Machinery Account 1st January 2000 $ 52000 Dr Cr Computing Depreciation 1) Machinery Depreciation charge = (Cost of the machine less residual value)/ useful life $52000/10= $5200 per year Balance carried down = machinery cost less depreciation charge for the year = (52000-5200) = $46800 2) Computer $49000/7= $ 7000 p.a The Computer lasted for only six month to 30th June 2000 the depreciation charge will therefore be half of $ 7000.
This is $3500. 3) Truck Depreciation Charge= $(27000-3000)/8= $3000 Cash Account Dr Cr Depreciation Account Dr Cr Computer Account Dr Cr Truck account Dr Cr Source: Robertson, 2009 Question 2a PPE average age can be computed as total PPE average value divided by depreciation charge. Barnaby Ltd PPE average age = 3,360,000/1,420,000= (2.366) an average age of about 2years and 4month Barnaby Ltd Asset turnover ratio= Sales / Average Total assets =10,300,000/4,480,000= 2.3 times Barnaby ltd asset useful life = Total average assets/ Depreciation expenses = 4,480,000/420,000 = 10.
7 years Jane Ltd Barnaby ltd Average age of PPE assets = Average Total PPE assets/ Depreciation Charge (Expense) = 2,000,000/130/000= 15.3 years Asset Turnover ratio= Sales / Average Total assets =12,600,000/3,750,000= 3.36 times Computing Jane’s ltd asset average useful life = Total average assets/ Depreciation expenses = 3,750,000/ 130,000 = 28.8 years Question 2 b Since Jane’s asset turnover ratio (3.
36 years) is higher compared to Barnaby ltd which has an asset turn over ratio of about 2.3 years. This gives it a better chance of using the assets to generate sales. Basing on the computed results, it remains evident that Jane ltd depreciates its assets over a longer period of time 28.
8 years as per the calculation compared to 10.7 years. This causes the depreciation expense to be lower and ultimately boosting profits to a higher compared to Barnaby limited. Question 3 The management accounting has a role of dealing with issues of internal rather than the external, cost measures and income issues of accounting. Therefore contemporary accounting issues targets the internal firm issues that are costs and income issues of financial accounting. Information systems has rapidity altered the nature and practice of management accounting with this the internal financial health of the firm is well assessed giving a true picture of business performance (Kajipet, 2000).
For instance it deals with the estimation of forthcoming costs; assess cost effectiveness of management policies and procedures. Hence, there are many issues that affect contemporary accounting: Information Systems The revolution of the computer age has immensely transitioned the nature of accounting and management as a whole. Modernized organizations have gained pace and have embraced computerization as a mechanism to be cost effectiveness. There through linking financial information of the organization that is financial accounting facets, internal data, consumer information, stakeholder’s data and supplies in one system. This improved how viewing of data by anyone who is aware of the system.
Integration of computing is hence eradicating management accounting (Kimmel, 2010). Lean Production Through being cost effective and being able to cut down costs in organizations various firms for instance Toyota has engulfed just-in-time production. Through this deliveries of materials that are to be used are made on the same day of production. Moreover assembled products are also shipped to the consumer simultaneously (Chadwick, L. (1998). Total Quality issues in accounting Most integrated systems have continually linked financial and management operations among other issues of quality management in accounting over internal and external ideas of any given organization.
The quality management concept has measureable issues addressed in trying to eliminate the distinction between these kinds of streams (Lucey, 2003). However, developing of a streamlined accounting system does not necessarily build specified areas of expertise, but rather work closely with both financial and management accounting concepts in financing projects while evaluating internal practices (Chadwick, 1998). Quality information is based on competitive advantage for an organization. For accounting information systems, quality of information given is imperative to success of any system in place. In our discussion we discuss important issues that remain important to any accounting system. Management or any organization in the contemporary world focuses on systemic issues (Kajipet, 2000).
This is contrary to the previous years. For instance, accounting information system marks one of the most critical systems in organization, with increased change being done well utilized. Despite all these accounting changes taking place, organizations have to improve on an approach that puts such systems at forefront in generating accurate accounting and management information, these remains important considering both systems and human related factors to effectively manage their financial systems for improved decision making. Case findings Importance of data quality issues have to be addressed by organization leadership.
It therefore remains evident that data quality is regarded a priority in any organization as revealed in the both Jane’s and Barnaby limited. For improved accounting information and decision making, there have to be well monitored data accuracy. This could prove important when information given is used in forecasting (Kajipet, 2000). Question 4 a.) Mauro Manufacturing Ltd Schedule of cost of goods manufactured For the year ended 31st December 2010 Direct Material: Raw material inventory on 1st /01/ 2010 $43,000 Add: purchases of raw material $206800 Raw material available for use $249,800 Less: raw materials as at December 31st $(39600) Raw material used $ 210,200 Direct labor: $250,600 Manufacturing Overhead: Indirect material - Indirect labor $35,410 Total manufacturing overhead $ 35,410 Total manufacturing costs $ 286,010 Add: Work-in-process inventory, January 1st $25,240 Subtotal $311,250 Deduct: work-in-progress inventory, December 31 $(23,600) Cost of goods manufactured $ 287,650 4 b.
Mauro Manufacturing Ltd Income Statement for the Year Ended 31st December Sales revenue 890,900 Less: Sales Returns - Sales Allowance - Sales discount (10,120) Net sales $880,780 Opening inventory $76,000 Add: Purchases $206,800 Less: Freight-in on raw m. purchase $ (5640) Cost of goods available for sale $ 277,160 Less: Closing inventory $(83,200) Cost of goods sold $ (193,960) Gross Profit $686,820 Expenses: Factory managers’ salary $60,000 Factory rates and taxes $10100 Factory repairs $4500 Factory power $ 36,000 Office power expenses $ 8,600 Depreciation on Factory $ 18,090 Factory Insurance $ 5,400 Freight-in on raw m. purchase $ 5640 Totall expenses $(148,330) Net profit $ 538,490 4 c.) Mauro Manufacturing Ltd Balance Sheet as at 31st December Current assets $ $ Finished goods Inventories 83,200 Account receivable 45,000 Cash 15,000 Total Assets $143,200 Current liabilities Factory machinery depreciation 18,090 Net profit for the year ended 45,630 Equity and Capital (suspense account) 79,480 Total Capital, Equity and Liabilities $143,200 Source: Drever, 2007 Question 5 b. Sierra Star Budget January 1st 2010 to February 28th 2010 Category Actual Budget Difference January Sales $525,000 $157,500 $ 368,000 Direct materials purchases $ 142,500 $ 151,200 $ (8700) February Sales $600,000 $60,000 $540,000 Direct material Purchases $ 165,000 $ 151,200 $13,800 Manufacturing overhead $ 90,000 - $90,000 Selling and Administrative Expenses $ 112,500 - $ 112,500 Direct Labor $ 142,500 - $ 142,500 Workings Computation Budget value January February Cash Sales (30%* 525,000/2) / 20 %*( 600,000/2) $ 157,500 $60,000 November December Credit sales (30 %*300,000/2)/ (20%*450,000/2) $ 45,000 $ 45000 Direct material purchases (40%*142,500) (60%*142,000) $ 57,000 $ 151,200 + (165,000*40%) Source: Weygandt, 2009 Question 5. b Cash budget Sierra Star Estimated statemet of cash receipt and disbusmnts For two month ended January 31st and February 28th Total Recipts = (Cash sale + Proceed Sales from investments + Debtors + Interest receivable ) Total Payments = (Disbursment Payments + Cash purchases) Closing Balance = (Total Receipts + Net reciepts/ Payment)
