QUESTION 1: Balance Day Adjustments
Below is the unadjusted Trial Balance for Blue Herrings Fishing Gear as at 30th June 2016.
IMPORTANT: Use the trial balance provided below to complete this question.
Do NOT use the trial balance you completed in Part A of the assignment.
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Blue Herrings Fishing Gear
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Trial Balance
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as at 30th June 2016
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Debit
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Credit
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Cash at Bank
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56,433
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Accounts Receivable
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68,398
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Inventory (1 July 2015)
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58,950
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Prepaid Insurance
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225
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Motor Vehicle
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45,000
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Shop Shelving
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95,625
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Accumulated Depreciation - Shop Shelving
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27,000
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Display Cabinets
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78,000
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Accumulated Depreciation - Display Cabinets
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7,100
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Accounts Payable
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17,550
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Rent Payable
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2,250
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Loan
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57,850
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S. Sole, Capital (1 July 2015)
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280,375
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S. Sole, Drawings
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40,500
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Sales
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766,923
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Sales Returns & Allowances
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1,060
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Interest expense
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4,600
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Discount Received
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2,250
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Purchases
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261,000
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Freight Inwards Expense
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5,550
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Insurance Expense
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1,350
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Advertising Expense
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19,300
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Office Operating Expense
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96,750
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Rent Expense
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29,250
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Wages Expense
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295,875
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Delivery Expense
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2,132
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Discount Allowed
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1,300
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Totals
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1,161,298
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1,161,298
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On the following page is information that Sam has provided to you related to the year ended 30 June 2016.
1. $300 of the Advertising expense relates to a radio campaign that will run in August 2016.
2. The Motor Vehicles, Shop Shelving and Display Cabinets are expected to be used evenly over their useful lives. The expected total useful lives and residual values of these assets are listed below:
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Estimated Useful life
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Estimated Residual
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Motor Vehicles
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5 years
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$5,000
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Shop Shelving
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10 years
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$5,625
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Display Cabinets (see note below)
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12 years
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0
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Sam has spoken with his accountant, Jen Ledger, about the required entries and the issue of materiality. As a result, it has been decided that due to its relatively small impact, Sam will start depreciating the new $42,000 Display Cabinets (purchased in June 2016) from the 1st July 2016.
3. A count of the stationery room revealed that Office Supplies on hand at 30th June 2016 were $2,623. This had been originally debited to Office Operating Expenses.
4. The balance in the Prepaid Insurance account represents coverage for June 2016.
5. $16,000 of the recorded Sales is for specially imported Marlin fishing rods which will not be delivered until 24th July 2016.
6. As of 30th June 2016, Tom has estimated that 5% of his Accounts Receivable will not be collected (round any required adjustment to the nearest whole dollar).
7. Wages earned by employees, but unpaid as at 30th June 2016 total $5,120.
REQUIRED:
As it is now the end of the financial year, you are required to undertake the following work for Sam:
(a) Prepare any necessary Balance Day Adjustment Journals for Blue Herrings Fishing Gear. Ensure that each journal entry is correctly formatted and include a brief narration (explanation) for each journal entry.
(b) Update the General Ledgers provided and post the journals from (a) above. All ledgers must be correctly formatted and footed (balanced).
(c) Complete the Adjusted Trial Balance provided. You will need to insert additional accounts that are not currently listed.
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BLUE HERRINGS FISHING GEAR
UNADJUSTED TRIAL BALANCE
AS AT 30 June 2016
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Debit ($)
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Credit ($)
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Cash at Bank
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56,433
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Accounts Receivable
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68,398
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Inventory (1 July 2015)
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58,950
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Prepaid Insurance
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Motor Vehicle
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45,000
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Shop Shelving
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95,625
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Accumulated Depreciation - Shop Shelving
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Display Cabinets
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78,000
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Accumulated Depreciation - Display Cabinets
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Accounts Payable
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17,550
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Rent Payable
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2,250
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Loan
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57,850
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S. Sole, Capital (1 July 2015)
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280,375
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S. Sole, Drawings
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40,500
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Sales
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Sales Returns & Allowances
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1,060
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Interest expense
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4,600
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Discount Received
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2,250
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Purchases
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261,000
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Freight Inwards Expense
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5,550
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Insurance Expense
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Advertising Expense
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Office Operating Expense
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Rent Expense
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29,250
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Wages Expense
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Delivery Expense
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2,132
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Discount Allowed
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1,300
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Totals
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QUESTION 2: Financial Statement
The following Trial Balance for Pikachu's Safety Apparel has been prepared at year end by Pikachu, but he realises it is not in the correct order.
REQUIRED:
Using the Trial Balance provided below, prepare the following for the period in question:
1. Fully classified Income Statement
2. Statement of Changes in Equity
Pikachu's Safety Apparel
TRIAL BALANCE AS AT 30 JUNE 2015
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Shop Furniture & Fittings
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25 000
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Accounts Receivable
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46 089
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Accumulated Depreciation - Shop Furniture & Fittings
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9 020
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Cash at Bank
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49 053
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Advertising Payable
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4526
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Sales
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547 310
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Electricity Expense
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1 600
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COS
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386 210
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Pikachu, Capital
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44 810
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Depreciation Expense - Shop Furniture & Fittings
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3 550
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Freight Inwards
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2 820
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Rent Expense
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29 300
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Accounts Payable
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16 018
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Discount Allowed
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3 725
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Inventory
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20 960
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Salaries Expense - Store
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33 400
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Loan Payable
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33 600
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Allowance for Doubtful Debts
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1 000
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Prepaid Advertising
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1 540
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Interest Payable
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620
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Advertising Expense
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560
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Sales Equipment
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14 400
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Interest Expense
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470
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Doubtful Debts Expense
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1 000
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Pikachu, Drawings
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18 500
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Sales Returns & Allowances
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8 630
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Discount Received
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3 203
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Salaries Expense - Admin
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13 300
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Totals
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660 107
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660 107
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Additional information
• Pikachu has determined that 30% of the electricity expense and $8,650 of the rent expense specifically relate to the administration office. The remainder of both these expenses relate to running the store.
QUESTION 4: Cash Flow Statement
You are provided with the following financial information for Goldstar Holdings Ltd:
GOLDSTAR HOLDINGS LTD
COMPARATIVE BALANCE SHEETS
AS AT JUNE 30th
2016 2015
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Current Assets
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Cash on Hand
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$5 000
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$4 000
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Cash at Bank
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1 400
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-
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Accounts Receivable (net) *
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4 800
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4 950
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Inventory
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18 500
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20 100
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Prepaid Expenses
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1 480
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$31 180
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890
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$29 940
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Non Current Assets
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Plant & Equipment
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72 000
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72 000
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less Acc. Depreciation
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(25 700)
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46 300
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(19 700)
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52 300
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Total Assets
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77 480
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82 240
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Current Liabilities
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Bank Overdraft
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-
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2 400
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Accounts Payable
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3 800
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4 250
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Accrued Expenses
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920
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850
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Tax Payable
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980
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5 700
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1 340
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8 840
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Non Current Liabilities
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Mortgage
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18 000
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20 000
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Total Liabilities
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23 700
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28 840
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Net Assets
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$53 780
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$53 400
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Equity
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Share Capital
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35 000
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29 000
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Retained Earnings
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18 780
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24 400
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$53 780
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$53 400
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* The (net) notation next to Accounts Receivable means this figure is net of the Allowance for Doubtful Debts
GOLDSTAR HOLDINGS LTD
INCOME STATEMENT
FOR THE YEAR ENDED 30TH June 2016
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Net Sales
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$104 000
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Cost of Sales
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61 800
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less Discount Received
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450
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61 350
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Gross Profit
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42 650
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Expenses:
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Selling & Admin Expense
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$20 160
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Doubtful Debts Expense
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430
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Depreciation Expense
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6 000
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Interest Expense
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2 680
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29 270
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Profit before Tax
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13 380
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Income Tax Expense
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4 000
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Profit
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$ 9 380
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REQUIRED:
a. Using the template provided, prepare a statement of cash flows. Show all calculations on the pro forma.
b. The owner of Goldstar Holdings Ltd can't understand why his increase in cash is so different to the profit figure. Explain to the owner at least two factors that may be causing this difference.
Question 4(a)
GOLDSTAR HOLDINGS LTD
Cash Flow Statement
FOR THE YEAR ENDED 30th JUNE 2016
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$'000
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$'000
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Cash Flows from Operating Activities
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Receipts from customers
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Payments to suppliers & employees
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Cash generated by operations
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Interest paid
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Income tax paid
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Cash Flows from Investing Activities
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Cash Flows from Financing Activities
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Payment of Mortgage
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Proceeds from Share Issue
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Dividends Paid
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Net increase / decrease in cash held
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Cash at the beginning of the year
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Cash at the end of the year
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Attachment:- Accounting for Business.rar