Accounting for Current Assets - Straight Line Method - Accounting and Finance Assignment Help

Assignment Task :

Question 1 – Accounting for Current Assets  

Run an Aged Receivables report as at 31 March 2020 and you will be using this data to answer the following questions. 

Use XERO to establish a business that is titled as Question 2, Student ID Number and your Name as the Business name (e.g. Question2_1234567_Alireza_Vafaei) and record one-month inventory transactions. 

Required

a) Assume that the business uses the allowance-method for accounting for bad debts and decides to estimate its bad debts expense based on 6% of the Accounts Receivable. Use the journal entry screen and prepare the journal entry required to bring in the required allowance for doubtful debts as at 31 March 2020. 

b) Prepare the adjusting journal entry on 31 March 2020 required to bring in the required allowance for doubtful debts assuming the Allowance for Doubtful Debts has a credit balance of $365.50 at 29 February 2020. 

c) Assume the same facts as in part (b), except that there is a debit balance of $180.30 in the Allowance for Doubtful Debts at 29 February 2020. Prepare the journal entry on 31 March 2020 required to bring in the required allowance for doubtful debts. 

d) Assume that the business writes-off bad debts amounting to $489.50 including GST and estimates an allowance for doubtful debts of 7% of Accounts Receivable is required at 30 April 2020. Prepare the journal entry required to bring in the required allowance for doubtful debts for next month at 30 April 2020 after the bad debts have been written off. 

Once all the transactions have been entered into the Xero software then attach the Journal Report from 1 March to 30 April 2020 in PDF format. 

Question 2 – Accounting for Non-Current Assets  

Use Xero to establish a business that is titled as Question 3, Student ID Number and your Name as the Business name (e.g. Question3_1234567_Alireza_Vafaei) and record one-month inventory transactions. 

Required

a) The business purchased office fittings costing $48,950 including GST from Light Fixtures Ltd on 8th March 2020 and paid for it by using the bank account. It is expected to have a residual value of $3,000 at the end of its useful life of 10 years. The business uses the straight-line method to calculate its depreciation. 

i. Use the journal entry screen to record the asset purchase on 8th March 2020. 

ii. Create the month end journal entry to record the depreciation expense on the Office Fittings for March. 

b) The business also purchases a Computer Server from Digital World on 11th March 2020 which is to be used for the business. The total expenditure on the Computer Server amounted to $12,430 including GST and was paid from the bank account. The estimated useful life of the Computer Server is 6 years and will be worth $2,800 at the end of the 6 years. Computer is depreciated using the diminishing balance method and the rate of depreciation is 21%. The Computer Server was sold for $11,440 including GST on 28th March 2020. 

i. Use the journal entry to record the purchase of the computer on 11th March 2020. 

ii. Record the journal entry for the sale of the Computer Server on 28th March 2020. 

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