ACCT1501 ? Group 5: Case 5A Our group investigated Case 5A which looked at the consolidated accounts of Woolworths Ltd.fs 2011 Annual Report. 1,2,3 Iain ? ppt slides details 4. a. Woolworth's Land and Buildings consists of "Development properties", "Freehold land, warehouse, retail and other properties" and "Leasehold Improvements" which in 2010 amounted to $927.8m, $1574.6m and $1169.5m and have been adjusted to account for accumulated depreciation/amortisation. In 2011 these amounted to $1563.4m, $1547.2m and $1277.9m. Therefore the net book value of Land and Buildings in 2010 was $3661.9m and in 2011 was $4388.5m. 4.b. Woolworth's Plant and Equipment in 2010 amounted to $3967.2m. In 2011 these amounted to $4231.8m. Both years have been adjusted for Accumulated depreciation. 5. Trade Debtors consisted of "Trade receivables", "Other receivables" and "Prepayments" in Current Assets and "Prepayments" and "Other receivables" in Non-current. The value of Trade Debtors amounted to $930.1m in 2010 and $1137.1m in 2011. 6. During the year, how much was written off in bad debts? Previous Year? Consolidated Cash Flow Statement Loss on sale and write-off of property, plant and equipment 2011: $15.4m 2010: $15.2m Bad debts are an expense that results from the accounts receivable that have been projected to be uncollectable or doubtful. During the year of 2011 $15.4m was written off in bad debts indicated by Loss on Sale and write-off of property, plant and equipment. In comparison, the previous yearfs (2010) bad debts were $15.2m. 7. What would the journal entry have been to record bad debts? $m $m DR Bad debts expense 15.4 CR Allowance for doubtful debts 15.4 DR Allowance for doubtful debts 15.4 CR Accounts receivable 15.4 The allowance for doubtful debts is a contra asset account, which means and increase in the allowance reduces total assets. The inclusion of the allowance is used to avoid directly changing the accounts receivable asset as can be seen in the journal entry. Allowance for doubtful debts is debited and accounts receivable credited, then the allowance is credited and bad debts expense debited which means accounts receivable is not directly adjusted. Woolworths Ltd also has an impairment allowance for other receivables. 8. Give examples from Woolworthsf financial statements to indicate that it uses accrual accounting. Cost of sales 2011: 40,186.3 2010: 38,391.2 Inventories 2011: 3,736.5 2010: 3,438.8 This is an example of accrual accounting because when the inventories are purchased at the time of transaction, it is recorded into the balance sheet. The cost of sales is then used as a record of the inventory that Woolworths has sold at the time the transaction was made. The reason for purchasing inventory is to make profit of it. Inventory is recorded in the balance sheet once the transaction to purchase it occurs. Then another transaction is made where the inventory is sold. In both cases itfs based on when the transactions occurred which is accrual accounting, as opposed to cash accounting where it would only be recorded when there was cash flow. 9. For Woolworths find the numbers for interest expense and interest paid. If they are not the same, give a possible reason. Interest paid 2011: 309.6 2010: 249.8 Interest expense 2011: 277 2010: 227.3 The interest paid and interest expense is different because of accrued interest. The financial period for reporting ends in June 31st, so the transaction for the interest occurred before that time. Therefore it is recorded as interest payable; however money is not received or given until after June 31st. This means that it is recorded as an interest expense. There is also a difference in numbers due to the difference of the period in which it was recorded/given.