Peerless Company
Balance sheet at $30 / 9 / \times 1$
( TABLE CAN'T COPY )
The company's first retail outlet opened its doors for business on 1 October. The company's transactions in October are summarised below.
1 TVs and videos are sold for 40,000 (euros), 22,000 on account, the balance for cash. Cash sales include delivery of the TV set to the customer who paid a deposit of 800 in September. The cost of items sold is 20,000 .
2 The company collects 7,000 of amounts owed by customers.
3 It pays 34,000 to suppliers for inventory and office equipment it purchased on account in September.
4 The company has two employees. Each earns a salary of 1,000 in the month. Because of the 300 advance to one of them in September, salary payments in October are only 1,700.
5 Rent expense is recognised. Rent consists of a monthly fixed charge of 2,000 and a variable charge of $1.5 \%$ of sales revenue. The rent prepayment at end-September represents three months of the fixed charge which was paid in advance in late September. The variable charge is to be paid in cash.
6 The company recognises depreciation of 200 on the shop fittings and 100 on the office equipment. (The shop fittings are expected to have a $71 / 2$-year life and salvage value of 1,000 ; the office equipment a six-year life and salvage value of 200 . The straight-line method of depreciation is used. The assets are depreciated from the start of October when operations begin.)
7 Organisation costs are amortised at the rate of 100 a month.
8 The income tax rate is $40 \%$. No tax is paid in October.
Required
(a) Record the above transactions and events in 1 to 8 on a worksheet similar to that used in Exhibits 3.1-3.3.
(b) Prepare for the benefit of the company's management an income statement for October and a balance sheet at 31 October $x 1$.
Check figure:
Total assets at $31 / 10 / \times 1 \quad 78,400$