HI5001 Accounting for Business Decisions Online Supplementary Assessment

Trimester 2, 2020

Assessment Weight: 50 total marks

Instructions:

Question 1 (10 marks)

The unadjusted trial balance of Jims Mowing is shown below (ignore GST).

Jims Mowing Trial Balance As at 30 June 2019
Account	Debit	Credit
Cash at bank	32,550
Accounts receivable	48,340
Supplies	5,640
Prepaid advertising	3,980
Prepaid insurance	3,600
Mowers	28,600
Accumulated Depreciation - Mowers		3,540
Vehicle	75,000
Accumulated Depreciation - Vehicle		7,000
Account payable		10,800
Unearned revenue		12,260
Loan payable		40,000
Jim, Capital		78,340
Jim, Drawings	40,600
Service revenue		198,800
Wages expense	81,620
Fuel and oil expense	15,680
Electricity expense	10,000
Mis. Expenses	5,130
	350,740	350,740

Additional information

1. A physical count showed supplies totalling $1,340 were still on hand at 30 June.
2. Mowers are depreciated at 10% per year.
3. Vehicle was purchased on 1 July 2017. It was estimated with a residual value of $5000 and a useful life of 10 years when it was initially purchased. Straight-line method is used.
4. Prepaid advertising has a balance of $1,600 at the end of the month.
5. Prepaid insurance which covers 2 years was purchased on 1 January 2019.
6. The balance in the unearned revenue account includes $3,600 received in May for mowing services completed in June.
7. Bank loan was borrowed on 1 January 2019. Interest is to be paid at the end of each year (31 December). Interest on bank loan is 6% per annum.
8. Received electricity bill of $1,400.

Required:

a) Prepare necessary adjusting entries. (8 marks)

b) Discuss in your own words why adjusting entries are necessary. (2 marks)