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ACC00724 Financial Statement of Ken Kennett Building Services Assignment 1 Answer

Accounting for Managers (ACC00724) S2, 2019

You should show all your calculations and word limit for the descriptive questions should not be more than 500 words.

Assignment 1 (20 Marks)

QUESTION 1 (10 Marks)

Ken Kennett Building Services is a local business operating in the housing industry. Ken Kennett has no formal accounting system and does not use financial statements for decision making. However, he is negotiating a contract with a supplier of building materials who wants to see his financial statements to ensure that Ken can meet his payments each month. Ken has asked you to prepare financial statements. Based on his last tax return and the content of his shoebox (where he keeps his invoices and receipts) for this year, you have recorded the following items:

Cash in the shoebox (with the receipts and invoices)     $500

Cash in the bank account    3,800

Building services provided550,000

Amounts owed by customers  80,000

Wages paid to employees150,000

Wages owed to the employees     3,500

Equipment  68,000

Building supplies used310,000

Building supplies on hand  18,000

Amounts owed to suppliers  30,000

Motor vehicle  32,000

Motor vehicle expenses    5,600

Electricity and telephone expenses    4,000

Cash used by Ken for personal expenditure    5,700

REQUIRED:

  1. Using the information above, prepare a statement of financial performance (income statement) and a statement of financial position (balance sheet) forKen Kennett Building Services. ( 6 Marks)
  2. How would the financial statements you provide help the supplier of building materials decide whether or not to trade with Ken? What parts of the financial statements would be positive indicators that Ken Kennett Building Services would be able to pay for supplies on time and what items may cause some concern for the suppliers? (4 Marks)

QUESTION 2 (10 Marks)

Clive Calmer offers accounting services to the local small business owners! He has set up a sole proprietorship business named CC Accounting. Clive has collected the following information relating to his business activities at the end of financial year:

Office supplies$1,500

Office supplies expense840

Telephone expense255

Motor vehicle expense330

Accounts receivable1,500

Bank loan7,500

Accounts payable 1,080

Cash at bank8,445

Computer equipment8,250

Advertising expense510

Accounting service income9,750

The following information was also disclosed from examining Clive’s bank statement:

Accounting service income receipts$8,250

Initial contribution by Clive3,300

Bank loan received9,000

Payments to suppliers 2,355

Repayment of loan1,500

Computer equipment purchase8,250

REQUIRED:

  1. Without preparing formal financial statements, calculate the following: (6 Marks)
  2. Profit/loss for the year
  3. Total assets at the end of the year
  4. Total liabilities at the end of the year
  5. Clive Calmer’s capital balance at the end of the year
  6. Net cash inflow/outflow for the year
  7. If Clive had withdrawn $3,000 in cash during the year, what effect would this have (increase, decrease, no effect) on the figures you calculated in requirement A? (4 Marks)

Answer

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