QUESTION 1: Balance Day Adjustments
Below is the unadjusted Trial Balance as at 30 June 2018 for “Feed Me Seymour”, a retail plant nursery and garden centre. It is owned and operated by Fran Giapani.
Feed Me Seymour
|Debit ($)||Credit ($)|
|Cash at Bank||35,760|
|Office Supplies on hand||4,368|
|Accumulated Depreciation — Nursery Equipment||15,912|
|Accumulated Depreciation — Delivery Van||24,960|
|F. Giapani — Capital (1 July 2017)||88,296|
|F. Giapani — Drawings||37,440|
|Sales Returns and Allowances||13,232|
|Cost of Sales||549,744|
|Sales Salary Expense||91,104|
|Office Salaries Expense||45,000|
|On the following page is information that Fran has provided to you in relation to the year ended 30 June 2018.|
- Sales Salaries which are payable but not recorded as at 30 June are $4,260.
- Both the Nursery Equipment and the Delivery Van are expected to be used evenly over their useful lives. The expected total useful lives and residual values of both assets is as follows:
|Estimated Useful life||Estimated Residual|
|Nursery Equipment||7 years||$4,040|
|Delivery Van||4 years||$12,400|
- In February 2018, Fran purchased two tickets to see “Little Shop of Horrors” (her favourite musical!). The tickets cost $175 each and she purchased them online using the business bank account. Fran recorded this transaction as a debit to Administration Expense and a credit to Cash at Bank.
- A count of the stationery cupboard revealed that office supplies on hand at 30 June 2018 were $575.
- The Prepaid Insurance account represents a 12-month insurance policy that commenced on 1 November 2017.
- In May 2018 a customer ordered the very rare “Audrey 2” carnivorous plant, which had to be imported from South America. Unfortunately, due to delays in obtaining the necessary customs clearances, this plant will not arrive in Australia until late September 2018. The customer paid $35,800 at the time they ordered the plant, and Fran recorded this as Sales revenue.
- As of 30 June 2018, Fran has estimated that 396 of customers who owe her money will be unable to
- The last time Fran received an electricity bill for the business was on 31 May 2018. She estimates that the power usage from then until 30 June 2018 was $1,080.
It is now the end of the financial year, and based on the information she has provided above, Fran has asked you to prepare any necessary balance day adjusting journals.
Use the General Journal document provided to record the correctly formatted journal entries required and include a narration (explanation) for each entry.
QUESTION 2: Financial Statement
The following adjusted Trial Balance for Otto’s Fine Furniture has been prepared at year end by the business owner Otto Mann.
Using the adjusted Trial Balance provided below, prepare the following for the period in question:
- Statement of Changes in Equity
- Fully classified Balance Sheet (in the narrative format)
OTTO’S FINE FURNITURE
ADJUSTED TRIAL BALANCE
AS AT 30 JUNE 2018
|Debit ($)||Credit ($)|
|Cash at Bank||101200|
|Inventory (30 June 2018)||46112|
|Allowance for Doubtful Debts||2200|
|Shop Furniture & Fittings||55000|
|Accumulated Depreciation — Shop Furniture & Fittings||19844|
|Accumulated Depreciation —Sales Equipment||11440|
|Capital, 0. Mann (1 July 2017)||98582|
|Drawings, 0. Mann||40700|
|Sales Returns & Allowances||18986|
|Depreciation Expense—Shop Furniture & Fittings||7810|
|Depreciation Expense — Sales Equipment||11440|
|Salaries Expense – Store||73480|
|Doubtful Debts Expense||2200|
|Salaries Expense – Admin||29260|
Otto has provided the following addition information to assist in your statement preparation:
- Otto has determined that his profit for the year ending 30 June 2018 was $133 474.
- $18 480 of the Loan Payable is due to be paid by the end of the next financial year (30 June 2019). The remainder of this loan will be payable after this date.
QUESTION 3: Cash Flow Statement
You are provided with the following financial information for Fire It Up Pty Ltd, a BBQ and outdoor entertaining retailer:
FIRE IT UP PTY LTD
COMPARATIVE BALANCE SHEETS
AS AT 30 JUNE
|Cash on Hand||71 500||15 600|
|Cash at Bank||139 100||59 800|
|Accounts Receivable (net)||75 400||63 700|
|Inventory||403 000||429 000|
|Prepaid Expenses||45 500||734 500||42 900||611 000|
|Store Fittings||1 287 000||988 000|
|less Acc. Depreciation||1592 800)||694 200||(530 400)||457 600|
|Land||169 000||299 000|
|Total Assets||1 597 700||1 367 600|
|Bank Overdraft||26 000|
|Accounts Payable||83 200||97 500|
|Expenses Payable||27 300||40 300|
|Tax Payable||54 600||191 100||72 800||210 600|
|Total Liabilities||360 100||210 600|
|Net Assets||$1 237 600||$1 157 000|
|Share Capital||598 000||546 000|
|Retained Earnings||639 600||611 000|
|$1 237 600||$1 157 000|
FIRE IT UP PTY LTD
FOR THE YEAR ENDED 30 JUNE 2018
|Cost of Sales||1690000|
|Less: Discount Received||6500||1683500|
|Gain on sale of building||78000|
|Selling & Admin Expenses||565500|
|Doubtful Debts Expense||11700|
|Profit before tax||396500|
|Income tax expense||122850|
- Proceeds from the sale of land was $208,000. The land had originally cost $130,000 and the sale made the company a profit (gain) of $78,000.
- The Selling & Admin Expenses include Depreciation expense of $62,400.
- During the year, 104,000 shares were issued at 0.50c per share
- Prepare a Statement of Cash Flows in the pro forma provided on the following page. You must show all calculations (answers without supporting calculations will receive zero marks)
- The owner of Fire It Up (Paddy O’Heater) thinks you have done a terrible job and cannot understand why his reported profit was so much higher than his increase in cash. Explain to Paddy at least two factors that may be causing this apparent discrepancy.
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