Richard Reid commenced business as an architect trading as Archi-pro. He has provided the first month’s business transactions for July 2017.
|3||Invested $120,000 of his own funds into a business bank account and took out a personal loan for $30,000, also deposited into the business account.|
|4||Purchased business premises located in Hawthorn for $450,000. Richard paid a 10% deposit and the balance was financed through a mortgage with Jaz Finance Corporation at 6% per annum interest.|
|5||Richard purchased architectural equipment for $15,000 cash. $3,600 was paid to Design Australia for six months database subscription. Office supplies was purchased for $800 on 30 day credit terms|
|6||Office equipment was acquired for $4,000 cash. Paid $3,600 for professional indemnity insurance for 12 months. Richard purchased computer equipment for $10,000 cash and a motor vehicle for $38,000 was acquired on 60 days interest-free credit terms.|
|7||Richard invoiced his first client $2,400 for services provided. Richard also contributed his personally owned architectural equipment valued at $8,000 to the business.|
|10||Invoiced clients $5,500 for services performed.|
|12||Received full payment from his first client.|
|14||Hired a recent graduate to assist in the business on a casual basis.|
|17||Richard withdrew $1,200 for personal use. Invoiced clients $6,600 for work performed|
|24||Paid wages to assistant totaling $1,200, $300 of which was deducted for PAYG tax. The PAYG tax will be remitted to the Australian Taxation Office in the future.|
|25||Received $2,800 from credit customers.|
|26||Paid telephone and internet account for July of $330.|
|28||Invoiced clients for work performed $7,600. Paid wages to assistant totaling $900, $200 of which was deducted for PAYG tax and will be remitted to the Australian Tax Office in the future.|
|31||Paid motor vehicle expenses for the month $180.
Richard withdrew $2,200 from the business, of which, $800 was for a one-off payment for professional membership joining fees to Australian Institute of Architects, the relevant professional body, and $1,400 for a deposit on a skiing trip to Japan.
Made a part payment of $350 for the office supplies
Received $1,800 from credit customers
- As at 31 July $240 of office supplies had been consumed.
- As at 31 July $2,030 interest has accrued on the mortgage.
- Utilities owing at balance date are $450
- The vehicle is depreciated at 20% per annum straight line.
- Computer equipment is depreciated at 30% per annum reducing balance.
- Architectural equipment is depreciated at 15% per annum straight line.
- Office equipment is depreciated at 20% per annum straight line.
- Assume a full month for depreciation and no residual value.
- Round up to nearest dollar.
- Ignore GST
- a) You are required to record the following transactions into the transaction analysis chart (template provided).
- b) Prepare the fully classified Income Statement and Balance Sheet for July 2017 for Archi-pro.
- c) Reid is concerned about the unlimited liability status of a sole trader and is considering setting up a proprietary limited company. He has read that shareholders enjoy limited liability and finds this attractive. Reid will be the only shareholder and director of the company.
Are there any circumstances in which Reid, as a director, could be personally liable for any debts of the company?
In your answer cite all relevant legislation, if any. (up to 600 words)
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