Tutorial solutions Week 9
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Tutorial solutions Week 9

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Financial studies ACCT1101 Financial Accounting Tutorial Solutions – Week 9 Exercise 12.5 Bank reconciliation NUNN’S AGENCIES Required: Prepare the bank reconciliation statement at 31 March, 2006. Model solution from Hoggett et al. (2007) NUNN’S AGENCIES Bank Reconciliation Statement as at 31 March 2006 Balance as per bank statement Cr $13 155.10 Add: Deposit not credited 1 270.30 14 425.40 Less: Cheques not presented Cheque No. 41 $339.50 Cheque No. 43 262.64 Cheque No. 46 423.90 Cheque No. 51 195.10 1 221.14 Cash at Bank balance Dr $13 204.26 1 Exercise 19.4 Investing and financing activities OCHRE LTD Required: A. Prepare the net cash flow used in investing activities section of the cash flow statement using the classification shown in Illustrative Example A of AASB 107. B. Prepare the net cash provided by financing activities section of the cash flow statement using the classification shown in Illustrative Example A of AASB 107. Model solution from Hoggett et al. (2007) A. OCHRE LTD Cash Flow Statement (Extract) for the year ended 30 June 2006 Cash flows from investing activities: Purchase of investments (6,8) $(270 000) Purchase of property, plant and equipment (3,5) (270 000) Proceeds from sale of equipment (1) 120 000 Proceeds from sale of investments (7) 51 000 Net cash used in investing activities $(369 000) B. Cash flows from financing activities: Proceeds from issue of ...

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Exercise 12.5Bank reconciliation NUNN’S AGENCIES Required: Prepare the bank reconciliation statement at 31 March, 2006. Model solution from Hoggett et al. (2007)
NUNN’S AGENCIES Bank Reconciliation Statement as at 31 March 2006 Balance as per bank statement Cr Add: Deposit not credited Less: Cheques not presented  ChequeNo. 41$339.50  ChequeNo. 43262.64  ChequeNo. 46423.90  ChequeNo. 51195.10 Cash at Bank balance Dr
Financial studies ACCT1101 Financial Accounting Tutorial Solutions – Week 9
$13 155.10 1 270.30 14 425.40 1 221.14 $13 204.26
Exercise 19.4Investing and financing activities OCHRE LTD Required: A. Preparethe net cash flow used in investing activities section of the cash flow statement using the classification shown in Illustrative Example A of AASB 107. B. Preparethe net cash provided by financing activities section of the cash flow statement using the classification shown in Illustrative Example A of AASB 107. Model solution from Hoggett et al. (2007) A. OCHRE LTD Cash Flow Statement (Extract) for the year ended 30 June 2006Cash flows from investing activities: Purchaseof investments (6,8)$(270 000)  Purchaseof property, plant and equipment (3,5)(2 70000)  Proceedsfrom sale of equipment (1)120 000  Proceedsfrom sale of investments (7)51 000 Net cash used in investing activities000) $(369 B. Cash flows from financing activities: Proceedsfrom issue of share capital (2)$300 000  Proceedsfrom longterm borrowings (9)500 000  Repaymentsof borrowings (4)(90 000)  Dividendspaid (10)(60 000) Net cash used in financing activities000 $650
RRN note… The model answer had the $5 000 accrued interest as part of investing inflows.While this may be technically correct, Ochre should have accrued the impending cash inflow in its accounts – in which case it would have to be an operating inflow.Nonetheless, the standard appears silent on this issue, except to say that judgement is required.
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Exercise 19.5Reconciling cash from operating activities with profit SILVER PTY LTD Required: Indicate whether each item should be added (A) or deducted (D) from profit when reconciling cash from operating activities.If the item should be neither added nor deducted, indicate with an (N). Model solution from Hoggett et al. (2007) 1. Decreasein accounts receivableA 2. Increasein inventoryD 3. Cashproceeds from sale of sharesN 4. Depreciationexpense A 5. Increasein accounts payableA 6. Decreasein accrued expensesD 7. Increasein trade bills receivableD 8. Cashdividends paidN 9. Increasein interest receivableD
Problem 12.6Bank reconciliation th ERRATA: Problem10.6 on p.545 in Accounting 6Edition  Item 4 Additional Information: First line “the bank statement showed a debit balance of $2 722.80”. Change amount FROM $2 722.80 TO $2 342.80. TAMMY’S TOYWORLD Required: A. Prepareand balance the Cash at Bank account in the general ledger for March 2006. B. Preparethe bank reconciliation statement at 31 March 2006. C. Whatconclusions can be drawn regarding control over cash payments after preparation of the reconciliation statement? Model solution from Hoggett et al. (2007) A. Cash at Bank 2006 2006 Mar 31Cash receipts$21 546Feb 28Balance $484  Rentrevenue 420Mar 31Cash payments24 108 Stale cheque60 Dishon.cheque 294  Balancec/d 3288 Insuranceexpense 350  Bankfees 30  Interestexpense 48  $25314 $25314  Apr1 Balanceb/d $3288
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B. TAMMY’S TOYWORLD Bank Reconciliation Statement as at 31 March 2006 Balance as per bank statement Dr$2 342.80 Add: Unpresented chequesno. 261$719.20  no.288 632.00  no.289 1000.00  no.293 342.00  Errordeposit 400.003 093.20  5436.00 Less: Outstandingdeposit 1720.00  Bankerror – cheque 285 shown twice228.00  Bankerror – cheque 296200.00 2148.00 Balance as per cash at bank Cr$3 288.00 C. Thepreparation of the bank reconciliation statement has: 1.Verified the accuracy of both the cash at bank account balance with the balance of the bank statement by reconciling the two independent records. 2.Identified errors in the business’s as well as the bank’s records The reconciliation process has confirmed that control of cash is adequate.
Ch. 19 Ethical IssuesReeling in the bank REEL ESTATE LTD Required: A. Whoare the stakeholders in this situation? B. Arethere ethical issues involved here?If so, what are they? C. Whatwould you do if you were Natascha Nitschke? Model solution from Hoggett et al. (2007) A. Stakeholdersin this situation are: Bob Budgie who owns the company and is trying to manipulate the cash flow statement so that he can get a loan from the bank. Natasha Nitschke who prepares the accounts for Reel Estate Ltd. The bank from whom Bob wants to get a loan. B. Majorethical issues arise in that Bob Budgie is using his position to try to influence Natasha to undertake activities which are being used to try to gain finance from a bank when the cash flow from operations suggest that the business may not be able to afford to repay the loan.Bob is suggesting that the sale of the building be reclassified to cash flow from operations, but the company is not in the business of selling its own office regularly. Theoffice would have been a noncurrent asset of the firm and not part of its inventory. Heis not acting ethically in that he is proposing to be dishonest and is not behaving in a professional manner.Natasha Nitschke is being asked to falsify accounts and violate normal company practice.Her personal integrity, and certainly her code of
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professional conduct as a professional accountant, is at stake if she were to acquiesce to Bob’s suggestions. C. NatashaNitschke should speak to Bob Budgie and explain that there was no scope to do anything. Natashashould stress her obligations to conform with accounting standards in classifying the sale of a noncurrent asset as a cash flow from investing activities. Natasha should explain that what Bob Budgie is proposing is dishonest and that she is under an obligation to her profession to prepare the accounts in accordance with the accounting standards.Natasha could not afford to compromise her professional standards and would need to consider approaching the ASIC if Bob persisted in his approach. Natashaneeds to consider what will happen if she gives in to Bob on this issue. Infuture it will be even more difficult to stand up to him.
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