QUESTION 1 [29 Marks]

Chopin Ltd is a retailing business. The business is registered for GST. Chopin Ltd uses a periodic inventory system. The business has a 30 June year end. The transactions for June 2021 are provided below. All transactions are inclusive of GST. The relevant customer and supplier account balances at 31 May, 2021 were:

Accounts Receivable Accounts Payable

S. Devine $6,050 D. Harms $18,150

R. Burton 3,025

Jun 5 Sold inventory to B. Senton for $4,400, terms 2/7, n/30.

6 Purchased inventory from S. Warren for $2,750, terms 2/7, n/30.

7 Received a cheque from S. Devine for $3,850 as part payment of his account.

8 Returned inventory of $550 to S. Warren for credit.

11 Paid Brambles Ltd for freight inwards of $330.

12 Received payment from B. Senton for amount due.

13 Paid S. Warren the amount due.

14 Paid Ace Reality rent of $1,100 for June.

15 Issued a credit note for damaged inventory of $770 returned by R. Burton.

17 Sent a cheque to D. Harms for $17,968 in full settlement of the account.

18 Paid Telstra for a telephone bill of $616.

23 Cash sales totaled $9,460.

25 Sold inventory on account to B. Cole for $7,700, terms 1/7, n/30.

28 R. Burton paid his account in full.

29 Purchased inventory from R. Gibson for $1,760, terms 2/7, n/30.

29 Received payment from B. Cole for goods sold on 25 June.

30 Chopin Ltd offers a 12-month warranty on their products. On 1 July 2020, there was a credit balance of $17,000 in its warranty provision account. During June Chopin Ltd incurred $16 500 in warranty costs which was in the form of inventory. At the end of the month, Chopin Ltd estimated its liability for unexpired warranty contracts as $17,500.

Required:

a) Record the June transactions in the relevant journals (round amounts to the nearest $). Total all special journals. Ignore narrations in the general journal.

[23 Marks]

b) Post the journals to the Accounts Receivable Control Account only in the general ledger. [3 Marks]

c) Explain the difference between a provision and other types of liabilities recognized in the statement of financial position. [3 Marks]