Mira Maz loves decorating and set up her own business a few years ago; Mira's Decorating Touches. The business is registered for GST, and has a 30 September year-end date.
The business is doing very well lately and Mira no longer has time to manage the books. She has approached you as her friend, and chartered accountant, to help her prepare her financial statements. Mira has provided you with her adjusted ledger balance as at 30 September 2012, as follows:
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Account
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Adjusted
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Accounts payable
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$36 036
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Accounts receivable
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102 528
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Accumulated depreciation - delivery equipment
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37 440
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Accumulated depreciation - furniture and fixtures
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21 216
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Advertising expense
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35 880
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Cash at bank
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35 688
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Cost of sales
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549 744
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Delivery equipment
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62 400
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Depreciation expense - delivery equipment
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12 480
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Depreciation expense - furniture and fixtures
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5 304
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Discount allowed
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9 048
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Discount received
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11 232
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Electricity expense
|
13 344
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Freight inwards
|
12 480
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Freight outwards
|
24 336
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Furniture and fixtures
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53 040
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GST Collections
|
94 817
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GST Outlays
|
67 205
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Insurance expense
|
3 744
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Inventory
|
187 200
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Loan payable
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156 000
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Mira Maz, Capital
|
162 552
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Mira Maz, Drawings
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37 440
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Office Supplies expense
|
2 496
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Office Supplies on hand
|
1 872
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Prepaid insurance
|
2 808
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Rent expense
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38 064
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Salaries expense
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140 784
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Salaries payable
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4 680
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Sales revenue
|
961 400
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Sales returns and allowances
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13 232
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Required:
1) Mira is keen to see the balance of her capital account, and asks you to prepare the narrative Balance Sheet as at 30 September 2012.
2) When you review the Balance Sheet, you notice Mira has not accounted for any doubtful debts. You advise her to provide you with an ageing analysis of her debtors. She provides you with the following analysis, but has not completed the last column:
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Accounts Receivable Balance
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% estimated uncollectable
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Estimated bad debts
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Accounts not yet due
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$38 600
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5
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Accounts overdue: 10 - 30 days
|
12 378
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10
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31 - 60 days
|
10 150
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20
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61 - 120 days
|
6 400
|
35
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121 days and over
|
35 000
|
85
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|
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$102 528
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2a) Complete the last column, in the table above, showing all calculations below and round to the two decimal places.
2b) Prepare the journal entry to establish the Allowance for doubtful debts account, in accordance with your calculations in the last column from the table above. Narrationsare not required.
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Date
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Account
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Debit
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Credit
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2c) On inspection of correspondence with debtors, it was determined that amounts due from customers totaling $33 000 must be written-off as uncollectable. Record the journal entry to reflect this. Narrations are not required.
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Date
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Account
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Debit
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Credit
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2d) The following day, Mira rings you to tell you that she received a cheque for $18 700, as payment in full for one of the accounts that had been written off as uncollectable. Record the journal entries to record the transaction. Narrations are not required.