• +44-190-022-0819 +44-190-022-0819
  • +1-248-268-9041 +1-248-268-9041
  • +61288800241 +61288800241

SEARCH SOLUTION

Search your solution from list of 1000+ questions

25-01-2018

WONDERLAND CONSTRUCTION SUPPLIES – Introduction

1.1 Introduction

A. Wonderland is the sole proprietor of Wonderland Construction Supplies - a GST-registered independent building and construction materials business that began operations on 2 July 2016. The business focuses mostly on supplying small builders with construction and renovation materials.  

A. Wonderland is an astute business owner who prides herself on delivering an excellent service whilst aiming to grow a profitable and successful business. Towards the end of the financial year, A. Wonderland employed some staff including a bookkeeper. With the new bookkeeper, the business is implementing a cloud-based accounting system. However, until the end of the financial year, A. Wonderland is continuing with the MS Excel spreadsheet system that she has been using to record the accounting transactions and manage her accounts and financial reports.

1.2 Accounting policies and other details

Like all Australian businesses, Wonderland Construction Supplies uses the financial year: 1 July to 30 June, withholds PAYG for its employees, and pays GST on sales to the Australian Government. The business uses a GST paid (Asset account) and GST collected (Liability account) to record its GST. Unless otherwise stated, assume all transaction amounts are inclusive of GST (10%).

A. Wonderland makes an annual withdrawal of funds from the business for private purposes.

Wonderland Construction Supplies uses the Accounts listed in the Chart of Accounts (please note, the Accounts in italics in the Chart of the Accounts template will be used in Task 2B only).

The following details on the accounting policies adopted by the business are required for Task 2B:

A. Wonderland uses the accrual accounting method.

A. Wonderland uses a perpetual inventory system using weighted average.

A. Wonderland is preparing an annual Business Activity Statement (BAS) in this first year of its operation (based on its declaration to the ATO that it will earn less than the $75 000 threshold) , and will remit the net GST liability due to the ATO following the end of the financial year (July 2017).

Wonderland Construction Supplies depreciates furniture using reducing balance method at the rate of 30%.

Fortnightly wages, from June 2017, are paid on the Wednesday for the previous fortnight. Employees work Monday to Friday.  On 5/7/17, M Hatter and C Cheshire will be paid a full fortnight’s pay for work 19/6/17 to 30/6/17.

Doubtful debts are adjusted at 30 June each year, such that the provision equates to 5% of Accounts Receivable balance at the end of the year. 

1.3 The business records the following transactions in the accounts

1.4 Chart of Accounts:

Wonderland Constructions Supplies Chart of Accounts are shown below. (Please note, the Accounts in italics in the Chart of the Accounts template will be used in Task 2B only when completing the adjustments and closing entries).

A. Wonderland is eager to understand more about how her business has performed this year. Her research reveals that some local competitors, operating a similar business model, are reporting financial ratios in the following ranges:

Current ratio: 1.5-2.7

Gross Profit Percentage: 38-43%

How does Wonderland Construction Supplies compare?

1.5 July 2016 and June 2017 calendar dates:

JULY 16

 

 

 

 

 

 

Mon

Tue

Wed

Thu

Fri

Sat

Sun

 

 

 

 

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

29

30

31

 

 

 

 

 

 

 

JUNE 17

 

 

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

29

30

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1.6 Journals and Ledgers

The business uses the following journals and ledgers:

General Journal  -     to record all transactions (including Adjustments and Closing entries in Task 2B)

General Ledger  -     all GJ entries are posted to the General Ledger (please note, do not post closing entries of Task 2B)

Worksheet -     to record adjustments and changes to the accounts when preparing the Adjusted Trial Balance

Sample of worksheet below:

Unadj Trial Balance – copied in as values (see below).

Adj Trial Balance should be the same as the final Trial Balance sheet. Check totals

1.7 Financial Reports

The business uses the following Financial Statements

Balance Sheet  -  Assets, Liabilities, Owners’ Equity

Income Statement-  Revenue, Expenses, Goss/Net Profit or Loss

Statement of Changes in Equity - Capital, Drawings

2.Task 2A Requirements

(Use the Task 2A template. Make adjustments as required including using formulas and links.)

Task 2B is made up of an Excel document that shows the accounts and financial reports for the entire accounting cycle for the business AND a Word document containing the financial report.

  1. Prepare the General Journal entries for the Transactions that occurred July 2016-June 2017. Transactions are listed above at 1.3. Use the accounts listed in the Chart of Accounts at 1.4.

  2. Post the GJ entries to the General Ledger. Enter names for the ledger accounts and add accounts to the template as necessary. Link the transaction amounts to the GJ values. (Please note, the template uses a running balance method. Create the formulas and links for these.)

  3. Prepare a Trial Balance as at 30 June 2017 by linking to the ledger accounts. It will be a live Trial Balance but at this point it is unadjusted as it does not include the Adjustments which will be created in Task 2B.

Adjustments (Adjustments DO NOT involve cash or GST)

Wonderland Construction Supplies must record the following end of year adjustments:

  1. Physical stocktake of supplies revealed Supplies used for the period: $365

  2. Wages earned by M Hatter and C Cheshire for the fortnight 19/6/17 to 30/6/17 will be paid on 5/7/17. (Assume they earned the same fortnightly rate as the previous fortnight.)

  3. Insurance paid on Oct 2 covers period 1 Oct 2016-30 Sept 2017. Adjust for the prepaid portion. (Note, insurance invoice total previously recorded as expense.)

  4. Calculate the Provision for Doubtful Debts and record the adjustment.

  5. Calculate the furniture depreciation using the 30% reducing balance method and record the adjustment.

  6. End of year stocktake reveals $680 worth of damaged stock. Record the adjustment to inventory

Excel Analysis of Accounting Cycle

Requirement - complete the following in an excel document:

  1. Make corrections identified in your feedback to Task 2A and save it as Task 2B. Check that the General Journal, General Ledger, and Trial Balance figures are correct.

  2. Open the Task 2B template and copy the Adjustments and Closing templates from the General Journal tab into row 185 (or below) of your General Journal sheet.

  3. Copy the Worksheet and Financial Statement sheets into your Task 2B file.

  4. Using the Worksheet – copy your Trial Balance figures into the Worksheet in columns B and C. VERY IMPORTANT - copy these as VALUES (using Paste Special).

  5. Prepare the Adjustment General Journal entries for the adjustments listed above at 1.3 (a. to f.). Enter these into both the Worksheet (in columns E and F) and the General Journal.

  6. Post the adjustment journal entries to the General Ledger using new accounts as necessary. (This will change the figures in your Trial Balance but not your Unadjusted Trial Balance in your Worksheet. Check this.)

  7. Prepare the Closing General Journal entries but DO NOT post to the Ledger. For closing:

  • debit revenue accounts and credit P& L Closing Account;

  • credit all expense accounts and debit P& L Closing Account;

  • debit P & L Closing Account (if a profit) and credit Capital account;

  • credit Drawings and debit Capital account

  1. Finalise the Worksheet – return to the Worksheet to calculate balances in the Adjusted Trial Balance (columns H and I). (Check the Adj Trial Balance figures in columns X and Y with the account balances in the Trial Balance – they should be the same.)

  2. Prepare the Financial Statements – In the Worksheet, copy or link across the appropriate figures to the Income Statement columns and to the Balance Sheet columns.  Then take these figures across to the Financial Statements sheet, and create Financial Statements according to a standard format (or follow the broad template provided in the spreadsheet). Identify Assets and Liabilities as ‘current’ or ‘non-current’ for the Balance Sheet (this was to be done in the Chart of Accounts)

Financial Report (900 words; Word document; structure below)

Requirement - Prepare a brief report that summarises the financial position of Wonderland Construction Supplies, addressing the following considerations:

  1. Financial Statements – include and summarise the Financial Statements from the Excel document (Income Statement, Balance Sheet, Statement of Changes in Equity)

  2. Financial Ratios – calculate the Current Ratio and Gross Profit Percentage and compare with its competitors position as identified above at 1.4.

  3. Wonderland Construction Supplies expects to invest in further assets in the coming year. Briefly describe the depreciation methods available and the main differences and benefits of each.

  4. The business used the weighted average Perpetual inventory method for FY 2017. What other methods could be used and how might they impact on the financial position of the business at the end of the period?

  5. What internal control mechanisms do you recommend (eg Bank Reconciliation; cash controls)?

Report Structure:

Title Page

Executive Summary

Table of Contents

  1.  Introduction

  2.  The Report (use subheadings)

  3.  Conclusion (including Recommendations)

  4.  List of References

Appendix (not included in word count)

Download Questions

The purpose of the study was to conduct a financial analysis of the Wonderland Construction supplies and suggest suitable measure to increase the efficiency and profitability of the firm. With this mind the financial statements were analysed using current ratio and gross profit ratio. The analysis revealed that the firm suffered in terms of profitability aspect and also had excess current asset than the industry norm. In the case of wonderland Construction Company we find that its current ratio is 4.33 as is shown in above table. The current ratio has been calculated by using following formula:-

Related Questions in (Adjusted Trial Balance)

13-01-2018

Solution: The Journal of Helene Berr and Rue Ordener, Rue Labat 2 evidences that prove the difficulty and destructiveness that the people had to face in those four years. As mentioned by Berr (2009, p.23), in h ...

18-01-2018

Solution: Employee communication highlights the sharing of ideas and information. In this competitive business world, information exchange is essential among employees to develop team performance effectively. m ...

18-01-2018

Solution: As per Section 1 of the Thirteenth year plan describes about China’s two key objectives that will be accomplished if the National People’s Congress or the standing committee of this party passes t ...

18-01-2018

Solution: (Feldman 2005) reference information extraction to be one of the weightiest pre-processing method that escalates the text mining potential significantly. Pre-processing is an essential part in informa ...

18-01-2018

Solution: The pro forma income statement represents a trending statement that includes the probable net income value for the company considering the current growth and decline rates valid throughout the period ...

18-01-2018

Solution: Mode is defined as the value which occurs more frequently in the data set. The mode for non-business is 82 while for business is only 59. P value can be calculated from z table . As per z table p valu ...

18-01-2018

Solution: ABC assumes that there are different activities involved in different processes that cause costs andthe product, services, and customers are reasons for those activities. The UK customer segment is br ...

19-01-2018

Solution: Residual earnings valuation method is used to calculate the intrinsic value of the stock based on the expected residual income of the company in the coming years. The residual income is discounted bac ...