Question 2 (LO 2 a, b c):
Preparation and evaluation of financial statements under the guidelines of New Zealand accounting framework. (60 marks)
Please read the following information regarding Interwood, and answer the questions given at the end of the information.
Bruce Minogue has decided to go into a retail business selling tables and chairs. He has named his business as Interwoo. He decided to open his first showroom in Remuera, Auckland. Bruce had the following transactions during June 2017 (The first month of his business):
|01/06/2017||Opened a bank account in the name of the business and transferred $ 22,000 from his personal account to business bank account.|
|02/06/2017||Obtained a bank loan worth $ 20, 0000 from ANZ Bank Remuera Branch for a fixed term of 5 years at 8% per year.|
|03/06/2017||Bruce transferred his personal car into the business name, fair value of the car is $ 15, 000. The car will be used by the business for 4 years, Bruce expects that he will be able to sell the car for $ 3000 at the end of 4th year.|
|04/06/2017||Signed a lease agreement with Lisa properties for renting a shop in Remuera Shopping Village. Rent per week is $ 1100 including GST ($100). As per agreement, Bruce transferred six months’ rent in advance from the business bank account.|
|06/06/2017||Made an initial purchase of 130 tables on credit from KiwiDanish manufacturers. Cost per table is $ 100.|
|07/06/2017||Made an initial purchase of 600 chairs from Tazz Factory located in Milford, North of Auckland, on cash. Cost of each chair is $ 30.|
|09/06/2017||Obtained office equipment from Officemate Remuera for $ 3,000, paid cash, Bruce expects that he will use this asset for 3 years and will scrap it at the end of third year.|
|10/06/2017||The business has signed an agreement with Remuera Times, a local newspaper, for an advertisement campaign. The newspaper will have an ad of the business in its Saturday and Sunday editions starting from Saturday 17th June, 2017 and ending on July 9th, 2017. This 4 weeks campaign will cover 2 weeks of June and 2 weeks of July. The campaign will cost the business $ 1380, payable on 20th July, 2017.|
|12/06/2017||Bruce purchased office supplies on credit from Bunny’s Warehouse. Cost of the purchase is $ 850. Interwood’s policy is to put the supplies to assets and adjust it at the end of the month.|
|14/06/2017||Interwood sold 50 tables on credit to Sophie & Co. Selling price per table is $ 250.|
|16/06/2017||Sold 35 tables to Mable’s Café for $ 230 each on cash.|
|17/06/2017||Sold 200 chairs to ShaneWood on credit for $ 95 each, the money will be received in the last week of July, 2017.|
|18/06/2017||Sold 100 chairs to Xuan Rentals for $ 85 each on cash.|
|19/06/2017||Bruce paid $ 780 weekly rent of his house from interwood’s bank account.|
|20/06/2017||Paid $ 3500 to KiwiDanish.|
|21/06/2017||Paid $ 920 to PWR accountants for the consultancy services received.|
|23/06/2017||Received utility bills for the month of June for $ 130. The bills are payable before 10th of July.|
|24/06/2017||Paid interest due on the loan for the month ended June 2017.|
|25/06/2017||Depreciated the car for the month of June, using straight line method of depreciation.|
|26/06/2017||Depreciated office equipment for month of June, using straight line method of depreciation.|
|28/06/2017||Adjusted for monthly rent.|
|28/06/2017||Adjusted for the advertisement expense.|
|28/06/2017||Physical inspection of office supplies shows that there are $ 300 worth of office supplies left in the store room.|
- Prepare a worksheet showing all of the above transactions (The transactions are GST inclusive; assume 15% GST as applicable in New Zealand). (LO2 a) (33 Marks) (0.5 march for each correct figure)
- Prepare Income statement and balance sheet for the month ended June, 2017 (LO2 b) (22 Marks) (7 marks for a classified income statement, 15 marks for a classified balance sheet)
- Calculate and analyse working capital of the Interwood (LO2 c) (5 Marks)
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