Joe and Mary Wilson own an office furniture retail business in partnership called “Bush
Furniture,” which operates in Malvern, Victoria. The business has operated from these
premises for 20 years. The Wilson’s decided to expand their business and have recently
opened a new store on the 1 March 2019, in Glen Waverley.
Each year the Wilson’s go overseas to an “Office Fair,” to become aware of new developments
in the office furniture business. This financial year the fair was in London where they were
fortunate to sign a franchise agreement to distribute “Nortle” a new range of office equipment.
The cost of the franchise included a “sign on” payment of $25,000 plus a payment of 7 ½ %
of sales revenue on this merchandise.
While Joe and Mary own the shop in Malvern they decided to lease the premises in Glen
Waverley. One of the reasons for doing this was because of the offer of a lease incentive by
way of a six month rent free period and a free fit out, valued at $25,000.
In December 2018, the Wilson’s became aware that a developer had sought approval to
redevelop the Glen Waverley site. As a result they spent $5,000 in legal costs in successfully
opposing the development.
Results of the Business Operations for the year ended 30/6/19 were:
Cash receipts $
Sales to Customers 1,056,625
Sales Bonus 25, 000
Cash expenditure $
Purchase of Stock 506,315
Set up costs 13,500
Rental payments 120, 000
Telephone 2 585
Overseas travel expenses 14,750
Car expenses(Running costs) 22,500
Legal costs 5,875
Advertising 12, 500
GST 30, 000
Furniture 24, 600
(i) Outstanding creditors 30/06/19 12,300
Outstanding debtors 30/06/19 76,000
At the year ending 30/6/19 a provision for doubtful debts has been raised equal to 1.5% of
sales. During the year $12,750 of outstanding debts were written off as bad.
(ii) Opening stock:
-closing stock at cost 523,650
Closing stock values: 30/6/19
Replacement Cost 602,312
Market Selling Value 830,000
At the end of the year a stocktake reveals that some of the stock is obsolete.
Consequently, a write down of stock (at cost of $12,000) has been made to $8,000.
(iii) Office Furniture:
Opening adjusted value
Acquisition of furniture during 2018/19:
Cost Acquis date
Desks and Chairs 1,750 01/07/18
Computers 15,600 08/07/18
Partitions 7,250 10/07/18
(iv) Car Expenses related to the following vehicles: Cost Acquis date
Toyota Hi Ace 21,500 21/08/11
Toyota Delivery van 30,000 11/10/12
Holden Statesman* 45,000 07/11/13
Volvo * 65,000 04/03/14