policy for the owner to replace

29 Jun policy for the owner to replace

Question
ACG12 Financial Accounting I – Assignment 1, SP4 2013

DETAILS OF ASSESSMENT

Assignment 1 – Due 29th December 2013 (11:00pm Adelaide time)

Compu-sell Enterprises are preparing their financial reports for the year ending 30th June

2013. Compu-sell specialises in selling new and used computers. The owner of Compu-sell

has prepared the financial reports himself. Unfortunately, the owner has not studied

accounting and believes he made a number of mistakes when preparing the end of year

financial reports. He has asked you for assistance in preparing the financial reports. You are

given all of the information used to prepare the financial reports for the year ending 30th

June 2013. The owner was not sure about adjusting entries and wants you to make sure they

have all been recorded correctly. He would like you to process any adjustments that are

deemed necessary. During your investigation you have identified the following issues

which may require further action:

(a) The telephone bill for the shop was still owing for the month ending 30th June

2013. The bill was received in the mail on the 21st of June but because everyone

was so busy, the bill was not paid or recorded in the financial reports for the year

ending 30th June. The amount shown on the bill was $315.

(b) All non-current assets purchased by the business are depreciated using straight

line depreciation as this is the only method the owner of Compu-sell has learnt.

(Show your depreciation journal entries in (b)).

(c) Allowance for doubtful debts has not been recorded for the year ending 30th June

2013. Credit sales for the year ending 30th June 2012 were $360,000 and

$410,000 for the year ending 3oth June 2013. The allowance for bad debts is

estimated as 2% of credit sales. Credit sales make up 70% of total sales.

(d) During the year, the owner took home some office supplies (which had

previously been recorded in the books as a current asset) for personal use (worth

$800). The owner recorded a debit to the “Miscellaneous Expenses” account and

a credit to “Drawings”.

(e) Office furniture was purchased by the business for $8,200 cash on the 1st of

March 2013. You have checked and the purchase was recorded correctly. It is

policy for the owner to replace office furniture every 3 years and give the old

furniture away to charity for free at the end of its useful life of three years. The

owner has not recorded anything else relating to this non-current asset for the year

ending 30th June 2013.

ACG12 Financial Accounting I – Assignment 1, SP4 2013

(f) Compu-sell received $2,000 cash from a customer on the 15th of June 2012 as

part payment for a sale of a computer which the customer purchased from

Compu-sell and was recorded as a debit to Cash at Bank and a credit to Unearned

Income. The total sale price was $3,500 and the computer was delivered to the

customer on the 4th of July 2012. The customer paid the balance owing once the

computer was delivered. A review of the records shows that the payment by the

customer of $1,500 was not recorded. The $2,000 was also still showing as

unearned income of $2,000 in the trial balance as at 30th June 2013.

(g) Rent for the office (where the administrative staff work) for 6 months covering

March – August was paid on the 1st of March 2013. The amount paid was $5,100.

The only reference to this payment is a Rent Expense account showing $5,100”

(you can assume the cash was correctly credited for $5,100). No other entries can