ACC106: Business Activity Statements (BAS) - ArborGear Accounting Case Study Assessment Answer

Subject Code: ACC106

ArborGear Accounting Case Study Assessment Answer

TASK: Introduction At 1 st June 2018, T Parkes established a new proprietorship, ArborGear, a GST- registered tree lopping equipment business that sells equipment to the general public. As well, the business provides training in the safe use and maintenance of its equipment. The business sources its stock from a number of suppliers. T Parkes, sole proprietor, has quickly established a reputable business and has employed two staff members. T Parkes is using Microsoft EXCEL software to maintain the accounting records of the business transactions during the month of June 2018, the last month of the Australian financial year. 1.2 Accounting Policies 1.2.1 ArborGear uses accrual accounting for recording transactions and adjustments. 1.2.2 ArborGear uses a perpetual inventory system with a weighted average. 1.2.3 ArborGear prepares quarterly Business Activity Statements (BAS) and remits the net GST liability due to the ATO in the month following the end of each quarter. (Note: as this is a new business, T Parkes has not yet prepared a BAS and has no liability at the start of June.) 1.2.4 ArborGear has the following depreciation policies: Trailer: depreciated over 5 years using straight-line method (residual value of $5 000) Vehicles: depreciated using reducing balance method at the rate of 30.5% over 6 years ($5 000 residual value) 1.2.5 ArborGear pays employee salaries on a weekly basis. Salaries are paid on the Thursday for the previous week. They both work Monday to Friday. The sales assistant works on a full-time basis and the training technician is paid an hourly rate. PAYG tax is withheld from their gross pay, and D Green also contributes a regular amount from his gross pay to a private health fund. Both employees receive employer superannuation contribution at the rate of 9.5% of gross salary (before deductions), on top of their pay. [The employees are being paid into the same superannuation fund through an online portal (this means you can account for all superannuation together).] 1.2.6 ArborGear records an allowance for doubtful debts that equates to 6% of Accounts Receivable balance at the end of the year. 1.2.7 ArborGear records all prepaid expenses as assets (prepayments) and then expenses the portion used as end of year adjustments.  Adjustments for end of the financial year 2018

•  The stocktake on 30 June revealed $820 worth of supplies on hand.
•  The next wages payment will occur on Thursday 5 July for the employee earnings in the final week of June. B Safe worked earned $994 between 25th and 29th June; D Green worked a usual week.
•  Calculate the amounts for depreciation expense for each of the two types of non-current Assets: trailer and vehicles (Estimate expense as though assets held for whole of month of June. You can use the depreciation schedule in the template or calculate manually.)
•  Calculate and record the adjusting entry for phone & internet for the end of the month given that June phone & internet paid in advance has been used up.
•  Calculate and record the adjusting entry for insurance for the end of the month given that June insurance paid in advance has been used up.
•  Calculate the Allowance for Doubtful Debts based on 6% of accounts receivable at the end of the year and make the necessary adjusting entry.

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