Question

Company Name: Abcde Pty Ltd

The company began operations as a retailer on 1 July 2017. 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

Relevant information

1. The company has the following opening balances at the 1 July in the current financial year:

Cash at Bank: $24,526.00
Accounts receivable: $4,518.00
Allowance for doubtful debt: $478.00
Inventory: $10,640.00
Motor vehicle: $21,827.00
Accumulated depreciation motor vehicle: $2,777.00 Accounts payable: $4,439.00
Bank loan owing (due in 20 months): $10,920.00 Office furniture: $11,927.00
Accumulated depreciation office furniture: $1,416.00 Office supplies: $573.00
Share capital: $39,239.00
Retained earnings: balance amount $14,742.00

2. Transactions for the month (all dollar amounts include GST where applicable).

02 July Sales on credit 66 units
05 July Sales on credit 63 units

11 July Sales on credit 78 units
18 July Sales on credit 54 units
22 July Sales on credit 59 units
29 July Sales on credit 66 units
03 July Paid Wages (ignore PAYG tax) $2,150.00 17 July Paid Wages (ignore PAYG tax) $2,294.00 30 July Paid rent for the current month $2,380.00 07 July Paid insurance $2,402.00

22 July Received advertising invoice (due in 30 days) $568.00
15 July Purchased computer on credit $2,441.00
07 July Purchased inventory on credit 25 units at the cost per unit of $25.00 14 July Purchased inventory on credit 23 units at the cost per unit of $27.00 20 July Purchased inventory on credit 21 units at the cost per unit of $25.00 24 July Purchased inventory on credit 29 units at the cost per unit of $28.00 30 July Purchased inventory on credit 30 units at the cost per unit of $27.00 18 July Received payment from accounts receivable $1,124.00
04 July Received payment from accounts receivable $961.00
17 July Received payment from accounts receivable $1,052.00
13 July Purchased office supplies on credit $622.00
26 July Paid motor vehicle expenses $115.00
07 July Paid accounts payable $1,170.00
18 July Paid accounts payable $1,489.00
04 July Paid accounts payable $935.00

3. Additional information:
Selling Price per unit (GST inclusive) $55.00

Insurance paid from the first of the current month and for: 7 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: $2,602.00

Depreciation rate office furniture 20% Residual value office furniture: $536.00

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 8 units were missing and these must be removed from inventory.

Office supplies on hand at end of the month were $257.00
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

REQUIRED:

SORT THE TRANSACTIONS IN DATE ORDER. This is critically important for any inventory transactions (sales and purchases) as the value of inventory is calculated using the moving weighted average method.

•manually prepare general journal entries to enter all relevant July transactions (including the opening entry and all adjusting entries).

• prepare a stockcard for the month (this is required to help you track inventory movements and calculate COS) using the moving weighted average cost method.
• Post all journals to the ledger.

• Prepare an adjusted trial balance.

Answer 1

Opening Balance as at 01.07.2017
Liabilities	Amount	Assets	Amount
Provision for Doubtful dedts	478.00	Cash at Bank	24,526.00
Accounts Payable	4,439.00	Accounts Receivable	4,518.00
Bank Loan	10,920.00	Inventory	10,640.00
Share Capital	39,239.00	Motor Vehicle	21,827.00
Retained Earning	14,742.00	Acc. Depreciation	(2,777.00)
		Office Furniture	11,927.00
		Acc. Depreciation	(1,416.00)
		Office Supplies	573.00
TOTAL	69,818.00	TOTAL	69,818.00
Income Statement for the period ending 31.07.2017
Particulars	Amount	Particulars	Amount
Opening Stock	10,640.00	Sales	21,230.00
Purchases	3,393.00	Closing Stock	5,655.72
Wages	4,444.00
Gross Profit	8,408.72
TOTAL	26,885.72	TOTAL	26,885.72
Rent	2,380.00	Gross Profit	8,408.72
Insurance Expenses	343.00
Advertisement Expenses	568.00
Repair & Maintenance	115.00
Depreciation on Motor Vehicle	317.50
Depreciation on Office Furniture	198.80
Depreciation on Computer	35.60
Provision For Bad debts	212.30
Office Supplies	938.00
Interest on Bank Loan	60.00
Net Profit	3,240.52
TOTAL	8,408.72	TOTAL	8,408.72
Closing Balance as at 31.07.2017
Liabilities	Amount	Assets	Amount
Provision for Doubtful dedts	690.30	Cash at Bank	12,287.00
Accounts Payable	4,860.00	Accounts Receivable	22,611.00
Bank Loan	10,980.00	Inventory	5,655.72
Share Capital	39,239.00	Motor Vehicle	21,827.00
Retained Earning	17,982.52	Acc. Depreciation	(3,094.50)
Outstanding Expenses	568.00	Office Furniture	11,927.00
		Acc. Depreciation	(1,614.80)
		Computer	2,441.00
		Acc. Depreciation	(35.60)
		Prepaid Advertisements	2,059.00
		Office Supplies	257.00
TOTAL	74,319.82	TOTAL	74,319.82