Skate ‘n’ Surf began operations on 1 June, buying and selling surfboards, skateboards, wetsuits and the protective gear for skateboarding. The structure of the business is that of a sole trader.

The business employed a sales assistant during the month who is to be paid fortnightly. Tax is deducted from the employee’s wages (PAYG withholding tax) and remitted to the Australian Taxation Office (ATO) on a quarterly basis.

The business has not registered with the ATO for the goods and services tax (GST) and has elected to use the accrual basis of accounting.

Accounting records

The business records all transactions in the general journal. These transactions are then posted to the appropriate account(s) in the general ledger and the accounts receivable or accounts payable subsidiary ledgers, where separate accounts are maintained for each customer or supplier.

Chart of accounts

The chart of accounts for Skate ‘n’ Surf contains the accounts and account numbers below.

100 Cash at bank

110 Accounts receivable

120 Inventory

130 Prepaid insurance

171 Shop equipment (cost)

172 Accumulated depreciation - shop equipment

200 Accounts payable

210 PAYG withholding payable

220 Superannuation payable

230 Bank loan

300 Capital

310 Drawings

320 Profit or loss summary

400 Sales revenue

410 Sales returns and allowances

420 Discount received

500 Cost of sales

600 Advertising expense

610 Depreciation expense

620 Discount allowed

630 Electricity expense

640 Insurance expense

650 Interest expense

660 Postage and stationery expense

670 Superannuation expense

680 Telephone expense

690 Wages expense

Transactions

June 1 The owner opened a bank account for the business with a deposit of $30,200. This is capital provided by him.

1 Purchased display stands, shelving etc. (shop equipment) from Shop Displays Pty Ltd for $28,600 and computer equipment for the shop from Computer Wizards for $3,900. These were paid for with a loan of $28,600 from the bank and cheque for $3,900 from the business bank account. The bank loan is repayable over 3 years.

2 Purchased inventory (skateboards and protective gear) from Excitement Plus for $25,500 on terms on net 30.

5 Cash purchase of stationery from Officeworks for $310.

7 Purchased surfboards and wetsuits from Surf Imports for $19,400 on terms of 10/10, n/30.

9 Paid Surf Imports the amount owing to them less the prompt payment discount.

11 Paid $5,580 for a 1-year insurance policy covering fire, theft, and public liability.

12 Paid $1,520 to Local Newspapers for advertising for the shop for the month.

13 Credit sale to Serious Fun of skateboards and protective gear for $5,000 (cost of sales $2,800). This customer was given terms of 5/10, n/30.

14 Credit sale to Surfing World of various inventory items for $7,100 (cost of sales $3,600). Terms net 30.

17 Credit sale to Academy Diving School of 15 wetsuits at a discounted price of $275 each on terms of net 15. Cost of sales $3,300.

18 Returned some protective gear to Excitement Plus that was faulty and received an adjustment note (credit note) from them for $210.

18 Received a cheque from Serious Fun for the amount owing by them after deducting the prompt payment discount.

19 Issued an adjustment note (credit note) to Academy Diving School for 4 wetsuits at $275 each that was not the size they required. The cost of the wetsuits to us was $450 and they were put back into inventory.

20 Cash sale of inventory to the value of $1,100 (cost of sales $450).

23 Paid Excitement Plus $2,300 of the amount owing to them.

25 Credit sale to Serious Fun of skateboards for $7,200 (cost of sales $3,760). Terms 5/10, n/30.

26 Received and banked a cheque for $5,200 from Surfing World in part payment of the amount owing by them.

27 Purchased wetsuits from Surf Imports for $7,500 on terms of 10/10, n/30.

30 Paid Telstra $150 for telephone expenses.

30 The owner cashed a cheque for $850 to pay wages to Scott Walker the sales assistant of $880 less PAYG Withholding of $30.

The end of month adjustments are below.

a. Depreciation on shop equipment for the month is 25% p.a. prime cost (straight line).

b. One-twelfth of the insurance expired.

c. Superannuation payable for the month is 10% of the gross wages paid.

d. Interest charged on the bank loan for the month was $119.

The transactions above have been journalised and posted. The adjusted trial balance is below.

(a)

Prepare the statement of profit or loss for June.

(b)