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Problem 5.1

Worksheet, financial statements and closing entries

The unadjusted trial balance of Secretarial Services is as follows: SECRETARIAL SERVICES Unadjusted Trial Balance as at 31 December 2017 Account Debit Cash at bank $ 6 200 Office supplies 7 260 Prepaid insurance 1 725 Office equipment 82 800 Accumulated depreciation – office equipment Bank loan payable (non-current) V. Prim, Capital V. Prim, Drawings 27 000 Secretarial services revenue Salaries expense 63 250 Advertising expense 2 250 Repairs expense 1 260 Sundry expense 7 520 Electricity expense 3 405 Telephone expense 2 620 Interest on bank loan expense 1 350 $206 640

Credit

$ 14 600 50 000 15 540 126 500

$206 640

The following additional information should be taken into account: 1. Office supplies unused at 31 December 2017 amount to $2320. 2. Unexpired insurance at 31 December 2017 is $540. 3. Office equipment is to be depreciated by $7400. 4. Salaries accrued but unrecorded on 31 December, $260. 5. Electricity accrued and unpaid, $830. 6. On 31 December, telephone charges of $425 have accrued but are unrecorded and unpaid. 7. Interest accrued on bank loan at 31 December was $250. Required A. Prepare adjusting and closing entries B. Prepare an income statement for the year ended 31 December 2017 and a balance sheet as at 31 December 2017. (A worksheet may be prepared to assist but it is not necessary.)

A. SECRETARIAL SERVICES Worksheet: for year ended 31 December 2017 Account title

Cash at Bank Office Supplies Prepaid Insurance Office Equipment Acc. Depr.– Office Equip. Bank Loan Payable V. Prim, Capital V. Prim, Drawings Secretarial Services Rev. Salaries Expense Advertising Expense Repairs Expense Sundry Expense Electricity Expense Telephone Expense Interest Expense Office Supp. Expense Insurance Expense Depr. Exp. – Office equip. Salaries Payable Electricity Payable Telephone Payable Interest Payable

Unadjusted Trial Balance Debit Credit 6 200 7 260 1 725 82 800 14 600 50 000 15 540 27 000 126 500 63 250 2 250 1 260 7 520 3 405 2 620 1 350 206 640 206 640

Adjustments Debit

1) 4 940 2) 1 185 3) 7 400

4) 260

5) 830 6) 425 7) 250 1) 4 940 2) 1 185 3) 7 400

15 290 Profit for the period

Credit

Adjusted Trial Balance Debit Credit 6 200 2 320 540 82 800 22 000 50 000 15 540 27 000 126 500 63 510 2 250 1 260 7 520 4 235 3 045 1 600 4 940 1 185 7 400

4) 260 5) 830 6) 425 7) 250 15 290

215 805

Income Statement Debit Credit

Balance sheet Debit 6 200 2 320 540 82 800

Credit

22 000 50 000 15 540 27 000 126 500 63 510 2 250 1 260 7 520 4 235 3 045 1 600 4 940 1 185 7 400

260 830 425 250 215 805

96 945 29 555 126 500

126 500

118 860

126 500

118 860

260 830 425 250 89 305 29 555 118 860

B. SECRETARIAL SERVICES Income Statement for the year ended 31 December 2017 INCOME Secretarial services revenue

$126 500

EXPENSES Salaries expense

$63 510

Advertising expense

2 250

Repairs expense

1 260

Sundry expense

7 520

Electricity expense

4 235

Telephone expense

3 045

Interest expense

1 600

Office supplies expense

4 940

Insurance expense

1 185

Depreciation expense – office equip.

7 400 96 945

PROFIT

$29 555

SECRETARIAL SERVICES Balance Sheet as at 31 December 2017 CURRENT ASSETS Cash at bank Prepaid insurance Office supplies NON-CURRENT ASSETS Office equipment Less. Accumulated depreciation TOTAL ASSETS CURRENT LIABILITIES Salaries payable Electricity payable Telephone payable Interest payable NON-CURRENT LIABILITIES Bank loan payable TOTAL LIABILITIES NET ASSETS EQUITY V Prim, Capital TOTAL EQUITY

$6 200 540 2 320 82 800 (22 000)

260 830 425 250

50 000

$9 060

60 800 $69 860

1 765

50 000 51 765 $18 095 $18 095 $18 095

Problem 5.13

The complete accounting cycle

The post-closing trial balance at 30 June 2017 of Payneham Professional Services is shown below. Transactions completed during the year ended 30 June 2018 are summarised below: 1. Collections on accounts receivable totalled $82 060. 2. Consulting fees of $88 150 plus GST of 10% were receivable during the year. Clients are invoiced after services are provided and are given 30 days in which to pay. 3. Rent paid in advance was $14 580, plus GST. PAYNEHAM PROFESSIONAL SERVICES Post-Closing Trial Balance as at 30 June 2017 Account Cash at bank Accounts receivable Prepaid rent GST receivable Office supplies Furniture and equipment Accumulated depreciation – furniture and equipment Accounts payable Salaries payable GST payable Tat Chiang, Capital

Account no. 1100 1101 1102 1105 1106 1110

Debit $ 14 800 9 440 1 220 2 240 1 320 28 720

1111 2200 2201 2203 3000 $57 740

Credit

$ 9 720 5 440 420 5 120 37 040 $57 740

4. Office supplies were purchased during the year for $380 plus GST in cash and $420 plus GST on credit. 5. Tat withdrew $25 000 for private use. 6. Salary payments amounted to $31 940, of which $420 was for salaries accrued to the end of the year ending 30 June 2017. 7. Advertising totalling $3360 plus GST was purchased on credit. 8. Electricity expense of $3600 plus GST was paid. 9. Accounts payable of $2880 were paid. 10. GST payable of $9120 less GST receivable of $2400 were forwarded in cash during the year to the Australian Taxation Office. The following additional information should be considered for adjusting entries: 11. Unused office supplies on hand at the end of the year totalled $760. 12. Depreciation on the furniture and equipment is $4600. 13. Salaries earned but not paid amount to $1180. 14. Rent paid in advance in transaction 3. Rent for 6 months of $7290 plus GST was paid in advance on 1 August and 1 February.

Required A. Prepare the ledger of Payneham Professional Services by opening T accounts for the accounts listed in the post-closing trial balance and for the accounts listed below. Post the 30 June 2017 balances. Account title

Account number

Tat Chiang, Drawings Profit or Loss Summary Consulting Fees Revenue Salaries Expense Electricity Expense Advertising Expense Depreciation Expense Rent Expense Office Supplies Expense B. C. D. E. F. G. H. I.

3301 3320 4400 5500 5503 5504 5505 5512 5513

Prepare journal entries to record the transactions completed (numbers 1–10). Post the entries to the T accounts. Journalise and post the adjusting entries. Prepare a 10-column worksheet for the year ended 30 June 2018. Prepare an income statement, a statement of changes in equity and a balance sheet. Journalise and post the closing entries. Prepare a post-closing trial balance. Prepare any suitable reversing entries on 1 July 2018.

A. C. F. and G. Cash at Bank 1/7/17 Balance b/d (1) Accounts receivable

14 800 82 060

16 038 418

(5) T. Chiang, Drawings (6) Salaries exp/payable

25 000 31 940

(8) Electricity exp/GST Rec.

3 960

(9) Accounts payable

2 880

(10) GST Payable

6 720

30/6/18 Balance c/d 96 860 1/7/18 Balance b/d

9 904

1100

(3) Prepaid rent/GST Rec. (4) Office supplies/GST Rec.

9 904 96 860

Accounts Receivable 1/7/17 Balance b/d

9 440

(2) Consulting fees rev/GST

96 965

(1) Cash at bank 30/6/18 Balance c/d

106 405 1/7/18 Balance b/d

1101 82 060 24 345 106 405

24 345

Prepaid Rent 1/7/17 Balance b/d (3) Cash at bank

1102

1 220

(14) Rent expense

14 580

30/6/18 Balance c/d

15 800 1/7/18 Balance b/d

14 585 1215 15 800

1215 GST Receivable

1/7/17 Balance b/d

2 240

(3) Cash at bank

1 458

(4) Cash/accounts payable (7) Accounts payable

1105

(10) GST Payable

2 400

80 336

(8) Cash at bank

360 30/6/18 Balance c/d

2 074

4 474 1/7/18 Balance b/d

4 474

2 074 Office Supplies

1/7/17 Balance b/d

1 320

(4) Cash/accounts payable

(11) Office supplies expense

800 30/6/18 Balance c/d 2 120

1/7/18 Balance b/d

760 1110

28 720

Accum. Depreciation – Furniture &Equipment 30/6/18 Balance c/d

760 2 120

Furniture and Equipment 1/7/17 Balance b/d

1106 1360

14320

1/7/17 Balance b/d (12) Depreciation expense

14320

1111 9 720 4600 14320

1/7/18 Balance b/d

14320

Accounts Payable (9) Cash at bank

2 880

1/7/17 Balance b/d

30/6/18 Balance c/d

6 718

(4) Office supplies/GST rec. (7) Advertising/GST rec.

9 598

Salaries Payable 30/6/18 Balance c/d

420 1180

1/7/17 Balance b/d (13) Salaries expense

1600

30/6/18 Balance c/d

9 120

462 3 696 6 718 2201 420 1180 1600

1/7/18 Balance b/d

1180

1/7/17 Balance b/d

5 120

(2) Accounts receivable

8 815

GST Payable (10) GST Rec.

5 440

9 598 1/7/18 Balance b/d

(6) Cash at bank

2200

2203

4 815 13 935

13 935 1/7/18Balance b/d

Tat Chiang Capital

4 815 3000

(d) T. Chiang, Drawings

16 000 1/7/17 Balance b/d

37 040

30/6/18 Balance c/d

25 200 (c) P or L Summary

18 070

41 200

41 200 1/7/18 Balance b/d

Tat Chiang, Drawings (5) Cash at bank

25 000 (d) T. Chiang, Capital

Profit or Loss Summary (b) Expenses

60205

(c) T. Chiang Capital

27945

(a) Income (Revenues)

88150

88150

3301 25000

3320 88150 88150

Consulting Fees Revenue (a) P or L Summary

25 200

(2) Accounts receivable

4400 88 150

Salaries Expense (6) Cash at bank

5500

31 520 (b) P or L Summary

(13) Salaries payable

32700

1180 32700

32700

Electricity Expense (8) Cash at bank

3 600

5503

(b) P or L Summary

3600

Advertising Expense (7) Accounts payable

3 360

5504

(b) P or L Summary

3360

Depreciation Expense – Furniture and Equipment (12) Accum. depreciation

4600

5505

(b) P or L Summary

4600

(b) P or L Summary

14585

Rent Expense (14) Prepaid rent

14585

5512

Office Supplies Expense (11) Office supplies

5513

1360 (b) P or L Summary

1360

B. General Journal 1.

2.

3.

4.

Cash at Bank Accounts Receivable Collection of receivables

1100 1101

82 060

Accounts Receivable Consulting Fees Revenue GST Payable Fees receivable for year

1101 4400 2203

96 965

Prepaid Rent GST Receivable Cash at Bank Rent paid for in advance

1102 1105 1100

14 580 1 458

Office Supplies GST Receivable Cash at Bank Accounts Payable

1106 1105 1100 2200

800 80

82 060

88 150 8 815

16 038

418 462

Office supplies purchased 5.

6.

7.

8.

9.

10.

Tat Chiang, Drawings Cash at Bank Drawings by owner

3301 1100

25 000

Salaries Payable Salaries Expense Cash at Bank Salaries paid

2201 5500 1100

420 31 520

Advertising Expense GST Receivable Accounts Payable Purchase of advertising

5504 1105 2200

3 360 336

Electricity Expense GST Receivable Cash at Bank Payments for electricity

5503 1105 1100

3 600 360

Accounts Payable Cash at Bank Payment to creditors.

2000 1100

2 880

GST Payable GST Receivable Cash at Bank GST paid to government

2203 1105 1100

9 120

25 000

31 940

3 696

3 960

2 880

2 400 6 720

D. General Journal Adjusting entries 2018 June 30 (11)

(12)

(13)

(14)

Office Supplies Expense Office Supplies Office supplies used

5513 1106

1 360

Depn. Exp. Furn. & Equip. Acc. Depn. Furn. & Equip. Depreciation of assets

5505 1111

4 600

Salaries Expense Salaries Payable Accrued salaries

5500 2201

1 180

Rent Expense Prepaid Rent Expiry of prepaid rent

5512 1102

14585

1 360

4 600

1 180

14585

E.

Account title Cash at Bank Accounts Receivable Prepaid Rent GST Receivable Office Supplies Furniture & Equipment Acc. Depn. – Furn. & Equip. Accounts Payable GST Payable T Chiang, Capital T chiang, Drawings Consulting Fees Revenue Salaries Expense Electricity Expense Advertising Expense Depn. Exp. Furn. & Equip. Rent Expense Office Supplies Expense Salaries Payable

Unadjusted trial balance Debit Credit 9 904 24 345 15 800 2 074 2 120 28 720 9 720 6 718 4 815 37 040 25 000 88 150 31 520 3 600 3 360 146 443 146 443

PAYNEHAM PROFESSIONAL SERVICES Worksheet for the year ended 30 June 2018 Adjustments Adjusted trial balance Debit

Credit

(14) 14585 (11) 1 360 (12) 4 600

Credit

Debit

Credit

14 320 6 718 4 815 37 040 25 000 88 150 32 700 3 600 3 360

32 700 3 600 3 360

(12) 4 600 (14) 14585 (11) 1 360

4 600 14585 1 360

4 600 14585 1 360

(13) 1 180 21725

152223

1 180 152223

Balance sheet Debit Credit 9 904 24 345 1215 2 074 760 28 720 14 320 6 718 4 815 37 040 25 000

88 150

(13) 1 180

21725 Profit for the year

Debit 9 904 24 345 1215 2 074 760 28 720

Income statement

60205 27945 88 150

88 150

92018

88 150

92018

1 180 64 073 27945 92018

F. PAYNEHAM PROFESSIONAL SERVICES Income Statement for the year ended 30 June 2018 INCOME Consulting fees revenue

$88 150

EXPENSES Salaries expense Electricity expense

$32 700 3 600

Advertising expense

3 360

Depreciation expense Rent expense

4 600 14585

Office supplies expense

1 360

PROFIT

60205 27945

PAYNEHAM PROFESSIONAL SERVICES Statement of Changes in Equity for the year ended 30 June 2018 T. Chiang, Capital – 1 July 2017 Add: Profit for the year

$37 040 27945 64985

Less: Drawings during the year T. Chiang, Capital – 30 June 2018

(25 000) 39985

PAYNEHAM PROFESSIONAL SERVICES Balance Sheet as at 30 June 2018 CURRENT ASSETS Cash at bank $9 904 Accounts receivable 24 345 Prepaid rent 1215 Office Supplies 760 Total current assets NON-CURRENT ASSETS Furniture and equipment 28 720 Less: Accum. depn. – furn. & equip. (14 320) Total non-current assets TOTAL ASSETS CURRENT LIABILITIES Accounts payable 6 718 GST payable [$4 815 – $2 074] 2 741 Salaries payable 1 180 TOTAL LIABILITIES NET ASSETS

36224

14 400 $50624

EQUITY T. Chiang, Capital TOTAL EQUITY

10 639 39985

39985 39985

G. General Journal Closing entries 2018 June 30 (a)

(b)

(c)

(d)

Consulting Fees Revenue Profit or Loss Summary Close revenue accounts

4400 3320

88 150

Profit or Loss Summary Salaries Expense Electricity Expense Advertising Expense Depn. Exp. – Furn. & Equip. Rent Expense Office Supplies Expense Close expense accounts

3320 5500 5503 5504 5505 5512 5513

60205

Profit or Loss Summary T. Chiang, Capital Transfer profit to capital

3320 3000

27945

T. Chiang, Capital T. Chiang, Drawings Close drawings to capital

3000 3301

25 000

88 150

32 700 3 600 3 360 4 600 14585 1 360

27945

25 000

H. PAYNEHAM PROFESSIONAL SERVICES Post-Closing Trial Balance as at 30 June 2018 Account Dr Cr Cash at bank $9 904 Accounts receivable 24 345 GST receivable 2 074 Prepaid rent 1215 Office supplies 760 Furniture & equipment 28 720 Accumulated depreciation $14 320 Accounts payable 6 718 GST payable 4 815 Salaries payable 1 180 T. Chiang, Capital 39985 67018 67018

I.

Reversing entry on 1 July 2018: (13)

Salaries Payable Salaries Expense Reversal of accrued salaries

2201 5500

1 180 1 180...