month of operations the business

Question 1 

Samson Lolo opened a law office on 2 March 2019. During the first month of operations the business completed the following transactions. All figures are inclusive of GST where applicable.

Mar 2         Samson Lolostarted his business with $29,000 consisting of $15,000 his own money and the balance borrowed from the bank.

Mar 3         Purchased supplies, $800, and furniture, $2,500, on credit.

Mar 4         Performed legal service for a client and received cash, $2,000

Mar 7         Acquired machinery, $26,000 with cash

Mar 11       Represented a client in court on credit, $890

Mar 15       Secretary’s fortnightly salary of $600 was paid.

Mar 16       Interest paid to bank, $100

Mar 18       Received $1,400 cash for work for a client relating to a motor vehicle accident.

Mar 19       Prepared defence documentation for a client and billed the client for $800

Mar 25       An accounts receivable (client) paid $600 to Samson Lolo.

Mar 30       Paid secretary’s fortnight salary, $600.

Mar 30       Paid rent for March plus two further months in advance, $1,800.

Mar 30       Samson Lolo withdrew cash of $1,300.

Requirements

Use the templates provided to complete the following:

  1. Journalise each transaction. Narration is required.
  2. Post to the ledger.
  3. Prepare the trial balance of Samson Lolo, Solicitor as at 30 March 2019

Question 2 

Ben is the CEO of LikeIT an IT store. Ben’s remuneration includes a bonus that is based on the profit that LikeIT makes. In 2018, LikeIT’s profit decreased significantly. Ben instructs the accountant to record a $3,000 sale of software to Ben’s family, even though the software will not be transferred until January 2019. Ben also tells the accountant not to make the following 31 December 2018 adjusting entries:

Rent owed to landlord                                                         $700

Prepaid salary expenses that has expired                      $300

Requirements

  1. Calculate the overall effects of these transactions on the store’s reported profit for 2018.
  2. Why is Ben taking this action? Is his action ethical? Give your reason.
  3. Identify the party that benefits and the party that is harmed by Ben’s action.

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