Prepaid Expense in the Rent Contract Account, Credit the Expense Account, Lease of the Company Car - Assignment Example

QUESTION 1 We debit the prepaid expense in the rent contract account and Credit the expense account. The balance is carried forward Number Prepayment Account 161 DR CR Rent 85000 Bank 85000 85000 85000 The prepaid rent is debited in the prepayment account and bank credited with the same amount Number Expense Account 205 DR CR Rent 5000 Bank 5000 5000 5000 We debit the rent for the month in the expense account and credit expense account with bank QUESTION 2 Number Wages Account 204 DR CR Expense account 37800 Bank Account 37800 Credit the wages account for the wages to be reflected in the expense account and debit the amount to be reflected in the bank as wages paid. Number Bank Account 101 DR CR Wages Account 37800 Prepayment Account 85000 Purchase of Bed 50500 Wright College 18000 inventory purchase 78900 Bal C/d 234200 252200 252200 We debit the bank account with wages paid from the wages account QUESTION 3 The expense of the manager visiting the design and manufacturing team in Hong Kong is deem as part of the cost of the bed since, the trip is an official duty for the company with regards to purchase of the beds. Number Bed Account 164 DR CR Bank 50500 Bed Account 50500 We debit the bank account to reflect the actual cost of the bed paid and credit the bed account. QUESTION 4 Number inventory purchase 120 DR CR Inventory 1st June 201x 24000 3rd June 201x 20000 5th June 201x 36000 8th June 201x 1100 Bank 78900 Bal C/d 80000 80000 We debit the purchase in the inventory account and credit the return outward and the bank to get the balance carried down in the inventory account Discount received Account DR CR 3rd June 201x 1000 5th June 201x 3000 Bal C/d 4000 4000 4000 We debit the discount received account and credit the balance carried down Number Return outward Account 401.1 DR CR inventory purchase 1100 Balance sheet 1100 1100 1100 We debit the return outward to reflect the amount of goods returned to the customer and credit the amount to reflect the amount to be debited in the balance sheet. QUESTION 5 Number Cost of Goods Sold (COGS) 500 Cost of goods sold={Number of units sold * the average price per unit } Average price={78900/110} 717.27 Cost of goods sold={717.27*10} $ 7,172.73 Number Revenue Account Number Closing inventory Account 401 DR CR 120 DR CR Wright College 18000 $ 71,727.27 Bank 18000 QUESTION 6; whether the lease of the company car is an operating or finance lease The lease is an operating lease since, the term of leas states that the car will returned back and the lesser transfers only the right to use the car. Because the lessee will not assume the t=risk of ownership, the lease cost is considered as an operating expense in the income statement and hence the lease doesn't impact the statement of financial position Read More