Case #1
Preparation of worksheet, financial statements and closing entries
The ledger of HNM Medical Service contains the accounts and account balances shown below on 30 June 2017:
|
Account
|
Debit
|
Credit
|
|
Cash at Bank
|
|
$ 12600
|
|
|
|
Accounts Receivable
|
|
11800
|
|
|
|
Prepaid Insurance
|
|
1800
|
|
|
|
Land
|
|
180200
|
|
|
|
Building
|
|
196000
|
|
|
|
Accumulated Depreciation - Building
|
|
|
$86
|
900
|
|
Equipment
|
|
32300
|
|
|
|
Accumulated Depreciation - Equipment
|
|
|
8
|
800
|
|
Accounts Payable
|
|
|
16
|
400
|
|
Mortgage Payable
|
|
|
64
|
000
|
|
Owner, Capital
|
|
|
236
|
950
|
|
Owner, Drawings
|
|
86500
|
|
|
|
Fees Earned
|
|
|
262
|
430
|
|
Rent Revenue
|
|
|
14
|
400
|
|
Salaries Expense
|
|
124600
|
|
|
|
Telephone Expense
|
|
4520
|
|
|
|
Interest Expense
|
|
3080
|
|
|
|
Insurance Expense
|
|
36480
|
|
|
|
|
$689
|
880
|
$689
|
880
|
The following account titles are included in the chart of accounts:
Interest Payable
Salaries Payable
Rates Payable
Unearned Fees
Depreciation Expense - Building Depreciation Expense - Equipment Rates Expense
The following information has not yet been recorded:
1. Rates owing at 30 June, $4820.
2. Depreciation on the equipment is $3680. Depreciation on the building is $9600.
3. An advance fee payment of $600 for minor surgery to be performed in July 2017 was credited to Fees Earned.
4. The mortgage contract provides for a monthly payment of $1000 plus accrued interest. The June payment was not made. The interest of $260 is accrued on the mortgage.
5. Prepaid insurance of $1340 has expired.
6. Salaries earned but not paid amount to $2360.
Required
A. Prepare a 10-column worksheet for the year ended 30 June 2017.
B. Prepare an income statement, a statement of changes in equity and a balance sheet.
C. Journalise the closing entries.
Case #2
Samantha Kennedy owns and manages a craft and material shop called Magic Thread. Most of the revenue of Magic Thread is derived from the sale of craft materials, although some revenue is made by giving craft lessons to groups of six customers at a time. As Samantha's shop relies on a large number of suppliers of small amounts of different craft materials, she has difficulty keeping track of all her accounts payable. Samantha is not very well organised and so struggles to send out accounts to her customers or collect money from them. Samantha is considering implementing a computerised accounting system as she has been doing a computer course at a local college and feels that it could help her to be more organised.
Required
A. What source documents would be required in a manual accounting system in order to record the sales to customers and receipt of cash, and to ensure correct payment of money to suppliers?
B. In her computer course, Samantha learnt that the focus in accounting should not be on bookkeeping but on the use of the information 'inside the computer' to make better decisions and to better manage the business. In what ways could a computerised accounting package help Samantha make better decisions and manage her business better?
Case #3
Derek Brown and Kate Wilson set up a partnership to run a small retail business. Derek con-tributed $60 000 to begin the business and Kate's contribution was $50 000. Derek is confident with numbers and accounting whereas Kate prefers to deal with people and to ignore anything requiring numbers. Kate has put her trust in Derek to set up the financial side of the business. Derek has decided that all profits should be distributed according to the initial capital contribution by each of the partners.
During the second year of operation, Derek bought a new house and to finance the deposit he withdrew $20 000 from his capital investment in the partnership. Kate accepted that this was reasonable and did not even think about the implications for profit distribution. The following year Derek withdrew another $20 000 from his capital investment in the partnership to reduce his house mortgage. Kate accepted that as Derek had put the money into the partnership, it was only fair that he could take it out again.
Derek and Kate both worked actively in the business and generally worked well together as business partners. They both were entitled to a salary of $30 000 on the assumption that they would contribute equally to the management of the business.
Required
A. Who are the stakeholders in this situation?
B. Does Derek appear to be doing anything wrong? Explain your response.
C. Are there any ethical issues involved here? If so, identify them.
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