Miranda’s Motor Mechanics analysed the accounting records and other data for the business. The following information is made available for the year ended 30 June 2016:
1. Salaries and wages owing to employees at the end of the financial year amounted to $2480.
2. Included in the Prepaid Rent account is an amount of $1600 paid in June for the month of July 2016. The Prepaid Rent account has a debit balance of $4800.
3. All equipment had been acquired when the business was established on 1 July 2013. The Equipment account has a debit balance of $142 000. The equipment has a useful life of 10 years and an estimated residual value of $6000.
4. The Motor Vehicle account has a debit balance of $80 000. The vehicle was purchased on 1 January 2016 and has an estimated useful life of 5 years and an estimated residual value of $10 000.
5. The Prepaid Insurance account has a debit balance of $3444. It consists of the following policies purchased during the financial year ending 30 June 2016:
|
Policy number GTX 9847 KLM 9043 PAR 2178 |
Date of policy 1 August 2015 1 December 2015 1 March 2016 |
Life of policy 1 years 2 year 6 months |
Premium paid $876 2 016 552 |
6. A physical count of office supplies on hand at 30 June gives a total of $890. The Office Supplies account has a debit balance of $2920.
7. Included in the Prepaid Advertising account balance of $8400 is the amount is $1650 paid to the local newspaper for advertising space in their July 2016 papers. The remainder of the balance is used up by 30 June 2016.
8. At the end of the year, the business had outstanding a long-term loan of $40 000 from one of Miranda’s friends. Interest of 8% p.a. is payable half-yearly on this loan, every 1 April and 1 October. The last interest payment made by the business was on 1 April 2016.
9. The Motor Mechanic Services Revenue account had a credit balance of $123 600. Included in this amount was $3280 for services to be provided in July 2016.
10. Accrued council rates at 30 June 2016 were $4200.
Required
1. Prepare the end-of-period adjusting entries required on 30 June 2016. Show clearly your calculations.
2. Provide reasons for your answers to items 2, 4 and 8 above.
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