Assessment Task: Financial Accounting

Trimester: T1 2018

Company Name: Abcde Pty Ltd

The company began operations as a retailer on 1 July in the current financial year. It buys and sells one inventory item, derrings, from a leased warehouse in the outer suburbs of Melbourne.

The company is registered for GST, which it pays quarterly. Assume GST was last paid on 30 June.

It uses the Moving Weighted Average method and the perpetual inventory recording method.

The company uses the straight line depreciation method for office furniture and computers and the reducing balance method for motor vehicles.

The company employs two people who are rostered over a seven day working week. The employees are paid fortnightly up to and including the day of payment. There are no penalty wages.

The company has one debtor (Debtor1) and one creditor (Creditor1). Terms for all credit sales and purchases are 30 days.

Relevant information: 1. The company has the following opening balances as at the 1st of July in the current financial year:

Cash at Bank: $24,075.00

Accounts receivable: $3,504.00

Allowance for doubtful debt: $326.00

Inventory: $11,220.00

Motor vehicle: $22,653.00

Accumulated depreciation motor vehicle: $2,247.00

Accounts payable: $4,094.00

Bank loan owing (due in 20 months): $11,243.00

Telephone payable: $165.00

Office furniture: $11,330.00

Accumulated depreciation office furniture: $1,372.00

Office supplies: $549.00

Share capital: $32,734.00

Retained earnings: balance amount $21,150.00

2. Transactions for the month (all dollar amounts include GST where applicable):

2 July Sales on credit 78 units

05 July Sales on credit 74 units

11 July Sales on credit 67 units

18 July Sales on credit 79 units

22 July Sales on credit 66 units

29 July Sales on credit 71 units

06 July Customer returned 1 unit(s) in excellent condition for a full refund from the sale on 05 July

15 July Paid wages (ignore PAYG tax) $1,853.00

29 July Paid wages (ignore PAYG tax) $2,068.00

19 July Paid rent for the current month $2,727.00

25 July Paid insurance $2,660.00

17 July Received advertising invoice (due in 30 days) $500.00

02 July Purchased computer on credit $2,432.00

07 July Purchased inventory on credit 20 units at the cost per unit of $25.00

14 July Purchased inventory on credit 29 units at the cost per unit of $27.00

20 July Purchased inventory on credit 26 units at the cost per unit of $24.00

24 July Purchased inventory on credit 23 units at the cost per unit of $25.00

30 July Purchased inventory on credit 29 units at the cost per unit of $28.00

25 July Abcde returned 1 unit(s) to their supplier for a full refund from the purchase on 24 July

01 July Received payment from accounts receivable $807.00

27 July Received payment from accounts receivable $678.00

30 July Received payment from accounts receivable $713.00

18 July Purchased office supplies on credit $512.00

21 July Paid motor vehicle expenses $100.00

04 July Paid accounts payable $1,359.00

14 July Paid accounts payable $1,432.00

25 July Paid accounts payable $1,446.00

23 July Paid outstanding telephone bill in full

3. Additional information:

Selling Price per unit (GST inclusive) $55.00

Insurance commences from the first of the month in which it is paid, and covers 9 months in total.

All asset purchases and expenses except wages include GST.

Cost of opening inventory items per unit $20.00

Depreciation rate for the motor vehicle is 20%

Residual value of the motor vehicle: $2,527.00

Depreciation rate for the office furniture is 20%

Residual value of the office furniture: $636.00

Regardless of purchase date, company policy is to depreciate new assets for 15 days in the month of purchase. Depreciation rate for the computer is 35%

No residual value is expected for computers.

The company counted inventory at the end of the month. They discovered that 8 units were missing and these must be removed from inventory.
Office supplies on hand at end of the month were $267.00

At the end of the month the company records potential bad debts expense using the percentage of sales method. The business uses 1% of net sales to determine estimated bad debts.

Interest owing on the bank loan at the end of the month is $60.00