Surround Sound PTY LTD - Assignment Example

PROBLEM SET A 12.1
(a)
Surround Sound Pty Ltd
General Journal


Date
Particulars Post Ref. $
Debit $
Credit

May 2 Cost of Goods Sold 505 $4200
Inventory 120 $4200

Accounts Receivable 110 $6930
GST Collected
Sales 210
400
$693
$6237

3 Inventory
GST Paid 120
140 $8316
$924
Accounts Payable 200 $9240


5 Accounts Payable 200 $308
GST Paid
Inventory 140
120 $30.8
$277.2


9 Cash 100 $6791.4
Discount Allowed
500 $138.6

Accounts Receivable 110 $6930


10 Accounts Payable 200 $8932
Cash 100 $8753.36
Inventory
120 $178.64



11 Supplies 130 $1247.4
GST Paid
Cash 140
100 $138.6
$1386


12 Inventory 120 $3326.4
GST Paid
Cash 140
100 $369.6
$3696


15 Cash 100 $352
GST Paid
Inventory 140
120 $35.2
$316.8


20 Inventory
GST Paid 120
140 $2237.4
$248.6
Accounts Payable 200 $2486



21 Inventory 120 $346.5
GST Paid
Cash 140 $38.5
$385


24 Cost of Goods Sold 505 $6076
Inventory 120 $6076

Cash 100 $9548
GST Collected
Sales 210
400 $954.8
$8593.2

May 25 Inventory
GST Paid 120
140 $1386
$154
Accounts Payable 200 $1540



27 Accounts Payable 200 $2486
Cash 100 $2436.28
Inventory
120 $49.72



29 Sales Return & Allowances 405 $138.6
GST Paid
Cash 140
100 $15.4
$154

Inventory 120 $98
Cost of Goods Sold
505 $98

31 Cost of Goods Sold 505 $1568
Inventory 120 $1568

Accounts Receivable 110 $2464
GST Collected
Sales 210
400
$246.4
$2217.6



(b)
Cash 100
Initial Balance
$7000 May 10
May 11 $8753.36
$1386
May 9 $6791.4 May 12 $3696

May 15 $352 May 21 $385

May 24 $9548 May 27 $2436.28

May 29 $154

Balance $6880.76





Accounts Receivable 110
May 2 $6930 May 9 $6930

May 31 $2464
Balance $2464










Inventory 120

May 3
May 12
May 20
May 21
May 25
May 29



Balance $8316
$3326.4
$2237.4
$346.5
$1386
$98



$3043.94 May 2
May 5
May 10
May 15
May 24
May 27
May 31 $4200
$277.2
$178.64
$316.8
$6076
$49.72
$1568








Supplies 130
May 11 $1247.4

Balance
$1247.4


GST Paid 140
May 3 $924 May 5 $30.8
May 11
May 12
May 20
May 21
May 25
May 29

Balance $138.6
$369.6
$248.6
$38.5
$154
$15.4

$1822.7 May 15
$35.2









Accounts Payable 200
May 5
May 27 $308
$2486
May 3
May 10 $9240
$8932
May 20
May 25 $2486
$1540

Balance $19404





GST Collected 210
May 2
May 31 $693
$246.4

Balance $939.4






Share Capital 300
Ini. Balance $7000



Sales 400
May 2 $6237
May 24
May 311 $8593.2
$2217.6

Balance $17047.8




Sales Returns and Allowances 405
May 29

Balance $138.6

$138.6


Discount Allowed 500
May 29

Balance $138.6

$138.6



Cost of Goods Sold 505
May 2 $4200 May 29 $98

May 24 $6076
May 31 $1568
Balance $11746





(c)

Surround Sound Pty Ltd
Income statement (Partial)
(enter date/time period)


Sales $17047.8
Less: Sales Returns & Allowances $138.6
Less: Sales Discount

Net Sales

Cost of Goods Sold $138.6

$16770.76

$11746

GROSS PROFIT $5024.76





PROBLEM SET B 5.6

(a)
Zucchini Ltd
Condensed Statement of Financial Performance
(enter date/time period)
FIFO LIFO
Sales $665,000 $665,000
Cost of Goods Sold: $384,000 $402,000

Gross Profit:
$281,000
$263,000

Operating Expenses: $120,000 $120,000



Profit before tax: $161,000 $143,000
Income Tax: $48,300 $42,900


Profit after income tax $112,700 $100,100


Total Inventory: (10,000 x 3.5) + (40,000 x 4) + (60,000 x 4.2) + (20,000 x 4.5) = $537,000

Cost of Goods Sold (FIFO)
Total Units = 95,000
(10,000 x 3.5) + (40,000 x 4) + (45,000 x 4.2) = $384,000

Ending Inventory (FIFO) = Total Inventory – Cost of Goods Sold = 537,000 – 384,000 =153,000

Cost of Goods Sold (LIFO)
Total Units = 95,000
(20,000 x 4.5) + (60,000 x 4.2) + (15,000 x 4) = $402,000

Ending Inventory (LIFO) = Total Inventory – Cost of Goods Sold = 537,000 – 402,000 =$135,000


(b) Answers to questions:

(1) LIFO produces the most meaningful inventory amount for the statement of financial position. Since the ending inventory for FIFO will be higher, it will overestimate the size of balance sheet in the balance sheet
(2) FIFO produces the most meaningful representation of the income statement as it assumes that it will be selling those inventories first which are bought first. Whereas, under the LIFO method one can increase the cost of goods sold and decrease the income tax which is not reasonable.
(3) FIFO method is most likely to approximate the actual physical flow of the goods since inventories that have been bought first will be sold first and it is fair to assume as the cost of inventory increases, the company will also aim to raise its prices.
(4) (48,300 - 42,900) = $5,400
By deploying the LIFO method, the management will be able to exploit tax benefits since the LIFO method results in lower taxes in an increasing cost environment. Therefore, the management will be able to increase its cash flows by $5,400 by using the LIFO method. Read More