Additional Exercise 4.14

06/11/2019 Additional Exercise 4.14
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Bentley Sem 2 2019 / Online Workbook
*Additional Exercise 4.14
(Note: Although this question is based on the Skate ‘n’ Surf business the accounts, amounts and
transactions involved may differ between questions. Please read each question separately.)
Skate ‘n’ Surf began operations on 1 June, buying and selling surfboards, skateboards, wetsuits and the protective gear
for skateboarding. The structure of the business is that of a sole trader.
The business employed a sales assistant during the month who is to be paid fortnightly. Tax is deducted from the
employee’s wages (PAYG withholding tax) and remitted to the Australian Taxation Office (ATO) on a quarterly basis.
The business has not registered with the ATO for the goods and services tax (GST) and has elected to use the accrual
basis of accounting.
Accounting records
The business records all transactions in the general journal. These transactions are then posted to the appropriate
account(s) in the general ledger and the accounts receivable or accounts payable subsidiary ledgers, where separate
accounts are maintained for each customer or supplier.
Chart of accounts
The chart of accounts for Skate ‘n’ Surf contains the accounts and account numbers below.
100 Cash at bank
110 Accounts receivable
120 Inventory
130 Prepaid insurance
171 Shop equipment (cost)
172 Accumulated depreciation – shop equipment
200 Accounts payable
210 PAYG withholding payable
220 Superannuation payable
230 Bank loan
300 Capital
310 Drawings
320 Profit or loss summary
400 Sales revenue
410 Sales returns and allowances
420 Discount received
500 Cost of sales
600 Advertising expense
610 Depreciation expense
620 Discount allowed
630 Electricity expense
640 Insurance expense
650 Interest expense
660 Postage and stationery expense
670 Superannuation expense
680 Telephone expense
690 Wages expense
Transactions

June 1 The owner opened a bank account for the business with a deposit of $30,000. This is capital provided by
him.
Purchased display stands, shelving etc. (shop equipment) from Shop Displays Pty Ltd for $30,000 and
computer equipment for the shop from Computer Wizards for $6,000. These were paid for with a loan of
1

$33,000 from the bank and cheque for $3,000 from the business bank account. The bank loan is repayable
over 4 years.
2 Paid $4,080 for a 1-year insurance policy covering fire, theft, and public liability.
2 Paid $1,200 to Local Newspapers for advertising for the shop for the month.
5 Purchased inventory (skateboards and protective gear) from Excitement Plus for $26,000 on terms on net
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7 Purchased surfboards and wetsuits from Surf Imports for $18,000 on terms of 10/10, n/30.
8 Credit sale to Serious Fun of skateboards and protective gear for $5,700 (cost of sales $2,100). This
customer was given terms of 5/10, n/30.
8 Cash sale of a skateboard and protective gear for $550 (cost of sales $300).
11 Cash purchase of postage stamps and stationery from Australia Post for $180.
12 Credit sale to Surfing World of various inventory items for $7,960 (cost of sales $4,000). Terms net 30.
12 Returned some protective gear to Excitement Plus that was faulty and received an adjustment note (credit
note) from them for $140.
13 Received a cheque from Serious Fun for the amount owing by them after deducting the prompt payment
discount.
14 Paid Surf Imports the amount owing to them less the prompt payment discount.
17 Credit sale to Academy Diving School of 15 wetsuits at a discounted price of $300 each on terms of net 15.
Cost of sales $3,750.
23 Paid Excitement Plus $3,700 of the amount owing to them.
24 Issued an adjustment note (credit note) to Academy Diving School for 1 wetsuit at $300 each that was not
the size they required. The cost of the wetsuit to us was $250 and it was put back into inventory.
24 Purchased wetsuits from Surf Imports for $8,800 on terms of 10/10, n/30.
25 Credit sale to Serious Fun of skateboards for $7,900 (cost of sales $4,300). Terms 5/10, n/30.
27 Received and banked a cheque from Academy Diving School for the amount owing by them.
30 A repayment of $1,100 was made on the bank loan.
30 The owner cashed a cheque for $960 to pay wages to Scott Walker the sales assistant of $1,000 less PAYG
Withholding of $40.
The end of month adjustments are below.
a. Depreciation on shop equipment for the month is 10% p.a. prime cost (straight line).
b. One-twelfth of the insurance expired.
c. Superannuation payable for the month is 10% of the gross wages paid.
d. Interest charged on the bank loan for the month was $156.
The transactions above have been journalised and posted. The statement or profit or loss for June is below.
Skate ‘n’ Surf
Statement of profit or loss
for the period 1 June to 30 June 20XX

Revenue
Sales revenue
Sales revenue 26,610
Less: Sales returns and allowances 300
Net sales revenue
Less: Cost of sales
Gross profit
Other revenue:
Discount received
26,310
14,200
12,110
1,800
13,910
Expenses
Advertising expense
Depreciation expense
Discount allowed
Insurance expense
Interest expense
Postage and stationery expense
Superannuation exepnse
Wages expense
Total expenses
Net profit/(loss)
1,200
300
285
340
156
180
95
1,000
3,556
$10,354

*(a)
Journalise end-of-year closing entries.
(Note: Enter debit entries first, followed by credit entries in the general journal. Credit account titles are
automatically indented when the amount is entered. Do not indent manually. Leave blank any answer fields
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that do not require an answer. Enter accounts following the order of accounts given in the statement of
profit or loss.)
Date Details Post
ref. Debit Credit
20XX
June
(To close revenue accounts)
(To close expense accounts)
(To close profit to capital
account)
*(b)
The parts of this question must be completed in order. This part will be available when you complete the part above.
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