ACCY112 Spring 2013-Week 2

Questions: e-learning Questions Question 1 John Moulder decides to branch out on his own and set up his own private practice as a solicitor. Events occurring in March 2015 are as follows. Ignore GST March 1 Deposited $400 000 into a business bank account, set up under the business name of John Moulder, Solicitor 2 Hired an office secretary who commenced work immediately. 3 Paid $8000 for the first month's rent of a suitable office. 4 Purchased office equipment and furniture for a total of $28 800. An initial $12 800 is paid in cash immediately and the rest is to be paid in 3 months time, with interest payable at 10% per annum 7 Paid $1200 for a 1-year insurance policy on the office equipment, effective from 1 March 2013 8 Paid $4000 in cash for office supplies. 12 Sent invoices to a number of clients for services rendered for a total amount of $18 000. 14 Moulder withdrew $12 000 cash from the business for personal use. Paid the office secretary $1300 for services rendered to the business. 19 Received $14 000 in cash from clients billed on 12 March. 24 Received $20 000 in cash from clients who paid immediately for services rendered. These clients were not invoiced previously. 31 Paid $15 000 for sundry expenses and wages of $1300 to the office secretary for the previous fortnight's work. JOHN MOULDER, SOLICITOR CHART OF ACCOUNTS

Assets (100-199) Cash at Bank Accounts Receivable Prepaid Insurance Prepaid Rent Office Supplies Office Equipment and Furniture Accumulated Depreciation - Office Equipment and Furniture Liabilities (200-299) Accounts Payable Wages Payable Electricity Account Payable Loan Payable Unearned Revenue Interest Payable Equity (300-399) John Moulder, Capital John Moulder, Drawings Income (400-499) Legal Fees Revenue Sundry Revenue Expenses (500-599) Wages Expense Office Supplies Used Rent Expense Insurance Expense Depreciation Expense Interest Expense Electricity Expense Telephone and Internet Expense Sundry Expense Profit & Loss Summary Required: Prepare general journal entries as necessary for each of the events. Page 1 of 4

100 110 120 130 140 150 155 200 210 220 230 240 250 300 310 400 410 500 510 520 530 540 550 560 570 580 600

Question 2 Shane's Car Rental began business operations on 1 January 2012. The capital of the business was $600 000 cash, which had all been contributed by Shane Dabrowski. He has asked you to be record keeper for the business on a part-time basis, and you initially establish the need for the following accounts (and numbers). Additional accounts may need to be added in the near future. GST is ignored. Cash at Bank 100 Accounts Receivable 110 Land 120 Building 130 Motor Vehicles 150 Office Equipment 170 Accounts Payable 220 Mortgage Payable 250 Shane Dabrowski, Capital 300 Shane Dabrowski, Drawings 310 Car Rental Income 320 The transactions undertaken by the business during January, including the initial investment by the owner, were as follows: Jan.1 Shane Dabrowski contributed $600 000 to the business. 2 The business acquired land for $125 000 and a building on the land for $88 000. A cash payment of $110 000 was made and a mortgage loan with the Federal Bank was arranged for the balance owing. 4 Purchased fifteen new vehicles at $25 000 each from City Auto Mart. The business paid $250 000 cash, and the remainder was due to be paid in 30 days. 7 One of the vehicles was transferred from the business to the owner, Shane Dabrowski,for cost price. 10 One vehicle was found to be defective, and the business returned it to City Auto Mart. The amount due to the creditor was reduced by $25,000 13 The business acquired some computer equipment for the main office at a total cost of $5,000 paid in cash 28 Car rental fees of $18,000 were received in cash. 29 Paid the remaining cash owing to City Auto Mart 30 The business paid wages of $2,500 for keeping the account. 31 Car rental fees of $12,000 were received in cash and an additional $5,000 was owing by clients Required: Prepare general journal entries as necessary for each of the events.

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Solution 1 Mar 1 Cash at Bank John Moulder, Capital Cash invested by owner. No entry required on the hiring of staff Prepaid Rent Cash at Bank Office rent paid for the month in advance. Alternatively debit Rent Expense Office Equipment and Furniture Cash at Bank Loan Payable Purchase of office equipment and furniture by paying cash and incurring an interest-bearing 3-month loan. Prepaid Insurance Cash at Bank Prepaid one-year insurance policy on office equipment. Office Supplies Cash at Bank Acquisition of office supplies. Accounts Receivable Legal Fees Revenue Legal services invoiced to customers. John Moulder, Drawings Cash at Bank Cash withdrawn by owner. Wages Expense Cash at Bank Payment of wages Cash at Bank Accounts Receivable Rental income received and receivable Cash at Bank Legal Fees Revenue Receipt of legal fees from clients. Wages Expense Sundry Expense Cash at Bank Payment of wages and sundry expenses. 130 100 8 000 100 300 400 000 400 000

2 3

80 000

150 100 230

28 800

12 800 16 000

120 100 140 100 110 400 310 100 500 100 100 110 100 400 500 580 100

1 200

1 200

4 000

4 000

12

18 000

18 000

14

12 000

12 000

14

1 300

1 300

19

14 000

14 000

24

20 000

20 000

31

1 300 15 000

16 300

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Solution 2 Jan 1 Cash at Bank Shane Dabrowski, Capital Cash invested by owner. Land Building Mortgage Payable Cash at Bank Land and buildings acquired for cash and under mortgage. 100 300 600 000 600 000

120 130 250 100

125 000 88 000 103 000 110 000

Motor Vehicles Cash at Bank Accounts Payable Vehicles purchased for cash and on credit.

150 100 220

375 000 250 000 125 000

Shane Dabrowski, Drawings Motor Vehicles Vehicle withdrawn by owner.

310 150

25 000 25 000

10

Accounts Payable Motor Vehicles Motor vehicles returned to supplier.

220 100

25 000 25 000

13

Office Equipment Cash at Bank Acquisition of computer equipment.

170 100

5 000 5 000

28

Cash at Bank Car Rental Income Rentals received from customers.

100 320

18 000 18 000

29

Accounts Payable Cash at Bank Payment to vehicle supplier

220 100

100 000 100 000

30

Wages Expense Cash at Bank Payment of wages Cash at Bank Accounts Receivable Car Rental Income Rental income received and receivable

420 100

2 500 2 500

31

100 110 320

12 000 5 000 17 000

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