Reference no: EM132189952

Practice Set Assessment

Coffee Supremo

Background and Facts

Louisa Arnold is the owner of Coffee Supremo, a specialty coffee machine business she started two years ago. The business is registered for GST.

Louisa sells 2 types of coffee machines that she purchases from manufacturers. She operates the business herself and employs one person full-time to assist her. Louisa also provides specialty barista training services to private clients on how to make perfect coffee. Coffee Supremo uses a perpetual inventory system and uses FIFO (First In First Out).

Coffee Supremo is operated from a rented premise and the business pays rent quarterly in advance.

Louisa has a variety of clients with whom she has built up a strong relationship. She offers them terms of 2/10, net/30. Louisa submits her Business Activity Statements (BAS) for GST quarterly to the Australia Taxation Office on an accrual basis.

Currently, the business uses a manual accounting system but plans to test a MYOB accounting system later in the year.

Accounting Information

Coffee Supremo uses the following specialised and general journals to record business transactions.

- Sales Journal - to record all invoices issued for sales of inventory
- Purchases Journal - to record all credit purchases
- Cash Receipts Journal - to record all cash received
- Cash Payments Journal - to record all cash payments
- General Journal - to record all other transactions

Coffee Supremo uses a general ledger in the form of a 4-column running balance (as described on page 22 Exhibit 2-13 of Custom Text). An Accounts Receivable and Accounts Payable subsidiary ledger is also used in this format.

Financial Statements are prepared at the end of each month, and the accounts are closed off at the end of each month.

All necessary proformas are included and are to be used to complete the manual practice set for August. The assignment can be completed either manually (handwritten) using the Excel templates provided, or by computer in Excel.

Chart of Accounts and Opening Balances 1stAugust

Account Number	Account Name	Debit	Credit
110	Cash at Bank	13,346
120	Accounts receivable	16,140
121	Allowance for Doubtful Debts		646
130	Prepaid Insurance
140	Prepaid Rent	3000
150	Office Supplies	950
160	Inventory	19,000
180	Delivery Van
181	Accumulated Depreciation - Delivery Van
200	Accounts Payable		16,995
220	Wages Payable		377
230	GST Clearing		1,045
250	Superannuation Payable		756
300	Capital		32,617
310	Drawings
350	Income Summary
410	Sales Revenue
412	Sales Discounts
415	Services Revenue
420	Interest Revenue
500	Cost of Sales
512	Bad debts expense
515	Bank Charges
521	Depreciation expense - Delivery Van
530	Electricity and Gas Expense
540	Insurance Expense
560	Office Supplies Expense
565	Rent Expense
570	Superannuation expense
590	Wages Expense

All account balances at 1stAugust are normal in nature.  

Subsidiary Ledgers

Accounts Receivable Subsidiary Ledger

As at 1 August

Cayden's Coffee Club	4,000
H. Proctor	12,140
	16,140

Accounts Payable Subsidiary Ledger

As at 1 August

Arabica Pty Ltd	6,765
Crema Supplies Pty Ltd	10,230
	16,995

Inventory on Hand

As at 1 August

	Units on Hand	Cost per Unit	Total
Espresso Sprint	40	320	12,800
Espresso Deluxe	10	620	6,200
			$19,000

AUGUST TRANSACTIONS

The following transactions relate to the operations of Coffee Supremo during August.

Note: All amounts are GST-inclusive unless otherwise stated.
Credit sales are made on credit terms of 2/10, n30
Round all amounts to the nearest cent (i.e., 29.845124 = 29.85)

	Date	Details
1.	August 1	Purchased a delivery van for $33,000 from Holland Autos on credit.  Terms are n/60. Invoice number 15448. GST = $3,000.  Hint:  PJ
2.	August 1	Paid insurance for 6 months in advance - $2,200 - chq 71.  GST = $200.  Hint:  CPJ
3.	August 1	Paid Arabica Pty Ltd in full for outstanding account balance at 1st August- no discounts applicable- chq 72.Hint:  CPJ/Subsidiary ledger
4.	August 2	Sold 10 Espresso Sprint machines for cash - $6,050.  GST = $550 Hint:  CRJ/Inventory Card
5.	August 6	Purchased office supplies for cash - $330- chq 73. GST = $30
6.	August 9	Received amount owed by Cayden's Coffee Club for Julyinvoices less the discount 2%.   Hint:  adjust GST.
7.	August 9	Paid fortnightly wages of $1,760 - chq 74.  No GST. ($1,383 relates to August wages; $377 relates to the wages accrued (payable - see trial balance) for July)
8.	August 12	Received payment from H. Proctor for part of the August balance - $2,140. There was no discount allowed.
9.	August 14	Purchased 15 Espresso Deluxe coffee machines from Arabica Pty Ltd for $10,395.  GST = $ 945. Terms 3/10, n/30, Inv.5430.
10.	August 15	Sold 17 Espresso Sprint machines to Cayden's Coffee Club for $10,285 (GST = $935), Inv. 4564.
11.	August 16	Invoiced Cayden's Coffee Club for Barista training, Inv. 4565 for $3,300.  GST = $300.
12.	August16	The owner withdrew cash of $2,350 - chq 75.  No GST.
13.	August 20	Paid the 1stAugustamount owing to Crema Supplies Pty Ltd with chq 76. No discounts were applicable.
14.	August 22	Paid electricity and gas bill, $390 - chq 77.  GST $35.45.
15.	August 23	Paid fortnightly wages of $1,760 - chq 78.  No GST.
16.	August 23	Paid superannuation contributions owing from July of $756 - chq 79.  No GST.
17.	August 24	Received payment from Cayden's Coffee Club for invoice 4564, less the applicable discount 2% (adjust GST).
18.	August 26	Sold to H. Proctor, 10 Espresso Deluxe machines - $9,350, GST = $ 850, inv. 4566.
19.	August 26	Purchased 20 Espresso Sprints coffee machines from Crema Supplies Pty Ltd for $7084, GST = 644.Terms 2/10, n/30, inv. 1389.
20.	August 31	Recorded bank charges of $40 and interest earned of $22.  No GST.

Instructions for Completion of Practice Set

A. Open all general ledger accounts by inserting the opening balances at 1 August as shown in the Chart of Accounts on page 2. For example, the balance of account 110 - Cash at Bank is $13,346 debit. Write "Opening Balance" in the "Details" column, and place $13,346 in the "Debit" balance column.

B. Open all subsidiary ledger accounts for accounts receivable and accounts payable by inserting the opening balances as at 1 August as shown in the schedule of accounts receivable and accounts payable on page 3. Insert the opening inventory balances into the inventory cards.

Note: For the general ledger, accounts receivable subsidiary ledger and accounts payable subsidiary ledgers, all accounts have normal balances

C. Record the transactions for August in the appropriate journals provided (narrations are not required).

D. Post daily to the accounts receivable and accounts payable subsidiary ledgers.
Post daily from the general journal. All other amounts will be posted at the end of the month.

Note: For posting reference purposes, use the journal page names and numbers. For example, when posting from the sales journal the reference will be "SJ9".

E. Total all columns of the special journals. Post from the special journals to the general ledger.

F. Prepare schedules of Accounts Receivable and Accounts Payable. Check that the total of the Schedule of Accounts Receivable equals the Accounts Receivable Control account in the general ledger and that the Schedule of Accounts Payable equals the Accounts Payable account in the general ledger.

G. Use the worksheet provided to prepare an Unadjusted Trial Balance as at 31August.

Check figures for this stage of the assignment are as follows:

- Total of the Cash column in the Cash Receipts Journal - $22211.30.
- Cash at Bank account balance - Dr $8976.30.
- Inventory account balance -$20050.
- GST Clearing account balance - Dr $1200.42.
- Unadjusted trial balance from worksheet - $110114.00.

Note:If any of your figures do not match those above, you have made an error which you will need to find and correct.

H. Using the following information record the necessary adjusting journal entries at 31August in the general journal. Post these to the general ledger.

1. Insurance
Louisa paid 6 months of insurance as noted in transaction on August 1.

2. Depreciation
On August 1, Louisa purchased a delivery van. It has a useful life of 10 years and a residual value of $6,000. The vehicle is depreciated using the straight-line method. Calculate depreciation for one month.

3. Accrued Wages
Wages owing at 31 August totalled $880.

4. Superannuation
Superannuation contributions accrued for August total $871.

5. Office Supplies
A stocktake of office supplies was performed on August 31. It was noted that $650 of supplies remain.

6. Bad Debts
An assessment of bad and doubtful debts at August 31 showed an increase in the amount falling into this category. Louisa has decided to increase the Allowance for Doubtful Debts to 5% of the accounts receivable balance at August 31.

7. Rent
Rent of $4,500 is paid every quarter, and was last paid on the 1st of July.

I. Record these adjustments in the adjustments column of the worksheet.

J. Complete the worksheet.

K. Record all closing entries in the general journal and post them to the general ledger.

L. Prepare a Post-closing Trial Balance as at 31August.

M. Prepare the Income Statement (functional format), Statement of Changes in Equity, and Classified Balance Sheet.

Attachment:- Assessment.rar