Question 1

Boozie Ltd is a manufacturer and distributor of beer throughout Australia. The company sells its
beer to customers via bottle shops. To encourage recycling, the bottom of every can and bottle
contains the following statement, ‘Boozie Ltd provides customers with a 10 cent refund for
every empty can and bottle returned to the company’. Customers can return their empty cans
and bottles to either Boozie Ltd headquarters or to their local distributors. Boozie Ltd does not
impose a time limit on the return of empty cans and bottles. Past experience indicates that
approximately 20% of customers return their empty cans and bottles.

Required:
By reference to the Conceptual Framework, should Boozie Ltd recognise a liability for the
refunds in the financial statements? Justify your answer.

Question 2

Krisgroom Ltd has just completed his first year in business. His business builds fences.
During the year, he was paid $75,000 in cash from his customers for jobs completed. At the
end of the year, he was owed $2,250 by one customer. He paid out $17,800 for expenses. He
owed $260 for advertising with a local newspaper. The truck and equipment used in the
business have an annual depreciation of $5,250.

Required：
Calculate the business’s profit under cash accounting and under accrual accounting?

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Question 3

Required:
Show the general journal entries necessary to record the above events.

Question 4
Properties’R’Us received $6,000, in advance, from a tenant for 6 months rent. The amount
was received on 1 May 2017.

(a) Show the general journal entry to record the balance day adjustment at 30 June 2017,
assuming the amount received was initially recorded as revenue.

(b) Show the general journal entry to record the balance day adjustment at 30 June 2017,
assuming the amount received was initially recorded as a liability.

Question 5
The following information relates to the business of Paisley’s Guitar School for the month of
June 2017:

June
1 Purchased equipment for $21,000. Paid $3,000 deposit and agreed to pay the
balance in 60 days.

3 Paid salaries of $7,900.

8 Brad Paisley withdrew $10,500 from the business for his personal use.

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 14 Paid $4,900 for radio commercials.

19 Paid $3,700 to creditors for supplies that had been purchased on credit.

23 Received $1,850 from customers to reduce the balance in their accounts.

30 Earned $39,000 in tuition fees during the month. Of these, 25% of the fees were
collected in cash and 75% will be paid within 2 months.

Required:
Prepare the general journal entries to record the above transactions that occurred during June
(ignore GST, and narrations are NOT required).

Question 6

Jindabine Boat Ltd stores and cleans boats for customers. It is completing the account
process for the year just ended 30 June 2017. The transactions during 2017 have been
journalised and posted. The following data with respect to adjusting entries is available:

1. Jindabine cleaned three boats for customers at the end of June, but not record the
service for $2700.

2. On 1 May 2017, Jindabine paid $1200 to the local newspaper for an advertisement to
run each Thursday for 12 weeks. All ads have been run except for three Thursdays in
July to complete12-week contract. Jindabine initially treated the payment as an asset.

3. Jindabine borrowed $250 000 at 12 per cent annual interest rate on 1 November 2016 to
expand its storage facility. The loan requires Jindabine to pay the interest quarterly until the
note is repaid in two years. Jindabine paid quarterly interest on 1 February and 1 May.

4. Jindabine received $4500 on 1 June 2017 to store a sailboat for winter until 30 November
2017. Jindabine credited the full amount to Unearned Storage Revenue 1 June.

5. Boat repair supplies on hand at 1 July 2016 totaled $16 500. Repair supplies purchased
debited to supplies on hand during the year amounted to $46 000. The year-end count

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showed $12400 of supplies on hand.

6. Wages earned by employees during June 2017, unpaid and unrecorded at 30 June 2017
amounted to $3800. The next payroll date will be 5 July2017.

Required:
Prepare the adjusting entries that should be recorded for Jindabine at 30 June 2017.