Question

Specific task requirements: Alfie Lockyer decides to start up a business as a sole trader on 1 July 2020. Alfie’s Rugby League Memorabilia and Framing Services will sell a range of different memorabilia items including framed jerseys, signed footballs and signed photos of famous rugby league players both online and from a retail shop in Caloundra, Queensland. The business will also provide professional framing services for customers from its retail shop. The chart of accounts for the business is shown below: Account number Account name Assets 1001 Cash at bank 1002 Accounts receivable 1003 Inventory 1004 Office supplies 1005 Prepaid rent 1006 Framing supplies 1101 Shop fixtures and fittings 1102 Accumulated depreciation – shop fixtures and fittings 1103 Office equipment 1104 Accumulated depreciation – office equipment Liabilities 2001 Accounts payable 2002 Wages payable 2003 Interest payable 2004 Electricity payable 2101 Bank loan Equity 3001 A. Lockyer, capital 3002 Drawings 3101 Profit or loss summary Income 4001 Sales income 4002 Framing services income Expenses 5001 Cost of sales 5002 Advertising expense 5003 Wages expense 5004 Insurance expense 5005 Phone and internet expense 5006 Electricity expense 5007 Office supplies expense 5008 Framing supplies expense 5009 Rent expense 5010 Interest expense 5011 Depreciation expense – shop fixtures and fittings 5012 Depreciation expense – office equipment Below are the transactions for the business for its first month of operations: 1 July 2020 Alfie Lockyer invests $50,000 cash to start the business. 1 July 2020 Borrowed $10,000 cash from the Southpac Bank at an interest rate of 5% per annum payable in arrears on 31 December and 30 June each year. 1 July 2020 Paid $12,000 cash for 12 months’ rent on the shop till 30 June 2021. 1 July 2020 Sunny Coast Shopfitters completed the fixtures and fittings for the shop at a total cost of $19,880 which is due to be paid by the end of July. 1 July 2020 Purchased office equipment for $5,000 cash and office supplies for $350 cash. 2 July 2020 Purchases framing supplies for $590 cash. 2 July 2020 Purchased the following memorabilia items for cash: • Framed Brisbane Broncos jersey signed by all members of the 1992 premiership winning team: Cost = $1,100 (Item BB1992); • Signed Billy Slater football boots: Cost = $575 (Item BS2004); • Football signed by all members of the 2010 Queensland State of Origin team: Cost = $1,530 (Item QLD2010); • Signed photo of 2010 NSW State of Origin team: Cost = $195 (Item NSW2010); • Signed photo of 1957 Australian Kangaroos team that won the Rugby League World Cup: Cost = $855 (Item WC1957). 2 July 2020 Incurred online advertising expenses of $3,000. Half of this amount is due to be paid by 23 July, with the remainder due on 13 August. 3 July 2020 Provided framing services for $1,350 cash. 4 July 2020 Sold item BS2004 for $940 cash. 6 July 2020 Sold item WC1957 for $1,560 to a customer on credit. Amount is due in 14 days. 7 July 2020 Paid $250 wages in cash to casual employee. 9 July 2020 Provided framing services for $1,075 cash. 11 July 2020 Purchased framing supplies for $665 cash. 12 July 2020 Provided framing services for $742 cash. 13 July 2020 Purchased the following memorabilia items for cash: • Signed and framed Jonathon Thurston poster: Cost = $475 (Item JT2017); • Framed photo of North Queensland Cowboys 2015 Premiership team: Cost = $350 (Item NQ2015); • Framed South Sydney jersey signed by all members of 2014 premiership winning team: Cost = $840 (Item SS2014); • Signed Wally Lewis match-worn football boots: Cost = $490 (Item WL1991); • NRL 2000 Grand final match ball signed by all members of Brisbane Broncos and Sydney Roosters: Cost $1,250 (Item NRL2000). 14 July 2020 Paid $300 wages in cash to casual employee. 16 July 2020 Received amount owing from customer from credit sale on 6 July. 17 July 2020 Sold Item NRL2000 for $2,090 cash. 19 July 2020 Provided framing services for $1,520 cash. 20 July 2020 Paid insurance expense of $525 for July in cash. 21 July 2020 Sold Item JT2017 to a customer on credit for $870. Amount is due within 14 days. 21 July 2020 Paid $500 wages in cash to casual employee. 22 July 2020 Paid amount owing for online advertising. 22 July 2020 Purchased framing supplies for $743 cash. 23 July 2020 Sold Item BB1992 to a customer on credit for $2,430. Amount is due within 14 days. 24 July 2020 Provided framing services for $928 cash. 25 July 2020 Paid $245 cash for phone and internet expenses for July. 25 July 2020 Sold item QLD2010 for $2,890 cash. 26 July 2020 Paid amount owing to Sunny Coast Shopfitters. 27 July 2020 Sold item NSW2010 for $200 cash. 28 July 2020 Paid $450 wages in cash to casual employee. 29 July 2020 Sold item WL1991 for $925 to a customer on credit. Amount is due in 14 days. 29 July 2020 Provided framing services for $2,890 on credit. Amount is due to be paid within 14 days. 30 July 2020 Purchased framing supplies for $1,148 cash. 30 July 2020 Received amount owing from customer for credit sale on 21 July. 31 July 2020 Alfie Lockyer withdrew $5,000 cash from the business. 31 July 2020 Received $850 electricity bill for the month of July. Amount is due to be paid in 7 days’ time. Below is some additional information relating to the transactions for the business for July 2020 (relevant for adjusting entries): • One month of rent expense was incurred at 31 July; • Wages of $165 were earned by the casual employee in the last few days of the month and the next payday is on 4 August; • Interest expense on the bank loan was incurred during the month with the next interest payment to the bank due on 31 December 2020; • A stocktake on 31 July revealed that the cost of supplies still on hand were as follows: o Office supplies = $60; o Framing supplies = $1,240. • Additional information for calculating depreciation expenses for July (ie one month) were as follows: o Shop fixtures and fittings: estimated useful life = 10 years, estimated residual value = $1,000; o Office equipment: estimated useful life = 4 years; estimated residual value = $500. Required: Complete the following for Alfie’s Rugby League Memorabilia and Framing Services for the month of July 2020: a) Record the above transactions for 1 to 31 July in the general journal; b) Post/transfer the transactions to the relevant ledger accounts; c) Using the above additional information, record the necessary adjusting entries in the general journal and post them to the relevant ledger accounts; d) Record the necessary closing entries in the general journal and post them to the relevant ledger accounts; e) Prepare a post-closing entry trial balance. Refer to example on p. 438 of Deegan textbook. NOTE: Balances should be linked to the closing balances in the ledger accounts; f) Prepare an income statement for the period ended 31 July 2020 (following the format on p. 523 of Deegan textbook). NOTE: Gross profit should be calculated; Expenses should be listed as they appear in the chart of accounts; and Tax expense should be ignored). g) Prepare a balance sheet as at 31 July 2020 (following the format on pp. 438- 439 of Deegan textbook). NOTE: Balances should be linked to the closing balances in the ledger accounts. NOTE: • You should use the template spreadsheet on Blackboard ‘ACC106 S2 2020_Task 2 template.xls’) to complete the above requirements; • All general journal entries should include a brief narration/explanation; • Appropriate formulae should be used in the ledger accounts to calculate the closing balances of each account. Refer to Exhibit 8.3 on p. 405 of Deegan textbook for an example of how to calculate the balance of a ledger account; • Before uploading your completed assignment to Blackboard, you should include your student number and name at the start of the file name, eg ‘1234567_John Smith_ ACC106 S2 2020_Task 2.xls’; • Refer to the marking rubric on the following pages for assessment criteria etc.

Answer 1

2 3 Debit Credit 4 General Journal Date Account Title & Explanation 2020 01-Jul Cash at bank A. Lockyer, capital (To record amount invested in business) 50,000 50,000 5 6 7 8 10,000 9 10 01-Jul Cash at bank Bank loan (To record amount borrowed from Bank) 10,000 11 12 13 12,000 14 01-Jul Prepaid rent Cash at bank (To record rent paid in advance) 12,000 15 16 17 19,880 18 01-Jul Shop fixtures and fittings Accounts payable (To record completion of Fixtures and Fittings) 19,880 19 20

21 22 01-Jul Office equipment 5,000 Office supplies 350 Cash at bank (To record purchase of Office Equipment and office Supplies) 23 5,350 24 25 26 590 27 02-Jul Framing supplies Cash at bank (To record purchase of Framing Supplies) 590 28 29 30 4,255 02-Jul Inventory (1100+575+1530+195+855) Cash at bank (To record Purchase of memorabilia items for 31 32 33 4,255 sh) 34 3,000 35 02-Jul Advertising expense Accounts payable (To record accrued advertising expense) 3,000 36 37 1,350 38 39 03-Jul Cash at bank Framing services income (To record Framing Services Income) 1,350 40

42 940 43 04-Jul Cash at bank Sales income (To record sale of item BS2004) 940 44 45 575 46 47 Cost of Sales Inventory (To record cost of Inventory) 575 48 49 50 1,560 51 06-Jul Accounts receivable Sales income (To record sale of item WC1957) 1,560 52 53 54 855 55 Cost of Sales Inventory (To record cost of Inventory) 855 56 57 58 250 59 07-Jul Wages expense Cash at bank (To record wages paid) 250 60 61 62 1,075 09-Jul Cash at bank Framing services income (To record Framing Services Income) 63 64 1,075

66 665 67 11-Jul Framing supplies Cash at bank (To record purchase of Framing Supplies) 665 68 69 70 742 71 12-Jul Cash at bank Framing services income (To record Framing Services Income) 742 72 73 74 3,405 75 13-Jul Inventory (475+350+840+490+1250) Cash at bank (To record Purchase of memorabilia items for cash) 3,405 76 77 78 300 14-Jul Wages expense Cash at bank (To record wages paid) 79 80 300 81 82 1,560 83 16-Jul Cash at bank Accounts receivable (To record amount received from customer) 1,560 84 85 2,090 86 87 88 17-Jul Cash at bank Sales income (To record sale of item NRL2000) 2,090

90 1,250 Cost of Sales Inventory (To record cost of Inventory) 91 92 1,250 93 94 1,520 95 19-Jul Cash at bank Framing services income (To record Framing Services Income) 1,520 96 97 98 525 99 20-Jul Insurance expense Cash at bank (To record Insurance paid) 525 100 101 102 870 103 21-Jul Accounts receivable Sales income (To record sale of item JT2017) 870 104 105 106 475 107 Cost of Sales Inventory (To record cost of Inventory) 475 108 109 110 500 111 21-Jul Wages expense Cash at bank (To record wages paid) 500 112

114 1,500 115 22-Jul Accounts payable Cash at bank (To record amount paid) 1,500 116 117 118 743 119 22-Jul Framing supplies Cash at bank (To record purchase of Framing Supplies) 743 120 121 122 2,430 123 23-Jul Accounts receivable Sales income (To record sale of item BB1992) 2,430 124 125 126 1,100 127 Cost of Sales Inventory (To record cost of Inventory) 1,100 128 129 130 928 131 24-Jul Cash at bank Framing services income (To record Framing Services Income) 928 132 133 134 245 135 25-Jul Phone and internet expense Cash at bank (To record payment of Phone and internet expense) 245 136

138 2,890 139 25-Jul Cash at bank Sales income (To record sale of item QLD2010) 2,890 140 141 142 1,530 143 Cost of Sales Inventory (To record cost of Inventory) 1,530 144 145 146 19,880 147 26-Jul Accounts payable Cash at bank (To record payment of Accounts Payable) 19,880 148 200 149 150 151 152 27-Jul Cash at bank Sales income (To record sale of item NSW2010) 200 195 153 154 155 156 157 158 159 160 Cost of Sales Inventory (To record cost of Inventory) 195 450 28-Jul Wages expense Cash at bank (To record wages paid) 450

925 162 163 164 29-Jul Accounts receivable Sales income (To record sale of item WL1991) 925 490 Cost of Sales Inventory (To record cost of Inventory) 490 165 166 167 168 169 170 171 172 173 2,890 29-Jul Accounts receivable Framing services income (To record Framing Services Income) 2,890 174 1,148 175 30-Jul Framing supplies Cash at bank (To record purchase of Framing Supplies) 1,148 176 177 178 870 179 30-Jul Cash at bank Accounts receivable (To record amount received from customer) 870 180 181 182 5,000 183 31-Jul Drawings Cash at bank (To record amount withdrawn) 5,000 184

186 850 187 31-Jul Electricity expense Electricity payable (To record accrued electricity expense) 850 188 189 190 191 Credit Adjusting Entries Date Account Title & Explanation 31-Jul Rent expense (12000/12) Prepaid Rent (To record expired rent) Debit 1,000 192 193 194 195 196 1,000 165 197 31-Jul Wages expense Wages payable (To record accrued wages) 165 198 199 200 42 201 31-Jul Interest Expense (10000*5%*1/12) Interest Payable (To record accrued interest expense) 42 202 203 204 290 205 31-Jul Office supplies expense (350-60) Office supplies (To record supplies consumed during the Year) 290 206

208 1,906 209 31-Jul Framing supplies expense Framing supplies (590+665+743+1148-1240) (To record supplies consumed during the Year) 1,906 210 211 212 157 (19880-1000)/10*1/12 213 31-Jul Depreciation expense-shop fixtures and fittings Accumulated Depreciation -- shop fixturesand fittings (To record depreciation expense) 157 214 215 216 94 (5000-500)/4*1/12 217 31-Jul Depreciation expense - office equipment Accumulated depreciation office equipment (To record depreciation expense) 94 218 219 220 221 222 223 Note; As per HOMEWORKLIB POLICY we are allowed to answer first question if there are multiple questions and I have answered all the Journal entries and Adjusting Entries. 224