Accounting and Financial Analysis Exercises

Adroit Company has the following information that has been extracted from the accounting records and bank statement of the company at 30 June 2019.

Closing balance on the bank statement $12 620 Credit

Cash receipts of 30 June which were deposited on 30 June did not appear on the bank statement $6 350

Outstanding cheques: No. 634 of $2 720 and No. 688 of $2 000

1.  Prepare a bank reconciliation statement at 30 June 2019 for Adroit Company.

2. The Cash at Bank account had an opening balance of $10 000 Dr. There was a cash sale of $4 275 that was not yet deposited into the bank. Bank fees of $25 was included in the bank statement but not in Cash at Bank ledger. Prepare and balance   
   Cash at Bank ledger as at 30 June 2019. 

The following information has been extracted from the financial reports of Martin & Sons Ltd.

	2018 ($)	2019 ($)
Sales	870 000	862 500
Interest expense	34 500	39 750
Income tax expense	66 900	79 500
Profit	78 750	84 150
Total assets	810 000	832 500
Total liabilities	450 000	495 000
Ordinary share capital	258 000	243 000
Retained earnings	102 000	94 500

1.  Calculate the following ratios for 2019:
2.  Return on total assets
3.  Return on ordinary equity

2.  Calculate the following ratios for 2018 and 2019:
a.  Profit margin 

3.  Analyse the company’s profitability and financial stability.

Puppy Co. prepared adjusted trial balance for the year ended 30 June 2019 as below:

Adjusted Trial Balance: as at 30 June 2019

Account

Debit $

Credit $

Cash at Bank	2 040
Accounts Receivable	31 500
Prepaid Rent	5 950
Equipment	67 000
Accumulated Depreciation Equipment		10 400
Accounts Payable		15 000
Salaries Payable		3 650
Unearned Revenue		8 700
Puppy Co., Capital		50 000
Puppy Co., Drawings	13 000
Puppy Sales Revenue		91 520
Salaries Expense	44 200
Rent Expense	2 520
Depreciation Expense	3 350
Telephone Expense	1 670
Office Supplies Expense	4 200
Sundry Expenses	3 840
	179 270	179 270

Red Cover sells furniture. In order to increase sales and incentivise customers, the company sells on credit too. The company’s accounting record shows the following information as at 30 June 2018. Ignore GST.

Prepare the required closing entries for Puppy Co. at 30 June 2019. Include narrations.

Accounts receivable (balance 30 June 2018)    152 000
Allowance for doubtful debts (credit balance 30 June 2018)    1 400 

The company uses the ageing of accounts receivable method in accounting for bad debts.

An analysis of the company’s Accounts Receivable is given below.

		Balance	% estimated
			uncollectable
Amounts not yet due		$80 000	1%
Amounts overdue: 10	- 30 days	28 450	3%
31	- 60 days	20 800	5%
61 - 120 days		12 448	26%
121 days and over		10 300	30%
		$152 000

a)  Prepare the journal entry to adjust the allowance for doubtful debts as 30 June 2018.

Include narration. Use the template below to show all your workings.

Workings for Ageing of accounts receivable method:

	Balance	% estimated
		uncollectable
Amounts not yet due	$80 000	1%
Amounts overdue: 10 - 30 days	28 450	3%
31 - 60 days	20 800	5%
61 - 120 days	12 448	26%
121 days and over	10 300	30%
	$152 000	Total

b)  Determine the balance in the Allowance for doubtful debts account.  

On 1 July 2017, Green Corp. purchased a machinery for $50 000 plus GST, paid in cash. Freight costs of $2 500 plus GST and installation costs of $1 500 plus GST were also paid in cash separately. The machinery has a useful life of 5 years and a residual value of $9 000. Green Corp. uses the straight-line depreciation method.

1.  Determine the amount that should be debited to the machinery account. Calculate GST amount. Show all workings.
2. Prepare the journal entries to record the purchase of the machinery. Include narration. 

3.  Prepare the journal entries to record depreciation expense of the machinery as at 30 June 2018. Show all workings. Include narration.