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.
Jacque has emailed you the following list of account information related to the year ended 30 June 2019:
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.
- $1,250 of the Unearned Sales is for a “Vampex” E-bike that was ordered and paid for in May 2019 and delivered on the 29th June 2019.
- 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.
- The prepaid rent was paid on 1 June 2019 and was Warehouse/Office rent for the two months ending July 31st 2019.
- A physical stocktake of inventory at 30 June 2019 revealed $21 900 on hand.
- It is estimated that 1% of the 30 June 2019 balance of Accounts Receivable is unlikely to be received.
- 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.
- The business insurance costs $150 per month. The last insurance payment made was for 12 months commencing 1 March 2019.
- Wages owing to the E-Bike Tour Guide at balance day equals $842.
- The Camping Equipment is expected to depreciate at 20% per year and will have no residual value.
The E-Bike Tour Company
|Date||Details||Debit ($)||Credit ($)|
QUESTION 2: Financial Statement
Mr Myles owns and manages, Get More Myles, a bike mechanic workshop, specialising in repairing bikes and selling bike parts. The following Trial Balance for Get More Myles has been prepared at year end by Mr Myles.
GET MORE MYLES
AS AT 30 JUNE 2019
|Debit ($)||Credit ($)|
|Inventory (1 July 2018)||20,960|
|L. Myles, Capital (1 July 2018)||87,820|
|Allowance for Doubtful Debts||304|
|Depreciation Exp – Motor vehicle||800|
|Accumulated Dep’n Shop Shelving||11,600|
|Office Furniture and Fittings||12,800|
|Accumulated Dep’n Office Furniture & Fittings||3,800|
|Cash at Bank||17,121|
|Doubtful Debts Expense||304|
|Loan (repayable 1 Oct 2024)||18,400|
|Depreciation Exp – Off. Furn. & Fittings||1,280|
|L. Myles, Drawings||14,400|
|Sales Returns & Allowances||380|
|Depreciation Exp – Shop Shelving||2,000|
|Office Operating Expense||34,400|
|Freight Inwards Expense||1,185|
|Accumulated Dep’n Motor vehicle||800|
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.
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
|ADELAIDE HILLS BIKE TOURS
FOR THE YEAR ENDED JUNE 30 2019
ANSWER THIS QUESTION ON THE PRO FORMA PROVIDED
- 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|
|Income Tax Paid|
|Cashflows from Operating Activities|
|Cashflows from Investing Activities|
|Purchase of Equipment|
|Proceeds from Sale of Land|
|Cashflows from Investing Activities|
|Cashflows from Financing Activities|
|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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