Reference no: EM132325541
Question
(Note: Although this question is based on the Skate 'n' Surf business the accounts, amounts and transactions involved may differ between questions. Please read each question separately.)
Skate 'n' Surf began operations on 1 June, buying and selling surfboards, skateboards, wetsuits and the protective gear for skateboarding. The structure of the business is that of a sole trader.
The business employed a sales assistant during the month who is to be paid fortnightly. Tax is deducted from the employee's wages (PAYG withholding tax) and remitted to the Australian Taxation Office (ATO) on a quarterly basis.
The business has not registered with the ATO for the goods and services tax (GST) and has elected to use the accrual basis of accounting.
Accounting records
The business records all transactions in the general journal. These transactions are then posted to the appropriate account(s) in the general ledger and the accounts receivable or accounts payable subsidiary ledgers, where separate accounts are maintained for each customer or supplier.
Chart of accounts
The chart of accounts for Skate 'n' Surf contains the accounts and account numbers below.
100Cash at bank110
Accounts receivable120
Inventory130
Prepaid insurance171
Shop equipment (cost)172
Accumulated depreciation - shop equipment200
Accounts payable210
PAYG withholding payable220
Superannuation payable230
Bank loan300Capital310
Drawings320
Profit or loss summary400
Sales revenue410
Sales returns and allowances420
Discount received500
Cost of sales600
Advertising expense610
Depreciation expense620
Discount allowed630
Electricity expense640
Insurance expense650
Interest expense660
Postage and stationery expense 670
Superannuation expense680
Telephone expense690
Wages expense
Transactions
June1The owner opened a bank account for the business with a deposit of $31,000. This is capital provided by him.
1Purchased display stands, shelving etc. (shop equipment) from Shop Displays Pty Ltd for $31,000 and computer equipment for the shop from Computer Wizards for $6,000.
These were paid for with a loan of $34,500 from the bank and cheque for $2,500 from the business bank account. The bank loan is repayable over 4 years.2Paid $3,960 for a 1-year insurance policy covering fire, theft, and public liability.
2Paid $1,000 to Local Newspapers for advertising for the shop for the month.
5Purchased inventory (skateboards and protective gear) from Excitement Plus for $22,000 on terms on net 30.
7Purchased surfboards and wetsuits from Surf Imports for $19,000 on terms of 10/10, n/30.8Credit sale to Serious Fun of skateboards and protective gear for $5,400 (cost of sales $2,100). This customer was given terms of 5/10, n/30.
8Cash sale of a skateboard and protective gear for $510 (cost of sales $300).
11Cash purchase of postage stamps and stationery from Australia Post for $120.
12Credit sale to Surfing World of various inventory items for $7,920 (cost of sales $4,200). Terms net 30.
12Returned some protective gear to Excitement Plus that was faulty and received an adjustment note (credit note) from them for $160.
13Received a cheque from Serious Fun for the amount owing by them after deducting the prompt payment discount.
14Paid Surf Imports the amount owing to them less the prompt payment discount.
17Credit sale to Academy Diving School of 16 wetsuits at a discounted price of $300 each on terms of net 15. Cost of sales $4,000.23Paid Excitement Plus $4,400 of the amount owing to them.
24Issued an adjustment note (credit note) to Academy Diving School for 1 wetsuit at $300 each that was not the size they required.
The cost of the wetsuit to us was $250 and it was put back into inventory.
24Purchased wetsuits from Surf Imports for $9,100 on terms of 10/10, n/30.25Credit sale to Serious Fun of skateboards for $8,000 (cost of sales $3,800).
Terms 5/10, n/30.27Received and banked a cheque from Academy Diving School for the amount owing by them.30A repayment of $1,100 was made on the bank loan.30The owner cashed a cheque for $750 to pay wages to Scott Walker the sales assistant of $800 less PAYG Withholding of $50.
The end of month adjustments are below.
a.Depreciation on shop equipment for the month is 20% p.a. prime cost (straight line).
b.One-twelfth of the insurance expired.
c.Superannuation payable for the month is 10% of the gross wages paid.
d.Interest charged on the bank loan for the month was $158.
The transactions above have been journalised and posted. The statement or profit or loss for June is below.
Skate 'n' Surf
Statement of profit or loss for the period 1 June to 30 June 20XX
Revenue Sales revenue Sales revenue 26,630
Less: Sales returns and allowances 300
Net sales revenue 26,330
Less: Cost of sales 14,150
Gross profit 12,180
Other revenue: Discount received 1,900 14,080
Expenses Advertising expense 1,000
Depreciation expense 617
Discount allowed 270
Insurance expense 330
Interest expense 158
Postage and stationery expense 120 Superannuation exepnse 76
Wages expense 800 Total expenses 3,371Net profit/(loss) $10,709
(a) Journalise end-of-year closing entries.
(Note: Enter debit entries first, followed by credit entries in the general journal. Credit account titles are automatically indented when the amount is entered. Do not indent manually. Leave blank any answer fields that do not require an answer. Enter accounts following the order of accounts given in the statement of profit or loss.)