Reference no: EM132212238
FREEFOX PUBLISHING - BACKGROUND
History
Benjamin Franklin is the sole proprietor of Freefox Publishing - a GST-registered business. Its operations are primarily focused on supplying retailers with select titles, publishing independent and local authors, organising and running workshops for prospective authors, and organising book launches. It also provides editorial and marketing services. While editing, layouts and design of the titles are completed in-house, the final drafts of manuscripts are sent to Meta Printing Services for printing. Further, under the firm's contract with Meta Printing Services, printing costs per unit are fixed and reviewed every March and September.
Benjamin prides himself on providing the highest quality customer service. Since its formation, the firm has been relatively profitable. Benjamin now has a full complement of staff looking after the various aspects of operations. Currently, the firm uses a manual accounting system managed by the accountant, Walter Ralegh.
Accounting System
Journals and Ledgers
Walt Ralegh uses the following ledgers, special and general journals in maintaining all the accounting records:
Sales Journal - records all credit sales of inventory.
Purchases Journal - records all credit purchases of inventory.
Cash Receipts Journal - records all cash received by the firm, including cash
sales, cash receipts from debtors and other sundry receipts.
Cash Payments Journal - records all cash payments and cheques issued by the
firm, including cash purchases, cash payments to creditors and other sundry payments.
General Journal - records all transactions that cannot be recorded in
the special journals listed above.
Subsidiary Legers - maintained for accounts receivable and accounts
payable, which are then reconciled against the relevant general ledger accounts.
Schedule of Accounts Receivable as at 1 January 2017
(Refer Excel worksheet tab Information)
Schedule of Accounts Payable as at 1 January 2017
(Refer Excel worksheet tab Information)
Schedule of Inventory as at 1 January 2017
(Refer Excel worksheet tab Information)
Schedule of Inventory Selling Price and Cost
(Refer Excel worksheet tab Information)
Schedule of Employees
(Refer Excel worksheet tab Information)
Chart of Accounts
(Refer Excel worksheet tab Chart of Accounts)
Accounting Policies
i. Freefox Publishing uses the accrual accounting method.
ii. Freefox Publishing uses a perpetual inventory system.
iii Freefox Publishing has the following depreciation policies:
- Buildings: depreciated over twenty years using the straight line method. The cost of buildings is $750,000. The estimated residual value of the buildings is $50,000.
- Furniture and fixtures: depreciated at the rate of 15% per annum using the reducing balance method. No residual value.
- Computer equipment: depreciated at the rate of 30% per annum using the reducing balance method. No residual value.
- Motor vehicles: depreciated over five years using the straight line method. The estimated residual value of motor vehicles is $35,000
iv. Freefox Publishing does not amortise Publishing Rights. The value of these Rights are tested for impairment annually.
v. The amount for the payroll of Freefox Publishing is $5,250 for a five-day work week. Employees are paid on every 2nd and 4th Thursday of each month for days worked via direct debit to employees' bank account. Accruals are raised at month end for days work but not paid.
vi. Freefox Publishing receives monthly bills in arrears from its electricity supplier.
vii. Delivery of goods sold at the customer's expense and provided by a Third party.
viii. Interests on mortgage:
- The loan, secured by a mortgage on the land and buildings, is Interest-only, which is payable on the 8th day of each month at the rate of 6.25% per annum. The bank withdraws the interest from the firm's bank account via direct debit.
ix. All transactions and calculations are to be rounded to the nearest dollar.
FREE FOX BUSINESS TRANSACTIONS - JANUARY
The following information relates to the operation of Freefox Publishing during January 2017.
2 Sold goods for cash:
Donne001 230 units Donne002 280 units
2 Received and paid January to March property rates $10,224 Cheque # 601
2 Received payment in full from Milton Booksellers for goods sold on December 15 - $33,528
3 Signed $35,000 contract with J. Donne to acquire the publishing rights to a series of children's books. Made an advanced payment to Donne - $6,000 cheque # 602)
3 Paid Meta Printing Services account outstanding as at 1 January 2017 in full.
4 Sold goods to Heyrick Book Company on credit (invoice #701). Items sold: Marvell001 282 units Southwell001 99 units Marvell002 144 units
5 Paid royalties to A. Marvell (cheque #604) - $5,000
5 Purchased computer equipment from Godolphin Technology for $12,120, of which $4,500 was paid in cash (cheque #605) and the remainder on credit (invoice #8221)
8 Received and paid electricity invoice for December - $2,375 (cheque #606)
9 Received payment in full for amount outstanding as at 1 January 2017 from Heyrick Book Company.
9 Purchased inventory on credit from Meta Printing Services (invoice #4212). Items purchased:
10
10 Received payment in full from Leigh Books for goods sold on December 13
- $95,000
11 Received advance bookings for tickets to W. Cartwright's book launch on January 25 - $1,200
11 Sent invoice to Crashaw College for organising and running a young writers' workshop - $3,000 (invoice #703)
12 Paid $19,000 to purchase a car for Benjamin's personal use (cheque #607)
15 Paid insurance premium of $70,380 for the period 16 January 2017 to 15 January 2018 (cheque #608). The premium has increased by $4,380 from the previous year.
16 Received and paid invoice for advertising - $10,500 (cheque #609)
17 Received the following order from Wilmont Book Store together with a
$20,000 deposit.
Donne001 350 units Cartwright001 625 units
Donne002 120 units Cartwright002 100 units
Marvell001 650 units Southwell001 256 units
Marvell002 435 units Vaughan001 216 units
17 Received payment from Milton Booksellers for goods sold on December 11 - $67,500
18 Purchased inventory on credit from Meta Printing Services (invoice #4228). Items purchased:
Donne001 300 units Cartwright002 600 units
Donne002 300 units Southwell001 540 units
Marvell002 100 units Vaughan001 540 units
Cartwright001 100 units
19
22
23 Paid fixed monthly internet service provider charges in advance (due 23rd of each month) - $3,000 (cheque #610)
24 Sent first shipment of goods to Wilmot Book Store (invoice #706), Items shipped:
Donne001 140 units Cartwright001 250 units
Donne002 48 units Southwell001 256 units
Marvell001 260 units Vaughan001 216 units
Marvell002 174 units
24 Received outstanding amount from Heyrick Book Company for goods sold on January 4.
25 Paid Meta Printing Services for inventory purchased on January 9 (cheque #611)
25 Received payment from Wilmont Book Store in payment for the first shipment of good made on 24 January.
25 Cartwright's book launch was a success. Door sales of tickets for cash -
$800. Sold goods for cash. Items sold: Cartwright002 90 units
29 Sold goods on credit to Stanley Bookmart (invoice #707). Items sold: Donne001 600 units Cartwright001 310 units Marvell002 500 units
30 Paid royalties to R. Southwell - $3,320 (cheque #612).
31 Supplies used for January - $6,500
31 Estimated electricity bill for January - $2,350
ASSIGNMENT REQUIREMENTS
1 Record all the necessary entries in the relevant journals and ledgers, excluding balance day adjustments, to maintain proper accounting records for the January transactions. Please note that you may need to create new accounts using subsequent account numbers where necessary. (All Journals in the Excel file can be expanded if necessary by inserting rows. General Ledger T accounts can be increased in number by copy/paste down the worksheet).
2 Reconcile all control accounts with subsidiary ledgers and produce as at 31 January 2017: Schedule of Accounts Receivable; Schedule of Accounts Payable; and Schedule of Inventory.
3 Prepare an unadjusted trial balance on the worksheet provided (see Excel file Worksheet Tab).
4 Record all necessary balance day adjustments for January on the worksheet.
5 Record all balance day adjustments in the general journal and post them to the relevant general ledger accounts.
6 Prepare an adjusted trail balance on the worksheet provided and complete the worksheet.
7 Prepare the Income Statement (using the Excel file Income Statement Tab) for the month ending 31 January 2017.
8 Prepare a classified Balance Sheet (using the Excel file Balance Sheet Tab) as at 31 January 2017.
9 Prepare the Statement of Change in Equity (using the Excel BS Tab) for the month ending 31 January 2017.
10 All Journals, General Ledger Accounts, Trial Balances, Worksheets and Financial Statements must have appropriate labels, headings, account name and number. Use the Chart of Accounts supplied (see Excel file COA Tab) and if additional accounts are required use the Account Code convention evident in the Chart of Accounts. Note the Chart of Accounts has ‘header accounts' (denoted in bold type) to specify the title of a group of accounts. Do not post to the header accounts only post to accounts specified under the header accounts.
Attachment:- Assignment Guidelines.rar