Assignment -
You have been appointed as an accountant at Betty Financial Services. On your first day as the new accounted your boss has already given you two tasks to be performed. The following task has been assigned and explained to you:
Task -
You have been given the Pre-Adjusted Trail Balance as well as some additional information that you need to take in to account when preparing the financial statements.
The client has also requested that you show exactly how you have determined your final balances that will be disclosed in the financial statements.
(TIP: Make use of the Worksheet Tool)
The client's business is called Peter Pan Costumes (Pty) Ltd. The business buy and sell costumes to customers and also rents out costumes to customers.
Peter Pan is the owner and he started the business on the 1st of January 2016.
The business buy and sells party costumes as well as renting costumes to customers. Peter took out a mortgage loan from Avias Bank to buy the building from which the business operates. He also bought a delivery truck to deliver costumes to clients and some costumes that will be used for hiring. The business and will repay the loan over 5 years.
Peter Pan Costumes (Pty) Ltd Pre-Adjusted Trail Balance For the year ended 31 December 2010
|
Account title
|
Trial Balance
|
|
Dr
|
Cr
|
|
Building
|
106 000
|
|
|
Delivery Truck
|
49 000
|
|
|
Costumes
|
75 000
|
|
|
|
Cash
|
14 500
|
|
|
Accounts Receivable
|
23 600
|
|
|
Accounts Payable
|
|
10400
|
|
Inventory - Costumes
|
6 500
|
|
|
|
Unearned Costume revenue
|
|
5000
|
|
Mortgage Payable
|
|
100 000
|
|
Capital ; Peter Pan
|
|
120 000
|
|
Drawing; Peter Pan
|
34100
|
|
|
|
Costume revenue - Costume Hire
|
|
75 000
|
|
Costume Revenue - Costume Sales
|
|
20 000
|
|
Cost of Sales
|
8000
|
|
|
Salaries
|
2800
|
|
|
Cleaning
|
3000
|
|
|
Accounting fees
|
1800
|
|
|
Insurance
|
1250
|
|
|
Interest expense
|
2100
|
|
|
Marketing
|
2750
|
|
|
330,400
|
330,400
|
Additional information:
1. The assets of the business are depreciated as follows:
a. Buildings - 10 year; straight line method (was bought 1 January 2016
b. Delivery Truck - 5 years; straight line method (was bought 1 June 2016)
c. Costumes - 2 years; straight line method (1 February 2016)
No depreciation was accounted for by the business.
2. On the 1st of October 2016 the business received cash in advance for $5000 for costumes sold but the income was not earned yet. The costumes were only delivered to the client on the 28th of December 2016. No adjustment has been made at year end.
3. Interest paid on the mortgage bond was not yet paid at the end of the year. Interest is calculated at 15% per year.
4. The business made a pre-payment for insurance of $1 250. This was to cover the insurance for the period 1 September 2016 - 31 August 2017. No correction was done at the end of the year.
5. On the 31st of December 2016, one of the customers, brought back costumes to the value of $1700 that were damaged beyond repair. The costumes were originally sold on credit to the customer. The cost value was $800.