ACC506

ACC506 Major Assignment Details:

As at the 1^stMay, Katy Perry establishes a new businessKatie’s Bridal Services as a sole trader.The business will hire out bridal gowns and other accessories as well as provide professional services to the general public. She registers the new business and opens a new bank account with the local branch of Eastside Bank. Note the business is also registered for GST.

May Transactions:

FIRST Month

·        Monday   1stMay

§  Katy deposits cash of $25,000 into the new Bank

§  Purchased the following non-current assets

Note the depreciation will be calculated at the end of Stage 2.

§  Purchased $2,200 worth of General bridal accessories(expected to be used in the current year) from Gogo Suppliers –on Credit Invoice GS-234 .No discount has been offered for early payment. (asset 1010)(Don’t forget subsidiary ledger)

§  Withdrew $100.00 cash from an ATM to establish a petty cash account. (No GST for this transaction)

§  Katy has the telephone installed by Hotshot Communications - the contract is for a monthly line rental of $110.00 plus charges for calls made. Cheque #004 for $330.00 for three months’ (12 Weeks) rent in advance is issued.

§  Katy phoned Your Insurance Ltd and arranged for insurance of the new business and paid for oneyear’s coverage(52 Weeks)drew a cheque # 0005 amount $1,650.00.

§  Purchased additional general supplies of $220.00 on credit from GogoSuppliers– on Credit Invoice GS-254 . No discount has been offered for early payment. (Don’t forget subsidiary ledger)

§  Katythe real estate company(Use your own name) $1,320(includes GST)rent for the month of May.

·        23^rd May

§  Katyprovided professional services for Mariah Carey on credit and invoiced her for $6,600.00 - invoice # KPS0001. A new policy offering discounts for early payment has been implemented – 2/7, n/30.(Don’t forger Subsidiary ledgers)

·        25^rd May

§  Katy provided professional services for Julia Roberts on credit and invoiced her for $5,500.00 - invoice # KPS 0002. A new policy offering discounts for early payment has been implemented – 2/7, n/30. (Don’t forger Subsidiary ledgers)

·        27^th May

§  Katyprovided professional services for Pink on credit and invoiced her for $2,200.00 - invoice # KPS0003. A new policy offering discounts for early payment has been implemented – 2/7, n/30.(Don’t forger Subsidiary ledgers)

§  The business has cash revenue from store hire income of $2,200 and store sales income of $6,600.00.Katy banks $5,800.00 and keeps $3,000.00 as drawings.

·        29^th May

§  Paid half of the amount owing toGogoSuppliers invoice GS-234 using Cheque # 0006(Don’t forget Subsidiary Ledgers)

·        31^st May

§  Employed new staff (Harry Potter, Ron Weasley&Steve Pepper) to be paidfortnightly starting on the 12^th next month.

·        Tax Scales

o   The above rates do not include the Medicare levy of 2% but as each has private health insurance is not necessary to deduct.

This is where you will start recording transactions

June

·        1^st June

§  Julia Roberts pays her account in full taking advantage of the 2% discount. (Your tutor will show you how to record the discount)(Don’t forget Subsidiary Ledgers)(Done in Lecture  6 Slides)

§  Purchased more office equipment on credit from Wayne Graham for $1,650.00 (includes GST) invoice WG 058. Wayne offers discount terms of 2/7, n30.(Don’t forget Subsidiary Ledgers)(Done in Lecture  6 Slides)

§  Purchased more office equipment on credit from Bishnu Sharma for $1,100.00 (includes GST) invoice BS 011. Bishnu offers discount terms of 2/7, n30.

058

·        2^nd June

§  Paid the rent (Use your own name)Direct Debit $1,320(includes GST) for rent for first week June (7 Days)(Done in Lecture  6 Slides)

§  Paid the remaining half of the amount owing to Gogo Suppliers invoice GS-234 using Cheque # 0007 (Don’t forget Subsidiary Ledgers)(Done in Lecture  6 Slides)

§  Pink paid her account in full taking advantage of the 2% discount. (Don’t forget Subsidiary Ledgers)

·        3^nd June

§  Katy provided professional services for Taylor Swift on credit and invoiced her for $3,300.00 - invoice # KPS 0004. A new policy offering discounts for early payment has been implemented – 2/7, n/30. (Don’t forger Subsidiary ledgers)

§  Mariah Carey paid her account in full outside the discount period. (Don’t forget Subsidiary Ledgers)

§  Katy provided professional services for Jane Campion on credit and invoiced her for $3,300.00 - invoice # KPS 0005. A new policy offering discounts for early payment has been implemented – 2/7, n/30. (Don’t forger Subsidiary ledgers)

·        4^th June

§  Paid Wayne Graham for invoice WG 58 using Cheque #00008Taking advantage of the discount.

·        5^th June

§  The business has cash revenue from store hire income of $1,100 and store sales income of $2,200.00. Katy banks $2,300.00 and keeps $1,000.00 as drawings. (Done in Lecture  6 Slides)

§  Paid the amount owing to Gogo Suppliers invoice GS-254 using Cheque # 0009(Don’t forget Subsidiary Ledgers)

§  Paid Bishnu Sharma for invoice BS011 using Cheque #00010Taking advantage of the discount.

June Week 2

·        Monday 8^th June

Katy Has decided, on the advice of her accountant, to implement an inventory system. She wants to sell wedding gowns in addition to the gowns for hire in the store. Her accountant advises her to separate the Accessories into three categories namely; Bouquets, Buttonhole Spray and Headpieces for the accessories, to use a periodic inventory system on a First in First out (FIFO) basis.

·        To facilitate this use the General Journal to shift $700.00 and $1,500.00 from account 1010 to accounts 5000 and 6020 respectively. Then record the accessories as shown in the table below.

·        Beginning Inventory. (To be recorded on FIFO Accessories worksheet)  

The gowns will be split into three categories but will use a perpetual inventory system on a weighted average basis.

·        Katy sourced a new supplier of accessories KPMG Suppliers who offered discount for early payment and purchased the following Accessories on credit.

KPMG Suppliers issued their invoice KP 0622 for $959.20 terms 2/7 n30.

·        Katy ordered the following Gowns on credit from Don Kerr  Suppliers

·        Don Kerr Suppliers delivered the gowns and issued invoiced DK 0115 for $2,475.00  offering terms of 2/7 n30 as an incentive for early payment

·        Paid rent using Electronic Funds Transfer KP 001

·       Tuesday 9th

·        Taylor Swift paid her account in full taking advantage of the discount on offer.

Thursday 11^th

·        Jane Campion paid her account in full taking advantage of the discount on offer.

·        Used $11.00 petty Cash for Postage Voucher 1 (Remember just use the petty cash book)

·        Friday 12^thJune

·        Katy provided Professional services for Julia Roberts on credit and invoiced her for $5,280.00 - invoice # KPS 0006. Terms– 2/7, n/30. (Don’t forger Subsidiary ledgers)(Done in Lecture  6 Slides)

§  Cash sales for the week are identified as:

(Note: the Accessories are recorded using the Periodic FIFO method while the Gowns are recorded using the Perpetual Moving Average method.)

§  Total receipts for sales of inventory for the week amounts to $3,689.40

§  Total receipts for Shop Hire revenue amounts to $1,650.00.

§  Katy banks $3,339.40 and keeps $2000.00 as drawings.

·        Paid KPMG Suppliers for their invoice KPM0622 with cheque # 0011 taking advantage of the discount.

·       Paid Don Kerr Suppliers for their invoice DK0958 with cheque # 0012 taking advantage of the discount

·       Paid all three employees two weeks’ pay using EFT

June Third Week

Monday June 15th

·        Katy ordered the following Gowns on credit from Don Kerr  Suppliers

·        Don Kerr Suppliers delivered the gowns and issued invoiced DK 0118 for $2,475.00  offering terms of 2/7 n30 as an incentive for early payment

§  Paid rent using  Direct Debit

^·            Thursday 18^th

o   Julia Roberts paid her account in full taking advantage of the discount on offer.

·        Used $16.50 petty Cash for Office Supplies Voucher 2 (Remember just use the petty cash book)

·        Friday 19^thJune

·        Katy provided Professional services and sold a Rossini Gown toPink on credit and invoiced her for $1,650.00 for the services and $660.00 for the Gown Total $2,310.00- invoice # KPS 0007. Terms– 2/7, n/30. (Don’t forger Subsidiary ledgers and inventory ledgers)(Done in Lecture  6 Slides)

§  Cash sales for the week are identified as:

(Note: the Accessories are recorded using the Periodic FIFO method while the Gowns are recorded using the Perpetual Moving Average method.)

§  Total receipts for sales of inventory for the week amounts to ????

§  Total receipts for Shop Hire revenue amounts to $2,200.00.

§  Katy banks $5,888.00 and keeps $3000.00 as drawings.

·       Paid Don Kerr Suppliers for their invoice DK0118 with cheque # 0013taking advantage of the discount

·        Katy arranged for advertising costing $3,300 from UBiz Advertisers to be run for 30 days starting on Saturday 20^th June. Katy used Cheque #0014 to pay for thr service in advance.

June Fourth Week

·        22^nd June

·        Katy purchased the following Accessories on credit from KPMG Suppliers who offered discount for early payment.

KPMG Suppliers issued their invoice KP 0666 for $985.60terms 2/7 n30.

·        Katy ordered the following Gowns on credit from Don Kerr  Suppliers

·        Don Kerr Suppliers delivered the gowns and issued invoiced DK 0215 for $1,100.00  offering terms of 2/7 n30 as an incentive for early payment

·        Paid rent using Electronic Funds Transfer KP 001

·       Tuesday 23th

·        Pink paid her account in full taking advantage of the discount on offer.

Thursday 25^th

·        Used $33.00 petty Cash for Taxi (Remember just use the petty cash book)

·        Friday 26^thJune

·        Katy provided Professional services$2,200.00 and one Louis Viton gown $550.00 for Taylor Swift on credit and invoiced her for $2,750.00 - invoice # KPS 0008. Terms– 2/7, n/30. (Don’t forger Subsidiary ledgers)

·        Katy provided Professional services$3,300.00 and one StellaMcCartney gown $990.00 for Jane Campion credit and invoiced her for $?????nvoice # KPS 0009. Terms– 2/7, n/30. (Don’t forger Subsidiary ledgers)

Katy provided Professional services$4,400.00 and one Rossini gown $1.650.00 for

·        Taylor Swift on credit and invoiced her for $??? - invoice # KPS 0008. Terms– 2/7, n/30. (Don’t forger Subsidiary ledgers)

§  Cash sales for the week are identified as:

(Note: the Accessories are recorded using the Periodic FIFO method while the Gowns are recorded using the Perpetual Moving Average method.)

§  Total receipts for sales of inventory for the week amounts to $?????

§  Total receipts for Shop Hire revenue amounts to $1,650.00.

§  Katy banks $???? and keeps $2000.00 as drawings.

·        Paid KPMG Suppliers for their invoice KPM0666 with cheque # 0015 taking advantage of the discount.

·       Paid Don Kerr Suppliers for their invoice DK0215  with cheque # 0016 taking advantage of the discount

·       Paid all three employees two weeks’ pay using EFT

June Fifth Week

·        29th June

·        Katy purchased the following Accessories on credit from KPMG Suppliers who offered discount for early payment.

KPMG Suppliers issued their invoice KP 0696 for $??? terms 2/7 n30.

·        Katy ordered the following Gowns on credit from Don Kerr  Suppliers

·        Don Kerr Suppliers delivered the gowns and issued invoiced DK 0315 for $??? offering terms of 2/7 n30 as an incentive for early payment

·        Paid rent using Electronic Funds Transfer KP 001

30th June

·        Repaid petty Cash $60.50 from funds withdrawn from bank teller

·        Taylor Swift was unhappy with the Professional services provided on invoice KBS005 and requested, and was granted a refund of $165.00 using credit note KBSCR 001.

·        Returned a faulty Rossini gown and was given a credit for $220.00 against invoice DK0315 1278

·        Do the Bank Reconciliation

Adjustments

·      Calculate the outstanding payroll liability (2 days for each employee)

·      Calculate and record the insurance expense for the two months

·      Calculate and record the Telephone expensefor the two months

·      Calculate and record the prepaid rent (5  Days)

·      Calculate and record the depreciation expense for the 2 Months

·      A stocktake of the Accessories revealed that there were:

o  19 Bouquets

o  7 Buttonhole Sprays

o  4 Headpieces

·      Any discrepancy with the calculated FIFO inventory is to be written off to account 6065 Stock write off expense

·      Only 10 days of the 30 days advertising has been used.

Note All adjustments rounded up to nearest full dollar amount.

Part B. (This should be done in your assignment in the Report Worksheet)

Write a brief report to Julie and Katy commenting on the financial performance of the business:

·        Calculate the following financial ratios and provide comments –

o   Current ratio

§  Industry average is 5:1

§  Accounting Norm is 3:1

o   Quick ratio

§  Industry average is 4 : 1

§  Accounting Norm is 1:1

·        Calculate and provide a cash flow statement for the first month of trading.

·        List and briefly explain the registrations and legal requirements that Katy would have undertaken to establish the business name as a sole trader.

·        Katy is contemplating forAlex Perry a partnership or a company. What extra General Ledger accounts would have to be created for

§  A Partnership

§  A Company