Piano Parlour is a piano retailer and repairer owned and operated by Claude Debusi. Claude has provided you with an adjusted year end trial balance and has tried to be helpful by sorting it into alphabetical order. He has also provided you with some additional information.

Please see the next page for the requirements of this question.

Piano Parlour TRIAL BALANCE AS AT 30 JUNE 2021

	Debit ($)		Credit ($)
Accounts Payable			33,375
Accounts Receivable	54,450
Accumulated Depreciation Delivery Van			7,200
Accumulated Depreciation Equipment			8,100
Advertising Expense	5,625
Allowance for Doubtful Debts			4,650
C. Debusi, Capital (1 July 2020)			87,000
C. Debusi, Drawings	18,750
Cash at Bank	24,000
Delivery Van	36,000
Depreciation Expense Delivery Van	4,200
Depreciation Expense Equipment	6,300
Discount Allowed	600
Discount Received			1,350
Doubtful Debts Expense	4,200
Equipment	24,000
Freight Inwards	3,225
Freight Outwards	1,800
Insurance Expense	5,400
Interest Expense	1,050
Inventory (1 July 2020)	64,500
Loan Payable			48,000
Prepaid Rent	2,700
Purchases	217,800
Purchases Returns			7,800
Rent Expense	9,900
Sales			326,700
Sales Returns	11,175
Sales Staff Wages Expense	28,500
	524,175		524,175

Additional information

• A stocktake revealed that closing inventory at 30 June 2021 was $66,750.
• 30% of the Insurance expense specifically relates to the administration office. The remainder of this expense relates to insuring the store.
• $2,900 of the Rent expense specifically relates to the administration office. The remainder of this expense relates to rent of the store.
• The Loan Payable is interest only, with the principal not due for repayment until 2023.

REQUIRED:

Question 2 part (a)

Identify which inventory method Piano Parlour is using.

Explain how you determined which inventory method Piano Parlour is using from the trial balance provided.

Question 2 part b

Using the Trial Balance and templates provided on the following pages, prepare the following financial statements for the period in question:

1. A fully classified Income Statement
2. A fully classified Balance Sheet in the narrative format
3. A separate Statement of Changes in Equity