1. Andrew Darby manages and owns all the shares in a small proprietary company called Darby's Derbys Pty Ltd which buys and sells hats. The assets, liabilities, and owner's equity of the business on 1 January 2018 are shown on the accompanying worksheet.
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3. The following information about Darby's Derbys Ltd is available:
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5. ·     The business has an accounting period of one month. It determines profit or loss for each month on its worksheet following proper accrual principles.
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7. ·     The opening balance in the prepayments column relates to rent for the months of January, February, and March 2018 which was paid in December 2017.
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9. ·     The accrual on 1 January relates to an amount owing for advertisements that appeared in the local newspaper in December 2017.
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11. ·     The shop fittings owned by the business have an expected life of 8 years, and an expected residual value of $1 000 at the end of that time.
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13. The following transactions took place during January 2018:
14. 1  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.
15. 2     Paid an insurance premium of $1 200 that will cover the business until 30 June 2018.
16. 3      Received payment for accounts receivable $6 000.
17. 6      Purchased hats on credit $12 000.
18. 8      Credit sales of hats $14 000 (these hats had cost $9 000).
19. 12    Paid wages of $1 400.
20. 15    Cash sales of hats $5 000 (these hats had cost $3 000).
21. 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.
22. 20    Paid accounts payable $7 800.
23. 25    Wrote off an account receivable to the value of $500 because it was accepted that the amount was never going to be paid.
24. 26    Purchased shop supplies on credit $200 and paid wages of $1 400.
25. 27    Received $600 from a customer for hats that are not going to be supplied until March.
26. 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.
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28. Required
29. a. Journal entries for the events that occurred in January 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.)
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31. b. an income statement, cash flow statement, and balance sheet on 31 January 2018.

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Answer a Journal entries for the events that occurred in January and also record all the accrual accounting adjustments that are necessary to determin... View the full answer