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ACG12 Financial Accounting I ? Assignment 1, SP4 2013




Question;ACG12 Financial Accounting I ? Assignment 1, SP4 2013DETAILS OF ASSESSMENTAssignment 1 ? Due 29th December 2013 (11:00pm Adelaide time)Compu-sell Enterprises are preparing their financial reports for the year ending 30th June2013. Compu-sell specialises in selling new and used computers. The owner of Compu-sellhas prepared the financial reports himself. Unfortunately, the owner has not studiedaccounting and believes he made a number of mistakes when preparing the end of yearfinancial reports. He has asked you for assistance in preparing the financial reports. You aregiven all of the information used to prepare the financial reports for the year ending 30thJune 2013. The owner was not sure about adjusting entries and wants you to make sure theyhave all been recorded correctly. He would like you to process any adjustments that aredeemed necessary. During your investigation you have identified the following issueswhich may require further action:(a) The telephone bill for the shop was still owing for the month ending 30th June2013. The bill was received in the mail on the 21st of June but because everyonewas so busy, the bill was not paid or recorded in the financial reports for the yearending 30th June. The amount shown on the bill was $315.(b) All non-current assets purchased by the business are depreciated using straightline 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 June2013. 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 isestimated 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 hadpreviously been recorded in the books as a current asset) for personal use (worth$800). The owner recorded a debit to the ?Miscellaneous Expenses? account anda credit to ?Drawings?.(e) Office furniture was purchased by the business for $8,200 cash on the 1st ofMarch 2013. You have checked and the purchase was recorded correctly. It ispolicy for the owner to replace office furniture every 3 years and give the oldfurniture away to charity for free at the end of its useful life of three years. Theowner has not recorded anything else relating to this non-current asset for the yearending 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 aspart payment for a sale of a computer which the customer purchased fromCompu-sell and was recorded as a debit to Cash at Bank and a credit to UnearnedIncome. The total sale price was $3,500 and the computer was delivered to thecustomer on the 4th of July 2012. The customer paid the balance owing once thecomputer was delivered. A review of the records shows that the payment by thecustomer of $1,500 was not recorded. The $2,000 was also still showing asunearned 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 coveringMarch ? 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 canbe found associated with this rental payment at the 30th of June 2013.(h) The records show that on the 1st of February 2013, the owner purchased a newmicrowave oven for the staff to use in the staffroom. He purchased the microwavefrom his own personal bank account and gave the microwave to the business. Themicrowave will be used evenly for the remainder of its useful life (another 6years). He recorded the contribution of the microwave to the business by theowner as a debit to ?Miscellaneous Income? and a credit to ?Capital?. Themicrowave was valued at $1,200. Nothing else has been recorded in relation tothis microwave in the year ending 30th June 2013.(i) Staff employed by Compu-sell are paid using commission. Commission iscalculated as 8% of sales and is recorded at the end of the financial year (that is,on the 30th of June). The owner has forgotten to record the commission on salesfor the year ending 30th June 2013.(j) The monthly bank statement for the month of June shows that interest earned andreceived on the bank account was $120 for the month of June. The bank statementalso indicates that bank fees paid for June were $85. Neither of these items hasbeen recorded by the owner of Compu-sell. The bank statement also shows that acustomer used direct deposit to pay for the amount owing for a credit sale madeby Compu-sell on the 10th of June 2013 (You can assume that the sale wasrecorded correctly). The amount paid by the customer was $1,900 and was paidusing an electronic transfer by the customer directly into the bank account ofCompu-sell. Compu-sell has only just found out about receiving the cash whenthey received the bank statement.(k) Compu-sell hired a part time accountant at the beginning of June 2013. Theaccountant is being paid $2,000 per month. No entry has been processed for thesalary of the accountant for June ? the accountant was paid on the 30th of June2013.Continued over the page?ACG12 Financial Accounting I ? Assignment 1, SP4 2013(l) Rent for the shop (where the business operates and generates income) for 6months covering April ? September was paid on the 1st of April 2013. Theamount paid was $9,600. A debit to ?Prepaid Rent? and a credit to ?Cash atBank? was recorded on the 1st of April 2013. On the 30th of June the owner ofCompu-sell found a new shop in a very popular shopping complex which wasoffering a long term rental contract at a better price. Therefore, an agreement wassigned for the new shop to be rented for the 12 months from the 1st of July 2013until the 30th of June 2014 ? payment was made on the 30th of June 2013 for 12months. The inventory was moved out of the old shop on the 28th of June 2013and the old shop would no longer be used for anything from the 1st of July ? 30thof September. The old shop was left empty for the remainder of the life of therental agreement (ie July ? September 2013) and the shop would no longer beused to help contribute any future income to the business. The new shop wasrented for $900 per month and nothing had been recorded yet for the payment ofthe rent for the new shop.(m) Compu-sell uses a periodic inventory system to record inventory. The accountingrecords indicate that opening inventory for the year ending 30th June 2013 was$80,900. A physical stocktake on the 30th June 2013 indicated that inventory onhand was $80,100. The owner did not make any changes to the financial reportsbecause he was unsure what to do. He has made a note in the financial reports toask you whether he needs to account for the discrepancy between the inventoryfigures.(n) ?Office supplies? used during the year amounted to $1,030. The only reference toOffice Supplies in the trial balance at the 30th of June is the ?Office Supplies?account which has a balance of $1,340.(o) Compu-sell paid $1,200 for advertising on the local radio on the 1st of June 2013.The advertising will occur on the 1st Tuesday of each month for June ? August2013. The amount paid was recorded as a debit to ?Advertising Expense? and acredit to ?Cash at Bank? for $1,200 on the 1st of June.(p) Office furniture (a chair) was purchased by the business on the 30th of June 2013.The value of the purchase was $100 cash. The $100 has been recorded as a debitto the ?General Expense? account and a credit to ?Cash at Bank? because theowner thought the amount was too small to record it as an asset. You have beenasked by the owner to provide a brief explanation as to why it is/is not appropriateto record the $100 as a General Expense. You are encouraged to look at yournotes from ACG11 Accounting for Business in relation to the ConceptualFramework, to answer this question.Continued over the page?ACG12 Financial Accounting I ? Assignment 1, SP4 2013(q) Unless otherwise stated, depreciation has already been recorded for all noncurrentassets and you have checked the records and are satisfied that thecalculations for depreciation for the non-current assets are correct.Additional Notes:? For the purposes of this assignment you are not required to account forGST? No narrations are required for the General Journal Entries? If you believe that no entry is required for any of the items shownabove, please write ?No entry required? as your answer? If in your opinion, no entry is required for any of the items above,please provide a brief explanation using your knowledge of theconceptual framework (eg definitions, recognition criteria,assumptions etc)? No entries should be dated earlier than 30th of June. All of yourentries are occurring on balance date ? if you think something shouldhave been recorded at an earlier date and it hasn?t been recorded,the date you should use is still the 30th of June.REQUIREDPrepare the general journal entries to make (if) necessary,adjustments/corrections for the information presented to you above.HINT: If you believe an entry is not required (that is, the information has beenrecorded correctly), please indicate in your answer why you think that an entryis not required. You are encouraged to refer to your assumed knowledge fromACG11 and the Conceptual Framework wherever possible.Total Marks for Assignment ? 50 MarksIMPORTANT: STUDENTS ARE ENCOURAGED TO READ THROUGHALL OF THE INFORMATION IN THE QUESTION ABOVE FIRSTBEFORE ANSWERING THE REQUIREMENTS OF THE QUESTION.


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