6. Solutions - Adjustments PDF

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Summary

The following trial balance has been extracted from the ledger of Mr Yousef, a sole trader. Trial Balance as at 31 May 20X Dr (RM) Cr (RM) Purchases and Sales 82,350 138, Carriage 5, Drawings 7, Rent, rates and insurance 6, Postage and stationery 3, Advertising 1, Salaries and wages 26, Bad debts 87...

Description

1.

The following trial balance has been extracted from the ledger of Mr Yousef, a sole trader. Trial Balance as at 31 May 20X6 Dr (RM) Purchases and Sales Carriage Drawings Rent, rates and insurance Postage and stationery Advertising Salaries and wages Bad debts Provision for doubtful debts

82,350 5,144 7,800 6,622 3,001 1,330 26,420 877

Accounts Receivable and Accounts Payable

12,120

Cash in hand Cash at bank Inventory as at 1 June 20X5 Equipment: at cost accumulated depreciation Capital

177 1,002 11,927

Cr (RM) 138,078

130 6,471

58,000

216,770

19,000 53,091 216,770

The following additional information as at 31 May 20X6 is available: a) Rent is accrued by RM210. b) Rates have been prepaid by RM880. c) RM2,211 of carriage represents carriage inwards on purchases. d) Equipment is to be depreciated at 15% per annum using the straight line method. e) The provision for doubtful debts to be increased by RM40. f) Inventory at the close of business has been valued at RM13,551.

You are required: a)

Prepare a statement of profit and loss and other comprehensive incomes for the year ended 31 May 20X6. (20 marks)

b)

Prepare a statement of financial position as at 31 May 20X6. (15 marks)

2. The following accounts balances were extracted from the books of Rindu Sayang Sdn Bhd for the accounting period ending 31 May 2015. Debit RM Capital Motor Vehicle Land and building Office Equipment Accumulated depreciation: Motor Vehicle Office Equipment Utilities Water and Electricity Bad debts Allowance for doubtful debts Stock (Opening) Discount Received Discount Allowed Purchases Sales Cash at bank Cash in hand Drawings Account payable Account receivable Insurance Salaries Carriage expenses (outward) Rental income Import duties Advertising Interest revenue Return outwards Return inwards

Credit RM 420,000

200,000 250,000 100,000 80,000 10,000 15,000 11,000 11,500 1,000 31,000 4,000 3,000 60,000 220,000 47,000 16,000 2,000 60,000 21,600 13,000 35,000 1,400 26,700 3,000 15,000 13,000 2,000 1,200 836,700

836,700

Additional information: 1. Closing stock as at 31 May 2015 was RM 40,000. 2. Water and Electricity bills amounting to RM300 still remained unpaid. 3. Interest revenue amounting to RM1, 400 has not yet been received. 4. Out of RM500 in the carriage outward was carriage inward. 5. The owner took RM 1,000 cash from bank account for personal use. 6. Prepaid insurance during the year was equal to RM3,000.

7. Depreciation is to be provided on the following basis: a) Motor vehicles 20% on cost b) Office equipment 10% on net book value (reducing balance method) 8. Allowance for doubtful debts is to be provided based on the balance of the accounts receivable at the rate of 4%. You are required: a) Record the transactions, as given in the additional information No. 2 until No. 7, in a journal (Note: Expaination is not required). b) Prepare a statement of profit and loss for the year ended 31 May 2015.

c) Prepare a statement of financial position as at 31 May 2015. (Note: A vertical format is required). a)JournalEnt ry 2.

3. 4. 5. 6. 7a. 7b. 8.

DrWat e randEl e t r i c t y CrAc c r uedWat e rand El ec t r i c i t y DrAc c r ue dI nt e r e s tRe venue CrI nt er es tRe v enue DrCar r i ageI nwar d CrCar r i ageOut war d DrDr awi ng CrBank DrPr e pai dI ns ur anc e CrI ns ur anc e DrDepr e c i at i onExpe ns e s MV CrAc cDe pMV DrDepr e c i at i onExpe ns e s OE CrAc cDe pOE DrAFDD CrDo ubt f ulDe bt

300√ 300√ 1400√ 1400√ 500√ 500√ 1000√ 1000√ 3000√ 3000√ 40, 000√ 40, 000√ 9000√ 9000√ 136 136

( 16√x1/ 2mar k=8marks )

b)Ri nduSayang

St at ementofProfitandLossandOt herCompr ehens i veI ncomesf ort heyear ended31March2015 Sal es Le s s :

Le s s :

220, 000√

Sal e sRe t ur n/ Re t ur nI nwar d

( 1, 200)√

Netsal es

218, 800

costofgoods ol d Ope ni ngs t o c k

31, 000√

Add:

Pur c has e s

60, 000√

Le s s :

Re t ur no ut war d/pur c has er e t ur n

( 2, 000)√

Add:

Car r i agei nwar d

Add:

Co s to fPur c has es

Le s s :

500√

I mpo r tdut i e s

3, 000√

Cl o s i ngs t o c k

( 40, 000)√

Gros sProfit

Add

166, 300

Ot heri ncome 4, 000√

di s c ountr e c ei ved r ent ali nc ome

26, 700√

i nt er es tr e venue

14, 400√ 136√

Do ut f ulde bt

Le s s :

( 52, 500)

Expens es wat e rande l ec t r i c i t y

( 11, 300)√

s al ar i es

( 35, 000)√

de pr ec i at i on

: Mo t o rVe hi c l es Offic ee qui pme nt

( 40, 000)√√ ( 9000)√√

di s c ountal l o wed

( 3, 000)√

c ar r i ageo ut war d

( 900)√

i ns ur anc e do ubt f ulde bt

( 10, 000)√ 0

ut i l i t i e s

( 15, 000)√

badde bt s

( 11, 500)√

45, 236

( 15, 000)√

adve r t i s i ng Netpr ofit /( NetLoss)

(150, 700)

60, 836√ ( 24√x1/ 2mark=12marks ) ( Format=1mar k)

c)Ri nduSayang St at ementofFi nanci alPosi t i on)asat31March2015 Co s t AcDe p NBV NonCurrentAsset s RM RM RM l andandbui l di ng 250, 000√ mo t orve hi c l e 200, 000√ ( 120, 000)√ 80, 000 Offic eEqui pment 100, 000√ ( 19, 000) )√ 81, 000 CurrentAsset c l os i ngs t o c k ac cr ec e i vabl e Le s s :AFDD c as hi nhand c as hatbank Pr epai dI ns ur anc e Ac c r uedI nt er e s tRe venue

40, 000√ 21, 600√ ( 864)√

20, 736 16, 000√ 46, 000√ 3, 000√ 1, 400√

127, 136 538, 136

Fi nancedby OwnerEqui t y Capi t al Les sNetProfit Les s:Drawi ng

420, 000√ 60, 836√ 480, 836 ( 3, 000)√

477, 836

NonCurrentLi abi l i t i es CurrentLi abi l i t i es Ac c o untpayabl e Ac c r uedwat e rande l ec t r i c i t ye xpens es

60, 000√ 300√ 60, 300 538, 136

Sherry owns a boutique, Mutiara Collection, at KLCC. The boutique sells traditional costumes and accessories. The following balances were extracted from the accounting books of Mutiara Collection as at 31 December 2014. Account Opening stock/inventory as at 1 January 2014 Sales returns Purchases returns Carriage inwards Carriage outwards Purchases Sales Discount received Commission received Rental expense Salary Salesman commission Discount allowed Interest expense Provision for doubtful debts Provision for depreciation – Delivery van Provision for depreciation – Costumes cabinet Provision for depreciation – Office equipment Delivery van Costumes cabinet Office equipment Accounts receivable Accounts payable Telephone & electricity expense Insurance expense Cash at bank Cash in hand Bank loan Drawings Capital

Dr RM 40,000 4,000

Cr RM

6,000 7,000 4,400 171,000 300,000 6,400 4,600 28,000 33,000 2,600 5,200 5,000 1,000 28,000 12,000 10,000 70,000 60,000 50,000 20,000 42,000 10,000 9,000 50,000 3,000 100,000 600 573,800

64,800 573,800

The following adjustments need to be considered as at 31 December 2014: a. The rental expense is RM2,000 per month. Sherry paid rental in advance for 2 months. b. The salary for the fashion designer amounting to RM3,000 was still unpaid. c. One of the business customers was declared bankrupt and unable to settle his debts. The customer still owed RM4,000. d. Provision for doubtful debts need to be provided at 5% of net accounts receivable. e. Depreciation on a yearly basis is to be provided on a straight line basis, as follows: - Delivery van – 20% - Costumes cabinet – 5%

f. g.

- Office equipment – 15% Sherry withdrew petty cash amounting to RM200 and took a pair of bracelets amounting to RM1,000 for her daughter’s wedding. Closing stock/inventory as at 31 December 2014 was RM32,000.

Required: 1. 2. 3.

Prepare the income statement for the year ended 31 December 2014. Prepare the statement of owner’s equity for the year ended 31 December 2014. Prepare the balance sheet as at 31 December 2014.

Detail all the necessary workings (e.g. journal entries, adjustment worksheet, etc).

Mutiara Collection Income statement for the year ended 31 December 2014 Sales 300,000 Less: Sales returns (4,000) 296,000 Opening stock 40,000 Purchases 170,000 Carriage inwards 7,000 Less: Purchases returns (6,000) Less: Closing stock (32,000) Cost of sales 179,000 Gross profit 117,000 Other income: Discount received Commission received

6,400 4,600 128,000

Expenses: Carriage outwards Rental expense Salary Salesman commission Discount allowed Interest expense Provision for doubtful debts

4,400 24,000 36,000 2,600 5,200 5,000 1,800

Telephone & electricity expense Insurance expense Bad debts written of Depreciation expense

10,000 9,000 4,000 24,500 126,500

Net income 1,500

Mutiara Collection Statement of owner's equity for the year ended 31 December 2014 Capital, 1 January 2014 64,800 Drawings (1,800) Net income 1,500 Capital, 31 December 2014 64,500

Mutiara Collection Balance sheet as at 31 December 2014 Non-current assets Delivery van

Current liabilities 70,000

Accounts payable 42,000

Provision for depreciation

28,000

Accrued salary

(42,000)

3,000

Costumes cabinet 60,000 Provision for depreciation (15,000)

45,000

Office equipment Provision for depreciation

50,000 -17,500 32,500

45,000

105,500 Current assets Stock

32,000

Accounts receivable Less: Provision for doubtful debts

16,000 -800 15,200

Prepaid rental

Non-current liabilities Bank loan

100,00 0

4,000 Cash at bank 50,000 Cash in hand

Owner's equity 2,800 Capital 104,000

Total assets

64,500 Total equity & liabilities

209,500

209,50 0...