AC3202 Semester A, 2022/2023

Week 2 Solutions

Question 1 (a)
1. Depreciation expense
Dr. Depreciation expense – equipment 20,000
Cr. Accumulated depreciation – equipment 20,000

2. Wages payable
Dr. Wage expense 5,000
Cr. Wages payable (10,000 – 5,000) 5,000

3. Interest payable
Dr. Interest expense 2,000
Cr. Interest payable ($60,000*8%*5/12) 2,000

4. Sales revenue earned

Dr. Unearned revenue 3,000
Cr. Sales 3,000

5. Prepaid Rent
Dr. Prepaid Rent 1,500
Cr. Rent expense 1,500

6. Tax expense
Dr. Tax expense 3,000
Cr. Tax payable 3,000

b)
Bell Ltd.
Statement of Profit or Loss and Other Comprehensive Income
For the year ended 31 December 2018

Note $
Sales (256,000+3,000) 259,000
Cost of goods sold (145,000)
Gross profit 114,000
Administrative expenses 1 (50,300)
Distributions costs 2 (14,800)
Other operating expenses 3 (25,300)
Operating profits $23,600
Interest expense (2,400+2,000) (4,400)
Profit before tax 19,200
Tax expense (3,000)
Profit for the year $16,200

Note 1: Administrative expense

Wage expenses (37,000*60%) 22,200
Rent expense (14,000 – 1,500) 12,500
Other administrative expenses 15,600
$50,300

Note 2: Distribution costs

Wage expenses (37,000*40%) $14,800

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Note 3: Other operating expenses
Other operating expenses 5,300
Depreciation – equipment 20,000
$25,300

c) Bell Ltd.
Statement of Changes in Equity
For the year ended 31 December 2018

Share capital Retained Profits Total

$ $ $
Balance at 1 January 2018 100,000 132,300 232,300
Profit for the year 16,200 16,200
Balance at 31 December 2018 100,000 148,500 $248,500

d) Bell Ltd.
Statement of Financial Position
As at 31 December 2018

$ $
Non-current assets
Equipment, less accumulated depreciation 128,000
(225,000 - (77,000+20,000))
Current assets
Inventories 87,000
Accounts receivables 85,000
Prepaid rent 1,500
Cash 60,000
233,500
Current liabilities
Accounts payables (38,000)
Wages payable (10,000)
Interest payable (2,000)
Tax Payable (3,000)
(53,000)
Net current assets 180,500
Total assets less current liabilities 308,500
Non-current liabilities
Note payable (60,000)
Net assets $248,500

Equity
Share Capital 100,000
Retained profits 148,500
Total Equity $248,500

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Question 2
a)

1. Depreciation expense $ $
Dr. Depreciation expense – buildings 10,505
(247,600-90,000)*5% + (90,000*5%)*7/12
Cr. Accumulated depreciation – buildings 10,505

Dr. Depreciation expense – furniture & fixtures 1,500

(15,000*10%)
Cr. Accumulated depreciation – furniture & fixtures 1,500

2. Bad debts expense

Dr. Bad debts expense 3,925
Cr. Allowance for doubtful accounts (4,575 – 650) 3,925

3. Prepaid insurance
Dr. Insurance expense 2,000
Cr. Prepaid insurance (7,000 – 5,000) 2,000

4. Accrued sales
Dr. Accounts Receivables 12,000
Cr. Sales 12,000

Dr. Cost of Goods Sold 8,000

Cr. Inventories 8,000

5. Accrued expenses
Dr. Sales commissions 900
Cr. Sales commissions payable 900

Dr. Interest expense 120

Cr. Interest payable 120

6. Tax payable
Dr. Tax expense 10,000
Cr. Tax payable 10,000

7. Dividends payable
Dr. Dividends 7,200
Cr. Dividends payable 7,200

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b)

Bond Ltd.
Statement of Profit or Loss and Other Comprehensive Income

for the year ended 31 December 2018

Note $
Sales (770,000 + 12,000 – 27,000) 755,000
Cost of sales (465,800 + 8,000) (473,800)
Gross profit 281,200
Administrative expenses 1 (113,530)
Selling and Distribution expenses 2 (104,525)
Operating profits 63,145
Interest expense (2,400+120) (2,520)
Profit before tax 60,625
Tax expense (10,000)
Profit for the year $50,625

Total Note 1: Note 2:

Administrative Selling and
expense Distribution
expenses
Depreciation expense - Buildings 10,505 10,505
Depreciation expense – Furniture and 1,500 1,500
Fixtures
Utilities expenses 16,700 16,700
Bad debt expenses 3,925 3,925
Other administrative expenses 10,200 10,200
Salaries expenses (70%; 30%) 89,000 62,300 26,700
Sales commissions (71,325+900) 72,225 72,225
Insurance expenses
(12,000+2,000; 60%; 40%) 14,000 8,400 5,600
$218,055 $113,530 $104,525

c)
Bond Ltd.
Statement of Changes in Equity
For the year ended 31 December 2018

Share Retained
capital Earnings Total
$ $ $
Balance at 1 January 2018 260,000 120,125 380,125
Profit for the year 50,625 50,625
Dividends (7,200) (7,200)
Balance at 31 December 2018 260,000 163,550 $423,550

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d)
Bond Ltd.
Statement of Financial Position
As at 31 December 2018

$ $
Non-current assets
Land 80,000
Buildings, less accumulated depreciation
(247,600 - (18,000+10,505)) 219,095
Furniture and Fixtures, less accumulated
depreciation (15,000 - (9,000+1,500)) 4,500
303,595
Current assets
Inventories (94,700-8,000) 86,700
Accounts receivables, less allowance for doubtful 86,925
accounts ((79,500+12,000) – 4,575)
Prepaid insurance 5,000
Cash 50,250
Total current assets 228,875
Total assets $532,470

Equity
Share Capital 260,000
Retained earnings 163,550
Total Equity 423,550

Non-current Liabilities
Loans Payable 18,000

Current liabilities
Accounts Payable 72,700
Interest Payable 120
Sales Commission payable 900
Dividends payable 7,200
Tax Payable 10,000
Total current liabilities 90,920
Total equity and liabilities $532,470

Net current assets $137,955

Total assets less current liabilities $441,550

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Question 3

a)
1. Furniture – correction of error
Dr. Furniture and fixtures 12,000
Cr. Administrative expenses 12,000

2. Depreciation expense
Dr. Depreciation expense – plant and equipment 22,750
Cr. Accumulated depreciation – plant and equipment 22,750
(227,500*10%)

Dr. Depreciation expense – furniture and fixtures 7,350

Cr. Accumulated depreciation – furniture and fixtures 7,350
(65,500*10%) + (12,000*10%*8/12)

3. Inventory count
No entry

4. Tax payable
Dr. Tax expense 4,000
Cr. Tax payable 4,000

5. Interest payable
Dr. Interest expense 1,200
Cr. Interest payable (120,000*6%*2/12) 1,200

6. Proposed dividends
No entry

b) P&G Co.
Statement of Profit or Loss and Other Comprehensive Income
for the year ended 31 December 2018

Note $
Sales (409,000-20,430) 388,570
Cost of goods sold 1 (201,220)
Gross profit 187,350
Administrative expenses 2 (63,900)
Selling expenses (48,650)
Other operating expenses 3 (47,100)
Operating profits $27,700
Interest expense (3,600+1,200) (4,800)
Profits before tax 22,900
Tax expense (4,000)
Profits for the year $18,900

Note 1: Cost of Goods Sold

Inventory, 1 Jan 2018 84,000
Purchases (184,000 – 6,780) 177,220
261,220
Less: Inventory, 31 December 2018 (60,000)
Cost of goods sold $201,220

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Note 2: Administrative expense
Administrative expenses (39,900-12,000) 27,900
Office Rent expense 36,000
$63,900

Note 3: Other operating expenses

Other operating expenses 17,000
Depreciation expense – plant & equipment 22,750
Depreciation expense – furniture and fixtures 7,350
$47,100

c)

P&G Co.
Statement of Changes in Equity
for the year ended 31 December 2018

Share Retained
capital Earnings Total
$ $ $
Balance at 1 January 2018 100,000 108,020 208,020
Profit for the year 18,900 18,900
Dividends (interim) (9,000) (9,000)
Balance at 31 December 2018 100,000 117,920 $217,920

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d)
P&G Co.
Statement of Financial Position
as at 31 December 2018

$ $
Non-current assets
Plant and Equipment (net)
(227,500 – (46,780+22,750)) 157,970
Furniture and fixtures (net)
((65,500+12,000) - (21,300+7,350)) 48,850
206,820
Current assets
Inventories 60,000
Accounts Receivables, less allowance for doubtful 89,200
accounts (91,000 – 1,800)
Cash 34,400
183,600
Current liabilities
Current portion of Loans Payable (30,000)
Accounts Payables (47,300)
Interest Payable (1,200)
Tax Payable (4,000)
(82,500)
Net current assets 101,100
Total assets less current liabilities 307,920
Non-current liabilities
Loans Payable (120,000 – 30,000) (90,000)
Net assets $217,920

Equity
Share Capital 100,000
Retained earnings 117,920

Total Equity $217,920

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Question 4
(a)

1. Insurance expired $ $
Dr. Insurance expense 4,800
Cr. Prepaid insurance (8,000*3/5) 4,800

2. Repairs expense – correction of error

Dr. Repair expense 16,200
Cr. Equipment 16,200

3. Depreciation expense
Dr. Depreciation expense – equipment 24,000
((220,600–16,200)-12,400)/8)
Cr. Accumulated depreciation – equipment 24,000

4. Rent income
Dr. Unearned rent (15,000*5/8) 9,375
Cr. Rent income 9,375

5. Wages payable
Dr. Wages expense 6,000
Cr. Wages payable 6,000

6. Tax payable
Dr. Tax payable (5,200 – 3,000) 2,200
Cr. Tax expense 2,200

7. Dividends Payable
Dr. Dividends 8,000
Cr. Dividends Payable 8,000

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(b)
Golden Limited
Statement of Profit or Loss and Other Comprehensive Income
for the year ended 31 December 2018

Note $
Sales 795,200
Cost of sales (432,300)
Gross profit 362,900
Other income – Rent income 9,375
372,275
Administrative expenses 1 (177,560)
Selling and Distribution expenses 2 (97,740)
Other operating expense 3 (77,300)
Profit before tax 19,675
Tax expense (5,200-2,200) (3,000)
Profit for the year $16,675

Note 1: Administrative expense

Wage expenses ((120,600+6,000)*60%) 75,960
Office Rent expense 90,000
Utilities expenses 11,600
$177,560
Note 2: Selling and Distribution expenses
Wage expenses (126,600*40%) 50,640
Advertising expenses 47,100
$97,740
Note 3: Other operating expenses
Other operating expenses 32,300
Insurance expense 4,800
Repair expense 16,200
Depreciation – equipment 24,000
$77,300

c)
Golden Limited
Statement of Changes in Equity
for the year ended 31 December 2018

Share Retained
capital Earnings Total
$ $ $
Balance at 1 January 2018 170,000 66,500 236,500
Shares issued 30,000 30,000
Profit for the year 16,675 16,675
Dividends (8,000) (8,000)
Balance at 31 December 2018 200,000 75,175 $275,175

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d)
Golden Limited
Statement of Financial Position
as at 31 December 2018

$ $
Non-current assets
Equipment, less accumulated depreciation 138,400
(220,600-16,200) - (42,000+24,000)

Current assets
Inventories 110,000
Trade debtors, less allowance for bad debts
(127,200–3,300) 123,900
Prepaid insurance (8,000-4,800) 3,200
Cash 79,300
316,400
Current liabilities
Trade creditors (57,000)
Unearned rent (15,000-9,375) (5,625)
Wages Payable (6,000)
Tax Payable (3,000)
Dividends Payable (8,000)
(79,625)
Net current assets 236,775
Total assets less current liabilities 375,175
Non-current liabilities
Loans Payable (100,000)
Net assets $275,175

Equity
Share Capital 200,000
Retained earnings 75,175
Total Equity $275,175

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