You are finalising financial reports for a client for the year ending 30th June 2016. The client is a growing business called Franks Fishing Charters that sells fishing equipment, and provides both fishing charters and workshops. Income is generated by selling fishing equipment, taking customers out on fishing trips and by running short workshops to help improve participants fishing skills. The owner, Frank, has the office manager prepare the financial reports with the assistance of a first year undergraduate accounting student undertaking an internship with the firm. Unfortunately, the office manager has not studied accounting and believes they made a number of mistakes when preparing the end of year financial reports. Frank has asked you for assistance in finalising the financial reports (and wants you to apply the rules of accrual accounting in preparing the reports). You are given all of the information used to prepare the financial reports for the year ending 30th June 2016. Disregard all taxes including GST and PAYG for this question. During your initial investigation you have identified the following issues which may (or may not) require further action:

1. All office staff work Monday to Friday. Total fortnightly wages are $12,600 (seven staff each paid $1,800). Office staff wages had been paid and recorded on the 3rd and 17th of June 2016. All employees who work are paid on the 3rd and 17th of June for work done up to and including the 3rd and 17th of June respectively. No other entries have been processed relating to wages in June 2016.

2. The firm controls a number of non-current assets. To make things simple, the owner decided all non-current assets should be depreciated using the straight line depreciation method overthe useful life of the asset. Details relating to assets controlled by the firm are shown below. Unless indicated otherwise in the information provided, all assets shown below were already in the accounts at the beginning of the reporting period.

Asset

Cost ($)

Useful Life (Years)

Residual Value ($)

Office Furniture

51,000

15

0

Office Equipment

21,900*

5

0

Motor Vehicles

62,000

10

4,000

Fixtures and Fittings

107,000

20

0

Buildings

320,000

25

60,000

Boats

560,000

20

82,000

* The $21,900 includes $900 for a camera contributed to the business by the owner (discussed in (4) below). For the purposes of the assignment, assume that all office equipment has a useful life of 5 years and a residual value of $0.

3. The electricity bill for the firm was paid by the owner on the 15th June 2016 the bill was for $650. The bill was paid using the personal bank account of the owner because they were paying some other personal bills at the same time and forgot to bring their credit card from the business to pay for the business electricity bill. The owner then took out $650 from the business bank account on the 30th of June to reimburse themselves for the payment they made on the 15th June. They also took out an extra $100 at the same time, on the 30th June, from the business bank account, for personal use. In other words a cheque was drawn on the business account for $750.

4. The owner purchased a camera for the business to use to record events that occur on charters. They purchased it from their own personal bank account on the 1st March 2016 and gave it to the business to use. The office manager recorded this contribution as a debit to Office Equipment and a credit to Owner Contributed Asset Income. The camera cost $900.

5. Upon receiving the bank statement for the month of June, 2016, it was discovered that a cheque previously received from a customer for a fishing charter had not cleared. The cheque was for $4,500 and was dishonoured on the 18th June. The staff at the business had no knowledge of this event until the bank statement was received.

6. An amount of $8,000 was paid for insurance on the 1st of June for the coming 12 months. The office manager recorded a DR of $8,000 against prepaid insurance and a CR of $8,000 against cash at bank. No other entries have been made in relation to this item.

7. A customer paid $6,000 cash for a charter on the 11th June (charter was taken the same day). This was recorded as a $6,000 DR to Accounts Receivable and a $6,000 CR Charter Revenue.

8. Frank has been investigating a new supplier and has decided to purchase $6,000 worth of stock once the business tax return comes through in the next financial year. The office manager has recorded this as an entry of $6,000 to Inventory (DR) and Accounts Payable (CR).9. The business received a cheque of $8,300 from a client, A. Argyle, for a charter in February 2014. The amount had previously been written off as a bad debt. The office manager had recorded this item as a DR to Cash at Bank and a CR to Accounts Receivable.

10. The business received its bank statement on the 30th of June 2016. The statement included showed interest incurred on the overdraft facility of $138. Bank fees of $37 had also been deducted. It was also found a customer had deposited an amount of $12,300 for a charter to be taken in August. The business has a 30 day cancellation policy. None of these transactions have been recorded by the office manager.

11. Frank allows the business to store fishing related inventory worth $5,000 for a friend who owns a similar business and is in the process of changing premises. A DR of $5,000 has been made to inventory and a CR of $5,000 to Accounts Payable.

Required

Prepare the general journal entries to make (if) necessary, adjustments/corrections for the information presented to you above.

If you believe an entry is not required (that is, the information has been recorded correctly), please indicate in your answer why you think that an entry is not required and justified against the Conceptual Framework and/or accounting standards.