Sie sind auf Seite 1von 2

1.

The trial balance of Pikachu Limited as at 31 December 2017 failed to agree and the difference
was entered in a suspense account. The draft retained profits of Pikachu Limited as at 31
December 2017 amounted to $633,300.

After investigation, the following errors were found:


(i) The following was the analysis of trade receivable as at 31 December 2017:
Period outstanding Amount of trade receivable Estimated percentage of
doubtful accounts
Less than 30 days $124,800 0%
31 to 60 days $67,600 2%
61 to 90 days $23,800 10%
More than 91 days $21,800 50%
Total $238,000 -

(ii) Accrued electricity of $1,000 at 31 December 2016 had been bought forward as an opening
debit balance in the electricity account.

(iii) A prepayment for insurance of $75,000 was mistakenly recorded as an accrual.

(iv) Bad debts recovered amounting to $600 had been credited to the cash at bank account only.

(v) On 31 December 2017, the warehouse manager reported that $9,100 of inventory was
ruined due to water leakage of the pipes. After the leakage, stocktaking revealed that
undamaged inventory costing $24,320 had a net realisable value of $23,920. The
management believed that the negotiation of responsibility for the loss with the insurance
company would be resolved in the third quarter of 2018. The bookkeeper recorded $24,320
on the income statement as the closing inventory figure, but no entries have been made for
the loss and the insurance claim.

(vi) The business issued 1,000,000 ordinary shares at $2 each on 11 December 2017. The
business had received the application monies of 1,300,000 shares. The transaction was
recorded in the share issue account and the bank account. The shares were allotted on 20
December 2016 and the unsuccessful applicants refunded on January 2017. The business
did not record the above transactions.

(vii) On 1 December 2017, the company placed a sum of $100,000 from its current account to a
6-month time deposit at an annual interest rate of 5%. The bookkeeper had not recorded the
transfer of the time deposit and no entry was made for the interest receivable.

(viii) On 1 June 2017, a piece of office equipment was purchased to replace an old one which
was traded-in with an agreed value of $34,000. The old equipment had a cost of $78,000
and a net book value of $23,400 as at 31 December 2017. The firm paid the balance of

1
$110,000 in cheque on 14 January 2018. The accountant only debited $110,000 to the
office equipment account and credited to the cash at bank account with the amount. No
other accounting entries were made.
The company depreciates the office equipment at an annual rate of 15% using the straight-
line method. It is the companys practice to charge a full years depreciation at the year of
acquisition, and none for the year of disposal.

(ix) A two-year tenancy agreement for the office premises commenced on 1 January 2017.
Monthly rental expense was $24,000. A two-month rent-free period for January and
February 2017 was allowed. A refundable deposit of $24,000 was paid on 1 January 2017.
No entries were made related to the above transaction.

Required:
(a) Prepare the necessary journal entries to record the allowance for doubtful accounts as at 31
December 2017 for item (i). (2 marks)
(b) Explain, with an accounting principle or concept, the accounting treatment of (ix). (3 marks)
(c) Prepare the necessary journal entries to correct items (ii) to (ix). Narrations are not required.
(9 marks)
(d) Prepare a statement to correct the amount of retained profit for the year ended 31
December 2017. (6 marks)
(Total: 20 marks)

Das könnte Ihnen auch gefallen