QUESTION 1: General Journal, General Ledger, Trial Balance
Paul is the sole proprietor of Auldana Custom Concrete Foundations (ACCF), a specialist construction company. The following is a list of transactions that took place during the month of May 2016.
May 1 - The business purchased additional equipment costing $22,400 by increasing the loan with the bank.
May 5 - The construction of a housefoundation was completed and the client was invoiced. The client paid $8,500 in cash and agreed to pay the remaining $33,500 over the following ten months.
May 10 - Paul withdrew $1,200 cash for personal use.
May 15 - An Advertising Bill for $1,680 was paid for in cash.
May 17 - Paul hurt his wrist at work and visited his local Doctor. The consultation cost $65, which he paid for using his own credit card.
May 23 - The business paid $750 off the loan owed for the purchase of equipment on May 1.
May 29 - The business received $3,350 from the debtor relating to the transaction on May 5.
REQUIRED:
a. Prepare the General Journal entries were required to record each transaction. Include a narration (explanation) for each journal entry.
b. Post the journals from (a) above to the General Ledgers provided, ensuring a balance for each ledger is included.
c. Complete the attached Adjusted Trial Balance provided for the account balances calculated in the General Ledger from (b) above.
QUESTION 2: Balance Day Adjustments
This is not a typo. Q1 was included in Part A of the assignment, which now continues in Q2.
Below is the unadjusted Trial Balance for Auldana Custom Concrete Foundations as at 30th June 2016.
NOTE: Please use this trial balance to complete the question (NOT the trial balance you completed in Part Aof the assignment).
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AULDANA CUSTOM CONCRETE FOUNDATIONS UNADJUSTED TRIAL BALANCE AS AT 30 June 2016
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Debit ($)
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Credit ($)
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Cash at Bank
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14037
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Accounts Receivable
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47046
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Inventory
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140400
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Prepaid Insurance
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4914
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Office Supplies on hand
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3 276
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Furniture & Fittings
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21030
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Accumulated Depreciation - Furniture &Fittings
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11 934
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Equipment
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69200
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Accumulated Depreciation - Equipment
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18720
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Accounts Payable
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27027
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Loan Payable
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120275
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Paul's ACCF - Capital
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54972
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Paul's ACCF - Drawings
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29280
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Sales Revenue
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706800
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Sales Returns and Allowances
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9924
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Cost of Sales
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412308
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Discount received
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12957
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Freight inwards
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9360
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Sales Salary Expense
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68328
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Delivery Expense
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18252
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Advertising Expense
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28590
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Rent Expense
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28 548
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Office Salaries Expense
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33750
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Electricity Expense
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7656
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Discount Allowed
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6 786
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Totals
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952685
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952685
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On the next page is Paul's information related to the year that ended 30 June 2016.
(1) A count of the stationery room showed that Office Supplies on hand at 30th June 2016 were $2 793.
(2) Both the Furniture & Fittings and the Equipment will be used evenly over their useful lives. The expected total useful lives and residual values of both assets is as follows:
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Estimated Useful life
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Estimated Residual
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Furniture & Fittings
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8 years
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$1030
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Equipment
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10 years
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$0
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(3) In order to allow for cash flow fluctuations, the bank has approved a $15,000 overdraft facility for Paul's business bank account.
(4) Office Salaries which are payable but not recorded as at 30th June are $1 125.
(5) The balance in the Prepaid Insurance account represents a 12 month insurance policy that commenced on 1st March 2016.
(6) $6500 of the recorded Sales Revenue is for deposits made for foundations which will not be installed until July/August 2016.
(7) As of 30th June 2016, Paul has estimated that3% of his Accounts Receivable will not be collected.
REQUIRED: As it is now the end of the financial year, you have to undertake the following work for Paul:
a. Prepare any necessary Balance Day Adjustment Journals for ACCF. Include a brief narration (explanation) for each journal entry.
b. Post the journals from (a) above to the General Ledgers provided.
c. Complete the Adjusted Trial Balance provided for the account balances calculated in the General Ledgers from (b) above.
QUESTION 3: Financial Statement
The following Trial Balance for Paul's Recycled Books has been prepared at year end by Paul, but he realises it is not in the correct order.
REQUIRED: Using the Trial Balance provided below, prepare the following for the period in question:
1. Fully classified Balance Sheet
2. Statement of Changes in Equity
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Paul's Recycled Books TRIAL BALANCE AS AT 30 JUNE 2016
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Debit ($)
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Credit ($)
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Shop Furniture & Fittings
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24375
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Accounts Receivable
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45 066
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Accumulated Depreciation - Shop Furniture & Fittings
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8395
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Rent Expense - Admin
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3 650
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Cash at Bank
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47 753
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Advertising Payable
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3 901
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Sales
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545 385
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Electricity Expense
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1 443
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COGS
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386 210
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Negan, Capital
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43 810
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Depreciation Expense - Shop Furniture & Fittings
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3 550
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Freight Inwards
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2 945
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Rent Expense - Store
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25 225
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Accounts Payable
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14995
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Discount Allowed
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3 580
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Inventory
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20 335
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Salaries Expense - Store
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33 400
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Loan Payable
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32400
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Allowance for Doubtful Debts
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1 000
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Prepaid Advertising
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1 470
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Interest Payable
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550
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Advertising Expense
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635
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Sales Equipment
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14 500
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Interest Expense
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395
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Doubtful Debts Expense
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1 000
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Paul, Drawings
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17600
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Sales Returns & Allowances
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6705
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Discount Received
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3 026
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Salaries Expense - Admin
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13 725
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Totals
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653562
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653562
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The loan is payable in equal amounts over 36 months.
QUESTION 4: Accounting Concepts
You are employed as a graduate accountant in a mid-tier accounting firm. One of the partners has asked you to review the following cases where a client has violated at least one of the assumptions, concepts or definitions you studied at university. The partner has asked for a written report in your own words (using references where appropriate), to please explain:
a) Which concept or assumption has been violated, and;
b) What the correct treatment should be.
i. The owner of a farming property argued that the value of a public road running past his land should be included among the farm's assets. He felt this was right because the road made it quicker and easier for him to transport his products. "This means that the road is an asset to the farm," he said.
ii. Jayne, an owner of a children's party business took party supplies home for her own personal use. She recorded this as a debit to Supplies Expense and credit to Supplies in the business's books.
QUESTION 5: Cash Flow Statement
Below are the summarised cash flow statements for two businesses. Comment in your own words using referencing where appropriate on which one has a healthier cash flow situation and justify your answer by explaining the significance of each of the three types of cash flows for each business:
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Cheap as Smith's
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Sniggles
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Cash flow from Operating Activities
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(12500)
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11800
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Cash flow from Investing Activities
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18500
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(6 200)
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Cash flow from Financing Activities
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(3500)
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(6800)
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Net increase / (decrease) in cash held
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2 500
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(1 200)
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Cash at the beginning of the year
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3900
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7 300
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Cash at the end of the year
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6 400
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6 100
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Attachment:- Assignment Files.rar