Question

Company Name: Ply wood ltd

The company began operations as a retailer on 1 July 2017. It buys and sells one inventory item, herrings.

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: $23,281.00
Accounts receivable: $3,135.00
Allowance for doubtful debt: $323.00
Inventory: $11,980.00
Motor vehicle: $24,389.00
Accumulated depreciation motor vehicle: $2,457.00Accounts payable: $5,559.00
Bank loan owing (due in 20 months): $11,669.00Office furniture: $12,603.00
Accumulated depreciation office furniture: $1,239.00Office supplies: $526.00
Share capital: $36,438.00
Retained earnings: balance amount $18,229.00

2. Transactions for the month (all dollar amounts include GST where applicable).02 July Sales on credit 56 units
05 July Sales on credit 80 units

© Copyright Deakin University 2020. 1 Sat, 05 Sep 20 21:39:54 +1000

11 July Sales on credit 69 units
18 July Sales on credit 79 units
22 July Sales on credit 59 units
29 July Sales on credit 65 units
07 July Paid Wages (ignore PAYG tax) $1,858.0021 July Paid Wages (ignore PAYG tax) $1,984.0023 July Paid rent for the current month $3,138.0003 July Paid insurance $2,584.00

19 July Received advertising invoice (due in 30 days) $529.00
19 July Purchased computer on credit $2,229.00
07 July Purchased inventory on credit 20 units at the cost per unit of $24.0014 July Purchased inventory on credit 27 units at the cost per unit of $26.0020 July Purchased inventory on credit 20 units at the cost per unit of $25.0024 July Purchased inventory on credit 21 units at the cost per unit of $26.0030 July Purchased inventory on credit 20 units at the cost per unit of $24.0029 July Received payment from accounts receivable $914.00
04 July Received payment from accounts receivable $1,163.00
08 July Received payment from accounts receivable $887.00
01 July Purchased office supplies on credit $619.00
03 July Paid motor vehicle expenses $159.00
10 July Paid accounts payable $881.00
03 July Paid accounts payable $1,220.00
01 July Paid accounts payable $1,118.00

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

Insurance paid from the first of the current month and for: 11 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 $20.00Depreciation rate motor vehicle 20%
Residual value motor vehicle: $2,973.00

Depreciation rate office furniture 20%Residual value office furniture: $501.00

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 $228.00
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

Compute at the Trail Balance.

Answer 1

Trial Balance as at 31 July 2017

Accounts Title	Debit ($)	Credit ($)
Share Capital		36438
Retained Earnings		22283.02
Accounts payable for Purchases		5048
Creditors for Computer		2229
Bank loan (Including outstanding interest)		11729
Creditors for office supplies		619
Advertising Invoice		529
Accumulated depreciation of Motor Vehicle		2822.53
Accumulated depreciation of Furniture		1440.7
Provision for bad debts (323+224.4)		547.4
Accumulated depreciation on Computer		32.5
Cash	13303
Accounts recievable	22611
Inventory	6110
Computer	2196.5
Office supplies	228
Furniture	12603
Motor Vehicle	24389
Prepaid Insurance	2350

Inventory Account for the month of July 2017

Particulars	Debit ($)	Particulars	Credit ($)
To Opening Stock (599 units @ $20/unit)	11980	By Sales (56 units @ $20.77/unit)	1163.12
To Purchases (20 units @ $24/unit)	480	By Sales (80 units @ $20.77/unit)	1661.60
To Purchases (27 units @ $26/unit)	702	By Sales (69 units @ $20.77/unit)	1433.13
To Purchases (20 units @ $25/unit)	500	By Sales (79 units @ $20.77/unit)	1640.83
To Purchases (21 units @ $26/unit)	546	By Sales (59 units @ $20.77/unit)	1225.43
To Purchases (20 units @ $24/unit)	480	By Sales (65 units @ $20.77/unit)	1350.05
		By Loss of inventory (5 units @ $20.77/unit)	103.85
		By closing inventory (294 units @ $20.77/unit)	6110
Total	14688	Total	14688

*Calculation of Weighted average cost:

Total cost of inventory purchased including opening stock / Total units including opening stock.

(11980+480+702+500+546+480) / (599+20+27+20+21+20) = 14688 / 707 = 20.77

Trade Receivables Account

Particulars	Debit ($)	Particulars	Credit ($)
To Opening balance	3135	By Cash	914
To Sales (56 units @ 55/unit)	3080	By Cash	1163
To Sales (80 units @ 55/unit)	4400	By Cash	887
To Sales (69 units @ 55/unit)	3795	By Closing balance	22611
To Sales (79 units @ 55/unit)	4345
To Sales (59 units @ 55/unit)	3245
To Sales (65 units @ 55/unit)	3575
Total	25575	Total	25575

Account payables Account

Particulars	Debit ($)	Particulars	Credit ($)
To Cash	881	By Opening balances	5559
To Cash	1220	By Purchases (20 units @ $24/unit)	480
To Cash	1118	By Purchases (27 units @ $26/unit)	702
To closing balance	5048	By Purchases (20 units @ $25/unit)	500
		By Purchases (21 units @ $26/unit)	546
		By Purchases (20 units @ $24/unit)	480
Total	8267	Total	8267

Profit & Loss during the month

Particulars	Debit ($)	Particulars	Credit ($)
To Opening stock	11980	To Sales	22440
To Purchases	2708	To Closing Stock	6110
To Wages (1858+1984)	3842
To Rent	3138
To Insurance (2584/11)	235
To Advertising expense	529
To Motor Vehicle Expense	159
To Depreciation on Motor vehicle (24389-2457)*20%*1/12	365.53
To Depreciation on Furniture (12603-501)*20%*1/12	201.7
To Depreciation on Computer (2229*35%*15/365)	32.5
To Office supplies used (526+619-228)	917
To bad debts expense (22440*1%)	224.4
To Interest on Bank loan	60
To Loss of Inventory	103.85
To Profit for the month (B.F)	4054.02

Cash Account

Particulars	Debit ($)	Particulars	Credit ($)
To Opening balance	23281	By Account payable	881
To Account receivable	914	By Account payable	1220
To Account receivable	1163	By Account payable	1118
To Account receivable	887	By Rent	3138
		By Insurance paid	2584
		By Motor vehicle expenses	159
		By Wages paid	1858
		By Wages paid	1984
		By Closing balance	13303