Mandy Cleaning Services Ltd - Accounting and Finance Assignment Help

Assignment Task:

Cash at Bank 27 400 

Accounts Receivable 8 000 

Office Supplies 5 000 

Prepaid Rental 6 000 

Office Equipment 24 000 

Accumulated Depreciation – Office Equipment 2 000 Accounts Payable 8 200 Unearned Service Revenue 6 000 Capital 40 200 Service Revenue 20 000 Salary Expense 6 000 

$76,400 $76,400

Required 

(a) Using the information provided from the unadjusted trial balance for Mandy  Cleaning Services Ltd at the end of the financial year, 30 June 2020, prepare the  general journal entries for the balance day adjustments listed and show all  workings. (10 Marks) 

Balance Day Adjustments 

1) A stocktake of the office supplies on 30 June 2020 showed a balance stock on hand  amounting to $1,080. 

2) 15% of the amount in the Unearned Service Revenue account has now been earned. 3) Received an invoice for $500 for utilities charges for the month of June 2020 and this  invoice remains unpaid on 30 June 2020. 

4) Rental was prepaid on 1 April 2020 for 4 months’ rent for the period 1 April 2020 to 31 July 2020 and requires adjusting. 

5) Depreciate office equipment using the straight-line method at the rate of 10% per annum. 

(b) After completing the adjustments in Part (a), prepare an income statement for the  year ending 30 June 2020 (show all workings). (10 Marks)

Question 2 (20 MARKS) 

Part 1 

On 1 January 2018 Augusta Ltd paid $39,500 for a machine with a useful life of 10 years and  a residual value of $1,500. The company uses a straight-line method to allocate depreciation  expense. The machine was sold on 31 May 2020 for $8,000. Augusta Ltd has its year-end on  30 June.  

Required 

Prepare all necessary general journal entries to recognise the sale of the machine on  31 May 2020. Show all workings. (6 Marks) 

Part 2 

Required 

Using your own words, discuss whether the following independent situations below  have any violations in their accounting treatments / records. In the case of a violation,  suggest an appropriate accounting treatment / record for the situation. Provide  supporting reasons in your answers. (8 marks) 

(a) The company purchases a data base that allows them to use in their business operations  for a year for a once off payment for $3,000. The company uses the data base to conduct  market review that is important for the company’s operation activities. The company  records the full amount as an asset.  

(b) The owner of the company has recorded his personal tax expenses in the entity’s income  statement. 

Part 3 

Peter and Henry formed a partnership on 1 July 2019 and have been operating for one year.  Upon formation Peter contributed $210,000 of capital, while Henry contributed $90,000. The  partnership agreement states partners are to share profits and losses 70% Peter and 30%  Henry. The partners have also agreed to pay salaries of $15,000 to each partner, interest on  drawings is calculated at 12% and interest on capital is calculated at 10%. Profits for the year  ended 30 June 2020 were $98,000. In the year ending 30 June 2020, Peter withdrew $10,000  and Henry withdrew $20,000. 

Required: 

Prepare the Profit Distribution account for the year ended 30 June 2020. (6 Marks)

Question 3 (20 MARKS) 

Chile Mine Ltd was registered as a new company 3rd January 2020 and issued a prospectus  inviting applications for 500,000 shares at $6 each. $2 was payable on application, a further  $2 was payable on allotment and the final $2 was payable on a call to be made on 1st July  2020. 

Applications closed on 31st January 2020 a total of $1,080,000 was received. This included  one applicant who paid for 20,000 shares in full. 

Shares were fully subscribed and allotted on the 1st February 2020, no refunds were made. 

On 26th of February 2020 all allotment monies due were paid and another shareholder of 5000  shares also paid the remaining $4 per share. Share issue costs of $2500 were paid on 14 March 2020. 

The call was made on the 1st of July 2020 and all money was received except for one shareholder of 1000 shares that did not pay by the 30th July 2020. 

Required 

Prepare all the necessary journal entries to account for the issue of the shares and all  transactions up to 30th July 2020. (20 Marks)

 

Question 4 (20 MARKS) 

Part 1 

The following information relates to the inventory of Max Ltd during May. Max Ltd uses a  periodic inventory system. 

@ $7.00 

@ $9.80 

@ $10.90 

Required 

May 1 3 

10 

12 

17 

25 

Beginning Inventory Purchased 

Sold 

Purchased 

Sold 

Sold 

100 90 

110 90 

80 

30 

units units units units units units 

Determine the cost of the ending inventory (assuming there have been no stock  losses) and the cost of sales, using the following three methods: (a) the average; 

(b) FIFO; 

(c) LIFO. 

Part 2 

The following transactions relate to the gardening maintenance business of Steve Jones. The  balance in the Allowance for Doubtful Debts account on 1 July 2019 was $7440. The bad debts  during the year ended 30 June 2020 amounted to $5220. Debtors’ balances on 30 June 2020 after the bad debts had been written off total $162 960, and a new allowance of 5% of debtors is  required.  

Required 

(a) Prepare and balance the Allowance for Doubtful Debts accounts for the year to 30 June  2020. 

(b) Show how the above information would be disclosed in: 

i. the income statement for the year ended 30 June 2020. 

ii. the balance sheet as at 30 June 2020. 

Question 5 (20 MARKS) 

Part 1 

(Question adapted from Exercise 18.8 of the textbook) 

The comparative statements of financial position of Hutt Electrical as at 30 June 2019 and  2020 and the income statement for the year ended 30 June 2020 are shown above. Additional information: 1) Other expenses include $52 500 depreciation expense. 2) All sales and purchases of inventory are on credit. 

3) Rent income is from an investment property of Hutt Electrical. 

Required 

Prepare a statement of cash flows from operating activities only for Hutt Electrical for  the year ended 30 June 2020 using the direct method.  

Show your workings by re-constructing all relevant T-ledger accounts.  (15 marks)

Part 2 

Sam Ltd was advised by its lawyer that they are very likely to lose in a lawsuit where a client  has claimed them for damages amounting to $5,000.  

Required 

Explain, in your own words, the appropriate accounting treatment and/or record of the  above for Sam Ltd. Include supporting reasons in your answers. (5 marks)

 

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