QUESTION 1: Balance Day Adjustments (19 marks) Fred Jones is the sole proprietor of 'Shore Read", a second hand book and coffee shop situated on the esplanade of a popular beach. The 'Shore Read' has become extremely popular with locals and holidaymakers due to the excellent coffee, special recipe chocolate fudge brownies and the extensive range of reasonably priced books. When Fred is in the shop he is very busy running the coffee shop and on Monday and Tuesdays he travels widely to source good second hand books to sell in the shop. He has become so busy that he is unable to attend to the bookkeeping, so he has recently hired Michell & Co Accounting Specialists Pty Ltd to take over the accounting function. You are the graduate accountant working at Michell & Co Accounting Specialists Pty Ltd and are now responsible for preparing the year end Balance Day Adjustment journals for "Shore Read Fred Jones has provided you with the 'Shore Read's Unadjusted Trial Balance but unfortunately he doesn't know what order the accounts should be in. (Continued next page) QUESTION 1: Balance Day Adjustments (cont.) Debit ($) Credit (5) Shore Read Unadjusted Trial Balance 30 June 2020 Shop Cleaning Experts Gas Expense Winter Expense Motor Vehicle Cash at Bank Term Deposit Prepaid Insurance Shop Furniture & Fittings Sales Returns & Allorences Interest expense Discount Received Electricity Expense Sam, Capital Accounts Receivable 18000 2387 3001 R$ 104 27 400 140 000 1536 85000 84 7360 1 136 5920 211 580 520 62 840 7200 47160 24 204 33 163 58272 SO 000 161 400 19760 16000 Accumulated Depreciation - Shop Furniture & Fittings Inventory (1 July 2019) Rent Expreme Bookkeepers Wages Expense Coffee Shop Star Wages Expense Bookshop Staff Wages Expose Purchases Advertising Expense Office Cleaning Expense Accounts Payable Office Supplies Expense Fred Jones, Drawings Repairs and Maintenance Payable Sales - Coffee Shop Sales Book Shop Accumulated Depreciation - Motor Vehicle Accrood Rent Discount Allowed Insurance Expense Totals 8185 2026 42452 362 824 145 200 26 300 1040 3072 835625 835 625 Fred has emailed you the following list of account information related to the year ended 30 June 2020. He is not sure if all of the following transactions require Balance Day Adjustment journals or not, but he is confident that you will know: (Continued next page) QUESTION 1: Balance Day Adjustments (cont.) (1) (2) (3) (4) The Shop Furniture & Fittings is expected to have a useful life of five years and have a residual value of $12,500. Fred records all office supplies purchases initially as an expense. Fred counts the Office Supplies and determines that there is $232 on hand at 30 June 2020. The 6 month insurance policy (policy #34448) of S1 536 was paid on March 1 2020. The Motor Vehicle is expected to have a useful life of six years and have a zero scrap value. $16 563 of the recorded sales represent payments made by customers to the 'Shore Read to source hard to find books such as first editions. As at 30 June 2020. Fred had not yet been able to source these difficult to find books during his weekly book buying trips. On 30 June, Fred estimated $80 of the Accounts Receivable will not be collected as the amount has been outstanding for 190 days. (5) (6) Staff wages payable but not recorded as at 30 June are 54 106. Of this s3 000 was coffee shop staff wages payable whilst the remaining amount was bookshop staff wages payable. The bank has approved an overdraft facility for $5 500 for the 'Shore Read'. $18,000 of the loan principal is due to be paid by 1 June 2021 (8) (9) REQUIRED: It is now the end of the financial year and Fred requires you to undertake the following: Prepare the Balance Day Adjustment Journals for the "Shore Read where required. The journals must be correctly formatted and include a narration (explanation) for each journal entry. (19 marks)