uestion

Part A - Manual Accounting(30 Marks)

Required:

Complete the following tasks for the month of June 2019 for Fred's Furniture Ltd.Read the attached information carefully, then enter the balances to date from the trial balance into the ledger accounts, and then enter the transactions into the journals and ledgers provided following the instructions below:

(a)Once you have entered the balances to date from the Trial Balance into each account in the general ledger, enter the transactions into the appropriate journals - you are expected to use both the general and the special journals provided ie: Sales, Purchases, Cash Receipts and Cash Payments journals.

I encourage you to provide a narration for all entries entered in the general journal and a description for entries in all other journals (as this is what you would do in the real world), but you won't be penalised if you don't provide narrations.

(b)Post entries for the month from the journals to the subsidiary ledgers, and to the general ledger T accounts, then balance the accounts. I recommend you also prepare a trial balance at this stage to check your work. The sum of the debit balance accounts should equal the sum of the credit balance accounts.

(c)Prepare a bank reconciliation at the end of the month, and enter any necessary journal entries to record adjustments to the company records, including entries to the cash at bank ledger account for the month.

(d)Complete any adjusting and closing entries required then prepare a post-closing trial balance at 30 June 2019. Reconcile the control account balances with the subsidiary ledgers.

(e)Prepare an Income Statement (Statement of Financial Performance) for the period ending 30 June 2019 and a Balance Sheet (Statement of Financial Position) as at 30 June 2019.

When you have entered all transaction data, you should prepare and submit the following reports:

All journals and the full set of T accounts.

Post-Closing Trial Balance as at 30 June 2019

Income Statement (Statement of Financial Performance) for the year ended 30 June 2019

Balance Sheet (Statement of Financial Position) as at 30 June 2019

Bank Reconciliation as at as at 30 June 2019

Company Information for Fred's Furniture:

• Fred's Furniture Ltd is a local retail business that sells furniture. The business was set up by Fred who registered the company on 1 July 2014 and issued 150 000 shares.

• The company has not yet declared or paid any dividends.In the first year of its life the company made a profit after tax of $5 410.

• The Financial year for the company ends on 30 June.

• Fred's Furniture Ltd use sales, purchases, cash receipts, cash payments journals and a general journal, along with a general ledger and subsidiary ledgers for debtors and creditors. The majority of their customers pay in cash, but they do offer credit to a handful of valued customer. When the business make credit sales, the terms are 3/10, n/30.

• Fred's Furniture Ltd rent a local warehouse paying rent of $1 650 each month (including GST).

• The company's warehouse fittings are being depreciated over 10 years with an estimated residual value of $6 500.The company has two delivery vans which are being depreciated over 6 years with an estimated combined residual value of $8 500.

• The loan was taken out on the 31^stMay and loan payments of $2 000 per month plus interest will be made monthly with the first payment due on the 1^stJuly 2019.Interest is to be paid at a rate of 11% per annum. The first month's interest is to be calculated on the full value of the loan of $60 000.

• Provision for doubtful debts is always adjusted at the end of each month to equal 2% of the value of debtors at that time.

• The company account for GST on an accrual basis and reconcile and pay GST every quarter.All figures are GST inclusivethus you will need to divide each figure by 11 to identify the GST component. (see the GST slides on MyLO)

• GST was last paid in April this year and is next due to be paid in July 2019 thus youDO NOTneed to reconcile or pay GST at the end of June for the quarter.This will be done by the accountant in July 2019.

• Gross wages represent the total wages expense. Tax taken from wages needs to be treated as "Tax Payable".

• Round all amounts to the nearest dollar.

The trial balance of the company at 31 May 2019 was as follows:

Fred's Furniture Ltd

Trial Balance

as at 31 May 2019

DRCR

100Cash at bank158 210

101Debtors control13 500

102Provision for doubtful debts270

103Inventory65 040

104Warehouse Fittings80 300

105Accumulated depreciation - W/H Fittings14 145

106Motor Vehicles (Delivery Van)62 500

107Accumulated depreciation -m/vehicles 9 000

200Creditors control16 200

250Accrued Expenses7 980

260Loan60 000

300Share capital150 000

310Retained profits5 410

400Sales Revenue620 540

401Sales returns3 900

402Discount revenue5 850

500Cost of goods sold228 935

501Depreciation Expense - W/H Fittings6 765

502Depreciation Expense - M/V8 250

503Discount expense2 620

504Electricity expense11 200

505Income Tax expense85 000

506Interest expense4 125

507Motor Vehicle expenses6 200

508Rent expense16 500

509Sundry expenses1 650

510Telephone expense2 250

511Wages expense135 000

600GST Collected9 100

610GST Paid6 550

$898 495$898 495

Schedule of Debtors Schedule of Creditors

as at 31 May 2019as at 31 May 2019

Rule Ltd 2 400Marn Ltd1 300

Zing Ltd3 200Pump Ltd7 600

Jun Ltd1 700Park Ltd1 900

Wing Ltd6 200Yard Ltd5 400

$13 500$16 200

The following transactions occurred in June 2019

June1Received a cheque for $2 200 from Rule Ltd (no discount allowed) as part

payment of their account, and deposited it in the bank account.

2Sold inventory for $1 900 (before discount) to Jun Ltd on credit, the

company was also given a trade discount of $85, then the normal credit

terms) COGS was $1 100

4Purchased inventory on credit from Park $1 595 (no discount allowed).

5Paid Yard $5 400 being full settlement of amount owing, chq no. 152

8Received and deposited payment in full from Wing Ltd (no discount

allowed).

11Sold inventory on credit to Wing $8 690 (COGS was $3 003)

12Paid Park the total amount owing to date, chq no. 153

12Paid telephone account of $825, chq no. 154

14Received a cheque for $5 500 from Wing Ltd in part payment of their

account (no discount allowed)

14Banked cash sales for the first two weeks of the month totalling $51 150 (COGS was $20 450).

14Withdrew cash from the bank account to pay wages of $3 900, gross

wages were $5 900 (wages before tax).

17Paid $462 for plastic bags and stationery items, chq no.155

18Sold inventory on credit to Zing Ltd $3 564 (COGS was $1 560)

23Paid Marn Ltd $ 1 300, chq no. 156

27Paid sundry expenses of $253, chq no. 157

28Wrote off the balance of the account owed by Rule Ltd as a bad debt

29Deposited Cash Sales of $30 800 (COGS was $15 650)

30Processed a direct debit from the bank account to pay wages of $4 300, gross wages were $6 200.

30Zing Ltd paid their debt in full (no discount allowed).

30Purchased inventory on credit from Park Ltd of $4 290 (before discount) The business was allowed a trade discount of $110 and terms of 1/10, n/30

30Banked cash sales for the remainder of the month totalling $7 150 (COGS

$2 450).

30Paid the rent for June, chq 158

Additional Information - entries have not been made in the accounts to allow

for any of these items:

Gross Wages owing at the end of the month total $2 300 and electricity owing for the month of June is $350.

Advertising owing for the month was $500

Income tax for the month of June 2019 is estimated to be $8 200

On the last day of the month (30 June) the business traded both of the delivery vans in for two larger vans worth $120 000 in total. They were given a trade in of $50 000 on the old vans, with the balance to be paid in 30 days. The new vans depreciation rate and residual value have not yet been determined.

The bank statement received at the end of June shows the following information:

Bank Statement

Fred's Furniture Ltd

2019DebitCreditBalance

June1Balance155 755CR

Deposit6 350162 105CRDeposit2 200164 305CR

3Chq.no. 1483 200161 105CR

4Chq.no. 149695160 410CR

8Chq. no. 1525 400155 010CR

Deposit6 200161 210CR

14Chq. no. 1533 495157 715CR

14Deposit5 500163 215CR

14Deposit51 150214 365CR

14Chq. no. 154825213 540CR

14Cash withdrawal3 900209 640CR

19Chq. no. 155462209 178CR

27Chq. no. 1561 300207 878CR

29Deposit30 800238 678CR

30Cash withdrawal4 300234 378CR

30Bank fees/charges52234 326CR

30Interest1 350235 676CR

At 31 May 2019 there were three outstanding cheques - cheque no. 148 for $3 200 and cheque no. 149 $695 and an outstanding deposit for $6 350.