Accrued Wages and Advertising

[mooimachicken]

hi was just wondering how you guys would do this question since I'm stuck.

1. Peng Peng owns and operates "Peng Peng's Nest", a business selling bedding supplies to major hotels. He has provided you with the following Pre-Adjustment Trial Balance (extract) (not needed) as at 30 June 2012. The business reports monthly.

- Accrued wages at the beginning of the period totalled $1200. Total wages paid for the period was $5600. Wages outstanding at the end of the period was $2200

- Quarterly Advertising Expense, of $528 inclusive of GST is paid at the end of August, November February and May

a. Prepare the general journal entries required to record the balance day adjustments on 30 June 2012 (narrations not required)

[Tragesty]

I'm not an expert but I'll give it a go!

For the general journal entry we would have:

Wages Expense      DR   2200
   Accrued Wages    CR   2200

We payed $480 for advertising expense + GST of $48. Since we pay advertising expense at end of August, November, February and May, at 30/6 we've consumed 1 month without having payed it (June's consumption).
$480/3 months = $160 accrued advertising

Advertising Expense    DR  160
   Accrued Advertising  CR  160

No guarantees I'm correct, but figured I'd try!

[BoredSatan]

But remember that the Wages Expense in the Income Statement will be

$5600-1200+2200=6600

[mooimachicken]

thanks, just another question

A payment for customs dusty of $500 (plus $50 GST) was incorrectly recorded as Freight Out

What would the general look like?

Freight Out CR 550
Customs Duty DR 500
GST Clearing DR 50

or

Freight Out CR 500
Customs Duty DR 500

[BoredSatan]

thanks, just another question

A payment for customs dusty of $500 (plus $50 GST) was incorrectly recorded as Freight Out

What would the general look like?

Freight Out CR 550
Customs Duty DR 500
GST Clearing DR 50

or

Freight Out CR 500
Customs Duty DR 500

I would assume the second since there would be GST on both customs duty and freight out..

[Nima2703]

Second is correct because GST will be debited in both scenarios but always record debits before credits in the general journal. so:
Customs Duty DR       500
   Freight In     CR                 500

[abcdqdxD]

Second is correct because GST will be debited in both scenarios but always record debits before credits in the general journal. so:
Customs Duty DR       500
   Freight In     CR                 500

Second is correct. There is no need to alter the GST - it was correctly recorded in the first place since Freight Out and Customs Duty are both payments to suppliers (hence a Debit entry in GST Clearing for both of them). GST only appears in correcting entries when it is not recorded correctly.