Question

Question 1

Retail operations

‘Cycling Deal’ started its operation in bicycle retail industry on 1 June 2019. The business is

owned by Alex Richardson. Cycling Deal purchase bicycles from suppliers and sell those cycles

at the local markets. The business is registered for GST. The following transactions occurred

during June 2019:

Date Details

1-Jun Alex Richardson deposited $35,000 into the business bank account.

3-Jun

Purchase of bicycles (100 small bicycles, and 100 large bicycles) from Rocky

Hills Ltd on account for $10,000 ($50 per bicycle) plus GST on terms of 2/10,

n/30.

4-Jun

Cycling Deal received an invoice from Finland Delivery Ltd relating to delivery

costs for the bicycles purchased on 3 June. The amount due is $300

(including GST), and is due on 18 June.

5-Jun Sent a cheque in the mail to Green Ltd for $200 (including GST), for stall fees

at the local markets for the month of June.

6-Jun

Sale of 30 bicycles (15 small bicycles, and 15 large bicycles) at the local

markets, at $100 each (including GST). All of the customers paid by

cash. The money was banked at the end of the day.

9-Jun Paid Rocky Hills Ltd for purchases made on 3 June (net of the early payment

discount), by electronic funds transfer.

13-Jun Sale of 10 small bicycles to a local childcare centre, at $100 each (including

GST), on 30 day credit terms.

15-Jun Sent a cheque in the mail to Finland Delivery Ltd, in relation to the invoice

received on 4 June.

20-Jun Purchase of bicycles (40 small, and 15 large) from Rocky Hills Ltd on account

for $3,190 ($58 per bicycle) plus GST on terms of 2/10, n/30.ACCT6002_Assessment Brief 2_Individual Case Study

Page 4 of 11

23-Jun

Cycling Deal received an invoice from Finland Delivery Ltd relating to delivery

costs for the bicycles purchased on 20 June 2019. The amount due is $180

(including GST), and is due on 6 July 2019.

24-Jun Returned 20 of the small bicycles purchased on 20 June as they were

damaged.

28-Jun

Sale of 28 bicycles (18 small, and 10 large) at the local markets, at $100 each

(including GST). All of the customers paid by cash. The money was banked at

the end of the day.

30-Jun A stocktake was completed, and the number of bicycles on hand was 139 (54

small bicycles, and 85 large bicycles).

Mr Richardson has come to you for assistance, as he would like to use the perpetual inventory

system and the First-in-first-out (FIFO) costing method, but are not sure how to set this up.

equired

i) Prepare an Excel worksheet for each of the bicycle lines for June (one for the small bicycles,

and one for the large bicycles) using the FIFO costing method to keep track of the number of

bicycles purchased, bicycles sold, bicycles on hand, cost of goods sold and gross profit made.

ii) Prepare journal entries (including any adjusting entries) for all of the business’s transactions

for June (using the perpetual inventory system and FIFO costing method). Include dates,

references and narrations.

iii) Prepare T-accounts in an Excel spreadsheet, and post all of the above journal entries to

the T-accounts. Include dates and references for each entry. Total all of the T-accounts to

determine their balances at the end of the June 2019.

iv) Prepare the ‘Adjusted Trial Balance’ in an Excel spreadsheet as at 30th June 2019. Use

formulas to generate all of the figures in the ‘Adjusted Trial Balance’ from the balances in the

T-Accounts.

v) The business has a year-end of 30th June. Prepare the closing entries as at 30th June 2019.

vi) Prepare the income statement, balance sheet and statement of changes in equity in Excel.

Answer 1

1)   For Small Bicycle                                  
   Date   Opening    Purchase    return    Sold    Stock in hand    Purchase cost    Charges    sale price    GP
   03-Jun   0   100       0   100   5000   150      
   06-Jun   100           15   85   0   0   1500   727.5
   13-Jun   85   0       10   75   0   0   1000   485
   20-Jun   75   40       0   115   2320          
   24-Jun   115       20       95   -1160          
   28-Jun   95           18   77           1800   873
                                      
   For Large Bicycle                                  
   Date   Opening    Purchase    Return    Sold    Stock in hand    Purchase cost    Charges    sale price    Gross profit
   03-Jun   0   100       0   100   5000   150      
       100               100   0          
   06-Jun   100           15   85   0       1500   727.5
   20-Jun   85   15           100   870          
   28-Jun   100           10   90   0       1000   485

2)   Journal Entries       
   Particulars    Amount   Amount
01-Jun   Bank A/c Dr.   35000  
   To cash A/c        35000
          
03-Jun   Purchase A/c - Small    5000  
   - Large    5000  
   To Rocky Hills Ltd.       10000
          
04-Jun   Purchase A/c - Small    150  
   - Large    150  
   To Finaland Delivery Ltd        300
          
05-Jun   Advertisement Expenses   200  
   Bank a/c        200
          
06-Jun   Cash A/c Dr    3000  
   To sales A/c        3000
          
06-Jun   Bank A/c Dr .   3000  
   To Cash A/c        3000
          
09-Jun   Rocky hills A/c Dr    9800  
   To Bank A/c        9800
          
13-Jun   Childcare Centre   1000  
   To sales A/c        1000
          
15-Jun   Finland delivery ltd    300  
   To bank A/c        300
          
20-Jun   Small Bicycle    2320  
   large Bicycle    870  
   To Rocky Hills Ltd        3190
          
23-Jun   Purchase A/c - Small    130  
   - Large    50  
   To Finaland Delivery Ltd        180
          
          
24-Jun   Rocky Hills Ltd    1160  
   To Small Bicycle        1160
          
28-Jun   Cash A/c Dr   2800  
   To Sales        2800
          
          
          
4)   Adjusted Trial Balance       
   Particulars    Amount  
   Capital A/c        35000
   P/l A/c        1442
   Purchase A/c - Small    7600  
   Purchase return        1160
   Purchase A/c - large    6070  
   Rocky hills A/c       2030
   Finland delivery        180
   Bank A/c    30500  
   Cash a/c    0  
   Sales        6800
   Child care A/c    1000  
   Rebate and Discount       200
   Advertisement Expenses    200  
   Loss On stock    1442  
       46812   46812
          
Note :          
   Stock in hand as per sheet       
   Small    77  
   Large    90  
          
   Stock in hand as reported      
   Small    54  
   Large    85  
          
   Difference loss       
   Small    23  
   Large    5  
LOSS          
   Cost as per FIFO       
   Small    1184.5  
   Large    257.5  
Entry would Be:          
          
   Stock Loss    1442  
   To Capital A/c ( Earning )       1442
          
          
          

3)   T- ACCOUNTS           
              
i)   Small Bicycle A/c           
   Particular   Amount    Particular   Amount
              
   Rocky Hills    5000   Rocky Hills    1160
   Finland Delivery    150      
   Rocky Hills    2320      
   Finland Delivery    130      
              
              
              
              
   large Bicycle A/c           
   Particular   Amount    Particular   Amount
              
   Rocky Hills    5000      
   Finland Delivery    150      
   Rocky Hills    870      
   Finland Delivery    50      
              
              
              
              
   Rocky hills Account           
   Particular   Amount    Particular   Amount
   Bank    9800   Small Bicycle    5000
   Rebate and Discount    200   large Bicycle    5000
   Small Bicycle    1160   Small Bicycle    2320
           large Bicycle    870
              
              
   Balance    2030      
       13190       13190
              
   Bank A/c           
   Particular   Amount    Particular   Amount
              
   Cash A/c    35000   Advertisement expenses    200
   Cash A/c    3000   Rocky Hills    9800
   Cash A/c    2800   Finland delivery ltd    300
              
              
           Balance    30500
       40800       40800
              
   Cash A/c           
   Particular   Amount    Particular   Amount
   Capital A/c    35000   bank A/c    35000
   Sales    3000   bank A/c    3000
   sales    2800   bank A/c    2800
              
       40800       40800
              
   Finland delivery A/c           
   Particular   Amount    Particular   Amount
   bank A/c    300   Small Bicycle    150
           Large Bicycle    150
           Small Bicycle    130
   Balance    180   Large Bicycle    50
       480       480
              
   Sale Account           
   Particular   Amount    Particular   Amount
           Small Bicycle - Cash    1500
           Large Bicycle - Cash    1500
           Child care centre    1000
           Small Bicycle - Cash    1800
           Large Bicycle - Cash    1000
              
              
   Rebate and Discount           
   Particular   Amount    Particular   Amount
           Rocky Hills    200
              
              
              
              
              
   Child care Account           
   Particular   Amount    Particular   Amount
   sales    1000      
              
              
              
              
              
   Capital A/c           
   Particular   Amount    Particular   Amount
   Stock loss    1442   Cash    35000