Perdisco practice set 1

Transactions ­ week 1

Now that you have reviewed information about Moondollars, you are to begin the first step in the accounting cycle, recording transactions. On this page of the practice set, you are asked to record transactions that occurred during the first week of June into the company's journals and post the appropriate entries to the ledger accounts. The following transactions occurred throughout the first week on June:

Date Transaction description
1 Paid the full amount owing to Brazil Imports Group, Cheque No. 603. Payment fell within discount period.
1 Obtained a loan of $58,000 from EastPac Bank at a simple interest rate of 6% per year. The first interest payment is due at the end of August 2016 and the principal of the loan is to be repaid on 1 June 2020.
2 Purchased 8 boxes of Le krappe Instant Coffee from Dominga Wholesalers for $264 each, terms net 30.
3 Purchased Chocolate Sprinkles from Jordo Gourmet Coffee for $317, terms 2/10, n/30.
3 Paid the full amount owing to Klam Wholesalers, Cheque No. 604. Payment fell within discount period.
3 Purchased Organic Chocolate Cream Liqueur with cash for $185, Cheque No. 605.
4 Sold 6 boxes of Disposable Napkins to Central Coffee for $263 each, Invoice No. 501.
4 Made cash sales of $6,347 during the first 4 days of the month.

Transactions - week 2

You are now instructed to record to record transactions that occurred during the second week of June into the company's books. The week 2 transactions are listed below:

Date Transaction description
9 Con's Coffee paid the full Con's Coffee paid the full amount owing on their account. Since Con's Coffee has been a loyal customer from the day of business commenced, a10% discount was given for this early repayment.
11 Sold Organic Chocolate Cream Liqueur to SloZone for $235, Invoice No. 502.
11 Made cash sales of $10,874 Made cash sales of $10,874 during the week.
11 Central Coffee returned $2,580 worth of product. Issued a Credit Note for $2,580.
12 Paid the full owing to Croup Coffee, Cheque No. 606.

Transactions - week 3

Using the company's records that are provided below, you are now required to record transactions that occurred throughout the third week of June. The week 3 transactions are listed below:

Date Transaction description
15 Paid sales staff wages of $5,761 for the two weeks up to and including yesterday, Cheque No. 607.
18 Sold 6 bags of Medium Roast Arabica Coffee Beans to Jandesh's Hot Spot for $374 each, Invoice No. 503.
18 SloZone paid $200 in partial payment of their account.
18 Made cash sales of $10,308 during the week.
19 Returned $2,868 worth of faulty product to Dominga Wholesalers. Received a Credit Note for $2,868.
20 Central Coffee paid the full amount owing on their account.
20 Received a purchase order from SloZone. Created a corresponding sales order to deliver 5 boxes of Plastic Condiment Containers to this customer for $219, each, Invoice No. 504.

Transactions - week 4

You are now asked to record transactions that occurred throughout the fourth week of June in the company's books. The week 4 transactions are listed below:

Date Transaction description
23 Ordered 5 boxes of Plastic Condiment Containers from Brazil Imports Group for $114 each, agreed terms with Brazil Imports Group are 2/10, n/30.
25 Made cash sales of $10,432 during the week.
26 Paid the full amount owing to Dominga Wholesalers, Cheques No. 608.
26 Delivered 5 boxes of Plastic Condiment Containers to SloZone for $219 each, Invoice No. 504, which was ordered on the 20th.
27 Paid the full amount owing to Jordo Gourmet Coffee, Cheque No. 609.

Transactions - week 5

You are now required to enter transactions that occurred during the final week of June into the company's books. The following transactions occurred throughout the last week of June:

Date Transaction description
29 Received 5 boxes of Plastic Condiment Containers for $114 each, which were ordered on the 23rd, agreed terms with Brazil Imports Group are 2/10, n/30.
29 Revamp Coffee Carts paid the full amount owing on their account.
29 Paid sales staff wages of $5,710 for the two weeks up to and including yesterday, Cheque No. 610.
30 Made cash sales of $6,701 during the last 5 days of the month.
30 Paid monthly salary of $6,200 to Imogen Chamberlain, Cheque No. 611.

Instructions for week

1) Record all transactions week wise in the relevant journals

Note that special journals must be used where applicable. Any transaction that cannot be recorded in a special journal should be recorded in the general journal.

2) Post entries recorded n the journals to the appropriate ledger accounts according to the company's accounting policies and procedures.

Note that the relevant totals of the special journals will be posted to the general ledger accounts at the end of the month. You will enter this after you prepare the Bank Reconciliation Statement.

Bank reconciliation

Now that you have finished recording all of the transactions for the month of June, you are required to prepare a bank reconciliation as at 30 June 2016.

The purpose of the bank reconciliation process is to reconcile the balance of cash shown in the company's ledger account against the balance of cash reported in the bank statement.

End of month posting

Now that you have completed the June bank reconciliation process, you are ready to perform the end of the month posting procedure. The purpose of this end of month posting is to transfer the totals from the special journals to the appropriate general ledger accounts so thar the balances in those ledger accounts reflect all of the transactions that occurred throughout the period.

Instructions for end of the month posting

1) Total the remaining columns in the special journals. Records the amount in the Total row of each journal.

2) Post the totals of the remaining columns in the special journals to their corresponding ledger account. To confirm that the posting has been performed, a posting reference is recorded in the last row of the special journals. If the total of a column is not required to be posted, you need to record an X in the post reference field for thar column.

3) Record the final unadjusted balance of each ledger account in the Unadjusted Balance row of each ledger, even for ledgers with a balance of zero. Although each ledger already has a running balance, the Unadjusted Balance row must still be filled out in order to receive full points.

Worksheet

Now that you have completed the end of month posting procedure,l you are asked to complete the worksheet for Moondollars.

The worksheet is an internal document that exits outside the journals and ledgers. It is often used in the manual accounting system to help record adjusting entries and prepare financial statements. After you have prepared the worksheet, in the next section of the practice set you will be asked to use the completed worksheet to help journalise and post adjusting entries to general ledger. You will also use this worksheet to assist you in preparing the financial statements for Moondollars in a later section of this practice set.

The details of the end of month adjustments for June are as follows:

  • Cash Registers owned by the business: original purchase price was $7,000, estimated useful life was 6 years, and estimated residual value was $1,500 at the end of the useful life. Depreciation is calculated on monthly basis using the straight line method. The monthly depreciation charge is calculated as the yearly depreciation expense divided by the number of months in a year.
  • Store Fixtures owned by the business: original purchase price was $54,000, estimated useful life was 8 years, and estimated residual value was $6,000 at the end of the useful life. Depreciation is calculated on a monthly basis using the straight line method. The monthly depreciation charge is calculated as the yearly depreciation expense divided by the number of months in a year.
  • Electricity expense for the month of June is estimated to be $932.
  • The water usage for the month of June is estimated to be $215.
  • Sales staff work every single day during the week including weekends and are not paid until the end of each  two weeks. Wages were last paid up to including 28 June. Wages incurred after that day (from 29 June to 30 June inclusive) are estimated to have been $740 per day.
  • Interest expense incurred during the month of June but yet paid to EAstPac Bank for the bank loan is $290.
  • Interest earned from short-term investments in Earth Bank for the month of June is $110.
  • Office supplies totalling $3,872 are still on hand at 30 June.
  • 2 months of rent remained pre-paid at the start of June.
  • 3 months of advertising remained pre-paid at the start of June.
  • 5 months of insurance remained pre-paid at the start of June

When calculating the portion of prepayments that expire during the month of June, you are asked to assume that an equal amount of expense is incurred per month.

Adjusting entries

You are now asked to journalise and post the adjusting entries after completing the worksheet. This is because, in the manual accounting system, the worksheet is not part of the journals and ledgers. Therefore completing the Adjustments colum in the worksheet does not automatically update the appropriate ledger accounts. Since this practice set is a manual accounting practice set, you are still required to manually journalise the adjusting entries and post them to the ledger as a separate step.

The purpose of adjusting entries is to ensure that the general ledger account balances reflect the income earned and expenses incurred during the accounting period.

Instructions for adjusting entries

1) Use the worksheet to assist you in recording the adjusting entries in the general journal.

2) Post the adjusting entries from the general journal to the general ledger accounts.

3) Record the final adjusted balance of each ledger account in the Adjusted Balance row of each ledger, even for ledgers with a balance of zero. Although each ledger already has a running balance, the Adjusted Balance row must still be filled out in order to receive full points.

Schedules of accounts

Now that all adjusting entries have been posted to the general ledger, you are asked to prepare the schedule of accounts receivable and the schedule of accounts payable as at 30 June 2016.

The purpose of preparing the schedule of accounts receivable is to verify that the sum of the customer balances recorded in the accounts receivable subsidiary ledger is equal to the balance of the Accounts Receivable control account in the general ledger. Similarly, the purpose of the schedule of accounts payable is to confirm that the sum of the supplierbalances recorded in the accounts payable subsidiary ledger is equal to the balance of the Accounts Payable control account in the general ledger.

Instructions for schedules of accounts

Using the subsidiary ledgers and the general ledger:

1) Create a schedule of accounts receivable as at the end of June.

2) Create a schedule of accounts payable as at the end of June.

Closing entries

In this stage of the accounting cycle, you are asked to record closing entries in the general journal and then post them to general ledger accounts. This step must be completed to prepare the accounts for the next accounting period.

Instructions for closing entries

1) Record closing entries in the general journal. Note that the business does not use a Cost of Sales account so all accounts that are used to calculate cost of sales need to be closed directly to the Profit and Loss Summary account.

remember that after performing a stocktake, the balance of inventory on hand as at 30 June is $59,900.

2) Post the closing entries from the general journal to the relevant general ledger accounts.

3) Record the final closing balance of each ledger account in the Post-Closing Balance row of each ledger, even for ledgers with a balance of zero. Although each ledger already has a running balance, the Post-Closing Balance row must still be filled out in order receive full points.

Post-Closing trial balance

Now that the closing entries have been journalised and posted, you are required to prepare a post-closing trail balance. This trail balance is prepared as a final check that closing entries have been journalised and posted correctly.

Instructions for post-closing trail balance

Using the general ledger, create a post-closing trail balance as at the end of June.

Remember to enter all answers to the nearest whole dollar.

Financial statements

To complete the accounting cycle for the month of June, you are now asked to prepare the following financial statements:

  • Income statement. This statement is prepared to help assess the financial performance of the business. It summarises the income earned and expenses incurred over the month of June.
  • Statement of changes in equity. This statement shows the movements in equity over the month of June.
  • Balance sheet. This statement reports the financial position of the business at the end of June. It presents the assets, liabilities and equity of the business as at 30 June 2016.

Instructions for financial statements

Using the company's accounting policies found in the policies and procedures popup, and appropriate information from previous pages of the practice set:

1) Prepare an income statement for the month of June

To begin, select the appropriate accounts using a popup link. Note that when you select ab account, brackets may automatically appear around the input box in which you are asked to enter the balance of the account. Next, enter all values as positive amounts because amounts to be subtracted are indicated on the income statement with brackets around the input box. Note that there are two instances where you are required to select profit or loss from a drop-down list. Brackets will be displayed if you select loss.

You may not need to use all of the lines in the income statement.

2) Prepare a statement of changes in equity for the month of June

Most values are to be entered in the input boxes as positive amounts, because values to be subtracted are already indicated on the statement with brackets around the input box. Note that you are required to select profit/loss from a drop-down list. Brackets will be displayed if you select loss.

3) Prepare a balance sheet as at the end of June.

To begin, select the appropriate accounts using a popup link. Note that when you select an account, brackets may automatically appear around the input box in which you are asked to enter the balance of the account. Next, enter all values as positive amounts because amounts to be subtracted will be indicated on the balance sheet with brackets around the input box.

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result of perdisco practice set 1
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