Accounting for Business…………………………………

QUESTION 1 – Financial Reporting Anne Ohner is the owner of a business. The following trial balance has been prepared at year’s end. A BUSINESS – TRIAL BALANCE AS AT 30 JUNE 2017 Debit ($) Credit ($) Cash 6 000 Accounts Receivable 13 000 Inventory (1 July 2016) 43 000 Prepaid Rent 1 500 Motor Vehicle 10 350 Building 132 000 Accumulated Depreciation – Building 25 200 Equipment 36 000 Accumulated Depreciation – Equipment 1 500 Accounts Payable 32 250 A Ohner, Capital (1 July 2015) 193 350 A Ohner, Drawings 12 800 Sales Income 207 800 Sales Returns & Allowances 2 250 Discount Allowed 400 Purchases 140 200 Discount Received 900 Salaries Expense Supplies Expense 21 200 800 Freight Inwards 2 150 Freight Outwards 1 180 Sales Staff Wages Expense 24 000 Local Government Rates Expense 820 Insurance Expense 3 000 Advertising Expense 3 750 Rent Expense 6 600 . . $461 000 $461 000 3 The following additional information is also provided: (i) $1,300 of the recorded sales represent payments made by customers in June, for goods which will not be delivered to the customers until August 2017. (ii) It is estimated that 1.5% of the 30 June 2017 balance of Accounts Receivable will be never be collected from the customers. (iii) Both the Building and Equipment are expected to be used evenly over their useful lives. The expected total useful lives and residual values of both assets is as follows: Estimated Useful life Estimated Residual Motor Vehicle 4 years 250 Equipment 5 years $5 000 Building 30 years – (iv) The firm’s insurance costs $200 per month. The last insurance payment made was for cash for 4 months commencing 1 June 2017. (v) General Wages owing but not paid as at balance day equals $530. (vi) The rent was paid on 30 June 2017 and was shop rent for the three months ending 30 September 2017. (vii) Upon receipt of the business’s bank statement, Harry realised that the business had earned $90 interest on 30 June 2017. This amount was placed directly into the bank account so the amount has not yet been recorded by the business. (viii) A physical stock take of inventory at 30 June 2017 revealed $46 250 on hand.

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