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Microsoft Word - ACCT6002_Assessment 2 Brief.docx ACCT6002_Assessment Brief 2_Individual Case Study Page 1 of 11 ASSESSMENT BRIEF Subject Code and Name ACCT6002 Accounting Fundamentals Assessment Assessment 2 - Case Study Individual/Group Individual Length (1,500 words +/- 10%) Learning Outcomes b) Explain the accounting cycle and apply double entry accounting principles to process transactions. c) Differentiate between periodic and perpetual inventory systems and apply appropriate accounting procedures. e) Prepare an accounting worksheet, Income Statement, Statement of Changes in Equity and Balance Sheet for sole proprietors and partnerships. g) Interpret, understand and analyse financial statements for decision making, and communicate their significance to accounting and non-accounting professionals. Submission By 11:55pm AEST/AEDT Sunday of Module 5.1 (week 9) Weighting 30% Total Marks 100 marks Context: The purpose of this assessment is to apply the conceptual and technical aspects of accounting and prepare relevant business financial statements. Students are expeted to contenxtualise and evaluate accounting information presented in statements for decision making purposes. Each question uses realistic data and the professional practices similar to that found in workplaces. ACCT6002_Assessment Brief 2_Individual Case Study Page 2 of 11 Instructions: • Students will work individually to prepare a response to ALL of the questions listed in the case study. • Students need to submit a report, presented in proper report format (including a reference list) by the end of Week 9. Submission Instructions: • The report needs to be submitted though the submission link available on the Blackboard. • The report should be submitted in Word format ACCT6002_Assessment Brief 2_Individual Case Study Page 3 of 11 Question 1 (40 marks) Retail operations ‘Cycling Deal’ started its operation in bicycle retail industry on 1 June 2019. The business is owned by Alex Richardson. Cycling Deal purchase bicycles from suppliers and sell those cycles at the local markets. The business is registered for GST. The following transactions occurred during June 2019: Date Details 1-Jun Alex Richardson deposited $35,000 into the business bank account. 3-Jun Purchase of bicycles (100 small bicycles, and 100 large bicycles) from Rocky Hills Ltd on account for $10,000 ($50 per bicycle) plus GST on terms of 2/10, n/30. 4-Jun Cycling Deal received an invoice from Finland Delivery Ltd relating to delivery costs for the bicycles purchased on 2 June. The amount due is $300 (including GST), and is due on 18 June. 5-Jun Sent a cheque in the mail to Green Ltd for $200 (including GST), for stall fees at the local markets for the month of June. 6-Jun Sale of 30 bicycles (15 small bicycles, and 15 large bicycles) at the local markets, at $100 each (including GST). All of the customers paid by cash. The money was banked at the end of the day. 9-Jun Paid Rocky Hills Ltd for purchases made on 3 June (net of the early payment discount), by electronic funds transfer. 13-Jun Sale of 10 small bicycles to a local childcare centre, at $100 each (including GST), on 30 day credit terms. 15-Jun Sent a cheque in the mail to Finland Delivery Ltd, in relation to the invoice received on 4 June. 20-Jun Purchase of bicycles (40 small, and 15 large) from Rocky Hills Ltd on account for $3,190 ($58 per bicycle) plus GST on terms of 2/10, n/30. ACCT6002_Assessment Brief 2_Individual Case Study Page 4 of 11 23-Jun Cycling Deal received an invoice from Finland Delivery Ltd relating to delivery costs for the bicycles purchased on 20 June 2019. The amount due is $180 (including GST), and is due on 6 July 2019. 24-Jun Returned 20 of the small bicycles purchased on 20 June as they were damaged. 28-Jun Sale of 40 bicycles (18 small, and 10 large) at the local markets, at $100 each (including GST). All of the customers paid by cash. The money was banked at the end of the day. 30-Jun A stocktake was completed, and the number of bicycles on hand was 139 (54 small bicycles, and 85 large bicycles). Mr Richardson has come to you for assistance, as he would like to use the perpetual inventory system and the First-in-first-out (FIFO) costing method, but are not sure how to set this up. Required i) Prepare an Excel worksheet for each of the bicycle lines for June (one for the small bicycles, and one for the large bicycles) using the FIFO costing method to keep track of the number of bicycles purchased, bicycles sold, bicycles on hand, cost of goods sold and gross profit made. ii) Prepare journal entries (including any adjusting entries) for all of the business’s transactions for June (using the perpetual inventory system and FIFO costing method). Include dates, references and narrations. iii) Prepare T-accounts in an Excel spreadsheet, and post all of the above journal entries to the T-accounts. Include dates and references for each entry. Total all of the T-accounts to determine their balances at the end of the June 2019. iv) Prepare the ‘Adjusted Trial Balance’ in an Excel spreadsheet as at 30th June 2019. Use formulas to generate all of the figures in the ‘Adjusted Trial Balance’ from the balances in the T-Accounts. v) The business has a year-end of 30th Prepare the closing entries as at 30th June 2019. vi) Prepare the income statement, balance sheet and statement of changes in equity in Excel. ACCT6002_Assessment Brief 2_Individual Case Study Page 5 of 11 Question 2 (25 marks) Bank Reconciliation This question continues on from question 1 above. It is now September 2019, and two months have passed since you first met with Mr Alex Richardson to assist him with implementing his inventory system and preparing his accounting records. He has come to you for some assistance as the balance in the ‘bank’ T- Account at the end of August 2019 doesn’t agree with the closing balance on the August bank statement. Mr Richardson is not sure what he has done wrong. The August 2019 bank statement appeared as follows: Bank statement for August 2019 Date Description Deposit Withdrawal Balance 1/08/2019 Opening balance $12,060.00 2/08/2019 Deposit 500.00 $12,560.00 5/08/2019 Cheque 3 200.00 $12,360.00 7/08/2019 Cash deposit 3,600.00 $15,960.00 12/08/2019 EFT – Rocky Hills Ltd 2,200.00 $13,760.00 16/08/2019 EFT – Finland Delivery Ltd 190.00 $13,570.00 16/08/2019 Cash deposit 4,200.00 $17,770.00 19/08/2019 Cheque 5 280.00 $17,490.00 20/08/2019 Cheque 6 250.00 $17,240.00 23/08/2019 EFT – Rocky Hills Ltd 4,300.00 $12,940.00 ACCT6002_Assessment Brief 2_Individual Case Study Page 6 of 11 23/08/2019 Cash deposit 3,400.00 $16,340.00 25/08/2019 Cheque 7 2,000.00 $14,340.00 26/08/2019 Cheque 10 260.00 $14,080.00 30/08/2019 Cash deposit 5,000.00 $19,080.00 31/08/2019 Annual bank fee 60.00 $19,020.00 31/08/2019 Interest 20.00 $19,040.00 31/08/2019 Closing balance $19,040.00 Cycling Deal’s accounting records for August 2019 showed an opening balance for the ‘bank’ account of $12,060, which agreed with the bank statement at 31 July 2019. Following is a summary of deposits and withdrawals recorded by Mr Richardson in his accounting records during August: Withdrawals: Deposits: Amount Date Detail Amount Date banked 2/08/2019 Cheque 3 $200.00 15/08/2019 EFT – Finland Delivery Ltd $199.00 7/08/2019 $3,600.00 16/08/2019 Cheque 4 $160.00 16/08/2019 $4,200.00 18/08/2019 Cheque 5 $280.00 23/08/2019 $4,300.00 18/08/2019 Cheque 6 $250.00 30/08/2019 $500.00 ACCT6002_Assessment Brief 2_Individual Case Study Page 7 of 11 23/08/2019 EFT – Rocky Hills Ltd $3,400.00 22/08/2019 Cheque 7 $2,000.00 23/08/2019 Cheque 8 $260.00 25/08/2019 Cheque 9 $390.00 25/08/2019 Cheque 10 $260.00 __________ $7,399.00 $12,600.00 The bank did not make any errors. Required i) Prepare the bank reconciliation for Cycling Deal at 31 August 2019. ii) Prepare the journal entries to correct any errors made by Cycling Deal, and to record transactions that have not yet been entered into the business’s accounting records. (Note: The correction of any errors relating to the recording of cheques or EFT payments should be made to ‘Accounts payable’. The correction of any errors relating to deposits (other than interest received) should be made to ‘Accounts receivable’.) iii) Prepare the ‘bank’ T-Account account for August 2019, in order to determine the balance in the ledger account after the above journal entries have been recorded and posted. ACCT6002_Assessment Brief 2_Individual Case Study Page 8 of 11 Question 3 (15 marks) Internal Controls This question continues from question 1 and 2 above. It is now July 2020, and Mr Alex Richardson has been very successful in growing the business of Cycling Deal. The business now operates at 2 markets in the region and employs 3 employees (Mr Richardson and 1 employee sell bicycles at the local market each week, and 2 employees are assigned to sell bicycles at the Sherwood markets) He has come to you for your advice, as he appears to be having problems with the inventory and/or cash receipts. He has been keeping track of inventory using the two worksheets that you showed him (in Question 1(i) above). He likes how it keeps track of inventory on hand, and he tells you how much he loves not having to count inventory each and every week after the markets to see what inventory is left. When he completed the stocktake on 30 June 2020, the closing balance of inventory in each worksheet didn’t match with the actual number of small and large bicycles on hand. The worksheets showed that the closing inventory was 68 small bicycles and 56 large bicycles.