Croudace Bay Trophies

Background and Facts

Croudace Bay Trophies is a business which sells trophies, medals, gifts and momentos for awards, farewells and other special occasions. Croudace Bay Trophies also make some cash sales to retail customers. Croudace Bay Trophies operate from premises situated in an industrial estate at Croudace Bay, employing several people to assist in assembly, engraving and sales of business inventory. The business is GST-registered.

Croudace Bay Trophies record inventory using the perpetual system. Inventories are valued at lower of cost and net realiseable value and are recorded net of all volume rebates and settlement discounts. Net realiseable value is the estimated selling price in the ordinary course of business, less estimated costs necessary to make the sale. Costs are recorded on a weighted average cost basis and include acquisition cost, freight, duty and other inward charges.

Croudace Bay Trophies has a number of clients with whom they have built up a strong relationship. They offer clients terms of 2/10, net 30 days. They submit Business Activity Statements quarterly on an accruals basis.

The business is operated from a large shed in an industrial estate at Croudace Bay.

Currently, the business uses a manual accounting system but plans to test an excel accounting system in July.

Accounting Information

Croudace Bay Trophies uses the following specialised and general journals to record its' business transactions.

Sales Journal - to record all invoices issued for credit sales of inventory

Sales Returns Journal -to record all credit notes issued for returned inventory

Purchases Journal - to record all credit purchases of inventory

Cash Receipts Journal - to record all cash received

Cash Payments Journal- to record all cash payments

General Journal - to record all other transactions

They use a general ledger in the form of a 4 column running balance (as described on page 71-72 of Horngren 8th ed). An Accounts Receivable and Accounts Payable subsidiary ledger is also used in this format.

General purpose financial statements prepared in accordance with Corporations Act 2001, Australian Accounting Standards and interpretations and other requirements of the law are prepared at the end of each month.The accounts are closed off at the end of each month. This financial report complies with the requirements of Australian Accounting Standards, as issued by the Australian Accounting Standards Board and International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board.

Financial reports are prepared on a historical cost basis except for investment properties, listed shares held for trading and available for sale investments which are measured at fair value.

Furniture is stated at historical cost less accumulated depreciation and any accumulated impairment losses. Land and buildings are measured at fair value. Depreciation on furniture is calculated on a straight-line basis over the estimated useful life of assets. Asset residual values, useful lives and amortisation methods are reviewed, and adjusted if appropriate, at the end of each financial year.

All necessary pro-formas are included and are to be used to complete the manual practice set for July.If you wish to use a T account format then you will need to generate your own forms to fill out.The assignment may be done electronically in Excel or manually in word based on the templates provided.

Chart of Accounts

Account Number Account Name Opening Balance

110 Cash at Bank 15,118.00

120 Accounts receivable 5,115.00

121 Allowance for Doubtful Debts -420.00

130 Prepaid Insurance

140 Term Deposit 10,000.00

150 Office Supplies 384.00

160 Inventory 5,620.00

170 Furniture 8,964.00

171 Accumulated Depreciation - Furniture -2,157.00

190 Premises 254,000.00

191 Accumulated Depreciation - Premises 0.00

200 Accounts Payable -1,180.00

210 Unearned Revenue 0.00

220 Wages Payable 0.00

230 GST Clearing -361.00

240 PAYG Payable -2,555.00

250 Superannuation Payable 0.00

280 Bank Loan - Non-current -151,580.00

300 Capital -140,948.00

310 Drawings

350 Income Summary

410 Sales Revenue

411 Sales Returns and Allowance

412 Discount Allowed

413 Discount Received

415 Consultation Revenue

420 Interest Revenue

500 Cost of Goods Sold

510 Advertising Expense

512 Bad and doubtful debts expense

515 Bank Charges

520 Depreciation Expense - Office Equipment

521 Depreciation expense - 3D Printer

522 Depreciation Expense - Premises

530 Insurance Expense

531 Interest Expense

540 Office Supplies Expense

550 PAYG expense

555 Postage

560 Rent Expense

570 Superannuation expense

580 Telephone and Internet Expense

585 Travel

590 Wages Expense

Subsidiary Ledgers

Accounts Receivable Subsidiary Ledger as at 31 May

LE Wooten 875.00

JR Wakeland 3,200.00

Canberra Associates 1,040.00

$5,115.00

Accounts Payable Subsidiary Ledger as at 31 May

Houghton Supplies 759.00

Delwood Plaza 421.00

$1,180.00

During June Croudace Bay Trophies completed the following transactions:

Date Transaction

June 2 Received $857.50 from LE Wooten as payment in full of amount owing at 30 June.

June 2 Issued invoice 191 for sale on credit to L. E. Wooten, $2,350. Croudace Bay cost of inventory was $1,390.

June 3 Received $3,200 from JR Wakeland as payment in full of the amount owing at 30 June.

June 3 Purchased inventory on credit terms of 3/10, n/60 from Delwood Plaza, $5,900.

June 4 Received $1,019.20 from Canberra Associates as payment in full of amount owing at 30 June.

June 4 Sold inventory for cash, $3,410 (cost $1,820)

June 5 Issued chq 471 to pay outstanding account to Houghton Supplies from May $759.00.

Issued chq 472 to pay outstanding account to Delwood Plaza from May $408.37 ($421 less discount).

Issued chq 473 to purchase furniture for cash, $1,080

June 8 Collected interest revenue of $120.

June9 Issued invoice 192 for sale on credit to Canberra Associates, $6,250 (cost $3,300)

June10 Purchased inventory for cash, $770, issuing cheque 474.

June12 Received $2,303 cash from LE Wooten in full settlement of her account receivable, net of the discount, from the sale of 2 July.

June13 Issued chq 475 to pay Delwood Plaza net amount owed from 3 July

Purchased supplies on credit from Houghton Supplies $680. Terms were net end of month.

June15 Sold inventory on credit to J R Wakeland, issuing invoice 193 for $740, (cost $410)

June17 Issued credit memo to JR Wakeland for $740 for defective goods returned by Wakeland. Also accounted for receipt of the inventory at cost.

June18 Issued invoice 194 for credit sale to LE Wooten $1,875 (cost $970)

June19 Received $6,125 from Canberra in full settlement of its account receivable from June9.

June20 Purchased inventory on credit terms of net 30 from Jasper sales $2,150.

June22 Purchased furniture on credit terms of 3/10, n/60 from Delwood Plaza $775.

Issued cheque 476 to pay insurance coverage, debiting prepaid insurance for $1,345 (includes GST)

June24 Sold supplies to an employee for cash of $88 (including GST), which was Croudace Bay's cost.

June25 Issued cheque 477 to pay electricity and gas $380

June28 Purchased inventory on credit terms of 2/10, n/30 from Houghton Supplies $420.

June29 Returned damaged inventory to Houghton Supplies, issuing a debit memo for $420.

Sold goods on credit to Canberra Associates, issuing invoice no. 195 for $1,800 (cost $1,000)

June30 Issued chq no. 478 to pay Houghton Supplies on account from June 13.

June30 Received cash in full from LE Wooten on credit sale of 18 June. There was no discount.

Issued chq no. 479 to pay monthly salaries of $1,100.

Adjusting entries

The following adjustments need to be considered, recorded and posted for the year ended 30 June:

Depreciation on the furniture for the year amounts to $568.

Interest accrued on the term deposit as at 30 June is $6.

Accrued wages amounted to $135 as at 30 June.

Prepaid Insurance of $200 was expensed for the year.

On the 17th July, there was a flood in the office of Croudace Bay Trophies when an employee was distracted while filling a jug with water by a customer who required extended attention. The flood damage will cost the business approximately $2,350 to repair as the business was not insured against this event.

Instructions for Completion of Practice Set

A. Open all general ledger accounts by inserting the opening balances at 1 June as shown in the Chart of Accounts above.For example the balance of account 110 Cash at Bank is $15,118 Dr, in the Cash at Bank write opening balance in details column and place $15,118.00 as the debit balance in the balance column.

B. Open all subsidiary ledger accounts for accounts receivable and accounts payable by inserting the opening balances as at 1 June as shown in the schedule of accounts receivable and accounts payable above.

Note: For the general ledger, accounts receivable subsidiary ledger and accounts payable subsidiary ledgers, all accounts have normal balances

C. Record the transactions for June noted above in the appropriate journals provided in the following pages (Narrations are not required)

D. Post daily to the accounts receivable and accounts payable subsidiary ledgers

Post daily from the general journal

Note: For posting reference purposes, use the journal page names and numbers. For example, when posting from the sales journal the reference will be SJ1

E. Total all columns of the special journals.Post from the special journals to the general ledger.

F. Prepare schedules of Accounts Receivable and Accounts Payable.Check that the total of the Schedule of Accounts Receivable equals the Accounts Receivable Control account in the general ledger and that the Schedule of Accounts Payable equals the Accounts Payable account in the general ledger.

G. Prepare bank reconciliation and post any adjustments required.

H. Record all adjusting entries in the general journal and post them to the general ledger.

I. Check that the key general ledger accounts agree with the relevant schedules:

Bank account balance agrees with the Bank reconciliation

Accounts receivable total agrees with Accounts receivable control and subsidiaries

Accounts payable agrees with Accounts payable control and subsidiary ledgers

J. Prepare Trial Balance as at 30 June.

K. Prepare the Income Statement (Classified), Statement of changes in Equity, and Classified Balance Sheet. Prepare statement of significant accounting policies using the information given in the question.

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