Question 1

The bank account of ABC Pte Ltd’s (“ABC”) accounting books showed a debit balance of $17,100 on 31 January 20X5. The balance on the bank statement as at the same date was $8,700. Analysis of the records in the cash account and in the bank statement revealed the following information:

(i) Cheques amounting to $3,000 dated 27 January 20X5 issued to suppliers have not yet been cleared by the bank.

(ii) A cheque of $7,050, received in early January 20X5, was deposited into the Quick Cheque Deposit Box on 30 January 20X5 but was not cleared by the bank by month end.

(iii) The January bank charge reflected on the bank statement was $60.

(iv) A cheque received from a customer and deposited into the bank account was refused by the paying bank. The amount was $7,800.

(v) A cheque payment to a part-time contract worker of $3,300 had been entered twice into the bank account.

(vi) The January bank interest earned on the average bank balance for the month reflected on the bank statement was $210.

Required:

(a) Prepare the bank reconciliation statement for ABC and provide all necessary journal entries (journal narratives not required) using the above information.

(b) Explain why it is necessary for a company to do the bank reconciliation statement.

Question 2

On 1 January 20X3, DR Manufacturing Ltd (“DRM”), which has 31 December accounting year end, installed a $400,000 manufacturing equipment paid for in cash. The equipment had a four year expected useful life and a $20,000 expected residual value. Initially, DRM used the double-declining method of depreciation.

On 1 January 20X5, due to the change in the pattern of usage of the equipment, the management of DRM decided to change the depreciation method to the straight-line method. The expected useful life and residual value were unchanged.

On 1 July 20X6, the company commissioned a new factory in another location and disposed of the existing equipment for $35,000 cash.

Required:

Illustrate by preparing the necessary journal entries, journal narratives required, for the years 20X3 through 20X6.

Question 3

Information relating to Great Products Pte Ltd’s (“GR”) inventory during the month of April 20X1 was given below:

Required:

Determine the cost of goods sold and the costs of ending inventory for the month of April 20X1 under the weighted average method if GR uses the perpetual inventory system.

Question 4

The following comparative statements of financial position are for GK Pte Ltd as at 31 December 20X1 and 20X2. Also provided is the extract from the income statement for the year ended 31 December 20X2.

Additional information:

(i) The equipment which was sold for cash was originally bought at a cost of $28,000. When sold, the accumulated depreciation of the equipment was $14,000

(ii) During the year, the company bought another piece of equipment paying the full amount in cash.

Required:

Prepare a statement of cash flows for GK Pte Ltd for the end ended 31 December 20X2 using the indirect method. 

Question 5

Bright Art Studio Pte Ltd (“BAS”), which has 31 December accounting year end, provides children with training in various art expressions like painting, pottery, drawing and decoupage. The activities were carried out from a rented premise. The trial balance of the company as at 31 December 20X2 included the following account balances: 

Before you prepare the financial statements, you managed to extract the following additional information:

(i) The company paid rent in advance every two years. The previous payment was made on 1 January 20X2.

(ii) A stock count of the actual supplies on hand as at 31 December 20X2 amounted to $1,000.

(iii) On 1 December 20X2, the company borrowed $24,000 by signing a 12- month 5.00% note payable. The entire amount plus interest is due on 30 November 20X3.

(iv) As at 31 December 20X2, $5,000 of previously unearned revenue has been earned.

(v) The company was commissioned to do a painting for a corporate client. The painting was delivered to the client on 12 December 20X2. On 14 December 20X2, the company billed the client $4,000 for the work done but the client had not paid up by 31 December 20X2.

(vi) On 29 December 20X2, the company engaged a plumber to fix a leaking water-pipe. The plumbing fee invoiced amounted to $250. The company had not paid the plumber by 31 December 20X2.

Required:

(a) Apply the accrual concept of accounting and prepare all necessary adjusting or additional journal entries (journal narratives not required) as required by the additional information.

(b) Prepare the Statement of Financial Position for BAS as at 31 December 20X2, incorporating all the necessary adjustments.