ncea level 2 accounting -...

NCEA LEVEL 2 ACCOUNTING By Elizabeth Pitu

2012

BOOK 2

Exercise Solutions

Exercise Solutions

NCEA Level 2 Accounting Accounts Receivable Solutions page 1

Example: – Aged Debtors’ Report – page 2

Aged Debtors’ Report

as at 1 April 2012

March February January December

M Jenkins 3,100 2,000

D Noble 700 900 500

J Zachos 600

A Michel 1,200

Totals 5,000 2,900 500 600

Example: – Kids Rags – page 5

Kids Rags Sales Journal

Date Debtor

Invoice

Total

Including

GST

GST

Sales

Excluding

GST

Freight

Excluding

GST

3-Apr Gold's Garments 4,416 576 3840

7-Apr Li and Co 2,208 288 1920

10-Apr Kids Plus 3,312 432 2880

14-Apr Gold's Garments 1,495 195 1200 100

21-Apr Green Scene 1,196 156 960 80

24-Apr Kids Plus 1,794 234 1440 120

30-Apr Li and Co 2,484 324 2160

Totals 16,905 2,205 14,400 300

Kids Rags Sales Returns Journal

Date Debtor

Credit Note

Total

Including

GST

GST

Sales

Excluding

GST

16-Apr Gold’s Garments 138 18 120

25-Apr Kids Plus 276 36 240

Totals 414 54 360

Kids Rags Cash Receipts Journal

Date Particulars Discount

Allowed Bank GST Sales

Accounts

Receivable

20-Apr Gold's Garments 260 3,000 -39 3,299

20-Apr Li and Co 1,000 1,000

24-Apr Green Scene 60 600 -9 669

29-Apr Kids Plus 1,500 1,500

320 6,100 -48 0 6,468


Kids Rags General Ledger

Accounts Receivable Control

1-Apr Balance 5,760 Dr

30-Apr Sales, Freight and GST 16,905 22,665 Dr

Sales Returns and GST 414 22,251 Dr

Bank, Discount Allowed and GST 6,468 15,783 Dr

Note: Sales total and Freight totals could be separated. Each would need to include GST. If combined the

particulars must clearly indicate that both sales and freight are included in the debit posting. Likewise

particulars for the payment must clearly indicate that the total includes discount allowed or discount

allowed and GST could be separated from the bank.

Alternative answer showing separate details for sales, freight, bank and discount allowed:



30-Apr Sales and GST 16,560 22,320 Dr

Freight and GST 345 22,665 Dr


Bank 6,100 16,151 Dr

Discount Allowed and GST 368 15,783 Dr

Kids Rags Accounts Receivable Subsidiary Ledger

Gold's Garments




16-Apr Sales Returns and GST 138 9,072 Dr

20-Apr Bank, Discount Allowed and GST 3,299 5,773 Dr

Li and Co



20-Apr Bank 1,000 3,000 Dr


Green Scene

1-Apr Balance 669 Dr


24-Apr Bank, Discount Allowed and GST 669 1,196 Dr

Kids Plus

10-Apr Sales and GST 3,312 3312 Dr


25-Apr Sales Returns and GST 276 4,830 Dr

29-Apr Bank, Discount Allowed and GST 1,500 3,330 Dr


Kids Rags

Schedule of Accounts Receivable

as at 30 April 2012

Gold's Garments 5,773

Li and Co 5,484

Green Scene 1,196

Kids Plus 3,330

Balance per Accounts Receivable Control 15,783

Note:

Labelling the total Balance per Accounts Receivable Control meets the requirement to understand

reconciliation of the accounts receivable subsidiary ledger with the accounts receivable control account.

By labelling the total students are indicating that they recognise that this total should agree with the balance

in the Accounts Receivable Control account. Students need to be encouraged to demonstrate this

understanding for Excellence. The end user needs to know that the subsidiary ledger agrees with the control.

Additional Exercises

Exercise One – page 10

Josephs Tents

Aged Debtors’ Report as at 1 April 2012

March February January December November

Takawe Tours 2,410 2,410

Green Camping 1,990

Outdoor Gear 3,270

Wilderness Store 3,300 1,650

Waitawheta Scouts 290 290

Awanui Journeys 2,100

4,800 3,560 5,710 1,650 1,990

Cash Receipts Journal

Date Particulars

Discount


Accounts

Receivable

7-Apr Waitawheta Scouts 290 290

7 Outdoor Gear 3,270 3,270

16 Awanui Journeys 87 2,000 -13 2,100

20 Takawe Tours 104 4,700 -16 4,820

21 Sales 4,540 592 3,948

24 Tui Tents 590 590

29 Wilderness Store 990 990

191 16,380 563 3,948 12,060


General Journal

30-Apr Bad debts 1,730.43

GST 259.57

G Green/Accounts Receivable 1,990.00

write off bad debt

7-May Awanui Journeys 290.00

Takawe Tours 290.00

correct error in processing invoice



30-Apr Tent Sales plus GST 10,350 28,060 Dr

Tent Repairs plus GST 1,380 29,440 Dr

Sales Returns plus GST 2,560 26,880 Dr

Bank, discount and GST 12,060 14,820 Dr

Bad debts and GST

1,990 12,830

Takawe Tours

1-Apr Balance 4,820.00 Dr

10 Sales, Repairs, GST 1,760.00 6,580.00 Dr

20 Bank, discount, GST 4,820.00 1,760.00 Dr

30 Repairs, GST 290.00 2,050.00 Dr

7-May Repairs error 290.00 1,760.00 Dr

Green Camping


30 Bad Debts, GST 1,990 0

Outdoor Gear


7 Sales, Repairs, GST 2,880.00 6,150.00 Dr

7 Bank, discount, GST 3,270.00 2,880.00 Dr

14 Sales, GST 3,470.00 6,350.00 Dr

16 Sales Returns, GST 1,200 5,150.00 Dr

Wilderness Store


25 Sales Returns, GST 1,360.00 3,590.00 Dr

29 Bank 990 2,600.00 Dr

Waitawheta Scouts

1-Apr Balance 580.00 Dr

7 Bank 290.00 290.00 Dr


Awanui Journeys


7 Repairs, GST 380.00 2,480.00 Dr

16 Bank, discount, GST 2,100.00 380.00 Dr

7-May Repairs error 290.00 670.00 Dr

Tui Tents

24-Apr Sales, GST 2,950.00 2,950.00 Dr

24 Bank 590.00 2,360.00 Dr

Schedule of Debtors

Takawe Tours 1,760.00

Outdoor Gear 5,150.00

Wilderness Store 2,600.00

Waitawheta Scouts 290.00

Awanui Journeys 670.00

Tui Tents 2,360.00

Balance per Accounts Receivable Control 12,830.00

Exercise Two – page 11

Kiwi Gardens Cash Receipts Journal



Accounts

Receivable

3-May Sales 824.00 107.48 716.52

S Bush 25.83 564.30 -3.87 594.00

4-May K Fell 34.78 1,120.00 -5.22 1,160.00

Sales 795.00 103.70 691.30

9-May Sales 349.00 45.52 303.48

10-May Sales 1,324.00 172.70 1,151.30

J Rose 600 600

60.61 5,576.30 420.30 2,862.61 2,354.00

Kiwi Gardens General Journal

4-May T Bell 340.00

K Fell 340.00

correct error in processing invoice

Bad debts 593.91

GST 89.09

C Rivers/Accounts Receivable 683.00

write off bad debt


Kiwi Gardens General Ledger


1-May Balance 4,634 Dr

12-May Sales and GST 1,052 5,686 Dr

Landscaping and GST 467 6,153 Dr


Bank, Discount and GST 2,354 3,737 Dr

Bad Debts and GST 683 3,054 Dr

Kiwi Gardens Accounts Receivable Subsidiary Ledger

T Bell

1-May Balance $1,027

4 Sales error 340 1,367

K Fell

1-May Balance $1,500

4 Sales error 340.00 1,160

4 Bank, discount, GST 1,160.00 -

J Rose

1-May Balance $830

3 Landscaping and GST 267.00 1,097

10 Sales and GST 238.00 1,335

Bank 600 735

11 Sales Returns and GST 28 707

C Rivers

1-May Balance $683

4 Bad debts and GST $683 -

S Bush

1-May Balance $594

3 Bank, discount, GST 594.00 -

7 Sales and GST 429.00 429

9 Sales returns and GST 34 395

A Li

7-May Sales, Landscaping and GST 585.00 585.00

Schedule of accounts receivable

T Bell 1,367

K Fell -

J Rose 707

S Bush 395

A Li 585.00

Balance per control 3,054


Exercise Three – page 13

Riverstone Aged Debtors' Report as at 1 June

May April March February

Garden Gurus $2,820 $1,790

Ground Control $2,000 $2,400

Green Space $2,590 $570

Green Scape $1,800 $1,700

Nature's Garden $2,600

$8,010 $4,360 $4,200 $1,700

Riverstone Cash Receipts Journal



Accounts

Receivable

3-Jun Sales 3,620.00 472.17 3,147.83

Nature's Garden 113.04 2,470.00 -16.96 2,600.00

Garden Gurus 122.61 4,469.00 -18.39 4,610.00

5-Jun Sales 4,170.00 543.91 3,626.09

Green Space 95.65 2,660.00 -14.35 2,770.00

9-Jun Green Scape 700.00 700.00

10-Jun Sales 3,740.00 487.83 3,252.17

Ground Control 3,000.00 3,000.00

11-Jun Green Planet 522.00 522.00

331.30 25,351.00 1,454.22 10,026.09 14,202.00

Riverstone General Journal

4-Jun Green Scape 390

Green Space 390

12-Jun Green Scape 30

Overdue Fees 30

Riverstone General Ledger


1-Jun Balance 18,270.00 Dr

12-Jun Sales and GST 5,840.00 24,110.00 Dr

Sales returns and GST 390.00 23,720.00 Dr

Overdue Fees 30.00 23,750.00 Dr

Bank, discount and GST 14,202.00 9,548.00 Dr

NOTE: Bank and Discount plus GST can be separate


Accounts Receivable Subsidiary Ledger

Garden Gurus


3 Bank, discount and GST 4,610.00 -

7 Sales 1,270.00 1,270.00 Dr

Ground Control


3 Sales 1,040.00 5,440.00 Dr

9 Sales 850.00 6,290.00 Dr

10 Bank 3,000.00 3,290.00 Dr

11 Sales returns 250.00 3,040.00 Dr

Green Space


4 Sales error 390.00 2,770.00

5 Bank, discount and GST - 2,770.00 - Dr

Green Scape


4 Sales error 390.00 3,890.00

9 Bank 700.00 3,190.00 Dr

12 Overdue fees 30.00 3,220.00 Dr

Nature's Garden

1-Jun Balance $2,600 Dr

3 Bank, discount and GST 2,600.00 -

7 Sales 940.00 940.00 Dr

9 Sales Returns 140.00 800.00 Dr

Green Planet

11-Jun Sales 1,740.00 1,740.00 Dr

3 Bank, discount and GST 522.00 1,218.00 Dr

Schedule of Debtors

Garden Gurus 1,270.00

Ground Control 3,040.00

Green Space -

Green Scape 3,220.00

Nature’s Garden 800.00

Green Planet 1,218.00

Balance per control 9,548.00


Exercise Four – page 14

Part A

There is plenty of information on which to base a class discussion about how Keri manages her debtors. As

she deals with motels, which are businesses, bad debts are not her major concern.

Students could discuss efficiency such as emailing customers, receiving payment weekly, being helpful in

dealing with complaints etc. They could discuss that weekly payments allow Keri to pay cash for fresh local

breakfast ingredients keeping her costs down.

Eg: she might go to the local market to source fresh free range eggs and need cash to pay. Having received

the cash from her motel customers she has it to pay for her ingredients.

Part B

Example of a manual solution. This exercise was actually designed to be completed using accounting

software so the solution is a little artificial.

Note the discounted breakfasts have been rounded to the nearest $ and could be combined with the

breakfast sales on 16 January for Seaside Motel as they were recorded on the one invoice.

Seaside Motel

9-Jan Breakfast sales 1124 1124 Dr

10-Jan Bank 1124 0 Dr


Breakfast sales discounted 57 1180 Dr

Oceanview Motel


10-Jan Bank 1932 0


Beach Motel


10-Jan Bank 710 0


Sandbar Motel


10-Jan Breakfast returns 82 1464

11-Jan Bank 1464 0


Exercise Solutions

NCEA Level 2 Accounting Inventory Processing Solutions page 13

Example – page 21

Starting point

600 pairs of gumboots on hand at $12.00 excluding GST

General Ledger

Inventory-Gumboots

01/04/12 Balance 7,200 Dr

Transaction One – a credit purchase of inventory – page 21

2/04/12 Purchased 100 gumboots at $13.80 including GST each on credit.

General Journal

02/04/12 Inventory-Gumboots 1,200

GST 180

Accounts Payable 1,380

Credit purchase of inventory

Explanation

We debit inventory (not purchases) as it is increasing, we debit GST (liability) because it is decreasing.

Accounts Payable or the suppliers name is credited with the GST inclusive amount. This liability is

increasing .

General Ledger

Inventory-Gumboots

01/04/12 Balance 7,200 Dr

02/04/12 Accounts Payable 1,200 8,400 Dr

Accounts Payable

01/04/12 Balance 4,000 Cr

02/04/12 Inventory-Gumboots plus GST 1,380 5,380 Cr

GST

01/04/12 Balance 3,000 Cr

02/04/12 Accounts Payable 180 2,820 Cr


Transaction Two – a credit sale of inventory – page 22

4/04/12 Sold 200 gumboots for $23 including GST each on credit.

The gumboots cost the business $12 excluding GST each

General Journal

04/04/12 Cost of Goods Sold-Gumboots 2,400

Inventory-Gumboots 2,400

Transfer of cost of goods sold

04/04/12 Accounts Receivable 4,600

GST 600

Sales-Gumboots 4,000

Credit sale recorded

Explanation

In the first entry we credit inventory as it is decreasing and as this is an internal transfer there is NO GST to

record – the amount recorded is thus GST exclusive. Cost of goods sold is debited as it is an expense

increasing.

In the second entry we debit Accounts Receivable (credit sale) or bank (cash sale) with the GST inclusive

amount. We then credit GST as the liability is increasing and credit sales with the GST exclusive amount

as the income is increasing.

General Ledger

Inventory-Gumboots

01/04/12 Balance 7,200 Dr


04/04/12 Cost of goods sold-Gumboots 2,400 6,000 Dr

Cost of Goods Sold-Gumboots

04/04/12 Inventory 2,400 2,400 Dr

Accounts Receivable

01/04/12 Balance 5,400 Dr

04/04/12 Sales-Gumboots plus GST 4,600 10,000 Dr

Sales-Gumboots

04/04/12 Accounts Receivable 4,000 4,000 Cr

GST

01/04/12 Balance 3,000 Cr


04/04/12 Accounts Receivable 600 3,420 Cr


Transaction Three – a purchase return to a supplier – page 23

Purchase return 5 pairs of gumboots at $13.80 including GST

General Journal

05/04/12 Accounts Payable 69

GST 9

Inventory-Gumboots 60

Purchase returns recorded

Explanation

As this is a purchase return it is the reverse of the purchase entry above. In the General Ledger we will now

have you complete the accounts to show the return:

General Ledger

Inventory-Gumboots

01/04/12 Balance 7,200 Dr



05/04/12 Accounts Payable 60 5,940 Dr

Accounts Payable

01/04/12 Balance 4,000 Cr

02/04/12 Inventory-Gumboots plus GST 1,380 5,380 Cr

05/04/12 Inventory-Gumboots plus GST 69 5,311 Cr

GST

01/04/12 Balance 3,000 Cr





Transaction Four – a sales return from a credit customer – page 24

9/04/06 – Wrote a credit note for a customer for 15 gumboots sold on 4/04/06.

Look back – These goods cost us $12 each excluding GST. The total amount to remove from cost of goods

sold is $180. We sold these units at $23 including GST each. The total amount of the return including GST

is $345. As with a sale, a sales return requires two entries – one for the cost of the goods excluding GST,

one for the selling price of the goods including GST with the GST being reversed.

General Journal

09/04/12 Inventory 180

Cost of goods sold-Gumboots 180

To record cost of the goods returned to the business

09/04/12 Sales Returns-Gumboots 300

GST 45

Accounts Receivable 345

sales returns recorded at selling price

General Ledger

Inventory-Gumboots

01/04/12 Balance 7,200 Dr




09/04/12 Cost of goods sold-Gumboots 180 6,120 Dr

Cost of Goods Sold-Gumboots

04/04/12 Inventory-Gumboots 2,400 2,400 Dr

09/04/12 Inventory-Gumboots 180 2,220 Dr

Accounts Receivable

01/04/12 Balance 5,400 Dr

04/04/12 Sales-Gumboots plus GST 4,600 10,000 Dr

09/04/12 Sales returns-Gumboots plus GST 345 9,655 Dr

Sales Returns-Gumboots

09/04/12 Accounts Receivable 300 300 Dr

GST

01/04/12 Balance 3,000 Cr






Ending point – a stock shortage – page 26

General Journal

12/04/12 Inventory Shortage 24

Inventory 24

To record a shortage of inventory after stock-take

General Ledger

Inventory-Gumboots

01/04/06 Balance 7,200 Dr




09/04/12 Cost of goods sold-Gumboots 180 6,120 Dr

12/04/12 Inventory shortage 24 6,096 Dr

Inventory Shortage

12/04/12 Inventory-Gumboots 24 24 Dr

In the general journal we have this entry – GST could be rounded

General Journal

Drawings 41.40

Inventory-Gumboots 36.00

GST 5.40

Took home 15 gumboots for personal use

Inventory-Gumboots

01/05/12 Balance 6,096 Dr

03/05/12 Drawings 36 6,060 Dr

Drawings

03/05/12 Inventory-Gumboots 36.00 36.00 Dr

GST 5.40 41.40 Dr

Note the inventory and GST could be shown as one total in the drawings account. GST could be rounded

for convenience.


Exercise Five – Drawings – page 27

General Journal

06/10/12 Drawings 184

Inventory 160

GST 24

Took a bat for personal use

Inventory

01/10/12 Balance 5,600 Dr

06/10/12 Drawings 160 5,440 Dr

Drawings

06/10/12 Inventory 160 160 Dr

GST 24 184 Dr

Revaluation Example – page 28

General Journal

31/03/12 Write down of inventory 11,000

Inventory 11,000

Revalue dated tops from $15,000 to their net realisable value of $4,000

Inventory

31/03/12 Balance 62,000 Dr

Write down of inventory 11,000 51,000 Dr

Write down of Inventory

31/03/12 Inventory 11,000 11,000 Dr

Exercise Six – page 29

General Journal

31/03/12 Write down of inventory 3,000

Inventory 3,000

Revalue jewellery to its net realisable value below cost

Inventory

31/03/12 Balance 47,000 Dr

Write down of inventory 3000 44,000 Dr

Write down of Inventory

31/03/12 Inventory 3,000 3,000 Dr


Exercise Seven – page 29

a) Complete the general journal and general ledger accounts below. You will need to enter the

opening balances.

General Journal

31/03/12 Cost of goods sold 1,300

Inventory 1,300

Revalue calendars to net realisable value below cost

Inventory

31/03/12 Balance 17,000 Dr

Cost of goods sold 1,300 15,700 Dr

Cost of goods sold

31/03/12 Balance 194,600 Dr

Inventory 1,300 195,900 Dr

A little bit of Theory:

b) State the amount that will be reported in the income statement for cost of goods sold.

$195,600

c) State the amount that will be reported in the statement of financial position for inventory.

$15,700

d) Explain in terms of the recognition criteria of an asset why the diaries and calendars need to

be reported at $700 instead of $2,000.

The recognition criteria require assets to be reported at their probable future economic benefit that has

a reliable measure. The probable cash from the diaries and calendars is now below their cost as they

are out of date so the $700 needs to be the amount at which they are reported. It faithfully represents

(reliable) the diaries and calendars, as the business knows dated diaries and calendars cannot be sold

above cost after 3 months into the year.


Calculation of the Cost of Inventory

Example One – Weighted Average – page 31

Taku Teddies Inventory Card - weighted average

Date Particulars IN OUT BALANCE

No. @ $ No. @ $ No. @ $

Jun-01 Balance 2,000 $12.00 24,000

Jun-07 Sale/K Mar 1,800 $12.00 21,600 200 $12.00 2,400

Jun-18 Purchase/Kidz Supply 3,000 $8.00 24,000 3,200 $8.25 26,400

Jun-20 Sale/Toytime 2,500 $8.25 20,625 700 $8.25 5,775

Jun-26 Purchase Return 75 $8.00 600 625 $8.28 5,175

Jun-28 Purchase/Kidz Supply 2,375 $9.00 $21,375 3,000 $8.85 26,550

Jun-29 Sale Bearhug 1,400 $8.85 12,390 1,600 $8.85 14,160

Drawings 20 $8.85 177 1,580 $8.85 13,983

Jun-30 Shortage 4 $8.85 35 1576 $8.85 13,948

Example Two – First-In First-Out – page 32

Taku Teddies Inventory Card - FIFO


No. @ $ No. @ $ No. @ $

Jun-01 Balance 2,000 $12.00 24,000

Jun-07 Sale 1,800 $12.00 21,600 200 $12.00 2,400

Jun-18 Purchase/Kidz Supply 3,000 $8.00 24,000 200 $12.00 2,400

3,000 $8.00 24,000

Jun-20 Sale/Toytime 200 $12.00 2,400

2,300 $8.00 18,400 700 $8.00 5,600

Jun-26 Purchase Return 75 $8.00 600 625 $8.00 5,000

Jun-28 Purchase/Kidz Supply 2,375 $9.00 21,375 625 $8.00 5,000

2,375 $9.00 21,375

Jun-28 Sale/Bearhug 625 $8.00 5,000

775 $9.00 6,975 1,600 $9.00 14,400

Drawing 20 $9.00 180 1,580 $9.00 14,220

Jun-30 Shortage 4 $9.00 36 1,576 $9.00 14,184

From the FIFO card

Purchase of Taku Teddies General Journal entry

Inventory 45,375

GST 6,806



Example Two (continued) – Journals – page 33

Sale of Taku Teddies General Journal entries (remember two entries!)

Cost of goods sold 54,375

Inventory 54,375

Accounts Receivable 131,100

Sales 114,000

GST 17,100

Return of Taku Teddies to supplier General Journal entry

Accounts Payable 690

Inventory 600

GST 90

Drawings of Taku Teddies General Journal entry

Drawings 207

Inventory 180

GST 27

Inventory Shortage General Journal entry

Inventory Shortage 36

Inventory 36

Exercise Eight – (written answers required) – page 33

a) Explain how the perpetual inventory system allows Teddy Treasures to identify inventory

shortages or stolen inventory.

The perpetual inventory system keeps a record of all movements of inventory on an inventory card or

file for each item of inventory stocked by the business. This means that there is a record at any time of

the quantity of an item of inventory that should be on the shelves. When a stock take (count of the

inventory item) is done, this can be compared to the records of what should be on hand and if the stock

take count is less than the records show there is a shortage or missing or stolen inventory.

b) Explain how re-order points and quantities can be established and how they benefit Teddy

Treasures.

Re-order points can be established as a quantity on hand that the inventory item should not fall below –

such as 5 teddies, so when the records show this point is reached more of that item can be ordered. The

re-order quantity – the best quantity to re-order can also be established and in a computer system a

purchase order can be automatically generated for the re-order quantity when then re-order point is

reached. This means Teddy Treasures will always have sufficient quantities of each item of inventory on

hand – it will not run short of demand from customers.


c) Explain why Teddy Treasures can complete an Income Statement at any time. What

advantage does this offer Teddy Treasures.

An income statement can be completed at any time with a perpetual inventory system as the cost of

goods sold is available – cost of goods sold is recorded with each sale – and therefore gross profit can be

determined without the need for a stock take. The advantage of this is that trends in gross profit (and

profit) can be determined on a regular basis – such as monthly so that any problems may be highlighted

before the end of the year or decisions made regarding inventory purchases and sales on a monthly basis.

d) Explain why most businesses use a computer and accounting software package when they

have a perpetual inventory system in place.

Inventory files require a lot of information to be held and up-dated with each purchase and sale of

inventory and each item of inventory requires its own file – this is much easier to manage with a

software package designed to keep control accounts automatically up-to-date as well as all the inventory

files with each sale and purchase of each item of inventory. Also if cost is determined using weighted

average the computer can hold the actual weighted average price (doesn’t need to round it) as you do

with a manual system.

e) State what items of information Teddy Treasures should include on its inventory cards to

ensure it makes the most of its perpetual inventory system.

It should include inventory codes, usual supplier, buying price, selling price, re-order points and re-order

quantities. These all make the perpetual inventory system work smoothly and take advantage of the

ability to re-order when quantities dictate.

f) Explain the main disadvantage of a perpetual inventory system using manual recording.

If the business has a large number of items of inventory there is a lot of recording to do and this is time

consuming and costly in terms of administrative staff time / salary and if weighted average is used to

determine costs the weighted average prices quickly become complex numbers or require rounding.

Exercise Nine – Taku Teddies Weighted Average Card – page 34

General Journal

(from weighted average card)

Jun-26 Accounts Payable 690

Inventory 600

GST 90

purchase return

Jun-28 Inventory 21,375

GST 3,206


purchase of inventory

Jun-29 Cost of goods sold 12,390

Inventory 12,390

Cost of goods sold

Accounts Receivable - Bearhug 32,200

Sales 28,000

GST 4,200

sale on credit

Drawings 199

GST 22

Inventory 177

Drawings of inventory


Exercise Ten – 90223 exam question 2005 – page 35

a) Record on the inventory card the following transactions for Accounting Revision Books in

July.

July 5 – Sold 25 Accounting Revision Books to Hukanui College on credit for $18.40

each including GST.

July 8 – Purchased 200 Accounting Revision Books for $8.74 each excluding GST.

July 9 – Jamie returned 10 Accounting Revision Books purchased on 8 July.

Bookworks Inventory Card

Product: Accounting Revision Books

Date Particulars In Out Balance

2011

No @ $ No @ $ No @ $

July 4 Balance 15 8 120

50 8.40 420

15 8 120

10 8.40 84 40 8.40 336

July 8 Purchase 200 8.74 1748 40 8.40 336

200 7.60 1520

July 9 Purchase Returns 10 8.74 87.74 40 8.40 336

190 8.74 1,661

b) Show the General Journal entries to record the sale of the Accounting Revision Books on

July 5.

05/07/11 Cost of goods sold 204

Inventory 204

Accounts Receivable 460

Sales 400

GST 60

c) Show the General Journal entry to record, as Drawings, the puzzles taken home by Jamie for

family birthday presents. Narrations are not required.

22/07/11 Drawings 92

Inventory 80

GST 12

Took puzzles home


d) Show the General Journal entry to record the re-measurement of the cook books to their net

realisable value. Narrations are not required.

22/07/11 Write down of inventory 320

Inventory 320

e) Explain WHY Jamie can prepare an Income Statement for Bookworks without having to

perform a stock take.

Jamie has the cost of goods sold available on the stock cards so he can calculate gross profit without

having to physically count his stock. This means he can complete his income statement.


Additional Exercises

Exercise Eleven – Includes Returns and Shortages – page 37

1. Unique Bats

General Journal


Inventory 40,000

Cost of bats sold

Sportsworld (Accounts Receivable) 92,000

Sales 80,000

GST 12,000

Sale of bats on credit

04/09/12 Inventory 96,000

GST 14,400


Purchase of bats on credit

05/09/12 Accounts Payable 18,400

Inventory 16,000

GST 2,400

Return of bats to supplier

06/09/12 Inventory 8,000


Cost of bats returned to the business

Sales returns 16,000

GST 2,400

Sportsworld (Accounts Receivable) 18,400

Sales return recorded at selling price


Inventory 28,800

Cost of bats sold

Bank 66,240

Sales 57,600

GST 8,640

Sale of bats for cash at selling price

12/09/12 Inventory shortage 320

Inventory 320

Inventory shortage recorded

30/09/12 Cost of goods sold 320

Inventory shortage 320

Transfer inventory shortage on balance day


2.

General Ledger

Inventory

01/09/12 Balance 64,000 Dr

02/09/12 Cost of goods sold 40,000 14,000 Dr






Cost of Goods Sold

06/09/12 Inventory 40,000 40,000 Dr

09/09/12 Inventory 8,000 32,000 Dr


Inventory shortage

09/09/12 Inventory 320 320 Dr

30/09/12 Cost of goods sold 320 0


Exercise Twelve – Anita’s Allsorts – page 39

Anita’s Allsorts General Journal

31/03/12 Inventory 16,000

GST 2,400


Purchase of inventory on credit


Inventory 1,000

GST 150

Returns of inventory to supplier


Sales 33,600

GST 5,040

Credit sale of inventory


Inventory 14,000

Cost of goods sold (on credit)

Sales Returns 2,880

GST 432


Sales returns of inventory

Inventory 1,200

Cost of Goods Sold 1,200

Cost of goods returned by credit customers

Drawings 230

GST 30

Inventory 200

Drawings of inventory

Cost of Goods Sold 360

Inventory 360

Write down of inventory to net realisable value


Anita’s Allsorts General Ledger

Inventory

01/03/12 Balance 8,000 Dr


Accounts Payable 1,000 23,000 Dr

Cost of Goods Sold 14,000 9,000 Dr

Cost of Goods Sold 1,200 10,200 Dr

Drawings 200 10,000 Dr

Cost of Goods Sold (write down) 360 9,640 Dr

Cost of Goods Sold

31/03/12 Inventory 14,000 14,000 Dr


Inventory (write down) 360 13,160 Dr

Sales

31/03/12 Accounts Receivable 33,600 33,600 Cr

Sales Returns

31/03/12 Accounts Receivable 2,880 2,880 Dr

Accounts Receivable

01/03/12 Balance 27,000 Dr

31/03/12 Sales and GST 38,640 65,640 Dr

Sales returns and GST 3,312 62,328 Dr

Drawings

31/03/12 Inventory plus GST 230 230 Dr


Exercise Thirteen – Includes drawings, write down of inventory, shortage – page 41

General Journal


Inventory 20,000

Cost of goods sold

Powerplus (Accounts Receivable) 40,250

Sales 35,000

GST 5,250

Sale of goods on credit

Inventory 16,000

GST 2,400

XYZ Ltd (Accounts Payable) 18,400

Purchase of goods on credit

Drawings 322

Inventory 280

GST 42

Inventory taken home for personal use

XYZ Ltd (Accounts Payable) 1,380

Inventory 1,200

GST 180

Goods returned to the supplier

Inventory 800

Cost of goods sold 800

Cost goods returned

Sales returns 1,400

GST 210

Powerplus (Accounts Receivable) 1,610

Sales return recorded at selling price

Cost of Goods Sold 2,800

Inventory 2,800

Write down of inventory to net realisable value

Inventory shortage 200

Inventory 200

Inventory shortage recorded


General Ledger

Inventory

Balance 120,000 Dr

Cost of goods sold 20,000 100,000 Dr

XYZ Ltd (Accounts Payable) 16,000 116,000 Dr

Drawings 280 115,720 Dr

XYZ Ltd (Accounts Payable) 1,200 114,520 Dr

Cost of goods sold 800 115,320 Dr

Cost of goods sold (write down) 2,800 112,520 Dr

Inventory shortage 200 112,320 Dr

Cost of Goods Sold


Inventory 800 19,200 Dr

Inventory (write down) 2,800 22,000 Dr

Drawings

Inventory 280 280 Dr

GST 42 322 Dr

Inventory Shortage

Inventory 200 200 Dr


Exercise Fourteen – Perpetual Inventory Card – page 43

Toy Trains inventory card - weighted average


No. @ $ No. @ $ No. @ $

Jun-1 Balance 1,000 $6.00 6,000

5 Sale/Toy Land 750 $6.00 4,500 250 $6.00 1,500

7 Toy Land return 50 $6.00 300 300 $6.00 1,800

11 Purchase/Toy Depot 2,700 $5.00 13,500 3,000 $5.10 15,300

15 Sale/Bank 1,800 $5.10 9,180 1,200 $5.10 6,120

22 Purchase/Toy Depot 800 $6.00 4,800 2,000 $5.46 10,920

27 Sale/Toy Town 1,450 $5.46 7,917 550 $5.46 3,003

29 Drawings 3 $5.46 16 547 $5.46 2,987

30 Sales error 50 $5.46 273 597 $5.46 3,260

Model Planes Inventory Card - Weighted average


No. @ $ No. @ $ No. @ $

Jun-1 Balance 1,200 24.00 28,800

5 Sale 800 24.00 19,200 400 24.00 9,600

11 Purchase 2,000 26.00 52,000 2,400 25.67 61,600

13 Purchase Returns 150 26.00 3,900 2,250 25.64 57,700

15 Sale 1,200 25.64 30,773 1,050 25.64 26,927

19 Sales Returns 100 25.64 2,564 1,150 25.64 29,491

22 Purchase 1,300 25.00 32,500 2,450 25.30 61,991

27 Sales 1,600 25.30 40,484 850 25.30 21,507

29 Drawings 5 25.30 127 845 25.30 21,381

30 Sales errror 50 25.30 1,265 795 25.30 20,115


Exercise Fifteen – page 44

Kiwi Soft Toy


Jun No. @ $ No. @ $ No. @ $

1 Balance 600 10.00 6,000

2 Sales 300 10.00 3,000 300 10.00 3,000

4 Purchase 800 10.40 8,320 300 10 3,000

800 10.40 8,320

12 Sales 300 10.00 3,000

450 10.40 4,680 350 10.40 3,640

13 Sales return 2 10.40 21 352 10.40 3,661

17 Purchase 1,000 10.20 10,200 352 10.40 3,661

1,000 10.20 10,200

21 Sale 352 10.40 3,661

248 10.20 2,530 752 10.20 7,670

27 Sale error 10 10.20 102 742 10.20 7,568

30 Shortage 1 10.20 10 741 10.20 7,558

General Journal

13/6 Inventory 21

Cost of Goods Sold 21

Reverse cost of goods sold for 2 kiwi returned

Sales Returns 40

GST 6

Bank 46

Cash refund for 2 kiwi returned

30/6 Inventory shortage 10

Inventory 10

Record 1 kiwi missing


Pukeko Soft Toy


Jun No. @ $ No. @ $ No. @ $

1 Balance 500 8.00 4,000

2 Sales 350 8.00 2,800 150 8.00 1,200

4 Purchase 900 7.50 6,750 150 8.00 1,200

900 7.50 6,750

12 Sales 150 8.00 1,200

450 7.50 3,375 450 7.50 3,375

17 Purchase 800 8.00 6,400 450 7.50 3,375

800 8.00 6,400

18

Purchase

return 45 8.00 360 450 7.50 3,375

755 8.00 6,040

21 Sale 450 7.50 3,375

40 8.00 320 715 8.00 5,720

24 Drawings 3 8.00 24 712 8.00 5,696

27 Sale error 10 8.00 80 722 8.00 5,776

General Journal

2/6 Cost of Goods Sold 2,800

Inventory 2,800

Transfer cost of 350 pukeko to cost of goods sold

Bank 6,440

Sales 5,600

GST 840

Cash sale of 350 pukeko

30/6 Drawings 28

GST 4

Inventory 24

Took 3 pukeko home for family

Note: GST rounded for drawings. If not drawings $27.60, GST $3.60.

ncea level 2 accounting -...

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