Maddox Smith Staff asked 4 years ago

Annual Insurance Policy

The CFO has taken extended holidays and has advised you that the following transactions occurred during January 2015: January 1 Paid $1 200 for an annual insurance policy (to be adjusted on a monthly basis). 2 Received $3 700 from Trade Debtor A (included in Accounts Receivable). 3 Paid $2 000 of Accounts Payable. 4 Reduced Bank Loan by $20 000. 5 Paid $50 cash for Courier services. Purchased Inventory for $8,000 cash (800 units at $10 each). Purchased workshop equipment for cash $4 200. Straight line depreciation of 10% applies. 6 Sent invoice to customer $5 280 (sold 160 of the units purchased on the 5th). 7 Paid weekly Wages of $1 500 (Note: please record entries on 14th, 21st, and 28th). 9 Recorded cash Sales $7 500 (250 of the units purchased on the 5th). 10 Recorded credit Sales $1 650 (50 of the units purchased on the 5th). 14 Paid Office Rent in cash $560. 15 Trade Debtor A in Accounts Receivable has notified you he will not be able to pay at least $700 of his balance owing. He will settle his bill on 2 February 2015. 18 Purchased $900 of Inventory on credit (75 units @ $12 each). 20 Purchased Land $30,000 for cash. 23 Cash sales $1 740 (30 of the units purchased on the 5th). 31 Performed a stock count and found 380 units left. Required: a) Prepare worksheet entries for the business transactions for the month ended 31 January 2015. Apart from insurance, depreciation (rounded to nearest $1), doubtful debts and inventory, no adjusting journal entries are required. You may need to add additional columns to the table for additional asset, or liability or equity accounts (don’t forget an ‘income statement’ column/s on the end). (20 marks) b) Prepare an income statement for the period ended 31 January 2015 (5 marks) c) Prepare a classified balance sheet as at 31 January 2015