just share the notes of financial information that learned

1. 1
ACC10007
Financial Information for Decision Making
LECTURE
ILLUSTRATIONS
Semester 1
2022
Table of Contents
Page
Topic 2 (Part 1) : Swin Ltd Year 1 …………………………………… 2
Topic 2 (Part 2) : Swin Ltd Year 2 …………………………………… 4
Topic 6: Tarrant Ltd ……………………………..…………………....... 6
Topic 7: XYZ Ltd …..………..……………..……………………………... 7
Topic 8: Cravings for Cake …………………………………………… 8

2. 2
Topic2 (Part 2) :Preparation of worksheetand
financialreports using accrual accounting principles -
Swin Ltd.Year 1
Swin Ltd. is a new business which started trading on 1 January 2022. The following
is a summary of transactions which occurred during the first year of trading:
1. The owners contributed $50,000 of capital which was paid into a bank account
opened in the name of the business.
2. At the start of the year, rent of $25,000 was paid to the owner of the premises. (Refer
to additional information below)
3. Sometime during the year, rates of $1,700 were paid to the local council. (Refer to
additional information below)
4. A delivery vehicle was bought on 1 January 2022 for $12,000 cash.
5. Wages totalling $33,500 were paid during the year.
6. Electricity bills for the first three-quarters of the year were paid totalling $1,650.
7. Inventory totalling $143,000 was bought for credit.
8. Inventory totalling $12,000 was bought for cash.
9. Sales on credit totalled $152,000 (cost $74,000).
10. Cash sales totalled $35,000 (cost $16,000).
11. Receipts from trade receivables totalled $132,000.
12. Payments to trade payables totalled $121,000.
13. Vehicle running expenses paid totalled $9,400.
Additional information for end of period adjustments:
(a) Premises were rented from 1 January 2022 for $20,000 per year.
(b) The rates of $1,700 paid during year related to the following:
• For the period 1 January 2022 to 31 March 2022 - $500
• For the period 1 April 2022 to 31 March 2023 - $1,200
(c) At the end of the year it was clear that a trade receivable who owed $400 would not be
able to pay any part of the debt.
(d) After 31 December 2022, but before the accounts had been finalised for the year, the
electricity bill for the last quarter arrived showing a charge of $620.
(e) The vehicle is expected to be used in the business for 4 years and then to be sold for
$2,000. S traight line depreciation method is used.
(f) At the end of the year the business owed $630 of wages for the last week of the year.

3. 3
SWIN LTD. FINANCIAL REPORTS
YEAR 1 OF OPERATIONS
Swin Ltd
Statement of Financial Position
as at 31 December 2022
Current assets $
Cash 750
Trade receivables 19,600
Prepaid expenses 5,300
Inventory 65,000
Non-current assets
Motor vehicle 12,000
Less: Accumulated Depreciation (2,500)
Currentliabilities
Trade payables 22,000
Accrued expenses 1,250
Net Assets
Equity
Share capital 50,000
Retained earnings 26,900
$
90,650
(9,500)
23,250
76,900
76,900
Swin Ltd.
Statement of Comprehensive Income
for year ended 31 December 2022
$
Sales
Less Cost of sales
Gross Profit
LessOperating Expenses:
Wages 34,130
Rent 20,000
Rates 1,400
Depreciation 2,500
Electricity 2,270
Vehicle costs 9,400
Bad debt 400
Total operating expenses
Net profit
$
187,000
(90,000)
97,000
(70,100)
26,900

4. 4
Topic 2 (Part 3): Preparation of Statement of Comprehensive
Income and Statement of Financial Position using accrual
accounting principles – Swin Ltd Year 2
Swin Ltd has been operating for 12 months. The following is a summary of transactions
which occurred during 2023, the second year of trading:
1. The owners withdrew capital in the form of cash of $20,000.
2. Premises continued to be rented at an annual rental of $20,000. During the year, rent
of $15,000 was paid to the owner of the premises. Remember: The remaining $5,000
rent for 2023 was paid in 2022.
3. Rates of $1,300 on the premises were paid during the year for the period 1 April 2023
to 31 March 2024.
4. A second delivery vehicle was bought on 1 January for $13,000 cash. This is
expected to be used by the business for four years and then to be sold for $3,000.
The business uses the straight-line depreciation method.
5. Wages totalling $36,700 were paid during the year, which includes the $630
outstanding from 2022. At the end of the year, the business owes $860 of wages for
the last week of the 2023 year.
6. Electricity bills totalling $1,820 for the first three quarters of the year were paid. After
31 December 2023, but before the accounts had been finalized for the year, the bill for
the last quarter of 2023 arrived showing a charge of $690. The electricity bill
outstanding for 2022 was also paid.
7. Inventory totalling $67,000 was bought on credit.
8. Inventory totalling $8,000 was bought for cash.
9. Sales on credit totalled $179,000 (cost $89,000).
10. Cash sales totalled $54,000 (cost $25,000).
11. Receipts from trade receivables totalled $178,000.
12. Payments to trade payables totalled $71,000.
13. Vehicle running expenses paid totalled $16,200.
Required:
Record entries on the worksheet for events that occurred during 2023 and also record the
accrual adjustments that are necessary to determine profit for the year. Ensure that the columns
are totalled and the worksheet is in balance.
Refer to the 2023 Financial Reports below.

5. 5
SWIN LTD. FINANCIAL REPORTS
YEAR 2 OF OPERATIONS
Swin Ltd.
Statement of Comprehensive Income
for year ended 31 December 2023
$ $
Sales 233,000
Less: Cost of sales (114,000)
Gross Profit
Less: Operating Expenses:
Wages 36,930
119,000
Rent 20,000
Rates 1,275
Depreciation 5,000
Electricity 2,510
Vehicle costs 16,200
Total operating expenses 81,915
Net profit 37,085
Swin Ltd.
Statement of Financial Position
as at 31st December 2023
$ $
Current assets:
Cash 49,110
Trade receivables 20,600
Prepaid expenses 325
Inventory 26,000 96,035
Non-current assets:
Motor vehicle 25,000
Less: Accumulated Depreciation (7,500) (17,500)
Current liabilities:
113,535
19,550
Trade payables 18,000
Accrued expenses 1,550
Shareholder Equity:
Share capital 30,000
Retained earnings 63,985 93,985
113,535

6. 6
Topic 6: Cost Volume Profit Analysis – Tarrant Ltd.
Tarrant Ltd buys mineral water in unmarked 1litre plastic bottles, attaches its own label to
the bottles, and then sells the bottles to restaurants for $3 each. Costs at present for the
business are as follows:
Required:
Advertising
Mineral water
Rent
Labelling
Manager's salary
Delivery costs
$ 5,000 per year
$ 1.20 per bottle
$ 10,000 per year
$ 0.30 per bottle
$ 45,000 per year
$ 0.30 per bottle
(a) What is the contribution per unit at present and what is the significance of this figure?
(b) How many bottles must be sold each year to break even?
(c) The company expects to sell 120,000 units in the coming year. What is the margin of
safety at this level of activity? How much profit will the business make for the year
if its estimated level of activity is accurate?
(d) The company estimates that if it reduced the selling price by $0.20 per bottle, spent
an additional $10,000 on advertising for the year, and improved the labels on the bottles
(at an extra cost of $0.10 per bottle), sales for the year would rise to 150,000 units.
With supporting calculations, show whether the company should make these changes.
(e) Licuria Ltd, a competitor of Tarrant Ltd from interstate, sold 100,000 1 litre bottles
of mineral water last year at $4 per unit and made a profit of $50,000. This year the
costsof Licuria Ltd remained the same; it sold 120,000 units at the same price, and
made a profit of $80,000. Determine the total fixed costs per year and the total variable
cost per unit of Licuria Ltd.
(f) Tarrant Ltd could avoid the manager's salary costs by paying her $0.50 for every bottle
sold. In what circumstances would Tarrant Ltd benefit from switching to this
arrangement? (revert to original cost scenario)
(g) Tarrant is to introduce new product - a sports mineral water - which will use the
existing litre bottles. The only additional variable cost is the additional of the "sport"
supplement at $0.20 per bottle. Other variable costs are as per the original cost
scenario for the 1 litre "standard" bottle. Fixed costs will increase by $10,000 per
year due to both administrative and production changes.
The sales mix is expected to be 75% standard and 25% sport. What is the new
breakeven point for Tarrant Ltd.?
(Selling price for the sports mineral water is expected to be $3.50 per bottle)

7. 7
Topic 7: Operational Decision Making – XYZ Ltd
XYZ Ltd manufactures two products. On average, it sells 40,000 units of product A and
60,000 units of product B each year.
Product A Product B
Selling price per unit $20 $30
Variable cost per unit $10 $14
Fixed costs $800,000
Product time per unit (direct labour hours) 2 hours 4 hours
1. Scarce Resources/Limiting Factor
This year the company has a restricted advertising budget of $50,000, which is only
enough to effectively promote one of its products. The marketing department estimates that
average sales of product A will increase by 20 per cent if it is advertised, while product B’s
average sales will increase by 15 per cent if it is advertised.
Scenario 1 - Assume unlimited direct labour hours. Which product to advertise?
Scenario 2 - Assume there are only 200,000 hours. Which product to advertise?
2. Special Orders/Contracts
ABC Ltd has approached XYZ Ltd to purchase 8,000 units of product A. As this is an
unusually large order for any customer, ABC Ltd is only willing to pay a discounted total price
of $144,000. They have also requested for all of the units to be modified to include the initials
of their company, which will incur an additional $1 variable cost per unit.
XYZ Ltd has identified that a new engraving machine costing $50,000 needs to be acquired in
order to be able to fulfil this modification. At the present moment, there would be no other
foreseeable use for this machine. The production capacity for Product A is 50,000 units.
Scenario 3 – Should the order be accepted?
Scenario 4 – If the production capacity is only 45,000 units, should the order be accepted?
3. Make or Buy
Make4U Ltd has approached XYZ Ltd to produce all 60,000 units of Product B for the entire
year for $18 per unit. This price includes all necessary manufacturing, packaging and
transportation costs. XYZ Ltd however has discovered that in doing so, $200,000 of fixed costs
can be reduced from its expenses.
Scenario 5 – Should XYZ continue manufacturing Product B or buy it from Make4U Ltd?
Scenario 6 – With the vacated capacity from not producing Product B, XYZ Ltd can now
generate an additional profit of $55,000. Would your answer to scenario 5 change?

8. 8
Topic8: Revenue and Cost Determination
Cravings for Cakes
Cravings for Cakes Pty Ltd make a range of delicious pastries and specialty cakes. The
company has used the same costing system for the past 20 years, which is structured
using one indirect cost pool using product output as a cost driver, and one direct cost
pool for ingredients. Over the past 20 years the factory has seen the introduction of
computer- controlled mixing machines and ovens that have replaced a lot of the labour
operations. Despite all this progress, the company seems to be struggling and profits are
declining despite the popularity of the specialty cakes. Products are priced using a 50%
mark-up on cost.
The Management Accountant is keen to implement a costing system using activity cost
pools. The activity centres, relevant cost allocations and cost driver usage are detailed in
Tables 1 and 2 below.
An analysis of the activity centres identified the following cost drivers and allocation:
Table1 - Activitycostdrivers
Activity Centre Cost Driver Total Cost ($)
Sales and dispatch Number of deliveries 53,235.80
Mixing Number of kilograms 103,978.98
Filling Number of cakes/pastries 162,484.28
Baking Number of batches 456,108.34
Packing Number of trays 174,192.59
TOTAL 950,000.00
After discussing the manufacture of the pastries and cakes with the production personnel, it
was identified that each product group's annual consumption of the cost driver is as follows:
Table 2 -use of cost drivers by products
Cost Driver Total Pastries Cakes
Number of deliveries 650 500 150
Number of kilograms 35,000 30,000 5,000
Number of cakes/pastries 110,000 100,000 10,000
Number of batches 150 100 50
Number of trays 2,400 2,000 400