Question

MAJOR CASE STUDY

You have commenced work at Alfred’s Accountants, and Alfred has given you a series of tasks to perform.

The first task is as follows:

Alfred hands you a pre-adjustment trial balance of an organisation known as Radcliffe Rifles and a series of notes about Radcliffe Rifles. He then asks you to undertake a series of tasks:

RADCLIFFE RIFLES

Pre-Adjustment Trial Balance as at 30 June 2020

Account	Debit	Credit
Accumulated Depreciation—Equipment		10 000
Advertising	1 700
Office Supplies	1 000
Bank	5 000
Capital—Blake		92 150
Cost of Sales	54 000
Accounts Payable		18 500
Customs Duty	3 000
Accounts Receivable	9 300
Delivery Expense	2 000
Discount Expense	2 100
Discount Revenue		3 200
Drawings	20 000
Equipment	90 000
Interest Expense	4 000
Loan—North Bank		40 000
Office Expenses	4 450
Prepaid Rent Expense	6 000
Sales		105 500
Inventory	47 800
Wages	19 000
Totals	269 350	269 350

The following transactions have not yet been entered in the accounts.

• Depreciation of equipment is to be charged at the rate of 1% per annum on cost.
• Prepaid Rent expired during the period $5600.
• A customer paid a deposit of $5000, inventory will be delivered on 5 July 2020.
• Wages owing at 30 June 2020 were $850.
• Accounts payable paid $12500.
• Prepaid annual insurance $1200, policy commencing from 1 July 2020.
• Accounts receivable collected 7500.
• On 30 June 2020 office supplies on hand $400.
• Radcliffe Rifles rented out the basement of the premises for $2000 per month. The tenant has not yet paid the June rent.
• Bad debt written off $500.

Task 1.

Required:

Mr Alfred instructs you to prepare the journal entries necessary to record above transactions in the General Journal as at 30 June 2020. Narrations are not required.   

Task 2

Required:

Mr Alfred instructs you to prepare an Income Statement for the 6 months ending 30 June 2020.

Task 3

Required:

Mr Alfred instructs you to prepare a fully classified Balance Sheet (using a narrative or T form) as at 30 June 2020. (Note: must use a standard Balance Sheet format with appropriate headings)

Answer 1

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Mr Alfred instructs you to prepare the journal entries necessary to record above transactions -in the General Journal as at 30 June 2020. Narrations are not required.
Sl No	Journal entry	Debit $	Credit $
1	Depreciation      a/c	900
	To accumulated depreciation a/c		900
	Profit and loss account a/c	900
	To Depreciation              a/c		900
2	Prepaid Rent expired during the period $5600.
	Rent                                  a/c	5600
	To prepaid Rent               a/c		5600
3	A customer paid a deposit of $5000, inventory will be delivered on 5 July 2020.
	Bank                                     a/c	5000
	To Customer Deopsit        a/c		5000
4	Accounts payable paid $ 12500
	Accounts payable              a/c	12500
	To Bank                               a/c		12500
5	Prepaid annual insurance $1200, policy commencing from 1 July 2020.
	Prepaid Insurance account	1200
	To Bank                            a/c		1200
6	Accounts receivable collected 7500.
	Bank                                      a/c	7500
	To Accounts Receivable    a/c		7500
7	On 30 June 2020 office supplies on hand $400
	Office supplies expense a/c	600
	To Office supplies            a/c		600
8	Radcliffe Rifles rented out the basement of the premises for $2000 per month. The tenant has not yet paid the June rent.
	Rent receivable                a/c	2000
	To Rental Income            a/c		2000
9	Bad debt written off $500
	Bad Debt Expense           a/c	500
	To Accounts receivable a/c		500

2.Task

Income Statement
Particulars	Amount($)
Sales		105500
Discount Revenue	3200
Cost of Sales	-54000
Gross Profit	159500
Operating Expense
Customs Duty	-3000
Wages		-19000
Rent Expense	-5600
Discount Expense	-2100
Delivery Expense	-2000
Office expense	-5050
Interest Expense	-4000
Other Income
Rental Income	2000
Net Income	120,750