Business School

ACCT1501 Accounting and Financial Management 1A

Session 1 2016

TUTORIAL WEEK 3 Solutions to Preparation Questions

Preparation Questions:
DQ 2.1, 2.2, 2.11, P1.18, P2.3, Case 2A

DQ2.1 If you had trouble with any of the terms, the glossary (pages 734 744) will help you.
DQ2.2
Assets are usually separated into shorter-term ones (current assets) and longer-term ones
(noncurrent assets). Current assets are those that are expected to be used, sold, or collected within
the next year, and noncurrent assets therefore are expected to have benefits for more than a year
into the future.

DQ2.11
Inventory and accounts receivable are current assets, because the inventory is expected to be sold
within a year of its purchase, and accounts receivable are expected to be collected within a year.
These assets would not be current assets if inventory was not expected to be sold within a year,
and accounts receivable is not expected to be collected within a year.

P1.18
1 Liabilities = Assets Owners equity
Pillows opening balance of liabilities
Pillows closing balance of liabilities
2 Closing balance of Owners equity

= $80,000 $50,000 = $30,000

= $30,000 / 2
= $15,000
= Opening balance of Owners equity +
Net profit
= (O/b assets O/b liabilities) + Net profit
Buffalo Ltds closing bal. of Owners equity = ($60,000 $25,000) + $43,000
= $78,000
3 Assets = Liabilities + Owners equity
Sparkle Industries closing balance of assets = $57,000 + $15,000 = $72,000
Sparkle Industries opening balance of assets = $72,000 3 = $24,000

P2.3

Current assets
Cash and cash equivalent
Accounts receivable
Inventory
Prepayments
Noncurrent assets
Long-term investments
Property, plant and
equipment
Less accumulated
depreciation
Patents and trademarks

Incob Ltd
Balance Sheet as at 30 June 2016
$
$
Current liabilities
43,000 Accounts payable
68,000 Notes payable
81,000 Income taxes payable
10,000 Current portion of long-term
202,000 debt
Noncurrent liabilities
110,000 Long-term debt
550,000
Provision for employee
190,000
360,000 entitlements
55,000
525,000

727,000

Total liabilities
Shareholders equity
Share capital
Retained profits

$
61,000
30,000
32,000
25,000
148,000
200,000
34,000
234,000
382,000
161,000
184,000
345,000
727,000

Case 2A
1 Point of time at which the balance sheet is drawn up 29 June 2014.
2 Currency in which accounts in the balance sheet are measured Australian dollars.
3 The 2014 balance sheet of Woolworths Limited balances as follows:
Assets (24,205.2m) = Liabilities (13,679.8m) + Shareholders Equity (10,525.4m)
4 The assets of 24,205.2m were financed by current liabilities 7,558.2m, noncurrent liabilities
6,121.6m and shareholders equity 10,525.4m (including issued capital 4,850.1m and
retained profits 5,423.1m).
5 The net assets figure of 10,525.4m is determined by deducting liabilities, 13,679.8m from
assets 24,205.2m.
$ million
6 Balances at 29 June 2014

current assets
7,174.8

current liabilities
7,558.2

noncurrent assets
17,030.4

noncurrent liabilities 6,121.6

7 Balance of Working Capital at 29 June 2014= current assets current liabilities
= 7,174.8m 7,558.2m = 383.4m.
8 Dividends paid $1,491.1m as per statement of cash flows, plus $32.0million to minority
interests.
9 Amount of share capital issued 4,850.1m.
10 Companies included in the consolidated figures Woolworths Supermarkets (Australian and
NZ), Dan Murphys, BWS, Cellar Masters, Big W, Ezibuy, Masters Home Improvement,
Home Timber & Hardware & ALH Group (hotels).
11 In 2014 the cost of goods sold amounted to $ 44,474.6 million. Referred to as cost of sales in
the income statement.
2

12 As you would expect the two figures are different. Net profit after income tax is $ 2,458.4
million, whereas the cash balance has increased from $ 849.2 million in 2013 to $ 922.6
million in 2014. Note that this figure includes the net change in cash from operations and all
investing and financing activities. As you will discover in chapter 14, companies are
required to reconcile the cash flow from operating activities to net profit after tax.
13 $ 2,458.4 million.
14 $ 60,952.2 million.
15 $ 4,693.2 million.
16 Cash increased by $73.4 million (from $849.2 million in 2013 to $922.6 million).