ACCT 10001: Accounting Reports & Analysis
Lecture 2 Illustration: ARA Galleries Pty Ltd
Adele Ashworth has a passion for art and has decided to open up her own boutique
gallery from which she will buy and sell art pieces. She has been advised to do this
by forming a proprietary company in which she and her husband, Randall, are
shareholders. Early in June of 2017 ARA Galleries Pty Ltd is established and during
that month the company:
Issued 10,000 shares (5,000 each to Adele and Randall) receiving a total of
$20,000 start-up capital
Received proceeds of $60,000 from a 6-year bank loan at 5% interest p.a.
Arranged a $2,000 per month lease of a warehouse (to commence in July
2017 with first payment due on July 1) from which to operate the gallery
Purchased fixtures and fittings of $30,000 for cash
Bought $25,000 worth of artworks from a variety of artists, paying $10,000
cash and agreeing to pay the balance of $15,000 on 60-day terms. These
pieces were to be displayed in the gallery and be available for sale to
customers.
Required:
Determine the assets, liabilities and equity of ARA Galleries Pty Ltd as at 30 June
2017.
Assets $ Liabilities $
Equity
ACCT 10001: Accounting Reports & Analysis
Lecture 2 Illustration: Transaction Analysis (continued)
The gallery opened for business on 1 July 2017 and the following is a summary of
transactions and events for the 2018 financial year:
1. Paid advertising $7,000
2. Purchased additional fixtures and fittings for cash $20,000
Adele and Randall installed the fixtures and fittings
3. Purchased more inventory on credit $40,000
4. Rent payments were $26,000 which included the payment of July 2018’s rent
in advance
5. Sold art pieces to customers for $150,000 of which $55,000 was collected in
cash immediately and $95,000 was sold on credit
6. The pieces sold above cost ARA Galleries $50,000
7. Paid utilities of $8,000
8. Paid wages $32,000. A further $1,000 of unpaid wages was owed on June 30.
9. Received $65,000 that was owed by credit customers
10. Loan repayments were $13,000 of which $3,000 was interest and $10,000
was principal
11. Paid suppliers $35,000 that was owing from previous credit purchases of
inventory
12. Depreciation of fixtures & fittings was $5,000 for the year
13. Paid a total dividend of $10,000 to shareholders
14. Income tax owing at the end of the year is $6,000
Additional information
The loan is to be repaid in equal instalments over the next 5 years
REQUIRED:
1. Complete the transaction worksheet provided
2. Prepare an appropriately classified and formatted statement of profit or loss and
balance sheet for ARA Galleries Pty Ltd for the 30 June 2018 reporting date.
TRANSACTION WORKSHEET FOR THE YEAR ENDED 30 JUNE 2018
Other Property, Other
Cash on Trade Trade Contributed
# Inventory current plant & current Loan Retained earnings
hand receivables payables equity
assets equipment liabilities
Op Opening balance
bal Revenue Expenses Dividends
1
2
3
4
5
6
7
8
9
10
11
12
13
14
Cl
bal
Closing balance
ARA GALLERIES PTY LTD
STATEMENT OF PROFIT OR LOSS FOR THE YEAR ENDED 30 JUNE 2018
Gross profit
Profit (Loss) before tax
NET PROFIT (LOSS)
ARA GALLERIES PTY LTD
BALANCE SHEET AS AT 30 JUNE 2018
Current assets $
Total current assets
Non-current assets
Total non-current assets
TOTAL ASSETS
Current liabilities
Total current liabilities
Non-current liabilities
Total non-current liabilities
TOTAL LIABILITIES
NET ASSETS
Equity
TOTAL EQUITY
