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FINANCIAL ACCOUNTING PRACTICE

Posted by:Prof. Lexx Posted on:May 30,2016
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Eric Chan operates cleaning and gardening business. Mr. Eric contributed $500,000 on 1 June 2015 into his business. The following transactions occurred in the month of June. Ignore GST.

June      1              Eric purchased a car for the business for a total cost of $60,000. The useful life was expected to be 12 years with a residual value of $3,000. Insurance for the car was also purchased for $12,000 p.a.

1              Eric signed a lease agreement to lease a suitable storage shed for a monthly rental of $12,000. Rent for 4 months was paid in advance. He also hired an assistant to help him with cleaning and lawn mowing tasks.

2              The business purchased equipment for a total cost of $180,250. A deposit of $40,000 was paid immediately and the balance was to be paid in 30 days. The equipment was expected to have a useful life of 7 years.

3              Purchased washing supplies for $4,800 cash. Purchased fuel and oil supplies for cash $7,900.

4              Signed a contract with Gulshan Advertiser Newspaper for 12 weeks of advertisements in its weekly newspaper. The business paid $9,600 in advance for these advertisements.

6              Received cash of $800 and $13,500 from clients for cleaning and law mowing services respectively.

8              Signed a contract with a new client to provide cleaning services for a monthly fee of $20,000. The client paid for 3 months’ service in advance.

13           Received cash of $14,000 for lawn mowing services provided to clients during the past week.

14           Paid the assistant wages of $8,200 for services provided to the business during the past fortnight.

21           Earned $7,300 for cleaning services from clients and $12,700 for lawn mowing during the past week. All money was received in cash except for one client for cleaning services, who arranged to pay the business $3,000 in 3 weeks’ time for service rendered.

28           Received in cash the sum of $8,000 for cleaning services provided to clients and $11,500 for lawn mowing and gardening services provided during the past week.

29           Paid the assistant $7,600 for services provided to the business during the past fortnight.

30           Eric withdrew $20,000 in cash from the business in order to pay for essential provisions for his family.

Additional information to consider:

  1. Cleaning services of $2,500 had been rendered to clients on 29 June but the invoice to bill these clients had not been prepared.
  2. Four weeks of advertisements had appeared in the newspaper up to 30 June.
  3. The business had provided cleaning services to its new client for 3 weeks of the first month (assumed to be 4 weeks long).
  4. A physical count showed that only $1,200 of washing supplies and $3,400 of fuel and oil supplies were still on hand.
  5. Wages owing to the assistant on 30 June amounted to $2,800.

Required:

                               

  1. Prepare journal entries to record the June 2015 transactions for the business and post these journal entries to suitable T accounts.

Marks 6

  1. Prepare an unadjusted trial balance as at 30 June 2015 Marks 2
  2. Prepare a 10-column work sheet for the month ended 30 June 2015 considering all additional information and any other adjustments necessary. Marks 6
  3. Prepare the income statement, the statement of changes in equity and the balance sheet as at 30 June 2015. Marks 4
  4. Prepare closing entry and the suitable reversing entry Marks 3
  5. Comment on the financial position of the business based on your prepared financial statements.                                                                         Marks 4
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Prof. Lexx

Overview I have a Bachelor of Arts, majoring in English and minoring in History. I have worked in various fields ranging from academic research to freelance translating to editing to customer support and data entry. These include editing my old university's newspaper as well as co-leading their creative writing team; serving as a junior member in the history department's research network; publishing music and film reviews for several different magazines and webzines; and translating papers and books for numerous researchers in various languages, including Russian, Spanish, and Romanian. I am also a skilled typist, with a rate of at least 70 words per minute, and have myself digitized dozens of books and essays for both private and commercial use. I have a very strong work ethic, and make sure to prioritize the task I am given so that it is completed as quickly as possible. I am organized and disciplined, ensuring a job done professionally and efficiently.

    I have a background of 8 years in writing profession and currently pursuing also as an editor and proofreader. I have a knack for writing and thus, it was obvious to enhance my skills and serve others. Currently joined ‘Member of Association of Professional Writers and Editors’ a

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    USA