Question 1

The following is the unadjusted trial balance for the year of business ending 31 December 20X8 for a hair salon in Singapore, ABC Beauty Salon Pte Ltd (“ABC”), which adopts the Singapore Financial Reporting Standards:

You are the accountant for ABC and the following data are made available to you to determine necessary adjusting entries:

(A) The prepaid insurance was purchased at the beginning of March 20X8 to provide coverage until end of June 20X9.

(B) A count showed $210 of unused shop supplies still available at the end of 31 December 20X8.

(C) The depreciation expenses on the shop equipment and building for the year were $350 and $2,220 respectively and were not accounted for yet.

(D) A beautician, renting a small space at the lack of the salon, was behind on space rental payments and the $800 of accrued revenues was unrecorded at the time the above trial balance was prepared.

(E) $1,600 of the Unearned Rent account balance was earned by year-end.

(F) One employee, a receptionist, works a five-day work week at $100 per day. The employee was paid for her work in the second last week of December 20X8. She worked four days in the last week of December 20X8, for which she was not paid yet and this was also not been accounted for in the books.

(G) One month's interest of $600 on the note payable, $600 accrued but was unrecorded.

(H) The company estimated the income tax payable to the tax authority in respect of the income earned in 31 December 20X8 would be $1,794. 

Required:

(a) Analyse the above and apply the accrual accounting concepts to prepare all necessary and adjusting journal entries (journal narratives NOT required) that are required to record all transactions by the end of the period to bring the trial balance for the financial year ending 31 December 20X8 up to date.

(b) Use your adjusted trial balance and prepare the Income Statement for the year ending 31 December 20X8.

(c) Prepare the necessary closing entries (journal narratives NOT required) to prepare the books for the coming new financial year.

(d) Compute the return on total assets for ABC for the year ending 31 December 20X8.

Question 2

On 1 January 20X0, DEF Ltd purchased freehold land and building for use in operations and incurred the following costs. 

The land has an indefinite useful life. The new building has an estimated useful life of thirty years and a residual value of $100,000. Any land improvements have an estimated useful life of ten years and no residual value. Assume that the company adopts the Singapore Financial Reporting Standards. Assume further that the company adopts the double-declining balance (“DDB”) method for building depreciation and straight-line method for land improvements. Where applicable, please round your answers to the nearest dollar.

Required:

(a) Determine the costs to be capitalised as Land and the costs to be capitalised as Building based on Singapore Financial Reporting Standard 16 Property, Plant and Equipment. Clearly explain why you include or exclude certain costs in your determination.

(b) Notwithstanding part (a) above, assume that the initial costs of the land was $320,000 and the initial costs of the building was $1,050,000. Determine the annual depreciation expense of the building for each of the financial year ended 31 December 20X0, 31 December 20X1 and 31 December 20X2.

(c) Notwithstanding part (a) above, assume that the initial costs of the land was $320,000 and the initial costs of the building was $1,050,000. On 31 December 20X2, the land and building was sold for $1,200,000. Illustrate the accounting for this transaction by explaining clearly what amount should be recognised in and derecognised from the respective journal accounts in the accounting books. 

Question 3

XYZ Ltd is a company that adopts Singapore Financial Reporting Standards. The following are XYZ Ltd’s Statement of Financial Position as at 31 December 20X7 and its Income Statement for the year ended 31 December 20X8: 

Additional information relating to transactions in the financial year ending 31 December 20X8:

 Sales were $13,000 of which $8,000 was received in cash from customers. There was no other cash received in respect of sales and accounts receivables.

 Bought new freehold land of $10,000 in cash.

 Sold other freehold land at its carrying amount of $5,000.

 Paid $1,000 principal on the long-term loan payable and $1,000 in interest.

 Issued 500 10% preference shares at par for $10,000 cash at the start of the year.

 Cash dividends of $1,000 were declared and paid to outstanding ordinary shareholders after preference dividends.

 Paid $5,500 on accounts payable.

 No other inventory purchases were made.

 All salaries and wages were paid in cash.

 Other expenses were on account.

 1,000 treasury shares (ordinary) were purchased at $3 per share during the year.

 The company’s practice is to classify interest receipts and dividend receipts as under investing cash flows and interest payments and dividend payments as under financing cash flows on the Statement of Cash Flows.

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

 Assume that the entity is granted tax-free status and that there is no depreciation. 

Required:

(a) Prepare the Statement of Financial Position for XYZ Ltd as at 31 December 20X8.

(b) Prepare the Statement of Cash Flows for XYZ Ltd for the year ending 31 December 20X8.