Please refer to Chapter 15 Balance Day Adjustments learning materials to complete the following questions:

Please follow the extract of the accounting Policies and Procedures of Milo Ltd. based on accrual accounting as below:

• All the prepaid expenses need to be adjusted on the last day of the period to match the revenue for the same period.
• The unused portion of the prepaid expenses need to be carried forward as current assets for the following period
• Any expenses due but not paid should be recognised as an expense to match the revenue of the respective period.
• Any revenue which is accrued in the period should be recognised as income for that period.
• Any revenue which is received as advance should be considered as current liability.
• The number of bad debts calculated every year, after following up the collection procedures, need to be written off on balance day of the respective financial year.
• Allowance for Doubtful Debts to be 5.5 % of Accounts Receivable
• The rules of double entry accounting principles must be followed.
• At balance day all Accrued income and expenses must be brought to account
• At balance day all prepaid income and expenses must be adjusted so that accounts are not overstated

You are working with Complete Business Services on the year-end adjustments for one of your clients, Milo Ltd. You are required to comply with the following information given by the client to finalise the year-end adjustment entries:

Ledger Account balances (prior to any Balance Day Adjustments) as of 30 June 2018:

Insurance	$ 2,400.00
Rent	$ 1,800.00
Interest Income	$ 1,400.00
Plant	$ 10,000.00
Accumulated Depreciation	$ 6,000.00
Accounts Receivable	$ 5,550.00
Allowance for Doubtful Debts	$ 200.00

Additional Information

• On 1 December 2017 a one-year insurance premium was paid for $2,400 plus GST. Insurance cover starts on 1 December
• Rent paid in advance $150 on 30 June 2018
• Interest earned but not received $350 on 30 June 2018
• Depreciation to be provided $1,000 on 30 June 2018
• Bad Debts to be written off $500 plus $50 GST on 30 June 2018
• Allowance for Doubtful Debts to be adjusted to 5.5% of Accounts Receivable
• Physical count on 30 June 2018 reveals inventory value of $68,000 and the perpetual records show inventory value $70,000. Milo Ltd uses a perpetual inventory system.

Task 8

Prepare general journal entries for the balance day adjustments, reversing general journal entries (for some accounts only) on 1 July 2018, and adjustment entries to record inventory variance.

Note: you need to provide the narration/description in each journal entry.