ACC106 Accounting Principles

Published : 08-Sep,2021 | Views : 10

Question:

The employer superannuation contribution is additional to the above annual salaries and is 9.5% of the gross salary before any deductions.The amount for the payroll of RTK Mudjimba Mowers is based on a five-day work-week.
Employees are paid fortnightly by electronic transfers. The business operates five (5) days a week from Tuesday to Saturday (inclusive). Staff are paid fortnightly on the Tuesday following the fortnight worked. The previous payday was Tuesday 23 May 2017 and the next pay day will be Tuesday 6 June 2017.

RTK Mudjimba Mowers uses the accrual accounting method for recording transactions and adjustments.
ii. RTK Mudjimba Mowers uses a perpetual inventory system using the average-cost method.
iii. RTK Mudjimba Mowers prepares quarterly Business Activity Statement (BAS) and remits the net GST liability due to the ATO in the month following the end of each quarter (the last quarter was paid in April).
iv. RTK Mudjimba Mowers has the following depreciation policies:
• Equipment: depreciated at the rate of 48.70% per annum using the reducing balance method. (estimated residual value is $2,000 and useful life is 5 years)
• Motor vehicles: depreciated over 4 years using the straight-line method. The estimated residual value of motor vehicles is $9,000.
• Furniture: depreciated over 8 years using the straight-line method. The estimated residual value of furniture is $2,000.
v. RTK Mudjimba Mowers receives a monthly bill in arrears from its electricity supplier.
vi. RTK Mudjimba Mowers estimates provision for bad debts using the Ageing of the Accounts Receivable method to determine the expense to be recorded at the end of the financial year. The rates used are: current month (30 days) at 1%; previous month (60 days) at 5%; everything else (90 days and over) at 15%.

A physical stock-take of office supplies revealed supplies on hand at 30 June totalled $450.
b. Calculate and record the adjusting entry for the Wages Payable that have not yet been paid as at 30 June.
c. The $5,000 balance of Prepaid Insurance as at 1 June is now fully used (expired) and 15 days coverage from the insurance policy paid on 14 June also needs to be expensed.
d. Calculate and record the adjusting entry for rent for the month of June.
e. Sun Radio advertising for the entire month of June was carried out and therefore the amount for one month should now be expensed.
f. Calculate the amount for Provision of Doubtful Debts and make the necessary adjusting journal entry.
g. Calculate the amounts for depreciation expense of each of the three non-current assets and record the necessary adjusting journal entries.
h. Based on the average usage of electricity for the year and the seasonal usage, an amount of $1,145 is estimated for June. The electricity bill for June will be received in early July.

Answer:

RTK Mudjimba Mowers
Income Statement
for the period ended 30-Jun-17
Sales Revenue	$9,78,956.00
Discount Received	$5,773.40
Sales Returns & Allowances	-$2,500.00
Cost of Goods Sold	-$5,89,670.22
Gross Profit	$3,92,559.18
Accounting Fees Expense	$5,000.00
Advertising Expense	$10,182.82
Bad Debts expense	$561.94
Bank Fees Expense	$250.00
Dep - Equipment	$7,244.69
Dep - Furniture	$1,625.00
Dep - Motor Vehicles	$16,700.00
Discount Allowed Expense	$2,086.00
Electricity Expense	$21,292.27
Fuel Expenses	$14,663.00
Insurance Expense	$29,090.91
Office Supplies Expense	$1,650.00
Phone & Internet Expense	$6,500.00
Postage Expense	$4,955.00
Rent Expense	$14,000.00
Wages Expense	$2,29,669.32
Total Expenses	$3,65,470.95
Net Income	$27,088.23
RT Kirk, Capital - Opening Balance	$4,31,635.00
RT Kirk, Drawings	-$85,000.00
Add: Net Income	$27,088.23
RT Kirk, Capital - Closing Balance	$3,73,723.23
Cash at Bank	$2,13,310.47
Accounts Receivable	$60,534.00
Provision for Doubtful Debts	-$1,022.94
Office Supplies	$450.00
Inventory	$88,741.78
Prepaid Insurance	$36,590.91
Prepaid Advertising	$5,681.82
Prepaid Rent	$4,000.00
GST Paid	$27,988.43
Total Current Assets	$4,36,274.47
Equipment	$56,527.00
Accum Dep - Equipment	-$48,895.54
Motor Vehicles	$75,800.00
Accum Dep - Motor Vehicles	-$43,820.00
Furniture	$15,000.00
Accum Dep - Furniture	-$4,425.00
Total Non-Current Assets	$50,186.46
Accounts Payable	$61,670.00
Electricity Payable	$1,145.00
GST Collected	$37,870.07
PAYG Tax Payable	$4,922.78
Medical Fund Payable	$130.29
Employer Super Payable	$2,209.32
Wages Payable	$4,790.25
Total Current Liabilities	$1,12,737.70
Total Liabililties	$1,12,737.70
Net Assets	$3,73,723.23
RT Kirk, Capital	$3,73,723.23
Total Shareholders' Equity	$3,73,723.23