Topic: Accounting problemTASKBackgroundChristina Adams and David Ng recently completed their professional accounting qualifications, registered as tax agents and obtained all the necessary individual licenses as well as professional registrations required to operate as individuals. During the three years in which they were fulfilling their work requirements for their professional status Christina managed to save $55,000 and David $27,500. The two friends had always wanted to run their own practice, so they rented premises and opened for business.You carried out the appropriate registrations prior to July 2012 and acquired the necessary resources. You then commenced business operations on 1 July 2012 as this coincided with the beginning of the tax year. You were to own a portion of the business based on the proportion of your capital contributions.The following records were kept of transactions and events that took place during the month of July.July 1 Jointly deposited $82,500 in the business bank account.Paid six months? rent in advance on premises, $1,800.Placed an order with Stationery on Stuart Street Printers for stationery, business cards and letterheads. The stationery is expected to last for one year.Paid Telstra a connection fee of $140 for the telephone, fax and internet connections.Signed a three-year lease with Caulfield Office Supplies Pty. Ltd. at a rent of $160 per month for furniture, office equipment, telephones and fax. The business paid for the first month?s rental.Hired Paula Mastrilli as an office assistant commencing immediately.Paid annual accounting membership fees for both Christina and David of $300 each.2 Paid Promotional Signs $1,500 for a sign advertising the business to be placed outside the premises.Paid $235 to advertise in the Daily News.3 Purchased a computer from B&W Computers for $4,000, with payment due in 15 days.4 Received the ordered goods from Stationery on Stuart Street Printers ? payment of $420 due on receipt of goods.4 ? 11 David completed a number of tax returns for clients with a total billing of $4,840. Clients are given 30 days credit.15 Signed a contract with XYZ Ltd for Christina to provide tax and bookkeeping services to the company. The terms of the contract were that Christina would spend one day a week at the XYZ Ltd offices and be paid a weekly fee of $3,250.Christina paid herself and David a fortnightly salary of $2,200 each.Pay Paula a fortnightly salary of $900.16 Received a payment from one of the clients (listed above: 4-11 July) of $2,250.Signed a three-year lease on a BMW at $1000 per month for Christina to use for business purposes, payable one month in advance on the 16th of each month. The first payment was made today for the first month of the lease.David withdrew $5,000 from the business to pay for his daughter?s school fees.18 Paid for the computer, purchased from B&W Computers.22 Received $3,250 weekly fee from XYZ Ltd.David completed tax returns with a total billing of $4,525 on 30 days credit.Christina and David completed tax returns with a total of $4,500 for cash.23 The liquidator of one of your clients has informed you that your client who used your services (period: 4-11 July) has no assets and will be unable to pay the $800 amount owing.29 Received $3,250 weekly fee from XYZ Ltd.Christina paid herself and David a fortnightly salary of $2,200 each.22 -31 Both completed work for additional clients amounting to $5,595. One of these clients paid $595 in cash; the rest were given 30 days? credit.Paid Paula a fortnightly salary of $900.Paid internet and telephone a total of $350.Paid postage $50.Paid the month?s electricity bill of $660.State any assumptions you make about particular transactions you feel are necessary in the notes to your accounts.Additional InformationThe computer has a useful life of 4 years and a residual value of $400.The stationery purchased is expected to last for one year and is to be consumed evenly over this period.The business contracted to clean the office has not been paid for their July services. The amount owing is $550.Required:Discuss (check midcourse.net for the help you need) the issues in relation to the share of profits for Christina and David given that the contributions made by each are different. This should be done in the context of the recommended structure (sole trader, partnership or company) you have chosen. You are not required to consider any accounting entries for profit sharing but Discuss (check midcourse.net for the help you need) the implications of your proposed arrangements and recommendations. The transactions you need to process relate to contributions made by Christina and David only.
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