MBS544 - Accounting Processes Group Assignment

Assignment Task

Question 1

Larkspur Furniture uses a perpetual inventory system and pays GST on an accrual basis. Larkspur engaged in the following transactions during July 2021. Transactions are inclusive of GST where relevant.

July 2

Purchased inventory for cash, $1 045

Purchased store supplies on credit for $495

Purchased inventory of $ 3,300 on account. Freight charges of $253, were added to the purchase invoice.

Sold goods for cash, $1 320. The cost of these goods was $700.

Received the electricity bill, $302.50.

Returned $220, of the inventory purchased on 8 July. It was damaged in transit.

Purchased inventory for cash for $3, 663.

Sold inventory on credit terms $11 160, less a $600 quantity discount (cost, $5000). Note: GST applies after the discount.

Received returned inventory from the 14 July sale, $440. Larkspur Furniture had despatched the wrong goods by mistake. A credit note was issued. Larkspur’s cost of the inventory received was $250. Ignore previous quantity discount.

Borrowed $5,000 from the bank. Signed a bill payable to the bank for this amount.

Purchased a computer on credit for $2,200.

Required:

1. Journalise the preceding transactions for Larkspur Furniture using multi-column special journals.
2. Post transaction amounts to ledger accounts and prepare a trial balance.
3. Complete the GST Section of the Business Activity Statement for July. As you are only reporting for one month, you will need to use the quarterly reporting option on the BAS statement.
4. Journalise payment of GST to the ATO on August 1, 2021.
5. A junior accountant is confused about why GST appears on the statement of financial position but not the statement of financial performance. Explain how and why this happens.

Chart of Accounts

101 Cash at bank 203 GST collected

102 Inventory 204 GST paid

103 Store supplies 401 Sales revenue

104 Accounts receivable 402 Sales returns and allowances

150 Office Equipment 501 Cost of goods sold

201 Accounts payable 601 Freight-in

202 Bill payable 602 Electricity expense

Question 2

The inventories control account balance of St George Fashions at 30 June 2023 was $110 510 using the perpetual method. A physical count conducted on that day found inventories on hand worth $110 100. Net realisable value for each inventories item held for sale exceeded cost. An investigation of the discrepancy revealed the following.

• Goods worth $3300 held on consignment for Rockhampton Accessories had been included in the physical count.
• Goods costing $600 were purchased on credit from Springbrook Ltd on 27 June 2023 on FOB shipping terms. The goods were shipped on 28 June 2023 but, as they had not arrived by 30 June 2023, were not included in the physical count. The purchase invoice was received and processed on 30 June 2023.
• Goods costing $1200 were sold on credit to Noosa Pty Ltd for $1950 on 28 June 2023 on FOB destination terms. The goods were still in transit on 30 June 2023. The sales invoice was raised and processed on 29 June 2023.
• Goods costing $1365 were purchased on credit (FOB destination) from Launceston Handbags on 28 June 2023. The goods were received on 29 June 2023 and included in the physical count. The purchase invoice was received on 2 July 2023.
• On 30 June 2023, St George Fashions sold goods costing $3150 on credit (FOB shipping) terms to Kurnell’s Boutique for $4800. The goods were dispatched from the warehouse on 30 June 2023 but the sales invoice had not been raised at that date.
• Damaged inventories valued at $1325 were discovered during the physical count. These items were still recorded on 30 June 2023 but were omitted from the physical count records pending their write-off.

Required

1. Prepare any journal entries necessary on 30 June 2023 to correct any errors and to adjust inventories.
2. i) What does the term ‘net realisable value’ mean?
3. ii) What sources of evidence could a company use to determine net realisable value?
4. iii)What action should a company take at year end if some of its inventory items have declined in value while other inventory items have increased in value? Why?

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