FINANCIAL ACCOUNTING PRACTICE (BBAC301)
Group Assessment – (2 Students per group)
DUE Session 5.2 – Week 5
Learning Outcome Assessed: a – d
Eric Chan operates cleaning and gardening business. Mr. Eric contributed $500,000 on 1 June 2015 into his business. The following transactions occurred in the month of June. Ignore GST.
June 1 Eric purchased a car for the business for a total cost of $60,000. The useful life was expected to be 12 years with a residual value of $3,000. Insurance for the car was also purchased for $12,000 p.a.
1 Eric signed a lease agreement to lease a suitable storage shed for a monthly rental of $12,000. Rent for 4 months was paid in advance. He also hired an assistant to help him with cleaning and lawn mowing tasks.
2 The business purchased equipment for a total cost of $180,250. A deposit of $40,000 was paid immediately and the balance was to be paid in 30 days. The equipment was expected to have a useful life of 7 years.
3 Purchased washing supplies for $4,800 cash. Purchased fuel and oil supplies for cash $7,900.
4 Signed a contract with Gulshan Advertiser Newspaper for 12 weeks of advertisements in its weekly newspaper. The business paid $9,600 in advance for these advertisements.
6 Received cash of $800 and $13,500 from clients for cleaning and law mowing services respectively.
8 Signed a contract with a new client to provide cleaning services for a monthly fee of $20,000. The client paid for 3 months’ service in advance.
13 Received cash of $14,000 for lawn mowing services provided to clients during the past week.
14 Paid the assistant wages of $8,200 for services provided to the business during the past fortnight.
21 Earned $7,300 for cleaning services from clients and $12,700 for lawn mowing during the past week. All money was received in cash except for one client for cleaning services, who arranged to pay the business $3,000 in 3 weeks’ time for service rendered.
28 Received in cash the sum of $8,000 for cleaning services provided to clients and $11,500 for lawn mowing and gardening services provided during the past week.
29 Paid the assistant $7,600 for services provided to the business during the past fortnight.
30 Eric withdrew $20,000 in cash from the business in order to pay for essential provisions for his family.
Additional information to consider:
- Cleaning services of $2,500 had been rendered to clients on 29 June but the invoice to bill these clients had not been prepared.
- Four weeks of advertisements had appeared in the newspaper up to 30 June.
- The business had provided cleaning services to its new client for 3 weeks of the first month (assumed to be 4 weeks long).
- A physical count showed that only $1,200 of washing supplies and $3,400 of fuel and oil supplies were still on hand.
- Wages owing to the assistant on 30 June amounted to $2,800.
- Prepare journal entries to record the June 2015 transactions for the business and post these journal entries to suitable T accounts.
- Prepare an unadjusted trial balance as at 30 June 2015 Marks 2
- Prepare a 10-column work sheet for the month ended 30 June 2015 considering all additional information and any other adjustments necessary. Marks 6
- Prepare the income statement, the statement of changes in equity and the balance sheet as at 30 June 2015. Marks 4
- Prepare closing entry and the suitable reversing entry Marks 3
- Comment on the financial position of the business based on your prepared financial statements. Marks 4
Assignment Marking Criteria
The following assignment criteria are designed to give the student a guide as to what markers are looking for in the assignment: