Financial Accounting Major Assignment Comprehensive problem
The following unadjusted trial balance is for the year ended 30 June 2019:
JAMES LTD
Unadjusted Trial Balance as at 30 June 2019
Debit Credit
Bank overdraft $ 178 050
Vehicle rental expenses $ 72 000
Cash at bank 7 500
Investment in government bonds 150 000
Goodwill 30 000
Interest revenue 4 800
Insurance expense 3 000
Land 230 000
Buildings 1 000 000
Office furniture and equipment 127 000
Retained earnings (1/7/18) 89 000
Revaluation surplus 15 000
Accumulated depreciation – office furniture and equipment 23 000
Accumulated depreciation – buildings 100 000
Accumulated impairment losses – goodwill 6 000
Allowance for doubtful debts 14 700
Cost of sales 197 400
Advertising expense 12 300
Sales returns and allowances 8 700
Sales 478 120
Mortgage payable 90 000
GST payable 15 000
Inventory 106 000
Share capital (issued and paid to $1 per share) 1 140 000
General reserve 18 000
Interest expense on overdraft 11 300
Discount received 11 250
Discount allowed 12 000
Fees revenue 17 900
Proceeds on sale of furniture 13 000
Carrying amount of furniture sold 5 000
Accounts payable 118 900
Accounts receivable 225 400
Salaries of sales staff 60 000
Administrative wages 70 620
Interest expense on mortgage 4 500
$ 2 332 720 $ 2 332 720
Additional information
(a) James Ltd is involved in the computer services industry. Leased vehicles are used mainly for delivery and service of computers. The company’s head office, which houses its administrative staff, is located on a prime piece of real estate in the local township.
(b) There have been no share issues during the year.
(c) The following adjustments are required before preparation of James Ltd’s financial statements for
the year:
1. Depreciation to be provided on a straight−line basis on buildings at 5% p.a. and on office furniture and equipment at 10% p.a. The sale of office furniture occurred at the beginning of the current financial year.
2. Goodwill is considered to have fallen in value through impairment by 10% of its original cost.
3. Management was informed that a particular debtor was bankrupt and the full account of
$12 000 needs to be written off.
4. The Allowance for Doubtful Debts account needs to be adjusted to 8% of accounts receivable, after considering the adjustment in (3) above.
5. Current income tax expense (and tax liability) for the year is estimated to be $8000.
6. Accrued wages to staff: sales $1500, administrative $2000.
7. Vehicle rental paid in advance at 30 June 2019 amounted to $30 000.
8. A dividend of 3c per share is to be declared on shares.
9. Land is to be revalued to its fair value of $250 000.
10. Transfer $10 000 from the general reserve to retained earnings.
Required
A. Prepare the journal entries (in general journal form) required by items 1–10 above.
B. Prepare the adjusted trial balance as at 30 June 2019.
C. Prepare the statement of profit or loss and other comprehensive income, with expenses classified by function, for James Ltd for the year ended 30 June 2019 in accordance with the requirements of IAS 1/ AASB 101.
D. Prepare the statement of changes in equity for the year ended 30 June 2019 in accordance with the requirements of IAS 1/AASB 101.
E. Prepare the company’s classified statement of financial position as at 30 June 2019 in accordance with the requirements of IAS 1/AASB 101, using the current/non−current classification.
