Reference no: EM133475034
Case: The following transactions took place during January 2018:
- The business borrowed $4 800 from Darby's sister. The loan is to be repaid in three year's time but interest at 5% per annum has to be paid (in arrears) each six months, starting on 1 July 2018.
- Paid an insurance premium of $1 200 that will cover the business until 30 June 2018.
3 Received payment for accounts receivable $6 000.
6 Purchased hats on credit $12 000.
8 Credit sales of hats $14 000 (these hats had cost $9 000).
12 Paid wages of $1 400.
15 Cash sales of hats $5 000 (these hats had cost $3 000).
16 Paid the local newspaper for the advertisements that appeared in December 2017 and for some others which appeared in January 2018, total payment being $1 200.
20 Paid accounts payable $7 800.
25 Wrote off an account receivable to the value of $500 because it was accepted that the amount was never going to be paid.
26 Purchased shop supplies on credit $200 and paid wages of $1 400.
27 Received $600 from a customer for hats that are not going to be supplied until March.
31 Wages for work done in January but not yet paid amounted to $300. Shop supplies on hand at the end of January amounted to $100.
Question 1. Prepare general ledger and also record all the accrual accounting adjustments that are necessary to determine profit for the month. (Hint - you will need six adjustments including the two mentioned on 31 January.)
Question 2. Prepare an income statement, cash flow statement and balance sheet at 31 January 2018.