Rephrase the answers

College of Administrative and Financial SciencesAssignment 1
Deadline: 02 /03/ 2024 @ 23:59
Student’s Name:
Student’s ID Number:
CRN:
Course Name: Financial Accounting
Course Code: ACCT 201
Semester: 2
Academic Year: 2023- 24
For Instructor’s Use only
Instructor’s Name:
Students’ Grade: …… /15
Level of Marks: High/Middle/Low
nstructions – PLEASE READ THEM CAREFULLY
• The Assignment must be submitted on Blackboard (WORD format only) via allocated folder.
• Assignments submitted through email will not be accepted.
• Students are advised to make their work clear and well presented, marks may be reduced for poor
presentation. This includes filling your information on the cover page.
• Students must mention question number clearly in their answer.
• Late submission will NOT be accepted.
• Avoid plagiarism, the work should be in your own words, copying from students or other resources
without proper referencing will result in ZERO marks. No exceptions.
• All answered must be typed using Times New Roman (size 12, double-spaced) font. No pictures
containing text will be accepted and will be considered plagiarism).
•
Submissions without this cover page will NOT be accepted.
Assignment Question(s): Marks 15 Chapter 1 to 5
College of Administrative and Financial Sciences
Q1 Globalization demands a single set of high-quality international accounting standards. List the elements of HighQuality Standards and explain the two major boards that set standards. (3 Marks)
Answer:
The elements of High-Quality Standards: 1. A single set of high-quality accounting standards established by a single standard-setting body.
2. Consistency in application and interpretation.
3. Common disclosures.
4. Common high-quality auditing standards and practices.
5. Common approach to regulatory review and enforcement.
6. Education and training of market participants.
7. Common delivery systems (e.g., extensible Business Reporting Language—XBRL).
8. Common approach to corporate governance and legal frameworks around the world.
Two Major Organizations: •
International Accounting Standards Board (IASB)
➢ Issues International Financial Reporting Standards (IFRS).
➢ Standards used on most foreign exchanges.
➢ Standards used by foreign companies listing on U.S. securities exchanges.
➢ IFRS is used in over 115 countries.
•
Financial Accounting Standards Board (FASB)
➢ Issues Statements of Financial Accounting Standards (SFAS).
➢ Required for all U.S.-based companies.
College of Administrative and Financial Sciences
Q2. Q2. What do you understand by deferrals and accruals in adjusting entries? Give numerical examples on how
such adjusting entries are made. (4 Marks)
Answer:
Deferrals are either: Prepaid expenses that Expenses paid in cash and recorded as assets before they are used or consumed.
Pioneer purchased advertising supplies costing $25,000 on October 5. Journal entry to record purchase of the supplies.
An inventory count at close of business on October 31 reveals that $10,000 of the advertising supplies are still on hand.
Unearned revenues that Revenues received in cash and recorded as liabilities before they are earned.
Pioneer Advertising received $12,000 on October 2 from KC for advertising services expected to be completed by
December 31. The journal entry to record the receipt on Oct. 2nd.
Analysis reveals that Pioneer earned $4,000 of the advertising services in October. Thus, Pioneer makes the following
adjusting entry.
College of Administrative and Financial Sciences
Accruals are either: Accrued revenues that Revenues earned but not yet received in cash or recorded.
In October Pioneer earned $2,000 for advertising services that it did not bill to clients before October 31. Thus, Pioneer
makes the following adjusting entry.
Accrued expenses that Expenses incurred but not yet paid in cash or recorded.
Pioneer signed a three-month, 12%, note payable in the amount of $50,000 on October 1. The adjusting entry on Oct.
31 to record the accrual of interest.
Q3. Fill in the blanks (1 Mark)
Sales Revenue
500,000
– Cost of goods sold
?
= Gross Profit
175,000
– Operating expenses
?
= Net Profit
76,500
?
305,800
?
115,750
65,250
Sales Revenue
– Cost of goods sold
= Gross Profit
– Operating expenses
= Net Profit
500,000
325,000
175,000
98,500
76,500
486,800
305,800
181,000
115,750
65,250
Answer:
✓ Cost of goods sold = Sales Revenue – Gross Profit = 500,000 – 175,000 = 325,000
✓ Operating expenses = Gross Profit – Net Profit = 175,000 – 76,500 = 98,500
✓ Gross Profit = Net Profit + Operating expenses = 65,250 + 115,750 = 181,000
✓ Sales Revenue = Gross Profit + Cost of goods sold = 181,000 + 305,800 = 486,800
College of Administrative and Financial Sciences
Q4. a. What do you understand by allocation to non-controlling interest and discontinued operations? Explain how
they are reported in the income statement. (2 Marks)
Answer:
Allocation to Non-Controlling Interest
If a company prepares a consolidated income statement that includes a partially own subsidiary. IFRS requires that the
net income of the subsidiary be allocated to the controlling and non-controlling interest. This allocation is reported at the
bottom of the income statement after net income.
Discontinued operations
•
A component of an entity that either has been disposed of, or is classified as held-for-sale, and:
1. Represents a major line of business or geographical area of operations, or
2. Is part of a single, co-coordinated plan to dispose of a major line of business or geographical area of operations, or
3. Is a subsidiary acquired exclusively with a view to reselling.
•
Companies report as discontinued operations:
1. (In a separate income statement category) the gain or loss from disposal of a component of a business.
2. The results of operations of a component that has been or will be disposed of separately from continuing operations.
3. The effects of discontinued operations net of tax, as a separate category after continuing operations.
A company that reports a discontinued operation must report per share amounts for the line item either on the face of
the income statement or in the notes to the financial statements.
Q4b. Intra-period Tax Allocation.
Answer:
Relates the income tax expense to the specific items that give rise to the amount of the tax expense.
•
On the income statement, income tax is allocated to:
(1) Income from continuing operations before tax
(2) Discontinued operations
College of Administrative and Financial Sciences
XYZ Co. has income before income tax of SR 50,000. XYZ Co. has a gain of SR 10,000 from discontinued operation.
Assuming a 35 percent income tax rate, how would XYZ Co. present the information on the income statement, and if it had
a loss of SR 10,000 from a discontinued operation. Assuming a 35 percent income tax rate, show the changes in Income on
the income statement. (2 Marks)
Prepare:
1. Changes in Income on the income statement when Loss made from discontinued operations.
Answer:
Description
Amount
Income before income tax
50,000
Income tax
(17,500)
Income from continuing operations
Loss from discontinued operations
Less: Applicable income tax reduction
32,500
10,000
3,500
(6,500)
Net Income
26,000
2. Changes in Income on the income statement when Gain made on discontinued operations.
Answer:
Description
Amount
Income before income tax
50,000
Income tax
(17,500)
Income from continuing operations
Gain on discontinued operations
Less: Applicable income tax
32,500
10,000
3,500
6,500
Net Income
39,000
College of Administrative and Financial Sciences
Q5
The following information in SAR. Prepare a Cash Flow Statement: – (3 Marks)
Opening Cash Balance
Closing Cash Balance
Increase in current liabilities
Decrease in current assets
Fixed assets purchase
Redemption of 12% bonds
Profit for the year
Depreciation
15,000
23,000
13,000
17,000
30,000
14,000
18,000
4,000
Answer:
Description
Amount
Operating Activities
Profit for the year
18,000
Depreciation
4,000
Increase in current liabilities
13,000
Decrease in current assets
Cash flow from Operations
17,000
52,000
Investing Activities
Fixed assets purchase
Cash flow from Investing
(30,000)
(30,000)
Financing Activities
Redemption of 12% bonds
Cash flow from Financing
(14,000)
(14,000)
Net increase in cash
8,000
Opening Cash Balance
15,000
Closing Cash Balance
23,000