Accounting for Decision Making
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ACCT1101 Accounting for Decision Making
Problem Set Assessment
Type: Problem Set/s
Learning Objectives Assessed: 1, 2, 3, 4
Weight: 30%
Individual
Task Description:
This assessment is based on a case of a retailing business.
Assignment materials will be released two weeks before the due date.
Topic assessed: Topics 1-5.
Question types: calculations, short answers and recording transactions.
Learning objectives assessed:
1. Identify and explain accounting terms and concepts that are relevant to business decision
making.
2. Record and interpret business transactions and financial statements.
3. Apply relevant and appropriate accounting knowledge and techniques in business problem-solving.
4. Make and justify effective business operating, financing and investing decisions informed by relevant
accounting information.
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Assessment Scenario
This assessment is based on a fictitious scenario of a retail business. This scenario is to be used when answering
questions within these assessment questions.
The full assessment scenario is provided below. Extracts of this scenario are provided throughout the
assessment for easy reference when specific data is required for questions.
Lenova Digital
Introduction
Lenova Digital is a Brisbane-based company that specialises in the sale of gaming software and accessories
online. Commission income only is earned from the sales in the online store. It is currently operated by Claire
and Sarah. Claire is an IT specialist and Sarah is a marketing manager. They set up the business on August 1,
2018, by purchasing equipment and developing a basic website. To promote the business, they pay for
advertising on Google and YouTube.
Lenova Digital also sells larger gaming items out of a warehouse that they rent. This segment of the business
purchases gaming chairs, gaming desks and gaming PCs from overseas suppliers. Paul and Sam, who are
employees that work in the warehouse, deliver the inventory to retail stores who purchase these items. Claire
and Sarah pay themselves and their two employees a fortnightly wage.
Lenova Digital is preparing their financial records using an accrual accounting system. They record sales
revenue at the point of delivering the goods to customers. Lenova Digital use a perpetual inventory system to
track and record their inventory. The First-in, First-out method (FIFO) is used to account for the valuation of
inventory and inventory movements. The straight line method is currently used for depreciation, although they
are also considering the diminishing balance method for the future.
Lenova Digital pays for most regular business expenses using a corporate credit card, which they pay monthly.
Claire and Sarah have provided information about the business transactions, their key suppliers and retail
customers and current warehouse inventory items for July 2023.
Suppliers
• Alliance Digital
• Gaming Accessories Co.
• Retail Store Customers
Retail Store Customers
• Gamer’s Rise
• Digital Computer Store
• BBG Games
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Current Warehouse Inventory Items
• Gaming chairs
• Gaming desks
• Gaming PCs
Transactions
For all transactions, please ignore GST and assume that all transactions are in Australian dollars.
1. July 1: Lenova Digital signed another 2-year lease for a warehouse and office for $6,000 per month to store
all their inventory. They have paid two months of rent in advance.
2. July 1: Sold 25 chairs for $135 each, 25 desks for $185 each and 10 PCs for $800 each to
Digital Computer Store. Delivery occurred the same day. The customer was given 90 days to pay their account.
3. July 1: Purchased new CCTV camera equipment that was installed on the same day. The total cost of
$18,000 was paid in cash.
4. July 5: An order was placed for 150 gaming chairs at a cost of $80 each and 150 gaming
desks at a cost of $117 each was placed with Gaming Accessories Co. Delivery occurred the same day and the
total was paid in cash.
5. July 6: An order was placed for 75 gaming PCs for $495 each from Alliance Digital. Delivery occurred the
same day and the total was paid in cash.
6. July 7: Sold 50 chairs for $135 each, 50 desks for $185 each and 15 gaming PCs for $800 each to BBG
Games. BBG Games has been given 90 days to pay their account and the products will be delivered to them in
7 days.
7. July 13: An order was placed for 100 gaming chairs at a cost of $75 each and 100 gaming
desks at a cost of $117 each with gaming Accessories Co. Delivery occurred the same day and the total was
paid in cash.
8. July 13: An order was placed with Alliance Digital for 40 gaming PCs for $495 each. Delivery occurred the
same day, and Lenova Digital have 30 days to pay their account.
9. July 14: Total commission income received in cash for the fortnight for the online store is $9,760.
10. July 14: Total wages for the fortnight were paid. This includes $2,500 each paid to Claire and Sarah and
$1,800 each to Sam and Paul.
11. July 14: Delivered goods to BBG Games, following the transaction on July 7.
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12. July 15: Sold 40 chairs for $135 each, 40 desks for $185 each, and 30 gaming PCs for $800 each to Gamers
Rise. Delivery occurred the same day. The customer was given 90 days to pay their account.
13. July 24: Sold 100 chairs for $130 each, 100 desks for $180 each and 15 gaming PCs for
$800 each to the Digital Computer Store. Delivery occurred on the same day. The customer
was given 90 days to pay their account.
14. July 28: Total commission income received in cash for the fortnight from the online store is $9,500.
15. July 28: Total wages for the fortnight were paid. This includes $2,500 each paid to Claire and Sarah and
$1,800 each to Sam and Paul.
16. July 30: A payment of $3,300 to the bank loan (inclusive of interest of $300) was made for the month of
July. Note that the business considers interest as a financing cashflow.
17. July 31: A payment was made for various business expenses incurred on the corporate credit card for the
month of July of $3,150.
18. July 31: Paid dividends to shareholders of $15,000.
July 2023 Adjustments at Month End (July 31)
Adjustment 1: Depreciation of assets
Lenova Digital owns four non-current assets as at July 31, 2023. Calculate the total depreciation for the month
for each of the assets below using the straight-line method.
Round calculations to the nearest whole dollar.
Exhibit 1
Equipment Delivery Truck Forklift CCTV
Date of acquisition 1 Aug 2018 1 Sept 2018 1 Sept 2018 1 Jul 2023
Useful life in years 5 8 12 15
Cost $55,500 $160,000 $30,000 $18,000
Residual value $10,000 $60,000 $5,500 $0
Adjustment 2: Recognition of insurance
Lenova Digital needs to recognise the insurance related to the month of July. Insurance of
$7,650 was paid in advance for a 12-month period on 30 June 2023. Round calculations to the nearest whole
dollar.
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Adjustment 3: Recognition of advertising
Lenova Digital needs to recognise the advertising related to the month of July. Advertising for a 12-month
period was paid to Google for $4,560 and to YouTube for $6,000 on 30 June 2023. Round calculations to the
nearest whole dollar.
Adjustment 4: Wages Owing
Wages owing but not yet paid as at 31 July were $1,720. Round calculations to the nearest whole dollar.
Adjustment 5: Recognition of rent
Lenova Digital needs to recognise the rent related to the month of July. Refer transaction on July 1. Round
calculations to the nearest whole dollar.
Adjustment 6: Recognition of income
On June 30, a local high school approached Lenova Digital for help. They asked Sarah to visit the school and
provide them with advice on which products would be best for their students to use. They paid $2,500 in
advance for Sarah to consult with them and provide a report outlining the available products. The business
initially recorded unearned revenue on June 30 when the cash was received. Sarah visited the school on July
31. An adjustment needs to be made to recognise the income earned. Round calculations to the nearest whole
dollar.
Part 1: Inventory calculations | Numeric entry
6 marks
Lenova Digital purchased and sold inventory throughout the month of July as shown in the
business transactions listed to the left. To record these transactions in the worksheet, the cost of these purchases
and the cost of the goods sold must be calculated first. Please use the tables below to show these calculations.
The second tab of the Excel spreadsheet also includes these tables so that you can calculate them in Excel
before entering them into Inspera.
These totals will be used in the worksheet.
Enter your answers in the table below using the information within the transactions.
DO NOT use a thousand separator. For example, the correct way to type “One Thousand” is “1000”, not
“1,000” or “1.000”. Only enter numbers. Do not enter dollar signs ($) in the cells.
Use date format DDMMYYYY (e.g., 01032023)
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Part 1: Inventory calculations
Questions 1 to 3: Inventory calculations | Numeric entry 2 marks for each table.
DO NOT use a thousand separator. For example, the correct way to type “One Thousand” is “1000”, not
“1,000” or “1.000”. Only enter numbers. Do not enter dollar signs ($) in the cells. Use date format
DDMMYYYY (e.g. 01072023).
Gaming Chairs Inventory Purchases Cost of Sale Balance
Date Qty Cost Total Qty Cost Total Qty Cost Total
Gaming Desks Inventory Purchases Cost of Sale Balance
Date Qty Cost Total Qty Cost Total Qty Cost Total
Gaming PCs Inventory Purchases Cost of Sale Balance
Date Qty Cost Total Qty Cost Total Qty Cost Total
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Part 2: Inventory justification
1 mark.
Instructions
Part 2 of this assessment requires you to draw on the decisions you made in Part 1 Inventory calculation and
explain how you calculated the numeric entries you calculated.
Question 4:
Please explain how you calculated the cost of sales for the gaming chairs on 24 July.
Select one alternative:
• The cost of sales was calculated by taking the cost of each inventory unit purchased first and
multiplying it by the number of units sold. This resulted in the cost of sales of 15 chairs at $80 each and
85 chairs at $75 each.
• The cost of sales was calculated by taking the cost of each inventory unit purchased first and
multiplying it by the number of units sold. This resulted in the cost of sales of 100 chairs at $75 each
and 15 chairs at $75 each.
• The cost of sales was calculated by taking the cost of each inventory unit purchased first and
multiplying it by the number of units sold. This resulted in the cost of sales of 85 chairs at $80 each and
15 chairs at $75 each.
• The cost of sales was calculated by finding the average cost of each inventory item purchased. This
resulted in dividing $21,625 by 275 chairs to find the cost of sales per unit of $78.64.
Part 3: Inventory Items
Instructions
Part 3 of this assessment requires you to draw on the decisions you made in Part 1 Inventory calculation and
explain how you calculated the numeric entries you calculated.
DO NOT use a thousand separator. For example, the correct way to type “One Thousand” is “1000”, not
“1,000” or “1.000”. Only enter numbers. Do not enter dollar signs ($) in the cells.