Adrian Ariel recently purchased a carpet business. Since then, the business has grown into a successful...

 

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Adrian Ariel recently purchased a carpet business. Since then, the business has grown into a successful importer and seller of fine carpets and rugs. AAA Carpets and Rugs (ABN 65 111 177 778) is situated at 133 Clare Street, Boydtown, Melbourne, Vic 3957. AAA Carpets and Rugs purchase their inventory from a number of suppliers. In addition to sales to individual customers the business also supplies some local carpet and rug businesses. Goods and Services Tax AAA Carpets and Rugs (AAA) is regeistered for GST and charges charges on all inventory sales and services provided to customers and pays GST on inventory purchases and most business expenses. Non-current asset acquisitions also incur GST. The rate of GST is 10%. Employees AAA Carpets and Rugs employs two university students on a casual basis, Ashana Anatolia anfd Andrew Arak. They are both paid an hourly rate of $25 per hour. They are owed $200 each at 1 April 2021. Note: Do not use the employee section of Xero; record the wages expense as a cash payment. Inventory The folllowing is a list of inventory on hand and suppliers at 31 March 2021: Quantity On hand Item description Item code Last Cost Last Sale price Supplier price Akstafa rug MHR Manluk hall runner Nineveh rug Tabriz carpet Oriental Carpets Persian Imports Persian Imports AR 500 750 6 350 550 8 NR 2,200 2,990 TC 630 870 Taba Tabai Each of the above iterms of inventory are shown as excluding GST. The inventory is purchased on credit under the terms of payment required by the suppliers. Once an order is placed the supplier will deliver the inventory the same day. AAA Carpets and Rugs uses the perpetual system and the first-in-first out method to record inventory transactions. Other services AAA Carpets also offer the additional services to customers cleaning and repairing carpets. Revenue from Cleaning and Repairs is recorded separately form the sale of carpets. Cleaning: AAA Rugs and Carpets will charge a fee of $70 per hour (excluding GST) for the specialised cleaning of antique and old rugs and carpets. Terms of payment are strictly cash at the time the service is provided. Repairs: AAA Rugs and Carpets offers a repair service for a fee of $50 per hour (excluding GST). Terms of payment are strictly cash at the time the service is provided. Supplier information Last invoice Name & ABN number Account Address Terms date balance Persian Imports 47 Browns St., net 30 days 10 March $5,500 16 111 199 990 Mainsville, NSW 20154 Oriental Carpets 112 High St., 74 222 233 334 Melbourne VIC 3008 net 30 days 20 March $24,200 Taba Tabai net 30 days 77 Sunset Rd., Darwin, NT 8012 22 March $11,990 55 222 288 889 Customer information Name & Date of last Account ABN number Address invoice balance Raver Rugs 90 Srinagar Rd., Brunswick Vic 3056 27 222 266 667 22 March $3,410 Cairo Carpets 84 111 122 223 Chodor Cres., Thomastown Vic 3074 25 March $3,707 11 Main Street Kew Vic 3101 Sorel Interiors 65 111 177 779 27 March $2,990 Terms of payment are net 30 days from the date of the invoice. All cash sales are given a discount of 5%. Bank loan AAA Rugs and Carpets borrowed $80,000 from Eastern Bank for the business. On the last day of each month a total of $2,125 is paid to Eastern Bank for the loan which comprises $1,500 principal and $625 interest. Prepaid Advertising AAA Rugs and Carpets paid for a seven-month advertisement on 1 March for $770 (including GST) in the Leader newspapers. The advertisement appears in numerous local Leader newspapers throughout the city. Trial Balance as at 31 March 2021 $ $ Bank account* Accounts Receivable Prepaid expenses Inventory Cleaning materials Delivery van Accumulated depreciation-delivery van Shop fittings Accumulated depreciation-shop fittings Accounts Payable Wages payable Electricity expense payable Net GST Payable Loan-Eastern Bank 600 28,493 10,107 610 620 600 25,350 670 630 640 710 28,000 711 1,380 720 4,500 1,600 41,690 721 800 805 400 810 310 820 2,140 18,500 31,700 97,720 830 880 Owners capital-Adrian Ariel Total 97,720 *Eastern Bank: BSB 117288, account number 854742 April transactions April 1 Paid Prime Real Estate rent of $7,920 (GST inclusive) for period 1 April to 30 June 2021 [chq 309]. Credit sale to Sorel Interiors: 2 Tabriz carpets & 2 Nineveh rugs [invoice 411]. Paid for printing to Officeworks (GST inclusive) [chq. 310] $473. Paid fuel and other delivery van expenses to GP Motors, 281.60 (GST inclusive) [chq. 311]. Credit purchase of 5 Nineveh rugs [Purchase Order 624]. Sorel Interiors paid the balance owing on 1 April. 3 3 4 Paid Tru energy the accrued electricity expense owing [chq.312]. Credit sale to Raver Rugs: 3 Akstafa rugs, 3 Manluk hall runners, 2 Nineveh rugs [Invoice 412]. Paid Mason Stewart $1,540 (GST inclusive) for a new cash register. It is estimated that the cash register will have an effective life of 10 years with nil residual value [chq.313]. Credit purchase from Persian Imports: 5 Akstafa rugs, 6 Manluk hall runners [P.O. 625]. AAA Carpets and Rungs paid Persian Imports the balance owing at 1 April [chq 314]. 4 6 Credit purchase of 5 Tabriz carpets [P.O. 626]. 7 Paid Ashana Anatolia and Andrew Arak each for 15 hours worked plus the amount owing at 1 April [chqs. 315 & 316]. AAA Carpets and Rugs purchased cleaning materials on credit from Klean King (ABN 74 222 233 334), $308 (GST inclusive). Klean King requires payment terms of net 30 days. This is recorded in a separate account to the purchase of inventory. Cash sales: 2 Mamluk hall runners, 1 Nineveh rug, 2 Tabriz carpets [Invoice 413]. 7 Paid monthly loan repayment to Eastern Bank. AAA Carpets and Rugs paid an additional $1,000 off the loan principal [chq. 317]. Paid Oriental Carpets the balance owing at 1 September [chq 318]. Adrian withdrew $1,000 for personal use [chq 319]. 9. 10 10 11 Paid Persian Imports for inventory purchased on 3 April [chq 320]. AAA Carpets and Rugs received payment for 9 hours cleaning and 14 hours for repairs. Raver Rugs paid the balance owing at 1 April. Credit purchase of 7 Manluk hall runners and 6 Ninevah rugs [P.O. 627]. 11 12 12 Received payment from Cairo Carpets for balance owing at 1 April. Adrian notices that 1 Manluk hall runner is damaged and returns it to the supplier and receives a full credit for the damaged carpet. 13 14 15 Paid Ashana Anatolia and Andrew Arak each for 20 hours worked [chqs. 321 & 322]. Paid telephone expenses of $572 (GST inclusive) to Telstra [chq 323]. Credit sale to Cairo Carpets: 3 Akstafa rugs, 3 Nineveh rugs, 3 Manluk hall runners [Invoice 414]. 15 15 Paid Taba Tabai the balance owing at 1 April and for inventory purchased on 6 April [chq. 324]. Credit sale to Raver Rugs: 2 Akstafa rugs, 3 Tabriz carpets [Invoice 415]. Cash sales – received payment for 6 hours cleaning and 6 hours for repairs. 16 17 17 Paid motor delivery van expenses to GP Motors, $341 (GST inclusive) [chq. 325]. Credit purchase of 8 Akstafa rugs [P.O. 628]. 18 19 ACC10008 assignment, semester 1, 2021 Page 4 of 14 Credit sale to Raver Rugs: 4 Akstafa rugs, 5 Manluk hall runners, 1 Tabriz carpet [Invoice 416]. Cairo Carpets paid for inventory purchased on 15 April. Paid the GST outstanding on 1 April [chq. 326]. 20 20 21 Raver Rugs paid for inventory purchased on 4 April. Paid Persian Imports $20,000 [chq. 327]. Credit sale to Cairo Carpets: 4 Akstafa rugs, 3 Nineveh rugs, 2 Tabriz carpets [Invoice 417]. 22 24 24 AAA Carpets and Rugs received payment for 18 hours cleaning and 12 hours for repairs. Cairo Carpets returned 2 Akstafa rugs. These were undamaged and returned to inventory. Credit purchase of 6 Tabriz carpets [P.O. 698]. Cairo Carpets paid for inventory purchased on 24 April. Cash sales: 1 Tabriz carpet and 1 Manluk hall runner [Invoice 418]. 25 26 26 27 28 29 Received payment from Raver Rugs for inventory sold on 17 April. Adrian withdrew $1,000 for personal use [chq 328]. AAA Carpets and Rugs paid Klean King for cleaning materials purchased on credit and purchased more cleaning materials on account for $217.80 (GST inclusive). [chq. 329]. The bank statement for April shows that bank fees of $34 had been charged to AAA Carpets and Rugs. 30 30 30 6. Prepare a Statement of Financial Performance (Income Statement) for April 2021 and a Statement of Financial Position (Balance Sheet) as at 30 April 2021. 7. Record closing entries in the general journal for April 2021. 8. Prepare a Trial Balance after closing entries for April 2021. Pro-forma journals, ledgers, worksheets and reports are available in the assessment folder and must be used to complete and submit part a (this is an excel file). (16 marks) Adrian Ariel recently purchased a carpet business. Since then, the business has grown into a successful importer and seller of fine carpets and rugs. AAA Carpets and Rugs (ABN 65 111 177 778) is situated at 133 Clare Street, Boydtown, Melbourne, Vic 3957. AAA Carpets and Rugs purchase their inventory from a number of suppliers. In addition to sales to individual customers the business also supplies some local carpet and rug businesses. Goods and Services Tax AAA Carpets and Rugs (AAA) is regeistered for GST and charges charges on all inventory sales and services provided to customers and pays GST on inventory purchases and most business expenses. Non-current asset acquisitions also incur GST. The rate of GST is 10%. Employees AAA Carpets and Rugs employs two university students on a casual basis, Ashana Anatolia anfd Andrew Arak. They are both paid an hourly rate of $25 per hour. They are owed $200 each at 1 April 2021. Note: Do not use the employee section of Xero; record the wages expense as a cash payment. Inventory The folllowing is a list of inventory on hand and suppliers at 31 March 2021: Quantity On hand Item description Item code Last Cost Last Sale price Supplier price Akstafa rug MHR Manluk hall runner Nineveh rug Tabriz carpet Oriental Carpets Persian Imports Persian Imports AR 500 750 6 350 550 8 NR 2,200 2,990 TC 630 870 Taba Tabai Each of the above iterms of inventory are shown as excluding GST. The inventory is purchased on credit under the terms of payment required by the suppliers. Once an order is placed the supplier will deliver the inventory the same day. AAA Carpets and Rugs uses the perpetual system and the first-in-first out method to record inventory transactions. Other services AAA Carpets also offer the additional services to customers cleaning and repairing carpets. Revenue from Cleaning and Repairs is recorded separately form the sale of carpets. Cleaning: AAA Rugs and Carpets will charge a fee of $70 per hour (excluding GST) for the specialised cleaning of antique and old rugs and carpets. Terms of payment are strictly cash at the time the service is provided. Repairs: AAA Rugs and Carpets offers a repair service for a fee of $50 per hour (excluding GST). Terms of payment are strictly cash at the time the service is provided. Supplier information Last invoice Name & ABN number Account Address Terms date balance Persian Imports 47 Browns St., net 30 days 10 March $5,500 16 111 199 990 Mainsville, NSW 20154 Oriental Carpets 112 High St., 74 222 233 334 Melbourne VIC 3008 net 30 days 20 March $24,200 Taba Tabai net 30 days 77 Sunset Rd., Darwin, NT 8012 22 March $11,990 55 222 288 889 Customer information Name & Date of last Account ABN number Address invoice balance Raver Rugs 90 Srinagar Rd., Brunswick Vic 3056 27 222 266 667 22 March $3,410 Cairo Carpets 84 111 122 223 Chodor Cres., Thomastown Vic 3074 25 March $3,707 11 Main Street Kew Vic 3101 Sorel Interiors 65 111 177 779 27 March $2,990 Terms of payment are net 30 days from the date of the invoice. All cash sales are given a discount of 5%. Bank loan AAA Rugs and Carpets borrowed $80,000 from Eastern Bank for the business. On the last day of each month a total of $2,125 is paid to Eastern Bank for the loan which comprises $1,500 principal and $625 interest. Prepaid Advertising AAA Rugs and Carpets paid for a seven-month advertisement on 1 March for $770 (including GST) in the Leader newspapers. The advertisement appears in numerous local Leader newspapers throughout the city. Trial Balance as at 31 March 2021 $ $ Bank account* Accounts Receivable Prepaid expenses Inventory Cleaning materials Delivery van Accumulated depreciation-delivery van Shop fittings Accumulated depreciation-shop fittings Accounts Payable Wages payable Electricity expense payable Net GST Payable Loan-Eastern Bank 600 28,493 10,107 610 620 600 25,350 670 630 640 710 28,000 711 1,380 720 4,500 1,600 41,690 721 800 805 400 810 310 820 2,140 18,500 31,700 97,720 830 880 Owners capital-Adrian Ariel Total 97,720 *Eastern Bank: BSB 117288, account number 854742 April transactions April 1 Paid Prime Real Estate rent of $7,920 (GST inclusive) for period 1 April to 30 June 2021 [chq 309]. Credit sale to Sorel Interiors: 2 Tabriz carpets & 2 Nineveh rugs [invoice 411]. Paid for printing to Officeworks (GST inclusive) [chq. 310] $473. Paid fuel and other delivery van expenses to GP Motors, 281.60 (GST inclusive) [chq. 311]. Credit purchase of 5 Nineveh rugs [Purchase Order 624]. Sorel Interiors paid the balance owing on 1 April. 3 3 4 Paid Tru energy the accrued electricity expense owing [chq.312]. Credit sale to Raver Rugs: 3 Akstafa rugs, 3 Manluk hall runners, 2 Nineveh rugs [Invoice 412]. Paid Mason Stewart $1,540 (GST inclusive) for a new cash register. It is estimated that the cash register will have an effective life of 10 years with nil residual value [chq.313]. Credit purchase from Persian Imports: 5 Akstafa rugs, 6 Manluk hall runners [P.O. 625]. AAA Carpets and Rungs paid Persian Imports the balance owing at 1 April [chq 314]. 4 6 Credit purchase of 5 Tabriz carpets [P.O. 626]. 7 Paid Ashana Anatolia and Andrew Arak each for 15 hours worked plus the amount owing at 1 April [chqs. 315 & 316]. AAA Carpets and Rugs purchased cleaning materials on credit from Klean King (ABN 74 222 233 334), $308 (GST inclusive). Klean King requires payment terms of net 30 days. This is recorded in a separate account to the purchase of inventory. Cash sales: 2 Mamluk hall runners, 1 Nineveh rug, 2 Tabriz carpets [Invoice 413]. 7 Paid monthly loan repayment to Eastern Bank. AAA Carpets and Rugs paid an additional $1,000 off the loan principal [chq. 317]. Paid Oriental Carpets the balance owing at 1 September [chq 318]. Adrian withdrew $1,000 for personal use [chq 319]. 9. 10 10 11 Paid Persian Imports for inventory purchased on 3 April [chq 320]. AAA Carpets and Rugs received payment for 9 hours cleaning and 14 hours for repairs. Raver Rugs paid the balance owing at 1 April. Credit purchase of 7 Manluk hall runners and 6 Ninevah rugs [P.O. 627]. 11 12 12 Received payment from Cairo Carpets for balance owing at 1 April. Adrian notices that 1 Manluk hall runner is damaged and returns it to the supplier and receives a full credit for the damaged carpet. 13 14 15 Paid Ashana Anatolia and Andrew Arak each for 20 hours worked [chqs. 321 & 322]. Paid telephone expenses of $572 (GST inclusive) to Telstra [chq 323]. Credit sale to Cairo Carpets: 3 Akstafa rugs, 3 Nineveh rugs, 3 Manluk hall runners [Invoice 414]. 15 15 Paid Taba Tabai the balance owing at 1 April and for inventory purchased on 6 April [chq. 324]. Credit sale to Raver Rugs: 2 Akstafa rugs, 3 Tabriz carpets [Invoice 415]. Cash sales – received payment for 6 hours cleaning and 6 hours for repairs. 16 17 17 Paid motor delivery van expenses to GP Motors, $341 (GST inclusive) [chq. 325]. Credit purchase of 8 Akstafa rugs [P.O. 628]. 18 19 ACC10008 assignment, semester 1, 2021 Page 4 of 14 Credit sale to Raver Rugs: 4 Akstafa rugs, 5 Manluk hall runners, 1 Tabriz carpet [Invoice 416]. Cairo Carpets paid for inventory purchased on 15 April. Paid the GST outstanding on 1 April [chq. 326]. 20 20 21 Raver Rugs paid for inventory purchased on 4 April. Paid Persian Imports $20,000 [chq. 327]. Credit sale to Cairo Carpets: 4 Akstafa rugs, 3 Nineveh rugs, 2 Tabriz carpets [Invoice 417]. 22 24 24 AAA Carpets and Rugs received payment for 18 hours cleaning and 12 hours for repairs. Cairo Carpets returned 2 Akstafa rugs. These were undamaged and returned to inventory. Credit purchase of 6 Tabriz carpets [P.O. 698]. Cairo Carpets paid for inventory purchased on 24 April. Cash sales: 1 Tabriz carpet and 1 Manluk hall runner [Invoice 418]. 25 26 26 27 28 29 Received payment from Raver Rugs for inventory sold on 17 April. Adrian withdrew $1,000 for personal use [chq 328]. AAA Carpets and Rugs paid Klean King for cleaning materials purchased on credit and purchased more cleaning materials on account for $217.80 (GST inclusive). [chq. 329]. The bank statement for April shows that bank fees of $34 had been charged to AAA Carpets and Rugs. 30 30 30 6. Prepare a Statement of Financial Performance (Income Statement) for April 2021 and a Statement of Financial Position (Balance Sheet) as at 30 April 2021. 7. Record closing entries in the general journal for April 2021. 8. Prepare a Trial Balance after closing entries for April 2021. Pro-forma journals, ledgers, worksheets and reports are available in the assessment folder and must be used to complete and submit part a (this is an excel file). (16 marks)

Answer rating: 100% (QA)

1 On 1 April 2021 Adrian purchases inventory on credit from AB Rugs Pty Ltd ABN 45 000 000 000 for 2000 The inventory is delivered on 2 April Debit Credit Inventory 2000 Accounts Receivable 2000 To re... View the full answer