Please follow the extract of the accounting Policies and Procedures of Milo Ltd. based onaccrual accounting as below:• All the prepaid expenses need to be adjusted on the last day of the period to match the revenuefor the same period.• The unused portion of the prepaid expenses need to be carried forward as current assets for thefollowing periodAny expenses due but not paid should be recognised as an expense to match the revenue of therespective period.Any revenue which is accrued in the period should be recognised as income for that period.Any revenue which is received as advance should be considered as current liability.●• The number of bad debts calculated every year, after following up the collection procedures, needto be written off on balance day of the respective financial year.• Allowance for Doubtful Debts to be 5.5 % of Accounts ReceivableThe rules of double entry accounting principles must be followed.• At balance day all Accrued income and expenses must be brought to account• At balance day all prepaid income and expenses must be adjusted so that accounts are notoverstatedYou are working with Complete Business Services on the year-end adjustments for one of yourclients, Milo Ltd. You are required to comply with the following information given by the client tofinalise the year-end adjustment entries:Ledger Account balances (prior to any Balance Day Adjustments) as of 30 June 2018:Insurance$ 2,400.00$ 1,800.00$ 1,400.00$ 10,000.00$ 6,000.00$ 5,550.00200.00RentInterest IncomePlantAccumulated DepreciationAccounts ReceivableAllowance for Doubtful Debts $Additional Information- On 1 December 2017 a one-year insurance premium was paid for $2,400 plus GST. Insurancecover starts on 1 December- Rent paid in advance $150 on 30 June 2018Interest earned but not received $350 on 30 June 2018- Depreciation to be provided $1,000 on 30 June 2018- Bad Debts to be written off $500 plus $50 GST on 30 June 2018- Allowance for Doubtful Debts to be adjusted to 5.5% of Accounts Receivable- Physical count on 30 June 2018 reveals inventory value of $68,000 and the perpetual recordsshow inventory value $70,000. Milo Ltd uses a perpetual inventory system. Prepare general journal entries for the balance day adjustments, reversing general journal entries(for some of the accounts only) on 1 July 2018, and adjustment entry to record inventory variance.Note: you need to provide the narration/description on each journal entry.Answer:Date Particulars Debit Credit

Prepaid insurance will be for July 2018 to November 2018 , ie 5 months Entries for Accrued Expenses…

Ledger Account balances (prior to any Balance Day Adjustments) as of 30 June 2018: Insurance $ Rent Interest Income Plant 2,400.00 $ 1,800.00 $ 1,400.00 $ 10,000.00 $ 6,000.00 $ 5,550.00 200.00 Accumulated Depreciation Accounts Receivable Allowance for Doubtful Debts $ Additional Information - On 1 December 2017 a one-year insurance premium was paid for $2,400 plus GST. Insurance cover starts on 1 December - Rent paid in advance $150 on 30 June 2018 - Interest earned but not received $350 on 30 June 2018 Depreciation to be provided $1,000 on 30 June 2018 - - Bad Debts to be written off $500 plus $50 GST on 30 June 2018 - Allowance for Doubtful Debts to be adjusted to 5.5% of Accounts Receivable - Physical count on 30 June 2018 reveals inventory value of $68,000 and the perpetual records show inventory value $70,000. Milo Ltd uses a perpetual inventory system.

Ledger Account balances (prior to any Balance Day Adjustments) as of 30 June 2018: Insurance $ Rent Interest Income Plant 2,400.00 $ 1,800.00 $ 1,400.00 $ 10,000.00 $ 6,000.00 $ 5,550.00 200.00 Accumulated Depreciation Accounts Receivable Allowance for Doubtful Debts $ Additional Information - On 1 December 2017 a one-year insurance premium was paid for $2,400 plus GST. Insurance cover starts on 1 December - Rent paid in advance $150 on 30 June 2018 - Interest earned but not received $350 on 30 June 2018 Depreciation to be provided $1,000 on 30 June 2018 - - Bad Debts to be written off $500 plus $50 GST on 30 June 2018 - Allowance for Doubtful Debts to be adjusted to 5.5% of Accounts Receivable - Physical count on 30 June 2018 reveals inventory value of $68,000 and the perpetual records show inventory value $70,000. Milo Ltd uses a perpetual inventory system.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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