Pete operates John Jones Pty Ltd, which is organised on a June year-end: Accounting for Managers, Assignment, UOL

QUESTION 2

Pete operates John Jones Pty Ltd, which is organised on a June year-end. Pete has come to you to provide input on how to treat certain items as John Jones Pty Ltd prepares its financial statements for the year ended 30 June 2023.

Additional information:
1. Annual leave liability has been calculated at $6,000. This amount had not been recorded in the accounts as at 30 June 2023.

2. Sundry expenses account had a payment of $3,000 for a new computer recorded within it. Payment was made on 30 June 2023.

3. The accounts receivable list indicated that one debtor did go bankrupt prior to 30 June 2023. The amount of this debt was $20,000. There was no provision for doubtful debts nor was this debt provide for at year end.

4. The company prepaid its insurance for 12 months for an amount of $1,200. The prepayment occurred on 1 May 2023. The $1,200 was shown as insurance expense.

5. The company purchased a new computer on 1 June for $20,000. It is estimated that it will last for 10 years. At the end of 10 years, it will have zero scarp value. The company did not record any deprecation for June 2023. It has a policy of using straight line depreciation.

6. A loan of $400,000 was incorrectly recorded as equity.

7. A payment of $30,000 on 30 June 2023 for additions to buildings has been incorrectly allocated to repairs and maintenance.

Required:

a) State which of the above items need adjustment and why or why not. For each item that
needs adjustment, show the accounting equation entry required to make the necessary
adjustments in the books (show all workings and assumptions).

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