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In: Accounting

The balance date for this company is 31st March 2020. You are to record the effect...

The balance date for this company is 31st March 2020. You are to record the effect of each transaction on the extended accounting equation using the table on the next page (page 5). Include all balance day adjustments where applicable. The first example illustrates how you would record the answers on the table.

  1. Purchased inventory for $55,000. Paid half upon the receipt of the inventory and the remainder on credit.
  1. Depreciate the equipment at balance date. Cost of equipment is $40,000 and the expected salvage value at the end of 5 years is $5,000. The equipment was purchased on 1st September 2019. Use the straight line depreciation for this business.

  1. Sold an old equipment for $12,000. The cost of the equipment was $50,000 and it has an accumulated depreciation to date of $42,000.
  1. Paid the supplier promptly as a 10% discount was offered for an amount owing of $10,000.
  1. Paid the annual insurance of $24,000 on 1st Feb 2020.
  1. Invested $20,000 with the bank on 1st January 2020 with an interest rate of 3.5% per annum. The interest was shown in the business bank account on 2nd April 2020.
  1. Sold inventory on credit for $17,000 (cost is $9,000).

  1. Weekly wages of $50,000 was paid on 3rd April 2020. The wages was for the period 29th March to 2nd April 2020.

  1. Repaid the bank loan: $50,000 principal and $4,000 interest.

  1. Received from debtor the full amount owing of $17,000 less 3% discount for early repayment.

  1. Received $5,000 deposit from a supplier on 1st March 2020 for the sale of inventory to be delivered on 7th April 2020.

  1. Dividends paid to the owners of $2,000.


Extended Accounting Equation: Asset + Expenses = Liabilities + Equity + Revenue

Transaction No.

ASSET

EXPENSES

LIABILITIES

EQUITY

REVENUE

Inventory +55000

Bank - 27500

Accounts Payable

+ 27500

    (40000-5000)/5 = 7000

    7000/12 * 6 = (3500)

    3500

                        Solutions

                        Expert Solution

                        Please find below the required answer for above given question:

                        Transaction No. ASSETS + EXPENSES = LIABILITIES + EQUITY + REVENUE Remarks
                        Cash + Inventory + Equipment + Prepaid Insurance + Bank Deposits + Interest Receivable + Accounts Receivable + Prepaid Wages + Depreciation + Insurance Expense + Cost of Goods Sold + Wages Expense + Interest Expense + 3% Discount Allowed = Accounts Payable + Bank Loan + Unearned Sales Revenue + Dividends + Profit on sale of Equipment + 10% Discount Received + 3.5% Interest Income + Sales Revenue
                        1 -$27,500 + $55,000 + + + + + + + + + + + + = $27,500 + + + + + + + Purchased inventory of $55,000 paying half in cash and half on credit
                        2 + + -$4,083 + + + + + + $4,083 + + + + + = + + + + + + + Depreciation on equipmet charged for 7 months i.e. ($40,000-$5,000)/5/12*7
                        3 $12,000 + + -$8,000 + + + + + + + + + + + = + + + + $4,000 + + + Equipment costing $8,000 ($50,000 - $42,000) sold for $12,000 cash
                        4 -$9,000 + + + + + + + + + + + + + = -$10,000 + + + + + $1,000 + + Paid supplier an owing of $10,000 and got 10% discount for promptly payment
                        5 -$24,000 + + + $20,000 + + + + + + $4,000 + + + + = + + + + + + + Paid annual insurance of $24,000 out of which 2 months insurance expensed out and balance 10 months as prepaid
                        6 -$20,000 + + + + $20,000 + $175 + + + + + + + + = + + + + + + $175 + Invested $20,000 in a bank deposit with 3.5% p.a. interest calculated for 3 months on $20,000
                        7 + -$9,000 + + + + + $17,000 + + + + $9,000 + + + = + + + + + + + $17,000 Sold inventory costing $9,000 on credit for $17,000
                        8 -$50,000 + + + + + + + $20,000 + + + + $30,000 + + = + + + + + + + Paid $50,000 wages paid on 3rd April. 2020 which includes 3 days wages of March. 2019 i.e. 29th, 30th and 31st
                        9 -$54,000 + + + + + + + + + + + + $4,000 + = + -$50,000 + + + + + + Repaid the bank loan of $50,000 principal along with an interest of $4,000
                        10 $16,490 + + + + + + -$17,000 + + + + + + + $510 = + + + + + + + Received from debtor owing $17,000 by allowing him 3% discount on $17,000
                        11 $5,000 + + + + + + + + + + + + + = + + $5,000 + + + + + Received an advance deposit of $5,000 from a customer on 1st March, 2020 to whom sale of inventory to be made on 7th April, 2020
                        12 -$2,000 + + + + + + + + + + + + + = + + + -$2,000 + + + + Dividends of $2,000 paid to owners
                        Total -$153,010 + $46,000 + -$12,083 + $20,000 + $20,000 + $175 + $0 + $20,000 + $4,083 + $4,000 + $9,000 + $30,000 + $4,000 + $510 = $17,500 + -$50,000 + $5,000 + -$2,000 + $4,000 + $1,000 + $175 + $17,000

                        ekkarill92 answered 1 year ago
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