COMR2008 Principles of Accounting

Module 5 Preparing financial statements

Activity Solutions

Chapter 4
Exercises: 4.11, 4.12
Problem: 4.22, 4.30

Page 1 of 19
Suggested solutions by Hoggett, J., Medlin, J., Chalmers, K., Beattie, C., Hellmann, A. & Maxfield, J., (2018).
Accounting, 10th ed, John Wiley and Son Australia.
Exercise 4.11 Adjusting entries for depreciation

Trev’s Gardening Services purchased a trailer on 1 July 2019 for $26 200. It was
estimated to have a useful life of 5 years and a residual value at the end of that time of $2
800.

Required
(a) What is the depreciation expense for the year ended 30 June 2020?
(b) What is the balance of the Accumulated Depreciation account at the end of June 2021?
(c) What is the carrying amount of the hearse in the statement of financial position at 30
June 2020 and at 30 June 2021?
(d) Explain why an entry is made to the Accumulated Depreciation account rather than
to the Trailer account.

Answer

(a) Depreciation expense for the year ended 30 June 2020 = ($26 200 – $2 800)/5
= $4 680.
(This assumes that the trailer was used at an even rate throughout the year.)

(b) The Balance of the Accumulated Depreciation account after two years of service is
$9 360.

(c) The carrying amount of the trailer represents the net amount to be carried forward to the
next accounting period.

Year ended Year ended

30 June 2020 30 June 2021
Trailer $26 200 $26 200
Accumulated depreciation (4 680) (9 360)
Carrying amount $21 520 $16 840

(d) An entry is made to the Accumulated Depreciation account in order to keep the Trailer
account recorded at its original cost. The Accumulated Depreciation is a contra account to the
Trailer account, which is then deducted in the statement of financial position from the Trailer
account to show the carrying amount at the end of each accounting period.

By disclosing both accounts in the statement, the reader is able to assess the approximate age
of the asset held by the entity. For instance, it can be seen that the Accumulated Depreciation
account in 2021 is larger than in 2020, thus showing that, since more depreciation has been
written off the asset, the asset is now older and the entity has not replaced it with a new one.

Page 2 of 19
Suggested solutions by Hoggett, J., Medlin, J., Chalmers, K., Beattie, C., Hellmann, A. & Maxfield, J., (2018).
Accounting, 10th ed, John Wiley and Son Australia.
Exercise 4.12 Adjusting entries

Selected accounts of Amanda’s Art Supplies are shown below at 30 June of the current
year before any adjusting entries have been made.

Additional information
1. Prepaid insurance represents premiums for 1 year paid on 1 April.
2. Supplies of $430 were on hand at 30 June.
3. Shop shelving, which had been purchased on 1 January, is expected to last 10 years
and have a residual value of $2 000.
4. Amanda collected 4 months’ rent in advance on 1 June from a number of tenants.
5. Accrued salaries not recorded as at 30 June are $2 400.

Required
(a) Record in the general journal the necessary adjusting entries on 30 June. (LO3)

Page 3 of 19
Suggested solutions by Hoggett, J., Medlin, J., Chalmers, K., Beattie, C., Hellmann, A. & Maxfield, J., (2018).
Accounting, 10th ed, John Wiley and Son Australia.
(a)

AMANDA’S ART SUPPLIES

General Journal
Date Particulars Debit Credit
June 30 Insurance Expense 1 125
Prepaid Insurance 1 125
Insurance expired. ($4 500 × 3/12)

Supplies Expense 290

Supplies 290
Supplies used. ($720 – $430)

Depreciation Expense – Shop Shelving 1 100

Accumulated Depreciation 1 100
– Shop Shelving
Depreciation on office equipment.
($24 000 – $2 000)/10 × 6/12 = $1 100)

Unearned Rental Fees 1 200

Rental Fees Revenue 1 200
Rental fees earned for one month.
($4 800 ÷ 4)

Salaries Expense 2 400

Salaries Payable 2 400
Accrued salaries.

Problem 4.22

Preparing a worksheet

Non-GST version

JetSki Hire runs a business on the Murray River hiring out jet skis to holiday makers,
tour operators and for corporate training sessions. The unadjusted trial balance of JetSki
Hire is shown below (ignore GST).

Page 4 of 19
Suggested solutions by Hoggett, J., Medlin, J., Chalmers, K., Beattie, C., Hellmann, A. & Maxfield, J., (2018).
Accounting, 10th ed, John Wiley and Son Australia.
The following additional information is available at the end of June.

1. Repairs on one jet skis done in June for $1 870 have not yet been paid for or recorded.
An invoice has been issued by the repairer.
2. Expired insurance amounted to $11 000.
3. Depreciation on the jet ski fleet for 1 year is $28 500. Depreciation on the office
equipment is $1 320.
4. Salaries earned but not paid amounted to $3 780.
5. The balance in the Unearned Rental Revenue account includes $560 received for
services rendered on 27 June.
6. The June telephone costs of $600 have not been paid for or recorded at 30 June 2019.
A tax invoice has been received.
7. Accrued interest on the loan payable is $7 800.

Required
(a) Prepare a 10-column worksheet for the year ended 30 June 2019.

Page 5 of 19
Suggested solutions by Hoggett, J., Medlin, J., Chalmers, K., Beattie, C., Hellmann, A. & Maxfield, J., (2018).
Accounting, 10th ed, John Wiley and Son Australia.
(a)
JETSKI HIRE
Worksheet
for the year ended 30 June 2019

Unadjusted trial balance Adjustments Adjusted trial balance Income Statement Balance Sheet
Account Title Debit Credit Debit Credit Debit Credit Debit Credit Debit Credit
Cash at Bank 19 690 19 690 19 690
Accounts Receivable 15 200 15 200 15 200
Prepaid Insurance 12 500 (b) 11 000 1 500 1 500
Jet skis 267 300 267 300 267 300
Accum. Depr. Jet skis 105 600 (c) 28 500 134 100 134 100
Office Equipment 6 930 6 930 6 930
Accum. Depr. Office Equip. 2 940 (c) 1 320 4 260 4 260
Accounts Payable 19 600 19 600 19 600
Loan Payable 82 500 82 500 82 500
Unearned Rental Revenue 2 770 (e) 560 2 210 2 210
J. Jetson, Capital 111 580 111 580 111 580
J. Jetson, Drawings 27 390 27 390 27 390
Rental Revenue 119 690 (e) 560 120 250 120 250
Salaries Expense 50 160 (d) 3 780 53 940 53 940
Rent Expense 8 680 8 680 8 680
Repairs/Maint. Expense 9 770 (a)1 870 11 640 11 640
Marine Supplies Expense 22 440 22 440 22 440
Telephone Expense 4 620 (f) 600 5 220 5 220
$444 680 $444 680
Repairs/Maint. Exp. Payable (a) 1 870 1 870 1 870
Insurance Expense (b) 11 000 11 000 11 000
Depr. Exp. – jet skis (c) 28 500 28 500 28 500
Depr. Exp. – Off. Equip. (c) 1 320 1 320 1 320
Salaries Payable (d) 3 780 3 780 3 780
Telephone Expense Payable (f) 600 600 600
Interest Payable (g) 7 800 7 800 7 800
Interest Expense (g) 7 800 7 800 7 800
55 430 55 430 488 550 488 550 150 540 120 250 338 010 368 300
Loss for the year 30 290 30 290
150 540 150 540 368 300 368 300
Problem 4.22 Preparing a worksheet

GST version

JetSki Hire runs a business on the Murray River hiring out jet skis to holiday
makers, tour operators and for corporate training sessions. The unadjusted trial
balance of JetSki Hire is shown below.

JETSKI HIRE
Unadjusted Trial Balance
as at 30 June 2019
Account Debit Credit
Cash at bank $ 19 690
Accounts receivable 15 200
GST receivable 4 400
Prepaid insurance 12 500
Jet skis 267 300
Accumulated depreciation — jet skis $ 105 600
Office equipment 6 930
Accumulated depreciation — office 2 940
equipment 19 600
Accounts payable 82 500
Loan payable 2 770
Unearned rental revenue 6 600
GST payable 109 380
J. Jetson, Capital 27 390
J. Jetson, Drawings 119 690
Rental revenue 50 160
Salaries expense 8 680
Rent expense 9 770
Repairs and maintenance expense 22 440
Marine supplies expense 4 620
Telephone expense
$ 449 080 $ 449 080

The following additional information is available at the end of June.

1. Repairs on one jet skis done in June for $1 870 have not yet been paid for or
recorded. A tax invoice has been issued by the repairer.
2. Expired insurance amounted to $11 000.
3. Depreciation on the jet ski fleet for 1 year is $28 500. Depreciation on the office
equipment is $1 320.
4. Salaries earned but not paid amounted to $3 780.
5. The balance in the Unearned Rental Revenue account includes $560 received
for services rendered on 27 June.
6. The June telephone costs of $600 have not been paid for or recorded at 30 June
2019. A tax invoice has been received.
7. Accrued interest on the loan payable is $7 800.
Page 7 of 19
Suggested solutions by Hoggett, J., Medlin, J., Chalmers, K., Beattie, C., Hellmann, A. & Maxfield, J.,
(2018). Accounting, 10th ed, John Wiley and Son Australia.
Required
(a) Prepare a 10-column worksheet for the year ended 30 June 2019.

Page 8 of 19
Suggested solutions by Hoggett, J., Medlin, J., Chalmers, K., Beattie, C., Hellmann, A. & Maxfield, J.,
(2018). Accounting, 10th ed, John Wiley and Son Australia.
(a)
JETSKI HIRE
Worksheet
for the year ended 30 June 2019
Unadjusted trial balance Adjustments Adjusted trial balance Income Statement Balance Sheet
Account Title Debit Credit Debit Credit Debit Credit Debit Credit Debit Credit
Cash at Bank 19 690 19 690 19 690
Accounts Receivable 15 200 15 200 15 200
GST Receivable 4 400 (a) 187 4 647 4 647
(f) 60
Prepaid Insurance 12 500 (b) 11 000 1 500 1 500
Jet skis 267 300 267 300 267 300
Accum. Depr. Jet skis 105 600 (c) 28 500 134 100 134 100
Office Equipment 6 930 6 930 6 930
Accum. Depr. Office Equip. 2 940 (c) 1 320 4 260 4 260
Accounts Payable 19 600 19 600 19 600
Loan Payable 82 500 82 500 82 500
Unearned Rental Revenue 2 770 (e) 560 2 210 2 210
GST Payable 6 600 6 600 6 600
J. Jetson, Capital 109 380 109 380 109 380
J. Jetson, Drawings 27 390 27 390 27 390
Rental Revenue 119 690 (e) 560 120 250 120 250
Salaries Expense 50 160 (d) 3 780 53 940 53 940
Rent Expense 8 680 8 680 8 680
Repairs/Maint. Expense 9 770 (a)1 870 11 640 11 640
Marine Supplies Expense 22 440 22 440 22 440
Telephone Expense 4 620 (f) 600 5 220 5 220
$449 080 $449 080
Repairs/Maint. Exp. Payable (a) 2 057 2 057 2 057
Insurance Expense (b) 11 000 11 000 11 000
Depr. Exp. – jet skis (c) 28 500 28 500 28 500
Depr. Exp. – Off. Equip. (c) 1 320 1 320 1 320
Salaries Payable (d) 3 780 3 780 3 780
Telephone Expense Payable (f) 660 660 660
Interest Payable (g) 7 800 7 800 7 800
Interest Expense (g) 7 800 7 800 7 800
55 677 55 677 493 197 493 197 150 540 120 250 342 657 372 947
Loss for the year 30 290 30 290
150 540 150 540 372 947 372 947

Page 9 of 19
Suggested solutions by Hoggett, J., Medlin, J., Chalmers, K., Beattie, C., Hellmann, A. & Maxfield, J., (2018). Accounting, 10th ed, John Wiley and Son Australia.
Problem 4.30 Preparing a worksheet and financial statements

Non-GST version

The unadjusted trial balance of Helena’s Hire Cars is shown below (ignore GST).

Additional information
1. Petrol purchased on credit for $680 and used during the last week in June has
not been paid for or recorded.
2. A physical count showed office supplies totalling $340 were still on hand at 30
June.
3. Depreciation for 1 year on the hire cars is $12 400. Depreciation on the office
equipment is $980.
4. The balance in the Advertising Expense account includes $600 prepayment for
an advertising campaign beginning in July.
5. The balance in the Unearned Hire Fees account includes $1 800 received in
May for hire services completed in June.
6. The June insurance premium of $700 is overdue and has not been recorded. A
tax invoice has not been received.
7. Wages earned but not paid amounted to $1 150.

Page 10 of 19
Suggested solutions by Hoggett, J., Medlin, J., Chalmers, K., Beattie, C., Hellmann, A. & Maxfield, J.,
(2018). Accounting, 10th ed, John Wiley and Son Australia.
Required
(a) Prepare a 10-column worksheet for the year ended 30 June 2019.
(b) Prepare the income statement for the business for the year ended 30 June 2019.
(c) Prepare a statement of changes in equity for the year ended 30 June 2019.
(d) Prepare a balance sheet as at 30 June 2019.

Answer

Page 11 of 19
Suggested solutions by Hoggett, J., Medlin, J., Chalmers, K., Beattie, C., Hellmann, A. & Maxfield, J.,
(2018). Accounting, 10th ed, John Wiley and Son Australia.
(a)

HELENA’S HIRE CARS

Worksheet for the year ended 30 June 2019
Unadjusted trial balance Adjustments Adjusted trial balance Income statement Balance sheet
Account Title Debit Credit Debit Credit Debit Credit Debit Credit Debit Credit
Cash at Bank 8 140 8 140 8 140
Accounts Receivable 12 860 12 860 12 860
Office Supplies 640 (b) 300 340 340
Hire Cars 93 600 93 600 93 600
Accum. Depr. Hire Cars 39 400 (c) 12 400 51 800 51 800
Office Equipment 6 200 6 200 6 200
Accum. Depr. Office Equip. 3 500 (c) 980 4 480 4 480
Accounts Payable 10 800 10 800 10 800
Unearned Hire Fees 2 260 (e) 1 800 460 460
H. Savva, Capital 68 340 68 340 68 340
H. Savva, Drawings 20 600 20 600 20 600
Removal Fees Revenue 98 700 (e) 1 800 100 500 100 500
Insurance Expense 8 180 (f) 700 8 880 8 880
Wages Expense 50 620 (g) 1 150 51 770 51 770
Advertising Expense 3 880 (d) 600 3 280 3 280
Maintenance Expense 7 600 7 600 7 600
Fuel and Oil Expense 10 680 (a) 680 11 360 11 360
$223 000 $223 000
Fuel and Oil Payable (a) 680 680 680
Office Supplies Expense (b) 300 300 300
Depr. Exp. – Hire Cars (c) 12 400 12 400 12 400
Depr. Exp. – Office Equipment (c) 980 980 980
Prepaid Advertising (d) 600 600 600
Insurance Payable (f) 700 700 700
Wages Payable (g) 1 150 1 150 1 150
18 610 18 610 238 910 238 910 96 570 100 500 142 340 138 410
Profit for the year 3 930 3 930
100 500 100 500 142 340 142 340
(b)

HELENA’S HIRE CARS

Income Statement
for the year ended 30 June 2019
INCOME
Removal fees $100 500

EXPENSES
Insurance expense $8 880
Wages expense 51 770
Advertising expense 3 280
Maintenance expense 7 600
Fuel and oil expense 11 360
Depreciation – cars 12 400
Depreciation – office equipment 980
Office supplies expense 300
Total Expenses 96 570
PROFIT $3 930

(c)

HELENA’S HIRE CARS

Statement of Changes in Equity
for the year ended 30 June 2019
H. Savva, Capital – 1 July 2018 $68 340
Profit for the year 3 930
Less Drawings (20 600)
H. Savva, Capital – 30 June 2019 $51 670

Page 13 of 19
Suggested solutions by Hoggett, J., Medlin, J., Chalmers, K., Beattie, C., Hellmann, A. & Maxfield, J.,
(2018). Accounting, 10th ed, John Wiley and Son Australia.
(d)

HELENA’S HIRE CARS

Balance Sheet
as at 30 June 2019

CURRENT ASSETS
Cash at bank $8 140
Accounts receivable 12 860
Office supplies 340
Prepaid advertising 600 $21 940
NON-CURRENT ASSETS
Hire cars $93 600
Accumulated depreciation (51 800) 41 800
Office equipment 6 200
Accumulated depreciation (4 480) 1 720 43 520
TOTAL ASSETS $65 460

CURRENT LIABILITIES
Accounts payable 10 800
Unearned removal fees 460
Wages payable 1 150
Fuel and oil payable 680
Insurance payable 700 13 790
NET ASSETS $51 670

EQUITY
H. Savva, Capital 51 670
TOTAL EQUITY $51 670

Page 14 of 19
Suggested solutions by Hoggett, J., Medlin, J., Chalmers, K., Beattie, C., Hellmann, A. & Maxfield, J.,
(2018). Accounting, 10th ed, John Wiley and Son Australia.
Problem 4.30 Preparing a worksheet and financial statements

GST version

The unadjusted trial balance of Helena’s Hire Cars is shown below:

HELENA’S HIRE CARS

Unadjusted Trial Balance
as at 30 June 2019
Account Debit Credit
Cash at bank $ 8 140
Accounts receivable 12 860
GST receivable 1 500
Office supplies 640
Hire cars 93 600
Accumulated depreciation – hire $ 39 400
cars 6 200
Office equipment 3 500
Accumulated depreciation – office 10 800
equipment 2 260
Accounts payable 3 240
Unearned hire fees 66 600
GST payable 20 600
H. Savva, Capital 98 700
H. Savva, Drawings 8 180
Hire fees revenue 50 620
Insurance expense 3 880
Wages expense 7 600
Advertising expense 10
Maintenance expense 680
Fuel and oil expense
$ 224 500 $ 224 500

Additional information
1. Petrol purchased on credit for $680 plus GST of 10% and used during the last
week in June has not been paid for or recorded.
2. A physical count showed office supplies totalling $340 were still on hand at 30
June.
3. Depreciation for 1 year on the hire cars is $12 400. Depreciation on the office
equipment is $980.
4. The balance in the Advertising Expense account includes $600 prepayment (net
of GST) for an advertising campaign beginning in July.
5. The balance in the Unearned Hire Fees account includes $1 800 received in May
for hire services completed in June.
6. The June insurance premium of $700 plus GST is overdue and has not been
recorded. A tax invoice has not been received.
7. Wages earned but not paid amounted to $1 150.

Required
Page 15 of 19
Suggested solutions by Hoggett, J., Medlin, J., Chalmers, K., Beattie, C., Hellmann, A. & Maxfield, J.,
(2018). Accounting, 10th ed, John Wiley and Son Australia.
(a) Prepare a 10-column worksheet for the year ended 30 June 2019.
(b) Prepare the income statement for the business for the year ended 30 June
2019.
(c) Prepare a statement of changes in equity for the year ended 30 June 2019.
(d) Prepare a balance sheet as at 30 June 2019.

Answer

Page 16 of 19
Suggested solutions by Hoggett, J., Medlin, J., Chalmers, K., Beattie, C., Hellmann, A. & Maxfield, J.,
(2018). Accounting, 10th ed, John Wiley and Son Australia.
(a)

HELENA’S HIRE CARS

Worksheet for the year ended 30 June 2019
Unadjusted trial balance Adjustments Adjusted trial balance Income statement Balance sheet
Account Title Debit Credit Debit Credit Debit Credit Debit Credit Debit Credit
Cash at Bank 8 140 8 140 8 140
Accounts Receivable 12 860 12 860 12 860
GST Receivable 1 500 (a) 68 1 638 1 638
(f) 70
Office Supplies 640 (b) 300 340 340
Hire Cars 93 600 93 600 93 600
Accum. Depr. Hire Cars 39 400 (c) 12 400 51 800 51 800
Office Equipment 6 200 6 200 6 200
Accum. Depr. Office Equip. 3 500 (c) 980 4 480 4 480
Accounts Payable 10 800 10 800 10 800
Unearned Hire Fees 2 260 (e) 1 800 460 460
GST Payable 3 240 3 240 3 240
H. Savva, Capital 66 600 66 600 66 600
H. Savva, Drawings 20 600 20 600 20 600
Removal Fees Revenue 98 700 (e) 1 800 100 500 100 500
Insurance Expense 8 180 (f) 700 8 880 8 880
Wages Expense 50 620 (g) 1 150 51 770 51 770
Advertising Expense 3 880 (d) 600 3 280 3 280
Maintenance Expense 7 600 7 600 7 600
Fuel and Oil Expense 10 680 (a) 680 11 360 11 360
$224 500 $224 500
Fuel and Oil Payable (a) 748 748 748
Office Supplies Expense (b) 300 300 300
Depr. Exp. – Hire Cars (c) 12 400 12 400 12 400
Depr. Exp. – Office Equipment (c) 980 980 980
Prepaid Advertising (d) 600 600 600
Insurance Payable (f) 770 770 770
Wages Payable (g) 1 150 1 150 1 150
18 748 18 748 240 548 240 548 96 570 100 500 143 978 140 048
Profit for the year 3 930 3 930
100 500 100 500 143 978 143 978

Page 17 of 19
Suggested solutions by Hoggett, J., Medlin, J., Chalmers, K., Beattie, C., Hellmann, A. & Maxfield, J., (2018). Accounting, 10th ed, John Wiley and Son Australia
(b)

HELENA’S HIRE CARS

Income Statement
for the year ended 30 June 2019
INCOME
Removal fees $100 500

EXPENSES
Insurance expense $8 880
Wages expense 51 770
Advertising expense 3 280
Maintenance expense 7 600
Fuel and oil expense 11 360
Depreciation – cars 12 400
Depreciation – office equipment 980
Office supplies expense 300
Total Expenses 96 570
PROFIT $3 930

(c)

HELENA’S HIRE CARS

Statement of Changes in Equity
for the year ended 30 June 2019
H. Savva, Capital – 1 July 2018 $66 600
Profit for the year 3 930
Less Drawings (20 600)
H. Savva, Capital – 30 June 2019 $49 930

18 of 19
Suggested solutions by Hoggett, J., Medlin, J., Chalmers, K., Beattie, C., Hellmann, A. & Maxfield, J., (2018).
Accounting, 10th ed, John Wiley and Son Australia.
(d)

HELENA’S HIRE CARS

Balance Sheet
as at 30 June 2019

CURRENT ASSETS
Cash at bank $8 140
Accounts receivable 12 860
Office supplies 340
Prepaid advertising 600 $21 940
NON-CURRENT ASSETS
Hire cars $93 600
Accumulated depreciation (51 800) 41 800
Office equipment 6 200
Accumulated depreciation (4 480) 1 720 43 520
TOTAL ASSETS $65 460

CURRENT LIABILITIES
Accounts payable 10 800
Unearned removal fees 460
GST payable 1 602
Wages payable 1 150
Fuel and oil payable 748
Insurance payable 770 15 530
NET ASSETS $49 930

EQUITY
H. Savva, Capital 49 930
TOTAL EQUITY $49 930

19 of 19
Suggested solutions by Hoggett, J., Medlin, J., Chalmers, K., Beattie, C., Hellmann, A. & Maxfield, J., (2018).
Accounting, 10th ed, John Wiley and Son Australia.