Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Andrew Darby manages and owns all the shares in a small proprietary company called Darby's Derbys Pty Ltd which buys and sells hats. The assets,

  1. Andrew Darby manages and owns all the shares in a small proprietary company called Darby's Derbys Pty Ltd which buys and sells hats. The assets, liabilities, and owner's equity of the business on 1 January 2018 are shown on the accompanying worksheet.

  2. The following information about Darby's Derbys Ltd is available:

  3. ·     The business has an accounting period of one month. It determines profit or loss for each month on its worksheet following proper accrual principles.

  4. ·     The opening balance in the prepayments column relates to rent for the months of January, February, and March 2018 which was paid in December 2017.

  5. ·     The accrual on 1 January relates to an amount owing for advertisements that appeared in the local newspaper in December 2017.

  6. ·     The shop fittings owned by the business have an expected life of 8 years, and an expected residual value of $1 000 at the end of that time.

  7. The following transactions took place during January 2018:
  8. 1  The business borrowed $4 800 from Darby's sister. The loan is to be repaid in three year's time but interest at 5% per annum has to be paid (in arrears) each six months, starting on 1 July 2018.
  9. 2     Paid an insurance premium of $1 200 that will cover the business until 30 June 2018.
  10. 3      Received payment for accounts receivable $6 000.
  11. 6      Purchased hats on credit $12 000.
  12. 8      Credit sales of hats $14 000 (these hats had cost $9 000).
  13. 12    Paid wages of $1 400.
  14. 15    Cash sales of hats $5 000 (these hats had cost $3 000).
  15. 16    Paid the local newspaper for the advertisements that appeared in December 2017 and for some others which appeared in January 2018, total payment being $1 200.
  16. 20    Paid accounts payable $7 800.
  17. 25    Wrote off an account receivable to the value of $500 because it was accepted that the amount was never going to be paid.
  18. 26    Purchased shop supplies on credit $200 and paid wages of $1 400.
  19. 27    Received $600 from a customer for hats that are not going to be supplied until March.
  20. 31    Wages for work done in January but not yet paid amounted to $300. Shop supplies on hand at the end of January amounted to $100.

  21. Required
  22. a. Journal entries for the events that occurred in January and also record all the accrual accounting adjustments that are necessary to determine profit for the month. (Hint - you will need six adjustments including the two mentioned on 31 January.)

  23. b. an income statement, cash flow statement, and balance sheet on 31 January 2018.

Step by Step Solution

3.25 Rating (157 Votes )

There are 3 Steps involved in it

Step: 1

Answer a Journal entries for the events that occurred in January and also record all the accrual accounting adjustments that are necessary to determin... 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

Advanced Engineering Mathematics

Authors: Erwin Kreyszig

10th edition

470458364, 470458365, 978-0470458365

More Books

Students also viewed these Accounting questions

Question

Explain the causes of indiscipline.

Answered: 1 week ago

Question

Can a discontinuous function have a Laplace transform? Give reason.

Answered: 1 week ago