Eddie Green owns and operates a small business Paradise Garden that sells gardening products through its...
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Eddie Green owns and operates a small business Paradise Garden that sells gardening products through its online store. All sales revenue received from online sales is recorded as unearned revenue at the time it is received. The GST on the sales is recorded at this time. The business uses a 50% mark up and reports are prepared every 6 months on 30 June and 31 December. The following Pre-adjusted Trial Balance was prepared at the end of the current period: Paradise Garden Pre-adjusted Trial Balance as at 31 December 2022 Accounts Payable Accounts Receivable Accrued Commission Revenue Admin. expenses Capital Bank Drawings Electricity GST clearing Interest expense $ $ 24 000 36 220 2 270 1 500 40 015 11 000 2 700 11 500 890 1 205 Interest revenue 230 Inventory 51 000 Loan 5 900 Prepaid Insurance Expense 13 500 Rent 2 450 Unearned Sales Revenue 75 000 Wages 12 460 Website maintenance 2 360 TOTALS 147 850 147 850 a. Prepare the General Journal entries required for the balance day adjustments at 31 December 2022: A physical count showed the business had an inventory gain of $290. Prepaid Insurance Expense was paid on 1 September 2022 for 6 months. $850 wages expense remained unpaid 70% of unearned sales has now been earned The accrued commission revenue is paid by a Garden Pots Wholesalers for a particular ceramic garden pot. At balance day $1 300 of this commission was received. A donation of a bag of high quality soil that was purchased for $160 was incorrectly recorded as Drawings. b. According to the definitions of the elements, explain how 'unearned sales' is treated. C. Prepare an Income Statement for the three months ended 31 December 2022. d. Prepare the Balance Sheet (extract) to show Current Assets as at 31 December 2022. e. Explain how the Going Concern assumption will affect the reporting of the Unearned Sales in the Balance Sheet of 31 December 2022. Question 1 2345 EOC ASSESSMENT - PRACTICE QUESTIONS 19 November 2023 Account MACRON MUSIC Post-adjustment Trial Balance as at 31 December 2021 Debit $ Credit $ 39 180 Accounts Payable Accounts Receivable 25 450 Accrued Rent 2500 Accrued Wages Accumulated Depreciation-Delivery Vans 14 000 16 000 Advertising 5 200 Allowance for Doubtful Debts 3 300 Bank Buildings Buying Expenses Capital Cost of Sales 7 820 220 000 2 500 139 690 350 000 Delivery Van Depreciation - Delivery Van Discount Expense Discount Revenue 80 000 500 4 600 3.700 Drawings GST Clearing Freight In 52 000 7.000 12 000 57 000 2 000 4 800 36 000 Interest Expense Inventory Inventory Loss Loan - ANZ Maintenance Expense 5 760 Office Expenses 47 300 Prepaid Insurance Expense 7 350 Rent Expense 1 400 Sales Sales Returns 3.000 Unearned Sales Revenue Wages Totals Prepare an Income Statement for the year ended 31 December 2021. Prepare a Classified Balance Sheet as at 31 December 2021 704 510 82 400 14 600 975 780 975 780 Question 2 The accountant of Carpet Universe provided the following Trial Balance extract as at 30 June 2021. Carpet Universe Trial Balance (extract) as at 30 June 2021 Account Capital Cash at Bank Cash Sales Debit Credit 50 650 Cost of Sales 10 220 3 200 Customs Duty Sales Returns 4 200 Credit Sales Accounts Payable Accounts Receivable 7 930 Discount Expense 165 3.480 9 300 21 500 11 200 Discount Revenue Drawings GST Clearing 2 400 Freight Out 1 200 Inventory 30 940 140 894 Additional Information Reports are prepared on a quarterly basis. On 19 June 2021 the owner donated carpet to the value of $1,200 to his son's school. This transaction has not been recorded. A payment of $330 (including GST) for Customs Duty had incorrectly recorded as Drawings. Another payment of $220 (including GST) for Customs Duty was incorrectly recorded as Freight Out. a. Prepare the General Journal entries required to record the additional information on 30 June 2021. 4 marks b. Prepare an extract of the Income Statement for the quarter ended 30 June 2021 to show the profit result up to and including Other Revenue. 5 marks Eddie Green owns and operates a small business Paradise Garden that sells gardening products through its online store. All sales revenue received from online sales is recorded as unearned revenue at the time it is received. The GST on the sales is recorded at this time. The business uses a 50% mark up and reports are prepared every 6 months on 30 June and 31 December. The following Pre-adjusted Trial Balance was prepared at the end of the current period: Paradise Garden Pre-adjusted Trial Balance as at 31 December 2022 Accounts Payable Accounts Receivable Accrued Commission Revenue Admin. expenses Capital Bank Drawings Electricity GST clearing Interest expense $ $ 24 000 36 220 2 270 1 500 40 015 11 000 2 700 11 500 890 1 205 Interest revenue 230 Inventory 51 000 Loan 5 900 Prepaid Insurance Expense 13 500 Rent 2 450 Unearned Sales Revenue 75 000 Wages 12 460 Website maintenance 2 360 TOTALS 147 850 147 850 a. Prepare the General Journal entries required for the balance day adjustments at 31 December 2022: A physical count showed the business had an inventory gain of $290. Prepaid Insurance Expense was paid on 1 September 2022 for 6 months. $850 wages expense remained unpaid 70% of unearned sales has now been earned The accrued commission revenue is paid by a Garden Pots Wholesalers for a particular ceramic garden pot. At balance day $1 300 of this commission was received. A donation of a bag of high quality soil that was purchased for $160 was incorrectly recorded as Drawings. b. According to the definitions of the elements, explain how 'unearned sales' is treated. C. Prepare an Income Statement for the three months ended 31 December 2022. d. Prepare the Balance Sheet (extract) to show Current Assets as at 31 December 2022. e. Explain how the Going Concern assumption will affect the reporting of the Unearned Sales in the Balance Sheet of 31 December 2022. Question 1 2345 EOC ASSESSMENT - PRACTICE QUESTIONS 19 November 2023 Account MACRON MUSIC Post-adjustment Trial Balance as at 31 December 2021 Debit $ Credit $ 39 180 Accounts Payable Accounts Receivable 25 450 Accrued Rent 2500 Accrued Wages Accumulated Depreciation-Delivery Vans 14 000 16 000 Advertising 5 200 Allowance for Doubtful Debts 3 300 Bank Buildings Buying Expenses Capital Cost of Sales 7 820 220 000 2 500 139 690 350 000 Delivery Van Depreciation - Delivery Van Discount Expense Discount Revenue 80 000 500 4 600 3.700 Drawings GST Clearing Freight In 52 000 7.000 12 000 57 000 2 000 4 800 36 000 Interest Expense Inventory Inventory Loss Loan - ANZ Maintenance Expense 5 760 Office Expenses 47 300 Prepaid Insurance Expense 7 350 Rent Expense 1 400 Sales Sales Returns 3.000 Unearned Sales Revenue Wages Totals Prepare an Income Statement for the year ended 31 December 2021. Prepare a Classified Balance Sheet as at 31 December 2021 704 510 82 400 14 600 975 780 975 780 Question 2 The accountant of Carpet Universe provided the following Trial Balance extract as at 30 June 2021. Carpet Universe Trial Balance (extract) as at 30 June 2021 Account Capital Cash at Bank Cash Sales Debit Credit 50 650 Cost of Sales 10 220 3 200 Customs Duty Sales Returns 4 200 Credit Sales Accounts Payable Accounts Receivable 7 930 Discount Expense 165 3.480 9 300 21 500 11 200 Discount Revenue Drawings GST Clearing 2 400 Freight Out 1 200 Inventory 30 940 140 894 Additional Information Reports are prepared on a quarterly basis. On 19 June 2021 the owner donated carpet to the value of $1,200 to his son's school. This transaction has not been recorded. A payment of $330 (including GST) for Customs Duty had incorrectly recorded as Drawings. Another payment of $220 (including GST) for Customs Duty was incorrectly recorded as Freight Out. a. Prepare the General Journal entries required to record the additional information on 30 June 2021. 4 marks b. Prepare an extract of the Income Statement for the quarter ended 30 June 2021 to show the profit result up to and including Other Revenue. 5 marks
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Answer rating: 100% (QA)
a General Journal entries for balance day adjustments at 31 December 2022 1 Inventory gain of 290 Debit Inventory 290 Credit Cost of Sales 290 2 Prepaid Insurance Expense for 6 months Debit Prepaid In... View the full answer
Related Book For
South-Western Federal Taxation 2020 Comprehensive
ISBN: 9780357109144
43rd Edition
Authors: David M. Maloney, William A. Raabe, James C. Young, Annette Nellen, William H. Hoffman
Posted Date:
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