Additional Exercise 3.21

(Note: Although this question is based on the Skates 'n' Surf business the accounts, amounts and transactions involved may differ between questions. Please read each question separately.)

Skate n Surf began operations on 1 June, buying and selling surfboards, skateboards, wetsuits and the protective gear for skateboarding. The structure of the business is that of a sole trader.

The business employed a sales assistant during the month who is to be paid fortnightly. Tax is deducted from the employees wages (PAYG withholding tax) and remitted to the Australian Taxation Office (ATO) on a quarterly basis.

The business has not registered with the ATO for the goods and services tax (GST) and has elected to use the accrual basis of accounting.

Accounting records The business records all transactions in the general journal. These transactions are then posted to the appropriate account(s) in the general ledger and the accounts receivable or accounts payable subsidiary ledgers, where separate accounts are maintained for each customer or supplier.

Chart of accounts The chart of accounts for Skate n Surf contains the accounts and account numbers below.

100 Cash at bank 110 Accounts receivable 120 Inventory 130 Prepaid insurance 171 Shop equipment (cost) 172 Accumulated depreciation - shop equipment 200 Accounts payable 210 PAYG withholding payable 220 Superannuation payable 230 Bank loan 300 Capital 310 Drawings 320 Profit or loss summary 400 Sales revenue 410 Sales returns and allowances 420 Discount received 500 Cost of sales 600 Advertising expense 610 Depreciation expense 620 Discount allowed 630 Electricity expense 640 Insurance expense 650 Interest expense 660 Postage and stationery expense 670 Superannuation expense 680 Telephone expense 690 Wages expense

Transactions June 1 The owner opened a bank account for the business with a deposit of $25,500. This is capital provided by him. 1 Purchased display stands, shelving etc. (shop equipment) from Shop Displays Pty Ltd for $33,980 and computer equipment for the shop from Computer Wizards for $3,700. These were paid for with a loan of $29,760 from the bank and cheque for $7,920 from the business bank account. The bank loan is repayable over 3 years. 1 Paid $5,040 for a 1-year insurance policy covering fire, theft, and public liability. 2 Purchased inventory (skateboards and protective gear) from Excitement Plus for $17,800 on terms on net 30. 5 Paid $1,600 to Local Newspapers for advertising for the shop for the month. 6 Cash sale of a skateboard and protective gear for $480 (cost of sales $195). 7 Purchased surfboards and wetsuits from Surf Imports for $16,270 on terms of 10/10, n/30. 8 Returned some protective gear to Excitement Plus that was faulty and received an adjustment note (credit note) from them for $200. 9 Credit sale to Serious Fun of skateboards and protective gear for $4,400 (cost of sales $1,720). This customer was given terms of 5/10, n/30. 11 Paid Surf Imports the amount owing to them less the prompt payment discount. 12 Credit sale to Surfing World of various inventory items for $6,760 (cost of sales $3,250). Terms net 30. 13 Cash purchase of stationery from Officeworks for $250. 14 Credit sale to Academy Diving School of 20 wetsuits at a discounted price of $260 each on terms of net 15. Cost of sales $2,280. 18 Received a cheque from Serious Fun for the amount owing by them after deducting the prompt payment discount. 19 Cash sale of inventory to the value of $860 (cost of sales $330). 20 Issued an adjustment note (credit note) to Academy Diving School for 1 wetsuit at $260 each that was not the size they required. The cost of the wetsuit to us was $200 and it was put back into inventory. 24 Paid Excitement Plus $5,300 of the amount owing to them. 25 Credit sale to Serious Fun of skateboards for $6,250 (cost of sales $2,600). Terms 5/10, n/30. 26 Purchased wetsuits from Surf Imports for $5,900 on terms of 10/10, n/30. 27 Received and banked a cheque from Academy Diving School for the amount owing by them. 30 The owner cashed a cheque for $1,850 to pay wages to Scott Walker the sales assistant of $850 less PAYG Withholding of $70, and $1,070 drawings for himself.

The June transactions above have been journalised and posted. Following are the end of month adjustments (round to the nearest dollar), which are also journalised

a. Depreciation on shop equipment for the month is 20% p.a. prime cost (straight line). b. One-twelfth of the insurance expired. c. Superannuation payable for the month is 9% of the gross wages paid. d. Interest charged on the bank loan for the month was $124. Date Description Post ref. Debit Credit 20xx June 30 Depreciation expense 628 Accumulated depreciation - shop equipment 628 (Depreciation for the month) 30 Insurance expense 420 Prepaid insurance 420 (Amount of prepaid insurance expired for June) 30 Superannuation expense 77 Superannuation payable 77 (Superannuation payable for June) 30 Interest expense 124 Bank loan 124 (Interest charged to bank loan for June) (Note: Leave blank any answer fields that do not require an answer.) No. 100 Debit Credit Cash at bank Date Details June 1 Capital 6 Sales revenue 18 Accounts receivable 19 Sales revenue 27 Accounts receivable Date 25,500 Pune 480 4,180 860 4,940 Details 1 Shop equipment (oost) 1 Prepaid insurance 5 Advertising expense 11 Accounts payable 13 Postage and stationery expense 24 Accounts payable 30 Wages expense 30 Drawings 7,920 5,040 1,600 14,643 250 5,300 780 1,070 No. 110 Details Debit Credit Accounts receivable Date June 9 Sales revenue 12 Sales revenue 14 Sales revenue 25 Sales revenue Date 4,400 Dune 6,760 5,200 6,250 Details 18 Cash at bank 18 Discount allowed 20 Sales returns and allowances 27 Cash at bank 4,180 220 260 4,940 No. 120 Inventory Date June Details Debit Details Credit 2 Accounts payable 7 Accounts payable 20 Cost of sales 26 Accounts payable Date 17,800 Dune 16,270 200 5,900 6 Cost of sales 8 Accounts payable 9 Cost of sales 12 Cost of sales 14 Cost of sales 19 Cost of sales 25 Cost of sales 195 200 1,720 3,250 2,280 330 2,600 No. 130 Prepaid insurance Date Details Debit Date Details Credit June 1 Cash at bank 5,040 June No. 171 Details Debit Details Credit Shop equipment (cost) Date June 1 Bank loan 1 Cash at bank Date 29,760 7,920 No. 172 Accumulated depreciation - shop equipment Date Details Debit Date Details Credit Pune No. 200 Details Debit Details Credit Accounts payable Date June 8 Inventory 11 Cash at bank 11 Discount received 24 Cash at bank Date 200 June 14,643 1,627 5,300 2 Inventory 7 Inventory 26 Inventory 17,800 16,270 5,900 No. 210 PAYG withholding payable Date Details Debit Details Credit Date June 30 Wages expense 70 No. 220 Superannuation payable Date Details Debit Date Details Credit Dune No. 230 Bank loan Date Details Debit Date Credit Details 1 Shop equipment (cost) June 29,760 No. 300 Capital Date Details Debit Details Credit Date Dune 1 Cash at bank 25,500 No. 310 Drawings Date June Details Debit Date Details Credit 30 Cash at bank 1,070 No. 400 Sales revente Date Details Debit Credit Date June Details 6 Cash at bank 9 Accounts receivable 12 Accounts receivable 14 Accounts receivable 19 Cash at bank 25 Accounts receivable 480 4,400 6,760 5,200 860 6,250 No. 410 Sales returns and allowances Date Details 20 Accounts receivable Debit Date Details Credit June 260 No. 420 Discount received Date Details Debit Details Credit Date June 11 Accounts payable 1,627 No. 500 Details Debit Details Credit 20 Inventory 200 Cost of sales Date June 6 Inventory 9 Inventory 12 Inventory 14 Inventory 20 Inventory 25 Inventory Date 195 June 1,720 3,250 2,260 330 2,600 No. 600 Advertising expense Date Dune 5 Cash at bank Details Debit Date Details Credit 1,600 No. 610 Depreciation expense Date Details Debit Date Details Credit June No. 620 Discount allowed Details June 16 Accounts receivable Date Debit Date Details Credit 220 No. 640 Insurance expense Date Details Debit Date Details Credit June No. 650 Interest expense Date June Details Debit Date Details Credit No. 660 Postage and stationery expense Date June 13 Cash at bank Details Debit Date Details Credit 250 No. 670 Superannuation expense Date Details Debit Date Details Credit June No. 690 Debit Date Details Credit Wages expense Date Details June 30 Cash at bank 30 PAYG withholding payable 780 70