“Quick Kip” is a pet store specialising in cat beds. The store is owned and operated by Kat Knapp. The following adjusted trial balance has been prepared at year end but is not in the correct order.
Quick Kip – TRIAL BALANCE AS AT 30 JUNE 2020
| Debit ($) | Credit ($) | |
| Cash | 16,000 | |
| Advertising Expense | 1,200 | |
| Depreciation Expense – Equipment | 4,200 | |
| Freight Outwards | 3,750 | |
| Allowance for Doubtful Debts | 3,100 | |
| Insurance Expense | 3,600 | |
| Inventory (1 July 2019) | 43,000 | |
| General Expense | 2,800 | |
| Loan Payable | 32,000 | |
| Rent Expense | 6,600 | |
| Equipment | 16,000 | |
| Sales Returns | 400 | |
| Accumulated Depreciation – Equipment | 5,400 | |
| Prepaid Rent | 1,500 | |
| Delivery Van | 24,000 | |
| Purchases Returns | 5,200 | |
| Accumulated Depreciation – Delivery Van | 4,800 | |
| Accounts Payable | 22,250 | |
| Sales Staff Wages Expense | 19,000 | |
| Freight Inwards | 2,150 | |
| Accounts Receivable | 36,600 | |
| Doubtful Debts Expense | 700 | |
| K. Knapp, Capital (1 July 2019) | 58,000 | |
| Depreciation Expense – Delivery Van | 2,800 | |
| Discount Received | 900 | |
| K. Knapp, Drawings | 12,500 | |
| Sales | 217,800 | |
| Purchases | 145,200 | |
| Discount Allowed | 7,450 | |
| 349,450 | 349,450 |
Additional information
⦁ Closing Inventory (as per stocktake) at 30 June 2020 was $45,500.
⦁ 30% of the insurance expense specifically relates to the administration office. The remainder of this expense relates to insuring the store.
⦁ $2,000 of the rent expense specifically relates to the administration office. The remainder of this expense relates to rent of the store.
⦁ The Loan is not due for repayment until 2022.
REQUIRED
(a)
Identify which inventory method Quick Kip is using.
Explain how you determined which inventory method Quick Kip is using from the trial balance provided.
(b) Using the Trial Balance, prepare the following financial statements for the period in question:
⦁ A fully classified Income Statement
⦁ A separate Statement of Changes in Equity
⦁ A fully classified Balance Sheet in the narrative format
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