Instructions

1.The due date for this assignment is Friday 16 July (Session 10) at 5pm via the online LMS portal under Session 10. Late submission will not be accepted.

2.This assignment is designed to give accounting students the opportunity to prepare a set of accounts manually. It is important that each group work on this assignment on their own. Collusion between groups is not permitted. The assignment will be marked on effort and not only on the correct answer. It is expected that groups will get different answers because of the assumptions made. Make sure the work your group submits is your own work and not copied or taken from other groups. Any evidence of collusion or copying will be treated very seriously and reported as academic misconduct This assignment is designed to illustrate how the accounting process works, so use it as a learning tool rather than worrying about what other groups are doing.

3.This is a group assignment. Groups are to consist of 3 students only. It is your responsibility to find 2 other students to complete the assignment with. You do NOT have to be in the same tutorial group as your assignment partners. Under no circumstances may the assignment be completed by groups of two, four or any other combination! In order to do well in the assignment, it is important that students work well together as a group. To this end, a group charter has been uploaded to LMS under the assignment icon on the unit homepage. Each member of the group is required to read and sign the charter. This will commit all group members to attend meetings when scheduled and to undertake the work agreed to by the group. If any students have difficulties with their group members, they are to take the charter to the unit coordinator as evidence that these matters have been discussed and agreed. If any student fails to honour the group charter and does not contribute to the assignment as agreed, they will be given a reduced mark or zero for the assignment.

4.This handout contains the general information required to complete the assignment, as well as background information about the company and the transaction details.

COMPANY BACKGROUND

• Scallion Ltd began business on 1 July 2019, specialising in the purchase and supply of packaging materials. An accounting system was designed and a chart of accounts was established. The business uses the periodic inventory system and is registered for GST at the rate of 10%.
• 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 company's 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

Scallion Ltd uses subsidiary ledgers for Accounts Receivable and Accounts Payable only.

The company maintains a general ledger to record the increases and decreases in each asset, liability, owner's 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.

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).

YOUR ASSIGNMENT

The firm's in-house accountant has gone overseas for one month. You have been hired by Scallion Ltd to carry out the accounting duties in the accountant's 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 representing 11 months of the financial year to 31 May 2020 is presented below:

ACCOUNT NAME

1 June Opening Balances

Cash

$ 70,785

Accounts Receivable

25,740

Allowance for doubtful debts

2,645

Inventory

32,400

Office Supplies

1,800

Prepaid General Insurance

3,600

GST Paid

6,300

Equipment

13,500

Machinery

65,000

Truck

46,100

Land

350,000

Accounts Payable

69,300

GST Collected

15,795

Share Capital

340,000

Discount received

13,200

Repairs and maintenance

7,400

Purchases

486,200

Purchases returns & allowances

7,040

Salaries expense

83,600

Sales

789,800

Sales returns & allowances

8,800

Electricity expense

12,100

Telephone expense

2,505

Office expenses

13,500

Discount allowed

8,450

SUBSIDIARY LEDGERS

The individual balances of Accounts receivable and Accounts payable as at 1 June 2020 are shown below. Amounts include GST.

Accounts Receivable Subsidiary Ledger

CUSTOMER

1 June Opening Balances

Croft Ltd

$ 2,970

M. Biller

14,850

O. Mowen

7,920

TOTAL

25,740

Accounts Payable Subsidiary Ledger

CREDITOR

1 June Opening Balances

Tumult Ltd

$ 17,820

Lynwood Ltd

29,700

Dyson Ltd

21,780

TOTAL

69,300

ACCOUNTING PROCEDURES

Transactions are recorded by the accountant on a daily basis in the appropriate journal. Transactions are posted daily from the General Journal and the Cash Receipts and Cash Payments Journal 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

The following transactions occurred during June 2020 and are INCLUSIVE of GST where appropriate.

2020

June 1Scallion Ltd shareholders invested $60,000 cash in the business.

Purchased land and an existing retail store for $110,000 of which $77,000 is considered land cost. Paid $33,000 by cheque no. 98 for the retail store and signed a mortgage payable for the balance. The retails store is depreciated over its useful life of 10 years.

2Paid Lynwood Ltd $14,700 less a discount of $594 with cheque no. 99.

Received cheque from M. Biller for $10,000 as part payment of his account

Purchased store furniture on credit terms from Corma Ltd for $7,480, terms n/60.

5Purchased inventory on credit terms from Tumult Ltd $4,400; invoice date 6 June, terms 2/10, n/60.

6Purchased a 3-year fire insurance policy for $792, cheque no. 100.

7Sent cheque no. 101 to Tumult Ltd in full settlement of May invoice

8Purchased inventory for $5,500, cheque no. 102.

Paid Lynwood Ltd $15,000 cheque no. 103 for balance owing on May account.

9Returned unsatisfactory goods to Tumult Ltd and received a credit note for $880.

13 Sold inventory to M. Biller on account, $9,020; invoice no. 210, terms 1/10, n/30.

15 O. Mowen paid his account in full.

Paid Tumult Ltd amount due for June 6 invoice, cheque no.104.

Cash sales for period to 15 June were recorded today, $3,740.

16 Sold inventory to O. Mowen on account $5,170; invoice no. 211, terms 1/10, n/30.

Paid salaries for period to 15 June totaling $2,650, cheque no. 105.

17 M. Biller paid the balance of his May invoice.

20 Purchased inventory on credit terms, from Lynwood Ltd, $5,390; invoice date 20 June, terms 1/10, n/30.

Sent cheque, no. 106 to Dyson Ltd in full settlement of the account.

22 Received account for $143 from M. Parson for items chargeable to office expenses, terms n/30.

23 Received inventory returned by O.Mowen and issued a credit note for $2,200.

Received a cheque from M. Biller for invoice no. 210.

26 Received a cheque from O. Mowen for balance due on invoice no. 211

Purchased inventory from Dyson Ltd for $35,750, terms, 1/20, n/30.

29 Sold inventory worth $15,400 on credit to J. Rowls; invoice no. 212, terms 1/10, n/30.

Paid $220 for electricity expenses, cheque no. 107.

Paid Lynwood Ltd for the invoice dated 20 June, cheque no. 108.

30 Purchased inventory on account from Amcor Ltd $26,400, terms 2/10, n/30.

Cash sales from 16 June to 30 June were $2,145.

Paid salaries for period 16-30 June totaling $2,850, cheque no. 109.

Purchased office supplies for $330, cheque no. 110.

Received account from C. Bond for $110 for delivery expenses for the month.

Sold inventory on credit to O. Mowen for $17,600, invoice no. 213, terms 1/10, n/30.

Purchased printer for use in the business office at a cost of $825 using a short-term loan.

ADDITIONAL INFORMATION

At the end of the 2020 financial year, Scallion Ltd identified the following items that need to be resolved before financial statements are prepared. GST has been correctly accounted for on these non-current asset transactions.

1. On 1^st July 2019, Scallion Ltd purchased a used machine for $65,000 cash. The cost was debited to the "Machinery" account in the ledger. Prior to use, additional expenses were incurred for installing and testing the machine. These costs amounted to $7,400 and were debited to the "repairs and maintenance expenses" account. The installation and testing was completed on 1^st October 2019, and the machine was brought into use on that date. The machine has an estimated useful life of 5 years, with a residual value of $6,000. Scallion uses straight-line depreciation for machinery and records depreciation to the nearest month. No depreciation has yet been provided in respect of this asset in the current year.

1. On 2^nd July 2019, a small building and land were purchased for $350,000. The purchase price was determined by appraisers based on a fair value of $250,000 for the land, and $100,000 for the building. The total purchase consideration of $350,000 was debited to the "land" account. The building has an estimated useful life of 10 years with no residual. Scallion uses straight line depreciation for buildings. No depreciation has yet been provided for the building in the current year. On 1 June 2020, Scallion decided to adopt the revaluation model to measure its land at fair value. A valuation was carried out on 30 June 2020, and the land was valued at $295,000. No journal entry has been made in relation to this valuation. The fair value of the land and retail store acquired on 2^nd June 2020 has not changed.

3. A new truck was purchased on 31^st March 2020. Scallion Ltd paid cash of $46,100. The truck has an estimated useful life of 4 years with a residual value of $13,300 and is to be depreciated using the reducing balance method (using a rate of 1.5 times the straight-line rate). No depreciation has yet been provided in respect of this asset in the current year.

4. Prepare general journal entries to record the following information.

a)Office supplies on hand at 30 June total $900

b)The one-year general insurance policy expires on 31 October 2020

c)Equipment has a useful life of 4 years with no residual value. Store furniture and printer have useful life of 5 years with no residual value. Scallion Ltd uses straight-line depreciation for these assets. (Round all depreciation amounts upwards to nearest whole $).

d)Commission revenue of $39 600 has accrued during June

e)Inventory at 30 June is $28 800

REQUIRED:

1.a) Record the transactions in the special journals in the following order: sales journal, purchases journal, cash receipts, cash payments and general journal. You will need to use the general journal for more adjusting entries coming up, so make sure you leave room. The business uses sales and purchases journals for inventory transactions on credit only. Returns are processed through the general journal. (Remember that special journals replace the general journal, so transactions will be recorded in a special journal or the general journal but not both). In the sales journal, you will need a column for Sales, GST Collected and Accounts Receivable. In the purchases journal, you will need columns for Purchases, GST Paid and Accounts Payable. The Cash Receipts and Cash Payments are multiple-column journals and require columns relevant to this particular business. An example of a suitable format for these journals is provided on pages 379 & 384 of your text.

2.Prepare the accounts receivable control account as it would appear in the general ledger at the end of the reporting period, together with the related subsidiary ledger. Ensure that the individual customer balances agree with the total of the control account. Provide the accounts payable control account as per the general ledger at the end of the financial year and the subsidiary ledger and ensure that the individual supplier balances agree with the total of the control account.

3.Prepare any adjusting or correcting entries required as at 30 June 2020 in relation to the additional information provided above.

4.Any entries necessary in respect of depreciation for each class of non-current assets discussed in the information given for the year ended 30 June 2020

3. Scallion Ltd uses the allowance method of accounting for bad debts. One percent of net sales is estimated to be uncollectable for the year ended 30 June 2020 (round amount to nearest whole $). On 30 June, Scallion Ltd was notified by the lawyers of Croft Ltd that they had been declared bankrupt and were unable to pay the amount owing. This debt was subsequently written off.

4. Scallion Ltd received the June 2020 bank statement from First State Bank, as shown below:

Scallion Ltd

STATEMENT OF ACCOUNT-FIRST STATE BANK

DateParticularsDebitCreditBalance

$$$

1JunBalance brought forward71,135 CR

2JunDeposit2,00073,135 CR

2JunCheque9655072,585 CR

4JunCheque 9833,00039,585 CR

5JunDeposit60,00099,585 CR

6JunCheque 9914,10685,479 CR

7JunEFT-Collection of Rent2,00087,479 CR

8JunCheque100 79286,687 CR

8JunDeposit10,00096,687 CR

9JunInterest on account50097,187 CR

9JunCheque101 17,82079,367 CR

17 JunCheque 1043,449.6075,917.40 CR

17 JunBank Charges11075,807.40 CR

17 JunCheque10315,00060,807.40CR

17 JunDeposit11,66072,467.40CR

18 JunDeposit4,85077,317.40CR

19 JunCheque1052,65074,667.40CR

21 JunCheque10621,78052,887.40CR

30 JunDeposit2,14555,032.40CR

30 JunCheque11033054,702.40CR

30 JunBank Charges15054,552.40CR

The previous bank reconciliation performed at 31 May 2020 is provided below:

Bank Statement Balance 31 May 2020$71,135CR

Plus : Outstanding Deposits2,000

Less;

Unpresented Cheques;

96$ 550

971,8002,350

Balance per Cash at Bank Account70,785

Further Information:

*EFT stands for Electronic Funds Transfer. Scallion Ltd does not have any rental properties. For any differences between the records of the bank and the entity, assume the business records are correct.

a.Using the information provided, prepare the Cash at Bank account at 30 June 2020 using a "T" account (any required adjustments as a result of the bank reconciliation, should be made through the cash journals).

b.Prepare the Bank Reconciliation Statement for Scallion Ltd at

30June 2020.

5.Prepare a fully classified profit or loss statement for the year ended 30 June 2020 and a balance sheet at 30 June 2020 showing all assets, liabilities and equity items for Scallion Ltd. Also show how the sales account would appear in the general ledger at the end of the accounting period and the GST paid account (T accounts are preferred).

6.Make sure you close the relevant accounts at the end of the financial reporting period ready for next year. Prepare any related reports to show the account balances at the start of the next financial year.

In the following section, you are required to provide written explanations to the following two questions. This section is to be no more than 300 words in total and your answers are required to be properly referenced. No marks will be given for these two questions if your answers are taken from the internet without proper referencing.

7.Provide an explanation for the accounting treatment of GST in relation to accounting for bad debts that is recommended according to generally accepted accounting principles (GAAP), if:

i)You were required to write off the balance of a customer's account

ii)You had to estimate bad debts expense using the allowance method for the year end accounts

8.Explain the income taxation implications for Scallion Ltd for the year ended 30 June 2020. Do not calculate income tax expense but discuss whether Scallion Ltd would be eligible to pay income tax and why.

I only need help for the Question 4 a and B ( Bank Recon )