Reference no: EM132710279
Question - The Accounting System and the Balance Sheet
Axel Norse owns a business called Norse Doors which supplies and installs roller garage doors. The opening balances of assets and liabilities as at 1 April 2020 are as follows:
|
Cash at Bank
|
17,500
|
|
Accounts receivable
|
7,200
|
|
Inventory
|
12,000
|
|
Prepaid Insurance
|
2,200
|
|
Equipment
|
5,500
|
|
Vehicle
|
20,000
|
|
Accounts Payable
|
6,000
|
|
Accrued Expenses
|
350
|
|
Loan
|
15,000
|
The inventory is represented by ten standard roller doors of varying colours with a cost price of $1,200 each.
The transactions relating to April 2020 are as follows:
1. Supplied and installed five roller doors at a new apartment complex in Hilton. Invoiced the developer, Roebuck Bros. $9,000 payable 20th of May.
2. An advertisement was placed in the Regional Herald and $540 was paid. The advertisements will appear in April.
3. The bill for fuel of $400 for March 2020 was received and paid. This expense had been accrued at $350.
4. An accounts receivable, A. Wan, paid their debt of $5,400.
5. Two roller doors were provided and installed at the property of J. Kauri. who paid cash of $3,600.
6. Wages of $4,200 was paid to the assistant, Len D. Hand.
7. The total Accounts Payable as at 1 April were paid.
8. The Insurance expense for the month was recognised (the Prepaid Insurance balance as at 1 April represents four months of unexpired insurance).
9. Fuel use for the month of April was estimated at $380.
10. The interest on the loan is deducted by the bank. The loan has an interest rate of 6% per year and is paid in equal monthly amounts.
Note: Assume that Norse Doors operates on the perpetual inventory system. For the purposes of the question you may ignore depreciation, GST and Income Tax implications.
Required -
(i) Use the accounting equation format worksheet in the workbook. First calculate the opening balance of the capital account and then show the effect of the transactions 1 to 10 on the accounting equation for the month. Indicate the changes by using plus or minus signs. Show all "Expenses" in the Expenses column with a minus sign.
(ii) On the second sheet of the workbook prepare the Working Capital section of the Balance Sheet for Norse Doors as at 30 April 2020.