COMPANY BACKGROUND Pets Paradise sells pet foods, toys and accessories bought from a number of suppliers who source the goods from local and overseas manufacturers. The goods are sold to several pet shops and veterinary clinics throughout Australia. Pets Paradise Pty Ltd has been in business in Perth since July 2016. The firm operates one retail store, which was opened by Paula Granger. As the business expanded, Paula formed a proprietary company to operate the business. The companys share capital consists of 210,000 ordinary shares that are owned by various members of the Granger family. The store is open seven days a week from 9am to 5pm and is staffed by two sales employees. The company sells pet food and accessories directly to the public. In addition, various firms and organisations purchase directly from the company on credit. The company also employs two office staff who work a five-day week from Monday to Friday. One office staff member is responsible for overseeing the daily running of the business, including inventory ordering; the other maintains the companys accounting records. ACCOUNTING SYSTEM The company has a financial year-end 30 June and prepares adjusting entries only at the end of the year. The firm uses the following journals to maintain its accounting records: Sales Journal: to record all credit sales of inventory Purchases Journal: to record all credit purchases of inventory Cash Receipts Journal: to record all cash receipts Cash Payments Journal: to record all cash payments General Journal: to record all transactions other than the above Pets Paradise maintains Accounts Receivable and Accounts Payable subsidiary ledgers. The company maintains a general ledger to record the increases and decreases in each asset, liability, owners equity, revenue and expense account. Subsidiary ledgers are used to record the separate details of Accounts Receivable and Accounts Payable. The company maintains a periodic system to account for its inventory. ALL inventory is marked up by 25% on cost. For control purposes, any freight charged on goods purchased is processed in a separate freight inwards account. GOODS AND SERVICES TAX (GST) The company is registered for GST at the rate of 10% and is required to pay GST on its purchases and to collect GST when making sales. The company uses a GST paid account for GST on purchases and a GST collected account for GST on sales (for manual records). All transactions provided for the month of June exclude GST. Therefore, you must remember to account for GST on the supply of goods and services to customers and in goods and services purchased from suppliers, when recording the transactions for June for the company. YOUR ASSIGNMENT The firms in-house accountant has gone overseas for one month. You have been hired by Paula Granger to carry out the accounting duties in the accountants absence. This assignment provides you with the unadjusted trial balance at the end of May and requires you to record typical transactions for a retail business for the last month of the financial year. Once these transactions have been recorded and posted, you are required to complete the accounting cycle by journalising and posting adjusting and closing entries and preparing financial statements. UNADJUSTED TRIAL BALANCE The unadjusted trial balance as at 31 May 2020 for Pets Paradise Pty Ltd is presented below: Account Debit Credit Cash at bank 156,847 Accounts receivable control 122,512 Store supplies 21,690 Inventory (beginning) 507,915 Prepaid store rent paid 1 September 2019 135,000 GST Paid 13,536 Store fittings 71,550 Accumulated depreciation Store fittings Computers 11,250 Accumulated depreciation Computers 1,800 Accounts payable control 148,905 GST Collected 11,137 Bank loan due 30 November 2024 135,000 Share capital 315,000 Retained earnings 1 July 2019 274,739 Sales revenue 1,767,351 Discount allowed 22,027 Sales returns and allowances 9,517 Purchases 1,325,857 Discount received 19,755 Purchase returns and allowances 12,892 Freight-out 1,350 Wages expense sales staff 82,395 Rent expense 15,750 Insurance expense 1,800 Advertising expense 11,857 Interest expense 4,500 Utilities expense 8,910 Telephone expense 7,695 Sundry expenses 1,755 Salaries expense office staff 152,866 2,686,579 2,686,579 SUBSIDIARY LEDGERS The individual balances of Accounts receivable and Accounts payable as at 31 May 2020 are shown below. Amounts include GST. Schedule of Accounts Receivable All credit sales are made on terms 2/10, n/30. Account Invoice Date Amount Pooch Parlour 18 May 20,655 Pets on Parade 12 May 17,257 VetAus 26 May 25,582 Cat Hotel 25 May 14,940 Pets R Us 2 May 23,715 City Farmers 29 May 12,825 Pet City 15 Feb 7,538 122,512 Schedule of Accounts Payable Account Invoice Date Credit Terms Amount World of Pets 30 April n/45 18,945 Pet Supplies 19 May 1/15,n/30 27,630 Glamour Pets 4 May n/30 35,077 Doggy Delights 30 May 2/10, n/30 22,117 Dr. Harry 15 May 2/10, n/30 19,710 Better Pets and Gardens 15 April n/60 25,426 148,905 ACCOUNTING PROCEDURES Transactions are recorded by the accountant for Pets Paradise Pty Ltd on a daily basis in the appropriate journal. Transactions are posted daily from the General Journal and the Cash Receipts and Cash Payments Journal. Transactions are also posted daily to the Accounts receivable and Accounts payable subsidiary ledgers. Totals of the special journals are posted to the appropriate accounts at the end of the month. Note: Amounts are to be recorded as the exact amounts in the journals and ledgers but are to be rounded to the nearest dollar when preparing financial statements. TRANSACTIONS Week 1 June 1 Sold inventory to Cat Hotel $7,380, invoice # 218. Issued cheque #40 to pay delivery costs of $180 to Fasta Courier. The delivery cost is not recoverable from the buyer. Paid the amount owing to Pet Supplies, cheque #41. Purchased store supplies for $1,485 from Kmart, cheque #42. Received the mount owing from Pooch Parlour, receipt #121. 2 Received the amount owing from Pets R Us, receipt #122 Paid the amount owing to Glamour Pets, cheque #43. Recorded cash sales for the week of $11,542. Week 2 June 3 Paid $8,460 of the amount owing to Dr. Harry, cheque #44. Purchased inventory costing $8,752 from World of Pets, invoice #WP004. 6 Received the amount owing from City Farmers, receipt #123. Sold inventory on credit to VetAus for Ltd $19,035, invoice #219 . 7 Received from VetAus the amount owing from the May 26 invoice, receipt #124. Returned unwanted inventory purchased on June 3 to World of Pets and received a credit note for $1,147 (excluding GST). Paid the amount owing to Doggy Delights, cheque #45. 8 Pets on Parade paid the amount owing, receipt #125. 9 Paid World of Pets the amount owing from the April 30 invoice with cheque #46. Cat Hotel paid the entire balance of their account, receipt #126. Recorded cash sales for the week of $14,347. Week 3 June 12 Paid sales staff wages: $3,465, cheque #47. Purchased inventory from Glamour Pets, $28,890. Date of invoice was June 9, invoice #GP147. 13 Pets on Parade purchased $11,745 of inventory on credit, invoice #220. 14 Sold inventory on credit to Pets on Parade for $5,108, invoice # 221. Paid the amount owing to Better Pets and Gardens, cheque #48. Received the amount owing from VetAus, receipt #127. 15 Paid office staff salaries, $13,905, cheque # 49. 16 Purchased inventory from Doggy Delights, $31,185, invoice #DD2841. Recorded cash sales for the week, $9,638. Week 4 June 19 Purchased $12,668 of inventory from Pet Supplies, invoice #PS1142. The invoice date was June 16. Sold inventory on credit to Cat Hotel, $6,278 invoice # 222. 20 Purchased inventory from Doggy Delights for $7,785, invoice #DD2842. The invoice date was June 18. Received payment for the entire balance of their account from Pets on Parade, receipt #128. 21 Issued cheque #50 to pay for June radio advertising at Nova Radio 93.5 for $1,080. Sold inventory to Pooch Parlour on credit for $16,178, invoice #223. Issued cheque #51 to pay delivery cost of $113 to Red Parcel Delivery. The delivery cost is not recoverable from the buyer. Purchased inventory on credit from Pet Supplies, $15,300, invoice #PS1143. 22 Cash purchase of inventory from Bird World for $5,783, cheque #52. 23 Issued a credit note of $2,228 (excluding GST) to Pooch Parlour for inventory returned. Paid the entire amount owing to Doggy Delights, cheque #53. Purchased inventory from Dr. Harry for $12,420. Invoice date was June 22, invoice #DrH1112. Sold inventory on credit to VetAus for $4,230, invoice #224. Recorded cash sales for the week, $6,682. Week 5 June 26 Paid Optus telephone bill, $810 by cheque #54. Paid sales staff wages, $3,465, cheque #55. 27 Sold inventory on credit to City Farmers for $9,765, invoice #225. Purchased inventory from Glamour Pets for $18,315, invoice #GP148. The invoice date was June 25. 28 Received the amount owing from Pooch Parlour, receipt #129. Sold inventory on credit to Pets R Us for $17,865, invoice #226. Purchased $15,638 of inventory from Better Pets and Gardens, invoice #BPG0003. The date of the invoice was June 27. 29 Paid the entire balance owing to Dr. Harry. Cheque #56. 30 Pets R Us returned unwanted inventory from the sale on June 28. Issued a credit note for $2,835 (excluding GST). Sold inventory on credit to Pets on Parade for $5,918, invoice #227. Issued additional $1 shares to the owners for $18,000 cash. Issued cheque #57 for $135 to pay Darrell Lee Chocolates for chocolates to give to customers when they visit the store (Hint: treat as sundry expense). Recorded cash sales for the week of $11,275. ADDITIIONAL INFORMATION FOR 30 JUNE 2020 Pets Paradise Pty Ltd prepares adjusting entries once each year on 30 June. You should assume all adjusting entries for prior years have been correctly recorded. Enter the following adjustments into the appropriate journal: 1. Store supplies on hand were $6,952. 2. Paula Granger paid store rent on 1 September 2019 for twelve months. The amount was recorded in prepaid rent account. 3. The computers are depreciated using the reducing balance method and the depreciation rate is 15%. 4. Office staff salaries are paid monthly on the fifteenth of each month (Monday, in June) for work performed up to and including that date. Total daily wages total $463.50. (Hint: check working week). 5. A one-year public liability insurance policy was purchased on 1 April 2020 for $1,800. The amount was recorded in the insurance expense account. 6. The store fittings are depreciated using the straight-line method and have a useful life of eight years and a residual value of $6,750. The fittings were installed on 1 March 2020. 7. Interest on the bank loan is charged at 6 per cent per annum. The interest is paid annually on 30 November. The loan was taken out on 1 December 2019. 8. Electricity usage for June was estimated to be $1,598 and telephone usage was estimated to be $778. These amounts have not yet been recorded. 9. Sales staff are paid weekly (for a seven-day working week) every Thursday for work performed up to and including Thursday. Weekly salaries total $1,734. Balance day for 2020 fell on a Tuesday. 10. The directors decided to pay their loyal shareholders a dividend for the first time during 2020. Directors declared a dividend of 52c per share to be paid to shareholders on 30 September. This dividend was approved by the shareholders at a special shareholder meeting held on 25 June 2020. 11. The firm has been informed that Pet City is experiencing financial difficulties. Management of Pets Paradise Pty Ltd has agreed to write-off $4,500 (including GST) of the amount owing as a bad debt. Pet City has indicated it will pay the remaining balance in July. Due to the low level of bad debts, Pets Paradise Pty Ltd uses the direct write-off method. 12. The estimate of tax payable for the year ended 30 June 2010 is $35,300. The amount is due for payment on 30 September 2020. 13. A stock-take on 30 June 2020 determined that the balance of closing inventory is $693,266. ADJUSTED TRIAL BALANCE AS AT 30 JUNE 2019 (PREVIOUS YEAR) ACCOUN T DEBIT CREDIT Cash at bank 93,171 Accounts receivable control 102,465 Store supplies 15,534 Inventory (ending) 507,915 Prepaid insurance 1,000 Prepaid rent 15,000 GST Paid 10,427 Computers 11,250 Accumulated depreciation computers 1,800 Accounts payable control 114,693 Wages payable 1,015 Salaries payable 5,450 Electricity payable 395 Income tax payable 74,950 GST Collected 8,028 Share capital 315,000 Retained earnings 30 June 2019 274,739 Sales revenue 1,206,785 Discount allowed 17,933 Sales returns and allowances 5,274 Purchases 769,386 Discount received 14,201 Purchases returns and allowances 7,374 Freight-out 770 Wages expense sales staff 80,495 Depreciation expense computers 1,800 Supplies expense 12,274 Rent expense 123,500 Advertising expense 15,274 Utilities expense 8,270 Tax expense 74,950 Telephone expense 8,028 Insurance expense 300 Electricity expense 1,468 Sundry expenses 1,471 Salaries expense office staff 146,475 Totals 2,024,430 2,024,430 Beginning Inventory at 1 July 2018 is $358,075. REQUIRED: 1. Record the June transactions in the appropriate journal: sales, purchases, cash receipts, cash payments and general. Blank journals, ledgers and financial statements are on LMS under the assignment tab, for you to use to complete the assignment. The assignment is to be typed not hand written as are working papers. 2. Post the journals to the general and subsidiary ledgers. New accounts should be added as needed