Retail operations and retail inventory Splash Out The Back began business on 1 November 2019. The business has been set up as a partnership between Mr. and Mrs. Fisher. It operates an online store, selling inflatable swimming pools to the public, for use in back yards. The business began by selling one particular model of inflatable swimming pool but will look to expand the product lines that it sells within the next year. The business is registered for GST. The following transactions occurred during November 2019: Date Details 1 Nov Mr. and Mrs. Fisher deposited $20,000 into the business bank account ($10,000 each). 1 Nov Splash Out The Back rented a small warehouse for the business, to store inventory that is purchased. The warehouse rent costs $330 per month (including GST). Splash Out The Back pays the landlord $990 from the bank account, for rent for November, December, and January. 8 Nov Splash Out The Back purchased 30 of the inflatable swimming pools on account for $88 per pool, including GST, from the pool manufacturer, Intex Pools Ltd. Intex Pools Ltd also charged a delivery fee on the invoice of $55, including GST (to deliver the swimming pools to Splash Out The Back). The invoice is due for payment on 20 November. 15 Nov Splash Out The Back paid the invoice from Intex Pools Ltd (for purchases made on 8 November) from the business bank account. 16 Nov Splash Out The Back sold 12 of the swimming pools via its online store, at $165 each (including GST). All of the customers paid by Paypal and the money was received in the business bank account by the end of the day. Note: Splash Out The Back does not pay any PayPal fees when customers pay by PayPal. 20 Nov One of the customers who purchased a swimming pool on 16 November returned their swimming pool for a refund. The swimming pool was returned in an original, brand new condition (unopened). The customer paid for the freight to return the swimming pool, and Splash Out The Back refunded the customer $165 from the business bank account. 22 Nov Splash Out The Back purchased 40 of the inflatable swimming pools on account for $99 per pool, including GST, from the pool manufacturer, Intex Pools Ltd. Intex Pools Ltd also charged a delivery fee on the invoice of $55, including GST, to deliver the swimming pools to Splash Out The Back. The invoice is due for payment on 5 December. 23 Nov Splash Out The Back had a 24-hour sale, and sold 34 of the swimming pools via its online store, at $143 each (including GST). All of the customers paid by Paypal and the money was received in the business bank account by the end of the day. 25 Nov Splash Out The Back was contacted by a primary school. The primary school wanted to purchase 10 of the inflatable swimming pools for their school water fun day. Splash Out The Back agreed to sell 10 of the swimming pools to the primary school for $154 each (including GST). The sale was made on credit terms of 2/10, n/30. 27 Nov Splash Out The Back received the money in the business bank account from the primary school that purchased swimming pools on 25 November. The amount received was the invoiced amount, less the sales discount. 30 Nov Mrs. Fisher accidentally damaged one of the swimming pools in the warehouse, and the swimming pool needs to be written off. 30 Nov Splash Out The Back received an invoice from Telstra (for telephone and internet used by the business), with an amount payable of $88 (including GST). The due date for payment is 16 December. 30 Nov Splash Out The Back received an invoice from Australia Post for postage costs re. delivering swimming pools to customers. Australia Post charges $9.90 postage per swimming pool delivered (including GST). The invoice is due for payment on 20 December. Mr & Mrs. Fisher dont have any experience keeping inventory and accounting records. They have come to you for assistance.

Required: i. Prepare a business report*for Splash Out The Back to help the owners understand the different inventory accounting systems (periodic and perpetual), and costing methods (specific unit cost; first-in-first-out (FIFO); last-in-first-out (LIFO); and average cost methods). In your report, also discuss any advantages and disadvantages of these different systems and methods. Given your knowledge of the business and your knowledge of the regulatory requirements that will apply to Splash Out The Back, include a recommendation on the inventory system and costing method/s that Splash Out The Back should consider adopting.

ii. Prepare Excel worksheets for the swimming pools for November using the perpetual inventory system and the FIFO, LIFO, and average-cost methods. In your spreadsheets, keep track of the number of swimming pools purchased, swimming pools sold, swimming pools on hand, cost of goods sold, and gross profit made.

iii. Now assume that Splash Out The Back has adopted the perpetual inventory system and the FIFO costing method. Prepare journal entries (including any adjusting entries) for all of the businesss transactions for November. Include dates, references, and narrations.

iv. Prepare T-accounts in an Excel spreadsheet, and post all of the above journal entries to the T-accounts. Include dates and references for each entry. Total all of the T accounts to determine their balances at the end of November 2019.

v. Prepare the Adjusted Trial Balance in an Excel spreadsheet as at 30 November 2019. Use formulas to generate all of the figures in the Adjusted Trial Balance from the balances in the T-Accounts.

vi. Prepare the income statement, balance sheet, and statement of changes in equity in Excel. Use formulas to generate all of the figures in the financial statement reports from the Adjusted Trial Balance.

vii. Assume that Splash Out The Back has a year-end date of 30 November. Prepare the closing entries as at 30 November 2019. Bank reconciliations and cash

This question continues on from question 1 above.

It is now March 2020, and Mr & Mrs. Fisher have come to you for some assistance as they are having trouble reconciling the bank account as of 29 February 2020. The February 2020 bank statement appeared as follows:

Bank statement for February 2020:
Date	Description	Deposit	Withdrawal	Balance
1/02/2020	Opening balance			$13,276.00
2/02/2020	Deposit - PayPal	2,288.00		$15,564.00
2/02/2020	EFT - Elite Real Estate Ltd - rent		990.00	$14,574.00
5/02/2020	Deposit - PayPal	3,422.00		$17,996.00
7/02/2020	Cheque 15		9,955.00	$8,041.00
11/02/2020	EFT - Star FM Radio - advertising		332.00	$7,709.00
12/02/2020	Deposit - PayPal	2,853.00		$10,562.00
13/02/2020	Deposit - PayPal	2,239.00		$12,801.00
16/02/2020	Cheque 19		220.00	$12,581.00
19/02/2020	Cheque 16		1,287.00	$11,294.00
22/02/2020	Deposit - PayPal	1,510.00		$12,804.00
23/02/2020	EFT - Facebook Advertising Ltd - advertising		330.00	$12,474.00
23/02/2020	EFT - Google Advertising Ltd - advertising		242.00	$12,232.00
24/02/2020	Deposit - Rainbow Childcare - 2 pools	330.00		$12,562.00
26/02/2020	Cheque 20		4,015.00	$8,547.00
26/02/2020	EFT - Mr & Mrs. Fisher		2,000.00	$6,547.00
27/02/2020	EFT - Telstra - phone		99.00	$6,448.00
28/02/2020	Interest	2.00		$6,450.00
28/02/2020	Monthly bank fee		10.00	$6,440.00

Splash Out The Backs accounting records for February 2020 showed an opening balance for the bank account of $2,034.00. The bank reconciliation from January 2020 showed a bank balance of $13,276.00, less outstanding cheques (Cheque 15 for $9,955.00, and Cheque 16 for $1,287.00). Following is a summary of deposits and withdrawals recorded in the accounting records during February:

Withdrawals:
Date	Detail	Amount
2/02/2020	EFT - Elite Real Estate Ltd (rent)	$900.00
7/02/2020	Cheque 15 - Intex Pools Ltd (inventory)	$9,956.00
11/02/2020	EFT - Star FM Radio (advertising)	$332.00
15/02/2020	Cheque 19 - Officeworks (stationery)	$220.00
19/02/2020	Cheque 16 - Australia Post (delivery costs to customers)	$1,287.00
23/02/2020	Cheque 20 - Intex Pools Ltd (inventory)	$4,015.00
26/02/2020	EFT - Mr & Mrs. Fisher (drawings)	$2,000.00
27/02/2020	EFT - Telstra (phone)	$99.00
28/02/2020	Cheque 21 - Snap Printery (stationery)	$440.00
		$19,249.00

Deposits:
Date	Detail	Amount banked
2/02/2020	Sales	$2,880.00
5/02/2020	Sales	$3,422.00
12/02/2020	Sales	$2,883.00
13/02/2020	Sales	$2,239.00
22/02/2020	Sales	$1,510.00
29/02/2020	Sales	$704.00
		$13,638.00

The bank did not make any errors.

Required:

1. Prepare the bank reconciliation for Splash Out The Back as at 29 February 2020.
2. Prepare the journal entries to correct any errors made by Splash Out The Back, and to record transactions that have not yet been entered into the business accounting records. (Note: The correction of any errors relating to deposits (other than interest revenue) should be made to the Sales account, and the correction of any errors relating to payments should be made to the appropriate expense or asset account). As Splash Out The Back is registered for GST, you must account for GST when preparing these journal entries. (Note: all sales and all expenses (apart from interest received and bank fees paid) are subject to GST).
3. Prepare the bank T-account for February 2020, in order to determine the balance in this ledger account after the above journal entries have been recorded and posted.

   Property, plant, and equipment

   This question continues on from questions 1 and 2 above.

   Splash Out The Back purchased a delivery vehicle for the business on 1 April 2020 for $27,000, paid from the business bank account. The delivery vehicle is expected to have a useful life of 8 years (or 300,000 kms), and a residual value of $3,000.

   On 30 June 2022, the business sold the delivery vehicle for $22,000.

   For the purposes of this activity:

4. assume that the business has a year-end of 30 June.
5. ignore any GST.

6. Required:

7. Assume that the company uses the straight-line method of depreciation. Calculate the depreciation expense for each financial year (up to 30 June 2022), and calculate the gain/(loss) on disposal. Prepare journal entries to account for the acquisition of the delivery vehicle, depreciation expense for each financial year, and the sale of the delivery vehicle on 30 June 2022. Include dates and brief narrations for each journal entry.
8. Now assume that the company uses the units-of-production method of depreciation. Prepare a depreciation schedule for the delivery vehicle (up to 30 June 2022), assuming that the delivery vehicle was used for: 6,000 kms during the year ended 30 June 2020, 40,000 kms during the year ended 30 June 2021, 45,000 kms during the year ended 30 June 2022. Show workings.
9. Now assume that the company uses the reducing-balance method of depreciation. Calculate the deprecation rate, and prepare a depreciation schedule for the delivery vehicle (up to 30 June 2022). Show workings.