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Answer 1
(a) (i) Advertising and Promotions
20X8 $ 20X8 $
Jul 28 Bank 7,500 Apr 1 Accrued b/f 2,220
Oct 15 Bank 12,600
20X9
Mar 31 Profit and loss 14,400
" 31 Prepaid c/f 3,480
20,100 20,100
(iv) Rates
20X8 $ $
Apr 1 Prepaid b/f (3 months) 4,680
Jul 1 Bank (6 months) 10,080
Oct 1 Bank (6 months) 10,080
20X9
Mar 31 Profit and loss (12 months) 19,800
1
" 31 Prepaid c/f (3 months: $10,080 × 2 ) 5,040
24,840 24,840
189
Answer 2
(a)
Cash Book
20X6 $ 20X6 $
Mar 31 Balance b/f 93,596 Mar 31 Bank interest charges (3) 184
" 31 Paul Lee: Incorrect payment (2) 1,080 " 31 Rates: Autopay (4) 2,688
" 31 Peter Pang: Credit transfer (5) 3,256 " 31 David Ho: Dishonoured cheque (6) 2,080
" 31 Omitted sales receipts (8) 2,504 " 31 Balance c/f 95,484
100,436 100,436
(b) Anne Lo
Bank Reconciliation Statement as at 31 March 20X6
$
Balance as per bank statement 91,600
Add (7) Uncredited items 8,744
100,344
Less (1) Unpresented cheques 4,860
Corrected balance as per cash book 95,484
(c) A bank reconciliation statement is compiled to ensure that the difference between the balance in the bank
statement and the balance in the cash book is due principally to the timing difference in entering items, or to
discover errors or irregularities, if any, in either the bank’s or the depositor’s records.
Answer 3
(a) Patrick Ho
The Journal
Date Particulars Dr Cr
20X6 $ $
Dec 31 (1) Bank interest charges 3,600
Suspense 3,600
Dec 31 (2) Charles 1,325
Suspense 1,325
Dec 31 (3) Equipment 6,000
Stock 6,000
Dec 31 (4) Suspense 30
Wing Wah Ltd ($3,830 – $3,800) 30
Dec 31 (5) Suspense 180
Sales ($755 – $575) 180
Dec 31 (6) Discounts allowed 380
Discounts received 380
Suspense 760
Dec 31 (7) Suspense 500
190
(b) Suspense
$ $
Wing Wah Ltd (4) 30 Bank interest charges (1) 3,600
Sales (5) 180 Charles (2) 1,325
Difference in trial balance 5,975 Discounts allowed (6) 380
Discounts received (6) 380
Trial balance: Petty cash (7) 500
6,185 6,185
(c) Statement Showing the Effect on Net Current Assets After the Corrections
$ $
Original net current assets 81,085
Add (2) Debtors understated 1,325
(7) Petty cash balance omitted 500 1,825
82,910
Less (3) Stock overstated 6,000
(4) Debtors overstated 30 6,030
Corrected net current assets 76,880
Answer 4
Stephen Kwan
Trading and Profit and Loss Account for the year ended 31 March 20X5
$ $
Sales 18,250
Less Cost of goods sold:
Stock as at 1 April 20X4 4,000
Add Purchases 12,250
16,250
Less Stock as at 31 March 20X5 4,250 12,000
Gross profit 6,250
Add Other revenues:
Discounts received 300
Interest receivable 438
6,988
Less Expenses:
Sundry expenses 162
Rent and rates ($1,200 – $100) 1,100
Insurance 325
Wages and salaries ($2,975 + $275) 3,250
Discounts allowed 475
Bad debts 113
Provision for bad debts [($4,613 – $113) × 5% – $150] 75
6
Provision for depreciation: Office equipment [($750 × 10%) + ($250 × 10% × 12 )] 88
Motor vehicles 400 5,988
Net profit 1,000
191
Stephen Kwan
Balance Sheet as at 31 March 20X5
$ $ $ $
Fixed Assets
Office equipment 1,000
Less Accumulated depreciation 88 912
Motor vehicles 2,000
Less Accumulated depreciation 400 1,600 2,512
Current Assets
Stock 4,250
Debtors 4,500
Less Provision for bad debts 225 4,275
Prepayments 100
Interest in arrears 438
Cash in hand 250 9,313
Answer 5
(a) Mark Choi
Trading and Profit and Loss Account for the year ended 31 May 20X6
$ $
Sales (W1) 426,855
Less Cost of goods sold:
Stock as at 1 June 20X5 16,800
Add Purchases (W2) 222,180
238,980
Less Stock as at 31 May 20X6 20,100 218,880
Gross profit 207,975
Add Other revenues:
Discounts received 480
208,455
Less Expenses:
Bad debts 435
Discounts allowed 720
Provision for depreciation: Furniture and equipment ($36,000 × 10%) 3,600
Insurance ($4,260 + $360 – $1,080) 3,540
Electricity and water ($894 – $78 + $126) 942
Stationery 318
Transportation ($5,040 + $480 – $720) 4,800
Rent 33,000
Telephone 420
Wages ($127,500 + $3,000) 130,500 178,275
Net profit 30,180
192
(b) Mark Choi
Balance Sheet as at 31 May 20X6
Fixed Assets $ $ $
Furniture and equipment 36,000
Less Provision for depreciation ($7,200 + $3,600) 10,800 25,200
Current Assets
Stock 20,100
Debtors 16,800
Prepayments ($720 + $1,080) 1,800
Bank (W3) 27,468 66,168
Workings:
(W1) Calculation of credit sales for the year ended 31 May 20X6:
$
Cash received from debtors 110,400
Add Discounts allowed 720
Bad debts 435
Debtors as at 31 May 20X6 16,800
128,355
Less Debtors as at 1 June 20X5 11,700
Credit sales for the year 116,655
(W2) Calculation of credit purchases for the year ended 31 May 20X6:
$
Cash paid to creditors 55,800
Add Discounts received 480
Creditors as at 31 May 20X6 8,700
64,980
Less Creditors as at 1 June 20X5 4,200
Credit purchases for the year 60,780
193
(W3) Calculation of cash at bank:
$ $
Balance as at 1 June 20X5 7,500
Receipts
Cash sales 310,200
Debtors 110,400
Interest free loan from Mary 15,000 443,100
Less Payments
Rent 33,000
Wages 127,500
Cash purchases 161,400
Creditors 55,800
Telephone 420
Electricity and water 894
Stationery 318
Transportation 5,040
Insurance 4,260
Drawings 27,000 415,632
Balance as at 31 May 20X6 27,468
194