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MAA103 Accounting for Decision Making:Service Revenue


Question 1 (6 marks)
Ink Spill, a printing company, provides printing services to its customers. Customers normally pay for printing services in advance. In October 2020, Ink Spill received $20,000 from customers for services to be provided in November 2020. A senior accountant at Ink Spill wants to record the full amount as a liability in the company’s Balance Sheet at the end of October 2020.


Should the $20,000 be recorded as a liability in the company’s Balance Sheet at the end of October 2020? Explain, using the definition and recognition criteria of a liability in your explanation.    (6 marks)

Question 2 (3 + 1 = 4 marks)
Dark Room is a business servicing film photographers. In November 2021, Dark Room will be paying $12,000 to cover six months of various expenses between November 1, 2021 and April 30, 2022 and receiving $18,000 from a client for services to be delivered over the following twelve months between November 1, 2021 and October 31, 2022.

Assume various expenses are incurred and services provided evenly across the six and twelve months, respectively.

Calculate the monthly expenses, service revenue and profit/loss of Dark Room for the months of November 2021 and December 2021 under both cash and accrual accounting using the table below. Ignore GST.   (3 marks)

Question 3 (4 marks)
A manager at Stalemate, a chess business retailing chess boards and providing chess lessons, requires help with interpreting some of the accounting transactions that took place during the month of September 2021. The manager has provided you with a list of those transactions below.

Underneath each transaction in the space provided, write a brief narration describing the economic event that corresponds to that transaction.
(4 marks)

Question 4 (2 + 3 = 5 marks)
Piece of Time is a manufacturer of wrist watches and relies heavily on advertising to promote its products. Its partially filled Prepaid Advertising account below is missing an additional $44,000 (GST-inclusive) prepaid in cash for advertising by Piece of Time on July 8, 2021 and the recognition of advertising expense for the month of July 2021.

Complete the Prepaid Advertising 3-column ledger below to find out the amount of advertising expense incurred by Piece of Time in July 2021.

Question 5 (6 marks)
Hill Riders is a local bicycle shop retailing and servicing mountain bikes. The following information pertains to the business for the month of August 2021.

1.On August 1, Hill Riders purchased additional equipment for $15,400 (GST-inclusive). The equipment was delivered on August 1 and the business paid 30% of that amount on the same day. Hill Riders paid the remaining amount on August 20.

2.Hill Riders started using equipment purchased on August 1 from the day of purchase. The management believes the equipment will last for five years. By the end of August 2021, no depreciation on that equipment had been recorded for the month.

3.Hill Riders received $16,500 (GST-inclusive) on July 29, 2021 for bike servicing to be provided in August 2021. By the end of August 2021, all services had been provided.

4.At the end of July 2021, Hill Riders recorded gross wages of $12,000 of which $3,300 was a PAYG withholding. The rest was payable to employees. On August 5, Hill Riders paid the outstanding amount to employees from the July transaction.

Record the financial impacts of the above events in the month of August 2021 in the General Journal below. Narrations are not required.
(6 marks)

Question 6 (7 + 1 = 8 marks)
Porcelain is a manufacturer of ceramic products. Its management has provided the following accounts and their adjusted closing balances for the year ending June 30, 2021. The net loss for the year ending June 30, 2021 is $700.

Prepare a classified Balance Sheet for Porcelain as at June 30, 2021.   (7 marks)

Question 7 (5 marks)

Provide 2 example initiatives of corporate social responsibility (CSR) and explain how each initiative safeguards or advances the stakeholders’ interests.    (5 marks)


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