Topic 5 - Workshop Worksheet PDF

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BSB110 Topic 5 Workshop Worksheet – Accrual Accounting Concepts PSA3.2 Maxi Services Ltd The unadjusted trial balance at 30 June 2020 for Maxi Services Ltd is as follows. MAXI SERVICES LTD Trial Balance as at 30 June 2020 No. 10 0 10 4 112 113 13 0 13 1 20 0 21 3 30 0 31 0 40 0 50 0 51 0 51 5 53 0

Account Name

Debit $

Cash

54,800

Accounts Receivable

15,000

Prepaid Insurance Supplies Office Equipment

Credit $

3,200 1,500 30,000

Accumulated Depreciation

20,000

Accounts Payable

7,400

Service Revenue Received in Advance

4,000

Share Capital

60,000

Retained Earnings

7,500

Service Revenue Salaries Expense

46,800 34,000

Rent Expense

2,000

Insurance Expense

1,200

Electricity Expense

4,000

Total

145,700

145,700

The chart of accounts for Maxi Services Ltd contains the following accounts in addition to those listed on the trial balance:  218 Electricity Payable

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  

215 Salaries Payable 520 Depreciation Expense 505 Supplies Expense.

Other data: 1. Supplies on hand at 30 June total $1,000. 2. An electricity bill for $300 for June has not been recorded and will not be paid until next month. 3. The balance of the prepaid insurance account is the annual premium for insurance commencing 1 January 2020. 4. Services were performed during the current period in relation to $3,000 of Revenue Received in Advance. 5. Salaries of $4,600 are owed at 30 June. 6. Depreciation expense for the year is $4,000. 7. Invoices representing $4,400 of services performed during the month have not been recorded as of 30 June 2020.

Required: (a) Prepare the adjusting entries from the information provided. (b) Prepare an adjusted trial balance as at 30 June 2020 using the table below. (c) Calculate profit or loss for the year ended 30 June 2020. (d) If the business wanted to report a higher profit which of the adjusting entries above would be avoided? Which stakeholders would be affected by the misreported profit?

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PSA3.2 Solution (a) Maxi Services Ltd General Journal # Date 30 June

Account Name (narration) Supples Expense

Post Ref. 505

Supplies

113

Electricity Expense

530

Electricity Payable

Salaries expense

500 300 300 1,600 1,600

213

3,000

400 500

Salaries payable

215

Depreciation expense

520

Accumulated Deprecation

Credit

500

218

Insurance Expense Prepaid Insurance Service revenue received in advanced Service Revenue

Debit

3,000 4,600 4,600 4,000

131

Accounts Receivable

104

Service Revenue

200

4,000 4,400 4,400

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(b) Adjusted Trial Balance MAXI SERVICES LTD Adjusted Trial Balance as at 30 June 2020 No.

10 0 10 4 112 113 13 0 13 1 20 0 21 5 21 8 21 3 30 0 31 0 40 0 50 0 50 5 51 0 51 5 52 0 53 0

Account Name

Unadjusted Trial Balance Debit Credit $ $

Cash

54,800

Accounts Receivable

15,000

Prepaid Insurance Supplies Office Equipment

Adjusting Entry Debit Credit

54,800 4,400

30,000

24,000 7,400

7,400

Salaries Payable Electricity Payable Service Revenue Received in Advance

4,000

Share Capital

4,600

4,600

300

300

3,000

1,000 60,000

60,000

Retained Earnings

7,500

7,500

Service Revenue 34,000

Rent Expense

2,000

Insurance Expense

1,200

Depreciation Expense 4,000

54,200

3,000 4,400

46,800

Supplies Expense

Electricity Expense

1,600 1,000 30,000

4,000

20,000

Accounts Payable

Salaries Expense

19,400 1,600 500

3,200 1,500

Accumulated Depreciation

Adjusted Trial Balance Debit Credit

4,600

38,600

500

500 2,000

1,600

2,800

4,000

4,000

300

4,300

5

Total

145,700

145,700

18,40 0

18,40 159000 159000 0

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(d) Calculate profit or loss.

Maxi Services Ltd Statement of Profit or Loss for the year ended 30 June 2020 $

$

REVENUES Service Revenue

54,200

LESS: EXPENSES 1Salaries Expense 2Supplies Expense

38,600 500

3Rent Expense

2,000

4Insurance Expense

2,800

5Depreciation Expense

4,000

6Electricity Expense

4,300

Profit:

52 200 2000

(e) If the business wanted to report a higher profit which of the adjusting entries above would be avoided? 1, 2, 3, 5, 6

Which stakeholders would be affected by the misreported profit? Employees, Suppliers, Insurance providers, electricity providers

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PSB3.2 Brothers Ltd Brothers Ltd began operations on 1 February 2019. The trial balance at 30 June is as follows. BROTHERS LTD Trial Balance as at 30 June 2019 No . 10 0 10 4 112 113 13 0 20 0 21 3 30 0 40 0 50 0 51 0

Account name

Debit

Cash

9,480

Accounts Receivable

3,150

Prepaid Insurance Supplies

2,520 2,350

Office Equipment

Credit

22,500

Accounts Payable

1,550

Service Revenue Received in Advance

1,500

Share Capital

20,000

Service Revenue

25,495

Salaries Expense

3,295

Rent Expense

5,250

TOTAL

48,545

48,545

In addition to those accounts listed on the trial balance, the chart of accounts for Brothers Ltd also contains the following accounts:  131 Accumulated Depreciation – Office Equipment  218 Electricity Payable  215 Salaries Payable  520 Depreciation Expense  515 Insurance Expense  530 Electricity Expense  505 Supplies Expense.

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Other data: 1. Supplies on hand at 30 June total $490. 2. An electricity bill for $110 has not been recorded and will not be paid until next month. 3. The insurance policy is for a year, commencing 1 February 2019. 4. Services were performed during the period in relation to $800 of Revenue Received in Advance. 5. Salaries of $770 are owed at 30 June. 6. The office equipment has a 5-year life with no resale value and is being depreciated at $375 per month for 60 months. 7. Invoices representing $1500 of services performed during the month have not been recorded as of 30 June.

Required: (a) Prepare the adjusting entries for the month of June. (b) Using T-accounts, enter the totals from the trial balance as beginning account balances and then post the adjusting entries to the ledger accounts. (c) Prepare an adjusted trial balance as at 30 June 2019. (d) If the business wanted to report a higher profit which of the adjusting entries would be avoided? Which stakeholders would be affected by the misreported profit?

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(a) Prepare the adjusting entries for the month of June. Brothers Ltd General Journal #

Date 30 June

Account Name (narration) Supplies Expense Supplies Electricity Expense Electricity Payable Insurance Expense Prepaid Insurance Service Revenue Received in Advance Service Revenue Salaries Expense Salaries Payable Depreciation Expense Accumulated Depreciation – Office Equipment Accounts Receivable Service Revenue

Post Ref. 505

$ $ Debit Credit 1,860

113

1,860

530

110

218 515

110 1,050

112 213

1,050 800

400 500

800 770

215 520

770 1,875

131 104 400

1,875 1,500 1,500

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(b) Using T accounts, enter the totals from the trial balance as beginning account balances and then post the adjusting entries to the ledger accounts. Brothers Ltd General Ledger

30 Balance June

Balance Service Revenue

Balance

Cash 9,840

100

Accounts Receivable

10 4

3,150 1,500

Prepaid Insurance 2,520 Insurance Expense

Balance

Supplies 2,350

Balance

Office Equipment 22,500

Supplies Expense

112 1,050

113 1,860

130

Accumulated Depreciation – Office Equipment Depreciation Expense Accounts Payable Balance Service Revenue Received in Advance Service Revenue 800 Balance

131 1,875 20 0 1,550 213 1,500

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Salaries Payable Salaries Expense Electricity Payable Electricity Expense Share Capital Balance Service Revenue Balance Service Revenue Received In Advance Accounts Receivable

Salaries Expense Balance Salaries Payable

Supplies

Balance

Prepaid Insurance

215 770 218 110 30 0 20,000 400 25,495 800 1,500 27,795 50 0

3,295 770

Supplies Expense 1,860

505

Rent Expense

51 0

5,250 Insurance Expense 1,050

Depreciation Expense Accumulated Depreciation 1,875 Electricity Expense

515

520

53

12

0 Electricity Payable

110

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(c) Prepare an adjusted trial balance as at 30 June 2019.

Brothers Ltd Adjusted Trial Balance as at 30 June 2019 No.

Account Name Cash

Debit $ 9,840

Accounts Receivable

4,650

Prepaid Insurance

1,470

Supplies Office Equipment

Credit $

490 22,500

Accumulated Depreciation – Office Equipment

1,875

Accounts Payable

1,550

Service Revenue Received in Advance

700

Salaries Payable

770

Electricity Payable

110

Share Capital

20,000

Service Revenue

27,795

Salaries Expense

4,065

Supplies Expense

1,860

Rent Expense

5,250

Insurance Expense

1,050

Depreciation Expense

1,875

Electricity Expense

110 52,800

52,800

(d) If the business wanted to report a higher profit which of the adjusting entries would be avoided? Which stakeholders would be affected by the misreported profit?...