Question 1

CC Ltd is a company incorporated in Singapore and uses the Singapore Financial Reporting Standards (“FRSs”). Its financial year end is 31 December. CC Ltd’s unadjusted trial balance includes the following account balances as at 31 December 20X7: 

The following information pertaining to the financial year ending 31 December 20X7 are available to determine additional journal entries:

(i) The prepaid insurance was purchased at the beginning of July to provide coverage for nine months from July 20X7 through March 20X8.

(ii) The company estimates $8,150 in depreciation each year.

(iii) A count showed $86,000 of supplies on hand at the end of the year.

(iv) The notes receivable was accepted on 1 October 20X7 and will be due in six months’ time, together with the interest, and the interest rate is 8% per annum.

(v) Services in the amount of $5,600 were performed for customers who had previously paid in advance.

(vi) Services in the amount of $2,000 were performed during the year; these services have not yet been billed or recorded.

(vii) A written off debt of $5,000 was recovered on 31 December 20X7 but not recorded.

(viii) The firm accounts for impairment of accounts receivables under FRS 109 Financial Instruments, i.e. the firm computes the lifetime expected credit losses of its accounts receivables and makes an allowance for impairment losses (if required), at every year end. The allowance for impairment losses of $2,000 was brought forward from last year. At the end of this financial year, the provision matrix prepared by the firm estimated the amount of accounts receivables not expected to be collected and that amount happens to be equivalent to 10% of the final Accounts Receivable balance.

(ix) Salaries at $200 per day per employee for 5 employees over a period of 3 days, had not been paid nor recorded as at 31 December 20X7. 

Required:

(a) Using the information above, prepare and record all necessary journal entries and annual adjusting entries that are required at the end of the financial period. Journal narratives are not required.

(b) Prepare a Statement of Financial Position for CC Ltd as at 31 December 20X7.

Question 2

The BB Bookstore Pte Ltd deposits all cash receipts on the day when they are received and it makes all cash payments by cheques. At the close of business on 31 December 20X1, its Cash account in its books shows a debit balance of $18,303. The following information was discovered during the bank reconciliation.

• Cheque payment of $45,000 made for the textbook purchases in December had not been cleared by the bank.

• Included in the bank statement was a bank service charge in the amount of $35.

• Cheque No. 737777 was correctly drawn for $805 in payment of a utility bill on December 16. The bookstore mistakenly recorded it with a debit to Utilities Expense and a credit to Cash in the amount of $850.

• A cheque received from a customer of $1,228 was rejected by the bank after it was deposited on 20 December. This was subsequently informed to be a bounced cheque.

Required:

(a) Prepare a bank reconciliation statement and determine the balance reflected on the bank statement at the end of December 20X1.

(b) Prepare the journal entries for the items revealed from the bank reconciliation. Journal narratives are not required.

Question 3

JJ Pte Ltd is a family-owned business in Singapore, with financial year ending 31 December. As at 1 January 20X7, the company’s shareholders’ equity comprised 2.5 million ordinary shares at book value of $2,550,000, fair value reserves of $5,000 and retained earnings of $870,000. During 20X7, the following events took place:

(i) On 1 March 20X7, JJ Pte Ltd issued 200,000 ordinary shares for cash, at the issue price of $1.10 per share.

(ii) At the annual general meeting on 15 April 20X7, the company declared final cash dividend at $0.08 per share. This was approved by the shareholders.

(iii) The dividend declared in (ii) was distributed on 1 May 20X7.

(iv) On 1 October 20X7, JJ Pte Ltd bought a machine for cash of $90,000. Its useful life is 5 years and the residual value of the machine at the end of its useful life is $2,000.

(v) On 31 December 20X7, the company accounted for depreciation of the machine bought in (iv) using the Double-Declining Balance method.

(vi) In 20X6, JJ Pte Ltd had bought shares in Tany Ltd, which was measured as a fair value through other comprehensive income investment under FRS 109 Financial Instruments. On 31 December 20X7, the carrying amount of this investment was $100,000 and the fair value was $103,000. 

Required:

(a) Illustrate the accounting of Events (i) to (vi) by preparing the necessary journal entries that JJ Pte Ltd should record. Journal narratives are not required. Please state assumptions made, if any.

(b) Prepare the Statement of Changes in Equity of JJ Pte Ltd for the year ended 31 December 20X7. [Hint: Do not use “other reserves” as a header in the statement.] Assume that the profit for the year ended 31 December 20X7 is $323,000, after Events (i) to (vi) have been accounted for.

(c) Compute the Return on Equity for JJ Pte Ltd for the year ended 31 December 20X7 and comment on whether this is a good ratio.

Question 4

The Statements of Financial Position of SS Pte Ltd as at 31 December 20X7 and 31 December 20X8, and its Statement of Profit or Loss for the year ended 31 December 20X8 are as follows:

Additional information:

(i) In May 20X8, SS Pte Ltd bought an equipment costing $15,000 for cash.

(ii) A separate piece of equipment was sold for cash in September 20X8.

(iii) New shares were issued for cash in October 20X8. No shares were bought back during the year.

(iv) The company’s practice is to classify interest receipts/payments and dividend receipts under operating cash flows and dividend payments under another category on the Statement of Cash Flows.

(v) When preparing the Statement of Cash Flows, the company’s practice is to present the section on cash flows from operating activities using the indirect method.

Required:

Prepare SS Pte Ltd’s Statement of Cash Flows for the year ended 31 December 20X8.