Eylon Musket, an engineer, has been working at his friends construction firm on a part time basis for the past 5 years. As of May 1, 2023, Eylon decided to pursue his dreams of operating his own business as an engineering consultant and trading specialised items for the construction industry. He rented office and store space at the REGAL Business Spaces Complex and executed the following transactions during May 2023:

May 1

May 1

May 3

May 4 May 5 May 5 May 6

May 7

May 7 May 10 May 13

May 17 May 17 May 21

Eylon invested the following assets into the business: cash of $150,000; office equipment of $400,000; and a bank balance of $300,000.

Paid rent for May by cheque $125,000 and purchased a mini pick-up motor van on credit from Yokoyahama Inc. for $650,000.

Bought office furniture from Corporate Office Interiors, paying by cheque $185,000 and bought merchandise for resale by cheque $540,000.

Sold merchandise to Ashtray Business, for cash Sold merchandise on credit to Weeprof Construction Sold merchandise on credit to Newbian-11 Construction

$90,000. $400,000. $95,500.

Weeprof Construction settled 50% of its account balance with cash receiving a 5% cash discount. (Tip: do a rough check of the balance owed by Weeprof Construction)

Merchandise valued at $35,500, sold to Nubian-11 Construction on May 5, was returned to Eylon Musket. A credit note was given to Nubian-11 Construction.

Sold merchandise on credit to J.P. Millet Ltd $88,000. Bought merchandise on credit from IMAC plc $22,000.

Received a long-term loan from MJJC Bank for $450,000 by cheque and also bought stationery for cash $15,000.

Bought merchandise on credit from Camel Equipment $17,500. Lodged cash to the business bank account $130,500

Eylon took some merchandise for renovation of his mothers town house amounting to $85,000

3

May 22

May 24 May 25 May 28 May 31

Paid Camel Equipment in full settlement of the balance outstanding by cheque having received a discount of $2,500 (Tip: do a rough check of the balance owed to Camel Equipment)

Commission received by cheque of $60,000 and cash of $38,000.

Paid wages by bank transfer $140,000 and cash $20,000.

Purchased merchandise on credit from LCS for $57,000.

Paid electricity by cheque $24,800 and accounting system maintenance of $12,000 by cheque.

REQUIRED:

Commission earned in May was over paid by approximately $2,500.

On review of the Payroll Register, the Payroll Clerk noted the basic pay for two

employees were each understated by $1,000. Payroll was re-done.

20% of the rental expense paid related to the month of June 2023

The maintenance paid for the accounting software is the annual amount. It should

be recorded to the expense on a monthly pro rata basis.

It was found that $8,000 of J P Millets balance must be written off as bad debts.

For the first month of operation, depreciation annually is calculated at:

o Office furniture 10% Straight Line o Motor Van - 20% Straight Line o Office Equipment 10% Straight line

Note: when doing the adjusted T accounts only the accounts that have been affected need to be done (8 marks)

g) Prepare the Statement of Profit or Loss and the Statement of Financial Position for the period under review. For use in the financial statements, closing stock amounts to $305,000 at the end of the month.