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BACKGROUND AND FACTS Lauren Flintoff is the owner of a retail sports equipment business located in Milton that she established 3 years ago. She operates the business as a sole trader. Lauren submits her Business Activity Statements (GST Return) quarterly on an accruals basis. Lauren is currently using a manual system to prepare her financial records. She has come to you to implement QuickBooks software. To ensure the accuracy of the software implementation, she has asked you to prepare both manual records and records in QuickBooks for the month ending 30 April, 2014. Chart of Accounts and Trial Balance as at 1 April, 2014 Account No. Account Name Balance DR CR 101 Cash at Bank – ANZ 27,580 110 Accounts Receivable 36,518 112 Inventory 46,770 115 Prepaid Insurance – 118 Office Supplies Inventory 1,520 130 Office Equipment 29,080 131 Accumulated Depreciation – Office Equipment 14,040 135 Computer Equipment 24,460 136 Accumulated Depreciation – Computer Equipment 15,288 200 Tax Payable (GST) 12,450 201 Accounts Payable 28,970 203 Wages Payable – 205 PAYG Tax Payable 5,180 301 Capital 90,000 Total 165,928 165,928 302 Drawings 307 Income Summary 401 Sales Revenue 402 Sales Returns & Allowances 405 Interest Revenue 501 Cost of Goods Sold 503 Bank Charges 505 Depreciation Expense – Computer Equipment 506 Depreciation Expense – Office Equipment 510 Entertainment Expense 520 Insurance Expense 542 Office Supplies Expense 560 Rent Expense 580 Telephone and Internet Expense 585 Wages Expense Accounts Receivable Subsidiary Ledger as at 1 April Dawson Training 23,120 Indigo Sports Centre 7,448 Weston High School 5,950 Total 36,518 Accounts Payable Subsidiary Ledger as at 1 April Premium Accountants 3,850 Ballistic Sports Equipment 16,500 Insight Computers 4,520 Odin Training & Recruitment 1,100 Sports Wholesalers 3,000 Total 28,970 Inventory Balances as at 1 April Active Sports sells three types of inventory and uses a perpetual inventory system. The stock take at 31 March showed: Item Description Units on Hand Unit Cost (excl GST) $ Total Value (excl GST) $ Unit Selling Price (excl GST) $ Tennis racquets 64 160 10,240 320 Cross-Trainers 23 110 2,530 220 Skis 17 2,000 34,000 4,000 46,770 Accounting Information The business uses the following specialised journals to record its business transactions: • A Sales Journal is used to record the sale of inventory on credit during the month. • A Cash Receipts Journal is used to record all cash received. • A Cash Payments Journal is used to record all cash paid. • A Purchases Journal is used to record all purchases of inventory on credit. • A General Journal is used to record all other transactions. All invoices received for expenses incurred and owing are recorded in the general journal at the time of receiving the invoice. (Narrations are not required for general journal transactions.) The business uses a general ledger, an accounts receivable subsidiary ledger and an accounts payable subsidiary ledger. The 4 column running balance form of ledger account is used. The business does use a Sales Returns and Allowances account in the current manual system to record sales returns from customers. Note that there is no ability in our Quickbooks student version software to record Sales Returns separately. Instead the software will process a sales return as a reduction from Sales Revenue. NOTE: There is an extra column in the ledger accounts to make a note of source document numbers etc. We do not have such information so you may leave this column blank. Financial statements are prepared at the end of each month. The accounts are also closed off at the end of each month. All necessary pro-formas are available on the Blackboard site and are to be used to complete the manual accounting practice set. Quick Books software is to be used to prepare computerised records in Part B to ensure they agree. The business transactions that occurred in April 2014 are as follows: 1. April 1 Paid rent for April $4,400 with cheque number 46 ($4,000 plus GST $400). 2. April 1 Purchased an Apple MacBook Pro on credit from Insight Computers for $1,342 ($1,220 plus GST $122) 3. April 2 Purchased office supplies with cheque number 47 for $770 ($700 plus GST $70) 4. April 2 Sold 5 pairs of skis on credit to Snowy Resort, invoice number AB32 $22,000 ($20,000 plus GST $2,000). 5. April 3 Purchased 40 tennis racquets on credit from Dunlop $ 7,040 ($6,400 plus GST $640). 6. April 4 Paid for prepaid insurance of $1,320 for 12 months effective 1 April ($1,200 plus GST $120) with cheque number 48. 7. April 4 Sold 23 pairs of cross-trainers, 6 tennis racquets and 1 pair of skis as a cash sale for $12,078 ($10,980 plus $1,098 GST), receipt number C324. 8. April 4 Lauren withdrew $8, 000 cash for her personal use with cheque number 49 (no GST is applicable.) 9. April 4 Paid the monthly net wages of the staff of $10,400 with cheque number 50 (no GST is applicable.) 10. April 10 Sold 4 pairs skis and 20 tennis racquets on credit to Mainstream Adventures, Invoice Number AB33 $24,640 ($22,400 plus GST $2,240). 11. April 11 Purchased 50 pairs of cross trainers and 5 pairs of skis on credit from Sports Wholesalers $ 17,050 ($15,500 plus GST $1,550). 12. April 14 Paid Premium Accountants the balance owing of $3,850 with cheque number 51. 13. April 21 Paid Ballistic Sports Equipment $15,400 with cheque number 52 as part payment of prior month purchases of inventory. 14. April 21 Issued a credit note to Mainstream Adventures for return of 2 tennis racquets, Credit Number 14 $704 ($640 plus GST $64). 15. April 22 Received $15,200 from Dawson Training as payment on account. 16. April 26 Paid the monthly telephone and internet expense with cheque number 53 for $275 (GST $25). 17. April 26 Invoiced Dawson Training for 40 tennis racquets, Invoice Number AB34 for $14,080 ($12,800 plus GST $1,280). 18. April 28 Received $6,000 on account from Indigo Sports Centre. 19. April 28 Returned 5 pairs of cross trainers to Sports Wholesalers and received a credit of $ 605 ($550 plus GST $55). 20. April 30 Lauren lodged her quarterly Business Activity Statement (BAS return) and paid cheque number 54 to the ATO for a total of $17,630. This represented the March quarter net GST payable of $12,450 and also the previous month PAYG tax payable of $5,180 (record each transaction on a separate line). 21. April 30 Received $22,000 from Snowy Resort as payment on account. 22. April 30 Bank statement: Received interest into the bank account $125. (no GST applicable) 23. April 30 Bank Statement: Bank charges of $25 (no GST applicable) 24. April 30 Record a general journal entry for $2,590 for the total PAYG tax withheld on the monthly wages. (Debit wages expense and credit PAYG Tax Payable). Part A Instructions (1 – 8) 1) Enter the opening balances at 1 April into the general ledger and subsidiary accounts. 2) Record the April transactions in the following journals: cash payments, cash receipts, purchases, sales and the general journal. 3) Post daily to the subsidiary ledgers. Post daily from the general journal. Post the monthly totals of the special journals to the general ledger. Include posting references in the journals. 4) Prepare a trial balance as at 30 April 2014, in the trial balance columns of the worksheet. 5) Complete the worksheet using the additional information below on required adjusting entries: A) Accrued Wages Wages owing as at 30 April are $3,300. B ) Insurance Noted in the transactions above, Lauren prepaid 12 months of insurance on April 4. C ) Depreciation – Office Equipment Annual Depreciation on Office Equipment has been calculated at $5,616. D ) Depreciation – Computers Annual Depreciation on Computers has been calculated at $6,840. E) Office Supplies Expense On 30 April, Lauren performed a stocktake of her office supplies and noted that there was $370 of supplies remaining. 6) Prepare and post adjusting and closing entries. 7) Prepare the following statements for month ended 30 April in accordance with AASB 101: – a classified income statement – a statement of changes in equity and – a classified statement of financial position. Note that there is a need to split Sales and Sales Returns separately in the manual system as discussed earlier. For the purposes of expense classification, please use the following information: Selling Expenses: Wages Administrative Expenses: Depreciation – Computer Equipment, Depreciation – Office Equipment, Insurance Expense, Office Supplies Expense, Rent Expense, Telephone and Internet Expense Finance Expenses: Bank Charges 8) Prepare a post-closing trial balance, and determine whether the subsidiary ledgers agree with the control accounts in the general ledger.

BACKGROUND AND FACTS

Lauren Flintoff is the owner of a retail sports equipment business located in Milton that she established 3 years ago. She operates the business as a sole trader.

Lauren submits her Business Activity Statements (GST Return) quarterly on an accruals basis.

Lauren is currently using a manual system to prepare her financial records. She has come to you to implement QuickBooks software. To ensure the accuracy of the software implementation, she has asked you to prepare both manual records and records in QuickBooks for the month ending 30 April, 2014.

Chart of Accounts and Trial Balance as at 1 April, 2014

Account No. Account Name Balance
DR CR
101 Cash at Bank – ANZ 27,580
110 Accounts Receivable 36,518
112 Inventory 46,770
115 Prepaid Insurance –
118 Office Supplies Inventory 1,520
130 Office Equipment 29,080
131 Accumulated Depreciation – Office Equipment 14,040
135 Computer Equipment 24,460
136 Accumulated Depreciation – Computer Equipment 15,288
200 Tax Payable (GST) 12,450
201 Accounts Payable 28,970
203 Wages Payable –
205 PAYG Tax Payable 5,180
301 Capital 90,000
Total 165,928 165,928

302 Drawings
307 Income Summary
401 Sales Revenue
402 Sales Returns & Allowances
405 Interest Revenue
501 Cost of Goods Sold
503 Bank Charges
505 Depreciation Expense – Computer Equipment
506 Depreciation Expense – Office Equipment
510 Entertainment Expense
520 Insurance Expense
542 Office Supplies Expense
560 Rent Expense
580 Telephone and Internet Expense
585 Wages Expense

Accounts Receivable Subsidiary Ledger as at 1 April

Dawson Training 23,120
Indigo Sports Centre 7,448
Weston High School 5,950
Total 36,518

Accounts Payable Subsidiary Ledger as at 1 April

Premium Accountants 3,850
Ballistic Sports Equipment 16,500
Insight Computers 4,520
Odin Training & Recruitment 1,100
Sports Wholesalers 3,000
Total 28,970

Inventory Balances as at 1 April

Active Sports sells three types of inventory and uses a perpetual inventory system.
The stock take at 31 March showed:

Item Description Units on Hand Unit Cost
(excl GST)
$ Total Value
(excl GST)
$ Unit Selling Price
(excl GST)
$
Tennis racquets 64 160 10,240 320
Cross-Trainers 23 110 2,530 220
Skis 17 2,000 34,000 4,000
46,770
Accounting Information

The business uses the following specialised journals to record its business transactions:
• A Sales Journal is used to record the sale of inventory on credit during the month.
• A Cash Receipts Journal is used to record all cash received.
• A Cash Payments Journal is used to record all cash paid.
• A Purchases Journal is used to record all purchases of inventory on credit.
• A General Journal is used to record all other transactions. All invoices received for expenses incurred and owing are recorded in the general journal at the time of receiving the invoice. (Narrations are not required for general journal transactions.)

The business uses a general ledger, an accounts receivable subsidiary ledger and an accounts payable subsidiary ledger. The 4 column running balance form of ledger account is used.

The business does use a Sales Returns and Allowances account in the current manual system to record sales returns from customers. Note that there is no ability in our Quickbooks student version software to record Sales Returns separately. Instead the software will process a sales return as a reduction from Sales Revenue.

NOTE: There is an extra column in the ledger accounts to make a note of source document numbers etc. We do not have such information so you may leave this column blank.

Financial statements are prepared at the end of each month. The accounts are also closed off at the end of each month.

All necessary pro-formas are available on the Blackboard site and are to be used to complete the manual accounting practice set. Quick Books software is to be used to prepare computerised records in Part B to ensure they agree.

The business transactions that occurred in April 2014 are as follows:

1. April 1 Paid rent for April $4,400 with cheque number 46 ($4,000 plus GST $400).
2. April 1 Purchased an Apple MacBook Pro on credit from Insight Computers for $1,342 ($1,220 plus GST $122)
3. April 2 Purchased office supplies with cheque number 47 for $770 ($700 plus GST $70)
4. April 2 Sold 5 pairs of skis on credit to Snowy Resort, invoice number AB32 $22,000 ($20,000 plus GST $2,000).
5. April 3 Purchased 40 tennis racquets on credit from Dunlop $ 7,040 ($6,400 plus GST $640).
6. April 4 Paid for prepaid insurance of $1,320 for 12 months effective 1 April ($1,200 plus GST $120) with cheque number 48.
7. April 4 Sold 23 pairs of cross-trainers, 6 tennis racquets and 1 pair of skis as a cash sale for $12,078 ($10,980 plus $1,098 GST), receipt number C324.
8. April 4 Lauren withdrew $8, 000 cash for her personal use with cheque number 49 (no GST is applicable.)
9. April 4 Paid the monthly net wages of the staff of $10,400 with cheque number 50 (no GST is applicable.)
10. April 10 Sold 4 pairs skis and 20 tennis racquets on credit to Mainstream Adventures, Invoice Number AB33 $24,640 ($22,400 plus GST $2,240).
11. April 11 Purchased 50 pairs of cross trainers and 5 pairs of skis on credit from Sports Wholesalers $ 17,050 ($15,500 plus GST $1,550).
12. April 14 Paid Premium Accountants the balance owing of $3,850 with cheque number 51.
13. April 21 Paid Ballistic Sports Equipment $15,400 with cheque number 52 as part payment of prior month purchases of inventory.
14. April 21 Issued a credit note to Mainstream Adventures for return of 2 tennis racquets, Credit Number 14 $704 ($640 plus GST $64).
15. April 22 Received $15,200 from Dawson Training as payment on account.
16. April 26 Paid the monthly telephone and internet expense with cheque number 53 for $275 (GST $25).
17. April 26 Invoiced Dawson Training for 40 tennis racquets, Invoice Number AB34 for $14,080 ($12,800 plus GST $1,280).
18. April 28 Received $6,000 on account from Indigo Sports Centre.
19. April 28 Returned 5 pairs of cross trainers to Sports Wholesalers and received a credit of $ 605 ($550 plus GST $55).
20. April 30 Lauren lodged her quarterly Business Activity Statement (BAS return) and paid cheque number 54 to the ATO for a total of $17,630. This represented the March quarter net GST payable of $12,450 and also the previous month PAYG tax payable of $5,180 (record each transaction on a separate line).
21. April 30 Received $22,000 from Snowy Resort as payment on account.
22. April 30 Bank statement: Received interest into the bank account $125. (no GST applicable)
23. April 30 Bank Statement: Bank charges of $25 (no GST applicable)
24. April 30 Record a general journal entry for $2,590 for the total PAYG tax withheld on the monthly wages. (Debit wages expense and credit PAYG Tax Payable).

Part A Instructions (1 – 8)

1) Enter the opening balances at 1 April into the general ledger and subsidiary accounts.
2) Record the April transactions in the following journals: cash payments, cash receipts, purchases, sales and the general journal.
3) Post daily to the subsidiary ledgers. Post daily from the general journal. Post the monthly totals of the special journals to the general ledger. Include posting references in the journals.
4) Prepare a trial balance as at 30 April 2014, in the trial balance columns of the worksheet.
5) Complete the worksheet using the additional information below on required adjusting entries:

A) Accrued Wages

Wages owing as at 30 April are $3,300.

B ) Insurance

Noted in the transactions above, Lauren prepaid 12 months of insurance on April 4.

C ) Depreciation – Office Equipment

Annual Depreciation on Office Equipment has been calculated at $5,616.

D ) Depreciation – Computers

Annual Depreciation on Computers has been calculated at $6,840.

E) Office Supplies Expense

On 30 April, Lauren performed a stocktake of her office supplies and noted that there was $370 of supplies remaining.

6) Prepare and post adjusting and closing entries.

7) Prepare the following statements for month ended 30 April in accordance with AASB 101:
– a classified income statement
– a statement of changes in equity and
– a classified statement of financial position.

Note that there is a need to split Sales and Sales Returns separately in the manual system as discussed earlier.

For the purposes of expense classification, please use the following information:

Selling Expenses:
Wages

Administrative Expenses:
Depreciation – Computer Equipment, Depreciation – Office Equipment, Insurance Expense, Office Supplies Expense, Rent Expense, Telephone and Internet Expense

Finance Expenses:
Bank Charges
8) Prepare a post-closing trial balance, and determine whether the subsidiary ledgers agree with the control accounts in the general ledger.

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