Reference no: EM131601732

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.

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 stock take 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:- Assignment File.rar