Question

The draft accounts for the year ended 30 June 2019 and a balance sheet as at that date for W. Willow 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 for your help. An examination of the accounting records reveals the following. W. Willow is registered for GST.

Required:
(a) Show the journal entries required to make the necessary adjustments.    

1. Interest of $1920 on the investments held by the business was due, but has not been received.

Type your answers in the Table included in the Response Template below.

2. A payment of $4160 for new office furniture has been incorrectly debited to the Sundry Expenses account. The furniture had been purchased 30th of June 2019.

Type your answers in the Table included in the Response Template below.

3. Rent due from customers Raggatt and Petney amounting to $2560, plus GST, is not included in the accounts.

Type your answers in the Table included in the Response Template below.

4. Repairs to Willow’s private motor vehicle, $1700, plus GST, have been debited to the Vehicle Expenses account and GST Receivable account.

Type your answers in the Table included in the Response Template below.

5. Commission due to sales representatives for the month of June, $4480, has been overlooked.

Type your answers in the Table included in the Response Template below.

6. An insurance policy covering contents and buildings was taken out on 1 March 2019, the annual premium of $2400 being paid in advance on this date and debited to the Prepaid Insurance account.

Type your answers in the Table included in the Response Template below.

7. A payment of $35 000 which occurred on 1 July 2018 for additions to buildings has been debited to Repairs and Maintenance.

Type your answers in the Table included in the Response Template below.

8. No depreciation has been recognised for the year ending 30 June 2019. The draft balance sheet shows the following.

Depreciation is to be calculated as follows.

(b) Buildings: 2% on cost

Type your answers in the Table included in the Response Template below.

(c) Office furniture and equipment: 20% on cost

Type your answers in the Table included in the Response Template below.

(d) Calculate the effect (increase or decrease) of each of the adjustments on the profit figure of $64 900 as shown in the draft accounts.

Answer 1

				($)
1	Accrued Interest account Dr	1920
	To Interest Income account		1920
	(Being Interest accrued on Investments)
2	Furniture account Dr	4160
	To Sundry Expenses			4160
	(Being Furniture purchased wrongly debited to Sundry Exps , now rectified)
3	Rent Exps Ac Dr		3020
	To rent outstanding			3020
	(Being rent due with GST assumed @ 18% on Rent
4	Repiars to vehicle account Dr	2006
	To Vehicle account			1700
	To Input credit on repairs account	306
	(Being repairs to vehicle debited to Vehicle account & ITC taken which is not allowed in GST now reversed & rectified)
5	Commission on sales ac Dr	4480
	To Commission payables account	4480
	(Being commission on sales due now recorded)
6	Insurance Exps Account Dr	200
	To Prepaid Insurane			200
	(Being Insurance Exps debited to Prepaid insurance now debited to insurance a/c for March month)
7	Building Ac Dr		35000
	To repairs on Building account		35000
	(Being Building additions made debited in repairs a/c now rectified)
8	Depreciation ac Dr		7832
	To Building			7000
	To Ofice furniture			832
	(Being Dep on Building & furniture debited as per rate)