QUESTION ONE (20 MARKS)

You have been provided with the end of year, unadjusted trial balance for Tinas Managerial Advice business and the balance day adjustments to be implemented. Tina commenced business on 1^st July 2018.

Required:

1. Provide the General Journal entries for the:

i) Balance day adjustments on the 31^st October 2018;

ii) Reversing entries where required on 1^st November 2018.

(9 Marks)

2. Provide an Income Statement for the period ending 31^st October 2018. (4 Marks)

3. Provide a fully classified Balance Sheet showing. (5 Marks)

4. Explain the role of the Prepaid Contents Insurance and the Unearned Advice Commissions Revenue accounts in this business. (2 Marks)

TINAS MANAGERIAL ADVICE SERVICE

UNADJUSTED TRIAL BALANCE AS AT 31^st OCTOBER 2018

ACCOUNT DEBIT $ CREDIT $

Cash at bank 25,440

Accounts Receivable 91,000

Allowance for Doubtful Debts 2,000

Office Supplies Inventory 300

Prepaid Contents Insurance 4,800

Prepaid Rent of offices 12,000

Photocopier (Purchased 1^st July 2017) 60,000

Accounts Payable 32,000

Unearned Advice Services Revenue 3,340

VAT Collected (20%) 22,068

VAT Paid (20%) 2,287

Loan from WES Bank Ltd (due 30^th June 2025) 80,000

Capital Tina Tobin 36,219

Drawings Tina Tobin 10,000

Advice Service Revenue 134,000

Electricity Office 3,100

Discount Expense 300

Advice staff bonus 6,800

Advice staff wages 78,200

Office Staff wages 15,400

TOTAL $309,627 $309,627

QUESTION ONE CONTINUED

Additional Information

• The 12-month Content Insurance policy was paid on 1^st July 2018.

• An Accounts Receivable of $1,000 is uncollectible and is to be written off. The policy is to have the Allowance for Doubtful Debts equal to 1% of net Advice Service Revenue.

• The Photocopier is to be depreciated using a unit method; it is anticipated that the photocopier will be kept till it has produced 2,000,000 copies and then be traded in for $10,000. As at 30^th October 2018 it had produced 80,000 copies.

• $1,340 of the Unearned Advice Services Revenue had been earned, but not recorded on 29^th October 2018.

• Advice Staff Wages amounting to $2,600 had been incurred but not yet paid as at 31^st October 2018.

• Office Supplies on hand as at 31^st October were valued at $170.

• $4000 of the Prepaid Rent of Showroom figure relates to the month of November 2018.