Alex Au is the owner and manager of Titan Hardware, a hardware store located in the...

   

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Alex Au is the owner and manager of Titan Hardware, a hardware store located in the city of Europa. All sales are on credit terms and are made to business establishments only. A gross profit margin of 20% is earned on all sales. Payments are received in the month following the sales, and any uncollected amounts at that point are treated as bad debts. The opening balances of selected assets, liabilities and equity of the business as at 1 June 2022 are shown in the worksheet on page 3. As at 1 June 2022: • Titan Hardware recorded a quick ratio was 0.9 and a debt-to-equity ratio of 0.7. . • The carrying amount of the plant and equipment was $432,000. • Accrued expenses include an amount of $39,000 relating to overdue unpaid rental for the months of March 2022, April 2022 and May 2022. • Unearned revenue relates an advance payment from a customer for goods to be delivered equally over the months of June 2022, July 2022 and August 2022. • The bank loan represents 20 equal monthly instalments. The final instalment is expected to be paid in January 2024. During the month ended 30 June 2022, the following events occurred: June 1 Purchased additional computers for office use $30,000 on credit. 3 Paid one month of the overdue rental due to the threat of legal action by the landowners. Titan Hardware promised to pay all the remaining rental by August 2022 when a new rental agreement will be drawn up. 6 Signed a $50,000 agreement to sell hardware to a new customer. 10 Alex Au took out $8,000 of hardware for repairs and maintenance of the store. Paid monthly loan instalment. 14 17 Titan Hardware made a payment of $3,000 for Alex Au's personal travelling expenses. The owner will reimburse the business in 30 days' time. 23 Estimated June 2022 utilities to be $7,000. The actual bill will only be received in July 2022. 28 Paid $11,000 salaries for June 2022. 30 Recorded $120,000 payment from customers. 30 Total billings to customers for goods delivered in June 2022 was $300,000. Additional information: On 1 November 2021, Titan Hardware purchased a 12-months insurance plan to protect the assets of the business with effect from 1 December 2021. The prepaid expenses amount as at 1 June 2022 represents the unutilised portion of that insurance plan. Titan Hardware depreciates its plant and equipment using the straight-line method over a useful life of 5 years with no residual value. Depreciation for all plant and equipment items will only commence in the month following the purchase. Required: (a) In the following Worksheet, (i) Enter the amounts for the opening balances marked (A), (B). (C) and (D). (ii) Enter all applicable transactions for the month of June 2022, including all necessary month-end adjustments. Inventory Plant and Accumulated equipment depreciation Accounts Accrued Unearned Bank payables expenses loan Capital revenue 574,000 B (108,000) 254,000 C 45.000 D 800,000 (b) Prepare a properly classified Statement of Comprehensive Income for the month ended 30 June 2022. (c) Prepare a properly classified Statement of Financial Position as at 30 June 2022. Date: Cash at Accounts Prepaid June bank receivables expenses 1 203,000 121,000 A Adjustments Adi Adj Adi Adj Adj Total (15 marks) Profit & Loss (5 marks) (4 marks) Notes Alex Au is the owner and manager of Titan Hardware, a hardware store located in the city of Europa. All sales are on credit terms and are made to business establishments only. A gross profit margin of 20% is earned on all sales. Payments are received in the month following the sales, and any uncollected amounts at that point are treated as bad debts. The opening balances of selected assets, liabilities and equity of the business as at 1 June 2022 are shown in the worksheet on page 3. As at 1 June 2022: • Titan Hardware recorded a quick ratio was 0.9 and a debt-to-equity ratio of 0.7. . • The carrying amount of the plant and equipment was $432,000. • Accrued expenses include an amount of $39,000 relating to overdue unpaid rental for the months of March 2022, April 2022 and May 2022. • Unearned revenue relates an advance payment from a customer for goods to be delivered equally over the months of June 2022, July 2022 and August 2022. • The bank loan represents 20 equal monthly instalments. The final instalment is expected to be paid in January 2024. During the month ended 30 June 2022, the following events occurred: June 1 Purchased additional computers for office use $30,000 on credit. 3 Paid one month of the overdue rental due to the threat of legal action by the landowners. Titan Hardware promised to pay all the remaining rental by August 2022 when a new rental agreement will be drawn up. 6 Signed a $50,000 agreement to sell hardware to a new customer. 10 Alex Au took out $8,000 of hardware for repairs and maintenance of the store. Paid monthly loan instalment. 14 17 Titan Hardware made a payment of $3,000 for Alex Au's personal travelling expenses. The owner will reimburse the business in 30 days' time. 23 Estimated June 2022 utilities to be $7,000. The actual bill will only be received in July 2022. 28 Paid $11,000 salaries for June 2022. 30 Recorded $120,000 payment from customers. 30 Total billings to customers for goods delivered in June 2022 was $300,000. Additional information: On 1 November 2021, Titan Hardware purchased a 12-months insurance plan to protect the assets of the business with effect from 1 December 2021. The prepaid expenses amount as at 1 June 2022 represents the unutilised portion of that insurance plan. Titan Hardware depreciates its plant and equipment using the straight-line method over a useful life of 5 years with no residual value. Depreciation for all plant and equipment items will only commence in the month following the purchase. Required: (a) In the following Worksheet, (i) Enter the amounts for the opening balances marked (A), (B). (C) and (D). (ii) Enter all applicable transactions for the month of June 2022, including all necessary month-end adjustments. Inventory Plant and Accumulated equipment depreciation Accounts Accrued Unearned Bank payables expenses loan Capital revenue 574,000 B (108,000) 254,000 C 45.000 D 800,000 (b) Prepare a properly classified Statement of Comprehensive Income for the month ended 30 June 2022. (c) Prepare a properly classified Statement of Financial Position as at 30 June 2022. Date: Cash at Accounts Prepaid June bank receivables expenses 1 203,000 121,000 A Adjustments Adi Adj Adi Adj Adj Total (15 marks) Profit & Loss (5 marks) (4 marks) Notes

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