Question 6 (14 marks) Answer each of the following five parts assuming a balance date of 30 June 2016. Journal narrations are not required. Rance Ltd entered into a loan of $10,000 on 1 February 2016 and was being charged interest at 6% simple per annum. Prepare any required general journal adjusting entry for the financial year assuming no payment of interest has been made. [2 marks] Cotchin Ltd had accounts receivable at 30 June 2016 totaling $76,100 Dr. The doubtful debts allowance at the same time was $2,310 Cr (before any bad debts written-off), but it was decided by the accountant to increase the allowance for doubtful debts to 2% of adjusted accounts receivable after writing off $3,100 in uncollectable accounts. Prepare the necessary general journal entries to record the above events. [3 marks] (c) Vickery Ltd, a small Australian service company, has 10 employees. The current annual payroll for these employees is $375,000. The employees are entitled to four weeks of annual

Journal entry a. 1st feb 2016 cash a/c Dr. 10000 To loan a/c 10000 30 June 2016 Interest a/c Dr. 600 To interest on payable a/c 600 b. Bad debt expenses a/c Dr. 3100 To account receivable a/c 3100 Allowance for doubt debt Dr. 790 To profit &loss a/c 790 allowance for doubt debt DR. 1460 To account receivable a/c 1460 c. the annual cost of the leave 375000*17.5%= 65625 30 June salary expences a/c 440625 To salary payable a/c 440625 d. 30June depreciation a/c 20000 To machinery 20000 30 June depreciation a/c 1924 To computer a/c 1924 e. 30June advertise expenses a/c 4200 To prepaid advertising 4200

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Question 6 (14 marks) Answer each of the following five parts assuming a balance date of 30 June 2016

Accounting Aug 11, 2020

Question 6 (14 marks) Answer each of the following five parts assuming a balance date of 30 June 2016. Journal narrations are not required.

Rance Ltd entered into a loan of $10,000 on 1 February 2016 and was being charged interest at 6% simple per annum.

Prepare any required general journal adjusting entry for the financial year assuming no payment of interest has been made. [2 marks]

Cotchin Ltd had accounts receivable at 30 June 2016 totaling $76,100 Dr. The doubtful debts allowance at the same time was $2,310 Cr (before any bad debts written-off), but it was decided by the accountant to increase the allowance for doubtful debts to 2% of adjusted accounts receivable after writing off $3,100 in uncollectable accounts.

Prepare the necessary general journal entries to record the above events. [3 marks]

(c) Vickery Ltd, a small Australian service company, has 10 employees. The current annual payroll for these employees is $375,000. The employees are entitled to four weeks of annual leave and a leave loading of 17.5%.

Calculate the annual cost of the leave andprovide a general journal entry to record the weekly accrual of annual leave. [3 marks]

Miles Ltd purchased machinery for $380,000 on 1 March 2016. It is estimated that the machinery will have a working life of 10 years but the company believes it will only use the machinery for 6 years and then sell it for an estimated $20,000. The company uses the straight line method of depreciation for the machinery.

The company purchased a computer on 1 July 2014 for $10,000. The company believes it will use the computer for ten years and can sell it at the end of that period for $500. The company uses the reducing balance method of depreciation and a depreciation rate of 26% p.a.

Prepare the necessary general journal entries to record the depreciation of the two assets for the financial year ending 30 June 2016. [4 marks]

Ellis Ltd paid $4,200 for 6 months advertising on 1 January 2016. The transaction was initially recorded as an asset.

Prepare any adjusting entry, if required, for the financial year ending 30 June 2016. Justify your answer. [2 marks]

Expert Solution

Journal entry

1st feb 2016	cash a/c Dr.	10000
	To loan a/c	10000

30 June 2016	Interest a/c Dr.	600
	To interest on payable a/c	600

	Bad debt expenses a/c Dr.	3100
	To account receivable a/c	3100

	Allowance for doubt debt Dr.	790
	To profit &loss a/c	790

	allowance for doubt debt DR.	1460
	To account receivable a/c	1460

c. the annual cost of the leave 375000*17.5%= 65625

30 June	salary expences a/c	440625
	To salary payable a/c	440625

30June	depreciation a/c	20000
	To machinery	20000

30 June	depreciation a/c	1924
	To computer a/c	1924

30June	advertise expenses a/c	4200
	To prepaid advertising	4200

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