Tutorial 6 (Week beginning 2nd September 2019)

Topic 5: Completing the accounting cycle

SOLUTION TO HOMEWORK QUESTIONS

1. BE3.6 (p.203)
Khanna Ltd
Account Financial statement Post-closing
trial balance
(a) Accumulated depreciation Balance sheet Yes
(b) Depreciation expense Income statement No
(c) Retained earnings Balance sheet (and statement of Yes
changes in equity)
(d) Dividends Statement of changes in equity No
(e) Service revenue Income statement No
(f) Supplies Balance sheet Yes
(g) Accounts payable Balance sheet Yes

2. Bill Smith’s Hire Cars’ adjusted trial balance as at 30 June 2019 appears as shown below.

BILL SMITH’S HIRE CARS

Adjusted Trial Balance
as at 30 June 2019

Account Debit $ Credit $

Cash at bank 25 281
Accounts receivable 22 269
Prepaid insurance 6 480
Office supplies 2 025
Hire cars 354 150
Accumulated depreciation – hire cars 254 325
Accounts payable 30 600
Wages payable 2 385
Electricity payable 1 485
Unearned hire fees 28 440
B. Smith, Capital 84 195

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 B. Smith, Drawings 82 395
Hire fees revenue 330 210
Wages expense 118 635
Fuel and oil expense 22 170
Advertising expense 7 950
Maintenance expense 13 785
Depreciation expense 70 125
Insurance expense 6 375
$731 640 $731 640

Required:
(a) Identify which accounts should be closed on 30 June 2019. Journalise the closing
entries.
(b) Prepare an income statement for the period ending 30 June 2019.
(c) Prepare a statement of changes in equity for the period ending 30 June 2019.
(d) Prepare a balance sheet as at 30 June 2019.

(a) B. Smith Drawings; Hire fees revenue; Wages expense; Fuel and oil expense;
Advertising expense; Maintenance expense; Depreciation expense; Insurance expense.

Date Account Dr Cr
30 June 2019 Hire fees revenue 330 210
Profit or loss summary 330 210

30 June 2019 Profit or loss summary 239 040

Wages expense 118 635
Fuel and oil expense 22 170
Advertising expense 7 950
Maintenance expense 13 785
Depreciation expense 70 125
Insurance expense 6 375

30 June 2019 Profit or loss summary 91 170

B. Smith, Capital 91 170

30 June 2019 B. Smith, Capital 82 395

B. Smith, Drawings 82 395

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 (b) Prepare an income statement for the period ending 30 June 2019.

BILL SMITH’S HIRE CARS

Income statement
For the year ending 30 June 2019

Revenues
Hire fees revenue 330 210

Expenses

Wages expense 118 635

Fuel and oil expense 22 170
Advertising expense 7 950
Maintenance expense 13 785
Depreciation expense 70 125
Insurance expense 6 375 239 040

Profit 91 170

(c) Prepare a statement of changes in equity for the period ending 30 June 2019.

BILL SMITH’S HIRE CARS

Statement of Changes in Equity
For the year ending 30 June 2019

Beginning Capital, B. Smith 84 195

Add: Profit 91 170

Less: Drawings (82 395)

Ending Capital, B. Smith 92 970

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 (d) Prepare a balance sheet as at 30 June 2019.

BILL SMITH’S HIRE CARS

Balance Sheet
As at 30 June 2019
ASSETS
Current assets
Cash at bank 25 281
Accounts receivable 22 269
Prepaid insurance 6 480
Office supplies 2 025
Total current assets 56 055
Non-current assets
Hire cars 354 150
Less: Accumulated depreciation – hire cars 254 325 99 825
Total non-current assets 99 825
TOTAL ASSETS 155 880

LIABILITIES
Current liabilities
Accounts payable 30 600
Wages payable 2 385
Electricity payable 1 485
Unearned hire fees 28 440
Total current liabilities 62 910
TOTAL LIABILITIES 62 910

OWNER’S EQUITY
B. Smith, Capital 92 970
TOTAL OWNER’S EQUITY 92 970
TOTAL LIABILITIES & OWNER’S 155 880
EQUITY

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 3. PSA3.7 (pp.214-215)

Smart Rentals Ltd

Worksheet as at 30 June 2020

(a)

Trial balance Adjustments Adjusted trial Statement of Statement of financial

balance. profit or loss position
No. Account names Dr $ Cr $ Dr $ Cr $ Dr $ C $r Dr $ Cr $ Dr $ Cr $
100 Cash 15 000 15 000 15 000
112 Prepaid insurance 10 800 2 700 1 8 100 8 100
113 Supplies 11 400 4 200 2 7 200 7 200
120 Land 90 000 90 000 90 000
122 Building 420 000 420 000 420 000
123 Acc’d depn — building 5 400 3 5 400 5 400
130 Furniture 100 800 100 800 100 800
131 Acc’d Depn — furniture 4 500 3 4 500 4 500
200 Accounts payable 28 200 28 200 28 200
212 Rent rev. rec’d in adv. 21 600 9 000 5 12 600 12 600
214 Salaries payable 1 800 6 1 800 1 800
215 Interest payable 3 150 4 3 150 3 150
220 Mortgage payable 210 000 210 000 210 000
300 Share capital 360 000 360 000 360 000
400 Rent revenue 55 200 9 000 5 64 200 64 200
505 Advertising expense 3 000 3 000 3 000
506 Depreciation expense 9 900 3 9 900 9 900
510 Electricity expense 6 000 6 000 6 000
512 Insurance expense 2 700 1 2 700 2 700
515 Interest expense 3150 4 3 150 3 150
525 Salaries expense 18 000 1 800 6 19 800 19 800
530 Supplies expense 4 200 2 4 200 4 200
$675 000 $675 000 $30 750 $30 750 $689 850 $689 850
Profit 15 450 15 450
$64 200 $64 200 $641 100 $641 100

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(b)

Smart Rentals Ltd

General journal
Date Account name (narration) Post ref. Debit $ Credit $
2020
1 June 30 Insurance expense 512 2 700
Prepaid insurance 112 2 700
(To record expired insurance)

2 30 Supplies expense 530 4 200

Supplies 113 4 200
(To record supplies consumed)

3 30 Depreciation expense 506 9 900

Accumulated depreciation — building 123 5 400
Accumulated depreciation — furniture 131 4 500
(To record depreciation expense for 3 months)

4 30 Interest expense 512 3 150

Interest payable 215 3 150
(To record interest accrued ($210,000 x6%)x3/12)

5 30 Rent revenue received in advance 212 9 000

Rent revenue 400 9 000
(To record June rent)

6 30 Salaries expense 525 1 800

Salaries payable 214 1 800
(To record accrued salaries)

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(c)
Smart Rentals Ltd General ledger
Cash 100
30/6 Balance 15 000

Prepaid insurance 112

30/6 Balance 10 800 30/6 Insurance expense 2 700
30/6 Closing balance 8 100
10 800 10 800
1/7 Opening balance 8 100

Supplies 113
30/6 Balance 11 400 30/6 Supplies expense 4 200
30/6 Closing balance 7 200
11 400 11 400
1/7 Opening balance 7 200

Land 120
30/6 Balance 90 000

Building 122
30/6 Balance 420 000

Accumulated depreciation — building 123

30/6 Depreciation expense 5 400

Furniture 130
30/6 Balance 100 800

Accumulated depreciation — furniture 131

30/6 Depreciation expense 4 500

Accounts payable 200

30/6 Balance 28 200
Rent revenue received in advance 212
30/6 Rent revenue 9 000 30/6 Balance 21 600
30/6 Closing balance 12 600
21 600 21 600
1/7 Opening balance 12 600
Salaries payable 214

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 30/6 Salaries expense 1 800

Interest payable 215

30/6 Interest expense 3 150

Mortgage payable 220

30/6 Balance 210 000

Share capital 300

30/6 Balance 360 000

Rent revenue 400

30/6 Balance 55 200
30/6 Rent revenue in advance 9 000
64 200
Advertising expense 505
30/6 Balance 3 000
Depreciation expense 506
30/6 Accumulated depreciation 9 900
Electricity expense 510
30/6 Balance 6 000
512
Insurance expense
30/6 Prepaid insurance 2 700
515
Interest expense
30/6 Interest payable 3 150
525
Salaries expense
30/6 Balance 18 000
30/6 Salaries payable 1 800
19 800
Supplies expense 530
30/6 Supplies 4 200

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(d)
Smart Rentals Ltd
Adjusted trial balance
as at 30 June 2020
No. Account names Debit $ Credit $
100 Cash 15 000
112 Prepaid insurance 8 100
113 Supplies 7 200
120 Land 90 000
122 Building 420 000
123 Accumulated depreciation — building 5 400
130 Furniture 100 800
131 Accumulated depreciation — furniture 4 500
200 Accounts payable 28 200
212 Rent revenue received in advance 12 600
214 Salaries payable 1 800
215 Interest payable 3 150
220 Mortgage payable 210 000
300 Share capital 360 000
400 Rent revenue 64 200
505 Advertising expense 3 000
506 Depreciation expense 9 900
510 Electricity expense 6 000
512 Insurance expense 2 700
515 Interest expense 3 150
525 Salaries expense 19 800
530 Supplies 4 200
$689 850 $689 850

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(e)

Smart Rentals Ltd

Statement of profit or loss
for the three months ended 30 June 2020
$ $
Revenues:
Rent revenue 64 200
Expenses:
Advertising expense 3 000
Depreciation expense 9 900
Electricity expense 6 000
Insurance expense 2 700
Interest expense 3 150
Salaries expense 19 800
Supplies expense 4 200
Total expenses 48 750
Profit $ 15 450

Smart Rentals Ltd

Calculation of retained earnings
for the three months ended 30 June 2020

Retained earnings, 1 April $ -

Add: Profit 15 450
Retained earnings, 30 June 2020 $15 450

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 Smart Rentals Ltd
Statement of financial position
as at 30 June 2020
$ $
Assets
Current assets
Cash 15 000
Prepaid insurance 8 100
Supplies 7 200
Total current assets 30 300
Non-current assets
Land 90 000
Building 420 000
Less: Accumulated depreciation (5 400) 414 600
Furniture 100 800
Less: Accumulated depreciation (4 500) 96 300
Total Non-current assets 600 900
Total assets 631 200

Liabilities
Current liabilities
Accounts payable 28 200
Rent revenue received in advance 12 600
Salaries payable 1 800
Interest payable 3 150
Total current liabilities 45 750
Non-current liabilities
Mortgage payable 210 000
Total liabilities 255 750
Net assets $375 450
Equity
Share capital 360 000
Retained earnings 15 450
Total equity $375 450

(f) The following accounts would be closed: Rent revenue, Advertising expense,
Depreciation expense, Electricity expense, Insurance expense, Interest expense,
Salaries expense, Supplies expense.

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4. Complete the worksheet on page 8 of this document – the ‘Income Statement’ and
‘Balance Sheet’ parts.

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 Property Developers Ltd
Worksheet as at 30 June 2014
Account Unadjusted Trial Balance Adjustments Adjusted Trial Balance Income Statement Balance Sheet
Title Debit Credit Debit Credit Debit Credit Debit Credit Debit Credit
Cash at bank 13,500 13,500 13,500
Prepaid insurance 1,200 900 300 300
Debtors 22,000 22,000 22,000
Vehicles 18,000 18,000 18,000
Acc dep of vehicle 4,000 250 4,250 4,250
Land and buildings 80,000 80,000 80,000
Creditors 12,000 12,000 12,000
Capital 67,700 67,700 67,700
Sales revenue 126,000 126,000 126,000
Sales returns 1,000 1,000 1,000
Commisson revenue 4,000 1,100 5,100 5,100
Supplies expense 45,000 45,000 45,000
Wages Expense 19,000 900 19,900 19,900
Rates Expense 500 500 500
Office stationary expense 3,700 3,700 3,700
Sales and dist. expense 9,800 9,800 9,800
213,700 213,700
Depreciation Expense 250 250 250
Insurance Expense 900 900 900
Wages Payable 900 900 900
Commission Receivable 1,100 1,100 1,100

SubTotal 81,050 84,850

Profit/Loss 50,050 50,050
Total 3,150 3,150 215,950 215,950 131,100 131,100 134,900 134,900

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