Assessment Description-
A comprehensive accounting exercise designed to integrate your knowledge of accounting systems and the accounting cycle.
Group Assignment Scenario:
Psyche Books Ltd is a bookshop specialising in psychology textbooks. Psyche Books has the following balance sheet as at 30 September 2012:
|
Account name
|
Account no.
|
|
$
|
|
Assets
|
|
|
|
|
Current assets
|
|
|
|
|
Cash
|
1010
|
|
106 000
|
|
Accounts receivable
|
1020
|
|
147 000
|
|
Allowance for doubtful debts
|
1030
|
|
(14 400)
|
|
Inventory
|
1040
|
|
251 000
|
|
Prepaid insurance
|
1050
|
|
12 000
|
|
Prepaid rent
|
1060
|
|
45 000
|
|
Noncurrent assets
|
|
|
|
|
Buildings
|
1100
|
1 400 000
|
|
|
Accumulated depreciation - buildings
|
1105
|
(175 000)
|
1 225 000
|
|
Motor vehicle
|
1200
|
45 000
|
|
|
Accumulated depreciation - motor vehicle
|
1205
|
(9 000)
|
16 000
|
|
Total assets
|
|
|
1 807 600
|
|
Liabilities
|
|
|
|
|
Current liabilities
|
|
|
|
|
Accounts payable
|
2010
|
|
94 000
|
|
Interest payable
|
2020
|
|
48 000
|
|
Income tax payable
|
2030
|
|
47 000
|
|
Salaries payable
|
2040
|
|
25 000
|
|
Provision for employee entitlements
|
2050
|
|
14 000
|
|
Accrued expenses
|
2060
|
|
12 400
|
Additional information:
1. Psyche Books uses perpetual inventory systems and all its textbooks are sold at a 30 per cent mark- up.
2. Buildings are depreciated at 2.5 per cent p.a.
3. Motor vehicle has a useful life of 10 years and is depreciated using straight-line method.
Psyche Books uses the following chart of accounts:
Psyche Books uses the following chart of accounts:
|
Account name
|
Account no.
|
Account name
|
Account no.
|
|
Cash
|
1010
|
Share capital
|
3010
|
|
Accounts receivable
|
1020
|
Retained earnings
|
3020
|
|
Allowance for doubtful debts
|
1030
|
Sales
|
4000
|
|
Inventory
|
1040
|
COGS
|
5010
|
|
Prepaid insurance
|
1050
|
Interest expense
|
5020
|
|
Prepaid rent
|
1060
|
Income tax expense
|
5030
|
|
Prepaid advertising
|
1070
|
Salaries expense
|
5040
|
|
Buildings
|
1100
|
|
|
|
Accumulated depreciation - buildings
|
1105
|
Sundry expenses
|
5060
|
|
Motor vehicle
|
1200
|
|
|
|
Accumulated depreciation - motor vehicle
|
1205
|
Advertising expense
|
5070
|
|
Accounts payable
|
2010
|
Insurance expense
|
5080
|
|
Interest payable
|
2020
|
Rent expense
|
5090
|
|
Income tax payable
|
2030
|
Bad debts expense
|
5100
|
|
Salaries payable
|
2040
|
Inventory devaluation expense
|
5110
|
|
Provision for employee entitlements
|
2050
|
Depreciation expense -buildings
|
5120
|
|
Accrued expenses
|
2060
|
Depreciation expense -motor vehicle
|
5130
|
|
Bank loan
|
2100
|
Profit and loss summary
|
6000
|
|
The following events took place in October 2012:
|
|
01/10/12
|
Paid salaries.
|
|
03/10/12
|
Paid accrued expenses in full
|
|
06/10/12
|
Credit sales $78650.
|
|
07/10/12
|
Cash sales for the week amounted to $17849.
|
|
08/10/12
|
Paid interest on bank loan. as well as $12000 cowards the principal.
|
|
11/10/12
|
Paid $2000 for an advertisement in a local newspaper. The advertisement Is going to be published every Saturday for 8 weeks, starting on 13/10/12.
|
|
12/10112
|
Received $109456 from debtors.
|
|
14/10/12
|
Cash sales for the week amounted to $9815.
|
|
15/10/12
|
Paid $86 250 to creditors.
|
|
16/10112
|
Ordered $117 920 worth of inventory.
|
|
18/10/12
|
Credit sales $104546.
|
|
21/10712
|
Received the order placed on 16/10/12. Cash sales for the week amounted to $1534.
|
|
25/10 12
|
Accounts receivable of $14 230 were established to be uncollectable and were written off.
|
|
28/10/12
|
Paid income cite to ATO in full. Cash sales for the week amounted to $819.
|
|
29/10112
|
Received 86 000 from debtors
|
|
30/10/12
|
One of Psyche Books' employees decided to take his annual leave: he was paid $5500.
|
At the end of the month the following events occurred:
1. Some of the stock of Psyche Books' was recorded at $5000 but was established to have a net realisable value of $200.
2. Interest on bank loan accrued at the end of the month is $46000.
3. Depreciation was charged to the buildings and motor vehicle at the end of the month.
4. Monthly rent for Psyche Books' head office was $5000 and is payable on the first of every month in advance.
5. Prepaid insurance was originally for two years, purchased on 1 January 2012.
6. The company policy is to keep allowance for doubtful debts at the end of the month equal 3 per cent of total credit sales for the month.
7. Owed salaries at the end of the month: $22500.
8. Electricity charges for the month are estimated to be $2760; phone charges for the month are estimated to be $8900.
Assignment Requirements:
Required:
1. Prepare journal entries for the above transactions.
2. Create ledgers (T accounts) for all accounts as per chart of accounts
3. Enter the opening balances in the ledger accounts and post the journal entries to the ledger.
4. Prepare and post the adjusting entries.
5. Prepare pre-closing trial balance at 31 October 2012.
6. Prepare closing entries.
7. Prepare post-closing trial balance.
8. Prepare an income statement for the month of October 2012 and
9. Prepare a balance sheet as at 31 October 2012.
10. Prepare reversing entries.