Question 3

Bruce Lee is the proprietor of Lees Picture Framing. He uses the perpetual method to record inventories. The accounting period is 12 months. LEES PICTURE FRAMING Trial Balance (Extract) as at 30 June 2018 Debit Credit Cash on hand 350 Sales staff wages 8 500 Debtors 2 700 Interest revenue 320 Office equipment 17 000 Accumulated depreciation of office equipment 3 000 Promotional expenses 2 500 Insurance 1 200 Bank 6 000 Commission revenue 1 200 Delivery van 25 000 Interest on bank overdraft 280 Bad debts 200 Drawings 120 Debt collection fees 170 Additional Information at 30 June 2018 Commission revenue owing is $60 Promotional expenses includes $70 which was paid in advance Office equipment is depreciated at 15% using the diminishing-balance method. The delivery van is depreciated by the units-of-use method. It was purchased on 1st March and has travelled 3000 kilometres. The estimated residual value is $5 000 and the vehicle is expected to last 400 000 kilometres. (a) Complete the general journal entries to record the following adjustments. General Journal Date Particulars Debit Credit (b) Complete the income statement. LEES PICTURE FRAMING Income Statement for the year ended 30 June 2018 Sales Cost of Goods Sold Gross Profit Other Revenue Expenses Selling Administrative Financial Net Profit 85 000 45 000 40 000 1) Name the 6 types of adjustments mentioned in the video 2) What is Depreciation? 3) When does a business recognise a stock loss? 4) What are some examples of prepaid expenses? 5) What is prepaid revenue? 6) How should we classify: a. Accrued Expenses b. Accrued Revenue