# Chapter 12 13 2 Essay example

Submitted By JPTeddy-Medenilla
Words: 1315
Pages: 6

Chapter12`
12.14 (a) The accounting entry at the end of the reporting period to recognise eight days salary and wages expense would be (this assumes a ten day working week, of which 8 days remain unpaid at the end of the reporting period):
30 June
Dr
Wages and salaries expense
24 000

Cr
PAYG tax payable

8 000
Cr
Wages and salaries payable

16 000
(\$24 000 = \$30 000 x 8/10) (b) When the amount is ultimately paid to employees on 2 July, the entry would be:
2 July
Dr
Wages and salaries expense
6 000

Dr
Wages and salaries payable
16 000

Cr
PAYG tax payable

2 000
Cr
Cash at bank

20 000
\$6000 represents two days salary, which would be included as an expense of the new financial period. The employees would receive the net amount after deduction of the PAYE tax, that is, \$30 000 less \$10 000. This entry assumes that no reversing entries were made on 1 July. (c) When the amounts are paid to the ATO on Monday, the entry would be:
5 July
Dr
PAYG tax payable
10 000

Cr
Cash

10 000
12.15 (a) Jerry Lopez’s annual leave will cost his employer \$100 000 x 4/52 x 1.175. This equals \$9038 or \$174 per week. Therefore, the total amount paid to Lopez each year would be:
For 48 weeks at normal pay-rate: \$100 000 x 48/52 =
\$92 308
For 4 weeks inclusive of loading: \$100 000 x 4/52 x 1.175 \$9 038
Total salary and annual leave
\$101 346
If Lightning Bolt Ltd recognises the annual leave obligation throughout the year there would be the following entry each week:
Dr
Annual leave expense
174

Cr
Provision for annual leave

174 (b) If Lopez was to take two weeks annual leave, and assuming the related tax is \$1200, the entry would be:
Dr
Provision for annual leave
4 519

Cr
PAYG tax payable

1 200
Cr
Cash at bank

3 319
(\$4519 = \$9038/2)
Lightning Bolt Ltd would also need to provide the usual weekly annual leave journal entry, even when Lopez is on holidays. That is:
Dr
Annual leave expense
174

Cr
Provision for annual leave

174
Chapter 13
13.13 31 July 2015
Dr
Bank trust
1 400 000

Cr
Application account

1 400 000
(To recognise the aggregate receipt of application monies. The application account is considered to be a liability.)
4 August 2015
Dr
Application account
1 400 000

Cr
Share capital

1 400 000
(Once the shares are allotted, the company no longer has a liability to the subscribers. The subscribers become owners of the entity, rather than creditors.)
Dr
Cash at bank
1 400 000

Cr
Bank trust

1 400 000
(Once the shares have been allotted the company can then transfer the cash to its usual operating account.)
13.14 The entries to reflect the sale of the shares by Mick Limited would be:
1 July 2014
Dr Cash 2 600 000
Dr Insurance service contract (an asset) 400 000
Cr Share capital 3 000 000
(Issuing of shares for cash and for insurance services)
30 June 2015
Dr Insurance expense (statement of comprehensive income) 280 000
Cr Insurance service contract 280 000
(To record portion of services received)
The above entry assumed that the services consumed by Mick Ltd were not used in the manufacture of inventory or in the construction of particular non-current assets. Had they been used for such purposes then the cost of the services would have been included within the cost of the respective assets rather than being expensed to the statement of comprehensive income.
13.15 Journal entries:
1 July 2015
Dr Bank trust 25 000 000
Cr Application 25 000 000
(To recognise the aggregated applications for shares; the funds must stay in the trust account until such time as the shares are allotted.)
Dr Application 25 000 000
Cr Share capital 25 000 000
(To allot the shares)
Dr Cash at bank 25 000 000
Cr Bank trust 25 000 000
(To transfer cash to the organisation’s working account)
Dr Share capital 19 000
Cr Cash 19 000
(Issuing costs are offset against share capital)

13.16 15 July 2015
Dr
Bank trust
11 000 000

Cr
Application account

11 000 000
(To recognise the aggregate receipt of application monies. The