perdisco assignment

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You are currently working for the temporary accounting employment agency known as Accomptemp. Today you have been assigned the case of Intermaweb Computers, a small electronics store that operates in inner city Adelaide. The electronics store is owned by Jessica Cherenkov who, you later find out, started the business after leaving a career as a drummer.
Jessica tells you that she is hoping that the electronics store will be profitable enough that she will eventually be able to sell the business and live out her dream of creating innovative e-learning content for university students. She explains that times have been tough ever since the electronics store experienced the death of long time mentor, Chubbs McGoo.
The electronics store is set up as a single proprietorship with Jessica as the sole owner.
You are then asked by Jessica to complete the books for the month of June.
Accounting policies and procedures
The reporting period for Intermaweb Computers is one month. At the start of each month, reversing entries are performed to reverse the adjusting entries that were recorded at the end of the previous period. The previous accountant has already recorded and posted the reversing entries required on 1 June.
Intermaweb Computers uses the perpetual inventory system and applies the FIFO method to allocate costs to inventory and cost of sales.
In addition to the general journal (GJ), the business uses four special journals to record recurring transactions, namely the sales journal (SJ), purchases journal (PJ), cash receipts journal (CRJ) and cash payments journal (CPJ). When a transaction that affects an item of inventory is recorded, the related inventory card is also updated at the same time, so that a record of the movements of inventory is maintained on a daily basis.
The totals of the columns in the special journals are posted to general ledger accounts at the end of the month. The exceptions are the entries in the ‘Other Accounts’ columns in the cash receipts journal and the cash payments journal, which are posted to the ledger on a daily basis. Additionally, any entry that affects the accounts receivable or accounts payable subsidiary ledger is posted to the subsidiary ledger on a daily basis. All transactions that are entered in the general journal are posted on a daily basis.
Purchases and sales are on credit, except where the transaction specifies that cash has been received or paid. Intermaweb Computers uses the gross method of recording purchases and sales. Purchases are recorded when Intermaweb Computers receives the goods and sales are recognised when the goods sold are delivered to the customers. All purchases are received on the same day and all inventory items sold are delivered to customers on the same day as recorded in the transaction list, except for purchase orders and sales orders, which are delivered at a later date.
Past experience has shown that offering discounts did not increase the likelihood of accounts receivable being paid promptly. Therefore, settlement discounts are not normally offered to credit customers except in exceptional circumstances.
Jessica has advised you to use the allowance method of accounting for bad debts. The amount of uncollected receivables is estimated to be 5% of net credit sales for the current month.
The business is a registered entity for GST purposes and the price of all goods are quoted inclusive of 10% GST. Two separate accounts are maintained to record GST paid to suppliers and GST received from customers during the month. The net difference of these two accounts is reported as a payable in the financial statements when the business is required to pay the net amount to the Australian Taxation Office. If the business is entitled to receive the net difference from the Australian Taxation Office, this net amount is reported as a receivable. No GST is due to be remitted in the month of June. Further, GST does not apply to interest revenue, bank charges, salaries, wages and drawings by the owner.
The principal of the bank loan is not due to be repaid within the next 12 months.
Intermaweb Computers rents a show room to assist in selling and distributing the products of the business. The rent for this premises is paid in advance. The business has a policy of recording prepayments as assets. At the end of the month, adjustments will be made to the relevant accounts to recognise the expense in the appropriate period.
The electricity and water expenses incurred during the month relate to the running of the show room. Additional expenses include an insurance policy to protect the business against inventory items being damaged or lost during deliveries.
For reporting purposes, Intermaweb Computers classifies cost of sales as the cost of the inventory that was sold during the period. All other costs relating to the selling and distribution of the merchandise are classified as distribution costs.
The business has only one full-time employee, Caphis Rayleigh. He works from home and handles all of the administrative tasks. He gets paid once at the end of each month. All other employees are sales staff who are employed on a part time basis in the showroom. The sales staff receive their wages on a weekly basis.
All entries are entered to the nearest whole dollar.
Transactions
You will use the following five weeks of transactions as you complete the books for June. Note that the transactions are divided into five separate weeks. This is because you will not enter this whole list of transactions in any one page. You will be given five separate pages in which to enter the transactions for that week for each of the five weeks.
Date Description

Week 1
3   Purchased 11 NR759 video recorders from Mega Tech for $1,705 each, terms net 30.
3   Purchased 10 BG90 plasma televisions from Big Telco for $1,716 each, terms 2/10, n/30
4   Purchased 22 Zii game consoles with cash for $1,903 each, cheque no. 817.
5   Paid sales staff wages of $5,742 for the week up to and including yesterday, cheque number 818.
6   Made cash sale of 26 Zii game consoles for $2,640 each.
7   Paid the full amount owing to Pear Technology, cheque no. 819. Payment fell within discount period.
7   Paid the full amount owing to Moon Megasystems, cheque no. 820. Payment fell within discount period.
7   Sold 13 NR759 video recorders to Gurgle for $2,200 each, invoice no. 779.

Week 2
9   Gurgle returned 10 NR759 video recorders that were originally sold for $2,200 each on 7 June. These items cost $1,480 each and were not faulty or damaged. Issued a Credit Note for $22,000.
9   Made payment of $561 (includes 10% GST) for 3 months of electricity up to the beginning of June to PowerGen, cheque no. 821.
10   Sold 26 BlueBerry phones to Western Investment Group for $2,277 each, invoice no. 780.
10   Jessica Cherenkov withdrew $3,500 cash for personal use, cheque number 822.
11   Paid the full amount owing to Mega Tech, cheque no. 823.
12   Eastern Mining Corp paid the full amount owing on their account. Since Eastern Mining Corp has been a loyal customer from the day the business commenced, a 10% discount was given for this early repayment.
12   Paid sales staff wages of $5,750 for the week up to and including yesterday, cheque number 824.
13   Made cash sale of 7 Swish Phones for $1,595 each.

Week 3
15   Paid $3,080 (includes 10% GST) for one month’s rent of the show room (from 16 June to 15 July inclusive), cheque number 825.
15   Received $524 interest on the account held in Royal Bank of South Nakaratu.
18   Received a sales order to deliver 2 BlueBerry phones to Western Investment Group for $2,277 each, invoice no. 782.
19   Western Investment Group paid $27,900 in partial payment of their account.
19   Gurgle paid the full amount owing on their account.
19   Paid sales staff wages of $5,471 for the week up to and including yesterday, cheque number 826.
20   Sold 45 BG90 plasma televisions to JMH Financial Services for $2,288 each, invoice no. 781.
20   Made cash sale of 43 Zii game consoles for a list price of $2,640 each. A trade discount of 30% applies.
21   Returned 2 faulty Zii game consoles, originally purchased for $1,903 each, to JCN Electrical. Received a Credit Note for $3,806.

Week 4
22   Ordered 11 BG90 plasma televisions from Moon Megasystems for $1,560 each, agreed terms with Moon Megasystems are 2/10, n/30.
23   Paid the full amount owing to Big Telco, cheque no. 827. Payment fell outside discount period.
24   Paid the full amount owing to JCN Electrical, cheque no. 828.
26   Delivered 2 BlueBerry phones to Western Investment Group for $2,277 each, invoice no. 782, which was ordered on the 18th.
26   Paid sales staff wages of $5,013 for the week up to and including yesterday, cheque number 829.
27   Made cash sale of 60 NR759 video recorders for $2,200 each.
28   North Star Motors declared bankruptcy. Balance of the account written off as uncollectible. The GST component of the account can be recoverable from the Australian Taxation Office.

Week 5
29   Received 11 BG90 plasma televisions for $1,716 each, which was ordered on the 22nd, agreed terms with Moon Megasystems are 2/10, n/30.
29   Southern Infrastructure Corp paid the full amount owing on their account.
29   Made cash sale of 16 Swish Phones for $1,595 each.
30   Purchased 23 BlueBerry phones with cash for a list price of $1,540 each. A trade discount of 20% applies, cheque no. 830.
30   Paid monthly salary of $6,600 to Caphis Rayleigh, cheque no. 831.
30   Royal Bank of South Nakaratu deducted an account fee of $13 directly from the bank account of Intermaweb Computers.
Adjusting entries information
Using the following information, you will perform end-of-month adjusting entries:
•   Store Fixtures: useful life is 10 years, original purchase price was $47,000, and residual value is $4,000. Depreciation is calculated using the straight line method and is recorded monthly.
•   Cash Registers: useful life is 9 years, original purchase price was $27,000, and residual value is $3,000. Depreciation is calculated using the straight line method and is recorded monthly.
•   The business last paid a water bill in May, which was for 3 months of water expense up to the end of April. The additional accrual entry for water expense for the last two months is $229.
•   The estimated electricity payable as at the end of the month is $200.
•   Wages accrued after the last pay day (from 26 June to 30 June inclusive) are estimated to have been $220 per day.
•   Interest payable on the bank loan is $495.
•   Interest receivable on the bank account is $1,119.
•   A stocktake of office supplies at the end of the month shows that the business has $2,786 of supplies on hand.
•   15 days of rent remained pre-paid at the start of the month.
•   3 months of advertising remained pre-paid at the start of the month.
•   5 months of insurance remained pre-paid at the start of the month.
•   It was estimated that 5% of net credit sales would be uncollected.

Intermaweb Computers
Post-closing trial-balance
As at 31-05-12

Account No.   Name   Debit   Credit
100   Cash at bank   65,553
110   ARC – Accounts Receivable Control   71,323
111   Allowance for Doubtful Debts       10,000
112   Interest Receivable   273
120   Inventory   332,540
130   Office Supplies   3,527
135   GST Outlays   17,215
140   Prepaid Rent   1,400
141   Prepaid Advertising   3,000
142   Prepaid Insurance   2,750
150   Cash Registers   27,000
151   Accum Depn: Cash Registers       5,556
160   Store Fixtures   47,000
161   Accum Depn: Store Fixtures       23,292
210   APC – Accounts Payable Control       71,752
220   Wages Payable       1,504
221   Electricity Payable       595
222   Water Payable       129
225   Interest Payable       245
240   GST Collections       16,162
250   Bank Loan Payable       48,981
300   Jessica Cherenkov, Capital       393,365
302   Jessica Cherenkov, Drawings
310   Profit and Loss Summary
400   Sales Revenue
401   Sales Returns and Allowances
402   Discount Received
403   Interest Revenue
500   Cost of Sales
511   Advertising Expense
516   Wages Expense
540   Rent Expense
541   Electricity Expense
542   Water Expense
543   Insurance Expense
544   Office Supplies Expense
545   Salary Expense
560   Depn Expense: Store Fixtures
561   Depn Expense: Cash Registers
571   Interest Expense
572   Bank Charges
573   Discount Allowed
574   Bad Debts Expense
Total   571,581   571,581

Intermaweb Computers
Schedule of Accounts Receivable
As at 31-05-12

Account No.   Name   Debit   Credit
110-1   ARC – Eastern Mining Corp   10,000
110-2   ARC – North Star Motors   9,538
110-3   ARC – Gurgle   46,052
110-4   ARC – Southern Infrastructure Corp   5,733
110-5   ARC – JMH Financial Services
110-6   ARC – Western Investment Group
Total   71,323

Please note: Intermaweb Computers does not give a discount for early payment. All debtors are on net 30 credit terms.
Intermaweb Computers
Schedule of Accounts Payable
As at 31-05-12

Account No.   Name   Debit   Credit   Terms
210-1   APC – Big Telco       8,843   2/10, n/30
210-2   APC – Pear Technology       5,200   1/15, n/30
210-3   APC – JCN Electrical       49,709   net 30
210-4   APC – Moon Megasystems       8,000   2/10, n/30
210-5   APC – Mega Tech           net 30
210-6   APC – Hypertronics           net 30
Total       71,752

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