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Selected accounts of Tulip Ltd and their balances for the financial year ending 30 June 2021 are provided below. Account Name Debit $ Credit $

Selected accounts of Tulip Ltd and their balances for the financial year ending 30 June 2021 are provided below.

Account Name

Debit $

Credit $

Sales Revenue

374,800

Accounts Payable

94,500

Accounts Receivable

67,500

Cost of goods sold

105,000

Wages Payable

5,000

Cash at Bank

221,900

Share Capital (15,000 shares)

150,000

Inventory

147,500

Prepaid Insurance

28,500

Revenue Received in Advance

10,600

Rent expense

52,500

Wages expense

54,500

Allowance for doubtful debt

2,500

Other expenses

25000

Retained Earnings (opening balance)

65000

Additional information (not included in the figures above; Ignore GST):

  1. Tulip Ltd purchased a machine on 1 June 2021 for $38,000, paying $8,000 cash and signing a 2-month note payable for the remaining balance. Interest rate on the note is 15% per annum. The machine is expected to depreciate $3,600 each year.
  2. Stock count of inventories at end of the year revealed that Tulip Ltds inventory on hand balance on 30 June 2021 amounted to $146,000.
  3. Cost of insurance that has expired during the financial year amounted to $12,000.
  4. The company has determined that the allowance for doubtful debts should be adjusted to reflect 4% of accounts receivable at the end of the year.
  5. Tulip Ltd took out a loan of $100,000 at an annual interest rate of 12% from GMC Bank on 30 June 2021. The loan is repayable over 5 years and $12,000 of the loan is payable within 12 months. No interest is accrued on 30 June 2021.

REQUIRED:

  1. Financial accounting statements tend to reflect past events. In view of this, how can they be of any assistance to a user making a decision when decisions, by their very nature, can only be made about the future?

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