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 29th 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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