Individual Assignment
Page 1 of 16 ACC1AIS – Individual Assignment 2020 This assignment requires you to create a new business, input transactions, and generate financial statements and reports using Xero. This assignment question sheet should be used in conjunction with the weekly Xero help-sheets which explain in more detail the steps required to complete the transactions below. Task Overview The company for which you will be working in this assignment distributes, sell and repairs bicycles. You will be recording transactions for the month of September 2020. The assignment contains five separate sections, one for each accounting period during month of September. You should work through these sections sequentially. Once you have completed all the transactions you should prepare the requirements listed on page 12. Finally, you are required to submit your assignment files and reports via the assignment submission box on LMS. You are required to submit your assignment by Sunday (4 October 2020), 11.59 pm. Set up Company Your first task is to set up a new business in Xero - you must use your Student ID Number and FULL Name as the Business name. You will be doing this assignment via registering for a trial company and not using the Demo company. You are the accountant and owner of a business which is registered for GST purposes. You previously used to use another software as your main accounting system. However, as a result of changes in technology, you have decided to move onto a cloud-based accounting software platform, Xero. To transfer from your previous accounting package to Xero you are required to transfer balances in your previous system onto Xero. The conversion date (date when you stop using your previous system and start using Xero) is 1 September 2020, and the Trial Balance as at 31 August 2020 is as below: Page 2 of 16 Trial Balance as at 31 August 2020 Account Debit Credit Cash at bank $166,483.00 Accounts receivable $1,148,178.00 Prepaid Fire insurance $30,000.00 Inventory $1,325,800.40 Store Building $700,000.00 Accumulated Depreciation – Store building $125,000.00 Delivery Van $80,000.00 Accumulated Depreciation – Delivery Van $16,800.00 Accounts payable $705,120.00 Loan payable – Building Head Office $117,604.88 Unearned delivery revenue $49,600.00 Capital $1,497,039.94 Sales revenue $1,043,798.20 Interest expense – 8% annually $1,568.06 Fire Insurance expense $6,000.00 Salaries expense $50,000.00 Warehouse rent expense $4,400.00 telecommunication expense $1,360.00 GST $197,743.30 Allowance for Doubtful Debts – 10% $104,379.82 Provision for warranty – 5% $52,189.92 $3,711,532.76 $3,711,532.76 All figures included within the Trial Balance are GST exclusive except for accounts receivable and accounts payable. Page 3 of 16 Accounts receivable: 100 items of SKU112820, 150 items of SKU112821, 80 items of SKU112822, 70 items of SKU112823, 100 items of SKU112824, 110 items of SKU112825, 110 items of SKU112826 are sold on 15 August 2020 on credit to Bike Friday. Due date is 18 September 2020. Items sold on 15 August 2020 Sales price (incl. GST) Total receivable (incl. GST) SKU112820 – 100 items $1,698.00 $169,800 SKU112821 – 150 items $3,198.00 $479,700 SKU112822 – 80 items $1,718.00 $137,440 SKU112823 – 70 items $2,398.00 $167,860 SKU112824 – 100 items $1,098.00 $109,800 SKU112825 – 110 items $359.90 $39,589 SKU112826 – 110 items $399.90 $43,989 Total incl. GST $1,148,178 Accounts payable: 150 items of SKU112820, 160 items of SKU112821, 110 items of SKU112822, 100 items of SKU112823, 100 items of SKU112824, 140 items of SKU112825, 140 items of SKU112826 are purchased on 20 August 2020 on credit from Bike Works. Due date is 20 September 2020. Items purchased on 20 August 2020 Purchase price (incl. GST) Total payable (incl. GST) SKU112820 – 150 items $849.00 $127,350 SKU112821 – 160 items $1,599.00 $255,840 SKU112822 – 110 items $859.00 $94,490 SKU112823 – 100 items $1,199.00 $119,900 SKU112824 – 100 items $549.00 $54,900 SKU112825 – 140 items $178.00 $24,920 SKU112826 – 140 items $198.00 $27,720 Total incl. GST $705,120 Page 4 of 16 Inventories on hand at 31 August 2020: 450 items of SKU112820, 210 items of SKU112821, 330 items of SKU112822, 130 items of SKU112823, 200 items of SKU112824, 280 items of SKU112825, 150 items of SKU112826, and 140 items of SKU112827. Items on hand 31 August 2020 Purchase price (excl. GST) Total excl. GST SKU112820 – 450 items $771.82 $347,319.00 SKU112821 – 210 items $1,453.64 $305,264.40 SKU112822 – 330 items $780.90 $257,697.00 SKU112823 – 130 items $1,090.00 $141,700.00 SKU112824 – 200 items $499.10 $99,820.00 SKU112825 – 280 items $161.82 $45,309.60 SKU112826 – 150 items $180.00 $27,000.00 SKU112827 – 140 items $726.36 $101,690.40 Total excl. GST $1,325,800.40 Further Information Salaries expense $25,000 per month Warehouse rent expense $2,420 per month incl. GST Telecommunication expense $748 per month incl. GST Allowance for doubtful debts 10% of the Accounts Receivable Provision for warranty 5% of the sales revenue Interest expense on loan (Building Head Office) Calculated at 8% per annum Delivery Van Purchased on 1 July 2019 at $88,000 incl. GST, with a useful life of 5 years, and $8,000 residual value. It is depreciated using the straight-line method. Store Building Purchased on 1 July 2016, at $770,000 incl. GST with a useful life of 20 years, and $100,000 residual value. It is depreciated using the straight-line method. Fire insurance On 1st July 2020, you paid $39,600 incl. GST for a twelve-month fire insurance policy to Berkshire Group. Page 5 of 16 Items Refer to the Workshop 2 Help-sheet if you need detailed help to create new items. Item code Item name Buy price (Incl. GST) Sell price (Incl. GST) SKU112820 Road Bikes $849.00 $1,698.00 SKU112821 Commuter & Recreation Bikes $1,599.00 $3,198.00 SKU112822 Mountain Bikes $859.00 $1,718.00 SKU112823 Cyclocross Bikes $1,199.00 $2,398.00 SKU112824 Folding Bikes $549.00 $1,098.00 SKU112825 Touring Bikes $178.00 $359.90 SKU112826 BMX Bikes $198.00 $399.90 SKU112827 Cruiser Bikes $799.00 $1,598.00 https://www.edinburghbicycle.com/info/types-of-bikes-buying-guide/#cross-bikes Page 6 of 16 Period one: 1 September to 5 September 2020 Date Details 1 September You borrowed $104,000 from the Northern Bank on a short-term loan. The money is to be used to purchase welding machinery. The principle, plus 7.5% annual interest, will be paid in 3 months. 1 September You purchased 20 items of SKU112820, 10 SKU112821, 15 SKU112822, and 12 SKU112823 from Focus Bikes. You received all the stocks ordered and paid 20% of the purchase price together with the freight of $253 incl. GST. You agreed to pay Focus Bikes the balance on 5th October. 1 September You paid $11,440 incl. GST for a three-month product liability insurance policy to Society Insurance. 1 September You received $46,750 incl. GST cash in advance from clients for a one-year subscription to your company featured magazine, “RideOn”. 1 September You received $76,560 incl. GST in advance from Gocycle for repair of bicycles. 2 September You spent $1,496 incl. GST on miscellaneous office supplies at Officeworks. You paid for these from your bank account. Consider purchase of supplies as a prepaid supplies account. 2 September You spent $102,850 incl. GST on a welding machinery and paid for it by using your bank account. You estimate that the machinery will have a useful life of 5 years, during which you are planning to produce 40,000 units of new bike pedals. The residual value of the machinery is $13,500. Actual number of units of pedals that will be produced within the next twelve months will be 2,400 units. Record the purchased of machinery on this date. Note that the trial Company in Xero does not allow you to add an asset to the register or create asset types as we did in Demo Company in Week 6 so you’ll need to just record this transaction as an asset purchase. 3 September You sold 40 SKU112820 and 20 SKU112822 to Ideal Bikes. Ideal Bikes paid you the full amount into your bank account. 4 September You sold 80 SKU112826 and 60 SKU112825 to Road Riders. Road Riders paid you a deposit of 75% of the total sale into your bank account and agreed to pay the remaining 25% on 4th October. Details of transactions for Period 1: 1 to 5 September 2020 Page 7 of 16 Period two: 6 September to 12 September 2020 Date Details 6 September You spent $5,500 incl. GST on a computer at Digi-Com and paid for it from your bank account. You estimate it will have a useful life of 3 years and be worth $713.61 at the end of the 3 years. Computer is depreciated using the diminishing balance method and the rate of depreciation is 41%. Record the purchase of the computer on this date. 6 September You transferred surplus cash out of the Bank Account to an Investment Account. You realised that you don’t need all your capital sitting in the low interest working bank account so have transferred $70,000 into a higher interest-bearing account. Record this movement in a journal entry. This account will pay you 2.5% interest per annum