Question

 

Banksia Company completed the following transactions during 2018-2019. The annual accounting period ends 30 June 2019. a) Purchased inventory on credit at cost of AUD 16,800; perpetual inventory system is used. b) Received a customer deposit of AUD 18,000 from ABC Ltd for services to be rendered in the future. c) Borrowed AUD 900,000 from the bank on 1 March 2019 by giving the bank a six-month, 9% interest bearing note payable. d) Performed AUD 8,000 of the services paid for by ABC Ltd; the rest will be rendered in August 2019. e) Received the electricity bill for AUD 24,200, which will be paid in early July. f) On 1 June 2019 received rent in advance of AUD 21,600 from XYZ Ltd for a 3 month lease of premises from 1 June until 31 August 2019. g) Wages accrued in the last weekly payroll amounted to AUD 23,000 and will be paid on 5 July 2019. Required: 1) Prepare the journal entries for each of these transactions. 2) Prepare all adjusting entries required on 30 June 2019.

Answer 1

Journal Entries

Account Titles	Debit	Credit
Inventory	16,800
Accounts Payable		16,800
Cash	18,000
Unearned Service Revenue		18,000
Cash	900,000
Notes Payable		900,000
Unearned Service Revenue	8,000
Service Revenue		8,000
Utilities Expense	24,200
Accounts Payable		24,200
Cash	21,600
Unearned Rent Revenue		21,600
Wages Expense	23,000
Wages Payable		23,000

Adjusting entry

Account Titles	Debit	Credit
Interest Expense	27,000
Interest Payable		27,000
Unearned Rent Revenue	7,200
Rent Revenue		7,200

Interest Expense = 900000 x 9% x 4/12 = $27000
Rent Revenue = 21600 / 3 = 7200