Problem 6.

13

Journal entries, worksheet and completion of accounting cycle with GST periodic inventory system ***
SEETOS SEAFOODS

Required: A. Prepare journal entries to record the following transactions (round to nearest $).

June

2 5 7 15 16 18 21 30 30 30

Purchased inventory on credit, $10 960 plus GST of 10% Received a $1 350 payment within the discount period from customers for sales made in May. Paid $1 400 within the discount period for inventory purchased in May. Recorded cash sales for the first half of the month of $16 750 plus GST. Paid $6,360 towards inventory purchased on 2 June. Credit sales of $8 400 plus GST were made. Customer returned goods purchased on 19 June for $473 (includes GST) Paid salaries of $3 900 to sales staff and $1 000 to office staff. (GST exempt). Recorded cash sales of $7 960 plus GST for the second half of the month. Paid rent of $2 500 plus GST; $1 550 of that amount is for sales storage space and the remainder is for office space.

B. C.

D. E.

Set up T accounts for the accounts listed in the trial balance, enter the 31 May balances, and post the June journal entries to the T accounts. Prepare a 10-column worksheet for Seetos Seafoods as at 30 June 2006. Use the following information to make end-of-period adjusting entries. 1. $560 of the prepaid advertising expired during the year. 2. Depreciation on the sales equipment was $3 550 for the year. 3. Accrued interest on the loan payable is $620 (GST exempt) While making adjustments, add the following accounts as needed: Depreciation Expense Sales Equipment, Advertising Expense, Interest Payable. The ending balance of inventory was $15 800. Prepare an income statement, a statement of changes in equity and a balance sheet for the year ended 30 June 2006. Prepare the adjusting and closing entries.

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A. SEETOS SEAFOODS June 2 Purchases GST Outlays Accounts Payable Purchased inventory on credit. June 5 Cash at Bank Discount Allowed GST Collections Accounts Receivable Payment made on sale in May. June 7 Accounts Payable Discount Received GST Outlays Cash at Bank Payment on credit purchase in discount period. June 15 Cash at Bank Sales GST Collections Cash Sales. June 16 Accounts Payable Discount Received GST Outlays Cash at Bank Paid account payable in discount period. June 18 Accounts Receivable Sales GST Collections Credit Sales. June 21 Sales Returns & Allowances GST Collections Accounts Receivable Sales return on 18 June sale on credit. June 30 Salaries Expense Sales 3 900 430 43 473 9 240 8 400 840 6 424 58 6 6 360 18 425 16 750 1 675 1 414 13 1 1 400 1 350 25 3 1 378 10 960 1 096 12 056

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Salaries Expense Admin. Cash at Bank Paid Salaries. Cash at Bank Sales GST Collections Cash Sales. Rent Expense Store Rent Expense Admin. GST Outlays Cash at Bank Paid Rent.

1 000 4 900

8 756 7 960 796

1 550 950 250 2 750

B.
31/5 5/6 15/6 30/6 Cash at Bank 12 500 7/6 1 350 16/6 18 425 30/6 8 756 30/6 Bal. c/d 41 031 25 621 1 400 6 360 4 900 2 750 25 621 41 031 31/5 18/6 Accounts Receivable 13 700 2/6 9 240 21/6 Bal. c/d 1 378 473 21 089

Bal. b/d

Bal. b/d

22 940 21 089

22 940

31/5 30/6 Closing ent Bal. b/d

Inventory 20 960 31/5 Closing ent 15 800 30/6 Bal. c/d 36 760 15 800

20 960 15 800 36 760

31/5

Prepaid Advertising 2 100 Bal. c/d 30/6 Adv exp

1 540 560 2 100

Bal. b/d

2 100 1 540

31/5 2/6 30/6

GST Outlays 8 300 7/6 1 096 16/6 250 Bal. c/d 9 646 9 639

1 6 9 639 9 646

31/5

Sales Equipment 14 400 Bal. c/d

14 400

Bal. b/d

Bal. b/d

14 400 14 400

14 400

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Bal. c/d

Accum. Depr. Sales Equipment 9 020 31/5 30/6 Dep. exp 9 020 Bal. b/d

5 470 3 550 9 020 9 020

7/6 16/6 Bal. c/d

Accounts Payable 1 414 31/5 6 424 2/6 16 018 23 856 Bal. b/d

11 800 12 056 23 856 16 018

30/6 Bal. c/d

Interest Payable 620 31/5 Int. exp. 620 Bal. b/d

620 620 620

5/6 21/6 Bal. c/d

GST Collections 3 31/5 43 15/6 14 165 18/6 30/6 14 211 Bal. b/d

10 900 1 675 840 796 14 211 14 165

Bal. c/d

Loan Payable 9 600 31/5

9 600

9 600 Bal. b/d

9 600 9 600

Bal. 30/6 Drawings

S. Seeto, Capital 38 666 31/5 18 500 30/6 P & L 57 166 Bal. b/d

25 610 31 556 57 166 38 666

31/5

S. Seeto, Drawings 18 500 30/6 Capital

18 500

18 500

18 500

30/6 Closing ent.

Sales 512 310 31/5 15/6 18/6 30/6 512 310

479 200 16 750 8 400 7 960 512 310

31/5 21/6

Sales Returns & Allowances 8 200 30/6 Closing ent 430

8 630

8 630

8 630

31/5

2/6

Purchases 375 250 30/6 Closing ent. 10 960 386 210

386 210

Purchases Returns & Allowances 30/6 Closing 4 200 31/5 ent.

4 200

386 210

4 200

4 200

30/6 Closing ent.

Discount Received 3 171 31/5 7/6 16/6 3 171

3 100 13 58 3 171

31/5

Freight Inwards 2 820 30/6 Closing ent.

2 820

2 820

2 820

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31/5 30/6

Salaries Expense Sales 29 500 30/6 Closing ent. 3 900 33 400

33 400

31/5 30/6

33 400

Rent Expense Store 24 100 30/6 Closing ent. 1 550 25 650

25 650

25 650

31/5 30/6

Salaries Expense Admin 12 300 30/6 Closing ent. 1 000 13 300

13 300

31/5 30/6

13 300

Rent Expense Admin 2 700 30/6 Closing ent 950 3 650

3 650

3 650

30/6 Prepaid adv.

Advertising Expense 560 30/6 Closing ent. 560

560 560

Depreciation Expense Sales Equipment 3/6 Acc Dep. 3 550 30/6 Closing 3 550 ent. 3 550 3 550

31/5 5/6

Discount Allowed 3 700 30/6 Closing ent. 25 3 725

3 725

31/5 30/6 Interest pay.

Interest Expense 850 30/6 Closing ent. 620 1 470

1 470

3 725

1 470

30/6 Expenses/ Beg. Inv. 30/6 Capital

Profit & Loss Summary 503 925 30/6 Income/Inv . End. 31 556 535 481

535 481

535 481

Note:

Although requirement E asks for adjusting and closing journal entries it does not require that they are posted to the ledger accounts. The postings are shown in the solution for completeness and the ledger accounts have also been closed and balanced. Hence, all stages in the accounting cycle are satisfied.

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C.
SEETOS SEAFOODS Worksheet for the year ended 30 June 2006 Unadjusted trial Adjustments Adjusted trial balance balance Debit Credit Debit Credit Debit Credit
25 621 21 089 20 960 2 100 9 639 14 400 5 470 16 018 14 165 9 600 25 610 18 500 512 310 8 630 3 171 386 210 4 200 2 820 33 400 25 650 13 300 3 650 3 725 850 590 544 2 820 33 400 25 650 13 300 3 650 3 725 1 470 3 550 560 (3) 620 4 730 594 714 620 594 714 386 210 4 200 2 820 33 400 25 650 13 300 3 650 3 725 1 470 3 550 560 503 925 31 556 535 481 535 481 535 481 106 589 106 589 620 75 033 31 556 106 589 8 630 3 171 386 210 4 200 25 621 21 089 20 960 1 540 9 639 14 400 9 020 16 018 14 165 9 600 25 610 18 500 512 310 8 630 3 171 512 310 18 500

Income Statement Debit

20 960

Balance Sheet Debit

25 621 21 089 15 800 1 540 9 639 14 400 9 020 16 018 14 165 9 600 25 610

Account Title
Cash at Bank Accounts Receivable Inventory Prepaid Advertising GST Outlays Sales Equipment Acc. Depr. Equip. Accounts Payable GST Collections Loan Payable S. Seeto, Capital S. Seeto, Drawings Sales Sales Returns & Allowances Discount Received Purchases Purchases Returns & Allows. Freight Inwards Salaries Expense Store Rent Expense Store Salaries Expense Admin. Rent Expense Admin. Discount Allowed Interest Expense Depreciation Expense Advertising Expense Interest Payable Profit

Credit
15 800

Credit

(1) 560

(2) 3 550

(3) 620 590 544 (2) 3 550 (1) 560 4 730

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D. SEETOS SEAFOOD Income Statement for the year ended 30 June 2006 INCOME Sales Revenue Less: Sales returns and allowances Net sales revenue Cost of sales: Beginning inventory Add: Purchases Freight inwards Less: Ending Purchases ret. & allows. Net cost of purchases Cost of goods available for sale Less: Ending inventory Cost of sales GROSS PROFIT Other operating income: Discount received

$512 310 8 630 503 680 20 960 386 210 2 820 389 030 4 200 384 830 405 790 15 800 389 990 113 690 3 171 116 861

OPERATING EXPENSES (unclassified) Salaries expense store Rent expense store Salaries expense admin Rent expense admin Interest expense Depreciation expense Advertising expense Discount allowed PROFIT

33 400 25 650 13 300 3 650 1 470 3 550 560 3 725 85 305 $31 556

SEETOS SEAFOODS Statement of Changes in Owners Equity for the year ended 30 June 2006 S. Seeto, Capital 1 June 2006 Profit Less: Drawings S. Seeto, Capital 30 June 2006 $25 610 31 556 57 166 18 500 $38 666

6.67

SEETOS SEAFOODS Balance Sheet as at 30 June 2006 CURRENT ASSETS: Cash at bank Accounts receivable Inventory Prepaid Advertising NON-CURRENT ASSETS: Sales equipment Less: Accumulated depreciation TOTAL ASSETS CURRENT LIABILITIES: Accounts payable GST payable Interest payable NON-CURRENT LIABILITIES: Loan payable TOTAL LIABILITIES NET ASSETS EQUITY S. Seeto, Capital TOTAL OWNERS EQUITY

$25 621 21 089 15 800 1 540 14 400 (9 020)

$64 050

5 380 69 430 16 018 4 526 620 21 164 9 600 9 600 30 764 $38 666 38 666 $38 666

E.

Adjusting entries 30 June Advertising Expense Prepaid Advertising Depreciation Expense sales equipment Accumulated Depr. sales equipment Interest Expense Interest Payable 620 620 3 550 3 550 560 560

6.68

F.

Closing entries Profit & Loss Summary Sales Returns & Allowances Purchases Freight Inwards Salaries Expense Store Rent Expense Store Salaries Expense Admin. Rent Expense Admin. Interest Expense Discount Allowed Advertising Expense Depreciation Expense Inventory (Beginning) To close debit accounts. Sales Purchases Returns & Allowances Discount Received Inventory (Ending) Profit & Loss Summary To close credit accounts. Profit & Loss Summary S. Seeto, Capital To transfer profit to retained profits. S. Seeto, Capital S. Seeto, Drawings To transfer drawings. 18 500 18 500 31 556 31 556 512 310 4 200 3 171 15 800 535 481 503 925 8 630 386 210 2 820 33 400 25 650 13 300 3 650 1 470 3 725 560 3 550 20 960

6.69