Now that you have completed the June bank reconciliation process, you are asked to complete the worksheet for Hi-Fi Way.
The worksheet is an internal document that exists outside the journals and ledgers. It is often used in the manual accounting system to help record adjusting entries and prepare financial statements. After you have prepared the worksheet, in the next section of the practice set you will be asked to use the completed worksheet to help journalize and post adjusting entries to general ledger. You will also use this worksheet to assist you in preparing the financial statements for Hi-Fi Way in a later section of this practice set.
The details of the end of month adjustments for June are as follows:
Office Furniture owned by the business: original purchase price was $8,000, estimated useful life was 4 years, and estimated residual value was $1,500 at the end of the useful life. Depreciation is calculated on a monthly basis using the straight line method. The monthly depreciation charge is calculated as the yearly depreciation expense divided by the number of months in a year.
Office Equipment owned by the business: original purchase price was $49,000, estimated useful life was 11 years, and estimated residual value was $5,500 at the end of the useful life. Depreciation is calculated on a monthly basis using the straight line method. The monthly depreciation charge is calculated as the yearly depreciation expense divided by the number of months in a year.
The water usage for the month of June is estimated to be $120.
The estimated electricity payable as at the end of June is $282.
Sales staff work every single day during the week including weekends and are paid on a weekly basis. Wages were last paid up to and including 24 June. Wages incurred after that day (from June 25 to June 30 inclusive) are estimated to have been $1,890 per day.
Interest expense incurred during the month of June but not yet paid to ZNZ Bank for the bank loan is $265.
Office supplies totaling $1,944 are still on hand at June 30.
One month of prepaid rent expired during June. Remember that at the beginning of June, the business paid two month's worth of rent in advance.
3 months of advertising remained pre-paid at the start of June.
5 months of insurance remained pre-paid at the start of June.
When calculating the portion of prepayments that expire during the month of June, you are asked to assume that an equal amount of expense is incurred per month.
After taking a physical count of inventory at the end of the month, the balance of inventory on hand as at June 30 is found to be equal to the closing balance of the Merchandise Inventory account. This means there is no adjusting entry required for inventory shrinkage.