A.

The consolidated Net Income for the Year 10 is as follows:

Consolidated
S.N Parent Subsidiary
Particulars Amounts
o. Company Company
(Par + Sub)

Income:
1 Sales 24,800,000 12,000,000 36,800,000
2 Other Income 4,000,000 1,000,000 5,000,000
Total Income (a) 28,800,000 13,000,000 41,800,000

Expenditure:
3 COGS 18,000,000 8,200,000 26,200,000
4 Depreciation Exp. 3,400,000 1,800,000 5,200,000
5 Other Expenses 3,000,000 1,200,000 4,200,000
6 Income Tax 1,200,000 400,000 1,600,000
Total Expenses (b) 25,600,000 0 11,600,000 37,200,000

Consolidated Net Income/ (Loss)

3,200,000 1,400,000 4,600,000
( c)

Other Comprehensive Income:

(d)
Decrease in FV of
7 -150,000 -150,000
Inventory
Increase in FV of
8 600,000 600,000
Equipment
Increase in FV of
9 850,000 850,000
Goodwill ( 4.05M -3.2M)

Elimination of Profit
10 Margin in Inventory -112,500 -112,500
(600 K * 75%)= (450K * 25%)

Additional depreciation
11 due to change in FV of -75,000 -75,000
equipment(600K/8 years)

Net Consolidated Income

5,712,500

B. B. The Following Consolidated balance in Retained Earnings as of January 1, 2020

 Consolidated
Parent Subsidiary
Particulars Amounts
Company Company
(Par + Sub)
Retained Earnings 13,200,000 10,400,000 23,600,000
Less:
Profit Margin in underlying -25,000
inventory (100 K * 25%)
Net Amount of RE 23,575,000
On January 1, Year 5, Pillar Company purchased 80% of the shares of Salt for $800,000. On that date, Salt's
shareholder's equity consisted of $300,000 of common shares and $555,000 of retained earnings. This figure included
existing goodwill of $30,000.

The carrying value of Salt's identifiable net assets was equal to their fair values except:
date, Salt's
s. This figure included
 a. Receipts and payment A/c as on 30 april 2020
Receipts Amount Payments Amount
Balance b/d $6,600 Purchases $2,750
Rent paid 8,000
Subscription 11,750 Secretary Salary 5,000
Sale 5,800 Repairs to premises 2,900
Donation received 6,000 Office chair 6,350
Sale of raffle tickets 4,800 Telephone bill paid 1,500
Balance c/d 8,450
Total $34,950 Total $34,950

b. Bar trading A/c

Particular Amount Payments Amount
Opoening stock $6,600 Sale $2,750
Purchases Closing Stock 8,000
Gross profit (b/f) 11,750 5,000
 1. Accumulated Fund on April 1, 2021.
Sunshine Sporting Club
Balance Sheet
as of April 30, 2021
Liabilities Amount Assets Amount
Rent outstanding $2,000 Fixtures $15,500
Accum. Fund (bal. fig.) 27,850 Cash Balances 6,600
Subscription Outstanding 3,750
Bar stock 4,000
Total $29,850 Total $29,850

2. Receipts and payment A/c as on 30 april 2021

Receipts Amount Payments Amount
Balance b/d $6,600 Purchases $2,750
Rent paid 8,000
Subscription 11,750 Secretary Salary 5,000
Sale 5,800 Repairs to premises 2,900
Donation received 6,000 Office chair 6,350
Sale of raffle tickets 4,800 Telephone bill paid 1,500
Balance c/d 8,450
Total $34,950 Total $34,950

3. Bar trading A/c

Particular Amount Payments Amount
Opoening stock $4,000 Bar Sales $5,800
Bar Purchases 2,750 Closing Stock 2,750
Gross profit (b/f) 1,800
Total $8,550 Total $8,550

4. Income and Expenditure Account

For the month ended April 30, 2021
Expenditure Amount Dr. Income Amount Cr.
Rent 8K Gross profit $1,800
Less: Outs beg. 2K $6,000

Secretary's Salary 5,000 Subscriptions (92 x $150 )

or 11,750 -3,50 beg. + 5800
Repairs to premises 2,900 end 13,800
Telephone expense 1,500 Donations 6,000
Dep. on furniture [15.5K
*(25%/12)] 322.92 Sale of Raffle Tickets 4,800
Purchases
Surplus (bf) 10,677.08
Total $26,400 Total $26,400
 5. Sunshine Sporting Club
Balance Sheet
as of April 31, 2021
Liabilities Amount Assets Amount
Rent outstanding $2,000 Fixtures $15,500
Accum. Fund (bal. fig.) 27,850 Cash Balances 6,600
Subscription Outstanding 3,750
Bar stock 4,000
Total $29,850 Total $29,850

Balance Sheet
as of April 30, 2021
Liabilities Amount Assets Amount
Capital $27,850 Fixtures, net $15,177.08
Add: Surpluss 10,677.08 Office Chairs 6,350
Bar stock 2,750
Cash 8,450
Outstanding subscription 5,800
Total $38,527.08 Total $38,527.08

1). Accumulated fund =$27,850

2). Total of Receipts and Payments Account is $34,950.

Cash balance on April 30, =$8,450

3).Bar profit =$1,800

4). Excess of Income over Expenditure ; surplus $10,677.08

5). Total of balance sheet as at April 30, 2021 =$38,850.

 0.002
A. Today ticket Price (P) = $12.34 0.002
Inflation (i) (0.2%x 12 = 2.4% peryear) 2.40% 0.002
0.002
Nominal price in 2030 = P (l = i) ^t 0.002
where t = 10 years 0.002
0.002
Expected Nominal Price @ 2030 $15.6428084 0.002
(12.34*(1+2.4%)^10) 0.002
0.002
B. Price of 10 tickets on 2030 $156.43 0.002
(10 x 15.6428084) 0.002

Let 'x' should be saved today. Then 0.024

$156.428084068163 = x (1+r)^n
where r= 0.25% & n= 10 x 12= 120
S156.428084068163 = x (1+0.25%)^120
x = $156.428084068163/((1+0.25%)^120)
To be saved in bank today $115.92816752

C. FV of superticket = T0/( l + r)^0 +

Assume It Is Monday, May 1, The First Business Day Of The Month, And You Have Just Been Hired
As The Accountant For Coloompany,which operates with monthly accounting periods. All of the
company’s accounting work is completed through the end of April and its ledgers show April 30
balances.During your first month on the job, the company experiences the following transactions
and events (terms for all its credit sales are 2/10, n/30 unless stated differently):
a) relevance; faithful representation
b) Comparability
c) Consistency
d) Understandability
e) faithful representation
f) verifiable
g) timeliness
 A transaction refers to situations where an exchange between entities
occurs involving cash, goods, services, and other financial accounts.

1 a) The item indicates the signing of the purchase contract.

The item is not a transaction since no financial statement account

is affected.
b) The item indicates the purchase of company stock by the president
from a principal stockholder.

The item is not a transaction since no financial statement account

is affected since the purchase of stock is done between the
stockholders without the involvement of the company.
c) The item indicates the issuance of stocks for cash.

The item is a transaction since an economic event occurred

affecting the financial statement accounts stocks and cash.
d) The item indicates the acquisition of the building in January.

The item is a transaction since an economic event occurred

affecting the financial statement accounts building, accumulated
depreciation, and depreciation expense, for the depreciation of the
owned building.

e) The item indicates the acquisition of the land in January.

The item is a transaction since an economic event occurred

affecting the financial statement accounts land and cash since the
land used is owned by the company.
f) The item indicates the incurred legal expenses for cash.

The item is a transaction since an economic event occurred

affecting the financial statement accounts expenses and cash.
g) The item indicates the incurred cleaning services on account.

The item is a transaction since an economic event occurred

affecting the financial statement accounts expenses and accounts
payable.

2 The accounting principle indicated in the transaction is the economic

entity assumption where the entity transactions are accounted for
separately from its owners or shareholders.
Debit and Credit Procedures
A list of accounts for Montgomery Inc. appears below
Required: Complete the table below for these accounts. The information for the first account has been entered as an example

Type of Normal
No. Account Increase Decrease
Account Balance
1 Accounts Payable Liability Credit Credit Debit
2 Accounts Receivable Asset Debit Debit Credit
3 Bonds Payable Liability Credit Credit Debit
4 Building Asset Debit Debit Credit
5 Cash Asset Debit Debit Credit
6 Common Stock Equity Credit Credit Debit
7 Copyright Asset Debit Debit Credit
8 Cost of Goods Sold Expense Debit Debit Credit
9 Depreciation Expense Expense Debit Debit Credit
10 Income Taxes Expense Expense Debit Debit Credit
11 Income Taxes Payable Liability Credit Credit Debit
12 Insurance Expense Expense Debit Debit Credit
13 Interest Expense Expense Debit Debit Credit
14 Inventory Asset Debit Debit Credit
15 Investments Asset Debit Debit Credit
16 Retained Earnings Equity Credit Credit Debit
17 Sales Revenue Revenue Credit Credit Debit
18 Unearned Revenue Liability Credit Credit Debit
19 Utilities Expense Expense Debit Debit Credit
 Assets  *= Liabilties
Accounts
Cash A/R Supplies Notes Payable
Payable
8,000 15,900 4,100 28,000 2,500 4,000
a) 15,000
b) (850)
c) 2,250 2,250
d) 8,000 8,000
e) (1,080) (1,080)
f) (2,150)
g) 4,700
h) (3,180)
i) 1,920
j) (500) 500
k) 1,290 (1,290)
l) (1,000)
31,410 16,530 3,670 3,670 12,000

Revenue = 4,700+ 1,920 =6,620

enses = 850 + 2,150 +3,180 = 6,18-0
 Equity
Common
RE
Stock
12,000 9,500 28,000
15,000
(850)

(2,150)
4,700
(3,180)
1,920

(1,000)
27,000 8,940
 Madero Accounting Services

Trial Balance
August 31

Account Debit Credit

Cash $31,410
Accounts Receivable 16,530
Supplies 3,670
Accounts Payable 3,670
Notes Payable 12,000
Common Stock 27,000
Retained earnings 9,500
Dividends 1,000
Revenues 6,620
Expenses  6,180

Total $58,790 $58,790

No. Transaction Answers

Requires that an activity be recorded at the

1 Historical cost
exchange price at the time activity occurred

Allows a company to report financial

2 activities separate from the activities of the Economic entity
owner

Implies that items such as customer cannot

3 Monetary unit
be reported in the financial statements

Specifies that revenue should only be

4 recognized when a company has satisfied Revenue recognition
its performance obligation to the customer
Justifies why some assets and liabilities are
5 Going concern
not reported at their value if sold
Allows the life of a company to be divided
6 into artificial time periods so accounting Time period
reports can be provided on a timely basis
7 Is a prudent reaction to uncertainty Conservatism
Requires that expenses be recorded and
8 reported in the same period as the revenue Expense recognition
that it helped generate
Summary (letters): e, a, d, f, b, c, h, g
 Vaughn Company
Balance Sheet (Partial)
January 31, 2022

Current Liabilities:
Accounts payable $57,000
Notes Payable 22,500
Sales Taxes Payable* 5,808
Unearned Service Revenue** 5,500
Warranty Liability*** 3,150
Interest payable 50

Total Current Liabilities $94,008

*Sales Taxes Payable = (1,520 + 3,600 + 688) = 5,808

**Unearned service revenue = (16,500 – 10,500) = 6,000
***Warranty Liability = (45,000 x 7%) = 3,150
****Interest payable = (22,500 x 8% x 1/12 x10/30) = 50
S.no. Accounts title and explanations Debit Credit
Journal entries
Jan 5 Cash 20,520
   Sales Taxes Payable 1,520
   Sales revenue 19,000
(for sales made for cash)

Jan 12 Unearned Service Revenue 10,500

    Service Revenue 10,500
(for revenue earned)

Jan 14 Sales Taxes Payable 8,400

    Cash  8,400
(for taxes paid)

Jan 20 Accounts Receivable 48,600

   Sales Taxes Payable 3,600
   Sales Revenue (900*50) 45,000

Jan 21 Cash 22,500

   Notes Payable 22,500
(for amount borrowed)

Jan 25 Cash 9,288

   Sales Taxes Payable 688
   Sales Revenue 8,600
(for sales made for cash)

Adjusting entry
Jan 31 Interest Expense 50
     Interest Payable (22500*8%*1/12*10/30) 50
(for interest due)

Jan 31 Warranty Expense (45000 *7%) 3,150

    Warranty Liability 3,150
(for warranty expense incurred)
No.1 Debit Credit
a) Sales 10,200
Retained Earnings 10,200

b) Merchandise Inventory 5,250

Purchases 5,250

No entry necessary. Consigned goods should be included in the consignor's

c)
(Tilbert's) inventory.

d) Merchandise Inventory 2,250

Retained Earnings 2,250

e) Purchases 3,525
Retained Earnings 3,525

f) Retained Earnings 2,505

Purchases 2,505

g) Sales 5,475
Merchandise Inventory 4,050
Retained Earnings 1,425

a) Inventory per count $704,670

Transaction 2 31,260
3 0
4 0
5 25,620
6 -31,314
7 -34,560
8 4,500
Inventory as corrected $700,176

b) Adjusting Journal Entries

December 31,2016

Transaction 3
Sales 38,400
Accounts Receivable 38,400
Transaction 4
Purchases 46,890
Accounts Payable 46,890
Transaction 8
Sales returns and allowances 7,800
Accounts Receivable 7,800
 Unadjusted balances Sales Inventories
Invoice No. 6672 $7,500,000 $330,000
6674 7,500 0
6675 -12,600 9,300
6676 0 24,000
6677 -19,500 0
6678 11,700 0
6679 -25,800 0
Adjusted balances $7,461,300 $363,300

a) Sales $7,461,300
b) Inventories $363,300

1) Adjusting Entries
December 31,2016

a. Accounts payable 27,471

Purchases 27,471
*( Invoice No. 256 + 258 = $6,309 + 21,162 = $27,471)

b. Purchases 70,503
Accounts payable 70,503
*( Invoice No. 262 + 263 + 265 = $11,391 + 17,712 + 41,400 = $70,503)

c. Freight-in 3,240
Estimated freight-in payable 3,240
* [(In transit Invoice No. 254 + 265) x Average freight-in = $12,600 + 41,400 =
$54,000 x 6% = $3,240)

2) Balance per client at invoice cost $300,000

Add: Invoice No. 252 $8,136
253 3,123
254 12,600
255 13,833
263 17,712
265 41,400 96,804
Corrected inventory at invoice cost $396,804
Add: Average freight-in (6% x $396,804) 23,808
Adjusted inventory $420,612
 TERM ANSWER DESCRIPTION
Rebate: A partial refund of a car´s purchase price
Rebate that the dealer gives as an inducement to
C purchase.
Impulse purchase: The purchase of a good or
Impulse purchase service without fully considering your priorities and
A the availability of any alternatives.
Lease: A contract and business transaction in
which the user of an item, such as a car or house,
Lease
receives the right to use it in exchange for
H scheduled payments for a fixed period.

Dealer holdback: This rebate, calculated as a

percentage of the vehicle´s invoice price, that
Dealer holdback increases the dealer´s profit and allows a vehicle
to be sold for less than either the vehicle´s sticker
price or the dealer´s invoice price.
E

Closed-end lease: A lease transaction, often

called a walkaway lease, that allows the lessee, at
Closed-end lease the end of the lease period, to merely return the
vehicle-assuming that he or she has not exceeded
the preset mileage limit or abused the vehicle.
F
Sticker price: The popular name given to the
manufacturer´s suggested retail price (MSRP),
Sticker price
which by federal regulation is posted on the
B vehicle´s window.
Residual value: The value of a leased asset at the
Residual value
D end of the lease period.
Low-balling: The practice involving unethical car
dealers who first quote a low sales procce to
Low-balling induce a potential customer to make an offer and
the attempt to add costly add-ons to the
J transaction prior to the signing of the cotract.
Gross capitalized cost: This is the total price of the
Gross capitalized cost leased vehicle, including its negotiated cost and
G any applicable fees and taxes.
Gap insurance: An insurance policy that pays the
policyholder the differencec between the actual
cash value (ACV) that the insurance company
Gap insurance
pays when a vehicle is declared a total loss and
the outstanding loan amount on the purchase of
I the vehicle.
Question No. 2

Which is Better: A Rebate or a Low Introductory Interest Rate?

Automobile manufacturers and dealers use a variety of marketing devices to sell cars. Among these are rebates and low-cost d
financing packages.
To determine which method of reducing the vehicle's cost is better, you can use the following equation that considers the amo
interest rate on the loan (APR), the number of payments made each year (Y), the total number of scheduled payments (P), and
the transaction (F):
APR
Y x (95P+9) x F
12P × (P+1) × (4D+F)
You and your friend, Addison, have been shopping for your new car for several weeks. Together, you've visited several dealers
efforts have resulted in an agreed-on price of $39,950. In addition, the dealer has offered you either a rebate of 1,500 or an in
interest rate of 4.0% APR.
If you elect to take advantage of the 4.0% low-cost dealer financing, you'll also have to pay $1,498 in finance charges and mak
$902.03 for four years. Alternatively, you've also been preapproved for a four-year 10.0% loan from your credit union. This loa
of $975.19 per month and a 2% down payment.
Given this information, what is the adjusted cost of the dealer financing package, rounded to two decimal places?
4.00%
3.60%
The 4.60%
Should you accept the low-cost dealer-arranged financing package or should you accept the rebate and finance your new vehi
union loan?
Select the loan offered by your credit union as its cost is less than the adjusted cost of the dealer-arranged financing.
Select the loan offered by the dealer as it has a lower adjusted cost than the loan offered by your credit union.

REQUIREMENT NO. 2

For the 4.0% low cost financing package:

Y = Number of payments each year = 12 (Monthly payments)
P = Total number of payments = 12 x 4 = 48 (For four years)
D = Amount borrowed = $39,950
The lost-rebate on a cash transaction is an opportunity cost and thus, is a finance charge for this loan transaction.
So, Finance charge F = $1,498 + $1,500 = $2,998
Substituting these values in the above formula for APR, we get:

APR = [(Y x ((95 x P) + 9) x F) / ((12 x P) x (P+1) x (4 x D+F))]

APR = [(12 x ((95 x 48) +9) x $2,998) / ((12 x 48) x (48+1) x ((4 x $39,950) + $2,998))]
= (12 x $13,697,862) / (28,224 x 162,798)
= $164,374,344 / $4,594,810,752
= 0.0357739094974 ;
= 3.57739094974 % or 3.60% (rounded)
Select the loan offered by the dealer as it has a lower adjusted cost than the loan offered by your credit union.
Question 1

The following business transactions and business events relate to Violet Chan's Business Consultancy Pty Ltd.  (10 marks)

June 2016 
1     Violet commences business with $15 000 given to her by her Aunt Kate
4     Purchased new computer for her business $1200 on credit
5     Received $500 for services rendered
6     Paid rent on office $400
7     Negotiated with Ingrid and Olivia possible casual employment contracts totalling $1500
8     Aunt Kate injected a further $2000 gift into Violet's business
9     Billed a client $500 for services rendered
10   Received an invoice for new reception desk $3400
15   Paid for telephone connection fee $65
16   Sent a quote for a large prospective job $4800
16   Paid gas charges $231
23   Received $250 for consultation work completed
28   Paid in full for the reception desk bought on 10 June 2013
30   Paid advertising $200

1. Prepare general journal entries for the above transactions

2.  Enter these transactions into ledger accounts for the business.

Journal entries
Date Accounts title and explanations
June 1, 2016 Cash
Capital
(to record owner's cash investment in the business)

June 4, 2016 Computer

Accounts Payable
(to record purchased of computer on account)

June 5, 2016 Cash

Service Revenue/Fees Revenue
(to record cash received for service rendered)

June 6, 2016 Rent Expense

Cash
(to record rent paid)

No Journal Entry (No Transaction yet since the contract is not

June 7, 2016 yet perfected)

June 8, 2016 Cash

Capital
(to record owner's cash investment in the business)

June 9, 2016 Accounts Receivable

Service Revenue/Fees Revenue
(to record billed client on account for service rendered)

June 10, 2016 Office Furniture

Accounts Payable
(to record purchased of office equipment on account)

June 15, 2016 Telephone Expense/Utilities Expense

Cash
(to record paid telephone bill)

No Journal Entry (Uncertain future event and no economic

June 16, 2016 outflow/inflow. No transaction to journalize)

Gas Expense/Utilities Expense

Cash
(to record paid gas bill)
June 23, 2016 Cash
Service Revenue/Fees Revenue
(to record cash received for service rendered)

June 28, 2016 Accounts Payable

Cash
(to record payment of office furniture purchased on account)

June 30, 2016 Advertising Expense

Cash
(to record advertising expense)
 Debit Credit Cash
$ 15,000 June 1 Capital 15,000 June 6 Rent 400
$ 15,000 June 5 Service fees 500 June 15 telephone 65
June 8 Capital 2,000 June 16 gas 231
June 23 Service fees 250 June 28 accounts payable 3,400
1,200 . June 29 advertising 200
1,200
June 30 Balance c/d 13,454
17,750 17,750
500
500

Capital
400 June 1 Cash 15,000
400 June 8 Cash 2,000
Balance 17,000

Account receivable
2,000 June 9 Service fees 500
2,000 Balance 500

Fees Revenue/Service Revenue

500 June 5 Cash 500
500 June 9 AR 500
June23 Cash 250
Balance 1,250
3,400
3,400 Computer
June 4 AP 1,200
Balance 1,200
65
65 Office Furniture
June 4 AP 3,400
Balance 3,400

Accounts payable
231 June 28 Cash 3,400 June 4 Computer 1,200
231 June 30 Balance b/d 1,200 June 10 Office furniture 3,400
4,600 4,600
 250 June 30 balance c/d 1,200
250
Rent Expense
June 4 Cash 400
3,400 Balance 400
3,400
Utilities Expense/ Telephone & Gas Expense
June 15 Cash-Telephone 65
200 June 16 Cash-Gas 231
200 Balance 296

Advertising
June 29 Cash 200
Balance 200
 Dec 31, 2020 Dec 31, 2021
Pretax GAAP income 500,000 388,000
Add: Rental Revenue 30,000 10,000
Less: Maintenance Expense -20,000 -15,000
Taxable income 510,000 383,000

Taxable income 510,000 383,000

Multiply: Tax rate 25% 25%
Income tax payable $ 127,500 $ 95,750

Date Account title and explanation Debit

Dec 31, 2020 Income Tax Expense [Balancing figure] $124,500
Deferred Tax Assets (30K x 30%) 9,000
Deferred Tax Liability (20K x 30%)
Income Tax Payable (510K x 25%)
(To record Income Tax Expense for the period.)

Dec 31, 2021 Income Tax Expense [Balancing figure] 117,900

Deferred Tax Liability 6,000
Deferred Tax Assets
Income Tax Payable
(To record Income Tax Expense for the period.)

Dec 31, 2022 Income Tax Expense [Balancing figure] $178,500

Deferred Tax Liability $4,200
Deferred Tax Assets
Income Tax Payable
(To record Income Tax Expense for the period.)
Dec 31, 2022
425,000

$588,000

$588,000
30%
$176,400

Credit

600
127,500

9,000
114,900

$6,300
$176,400