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Homework answers / question archive / Assessment Task 2 - Written Assessment Part A Question 1 Paxton Consulting is a small IT consulting business that was established by John Paxton, operating as a sole trader, on 1 April 2021

Assessment Task 2 - Written Assessment Part A Question 1 Paxton Consulting is a small IT consulting business that was established by John Paxton, operating as a sole trader, on 1 April 2021

Accounting

Assessment Task 2 - Written Assessment Part A

Question 1 Paxton Consulting is a small IT consulting business that was established by John Paxton, operating as a sole trader, on 1 April 2021. The unadjusted trial balance as at 30 June 2021 is as follows:    

Paxton Consulting

Unadjusted Trial Balance 30 June 2021

 

 

Account

Debit

Credit

Cash at Bank

$34,600

 

Accounts Receivable

18,300

 

Prepaid Rent

3,000

 

Prepaid Insurance

6,000

 

Office Supplies

5,400

 

Computer Equipment

27,000

 

Accumulated Depreciation – Computer Equipment

 

 

Furniture and Fixtures

16,400

 

Accumulated Depreciation – Furniture and Fixtures

 

 

Accounts Payable

 

$13,800

Salary Payable

 

 

Interest Payable

 

 

Electricity Payable

 

 

Unearned Service Revenue

 

900

Bank Loan

 

20,000

J. Paxton, Capital

 

70,000

J. Paxton, Drawings

25,000

 

Service Revenue

 

95,000

Other Revenue

 

1,400

Salary Expense

24,800

 

Interest Expense

 

 

Supplies Expense

 

 

Depreciation Expense – Computer Equipment 

 

 

Depreciation Expense – Furniture and Fixtures

 

 

Rent Expense

18,600

 

Insurance Expense

 

 

Electricity Expense

1,200

 

Other Expenses

20,800

 

 

 

 

201,100

 

 

201,100

 

 

Adjustment Information

 

    1. A count on 30 June 2021 indicates that $3,800 of Office Supplies are still on hand.

 

    1. The computer equipment was purchased on 1 April 2021. It has an expected useful life of 5 years. The residual value is zero. The straight-line method is used for depreciation.

 

    1. The Furniture and Fixtures were purchased on 1 May 2021. They have an expected useful life of 6 years. The residual value is estimated to be $2,000. The straight-line method is used for depreciation.

 

    1. Employee salaries are $400 per day (Monday through Friday) and the business pays employees each Friday. In 2021, 30 June is a Wednesday. 
    2. In April 2021, $6,000 was paid for an eight-month insurance policy that provides insurance cover from 1 May to 31 December 2021.

 

    1. The balance in the Unearned Revenue account represents an advance payment by a customer made in April 2021 for services to be provided by Paxton Consulting over the three-month period from May to July 2021 inclusive. It is assumed that the services will be provided equally over the three months. 

 

    1. The electricity bill for June 2021 is estimated, based on prior usage, to be $700. 

 

    1. Paxton Consulting rents out unused parking space to another business for $175 per calendar month. The money is paid in arrears so that Paxton Consulting receives the amount for each month at the beginning of the following month. The rent for June 2021 is due to be received by Paxton Consulting in the first week of July. Paxton Consulting treats this as other revenue. 

 

    1. Interest of $132 is owed on the Bank Loan as at 30 June 2021.

 

    1. Paxton Consulting pays rent of $1,500 per week. This is always paid two-weeks in advance. The balance in the Prepaid Rent account represents the payment, made on 23 June 2021, for the period from 24 June to 7 July 2021 inclusive.    

 

 

Required

 

      1. Enter the unadjusted trial balance in a worksheet and complete the worksheet for Paxton Consulting for the period ended 30 June 2021.              (4 marks)

 

      1. Prepare the appropriate journal entries (with narrations/explanations) as at 30 June 2021 to record the adjusting entries.                (3 marks)

 

      1. Prepare the appropriate journal entries (with narrations/explanations) as at 30 June 2021 to record the closing entries.                  (1 mark)

 

      1. Prepare the Income statement.                                                                                              (2 marks)

 

      1. Prepare the Statement of changes in owner’s equity.                                                       (1 mark)

 

      1. Prepare the classified balance sheet.                                                                                (2 marks)

 

      1. Prepare the post-closing trial balance.                                                                               (2 marks)

 

Important information

This question can be completed using either:

 

  • A spreadsheet program such as Excel, or

 

  • A word processing program such as Word, or

 

  • A mixture of a spreadsheet program (such as Excel) or a word processing program (such as Word).

 

A sample worksheet and journal page are included in the ‘Written Assessment Resources’ folder in Moodle.

 

 

 

 

 

 

Question 2                                                                                                                                          5 marks

 

Jeanette Leeson operates a small travel agency as a sole trader. She has hired you as her accountant as she admits that her knowledge of accounting is rather limited. At the end of her first year (30 June 2021), you have prepared the financial statements for her business and sent them to her. Shortly afterwards you receive an email from Jeanette with the following questions:

 

  1. My Income Statement shows a Net Profit for the year of $150,000. However, during the year my Cash at Bank increased by only $65,000. Shouldn’t the Net Profit for the year be the same as the increase in cash for the year? Why is my increase in cash different from my Net Profit figure? 

 

  1. During the year I withdrew $45,000 cash to pay for personal expenses. Why does this not appear as an expense item on my Income Statement? Where, if anywhere, does this appear in my financial statements? Furthermore, I was considering making a loan to another business. Should I record their repayment of the loan amount as revenue? Should the interest I receive from them be recorded as revenue?   

 

  1. During June 2021, I paid $8,000 for an insurance policy that provides insurance cover from 1 August 2021 to 31 July 2022. Why has this payment not been recorded as an expense on my Income Statement? If this payment was not recorded as an expense, then how was it recorded and why? When will it be expensed and why?

 

  1. The notes to my financial statements state that they are prepared ‘on the assumption that the business is a going concern.’ I think that ‘going concern’ means that the business will continue but can you please clarify this for me? Why does it say that this is an ‘assumption’ when I definitely intend to remain in business for the next five years? 

 

  1. I am a bit confused about when I record revenue. For example, I complete a job for a customer, but they do not pay me until sometime later. When should I record this revenue? What requirements must be satisfied before this revenue can be recorded? Furthermore, if I had an asset, such as some equipment, that had been severely damaged, then should I wait until I sell it before recording the loss? 

   

               

Required

 

Draft a reply to Jeanette that answers her questions. Remember that she has only limited accounting knowledge. However, keep your responses brief and to the point. Your answer should not exceed 600 words in total.                    (5 marks)

 

Important information                                  

This question should be completed using a word processing program such as Word.

 

You do not need to include a title page or a table of contents.

 

Use the question numbers to indicate which question you are answering. You do not need to include the question as part of your answer.

 

You should number all the pages and include your name and student number (as either a Header or a Footer) on each page.

 

You should use a consistent font and font size throughout your assignment. Suggested fonts include Calibri or Arial. The font size should be 11 or 12.

 

 

 

Referencing

 

Your assignment should include references (both in-text and in a reference list) that conforms to the American Psychological Association (APA) style. 

 

A copy of ‘The Abridged American Psychological Association Referencing Style Guide (APA) 2020’ can be accessed from the CQUniversity Referencing Guides web page:

 

https://sportal.cqu.edu.au/learning-support/academic-and-study-help/referencing

 

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ACCT11081 Introductory Financial Accounting 

Assignment: Part A

 

Question

Assessment Criteria

 

Marks Awarded

 

 

 

Complete the worksheet

 

Prepare the adjusting journal entries

 

Prepare the closing journal entries

 

Prepare the Income statement

 

Prepare the Statement of changes in equity

 

Prepare the classified balance sheet

 

Prepare the post-closing trial balance

 

 

/4

 

/3

 

/1

 

/2

 

/1

 

/2

 

/2

 

 

 

 

Prepare written answers that are correct (accurate), clearly expressed (the meaning is evident), and succinct (concise/brief).

 

 

/5

 

 

 

 

Total

 

 

/20

 

 

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