Question 1 Cash versus accrual accounting
During March, Thuy Bui’s business performed services for a specific customer for which the fee was $9000. Payment was received in the following April.
- Was the revenue earned in March or April?
- What journal entries should be recorded under accrual accounting in March and April?
- What journal entries should be recorded under cash accounting in March and April?
Question 2 Adjusting entries
The financial year for Drip Dry Cleaning Services ends on 30 June. Using the following information, make the necessary adjusting entries at year-end. Ignore GST.
- On 15 February, Danielle Drip’s business borrowed $16 000 from Northern Bank at 8% interest. The principal and interest are payable on 15 August.
- Rent of $3600 for the 6-month period ending 31 July is due to be paid in August.
- The annual depreciation on equipment is estimated to be $7200. The 1 July balance in the Accumulated Depreciation account was $15 600.
- Drip Dry Cleaning Services purchased a 1-year insurance policy on 1 March of the current year for $660. A 3-year policy was purchased on 1 November of the previous year for $2700. Both purchases were recorded by debiting Prepaid Insurance.
- The business has two part-time employees who each earn $220 a day. They both worked the last 3 days in June for which they have not yet been paid.
- On 1 June, the Highup Hotel paid the business $2100 in advance for doing their dry cleaning for the next 3 months. This was recorded by a credit to Unearned Dry Cleaning Revenue.
- Water for June of $850 is unpaid and unrecorded.
- The supplies account had a $280 debit balance on 1 July. Supplies of $1560 were purchased during the year and $190 of supplies are on hand as at 30 June.
Prepare the necessary adjusting entries at 30 June.
Questions 3 Preparing a worksheet
The unadjusted trial balance of Helena’s Hire Cars is shown below (ignore GST).
|HELENA’S HIRE CARS|
|Unadjusted Trial Balance|
|as at 30 June 2019|
|Cash at bank||$||8 140|
|Accounts receivable||12 860|
|Hire cars||93 600|
|Accumulated depreciation – hire cars||$||39 400|
|Office equipment||6 200|
|Accumulated depreciation – office equipment||3 500|
|Accounts payable||10 800|
|Unearned hire fees||2 260|
|H. Savva, Capital||68 340|
|H. Savva, Drawings||20 600|
|Hire fees revenue||98 700|
|Insurance expense||8 180|
|Wages expense||50 620|
|Advertising expense||3 880|
|Maintenance expense||7 600|
|Fuel and oil expense||10 680|
|$||223 000||$||223 000|
- Petrol purchased on credit for $680 and used during the last week in June has not been paid for or recorded.
- A physical count showed office supplies totalling $340 were still on hand at 30 June.
- Depreciation for 1 year on the hire cars is $12 400. Depreciation on the office equipment is $980.
- The balance in the Advertising Expense account includes $600 prepayment for an advertising campaign beginning in July.
- The balance in the Unearned Hire Fees account includes $1800 received in May for hire services completed in June.
- The June insurance premium of $700 is overdue and has not been recorded. A tax invoice has not been received.
- Wages earned but not paid amounted to $1150.
Prepare a 10-column worksheet for the year ended 30 June 2019.
|Unadjusted TRIAL BALANCE||ADJUSTING ENTRIES||ADJUSTED TRIAL BALANCE||INCOME STATEMENT||BALANCE SHEET|
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