ACCT1101 Instruction: CompleteALLquestions from this section. Question 1 Fashion Rave Clothing is a sole proprietorship enterprise, which is owned legally by a single individual – Rover Heritage. The...

ACCT1101

Instruction: CompleteALLquestions from this section.

Question 1

Fashion Rave Clothing is a sole proprietorship enterprise, which is owned legally by a single individual – Rover Heritage. The purpose of Fashion Rave Clothing as a business is to own and operate clothing/merchandise stores. It is like a department store chain, selling men's, women's, and children's clothing and other related items. Fashion Rave Clothing prides itself on selling sophisticated clothing and is in the city, and they have a staff of 10 people employed in their stores.

Fashion Rave Clothing needs to calculate depreciation. As a company, they have long-term assets such as buildings, equipment, motor vehicle, among others. These assets are used over multiple periods and they need to allocate the cost of those assets over those multiple usage periods. This allows them to achieve the act of the matching of cost and benefits. They are matching the cost of the asset through depreciation expense, and the benefit being received through revenue - in other words, matching expense with revenue.

Fashion Rave Clothing has the following information (table 1 below) for its Building and Equipment:

Table 1

Additionally, Fashion Rave Clothing has the following total figures for Debtors at the end of each financial year (table 2 below). The Provision for Doubtful Debts is to be maintained at 5% of debtors at the year-end. Assuming no provision had previously existed.

Table 2

Furthermore, Fashion Rave Clothing had the following information:

i.Rates Receivables: Owingat1 January 2019 $108; Paid during financial year $644; Owing at 31 December 2019 $152.ii.Motor Expenses; Owingat1 January 2019 $64; Paid during financial year $308; Prepaid at 31 December 2019 $24.

The financial year of Fashion Rave Clothing ended on 31st December 2019.

You are required to answer the following questions:

A.Show the ledger accounts forRatesReceivablesandMotor Expensesincluding the balance transferred to the necessary part of the financial statements, also the balance

​carried down to the following year. ​​​​​ (6 marks)

B.i. Construct the Provision for Doubtful Debts Account for 2017, 2018 and 2019.ii.Show the relevant entries on the Profit and Loss Account for the year ended31 December2017, 2018 and 2019.iii.Show the Debtors on Balance Sheet extracts asat31 December 2017, 2018 and

​2019.​​​​​​​​​ (9marks)

C.There are several methods that can be used to calculate depreciation. Clearly explain the method of depreciation that would be most suitable for Fashion Rave Clothing to use.

(5 marks)

(Total 20 marks)

Question 2

Sammy Joe Cash Book (Bank columns only) for the month of June 2017 was as follows:

$ $

​June 1 Balance b/d 5 000 June 9 Wages ​500

​ 16 Cash deposit 700 10 ​Stationery 450

18 M. Panton 800 23 Big D Ltd 1 000

​ 20 Rory Richards 2 500 29 ​Electric Solution 2 680

26 Sadie Jones 1 900 30 Sweet Treat Pastry 880

______ 30 Balance c/d 5 390

​ 10 900​​​​​​ 10 900

July 1 Balance b/d 5 390

The following Bank Statement was received in June 2017:

Payments Receipts Balance

Required:

A.Bring the cash book up to date, starting with balanceatJune 30, 2017. (8 marks)

B.Prepare a statement to reconcile the difference between the amended Cash Book balance and the balance in the bank statement on June 30, 2017. (7 marks)

C.Sammy Joe has two (2) chequing accounts at two different commercial banks. The chequing account at BNS has a credit balance of $35 000. The other chequing account at CIBC has a debit balance of $30 000. The manager of Sammy Joe needs to withdraw $15 000 to pay for motor vehicle repairs.

Which of the accounts can the manager withdraw the $15 000 without increasingSammy

Joe overdraft at the bank? Give reason for your answer. (5 marks)

(Total 20 marks)

Question 3

A.A Trial Balance is a statement that can be prepared at any time depending on the need of the organization to check the arithmetical accuracy of the Ledger. With this knowledge in mind answer the following questions below: The Trial Balance is arithmetically correct but some of the balances are misplaced and the trial balance does not balance.

Required

Redraft the trial balance in the correct form. (13 marks)

​B.​ ​​​​​ $ $

Capital 19 000

Sales 40 980

Drawings 2 300

Cash 156

Advertising 2 354

Opening inventory 2 548

Rent and rates 3 400 Returns inwards 252

Purchases 28 700

Returns outwards 350

Commissions expense 10 230

Salaries 7 530

Bank 2 860

61 600 59 060

Certain transactions took place after correcting the trial balance. These events had a double effect on the trial balance:

Sold goods $560 in cash; paid salaries by cheque $4000; Bought goods $450 on credit.

Required

Show the double effect of the transactions on figures in the trial balance by drawing up a new trial balance. ​​​​​​​ (7 marks)

(Total 20 marks)