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LFS00AC1 Foundation Studies Test 1

Foundation Studies and Diploma Programs

Course:	Foundation Studies
Subject Code:	LFS00AC1
Subject Name:	Accounting 1
Assessment:	Test 1 - Trimester 2_2020
Percentage:	20% of final mark
Due:	5.45pm AEST Monday 20th July 2020 Week 4
Name:
ID Number:
General information and requirements:	· This is an individual assessment and must be completed by you. · You must complete the test on this Word document and submit it as a Word document in the link on Moodle. The link is just below where you downloaded this test paper. · In submitting this test electronically, you are agreeing to the policy relating to academic integrity at LTCA. · All students have access to download Microsoft Office for free. This information was provided during the orientation. · You have 4 hours in which to complete and submit the test. Do not wait until the last minute to submit your test paper. · Please enter your name and ID number in the space provided above.

Question	Possible marks	Marks achieved
1	18
2	24
3	8
Total	50

Question 1 (18 marks)

James Strong is the owner of Jim Jams Repairs. He has provided the following list of the firm’s assets and liabilities as at 30 June 2020.

	$
Accounts payable	8,000
Supplies	3,000
Accounts receivable	10,000
Cash at bank	7,000
Buildings	140,000
Loan – ANZ (due 1 December 2020)	9,000
Tools & Equipment	8,000
Van	25,000
Loan – NAB (due 30 June 2025)	120,000
Capital	?

Required:

Prepare a classified Balance Sheet as at 30 June 2020. You must ensure that you include all appropriate headings and totals.

Question 2 (24 marks)

Charlie Loong started Crafty Charlie Services on 1 June 2020. He has provided you with his business transactions for the first week of his business.

Required

Prepare a classified Balance Sheet after each transaction.

1.6.2020 – Charlie Loong deposited $50,000 into the business bank account

2.6.2020 – Purchased computer for $2,000 from Best Computers on credit

3.6.2020 – Borrowed $15,000 from CBA, payable in 3 years

4.6.2020 – Made payment of $1,500 to Best Computers

5.6.2020 – Bought stock of supplies $3,500 for cash

6.6.2020 – Withdrew $5,000 cash from the business

Question 3 (8 marks)

The following totals have been extracted from the Balance Sheet for Winkler Trading at 30 June 2020

	$
Current assets	45,000
Non-current assets	110,000
Current liabilities	30,000
Non-current liabilities	90,000
Owner’s equity	35,000

Required

Calculate the working capital of the business. (You must show the formula and all workings to gain full marks)
Calculate the working capital ratio. (You must show the formula and all workings to gain full marks)
Do you think that this business has a liquidity problem? Explain with reference to your answer in part b.

Expert's Answer

Question 3

3.Do you think that this business has a liquidity problem? Explain with reference to your answer in part b.

Answer:

No, Winkler doesn’t seem to have liquidity problem because its current assets are 1.5 times more than its current liabilities. It has $15,000 more current assets after covering for its current liabilities. Hence, it doesn’t seem to have any liquidity problem.