repair expense 300 Insurance expense 400 Profit 12 000

8 600 $ 3 400

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Accounting Program, School of Business

Spring 2011

200101 Accounting Information for Managers

P2.7 Preparing an income statement The directors of Pfahlert Ltd provide you with the following financial information for the period ended 31 December 2010: selling expenses $39 000; interest expense $15 000; legal fees $2500, administrative expense $31 000; income tax expense $16 000; cost of sales $190 000; ordinary share capital (20 000 shares issued) $80 000; sales revenue $310 000; other revenue $7500; dividends declared (for current period) $8000. Retained earnings at the beginning $116 000. Required (a) Prepare an income statement for Pfahlert Ltd for the period ended 31 December 2010. (b) Determine the closing balance of retained earnings at 31 December 2010.

School of Accounting, College of Business

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200101 Accounting Information for Managers

Autumn 2012

a) PFAHLERT LTD Income Statement for period ending 31 December 2010 Income Sales Less Cost of Goods Sold Gross Profit Other Revenue Total Income Less Expenses Selling Expenses Interest Expenses Legal Fees Administrative Expenses Total Expenses Net Profit before Tax Income Tax Expense Net Profit after tax

310 000 190 000 120 000 7 500 127 500 39 000 15 000 2 500 31 000 87 500 40 000 16 000 24 000

b) Closing balance of retained earnings = $116 000 + 24 000 8 000 = $132 000

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Accounting Program, School of Business

Spring 2011

200101 Accounting Information for Managers

Week 2 Other Textbook Homework Solutions

Chapter 1 1.7 What are three limitations on the usefulness of accounting information?

Instructors note: There are several limitations of the usefulness of accounting information, these include: 1. Time Lag (often 3 months plus) between the end of the reporting period and when this information (e.g. financial reports) is distributed to the users, although electronic transmissions via the internet has reduced this time problem. Historical data used information in financial reports is based on past transactions and one questions the reliability of these reports in providing forecast information. Subjectivity Although accounting information is prepared under the guidelines of GAAP there is a considerable amount of subjective reporting allowed e.g. method and amount of depreciation; amount reported for doubtful debts; goodwill reporting and different reporting methods used between countries. The introduction of global harmonisation has assisted in reducing this limitation. Local Government plans e.g. any plans to create bypass roads moving traffic away from the shop location? Any plans to encourage more businesses to the region?

2.

3.

4.

Chapter 2 E2.16 Refer to the JB Hi-Fi Ltd income statement in figure 2.2 on pages 55-6 to answer the following questions. a. What is the major difference between the format of this statement and that of a sole trader or partnership?

There are several differences between a company report and a sole trader and partnership report. Some of the differences could include: the standardised format tax profit before tax and profit for the year profit attributable to equity holders of the parent the basic and diluted calculations for earnings per share down the bottom of the statement

E2.17

Refer to the JB Hi-Fi consolidated balance sheets in figure 2.3 on pages 56-7 to answer the following questions. a. What is the major difference between the format of this statement and that of a sole trader or partnership? The major difference between the format of the balance sheet for the sole trader, partnership and the company JB Hi-FI is the Equity section. For a sole trader, the section will be entitled Owners Equity. For a partnership Partners Equity and for a company Shareholders Equity or just Equity. This section for JB Hi-Fi contains a number of items including issued capital, reserves and retained earnings. Additionally, company profit is reported under retained earnings, whereas for a sole trader or partnership the profit will be added to the owners equity account.

School of Accounting, College of Business

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