Mock Exam 8 — Question 1
Riverside Trading | Complete on paper
✎ Work on paper. No notes. No phone. Set a 120-minute timer (VCAA allows 15 minutes reading time beforehand). Do not open model answers until every question is complete.
Riverside Trading | Owner: Emma Liu | Trading / homewares and seasonal goods | GST 10% | Perpetual Weighted Average Cost, annual reporting
Trial Balance at 30 June 2026 (before adjustments)
| Account |
Debit $ |
Credit $ |
| Bank |
12,400 |
|
| Accounts Receivable |
67,800 |
|
| Allowance for Doubtful Debts |
|
2,100 |
| Inventory |
58,600 |
|
| Prepaid Insurance |
4,800 |
|
| Equipment |
240,000 |
|
| Accumulated Depreciation – Equipment |
|
84,000 |
| Accounts Payable |
|
41,200 |
| Capital |
|
180,000 |
| Drawings |
22,000 |
|
| Sales |
|
312,000 |
| Sales Returns |
8,400 |
|
| Cost of Sales |
156,000 |
|
| Wages |
48,000 |
|
| Rent |
18,000 |
|
Adjustments required: (1) Equipment: straight-line, cost $240,000, residual $24,000, 8-year life. (2) Insurance: the $4,800 prepaid on 1 July 2025 covers 12 months. (3) Allowance for Doubtful Debts: adjust to 4% of AR. (4) Wages accrued: $3,200. (5) Interest on bank loan of $6,400 accrued (loan not shown in trial balance – it is an end-of-year accrual). (6) A physical stocktake on 30 June revealed inventory of $57,900.
Question 1 (14 marks) — Comprehensive Adjustments and Financial Statements
(a)8 marks
Record all necessary adjusting entries in the General Journal at 30 June 2026. Narrations are not required.
Tip: 6 adjustments: (1) Dep: ($240,000-$24,000)÷8=$27,000/yr. (2) Insurance: all used = $4,800. (3) Allowance: 4%×$67,800=$2,712; existing $2,100; increase $612. (4) Wages: $3,200. (5) Interest: $6,400. (6) Inventory: $58,600-$57,900=$700 loss.
(b)6 marks
Prepare the Income Statement for Riverside Trading for the year ended 30 June 2026, incorporating all adjustments.
Tip: Net Sales = $312,000 − $8,400 = $303,600. COGS $156,000 + inventory loss $700 = $156,700. GP = $146,900. All expenses including adjustments. Net Profit.
