Reference no: EM132354304

Question :

Louise Lace owns and operates a successful textile business specialising in cushions and quilt covers. The business also sells a memory foam pillow that is made only for The Best Sleep Ever Company that has recently featured in a number of health and wellbeing magazines.

As a result of the recent positive media coverage of the excellent products sold by The Best Sleep Ever Company, Louise is too busy to undertake any record keeping for the company and has handed the record keeping over to the accounting practice where you work as a graduate accountant.

The Best Sleep Ever Co Trial Balance As at 30 June 2019
Cash Accounts Receivable Inventory (1 July 2018) Prepaid Rent Delivery Van	$ 8,160 48,960 58,480 2,448 21,760	$
Accumulated Den'n Delivery Van		4,352
Vacuum Packing Equipment	5,440
Accumulated Dan'n Vacuum Packing Equipment		2,720
Accounts Payable		43,860
L Lace, Capital (1 July 2018)		78,880
L Lace, Drawings	17,000
Sales		282,608
Sales Returns & Allowances	3,060
Discount Allowed	544
Purchases	190,672
Interest Revenue		1,224
Electricity Expense	2,924
Water Expense	1,632
Sales Staff Wages	32,640
Local Government Rates Expense	1,088
Insurance Expense	4,760
Advertising Expense	5,100
Rent Expense	8,976
	411 1 44	411 644

Louise has emailed you the following list of account information related to the year ended 30 June 2019:

It is now the end of the financial year and Louise requires you to undertake the following:

Prepare the Balance Day Adjustment Journals for The Best Sleep Ever Company where required, in the proforma provided on the next page.

Include narration (explanation) for each journal entry.

i) The prepaid rent was paid on 1 April 2019 and was Shop/Office rent for the four months ending 31 July 2019.

ii) Both the Delivery Van and Vacuum Packing 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:

	Useful life	Residual Value
Delivery Van	10 years
Vacuum Packing Equipment	3 years	$40

iii) A physical stocktake of inventory at 30 June 2019 revealed $57,930 on hand.

iv) $1,300 of the recorded sales represents receipts for goods which will not be delivered until 2 July 2019.

v) It is estimated that 5% of the 30 June 2019 balance of Accounts Receivable is unlikely to be received.

vi) Upon receipt of the business's bank statement, Louise realised that the business bank account had earned $51 interest on 30 June 2019 which had been directly paid into the bank account by the bank on that day. The accounting records need to be updated for this transaction.

vii) Louise had relied on word of mouth to promote her business to date however on 1 February 2019 Louise decided to use an advertising company to advertise her business and products and paid for the advertising campaign on that date. The advertising costs are $850 per month for a six month period.

viii) Sales staff wages owing but not paid as at balance day equals $842.