conditions: This is an individual assessment task (not a group assessment task).
Complete the 4 questions given below. A total of 50 marks are allocated to the questions below, which will then be converted to a mark out of 20%.
All workings, where appropriate, must be shown to substantiate your answers.

Question 1 [15 marks]
Retail operations and retail inventory
‘Little Red Riding’ began business on 1 June 2019. The business is a partnership, between Mr Wheeler and Mrs Wheeler. The business will sell children’s bicycles at the local markets. The business is not registered for GST. The following transactions occurred during June 2019:
Date: Details:
1-Jun Mr and Mrs Wheeler deposited $30,000 into the business bank account.
2-Jun Purchase of bicycles (100 small bicycles, and 100 large bicycles) from Red Bikes Rock Ltd on account for $10,000 ($50 per bicycle) on terms of 2/10, n/30.
4-Jun Little Red Riding received an invoice from Fast Freight Ltd relating to delivery costs for the bicycles purchased on 2 June. The amount due is $300, and is due on 18 June.
5-Jun Sent a cheque in the mail to Groove Markets Ltd for $300, for stall fees at the local markets for the month of June.
6-Jun Sale of 30 bicycles (20 small bicycles, and 10 large bicycles) at the local markets, at $100 each. All of the customers paid by cash. The money was banked at the end of the day.
10-Jun Paid Red Bikes Rock Ltd for purchases made on 2 June (net of the early payment discount), by electronic funds transfer.
13-Jun Sale of 10 small bicycles to a local childcare centre, at $100 each, on 30 day credit terms.
15-Jun Sent a cheque in the mail to Fast Freight Ltd, in relation to the invoice received on 4 June.
22-Jun Purchase of bicycles (30 small, and 10 large) from Red Bikes Rock Ltd on account for $2,200 ($55 per bicycle) on terms of 2/10, n/30.
23-Jun Little Red Riding received an invoice from Fast Freight Ltd relating to delivery costs for the bicycles purchased on 22 June 2019. The amount due is $180, and is due on 6 July 2019.
24-Jun Returned 20 of the small bicycles purchased on 22 June as they were damaged.
28-Jun Sale of 40 bicycles (25 small, and 15 large) at the local markets, at $100 each. All of the customers paid by cash. The money was banked at the end of the day.
30-Jun A stocktake was completed, and the number of bicycles on hand was 139 (54 small bicycles, and 85 large bicycles).

Mr and Mrs Wheeler have come to you for assistance, as they would like to use the perpetual inventory system and the First-in-first-out (FIFO) costing method, but are not sure how to set this up.
i) Prepare an Excel worksheet for each of the bicycle lines for June (one for the small bicycles, and one for the large bicycles) using the FIFO costing method to keep track of the number of bicycles purchased, bicycles sold, bicycles on hand, cost of goods sold and gross profit made.
ii) Prepare journal entries (including any adjusting entries) for all of the business’s transactions for June (using the perpetual inventory system and FIFO costing method). Include dates, references and narrations.
iii) Prepare T-accounts in an Excel spreadsheet, and post all of the above journal entries to the T-accounts. Include dates and references for each entry. Total all of the T-accounts to determine their balances at the end of the June 2019.
iv) Prepare the ‘Adjusted Trial Balance’ in an Excel spreadsheet as at 30th June 2019. Use formulas to generate all of the figures in the ‘Adjusted Trial Balance’ from the balances in the T-Accounts.
v) The business has a year-end of 30th June. Prepare the closing entries as at 30th June 2019.
Please also refer to the ‘Requirements’ section below for additional submission and spreadsheet requirements.

Question 2 [10 marks]

Bank reconciliations and cash

This question continues on from question 1 above.
It is now September 2019, and two months have passed since you first met with Mr and Mrs Wheeler to assist them with implementing their inventory system and preparing their accounting records.

They have come to you for some assistance as the balance in the ‘bank’ T-Account at the end of August 2019 doesn’t agree with the closing balance on the August bank statement… and they are not sure what they have done wrong.

The August 2019 bank statement appeared as follows:

Bank statement for August 2019:

Date Description Deposit Withdrawal Balance

1/08/2019 Opening balance $12,060.00
2/08/2019 Deposit 500.00 $12,560.00
5/08/2019 Cheque 3 200.00 $12,360.00
7/08/2019 Cash deposit 3,600.00 $15,960.00
12/08/2019 EFT – Red Bikes Rock Ltd 2,200.00 $13,760.00
16/08/2019 EFT – Fast Freight Ltd 190.00 $13,570.00
16/08/2019 Cash deposit 4,200.00 $17,770.00
19/08/2019 Cheque 5 280.00 $17,490.00
20/08/2019 Cheque 6 250.00 $17,240.00
23/08/2019 EFT – Red Bikes Rock Ltd 4,300.00 $12,940.00
23/08/2019 Cash deposit 3,400.00 $16,340.00
25/08/2019 Cheque 7 2,000.00 $14,340.00
26/08/2019 Cheque 10 260.00 $14,080.00
30/08/2019 Cash deposit 5,000.00 $19,080.00
31/08/2019 Annual bank fee 60.00 $19,020.00
31/08/2019 Interest 20.00 $19,040.00
31/08/2019 Closing balance $19,040.00

Little Red Riding’s accounting records for August 2019 showed an opening balance for the ‘bank’ account of $12,060, which agreed with the bank statement at 31 July 2019. Following is a summary of deposits and withdrawals recorded by Mr and Mrs Wheeler in their accounting records during August:

Withdrawals: Deposits:
Date Detail Amount Date banked
2/08/2019 Cheque 3 $200.00
15/08/2019 EFT – Fast Freight Ltd $199.00 7/08/2019 $3,600.00
16/08/2019 Cheque 4 $160.00 16/08/2019 $4,200.00
18/08/2019 Cheque 5 $280.00 23/08/2019 $4,300.00
18/08/2019 Cheque 6 $250.00 30/08/2019 $500.00
23/08/2019 EFT – Red Bikes Rock Ltd $3,400.00
22/08/2019 Cheque 7 $2,000.00
23/08/2019 Cheque 8 $260.00
25/08/2019 Cheque 9 $390.00
25/08/2019 Cheque 10 $260.00 __________
$7,399.00 $12,600.00

The bank did not make any errors.


i) Prepare a letter to Mr & Mrs Wheeler, explaining why the bank balance in the ledger account (or T-Account) won’t always equal the balance on the bank statement on a particular date, and common reasons for differences. Also provide an introduction and overview of bank reconciliations – What is a bank reconciliation? What is its purpose? How is it prepared?

ii) Prepare the bank reconciliation for Little Red Riding at 31 August 2019.

iii) Prepare the journal entries to correct any errors made by Little Red Riding, and to record transactions that have not yet been entered into the business’s accounting records. (Note: The correction of any errors relating to the recording of cheques or EFT payments should be made to ‘Accounts payable’. The correction of any errors relating to deposits (other than interest received) should be made to ‘Accounts receivable’.)

iv) Prepare the ‘bank’ T-Account account for August 2019, in order to determine the balance in the ledger account after the above journal entries have been recorded and posted.

Question 3 [15 marks]
Internal controls
This question continues on from question 1 and question 2 above.
It is now July 2020, and Mr and Mrs Wheeler have been very successful in growing the business of Little Red Riding. The business now operates at 3 markets in the region, and employs 4 employees (Mr and Mrs Wheeler sell bicycles at one local market each week, and 2 employees are assigned to sell bicycles at the Bidgee Markets, and 2 employees are assigned to sell bicycles at the Junee markets).
Mr and Mrs Wheeler have come to you for advice, as they appear to be having problems with their inventory and/or cash receipts. They have been keeping track of inventory using the two worksheets that you showed them (in Question 1(i) above). They really like how it keeps track of inventory on hand, and they tell you how much they love not having to count inventory each and every week after the markets to see what inventory is left.
When they completed the stocktake on 30 June 2020, the closing balance of inventory in each worksheet didn’t match with the actual number of small and large bicycles on hand. The worksheets showed that the closing inventory was 58 small bicycles, and 46 large bicycles. The stocktake showed that the business actually had 42 small bicycles and 30 large bicycles.
You review their inventory worksheets, and there are no errors in their worksheets… so it appears that cash takings and/or some bicycle have been stolen. You also review the three cash receipt books (one used at each of the three markets), and the amount of cash takings banked for the year was $300 less than the takings as per the cash receipt books.
Mr and Mrs Wheeler are unsure what has happened.
Undertake some research on internal controls and employee theft.

Prepare a business report on internal controls for Mr and Mrs Wheeler. In your business report:
• Explain what internal controls are, and the importance of implementing internal controls to safeguard the business’s assets;
• Discuss the risk of employee theft, and how big of a problem employee theft is in Australia;
• Explain three possible ways that employees could have stolen cash and/or bicycles from the business without Mr and Mrs Wheeler realising;
• Discuss three controls/procedures that Mr and Mrs Wheeler should implement in their business to help prevent employee theft.
(Word guide: 1,500 – 2,000 words)

Question 4 [10 marks]
Property, plant and equipment
This question continues on from question 1, 2 and question 3 above.
Little Red Riding purchased a 3 tonne Isuzu truck on 1st July 2020, for $45,000, funded via a bank loan. The truck will be used to store and transport bicycles to and from each of the weekly markets. Mr and Mrs Wheeler have contacted you to find out how they need to account for depreciation. They would like to use the cost model, but don’t have any understanding of the straight-line method, units-of-production method and reducing balance method. The truck has an estimated useful life of ten years (300,000 kilometres), and the estimated residual value is $10,000.

Mr and Mrs Wheeler estimate that the truck will travel 20,000km/year in years 1 – 3, 30,000km/year in years 4 – 7, and 40,000km/year in years 8 – 10.
Prepare a memo to Mr & Mrs Wheeler, explaining what depreciation is, and how depreciation is calculated under each of the three methods. To illustrate the differences in the annual depreciation expense to Mr & Mrs Wheeler, prepare a depreciation schedule (for the entire useful life of the truck) using each of the three methods. When preparing the depreciation schedule using the reducing balance method, use 2 times the straight-line rate. Ignore any GST. Show all relevant workings.

Online submission via Turnitin is required for this assignment. Details will be provided by your subject lecturer.
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This assessment task will assess the following learning outcome/s:
• be able to apply conceptual and technical aspects of accounting and prepare relevant business financial statements.
• be able to appraise the use of information technology including spreadsheet software in accounting problem solving, and evaluate the Internet as a professional resource.
• be able to demonstrate relevant business communication skills including report writing.
• be able to contextualise and evaluate accounting information for decision making purposes.
Assessment task 2 is designed to give you further opportunity to demonstrate knowledge and skills in more in-depth aspects of accounting and information systems including bank reconciliations, inventory systems, financial reports, accounting for non-current assets, as well as concepts and the application of spreadsheet software to the presentation and solution of accounting problems.

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