QUESTION 1
Grace Park has recently graduated with a Masters of Health and Human Services and has decided to set up her own business as a health policy and research consultant. From her past medical experience Grace is confident she can succeed with her business Park Health. Grace has provided the transactions for Park Health for the first quarter ending 3oth June 2018.
a) You are required to record the following transactions into the transaction analysis chart (template provided).
April
1 Invested $160,000 of her own funds into a business bank account.
2 Purchased a self-contained office space in Richmond for $360,000. Grace paid a 10% deposit and the balance was financed through a mortgage with Gotcha Banking Corporation.
3 Grace purchased office equipment $18,000 cash.
A six-month subscription for access to professional medical journals was purchased for $3,600 cash.
4 Office furniture was purchased for $3,000 cash.
Paid $2,400 for professional indemnity insurance for 12 months. Office stationery was purchased for $860 on 30 day credit terms.
5 Grace acquired a motor vehicle for $30,000 on 120 days credit terms. No payments are required until July 2018.
12 Grace invoiced her first client, Carringvale Private Hospital, $2,000 for a day’s consulting.
13 Grace contributed her own laptop computer valued at $4,500, to the business.
16 Invoiced clients $3,500 for consulting services performed.
17 Received full payment from her first client.
18 Hired a research assistant on a casual contract basis.
30 Paid a mortgage repayment of $2,800, of which $1,200 is interest and $1,600 is principal.
May
1. Invoiced clients $9,800 for consultation and research. Grace withdrew $2,400 for personal use.
10 Paid wages to her research assistant totaling $1,200, $300 of which was deducted for PAYG tax which will be remitted to the Australian Taxation Office at a later date.
24 Received $5,800 from credit customers.
26 Paid telephone and internet for bill for April of $320.
27 Big Pharma Ltd, have agreed to retain Grace’s services as a lobbyist and research consultant in the future at a rate of $2,200 per day.
30 Paid a mortgage repayment of $2,800, of which $1,200 is interest and $1,600 is principal.
June
2 Invoiced a range of health providers for work performed $9,200
9 Paid wages to assistant totaling $1,800, $500 of which was deducted for PAYG tax and will be remitted to the Australian Tax Office in the future.
16 Paid motor vehicle expenses for the quarter totaling $580. Received $8,400 from credit customers.
25 Grace withdrew $2,800 from the business, of which, $1,200 was for a one-off payment for professional accreditation to the Allied Health Association, the relevant professional body, and $1,600 for airfares to Hawaii for a holiday later in the year.
Made a part payment of $260 for the office stationery.
30 Paid a mortgage repayment of $2,800, of which $1,200 is interest and $1,600 is principal.
Additional information:
– Utilities owing at balance date are $680
– As at 30 June $500 of office supplies had been consumed.
– Motor vehicle is depreciated at 20% per annum straight line.
– Office and computer equipment is depreciated at 30% per annum reducing balance.
– Office furniture is depreciated at 10% per annum straight line.
– Assume a full quarter for depreciation and no residual value.
– Round up to nearest dollar.
– Ignore GST and income tax.
b) Prepare the fully classified Income Statement and Balance Sheet for the quarter ending 30 June 2018 for Park Health.
c) Park has concerns regarding the unlimited liability status of a sole trader and is considering setting up a proprietary limited company. She has read that shareholders enjoy limited liability and finds this attractive. Park will be the only shareholder and director of the company.
Are there any circumstances in which Park, as a director, could be personally liable for any debts of the company?
In your answer cite all relevant legislation, if any. (up to 750 words)
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