Question

QUESTION 1 Joe Lars is the owner of “Joe's Corner Garage", a car service and repair shop in the city of Clutchmore. Joe's Corner Garage services and repairs cars, as well as sells car accessories to customers. The opening balances of assets, liabilities and capital of the business as at 1 June 2020 are shown in the worksheet on page 3. The following is additional information relating to the Joe's Corner Garage's accounts balances as at 1 June 2020: Account Balance Particulars Accounts $62,000 This balance includes an amount of $500 owing from a receivables customer who was subsequently found to have run away in June 2020. The uncollectable amount is therefore considered as a bad debt. Prepaid $6,000 On 1 April 2020, the business paid for a 12-months fire expenses insurance plan to protect its property, plant and equipment with immediate effect. The amount of prepaid expenses as at 1 June 2020 represents the unutilised portion of that fire insurance. Accrued $12,000 This amount represents unpaid rental for four months from expenses February 2020 to May 2020. Unearned $7,200 Unearned revenue of $7,200 represents an advance payment revenue from a customer for car repair services to be performed equally over three months from June 2020 to August 2020. 4 During the month ended 30 June 2020, the business conducted the following transactions: Jun 1 Purchased a motor vehicle for customers' use while their cars are being serviced and repaired. The motor vehicle cost $50,000 and was purchased using a bank loan. The motor vehicle is expected to have a useful life of 5 years and at the end of that time, its residual value is estimated to be $5,000. Joe's Corner Garage uses the straight-line method to calculate depreciation. Paid $15,000 to accounts payables. 9 Paid three months of the overdue rental (February 2020 to April 2020). Joe took out some car accessories from the store amounting to $500 for personal use. Purchased $20,000 of inventory on credit. Received a total amount of $20,000 from customers to whom sales were made in May 2020. Paid $2,000 for June 2020 utilities. 15 17 27 29 30 Total sales of car accessories for the month amounted to $14,000. All transactions were on credit terms, and the business made a profit of $5,000 on these sales. Paid loan interest amounting to $250. 30 ACC10007 Financial Information for Decision Making Final Assessment Semester 1, 2020 Page 2 of 11 Required: (a) In the following Worksheet, enter ALL applicable transactions for the month of June 2020, including all necessary month-end adjustments. (13 marks) Date: June Cash Accounts receivables Prepaid expenses Inventory Motor vehicles Accumulated depreciation Accounts payables Accrued expenses Unearned revenue Loan Capital Profit & Loss Notes 14200 6.000 21.000 34.000 12.000 7 200 50.000 1 4 9 15 17 27 29 30 30 30 Adjustments Adj Adj Adi Adi Adi Total (b) Prepare a properly classified Statement of Comprehensive Income for the month ended 30 June 2020. (6 marks) (c) Prepare a properly classified Statement of Financial Position as at 30 June 2020. (5 marks)

Answer 1

1 (A) Worksheet: Date: June Cash Accounts receivab Prepaid expenses Inventory Motor vehicles Accumulated depreciati Accounts payables Accrued expenses Unearned revenue Loan Capital Profit & Loss Notes 14200 62000 6000 21000 0 34000 12000 7200 0 50000 50000 50000 4 -15000 -15000 9 -12000 -12000 15 -500 -500 17 20000 20000 27 20000 -20000 29 -2000 -2000 Utilities 30 14000 14000 Sales -9000 -9000 Cost of sales (14000-5000) (14000-5000) 30 -250 -250 Interest Adjustments Adj. -500 -500 Bad debt Adj. -600 -600 Insurance (6000/10) Adj. -2400 2400 Repair services performed (7200/3) Adj. 750 -750 Depreciation expense (50000-5000)/5*(1/12) 4950 55500 5400 31500 50000 750 39000 0 4800 50000 49500 3300 Total

amount($) Statement of emprehensive income for the year ended 30 june 2020 amount($) 16,400 -9,000 7,400 (B) Particulars Sales revenue (14000+2400) cost of sales Gross profit less: operating exp utilities exp bad debt exp insurance exp depreciation exp interest exp total operating exp -2000 -500 -600 -750 -250 -4100 3.300

Statement of financial position As on 30 June 2020 Amount ($) Amount ($) 4950 55500 5400 31500 97350 50000 (750) 49250 146600 Particulars Assets: cash Accounts receivable Prepaid expenses Inventory Total current assets Property plant and equipment: Motor vehicles Less: accumulated depreciation Total assets Liabilities and owners equity: Current liability: Accounts payable Unearned revenue Total current liabilities Long term liabilities: Loan Total liabilities Owner's equity Capital: Beginning balance drawings Net income Ending balance Total liabilities and owner's equity 39000 4800 43800 50000 93800 50000 (500) 3300 52800 146600

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