Company Name: Abcde Pty Ltd
The company began operations as a retailer on 1 July 2016. It buys and sells one inventory item, derrings, from a leased warehouse in the outer suburbs of Melbourne.
The company is registered for GST which it pays quarterly. Assume GST was last paid on 30 June. It uses the Weighted Average cost allocation method and the perpetual inventory recording method.
The company uses the straight-line depreciation method for office furniture and computers and the reducing balance method for motor vehicles.
The company employs two people who are rostered over a seven-day working week. The employees are paid fortnightly up to and including the day of payment. There are no penalty wages.
The company has one debtor (Debtor1) and one creditor (Creditor1). Terms for all credit sales and purchases are 30 days
- The company has the following opening balances at the 1 July in the current financial year:
Cash at Bank: $23,462.00
Accounts receivable: $4,463.00
Allowance for doubtful debt: $489.00
Motor vehicle: $20,358.00
Accumulated depreciation motor vehicle: $2,963.00 Accounts payable: $5,751.00
Bank loan owing (due in 20 months): $12,365.00 Office furniture: $12,769.00
Accumulated depreciation office furniture: $1,270.00 Office supplies: $687.00
Share capital: $41,075.00
Retained earnings: balance amount $8,586.00
- Transactions for the month (all dollar amounts include GST where applicable).
02 July Sales on credit 58 units
05 July Sales on credit 77 units
11 July Sales on credit 65 units
18 July Sales on credit 63 units
22 July Sales on credit 75 units
29 July Sales on credit 77 units
04 July Paid Wages (ignore PAYG tax) $2,196.00 18 July Paid Wages (ignore PAYG tax) $2,460.00 02 July Paid rent for the current month $2,713.00 15 July Paid insurance $2,410.00
02 July Received advertising invoice (due in 30 days) $731.00
17 July Purchased computer on credit $2,241.00
07 July Purchased inventory on credit 20 units at the cost per unit of $26.00 14 July Purchased inventory on credit 22 units at the cost per unit of $26.00 20 July Purchased inventory on credit 20 units at the cost per unit of $26.00 24 July Purchased inventory on credit 25 units at the cost per unit of $24.00 30 July Purchased inventory on credit 25 units at the cost per unit of $24.00 11 July Received payment from accounts receivable $882.00
16 July Received payment from accounts receivable $1,159.00
04 July Received payment from accounts receivable $1,070.00
15 July Purchased office supplies on credit $622.00
24 July Paid motor vehicle expenses $153.00
05 July Paid accounts payable $1,393.00
13 July Paid accounts payable $1,085.00
09 July Paid accounts payable $1,436.00
- Additional information:
Selling Price per unit (GST inclusive) $55.00
Insurance paid from the first of the current month and for: 12 months in total. Insurance commences from the first of the month in which it is paid.
All asset purchases and expenses except wages include GST. Cost of opening inventory items per unit $20.00 Depreciation rate motor vehicle 20%
Residual value motor vehicle: $2,891.00
Depreciation rate office furniture 20% Residual value office furniture: $624.00
Regardless of purchase date, company policy is to depreciate new assets for 15 days in the month of purchase. Depreciation rate computer 35%
No residual value is expected for computers.
The company counted inventory at the end of the month. They discovered that 5 units were missing, and these must be removed from inventory.
Office supplies on hand at end of the month were $209.00
At the end of the month the company records potential bad debts expense using the percentage of sales method. The business uses 1% of sales to determine estimated bad debts. Interest owing on the bank loan at the end of the month is $60.00
Prepare Journal Entries to record above transactions.
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