ACC10008 Financial Accounting Systems AssignmentCase Study – Highway Heaven
CaseStudy – Highway Heaven
General information
Thiscase study requiresyou to usedoubleentry manual recording andcomputer accountingsoftware (MYOB) for asmall business to record transactions for April 2017.It coversmanyof the commontransactions of everydaybusiness,including GST.
Specific information
Highway Heaven(ABN 53 004 085 616)isowned andoperatedby Michael Harley.He buys motorcycles from importers and sells them in Melbourne. His shop is at 888 Sydney Road, Glenville, 3056.
All sales of motor cycles are on credit, unless otherwise stated; customers are required to pay cash for riding lessons.Purchases of motor cycles are on credit and operating expenses are paid in cash.
ThebusinesschargesGST onallinventorysalesand riding lessons,andpays GST oninventorypurchasesandmost businessexpenses.
IMPORTANT: When establishing the business name for the assignment record ‘your name-HighwayHeaven’ (example; ;JohnSmith-Heaven.’)
Goods and Services Tax
Highway Heaven charges GST of 10% on all sales pays GST on all business expenses, except wages. Non-current asset acquisitions are also taxed at GST of 10%.
Employees
Michael has two employees, Dirk Davidson and Mae Scooter who are both paid $25 per hour. Wages owing to Dirk and Mai at 31 March is $400.
Inventory
The following is a list of closing inventory and the suppliers at 31 March 2017:
|
Quantity On hand |
Item Code |
Description |
Last cost price |
Sale Price |
Supplier |
|
20 |
BHH |
Big Head helmet |
$20 |
$60 |
Hit the Road |
|
15 |
RR |
Road Runner |
$1,650 |
$5,280 |
Best Bikes |
|
8 |
CC |
Coast Cruiser |
$2,200 |
$6,490 |
Best Bikes |
Each of the above items of inventory are quotedexcluding GST.
Inventory orders are delivered to Highway Heaven the same day the order is made to the supplier.
Highway Heaven maintains inventory records for all inventory items.
Lessons
Customers are charged $50 (excluding GST) per hour for riding lessons. All lessons are paid for in cash in advance.
Lessons revenue is recorded separately from sales of inventory.
Supplier information
Supplier balances at 31 March 2017 are:
|
Name |
Address |
ABN |
Account balance |
|
Hit the Road |
181 Bend Boulevard, Bankstown, 3111 |
50 566 722 363 |
$1,200 |
|
Best Bikes |
99 Hill Street Spokesville, 3222 |
20 888 566 222 |
$3560 |
Each of the above account balances represents deliveries of inventories received on 15 March 2017. All purchases are on terms 5/10, net 30 days.
Customer information
Customer balances at 31 March 2017 are:
|
Name |
Address |
ABN |
Last invoice date |
Account balance |
|
Free Wheelers |
22 Downhill Drive, Skyway, 3444 |
62 444 333 543 |
10 March |
$3,780 |
|
Kamikaze Couriers |
10 Lost Lane, Somerton, 3999 |
20 877 475 200 |
26 March |
$5,900 |
Terms of payment for customers is 2/15, net 30 days.
Highway Heaven sometimes receives payment within the discount period, but they may also receive payment outside the discount period.
Bank loan
Highway Heaven has a loan payable to Bikers Bank. Each month interest is paid $1,000 and $1,000 principal is paid off the loan.
Opening balances
Trial balance at 31 March 2017.
|
Account No. |
Account |
Debit |
Credit |
|
1-1110 |
Cash a bank |
14,370 |
|
|
1-1200 |
Accounts receivable |
9,680 |
|
|
1-1300 |
Inventory |
42,750 |
|
|
1-3110 |
Motor vehicles |
46,900 |
|
|
1-3120 |
Accumulated depreciation-motor vehicles |
10,900 |
|
|
1-3210 |
Shop fittings & fixtures |
7,500 |
|
|
1-3220 |
Accumulated depreciation of shop fittings & fixtures |
3,500 |
|
|
2-1200 |
Accounts payable |
4,760 |
|
|
2-1340 |
Net GST Payable |
1,390 |
|
|
2-1700 |
Legal fees payable-Dumbar & Dumbar |
880 |
|
|
2-1750 |
Wages payable |
400 |
|
|
2-2100 |
Loan, Bikers Bank, Brunswick |
50,000 |
|
|
3-1100 |
Capital, Michael Harley |
49,370 |
|
|
Total |
121,200 |
121,200 |
Transactions: April 2017
|
April 1 |
Wrote a cheque to All-Technics for a new cash register $3,740 (including GST). [Cheque 210] The cash register is expected to last for 3 years with a residual value of $160. Depreciation is allocated using the straight-line depreciation method. |
|
1 |
Wrote a cheque to White Real Estate for shop rent for April-June - $4,620. (GST inclusive) [cheque 211] |
|
2 |
Paid a six-month advertising campaign in Bikers World, a monthly magazine sold in newsagancies for motorbike enthusiasts. [Cheque 212] Highway Heaven will have an advertisement in each edition of the magazine. A cheque was written for $825 (GST inclusive) for the six months. |
|
3 |
Cash sale: 1 Coast Cruiser and 4 Big Head helmets (Invoice R301) |
|
4 |
Two customers paid for a 3 hour lesson each (Invoice L1) |
|
6 |
Paid legal fees owing to Dumbar & Dumbar [Cheque 213] |
|
8 |
Paid Hit the Road the balance outstanding at 31 March [Cheque 214] |
|
10 |
Michael withdrew $2,500 cash for personal use [Cheque 215] |
|
10 |
Cash sales: 5 Big Head helmets, 2 Road Runners and 1 Coast Cruiser (Invoice (R302) |
|
10 |
Total amount owing from March was paid to Best Bikes [Cheque 216] |
|
11 |
Credit sale: 3 Road Runner motorbikes to Kamikaze Couriers.(CR71) |
|
11 |
Highway Heaven urchased 10 Big Head helmets on credit. All goods were received the same day. (P.O. 344) |
|
12 |
Kamikaze Couriers paid the balance owing to Highway Heaven on 31 March. |
|
12 |
Credit purchase of the following items (P.O. 345) · 5 Road Runners · 5 Coast Cruisers All goods were received the same day. |
|
12 |
Paid $561 (GST inclusive) to Evans Garage for motor vehicle expenses. [Cheque 217] |
|
14 |
Free Wheelers paid the amount owing from March. |
|
14 |
Pay day. Dirk was paid for 28 hours and Mae was paid for 22 hours, which included the wages owing at 31 March. [Cheques 218 and 219]. GST is not applicable. |
|
15 |
Paid monthly loan repayment to Bikers Bank of $1,330 (this includes $330 interest). In addition, Michael decided the business will pay an additional $2,000 off the loan principal. GST is not applicable to this transaction. [Cheque 220] |
|
15 |
Credit sale of inventory to a new customer, Rangers Bike Club, of 2 Coast Cruisers. Freight/delivery charges were $80 (GST exclusive) (CR72) New customer details: 110 Melbourne Road, Williamsville, 3222, ABN 65 111 722 545 |
|
16 |
3 customers paid cash for a 3 hour lesson each. (Invoice L2) |
|
18 |
Received amount owing from Kamikaze Couriers for 11 April sale, allowing for the discount. |
|
19 |
Michael introduces a new product for sale. He has purchased tee shirts with the business logo on the back. The supplier is Tommy Tea, 18 Short Street, Tigerland, 3055.(ABN 84 958 732 843). Highway Heaven purchased 100 T-shirts on credit for a list price of $5.50.(GST inclusive).(P.O. 346) Selling price of the T-shirts is $16.50 (GST inclusive). |
|
21 |
Credit sale: 8 Big Head helmets and 30 T-shirts to Free Wheelers. (Invoice CR73) |
|
21 |
Paid for printing expenses of $429 (GST inclusive) to Officeworks. [Cheque 221] |
|
22 |
Michael withdrew $3,000 cash for personal use. [Cheque 222] |
|
23 |
A customer paid cash for a 4 hour lesson (Invoice L3). |
|
23 |
Credit purchase of inventory (P.O. 347 & P.O. 348): · 16 Big Head helmets · 2 Road Runners · 3 Coast Cruisers The goods were received on the same day. |
|
25 |
Credit sale of 4 Road Runners to Kamikaze Couriers.(Invoice CR73) |
|
25 |
Cash sale of 1 Coast Cruiser for special price of $4,510 (GST inclusive). The customer was particularly good at negotiating a special price. The customer also purchased 10 t-shirts for cash at the normal price(R303). |
|
26 |
Returned 10 Big Head helmets to Hit the Road as they were damaged. These items were purchased on 23 April. A credit note was issued by the supplier. |
|
27 |
Paid motor vehicle insurance of $682 (GST inclusive) to Allied Insurance. [Cheque 223] Note: record this as motor vehicle expenses. |
|
28 |
Pay day for employees. Dirk was paid for 30 hours and Mae was paid for 32 hours.[Cheques 224 and 225] |
|
31 |
Kamikaze Couriers returned 1 Road Runner as it was not required. Michael agreed to give Kamikaze Couriers a full credit as the motorbike was returned in perfect condition. |
|
31 |
A customer paid cash in advance for a 4 hour lesson to be conducted in May.(Invoice L4) |
e
Adjustments at 30 April 2017
Some adjustments are found in the above transactions.
Additional adjustments are:
· Motor vehicle and shop furniture & fixtures are to be depreciated at 15% using the diminishing value (reducing balance) method.
· Wages owing at 30 April: Dirk 9 hours, Mae 8 hours
· A physical stock take at 30 April showed the following items of inventory were on hand:
· Big Head helmet 16
· Road Runner 14
· Coast Cruiser 11
· T-shirts 52
Accounts List
|
1-0000 |
Assets |
|
|
1-1000 |
Current Assets |
|
|
1-1100 |
Cash at Bank |
|
|
1-1180 |
Undeposited funds |
|
|
1-1190 |
Electronic clearing account |
|
|
1-1200 |
Trade Accounts Receivable |
|
|
1-1300 |
Inventory |
|
|
1-2200 |
Prepaid Rent |
|
|
1-2250 |
Prepaid Advertising |
|
|
1-3100 |
Motor vehicle |
|
|
1-3110 |
Motor vehicle at cost |
|
|
1-3120 |
Motor vehicle-accumulated depreciation |
|
|
1-3200 |
Shop fittings & fixtures |
|
|
1-3210 |
Shop fittings at cost |
|
|
1-3220 |
Shop fittings-accumulated depreciation |
|
|
1-3300 |
Cash register |
|
|
1-3310 |
Cash register at cost |
|
|
1-3320 |
Cash register-accumulated depreciation |
|
|
2-000 |
Liabilities |
|
|
2-1200 |
Accounts Payable |
|
|
2-1300 |
GST Liabilities |
|
|
2-1310 |
GST Collected |
|
|
2-1330 |
GST Paid |
|
|
2-1600 |
Customer deposits |
|
|
2-1700 |
Legal fees payable |
|
|
2-1750 |
Wages payable |
|
|
2-2100 |
Loan-Bikers Bank |
|
|
3-0000 |
Equity |
|
|
3-1000 |
Owners’ Equity |
|
|
3-1100 |
Capital-Michael Harley |
|
|
3-1200 |
Drawings-Michael Harley |
|
|
3-8000 |
Retained Earnings |
|
|
4-0000 |
Income |
|
|
4-1100 |
Sales |
|
|
4-1200 |
Lessons income |
|
|
4-1500 |
Sales returns (manual recording only) |
|
|
4-2000 |
Freight collected |
|
|
5-0000 |
Cost of sales |
|
|
5-1000 |
Cost of goods sold |
|
|
5-1100 |
Inventory loss/gain |
|
|
5-2000 |
Freight |
|
|
6-0000 |
Expenses |
|
|
6-1000 |
Advertising |
|
|
6-1100 |
Printing |
|
|
6-1200 |
Rent |
|
|
6-1210 |
Discount given |
|
|
6-1220 |
Discount taken |
|
|
6-1250 |
Motor vehicle expenses |
|
|
6-1400 |
Loan interest |
|
|
6-1450 |
Bank fees |
|
|
6-1600 |
Legal fees |
|
|
6-1700 |
Depreciation-motor vehicle |
|
|
6-1750 |
Depreciation-shop fittings |
|
|
6-1800 |
Depreciation-cash register |
|
|
6-1930 |
Wages & salaries |
Note: Accounts which are linked accounts cannot be deleted.
Required:
Part A: manual recording
1. Record the opening balances as at 1 April 2017 in the general journal and appropriate general ledger accounts and the opening balances of accounts receivable, accounts payable and inventory in the appropriate subsidiary ledgers.
2. Record the transactions in the appropriate general or special journal for April 2017. Post all transactions from journals to the general ledger in accordance with accounting procedures.
3. Prepare schedules of accounts receivable, accounts payable and inventory as at 30 April 2017 and reconcile these with the control accounts in the general ledger.
4. Record end of month adjustments in the general journal and post these to the general ledger.
5. Prepare a Trial Balance after end of month adjustments as at 30 April 2017
6. Prepare an Income Statement for April 2017 and a Balance Sheet as at 30 April 2017.
7. Prepare closing entries for April 2017.
8. Prepare a Trial Balance after closing entries for April 2017.
Pro-forma journals, ledgers, worksheets and reports are available in the assessment folder and must be used to complete and submit part A.
Part B Computerised accounts using MYOB
1. Set up a data file for Deeper Dives and process the transactions for April 2017.
2. The Easy Setup Assistant can be used for the initial setup process to:
· Prepare the Chart of Accounts
· Enter the opening balances in the general ledger
· Setup customer and supplier cards and enter opening balances in the specialist modules
The Command Center can be used to create inventory items and enter opening balances of inventory
3. Record the transactions for April 2017.
4. Record end of month adjustments.
1. A printed copy of Part A as follows:
· General journal and all specialist journals
· General ledger
· Accounts Receivable, Accounts Payable and Inventory subsidiary ledgers and reconciliations
· Trial Balance after end of month adjustments
· Income Statement for April 2017
· Balance Sheet as at 30 April 2017.
· Trial balance as at 30 April 2017 after closing entries
2. Electronic submission via to submissions sub-folder in the assessment folder of the unit home page of
a. Part A excel file (name the file as ‘your name-HighwayHeaven-Part A’)
b. Part B MYOB file (name the file as ‘your name-HighwayHeaven-Part B’)
Please notify in the submission of your file if you used the ‘Mac’ version of MYOB to complete Part B of the assignment.
The hard copies of your assignment must be submitted by the due date in the assignment submission box on Level 11 of the BA Building.
Important Information
1. Iftheassignment does not satisfyboth of thefollowingrequirements, it will not be acceptedformarking.
a. Whenestablishingthe businessnamefortheassignment,studentsare required toinserttheirownnameafter thebusiness name(Deeper Dive-Yourname).For example, if thestudent’sname is JohnWhite, thecompany name ofthatstudent’s assignment would be(Deeper Dive-JohnWhite). Anyassignment with nostudentname/ names in thecompanyname will notbe accepted.
2. The assignment must be accompanied with an assignment cover sheet.
3. It is thestudent’s responsibilityto keep a backup copyof the assignment until all the assignmentprocess iscompleted andmarksareonblackboard.
4. Anyassignments handedinlatewill bepenalised as explained in theunit outline.Please refer tothe unit outlinefordetails.
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Solution: ACC10008 Financial Accounting Systems AssignmentCase Study – Highway Heaven