Reference no: EM132374096

Assignment - MONTAGUE CARPETS PTY LTD - ACCOUNTING PRACTICE

INTRODUCTION - The objective of this Accounting practice set is to provide students with an insight into the process of recording transactions, completing adjusting and closing entries, and preparing financial statements for a retail business.

Company Background - Montague Carpets Pty Ltd has been in business in Abbotsford, Victoria since July, 2014. The company was started by Napoleon Sackville and operates a large showroom which sells Carpets from all over the world on a wholesale basis to other Carpet specialist shops on both credit and cash terms. The company's Share Capital consists of 972,000 Ordinary Shares, originally issued at $1 each and which are owned by various members of the Sackville family. The company has employed a combination of sales and administration staff to run the business since July, 2014. The company has been profitable since it was formed.

Accounting System Information & Procedures - The company has a financial year end of 30 June and prepares adjusting entries at the end of the financial year.

To ensure efficiency of its accounting procedures, the company uses the following Special Journals to maintain its accounting records:

1. Sales Journal (SJ): to record all sales of Inventory on credit

2. Purchases Journal (PJ): to record all Purchases of Inventory on credit

3. Cash Receipts Journal (CRJ): to record all Cash Receipts

4. Cash Payments Journal (CPJ): to record all Cash Payments

5. General Journal (GJ): to record all transactions other than the above.

Business transactions are recorded for Montague Carpets on a daily basis in one of these five journals in the accounts.

Additionally, the company maintains a general ledger to record postings from the journals. Subsidiary Ledgers are used to record the separate details of Accounts Receivable and Accounts Payable. Transactions are posted immediately to the relevant ledger account if they are entered into the general journal, the "other" column of the Cash Receipts Journal or Cash Payments Journal, or if they affect any of the Accounts Receivable or Accounts Payable subsidiary ledger accounts. Apart from these transactions, totals of the special journals are taken at the end of the month and then posted to the appropriate accounts. The company uses a periodic inventory system.

In practice, the company would be required to collect and pay Goods and Services Tax (GST) on its sales and purchases. However, for the purposes of this exercise, GST has been excluded.

Please Note: All amounts in this practice set should be rounded off to the nearest dollar.

INSTRUCTIONS -

1) Enter the transactions for Weeks 1 - 5 into the appropriate Journal for the month of June 2020. Next, post all the Journal transactions to the ledger accounts as specified in the "Account System Information" section of the introduction.

2) Total all Special Journal columns and post to the appropriate ledger account at the end of the month.

3) Prepare the unadjusted Trial Balance as at 30 June 2020 on the Worksheet provided.

4) Prepare the adjusting entries shown on page 10 in the General Journal and post to the relevant ledger accounts. Now enter the adjustments in the relevant worksheet columns and prepare an adjusted Trial Balance.

5) A Stocktake on 30 June 2020 indicates that the balance of Closing Inventory is $1,214,136. Use this information to complete the remaining columns of the worksheet.

6) Use the worksheet to prepare the Income Statement and Balance Sheet.

7) Complete the Schedule of Accounts Receivable and Schedule of Accounts Payable. Ensure the balances agree with the totals in the control accounts.

8) Prepare closing entries and post to the relevant general ledger accounts.

9) Complete the post-closing Trial Balance as at June 2020.

ADJUSTING ENTRIES -

a) The Showroom Fittings were installed on 1 July, 2019. They have a useful life of 9 years and no salvage value.

b) The Equipment was installed on 1 July, 2014. It has a useful life of 10 years and estimated salvage value of $2,700.

c) Twelve months of store rent was prepaid on 1 March, 2020. Of the original prepaid amount, $211,320 worth of store rent has now expired.

d) A count of Stationery Supplies indicates that $73,170 still remain on hand at year end.

e) A one-year insurance policy was purchased on 1 November 2019 for $9,720.

f) Interest on the Westpac Bank Mortgage Loan is charged at 7% per annum and is paid annually on 1 August (the interest expense should be rounded up to the nearest dollar). The Westpac Bank Mortgage Loan was originally taken out on the 1 August, 2019.

g) The company has been informed that Wellington Modern Carpets has been declared bankrupt and Montague Carpets Pty Ltd has agreed to write off the amount owing as a bad debt. The company uses the direct write-off method to account for any bad debts in the books.

h) A telephone bill for $5,508 for June was received on 3 July, 2020. The amount has not yet been recorded. The company records them as a utilities expense.

i) Office Staff are paid once per month, $62,964. The Office Staff were last paid on the 15 June, 2020. Exactly half of one month Office Staff wages are still owing.

j) Sales Staff are paid fortnightly and work 7 days per week. The sales staff were last paid on the 29 June, 2020. One day of the wages bill is still owed to the Sales Staff.

k) The estimated Tax Payable for the year ended 30 June, 2020 is $74,058. This amount is to be paid on 19 October, 2020.

Attachment:- Assignment File - ACCOUNTING PRACTICE.rar