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Topic 4 Class Discussion Questions

The document discusses accounting adjustments that need to be made for two different entities, S. Steiner and Bankstown Rental Services. For S. Steiner, several expenses and revenues were incorrectly recorded or omitted and depreciation was not calculated. For Bankstown Rental Services, adjusting entries need to be made for unpaid expenses, depreciation, unearned and prepaid amounts, supplies, and accrued wages. The adjustments will impact the financial statements by increasing or decreasing profit, assets, liabilities, and equity.

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22 views

Topic 4 Class Discussion Questions

The document discusses accounting adjustments that need to be made for two different entities, S. Steiner and Bankstown Rental Services. For S. Steiner, several expenses and revenues were incorrectly recorded or omitted and depreciation was not calculated. For Bankstown Rental Services, adjusting entries need to be made for unpaid expenses, depreciation, unearned and prepaid amounts, supplies, and accrued wages. The adjustments will impact the financial statements by increasing or decreasing profit, assets, liabilities, and equity.

Uploaded by

syedimranmasood100
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Topic 4 Preparation of final reports

Class discussion questions

Question 1

The draft accounts for the year ended 30 June 2022 and a balance sheet as at that date for S.
Steiner are submitted to you. Towards the end of the financial year her accountant resigned and
she had completed the records herself. She thinks that errors have occurred and asks your
help. An examination of the accounting records reveals the following. S. Steiner is registered
for GST.

1. Interest of $1920 on the investments held by the business was due, but has not been
received.
2. A payment of $4160 for new office furniture has been incorrectly debited to the Sundry
Expenses account. The furniture had been purchased late in June 2022.
3. Rent due from customers Raggatt and Petney amounting to $2560, plus GST, is not
included in the accounts.
4. Repairs to Steiner’s private motor vehicle, $1700, plus GST, have been debited to the
Vehicle Expenses account and GST Receivable account.
5. Commission due to sales representatives for the month of June, $4480, has been
overlooked.
6. An insurance policy covering contents and buildings was taken out on 1 March 2022, the
annual premium of $2400 being paid in advance on this date and debited to the Prepaid
Insurance account.
7. A payment of $35 000 on 1 July 2021 for additions to buildings has been debited to Repairs
and Maintenance.
8. No depreciation has been recognised for the year ending 30 June. The draft balance sheet
shows the following.

Depreciation is to be calculated as follows.


(a) Buildings: 2% on cost
(b) Office furniture and equipment: 20% on cost

Required
(a) Show the journal entries required to make the necessary adjustments.
(b) Calculate the effect (increase or decrease) of each of the adjustments on the profit figure of
$64 900 as shown in the draft accounts.

1
Question 2

The financial year for Bankstown Rental Services ends on 30 June.

Required
(a) Using the following information, make the necessary adjusting entries.

i. The $765 telephone expense is unpaid and unrecorded at 30 June.


ii. The balance in Accumulated Depreciation at the beginning of the financial year was
$51 300. Annual depreciation on equipment is estimated to be $34 200.
iii. Rent of office premises of $3165, plus GST, for the 3-month period ending 31 July is
due to be paid in July.
iv. Bankstown Rental Services borrowed $70 000 from Bank on 15 March. The
principal, plus 8% interest, is payable on 15 September. Accrued interest on 30 June
has not been recorded.
v. Bankstown Rental Services purchased a 12-month insurance policy for $2940 on 1
November. A 24-month policy was purchased on 1 April for $6600. Both purchases
were recorded by debiting Prepaid Insurance.
vi. The Supplies account had a $1500 debit balance on 1 July of the preceding year.
Supplies costing $7100 were purchased during the year, and $1310 of supplies are
on hand as at 30 June.
vii. On 1 June, Bankstown Rental Services received 2 months’ rent in advance, totalling
$4660. This was recorded by a credit to Unearned Rental Revenue.
viii. The office assistant earns $280 a day. He will be paid in July for the 5-day period
ending 2 July.

Bankstown Rental Services is registered for GST.

(b) As you know, all adjusting entries affect one balance sheet account and one income
statement account. Based on your adjusting entries prepared in requirement A:
i. calculate the increase or decrease in profit
ii. calculate the increase or decrease in total assets, total liabilities and total equity.

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