School of Accountancy

110.109

Introductory Financial Accounting

Assessment 3 Booklet

Distance and Internal

Semester 2 – 2024
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COPYRIGHT

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Contents

Page

IMPORTANT INFORMATION ........................................................................................... 4

ASSESSMENT 3 DETAILS.............................................................................................. 6
Question 1: Accounting Cycle ................................................................................ 6
Question 2: Inventories .......................................................................................... 8
Question 3: Statement of Cash Flows .................................................................... 9
MARKING GUIDE ....................................................................................................... 11

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IMPORTANT INFORMATION

This is an electronic assessment and must be completed in the “Assessment 3 Answer

Workbook” – Excel templates, to be downloaded from Stream, completed by you, and then
uploaded back to Stream before the due date.

To enable your assessment to be marked, you must NOT alter the Excel templates in any
way that compromises the green columns dedicated to marking and the formulas in these
columns that add back to the ‘Marking Summary’ sheet.

You are advised to use formulas to pull data from one sheet to another, but this is not a
requirement for this assessment, and using formulas will not attract any marks.

Assessment 3 contributes 15% towards your final grade. It consists of three (3) questions: Q1:
Accounting Cycle, Q2: Inventories, and Q3: Statement of Cash Flows.

Please note that Assessment 3 is due by 11 PM, New Zealand time on 27 September.

Assessment 3 covers material from weeks 1 to 8 inclusive and mainly relates to the following
learning outcomes:

1. Demonstrate an understanding of the financial reporting framework for general

purpose financial statements for commercial enterprises.
2. Identify, measure, record and communicate economic transactions and events of
commercial enterprises’ operations using fundamental accounting concepts, including
the double-entry accounting system.
3. Apply basic measurement theory, and principles and concepts of accounting, to the
valuation of assets.

Before attempting this assessment, it is strongly recommended that you read both the
Assessment Information and Assessments 2 and 3 General Instructions (e.g. extensions,
submissions, return of marked assessments, etc.) on the course Stream site and the
assessment details on the following pages thoroughly. You should also study the relevant
material in the textbook and make sure you understand the concepts covered by practising
the weekly exercises and workshop questions before or as you complete this assessment.

Please feel free to keep in touch with the 110.109 teaching team regarding this assessment,
preferably through the Assessment Forum on Stream. That way all students benefit and often
we have found that the best way of learning is through discussion with your peers as well as
teaching staff.

Please remember that all 110.109 assessments must be your own work. Discussion on
Stream or in study groups is fine but comparing or suggesting answers on Stream or in
study groups as opposed to concepts may lead to marks being deducted to the extent of
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receiving zero marks if answers are too similar. Therefore, please do NOT discuss your
answers or ask public queries with suggested answers on the course Stream forums.
If you are unsure about this issue, you are welcome to use the Private Conversations on the
course Stream site.

There are a large number of students with whom the teaching staff and myself are involved in
this course, but that does not mean that you are not each individually very important to us. We
value each student and will try to provide appropriate guidance to the best of our ability.

All the best with your assessment.

Yuan Yuan on behalf of the 110.109 teaching team

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ASSESSMENT 3 DETAILS

Complete all three (3) questions in the “Assessment 3 Answer Workbook”. Name your
workbook as “SurnameID#” for submission, where ID# is your student ID number (e.g.,
Smith12345678). Before submitting, complete the first worksheet of the Answer
Workbook – Cover Sheet, with your current details.

Question 1: Accounting Cycle

Below is the unadjusted trial balance of Lee Ltd as at 30 June 2024. The company’s financial
year ends on 30 June.
Lee Ltd.
Unadjusted Trial Balance as at 30 June 2024
Account Title Debit Credit
$ $
Cash at Bank 24,000
Accounts Receivable 32,000
Inventory 22,710
Supplies (asset) 2,500
Prepaid Insurance 235
Equipment (cost) 62,000
Vehicle (cost) 82,000
Cost of Sales 52,000
Sales Returns and Allowances 1,870
Discount Allowed 1,500
Electricity Expense 3,000
Insurance Expense 2,585
Sales Salaries Expense 20,500
Selling Expense 7,570
Dividends Paid 2,000
Accumulated Depreciation - Equipment 2,500
Accounts Payable 14,085
PAYE Payable 1,600
Bank Loan (10% interest p.a.) 30,000
Share Capital 110,000
Retained Earnings 42,700
Sales 114,930
Discount Received 655
316,470 316,470

Additional data as at 30 June 2024:

(a) Supplies on hand on 30 June 2024 are $2,300.

(b) Annual insurance premium of $2,820 was paid on 1 July 2023. Adjustments to
Prepaid Insurance have been made until and including 31 May 2024.
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(c) June’s electricity bill of $500 was received and is payable on 15 July 2024. This bill
has not yet been recorded in the account. Use Accounts Payable to record the
electricity bill.
(d) Sales salaries accrued but not paid as of 30 June 2024 are $3,000 (Gross). PAYE
(10% of Gross) is payable on the 10th of the first month of each quarter.
(e) No depreciation has been charged since the last financial year. Depreciation is to
be charged at the following rates:
Equipment: The straight-line method at a rate of 10% is used for all the equipment.
Note: Some equipment was purchased on 1 January 2023; while the remaining
equipment was bought on 1 April 2024, at a cost of $12,000. No residual value is
assigned to any of the equipment.
Vehicle: The company vehicle was purchased on 1 September 2023 and has a
useful life of 5 years. The estimated residual value is $4,000. Straight-line
depreciation method is used for the vehicle.
(f) The bank loan of $30,000 was taken out on 1 July 2023 for five years. A payment
of $12,000, including both principal and interest, is due annually. The interest is
charged at a rate of 10% p.a. and is not compounded.
(g) The company includes Supplies, Electricity, Insurance and Depreciation Expenses
under administration expenses. Interest Expense is listed separately under financial
expenses.
(h) Due to an economic downturn, all profits will be retained at the end of the financial
year.

Required:

For the purpose of this question, please ignore GST and Income Tax. Show ALL your
workings. Narrations for journals are NOT required.

i. Journalise the adjusting entries on 30 June 2024 for Lee Ltd, in the General Journal.
(Note: Closing entries are NOT required). (23 marks)

ii. Complete the Worksheet for the year ended 30 June 2024 for Lee Ltd. (6 marks)

iii. Prepare a Classified Statement of Profit or Loss for Lee Ltd for the year ended 30
June 2024, as per Textbook Figure 4.6 (p. 204). Your answer should clearly identify
Net Sales, Gross Profit, and Net Profit (Loss) Before Tax.
(11 marks)

iv. Prepare a Statement of Changes in Equity for Lee Ltd for the year ended 30 June
2024. (3 marks)

v. Prepare a Classified Statement of Financial Position for Lee Ltd as at 30 June 2024.
(7 marks)

[Total Q1 = 50 marks]
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Question 2: Inventories

Kinney Ltd specialises in homemade feijoa bottled juice, which enjoys great popularity in the
local market. The company uses the perpetual inventory system for recording its cost of
sales. The inventories and purchases for the month of December are as follows:

Purchases Sales
December
Quantity Cost per unit Quantity
1 Beginning inventory 100 units $1.00
3 Purchase 200 units $1.30
7 Sales 220 units
9 Purchase 200 units $1.80
14 Sales 280 units
18 Purchase 300 units $2.00
21 Sales 200 units
30 Purchase 100 units $2.20

During the month, units were sold for $3.50 per unit.

Required:
For the purpose of this question, please ignore GST. Show ALL your workings.

i. Calculate the Cost of Goods Available for Sale for December, as per Textbook Figure
5.7 (p.244). (3 marks)

ii. Calculate the Cost of Sales for 14 December using the FIFO method, as per Textbook
Figure 5.18 (p.253). (2 marks)

iii. Calculate the Cost of Sales for 14 December using the LIFO method, as per Textbook
Figure 5.19 (p.254). (2 marks)

iv. Calculate the Cost of Sales for 14 December using the weighted average cost
method, as per Textbook Figure 5.20 (p.254). (4 marks)

v. Using the weighted average cost method, calculate the dollar amount ($) assigned to
the inventory on hand on 31 December and the cost of sales for the month of
December. (4 marks)

[Total Q2 = 15 marks]

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Question 3: Statement of Cash Flows

Set out below are the financial statements of Tui Ltd for the year ended 30 June:

Tui Ltd
Comparative Statement of Financial Position
as at 30 June
2023 2022
Assets
Cash $ 95,000 $ 47,250
Accounts receivable (net) 86,800 57,000
Inventory 121,900 102,650
Investments (long-term) 84,600 87,000
Property, plant and equipment 250,000 205,000
Accumulated depreciation (49,500) (40,000)
Total assets $588,800 $458,900

Liabilities and Shareholders’ Equity

Accounts payable $ 52,700 48,280
Accrued operating expenses 12,100 18,830
Notes payable (long-term) 100,000 70,000
Share capital 250,000 200,000
Retained earnings 174,000 121,790
Total liabilities and shareholders’ equity $588,800 $458,900

Tui Ltd
Statement of Profit or Loss
for the year ended 30 June 2023

Sales $300,000
Gain on sale of equipment 8,750
Less: 308,750
Cost of sales $ 99,460
Operating expenses 64,370
Income tax expense 7,270
Interest expense 5,440 (176,540)
Net profit after tax $ 132,210

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The following additional information was provided:

(a) All sales and purchases of inventories were on account.

(b) Accounts payable pertains to inventory creditors.
(c) During the year, additional equipment was purchased for cash. Old equipment
costing $47,000 was sold for cash with a gain of $8,750.
(d) The investment was sold for cash during the year.
(e) Cash dividends were declared and paid during the year.
(f) Operating expenses include a depreciation expense of $49,700.
(g) Interest expense and income tax expense were settled in cash.
(h) Additional shares and notes were issued for cash during the year.

Required:

For the purpose of this question, please ignore GST, but show ALL your workings.

i. Prepare a Statement of Cash Flows for Tui Ltd for the year ended 30 June 2023 using
the direct method, as per Textbook Figure 11.25 (p.578). (27 marks)

Hint: Refer to PSA11.1 and Demonstration Problem 2 in Chapter 11 as you attempt

this question.

ii. Prepare a reconciliation of net profit after tax to net cash provided from operating
activities, as per Textbook Figure 11.27 (p.582). (8 marks)

[Total Q3 = 35 marks]

Total Marks for Assessment 3 = 100 Marks

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MARKING GUIDE

Question 1: Accounting Cycle

Criteria Marks

i. Adjusting Entries [23]

Correct Dr. and Cr. accounts 13
Correct calculations 10
ii. Worksheet [6]
Dr. = Cr. balance in subtotals 6
iii. Statement of Profit/Loss [11]
Correct Net Sales 2
Correct Gross Profit 2
Correct Net Profit Before Tax 2
Classified format 3
Correct expense and revenue items 2
iv. Statement of Changes in Equity [3]
Correct closing balance of Retained Earnings 1
Correct closing balance of Equity 1
Correct items reported 1
v. Statement of Financial Position [7]
Classified format 1
Correct display of Accumulated Depreciation 1
Correct balance of Total Assets 1
Correct Current Liabilities items 2
Correct Non-Current Liabilities items 2
Total 50

Question 2: Inventories

Criteria Marks

i. Correct cost of goods available for sale 3

ii. Correct cost of sales using FIFO 2
iii. Correct cost of sales using LIFO 2
iv. Correct cost of sales using Weighted Average (WA) 4
v. Correct ending inventory using the WA and the cost of
4
sales for December
Total 15

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Question 3: Statement of Cash Flows

Criteria Marks

i. Statement of Cash Flows using direct method [27]

Correct amount of cash receipts from customers 3
Correct amounts of cash payments to operating activities 8
Correct amount of net cash provided by operating activities 1
Correct amounts of cash flows from investing activities 7
Correct amount of net cash provided by investing activities 1
Correct amounts of cash flows from financing activities 5
Correct amount of net increase in cash 1
Correct amount of cash at the beginning of the period 1
ii. Reconciliation [8]
Record correct amount of net profit after tax 1
Correct adjustments to reconcile profit 6
Correct net cash provided by operating activities 1
Total 35

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