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See file During the month of June 20x1, employees of Armidale-(Answered)

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During the month of June 20x1, employees of Armidale Cleaners (AC) have spent 60 hours cleaning the Large Mart Store in Armidale. The contract between Large Mart and AC requires Large Mart to pre-pay 180 hours of cleaning on the 1st day of each quarter (July, October, January and April). The Large Mart store manager can then decide when the store is cleaned, and how much time is spent cleaning the store.


During the month of June 20x1, employees of Armidale Cleaners

 

(AC) have spent 60 hours cleaning the Large Mart Store in

 

Armidale. The contract between Large Mart and AC requires Large

 

st

 

Mart to pre-pay 180 hours of cleaning on the 1 day of each

 

quarter (July, October, January and April). The Large Mart store

 

manager can then decide when the store is cleaned, and how much

 

time is spent cleaning the store.

 

Required:

 

.

 


 

a) State whether the USE OF the prepaid cleaning hours during

 

each month creates an asset, a liability, income, an expense or

 

equity in the accounting system of Large Mart. (1 mark)

 


 

.

 


 

b) Explain your decision based on the criteria that the conceptual

 

framework uses to define the item that is created by the USE OF

 

the prepaid cleaning hours each month and describe how each

 

criterion is fulfilled by the outlined situation. (3 marks)

 


 

Large Mart owns a computer which is used to track the inventory

 

in its warehouse in Armidale (the computer is a non-current asset).

 

On 1 June 20x1, the carrying value of the computer in the accounts

 

of Large Mart is $100,000. On the same day, Sydney Electronics

 

(SE) offers to purchase the computer from Large Mart for

 

$200,000. Large Mart agrees to sell the computer and SE pays the

 

$200,000 on 1 June 20x1.

 

Required:

 


 

.

 


 

a) State whether the GAIN that Large Mart has made when selling

 

the computer creates an asset, a liability, income, an expense or

 

equity in the accounting system of Large Mart. (1 mark)

 


 

.

 


 

b) Explain your decision based on the criteria that the conceptual

 

framework uses to define the item that is created by the GAIN that

 

Large Mart has made and describe how each criterion is

 

fulfilled by the outlined situation. (3 marks)

 


 

The statement of cash flows is an important part of every financial

 

report.

 

Required:

 

.

 


 

a) Explain why the statement of cash flows is useful for the users

 

of financial statements.(2 marks)

 


 

.

 


 

b) Determine if the statement of cash flows or the income

 

statement can be manipulated more easily AND explain your

 

decision. (2 marks)

 


 

On 1 July 20x2 (the first day of the financial year), Large Mart

 

decided to start selling electric bicycles (e-bikes). Initially, Large

 

Mart places an order for 50 e-bikes (for $250 per e-bike), and the

 

first e-bikes arrive at the Large Mart store on 8 July 20x2.

 

Following an advertising campaign, the e-bikes become a big seller

 

and Large Mart makes the following sales and purchase

 

transactions during the year:

 

Sale (10 August 20x2) of 10 e-bikes for a price of $900 per e-bike

 

Purchase (1 September 20x2) of 20 e-bikes for $300 per e-bike

 

Sale (10 September 20x2) of 30 e-bikes for $800 per e-bikeSale

 

(12 November 20x2) of 20 e-bikes for $750 per e-bike

 

Large Mart accounts for its inventory using the ?first?in?first?out?

 

cost flow assumption and the perpetual inventory system.

 

Required:

 

.

 


 

a) Calculate the cost of all e-bikes sold during the year ended 30

 

June 20x3 AND explain your calculations. (2 marks)

 


 

.

 


 

b) Calculate the closing balance of the inventory account on 30

 

June 20x3 AND explain your calculations. (2 marks)

 


 

.

 


 

c) Calculate the amount of revenue that the e-bikes have generated

 

for Large Mart during the year ended 30 June 20x3 AND explain

 

your calculations. (2 marks)

 


 

 

Paper#9257018 | Written in 27-Jul-2016

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