Alicia Whitcomb has started a domestic cleaning business called Sparkle View Cleaning (SVC). She started the business on 1st May 2015, it is now 30th June and she has asked for your assistance in preparing her financial statements. On 1st May Alicia deposited $5,000 into a new bank account opened in the name of the business. The $5,000 consisted of a $2,400 interest free loan from her father and $2,600 of her own money. Alicia rented some equipment from John's Equipment Hire. On 1st May, she signed a four-month rental agreement for cleaning equipment (vacuum cleaners and a floor polishing machine) and paid $400 for the four-month rental period. On the same day Alicia also purchased (for $3,000) an old van to be used exclusively for the business. She believes that the van has three years of useful life and then will have a resale value of $300. Alicia has made a note in her diary whenever she has taken items from the business for her personal use. At 30th June she consults her diary and calculates that she has taken $950 cash and $20 worth of cleaning supplies during the period. The loan made by her father is to be repaid in twenty-four equal repayments. Each repayment is made on the last business day of the calendar month. Normally all of the work done by SVC is performed on account but one domestic customer insisted in paying in cash at the time the work was done. The customer paid $120 and Alicia decided that it was not worth producing an invoice for an amount which had already been received. All work done during the period has been invoiced. Invoices totalling $8,300 had been issued. At 30th June Alicia's customers owe her $900. Her diary records list payments for supplies totalling $380, and at the end of the period she still has supplies that cost $60 on hand. She paid her employees $2,900, and still owes them $320 for their final week of work. During June Alicia paid her mobile telephone bill of $280 from her personal bank account. She estimates that 60% of the calls made were for the business purposes. She also has an unpaid bill for $125 from Keen Maintenance for a repair made to her floor polishing machine. Required: You must clearly show how you have calculated each amount shown on the statements, either by writing it next to the account name, for example Sales ($5 x 2,000) or by referencing the amount using a, b c etc. and putting your calculations for each of these at the bottom of the statement. For example, Sales (a) and then at the bottom of the statement put (a) and your calculation. Statements provided without calculations/explanations will receive no marks. a) Prepare the business Income Statement for the period. (9 marks) b) Prepare the Statement of Changes in Equity for the period. (6 marks) c) Prepare the classified Balance Sheet at the end of the period. (10 marks) ACT102 Assignment S1 2016 Page 3 of 6 Question 2 (18 marks) Margaret is a student who also operates a part time business called Just Pens Enterprises. She sells imported marker pens to various retail office and stationery supply shops. Business commenced in May 2014. Margaret conducts all of the business' operations (she works alone and has no employees). Margaret purchases pens for 60c each and sells them for $2.50 each. These amounts have not changed since Margaret started operations. At 1st July 2014 an amount of $1,500 appears as inventory in the trial balance. During the year ended 30th June 2015, Margaret made the following unit purchases and sales. Date Purchases Sales @60c ea @$2.50 ea July 11 1,000 Aug 3 600 Sept 12 2,000 Sept 30 1,300 Dec 2 1,500 Dec 6 400 Feb 3 700 Mar 22 1,500 April 19 2,300 May 26 800 TOTAL 5,000 7,100 On 30th June 2015 (the end of the accounting period), Margaret counted 370 pens remaining on hand. Required: a) Calculate the Gross Profit for the year ended 30th June 2015 under both the (i) perpetual and (ii) periodic methods of inventory recording by providing a correctly formatted extract (up to gross profit only) from Just Pens Enterprises income statement. You must also provide explanations and calculations for each amount shown on the statement extracts. Present this information below your statement extract. Statements provided without calculations and explanations will not receive marks. (HINT: Since you are being asked to calculate under both methods in this question, you have been given complete data in regard to inventory flow. Not all of this data is needed for each method, therefore ensure that you only use the data that you need for each method). (13 marks) b) Of the two methods used in a). Above, which method (if any): i. Provides the higher Gross Profit figure? (1 mark) ii. Provides the most information for control purposes, and why/how? (2 marks) iii. Considering the circumstances, which inventory method would be the most appropriate for Margaret's business? Explain why.