Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

& 08 E Transactions - week 1 ng Transactions - week 1 Now that you have reviewed information about Intermaweb Computer, you are ready to

image text in transcribedimage text in transcribedimage text in transcribed
image text in transcribedimage text in transcribedimage text in transcribed
& 08 E Transactions - week 1 ng Transactions - week 1 Now that you have reviewed information about Intermaweb Computer, you are ready to begin the first step in the accounting cycle, recording transactions. On this page of the practice set, you are asked to record transactions that occurred during the first week of June into the company's journals and post the appropriate entries to the ledger accounts. The following transactions occurred throughout the first week of June: Week 1 Date Transaction description Purchased 19 BG90 Plasma Televisions from Pear Technology for $1,089 each, terms net 30. Purchased 11 BlueBerry Phones from Pony for $528 each, terms 2/10, n/30 Paid the full amount owing to JCN Electrical, Cheque No. 744. Payment fell within discount period. Paid the full amount owing to Big Telco, Cheque No. 745. Payment fell within discount period. Purchased 26 DK800 Desktop Computers with cash for $1,430 each, Cheque No. 746. Paid sales staff wages of $13,067 for the week up to and including yesterday, Cheque No. 747. Note that $6,500 of this payment relates to the wages expense incurred during the last week of May. 5 Sold 17 BG90 Plasma Televisions to Hypertronics for $1,727 each, Invoice No. 320. 5 Made cash sale of 13 DK800 Desktop Computers for $2,585 each. AW wa o After completing this practice set page, you should know how to record basic transactions in the journals provided below and understand the posting process in the manual accounting system. Note that you will record the remaining June transactions in the following sections of this practice set. Remember, one purpose of using special journals is to make the posting process more efficient by posting the total of most columns in the special journals after all of the transactions for the period have been recorded. However, some parts of a journal entry are still required to be posted on a daily basis. View the company's accounting policies and proceduresE for details of what is to be posted daily or monthly. WL IR R ] Instructions for week 1 1) Record all week 1 transactions in the relevant journals. Note that special journals must be used where applicable. Any transaction that cannot be recorded in a special journal should be recorded in the general journal. 2) Post entries recorded in the journals to the appropriate ledger accounts according to the company's accounting policies and procedurest. Note that the relevant totals of the special journals will be posted to the general ledger accounts at the end of the month. You will enter this after you prepare the Bank Reconciliation Statement. 3) Update inventory cards on a daily basis. Remember to enter all answers to the nearest whole dollar. When calculating a discount, if a discount is not a whole number, round the discount to the nearest whole dollar. Then, to calculate the cash at bank amount, subtract the discount from the original amount. Additional instructions Displaying selected accounting records: = To save space, not all accounting records (e.g. journals and ledgers) will be displayed on every page. However, on each page you can access all accounting records necessary to answer the questions on that Your progress INTRODUCTION (CTIONS WEEK 2 TRANSACTIONS ~ TRANSACTIONS TRANSACTIONS WEEK S WEEK 4 WEEK 3 BANK END OF MONTH RECONCILIATION POSTING ORNE cLosiNG SCHEDULES ADIUSTING ENTRIES OF ACCOUNTS ENTRIES POST-CLOSING FINANCIAL YOU HAVE TRIAL BALANCE STATEMENTS. NOW FINISHED Completed: 2% (approximately) s page will take: up to 2.5 hours @ Remaining pages will take: up to 18 hours The time frames we provide are a guide only. It may take you more or less time to complete each page. Your grading Your grading outcome (still in progress) Awarded Total Points (prior to this page) 0 0 Points (on this page) - 238 Points (after this page) - 1,043 Total page. . . . ~ Information from previous pages Background Assume it is currently 1 June 2024. You are working for the temporary accounting employment agency known as Accomp. Today you have been asked to work at Intermaweb Computer, a small electronics store that operates in inner city Brisbane and is owned by Adriano Rayleigh. Your task here is to complete the accounting cycle for Intermaweb Computer for the month of June 2024. To assist you in this task, Adriano tells you to read the company's accounting policies and procedures. Note that you will be required to follow these policies and procedures when completing the accounts for Intermaweb Computer. Accounting policies a. Business operations: Intermaweb Computer is set up as a private non-listed company based in Brisbane with Adriano Rayleigh as the sole shareholder. The company derives its main source of revenue from retail sales of electronic goods. To assist in selling the products, Intermaweb Computer rents a large showroom. Note that the business is required to pay for the rent for this premises in advance. The electricity and water expenses incurred during the month relate to the running of the showroom. Additional expenses include an insurance policy to protect the business against inventory items being damaged or lost during deliveries. All costs associated with the showroom are classified as selling and distribution expenses. All part-time employees in the business are sales staff who receive their wages on a weekly basis. Adriano is the only full-time employee and his role is to handle all administrative tasks. Adriano's salary is paid once at the end of each month. b. Accounting cycle: The business adopts a monthly accounting cycle. c. Purchases: Purchases are recorded when the business receives the goods. All items purchased are received on the same day as recorded in the transaction list, except for purchase orders which are received at a later date. Note that the business uses the gross method of recording purchases and receives trade discounts and early payment discounts from some suppliers. d. Revenue recognition: The business recognises revenue when goods sold are delivered to customers. All items sold are delivered on the same day as recorded in the transaction list except for sales orders, which are delivered at a later date as agreed with the customer. Note that the business uses the gross method of recording sales and sometimes grants trade discounts to customers. Past experience has shown that offering settlement discounts did not increase the likelihood of accounts receivable being paid promptly. Therefore, settlement discounts are not normally offered to credit customers except in exceptional circumstances. e. Sales returns: So that the business can easily track the level of sales returns in relation to overall sales, all sales returns are recorded using a contra revenue account (Sales Returns and Allowances) rather than being recorded directly in the Sales Revenue account. f. Goods and services tax (GST): The company is a registered entity for GST purposes and accounts for GST on an accrual basis. As a small business, Intermaweb Computer pays GST in quarterly instalments and no GST is due to be remitted in the month of June. In the transaction list, all prices of goods and services that are subject to GST are quoted inclusive of 10% GST unless specifically noted otherwise. In the list of adjusting entries, all prices are quoted exclusive of GST. Note that two separate accounts are maintained to record GST paid to suppliers and GST received from customers during the month. The net difference of these two accounts is reported as GST Payable in the financial statements when the business is required to pay the net amount to the Australian Taxation Office. If the business is entitled to receive the net difference from the Australian Taxation Office, this net amount is reported as GST Receivable. Further, GST does not apply to interest revenue, bank charges, salaries and wages but GST does apply to payments for rent and electricity. g. Cash: The business accepts cash and cheques and uses cheques to pay for the majority of its expenses. On the day cheques are received, Adriano deposits them at the bank. It may take a number of days for the cheques to be cleared by the bank. The business holds its cheque account with BitiBank. h. Short-term investments: The business holds a six-month term deposit account with BitiBank at a simple interest rate of 6%. Interest is calculated on a monthly basis and received at the end of the deposit term. The monthly interest earned is calculated as the yearly interest divided by the number of months in a year. Note that when the deposit matures, Adriano usually rolls over the principal and interest received at the end of the term. The term deposit account was rolled over on 1 June 2024. i. Inventories: The business uses the perpetual inventory system and applies the FIFO method to allocate costs to inventory and cost of sales. Note that the business maintains a set of inventory cards with multiple pairs of lines to keep track of changes in inventory. In each inventory card under the Balance column, items with different unit costs are listed in separate lines with the items purchased earlier listed first in the pair of lines provided. j. Prepayments: The business has a policy of recording prepayments, including office supplies, as assets. At the end of the month, adjustments are made to the relevant accounts to recognise the expense incurred during the accounting period. k. Property, plant and equipment: Property, plant and equipment items are depreciated over their estimated useful life using the straight line method to calculate the depreciation charge. Depreciation is allocated on a monthly basis and the monthly depreciation charge is calculated as the yearly depreciation expense divided by the number of months in a year. I. Long term liabilities: The business obtained an interest only loan of $49,000 from MRMC Bank on 1 May 2024 at a simple interest rate of 6% per year. The first interest payment is due at the end of July 2024 and the principal on the loan is due on 1 May 2029. Accounting procedures Intermaweb Computer adopts a manual accounting system and uses the general journal and special journals for the recording of individual transactions. Adriano Rayleigh has tailored the design of those journals to meet the specific needs of the business so the format of those journals may be slightly different to those you have seen before. However, he advises you that the general principles of how to use special journals are followed in his business. The table below shows the journals used by the business and the types of transactions that can be recorded in each of these journals: June 2024. i. Inventories: The business uses the perpetual inventory system and applies the FIFO method to allocate costs to inventory and cost of sales. Note that the business maintains a set of inventory cards with multiple pairs of lines to keep track of changes in inventory. In each inventory card under the Balance column, items with different unit costs are listed in separate lines with the items purchased earlier listed first in the pair of lines provided. j. Prepayments: The business has a policy of recording prepayments, including office supplies, as assets. At the end of the month, adjustments are made to the relevant accounts to recognise the expense incurred during the accounting period. k. Property, plant and equipment: Property, plant and equipment items are depreciated over their estimated useful life using the straight line method to calculate the depreciation charge. Depreciation is allocated on a monthly basis and the monthly depreciation charge is calculated as the yearly depreciation expense divided by the number of months in a year. I. Long term liabilities: The business obtained an interest only loan of $49,000 from MRMC Bank on 1 May 2024 at a simple interest rate of 6% per year. The first interest payment is due at the end of July 2024 and the principal on the loan is due on 1 May 2029. Accounting procedures Intermaweb Computer adopts a manual accounting system and uses the general journal and special journals for the recording of individual transactions. Adriano Rayleigh has tailored the design of those journals to meet the specific needs of the business so the format of those journals may be slightly different to those you have seen before. However, he advises you that the general principles of how to use special journals are followed in his business. The table below shows the journals used by the business and the types of transactions that can be recorded in each of these journals: Journal Code Transaction type General journal GJ All transactions that are not able to be recorded in the special journals below. Sales journal SJ Credit sales of inventory Purchases journal PJ Credit purchases of inventory Cash receipts journal CRJ Cash inflows to the business Cash payments journal CPJ Cash outflows from the business To summarise the effects of transactions recorded in those journals, Adriano maintains the general ledger and the following ledgers: = accounts receivable subsidiary ledger, = accounts payable subsidiary ledger, and = inventory cards. Adriano then indicates that he is aware other businesses using a manual accounting system may post transactions from journals to ledgers at different times (i.e. daily or monthly). Although the posting procedures used in his business may be different to what you have seen before, he asks that you specifically follow his company's accounting procedures. The information below explains when transactions are required to be posted from the journals to the appropriate ledger accounts and inventory cards: Posting of entries recorded in the general journal All transactions that are entered in the general journal are posted on a daily basis. Note that if a transaction recorded in the general journal involves both a control account and a subsidiary ledger account, that journal entry will need to be posted to both ledgers. Posting of entries recorded in the special journals When a transaction is recorded in a special journal, part of the journal entry may need to be posted daily and part of that entry is to be posted monthly. a. Daily: = If a transaction affects a subsidiary ledger account, then the entry that involves a subsidiary ledger account is to be posted to that subsidiary ledger on a daily basis. However, the same amount posted to the subsidiary ledger account is not posted to the related control ledger account immediately. This procedure allows the business to keep track of supplier and customer balances on a daily basis. = In the cash receipts journal or the cash payments journal, if a transaction is recorded in the Other Accounts column, then the amount recorded in the Other Accounts column is to be posted to the appropriate general ledger account daily. = If a transaction results in a change in the number of inventory items on hand, then the entry that affects inventory is to be posted to the appropriate inventory card on a daily basis. In this way, the business is able to track the balance of inventory on hand. b. Monthly: = At the end of the month, the totals of each column in the special journals are manually calculated. Those totals, with the exception of the totals of the Other Accounts columns in the cash journals, are posted to the appropriate general ledger accounts at the end of the month

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Managerial Accounting

Authors: Charles E. Davis, Elizabeth Davis

4th Edition

1119577667, 978-1119577669

More Books

Students also viewed these Accounting questions

Question

6. How can hidden knowledge guide our actions?

Answered: 1 week ago