ACC101 – Fundamentals of Accounting I

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Question 1: Control Account and Subsidiary ledgers

The post-closing trial balance of Pollack Ltd as at I November 2012 contained the following normal balances:

	Account no.	Account title	Account balance
	1100	Cash at Bank	$120 000
	1120	Accounts Receivable	14 540
	1130	Bills Receivable	1 500
	1140	Inventory	160 000
	1150	Prepaid Insurance
	1160	GST Outlays	4 000
	1210	Delivery Vehicle	80 000
	1215	Accumulated Depreciation - Delivery Vehicle	8 000
	1220	Office Equipment	48 000
	1225	Accumulated Depreciation - Office Equipment	8 000
	2110	Accounts Payable	11 560
	2120	Bills Payable
	2150	GST Collections	7 000
	3110	Share Capital	384 000
	3120	Retained Earnings	9 480
	4110	Sales
	4115	Sales Returns and Allowances
	4120	Discount Received
	5110	Purchases
	5115	Purchases Returns and Allowances
	5120	Discount Allowed
	5130	Rent Expense
	5140	Electricity Expense
	5150	Salaries Expense

Subsidiary ledger balances at 31 October 2012 were:

Accounts Receivable

Customer	Date of sale	Terms	Amount
D. Draper	28 October	2/10, n/30	$4 200
C. Hand	30 October	2/10, n/30	4 620
T. Tremble	18 October	2/10, n/30	5 720
Accounts Payable
Creditor	Date of purchase	Terms	Amount
Laws Ltd	19 October	1/30, n/60	$3 280
M. Merlow	10 October	n/30	5 300
Lenny Ltd	23 October	1/15, n/30	2 980

Nov.

1. Bought inventory from M. Merlow on credit, $4800 plus GST; terms n/30. Purchased 1 year's insurance cover for $1800 plus GST, cheque no. 400.

3. Inventory sold to C. Hand last month was returned. Issued an adjustment note for the amount of $110 (including GST).

Received a cheque from D. Draper to cover the sale made on 28 October.

4. Paid Lenny Ltd cheque no. 401 for purchase of 23 October.

Purchased inventory from Laws Ltd on credit, $4800 plus GST; terms 1/10, n/60.

5. Issued cheque no. 402 for $3300 to M. Merlow on account, and issued a 60-day 10% bill

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payable for the balance due on the purchase of 10 October

8. Paid November rent of premises $1080 plus GST, cheque no. 403. Paid Laws Ltd for the purchase of 19 October, cheque no. 404.

10. Sold inventory on account to A. Arnott, $9000 plus GST; terms 2/10, n/30. Received cash for the issue of additional share capital, $60 000 (GST-free).

11. Received cheque for $2860 from T. Tremble in part payment of the sale made on 18 October, together with a bill receivable for the balance due.

12. Sold merchandise to D. Draper on account, $9600 plus GST; terms 2/10, n/30.

13. Purchased goods on credit from Lenny Ltd, $7920; terms 1/15, n/30 (including GST).

14. Paid fortnightly salaries by cheque no. 405, $2400.

Cash sales from 1 November to 14 November, $18 400 plus GST.

18. Sold goods to T. Tremble on account, $9300 plus GST; terms 2/10, n/30.

Received an adjustment note from Lenny Ltd for $154 for defective goods returned (includes GST).

19. Forwarded cheque no. 406 to ATO to cover GST owing from previous month, $3000.

20. A. Arnott forwarded a cheque for $2640 on account; no discount was allowed. Purchased goods for cash. Issued cheque no. 407 for $10 800 plus GST.

21. Received a cheque from D. Draper for $1320 and a promissory note (bill receivable) for the balance of his account; no discount was allowed.

26. T. Tremble forwarded a cheque for the goods sold on 18 November.

27. Paid Lenny Ltd for the purchase made on 13 November, cheque no. 408.

28. Paid fortnightly salaries with cheque no. 409, $2400 (GST-free).

30. Electricity account paid by cheque no. 410, $420 plus GST.

Cash sales from 15 November to 30 November, $18 000 plus GST.

Purchased inventory on credit from Lenny Ltd, $7260; terms 1/15, n/30 (includes GST).

Required

1. Record the November transactions (round amounts to the nearest dollar) in appropriate special journals and the general journal.

2. Open running balance accounts in the subsidiary ledgers and their control accounts in the general ledger, and enter the opening details of these accounts.

3. Post relevant data from the journals to the appropriate running balance subsidiary ledger accounts.

4. Prepare schedules of accounts receivable and accounts payable as at 30 November 2012, and reconcile to the appropriate subsidiary ledger control accounts in the general ledger.

5. Prepare the GST Collections and GST Outlays accounts as they would appear at 30 November 2012.

Question 2: Journal Entries, Discounts, Closing Entries and Income Statement- Both Perpetual and Periodic Inventory Systems

Starbright Lighting buys lamps for $40 each and sells them for $70 each. On 1April 2013, 24 lamps were in inventory. Starbright Lighting completed the transactions below during April.

April 3 Purchased 40 lamps on account. Terms: 2/10, n/30, EXW supplier's warehouse.

4. Paid freight cost of $60 on 3 April purchase.

5. Sold 22 lamps on account. Terms: 3/10, n/30, DDP acquirer's warehouse. Paid freight cost of $30.

9. Returned 10 of the lamps purchased on 3 April and paid the amount due on the lamps retained in stock.

10. A customer returned 3 of the lamps sold on 5 April. The lamps were not defective and were returned to stock.

13. Purchased 20 lamps on credit. Terms: 2/10, n/30, EXW supplier's warehouse.

14. Received payment from customer for the amount due on 5 April sale.

19. Sold 39 lamps for cash at $60 each.

20. Four of the lamps sold on 19 April were returned by the customer for a cash refund. The lamps were not defective.

22 Paid the supplier the amount owed for the 13 April purchase.

A physical inventory count taken on 30 April 2013 showed 20 lamps in stock.

Required

1. In two columns and ignoring GST, prepare general journal entries to record the transactions assuming:

1. a perpetual inventory system is used

2. a periodic inventory system is used. Narrations are not required.

2. Repeat requirement A but assume the business is registered for the GST.

3. Assuming Starbright closes its accounts at month-end, prepare relevant entries to close the accounts under both inventory systems.

4. Prepare two separate income statements showing gross profit and profit for April, assuming that:

1. the perpetual inventory system was used.

2. the periodic inventory system was used.

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