QUESTION 1: Balance Day Adjustments

Jacque Mercedes owns and operates a successful tour business specialising in mountain e-bike adventure holidays. The business also sells a range of cycling products but its main item is a custom made mountain e-bike, “Vampex”. The “Vampex” is made only for The E-Bike Tour Company and has recently featured in a number of bike touring / holiday magazines. As a result of this recent positive media coverage, Jacque has been too busy to undertake any record keeping for the company and has handed the record keeping over to the accounting practice where you work as a graduate accountant.

 

The E-Bike Tour Company Trial Balance 30 June 2019 $ $ Cash 3,060 Accounts Receivable 3,500 Inventory (1 July 2018) 21,930 Prepaid Rent 918 Warehouse Shelving 8,160 Accumulated Dep’n Warehouse Shelv. 1,632 Camping Equipment 16,900 Acc’d Depreciation Camping Equipment 1,020 Accounts Payable 12,447 Unearned Sales 4,000 J Mercedes, Capital (1 July 2018) 29,580 J Mercedes, Drawings 6,375 Sales 105,978 Sales Returns & Allowances 1,147 Discount Allowed 204 Purchases 71,502 Interest 459 Electricity Expense 1,097 Water Expense 612 Tour Guide Wages Expense 12,225 Local Government Rates Expense 408 Insurance Expense 1,800 Advertising Expense 1,912 Rent Expense 3,366 155,116 155,116

 

Jacque has emailed you the following list of account information related to the year ended 30 June 2019:

 

REQUIRED:

Prepare the Balance Day Adjustment Journals for The E-Bike Tour Company where required in the proforma provided on the next page.  Include narration (explanation) for each journal entry. If there are any transactions that you consider do not require a journal, provide an explanation why a journal is not required.

1. $1,250 of the Unearned Sales is for a “Vampex” E-bike that was ordered and paid for in May 2019 and delivered on the 29^th June 2019.
2. Jacque was reviewing the previous month’s journal entries and realised that $140 had been put into the electricity account in error and should have been put into the advertising account. This needs to be corrected.
3. The prepaid rent was paid on 1 June 2019 and was Warehouse/Office rent for the two months ending July 31st 2019.
4. A physical stocktake of inventory at 30 June 2019 revealed $21 900 on hand.
5. It is estimated that 1% of the 30 June 2019 balance of Accounts Receivable is unlikely to be received.
6. The Warehouse Shelving is expected to be used evenly over its useful life of four years and it is anticipated that it will have no residual value and will be donated to the Salvation Army at the end of its useful life.
7. The business insurance costs $150 per month. The last insurance payment made was for 12 months commencing 1 March 2019.
8. Wages owing to the E-Bike Tour Guide at balance day equals $842.
9. The Camping Equipment is expected to depreciate at 20% per year and will have no residual value.

 

The E-Bike Tour Company

 General Journal

Date	Details	Debit ($)	Credit ($)

 

 

QUESTION 2: Financial Statement

Mr Myles owns and manages, Get More Myles, a bike mechanic workshop, specialising in repairing bikes and selling bike parts. The following Trial Balance for Get More Myles has been prepared at year end by Mr Myles.

GET MORE MYLES

TRIAL BALANCE

AS AT 30 JUNE 2019

	Debit ($)	Credit ($)
Inventory (1 July 2018)	20,960
Rent Expense	22,600
Accounts Payable		7,240
L. Myles, Capital (1 July 2018)		87,820
Allowance for Doubtful Debts		304
Purchases	76,800
Interest Expense	1,885
Depreciation Exp – Motor vehicle	800
Prepaid Insurance	1,558
Shop Shelving	39,456
Accumulated Dep’n Shop Shelving		11,600
Office Furniture and Fittings	12,800
Accumulated Dep’n Office Furniture & Fittings		3,800
Insurance Expense	480
Cash at Bank	17,121
Accounts Receivable	16,841
Doubtful Debts Expense	304
Accrued Rent		800
Loan (repayable 1 Oct 2024)		18,400
Motor Vehicle	16,000
Depreciation Exp – Off. Furn. & Fittings	1,280
L. Myles, Drawings	14,400
Sales		258,821
Sales Returns & Allowances	380
Depreciation Exp – Shop Shelving	2,000
Discount Allowed	460
Advertising Expense	2,755
Wages	105,200
Office Operating Expense	34,400
Discount Received		800
Freight Inwards Expense	1,185
Accumulated Dep’n Motor vehicle		800
Delivery Expense	720
Totals	390,385	390,385

 

Additional Information:

Mr Myles confirmed that the Gross Profit for the year ended 30 June 2019 is $209,736, Selling Expenses are $63,335, Administration Expenses are $101,640 and the Finance Expenses are $7,449.

The stocktake performed by Mr Myles on the 30 June 2019 revealed a stock balance of $49,900.

 

REQUIRED:

Prepare a fully classified Balance Sheet and Statement of Changes in Equity for the year ending 30 June 2019.

 

QUESTION 3: Cash Flow Statement

You are provided with the following financial information for the business Adelaide Hills Bike Tours:

 

ADELAIDE HILLS BIKE TOURS                                                   COMPARATIVE BALANCE SHEETS                                                                              AS AT JUNE 30                                                                              Current Assets        2019             2018 Cash on Hand $1 200 $3 000 Cash at Bank 5 789 2 009 Accounts Receivable (net) 29 700 4 500 Inventory 28 000 18 000 Prepaid Expenses    1 650 $66 339     650 $28 159 Non Current Assets Plant & Equipment 83 500 64 000 less Acc. Depreciation (23 000) 60 500 (17 600) 46 400 Land   75 000   180 000 Total Assets 201 839 254 559 Current Liabilities Bank Overdraft 6 402 – Accounts Payable 1 522 2 800 Expenses Payable 780 790 Tax Payable    2 690 11 394 1 200 4 790 Non Current Liabilities     Bank Loan 20 000 20 000 Total Liabilities 31 394 24 790 Net Assets $170 445 $229 769 Equity Capital 170 445 229 769   $170 445   $229 769

 

 

ADELAIDE HILLS BIKE TOURS                                                      INCOME STATEMENT                                                   FOR THE YEAR ENDED JUNE 30 2019   Net Sales $137 100 Cost of Sales   45 200 Discount Received   280 Gross Profit:   92 180 Other Revenue:   Interest Revenue   52 52 92 232 Expenses: Selling & Admin Expense 18 845 Doubtful Debts Expense 354 Depreciation Expense 5 400 Interest Expense 3 800 28 399 Profit before tax 63 833 Income tax expense 5 178 Profit $58 655

 

 

ANSWER THIS QUESTION ON THE PRO FORMA PROVIDED

 

REQUIRED:

 

1. Prepare a Statement of Cash Flows in the pro forma provided and show all calculations (an answer without supporting calculations will receive zero marks).

 

ADELAIDE HILLS BIKE TOURS LTD

Cash Flow Statement

for the year ended 30 June 2019

 

	$	$
Cash Flows from Operating Activities
Receipts from customers
Payments to Suppliers & Employees
Cash generated from operations
Interest Paid
Income Tax Paid
Interest Received
Cashflows from Operating Activities
Cashflows from Investing Activities
Purchase of Equipment
Proceeds from Sale of Land
Cashflows from Investing Activities
Cashflows from Financing Activities
Drawings
Net Increase (decrease) in cash held
Cash at start
Cash at end

 

 

Please include all Calculations below – answers provided without supporting calculations will receive zero

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