frankwood question bank dse

Chapter 1 Accruals and Prepayments

QUESTION 1The following balances were extracted from the ledgers of K Hook’s business as at 31 March 2010:

$Rent 23,400 DrInsurance 5,500 DrLoan from Peter 20,000 CrCommission revenue 3,500 Cr

The following additional information was ascertained:(i) Two months’ rent totalling $4,680 was due but not yet paid.

(ii) Insurance included:Building insurance of $1,100 for 12 months ended 31 March 2010.Motor insurance of $4,400 for 12 months ended 31 July 2010.

(iii) The loan from Peter was borrowed on 1 April 2009, with an interest rate of 12% per annum. Only the interest for the first half of the year was paid.

(iv) Commissions of $1,500 were received for services to be provided in April 2010. This sum was included in the commission revenue account.

Required:(a) Explain the meaning of accruals. (1.5 marks)(b) Write up the above ledger accounts and show the transfer to the profit and loss account. (8 marks)(c) Prepare an income statement extract for the year ended 31 March 2010. (2 marks)(d) Prepare for Mr Hook a balance sheet extract as at 31 March 2010 to show the accruals and

prepayments. (2.5 marks)

Answer:(a) Accruals are expenses/revenues that have been incurred/earned during a period but have not been

paid/received by the end of that period. (1.5 marks)

(b)Rent

2010 $ 2010 $Mar 31 Balance b/d 23,400 Mar 31 Profit and loss 28,080 0.5 0.5

“ 31 Accrued c/f 4,680 0.5

28,080 28,0802010Apr 1 Accrued b/f 4,680 0.5

Insurance2010 $ 2010 $Mar 31 Balance b/d 5,500 Mar 31 Profit and loss 4,033 0.5 0.5

“ 31 Prepaid c/f ($4,400 × 124 ) 1,467 0.5

5,500 5,5002010Apr 1 Prepaid b/f 1,467 0.5

Loan Interest2010 $ 2010 $Mar 31 Balance b/d 1,200 Mar 31 Profit and loss 2,400 0.5 0.5

“ 31 Accrued c/f 1,200 0.5

($20,000 × 12% × 21 ) 2,400 2,400

2010

NSS BAFS: Frank Wood’s Financial Accounting 1 1 © Pearson Education Asia Limited 2010Question Bank

Apr 1 Accrued b/f 1,200 0.5

Commission Revenue2010 $ 2010 $Mar 31 Profit and loss 2,000 Mar 31 Balance b/d 3,500 0.5 0.5

“ 31 Prepaid c/f 1,500 0.5

3,500 3,5002010Apr 1 Prepaid b/f 1,500 0.5

(c)K Hook

Income Statement for the year ended 31 March 2010 (extract)$ $

Rent 28,080 Commission revenue 2,000 0.5 0.5

Insurance 4,033 0.5

Loan interest 2,400 0.5

(d)K Hook

Balance Sheet as at 31 March 2010 (extract)$ $

Current assets Current liabilities 0.5 0.5

Prepaid expenses 1,467 Accrued expenses ($4,680 + $1,200) 5,880 0.5 0.5

Unearned revenues 1,500 0.5

QUESTION 2The following balances were extracted from the books of Paul Mak, a sole trader, as at 1 January 2010:

$Insurance 480 DrRates 2,520 DrRent 840 CrTelephone and Internet 508 CrCommission revenue 600 Dr

During the year, the following sums were paid or received by cheque.2010 $Jan 1 Payment of three months’ rent to 28 February 2010 2,520“ 1 Receipt of three months’ commissions to 28 February 2010 1,800

Feb 1 Payment of one year’s insurance premiums to 31 January 2011 7,200Mar 1 Payment of telephone and Internet expenses for the past three months 1,524“ 1 Payment of three months’ rent in advance on a new rental contract 3,600

Apr 1 Payment of six months’ rates to 30 September 2010 6,480Jun 1 Payment of telephone and Internet expenses for the past three months 1,752“ 1 Rent payment 3,600

“ 30 Receipt of six months’ commissions to 31 August 2010 3,600Sept 1 Payment of rent 3,600“ 1 Payment of telephone and Internet expenses for the past three months 1,956

Oct 1 Payment of six months’ rates to 31 March 2011 6,480Dec 1 Payment of telephone and Internet expenses for the past three months 2,208“ 1 Rent paid 3,600“ 31 Receipt of five months’ commissions to 31 January 2011 3,000

2011Mar 1 Payment of telephone and Internet expenses for the past three months 2,004

Required:(a) Write up the above ledger accounts for the year ended 31 December 2010 and show the transfer to the


profit and loss account. (17.5 marks)(b) Prepare an income statement extract for the year ended 31 December 2010. (2.5 marks)(c) Explain the meaning of prepayments. (1 mark)

Answer:(a)

Insurance2010 $ 2010 $Jan 1 Prepaid b/f 480 Dec 31 Profit and loss 7,080 0.5 0.5

Feb 1 Bank 7,200 “ 31 Prepaid c/f ($7,200 × 121 ) 600 0.5 0.5

7,680 7,6802011Jan 1 Prepaid b/f 600 0.5

Rates2010 $ 2010 $Jan 1 Prepaid b/f 2,520 Dec 31 Profit and loss 12,240 0.5 0.5

Apr 1 Bank 6,480 “ 31 Prepaid c/f ($6,480 × 63 ) 3,240 0.5 0.5

Oct 1 Bank 6,480 0.5

15,480 15,4802011Jan 1 Prepaid b/f 3,240 0.5

Rent2010 $ 2010 $Jan 1 Bank 2,520 Jan 1 Accrued b/f 840 0.5 0.5

Mar 1 Bank 3,600 Dec 31 Profit and loss 13,680 0.5 0.5

Jun 1 Bank 3,600 “ 31 Prepaid c/f ($3,600 × 32 ) 2,400 0.5 0.5

Sept 1 Bank 3,600 0.5

Dec 1 Bank 3,600 0.5

16,920 16,9202011Jan 1 Prepaid b/f 2,400 0.5

Telephone and Internet2010 $ 2010 $Mar 1 Bank 1,524 Jan 1 Accrued b/f 508 0.5 0.5

Jun 1 Bank 1,752 Dec 31 Profit and loss 7,600 0.5 0.5

Sept 1 Bank 1,956 0.5

Dec 1 Bank 2,208 0.5

Dec 31 Accrued c/f ($2,004 × 31 ) 668 0.5

8,108 8,1082011Jan 1 Accrued b/f 668 0.5

Commission Revenue2010 $ 2010 $Jan 1 Accrued b/f 600 Jan 1 Bank 1,800 0.5 0.5

Dec 31 Profit and loss 7,200 Jun 30 Bank 3,600 0.5 0.5

“ 31 Prepaid c/f ($3,000 × 51 ) 600 Dec 31 Bank 3,000 0.5 0.5

8,400 8,4002011Jan 1 Prepaid b/f 600 0.5

(b)Paul Mak


Income Statement for the year ended 31 December 2010 (extract)$ $

Insurance 7,080 Commission revenue 7,200 0.5 0.5

Rates 12,240 0.5

Rent 13,680 0.5

Telephone and Internet 7,600 0.5

(c) Prepayments are expenses/revenues that have been paid/received during a period but have not been incurred/earned by the end of that period. (1 mark)


QUESTION 3Woody Chow started his business as a wholesaler on 1 January 2010. During the first year of business, the following operating expenses were incurred:(i) He rented an office in Tsim Sha Tsui for $600,000 per annum, payable quarterly at the end of March,

June, September and December.

Rates for the office, which totalled $3,000 per annum, were payable quarterly in advance until31 March 2010. Starting from 1 April 2010, the rates increased by $1,000 per annum and were payable yearly in advance. The following payments were made in 2010:2010 $Jan 1 750Apr 5 4,000

(ii) Woody took out a six-month fire insurance cover on the office and paid the $1,300 premium on1 January 2010. He later found that the cover was inadequate and upgraded it to a comprehensive insurance plan as from 1 July 2010 for an annual premium of $8,800, payable in advance. He paid the annual premium on 10 July 2010.

(iii) Water and electricity paid during the year totalled $8,000. Prepaid water expenses amounted to $200 and an accrual of $350 was made for electricity.

(iv) Other operating expenses paid during the year were $11,000 and $1,000 was accrued as at year end.

Required:(a) Distinguish between accrual accounting and cash accounting. (3 marks)(b) Show the following expense accounts for the financial year ended 31 December 2010, complete with

all the year-end adjustments and balances brought forward: Rent and rates Insurance Water and electricity Other operating expenses (12 marks)

(c) Prepare an income statement extract for the year ended 31 December 2010. It was determined that Woody Chow’s business had earned a gross profit of $135,000 for the year. (3 marks)

Answer:(a) Under cash accounting, revenues are recognised when received and expenses are recognised when

paid. Under accrual accounting, revenues and expenses are recognised when they are earned or incurred. The main difference between cash accounting and accrual accounting lies in the treatment of accruals and prepayments of expenses and revenues. (3 marks)

(b)Rent and Rates

2010 $ 2010 $Jan 1 Bank 750 Dec 31 Profit and loss 603,750 0.5 0.5

Mar 31 Bank 150,000 “ 31 Prepaid c/f 1,000 0.5 0.5

Apr 5 Bank 4,000 0.5

Jun 30 Bank 150,000 0.5

Sept 30 Bank 150,000 0.5

Dec 31 Bank 150,000 0.5

604,750 604,7502011Jan 1 Prepaid b/f 1,000 0.5

Insurance2010 $ 2010 $Jan 1 Bank 1,300 Dec 31 Profit and loss 5,700 0.5 0.5

Jul 10 Bank 8,800 “ 31 Prepaid c/f ($8,800 × 126 ) 4,400 0.5 0.5


10,100 10,1002011Jan 1 Prepaid b/f 4,400 0.5

Water and Electricity2010 $ 2010 $Dec 31 Bank 8,000 Dec 31 Profit and loss 8,150 0.5 0.5

“ 31 Accrued c/f 350 “ 31 Prepaid c/f 200 0.5 0.5

8,350 8,3502011 2011Jan 1 Prepaid b/f 200 Jan 1 Accrued b/f 350 0.5 0.5

Other Operating Expenses2010 $ 2010 $Dec 31 Bank 11,000 Dec 31 Profit and loss 12,000 0.5 0.5

“ 31 Accrued c/f 1,000 0.5

12,000 12,0002011Jan 1 Accrued b/f 1,000 0.5

(c)Woody Chow

Income Statement for the year ended 31 December 2010 (extract)$ $

Rent and rates 603,750 Gross profit b/d 135,000 0.5 0.5

Insurance 5,700 Net loss 494,600 0.5 0.5

Water and electricity 8,150 0.5

Other operating expenses 12,000 0.5

629,600 629,600


QUESTION 4The following revenues and expenses were received and paid by Larry & Co during 2010:(i) Larry & Co rented a building as its office premises in 2008 for three years at a cost of $48,000 per

annum. In 2010, Larry & Co made the following payments relating to rent:2010 $Jan 8 Rent for the three months ended 28 February 2010 12,000Mar 14 Rent for the three months ended 31 May 2010 12,000Jun 2 Rent for the three months ended 31 August 2010 12,000Oct 28 Rent for the three months ended 30 November 2010 12,000

(ii) Larry & Co sublet part of the building to three tenants:Tenant A entered into a one-year tenancy agreement on 1 March 2010 and paid the whole year's rent of $30,000 on 4 April 2010. Tenant B entered into a two-year tenancy agreement on 1 May 2010 and paid rent of $14,400 quarterly in advance. The first four rent payments were made on 1 June 2010,1 September 2010, 1 December 2010 and 1 March 2011. Tenant C paid $1,500 on 1 November 2010 as rent for a conference room for 30 days from 1 February 2011 to 2 March 2011.

(iii) Rates:Rates were paid quarterly in advance. Rates of $3,000 for the first quarter of 2010 were paid on31 December 2009. During 2010, Larry & Co paid $15,300 for the remaining three quarters of rates. Rates of $4,000 for the first quarter of 2011 were paid on 31 December 2010.

Required:(a) Show the rent expense, rent income and rates accounts as they would appear in the ledgers of Larry &

Co for the year ended 31 December 2010. (11.5 marks)(b) Prepare for Larry & Co a balance sheet extract as at 31 December 2010, showing both accruals and

prepayments. (2.5 marks)

Answer:(a)

Rent2010 $ 2010 $Jan 8 Bank 12,000 Jan 1 Accrued b/f 4,000 0.5 0.5

Mar 14 Bank 12,000 Dec 31 Profit and loss 48,000 0.5 0.5

Jun 2 Bank 12,000 0.5

Oct 28 Bank 12,000 0.5

Dec 31 Accrued c/f 4,000 0.5

52,000 52,0002011Jan 1 Accrued b/f 4,000 0.5

Rent Income2010 $ 2010 $Dec 31 Profit and loss 63,400 Apr 4 Bank 30,000 0.5 0.5

“ 31 Prepaid c/f [($30,000 × 122 ) Jun 1 Bank 14,400 0.5

+ ($14,400 × 31 ) + $1,500] 11,300 Sept 1 Bank 14,400 1 0.5

Nov 1 Bank 1,500 0.5

Dec 1 Bank 14,400 0.5

74,700 74,7002011Jan 1 Prepaid b/f 11,300 0.5

Rates2010 $ 2010 $


Jan 1 Prepaid b/f 3,000 Dec 31 Profit and loss 18,300 0.5 0.5

Dec 31 Bank 15,300 “ 31 Prepaid c/f 4,000 0.5 0.5

“ 31 Bank 4,000 0.5

22,300 22,3002011Jan 1 Prepaid b/f 4,000 0.5

(b)Larry & Co

Balance Sheet as at 31 December 2010 (extract)$ $

Current assets Current liabilities 0.5 0.5

Prepaid expenses 4,000 Accrued expenses 4,000 0.5 0.5

Unearned revenues 11,300 0.5

QUESTION 5Sigma Chan, a sole proprietor, extracted the following trial balance from his books at the close of business on 30 April 2011:

$ $Capital as at 1 May 2010 ? Returns inwards 1,592Accounts receivable 7,250 Returns outwards 858Accounts payable 1,380 Wages and salaries 6,2025% bank loan (repayable in 2015) 3,000 Bank 1,570Office furniture 1,466 Cash 146Discounts allowed 1,424 Rates and insurance 564Discounts received 586 Premises 12,574Fixtures and fittings 1,256 Drawings 3,562Purchases 19,804 Rent 250Sales 34,224 Inventory at 1 May 2010 4,148

Inventory as at 30 April 2011 was valued at $6,440.


Additional information:(i) Prepaid wages amounted to $1,250.(ii) Loan interest for the year was not paid.(iii) Rent owing amounted to $1,790.

Required:(a) Prepare a trial balance as at 30 April 2011. Calculate the capital account balance. (11 marks)(b) Draw up an income statement for the year ended 30 April 2011. (8 marks)(c) Draw up a balance sheet as at 30 April 2011. (7 marks)

Answer:(a)

Sigma ChanTrial Balance as at 30 April 2011

Dr Cr$ $

Capital at 1 May 2010 21,760 0.5

Accounts receivable 7,250 0.5

Accounts payable 1,380 0.5

5% bank loan (repayable in 2015) 3,000 0.5

Office furniture 1,466 0.5

Discounts allowed 1,424 0.5

Discounts received 586 0.5

Fixtures and fittings 1,256 0.5

Purchases 19,804 0.5

Sales 34,224 0.5

Returns inwards 1,592 0.5

Returns outwards 858 0.5

Wages and salaries 6,202 0.5

Bank 1,570 0.5

Cash 146 0.5

Rates and insurance 564 0.5

Premises 12,574 0.5

Drawings 3,562 0.5

Rent 250 0.5

Inventory as at 1 May 2010 4,148 0.5

61,808 61,808 0.5 0.5

(b)Sigma Chan

Income Statement for the year ended 30 April 2011$ $ $ $

Opening inventory 4,148 Sales 34,224 0.5 0.5

Add Purchases 19,804 Less Returns inwards (1,592 ) 32,632 0.5 0.5

Less Returns outwards (858 ) 18,946 0.5

23,094Less Closing inventory (6,440 ) 0.5

Cost of goods sold 16,654 0.5

Gross profit c/d 15,978 0.5

32,632 32,632Discounts allowed 1,424 Gross profit b/d 15,978 0.5 0.5

Wages and salaries ($6,202 − $1,250) 4,952 Discounts received 586 0.5 0.5

Rates and insurance 564 0.5

Rent ($250 + $1,790) 2,040 0.5

Loan interest ($3,000 × 5%) 150 0.5

Net profit 7,434 0.5

16,564 16,564(c)

Sigma ChanBalance Sheet as at 30 April 2011


$ $ $ $Non-current assets CapitalPremises 12,574 Balance as at 1 May 2010 21,760 0.5 0.5

Office furniture 1,466 Add Net profit for the year 7,434 0.5 0.5

Fixtures and fittings 1,256 15,296 29,194 0.5

Less Drawings (3,562 ) 0.5

Current assets 25,632Inventory 6,440 Non-current liabilities 0.5

Accounts receivable 7,250 5% bank loan 3,000 0.5 0.5

Prepaid expenses 1,250 0.5

Bank 1,570 Current liabilities 0.5

Cash 146 16,656 Accounts payable 1,380 0.5 0.5

Accrued expenses 1,940 3,320 0.5

31,952 ($1,790 + $150) 31,952

QUESTION 6Cyrus Lau is a confectionary retailer. The following trial balance was extracted from his ledgers on 31 March 2011:

Dr Cr$ $

Rent and rates 3,440Purchases and sales 46,830 89,700Office furniture 5,985Inventory as at 1 April 2010 10,695Carriage inwards 700Accounts receivable and accounts payable 27,380 10,170Bank 7,780Capital as at 1 April 2010 39,590Delivery van 6,730Discounts 2,165 545Returns 1,570 500Sundry expenses 820Wages and salaries 16,010Rental income 5,000Motor expenses 2,765Drawings 12,415Cash 220

145,505 145,505

Additional information:(i) Inventory as at 31 March 2011 was valued at $9,250.(ii) Sundry expenses of $300 were owing.(iii) Rental income for the months of February and March 2011 at $2,000 per month was outstanding.(iv) Van maintenance expenses were due but unpaid. The amount was equivalent to 10% of the cost of the

delivery van.


Required:(a) Draw up an income statement for the year ended 31 March 2011 and a balance sheet as at that date.

(15 marks)(b) Compute the following ratios for Cyrus Lau's business at 31 March 2011.

(i) Gross profit ratio (iv) Current ratio(ii) Net profit ratio (v) Quick ratio(iii) Return on capital employed (5 marks)(All calculations to 2 decimal places)

Answer:(a)

Cyrus LauIncome Statement for the year ended 31 March 2011

$ $ $ $Opening inventory 10,695 Sales 89,700 0.5 0.5

Add Purchases 46,830 Less Returns inwards (1,570 ) 88,130 0.5 0.5

Carriage inwards 700 0.5

47,530Less Returns outwards (500 ) 47,030 0.5




88,130 88,130Rent and rates 3,440 Gross profit b/d 39,655 0.5 0.5

Discounts allowed 2,165 Discounts received 545 0.5 0.5

Sundry expenses ($820 + $300) 1,120 Rental income ($5,000 + $4,000) 9,000 0.5 0.5

Wages and salaries 16,010 0.5

Motor expenses [$2,765 + ($6,730 × 10%)] 3,438 0.5


49,200 49,200

Cyrus LauBalance Sheet as at 31 March 2011

$ $ $ $Non-current assets CapitalOffice furniture 5,985 Balance as at 1 April 2010 39,590 0.5 0.5

Delivery van 6,730 12,715 Add Net profit for the year 23,027 0.5 0.5

62,617Current assets Less Drawings (12,415 ) 0.5Inventory 9,250 50,202 0.5


Accrued rental income 4,000 Current liabilities 0.5

Bank 7,780 Accounts payable 10,170 0.5 0.5

Cash 220 48,630 Accrued expenses ($300 + $673) 973 11,143 0.5 0.5

61,345 61,345

(b) (i) Gross profit ratio: $39,655 ÷ $88,130 = 45.00% (1 mark)(ii) Net profit ratio: $23,027 ÷ $88,130 = 26.13% (1 mark)(iii) Return on capital employed: $23,027 ÷ [($39,590 + $50,202) ÷ 2] = 51.29% (1 mark)(iv) Current ratio: $48,630 ÷ $11,143 = 4.36 : 1 (1 mark)(v) Quick ratio: ($48,630 − $9,250) ÷ $11,143 = 3.53 : 1 (1 mark)


QUESTION 7Candy Ho is a florist owner. The following trial balance was extracted from her books on 31 March 2010.

Dr Cr$ $

Accounts receivable and accounts payable 63,252 32,349Capital as at 1 April 2009 71,180Carriage inwards 330Carriage outwards 376Cash at bank 11,104Cash in hand 1,903Discounts allowed 3,138Discounts received 4,104Drawings 5,793Electricity 964Fixtures and fittings 21,206Inventory as at 1 April 2009 28,245Loan from Billy Chan (repayable in 2012) 14,480Purchases 94,878Rates 1,447Rent 2,655Repairs and maintenance 723Returns outwards 1,445Salaries 3,620Sales 116,076

239,634 239,634

Additional information:(i) Inventory as at 31 March 2010 was valued at $12,000.(ii) Items prepaid: rent $400; electricity $250.

Accruals: rates $120; repairs $57.(iii) 20% of the rent expenses were used for Candy's private purposes.(iv) 10% loan interest was not provided for during the year.

Required:(a) Draw up an income statement for the year ended 31 March 2010 and a balance sheet as at that date.

(16 marks)(b) Compute the following ratios for Candy Ho's business.

(i) Gross profit ratio(ii) Current ratio(iii) Quick ratio (3 mark)(All calculations to 2 decimal places)


Answer:(a)

Candy HoIncome Statement for the year ended 31 March 2010

$ $ $Opening inventory 28,245 Sales 116,076 0.5 0.5

Add Purchases 94,878 0.5

Carriage inwards 330 0.5

95,208Less Returns outwards (1,445 ) 93,763 0.5




116,076 116,076Carriages outwards 376 Gross profit b/d 6,068 0.5 0.5

Discounts allowed 3,138 Discounts received 4,104 0.5 0.5

Electricity ($964 − $250) 714 Net loss 3,275 0.5 0.5

Rates ($1,447 + $120) 1,567 0.5

Rent [($2,655 − $400) × 80%] 1,804 0.5

Repairs and maintenance ($723 + $57) 780 0.5

Salaries 3,620 0.5

Loan interest ($14,480 × 10%) 1,448 0.5

13,447 13,447

Candy HoBalance Sheet as at 31 March 2010$ $ $ $

Non-current assets CapitalFixtures and fittings 21,206 Balance as at 1 April 2009 71,180 0.5 0.5

Less Net loss for the year 3,275 0.5

Current assets Drawings [$5,793 + ($2,655 Inventory 12,000 − $400) × 20%] 6,244 (9,519 ) 0.5 1Accounts receivable 63,252 61,661 0.5

Prepaid expenses ($250 + $400) 650 Non-current liabilities 0.5

Bank 11,104 Loan from Billy Chan 14,480 0.5 0.5

Cash 1,903 88,909 0.5

Current liabilitiesAccounts payable 32,349 0.5

Accrued expenses 1,625 33,974 0.5

110,115 ($120 + $57 + $1,448) 110,115

(b) (i) Gross profit ratio: $6,068 ÷ $116,076 = 5.23% (1 mark)(ii) Current ratio: $88,909 ÷ $33,974 = 2.62 : 1 (1 mark)(iii) Quick ratio: ($88,909 − $12,000) ÷ $33,974 = 2.26 : 1 (1 mark)


QUESTION 8Michael Lee, a sole proprietor, extracted the following trial balance from his books at the close of business on 30 April 2009:

Dr Cr$ $

Accounts receivable and accounts payable 6,410 8,640Advertising 4,920Bank 3,100Capital 237,740Carriage inwards 1,410Carriage outwards 1,045Delivery van at cost 17,850Drawings 51,480Water and electricity 5,350Insurance 7,850Interest on bank overdraft 140Inventory at 1 May 2008 19,895Premises at cost 159,380Purchases 217,085Rent expense and revenue 2,000 10,330Repair expenses 5,925Return of goods to suppliers 4,985Sales 286,900Telephone and Internet expenses 1,205Returns inwards 750Office equipment 49,000

551,695 551,695

Additional information:(i) Inventory as at 30 April 2009 was valued at $3,719.

(ii) Items prepaid: telephone $600; electricity $390.Accruals: rent revenue $3,200, repair expenses $150; carriage inwards $60.

(iii) It was agreed that one-tenth of the water and electricity expenses should be charged to Michael in respect of private use.

(iv) Insurance consisted of: $Motor insurance paid on 1 June 2008 for the period up to 30 April 2009 3,350Property insurance paid on 1 May 2008 for the three months ended 31 July 2008 900Property insurance paid on 1 September 2008 for the 12 months ending 31 July 2009 3,600

7,850

(v) Rent of $1,600 had been paid for four months ending 31 July 2009.

Required:Draw up a vertical-style income statement for the year ended 30 April 2009 and a balance sheet as at that date. (16 marks)


Answer:Michael Lee

Income Statement for the year ended 30 April 2009$ $ $

Sales 286,900 0.5

Less Returns inwards (750 ) 0.5286,150

Less Cost of goods sold: Opening inventory 19,895 0.5


Carriage inwards ($1,410 + $60) 1,470 0.5


233,465Less Closing inventory (3,719 ) (229,746 ) 0.5

Gross profit 56,404 0.5

Add Other revenues:Rent received ($10,330 + $3,200) 13,530 0.5

69,934Less Expenses:

Advertising 4,920 0.5

Carriage outwards 1,045 0.5

Water and electricity [($5,350 − $390) × 109 ] 4,464 0.5

Insurance [$7,850 − ($3,600 × 123 )] 6,950 0.5

Interest on bank overdraft 140 0.5

Repair expenses ($5,925 + $150) 6,075 0.5

Rent [$2,000 − ($1,600 × 43 )] 800 0.5

Telephone and Internet expenses ($1,205 − $600) 605 (24,999 ) 0.5Net profit 44,935 0.5

Michael LeeBalance Sheet as at 30 April 2009

$ $ $Non-current assetsPremises at cost 159,380 0.5

Office equipment 49,000 0.5

Delivery van at cost 17,850 226,230 0.5

Current assetsInventory 3,719 0.5


Accrued rent revenue 3,200 0.5

Prepaid expenses ($600 + $390 + $900 + $1,200) 3,090 0.5

16,419Less Current liabilities:


Accrued expenses ($150 + $60) 210 0.5

Bank overdraft 3,100 (11,950 ) 0.5

Net current assets 4,469 0.5

230,699

Financed by:CapitalBalance as at 1 May 2008 237,740 0.5

Add Net profit for the year 44,935 0.5

282,675Less Drawings ($51,480 + $496) (51,976 ) 0.5

230,699


QUESTION 9The following is a summary of Judy Ku's bank account for the year ended 30 June 2012.

Bank$ $

Balance b/f 138,800 Accounts payable 122,200Accounts receivable 136,002 Carriage inwards 8,562Bank interest revenue 3,425 Drawings 7,595Commissions revenue 13,695 Water and electricity 5,744

Rent and rates 4,110Wages 29,885Sundry expenses 1,198Balance c/f 112,628

291,922 291,922

Additional information was available on 30 June 2012:(i) $

Accounts payable 114,244Accounts receivable 222,616Capital as at 1 July 2011 219,573Cash 16,130Inventory as at 30 June 2012 13,905Inventory as at 1 July 2011 9,525Plant and machinery 104,230Purchases 203,561Returns inwards 2,799Returns outwards 1,250Sales 376,396

(ii) Prepaid water charges amounted to $100.

(iii) Rent owing amounted to $190.

(iv) Electricity charges of $50 were owing.

(v) Sundry expenses of $340 were accrued.

Required:Prepare for Judy Ku an income statement for the year ended 30 June 2012 and a balance sheet as at that date.

(14 marks)


Answer:Judy Ku

Income Statement for the year ended 30 June 2012$ $ $ $


Add Purchases 203,561 Less Returns inwards (2,799) 373,597 0.5 0.5

Carriage inwards 8,562 0.5





373,597 373,597Water and electricity ($5,744 − $100 + $50) 5,694 Gross profit b/d 167,104 0.5 0.5

Rent and rates ($4,110 + $190) 4,300 Bank interest revenue 3,425 0.5 0.5

Wages 29,885 Commissions revenue 13,695 0.5 0.5

Sundry expenses ($1,198 + $340) 1,538 0.5


184,224 184,224

Judy KuBalance Sheet as at 30 June 2012$ $ $ $

Non-current assets CapitalPlant and machinery 104,230 Balance as at 1 July 2011 219,573 0.5 0.5


Current assets 362,380Inventory 13,905 Less Drawings (7,595 ) 0.5 0.5Accounts receivable 222,616 354,785 0.5

Prepaid expenses 100 Current liabilities 0.5

Bank 112,628 Accounts payable 114,244 0.5 0.5

Cash 16,130 365,379 Accrued expenses 0.5

($50 + $190 + $340) 580 114,824 0.5

469,609 469,609

QUESTION 10The trial balance of Stephen Chow’s business as at 12 October 2011 is shown below:

Stephen ChowTrial Balance as at 12 October 2011

Dr Cr$ $

Accounts payable 66,885Accounts receivable 198,120Bank overdraft 61,945Capital at 1 November 2010 371,575Cash in hand 2,220Discounts allowed 20,640Discounts received 12,090Carriage inwards 16,920Drawings 31,800Premises 251,100Inventory at 1 November 2010 15,060Purchases 212,040Sales 392,665Rent and rates 5,580Wages and salaries 151,680

905,160 905,160During the rest of October 2011, the following transactions were made:


2011 $Oct 13 Cash sales 69,405 “ 16 Credit purchases 47,550 “ 17 Settled the amount owing to a supplier by cheque 15,025 “ 20 Paid wages by cheque 4,000 “ 21 Cash received from a customer 25,000 “ 25 Stephen took cash from the business for his private use. 11,500 “ 28 Stephen took goods from the business for his private use. 5,000 “ 30 Cash banked 76,150

Inventory as at 31 October 2011 was valued at $10,885.

Required:(a) Draw up the trial balance as at 31 October 2011. (8 marks)

(b) Taking into consideration the following additional information, prepare for Stephen Chow an income statement for the year ended 31 October 2011 and a balance sheet as at that date. (12 marks)Additional information as at 31 October 2011:(i) Wages of $3,500 were owed.(ii) Half of the rent and rates were incurred by Stephen's private apartment.(iii) Carriage inwards of $2,000 was prepaid.

Answer:(a)

Stephen ChowTrial Balance as at 31 October 2011

Dr Cr$ $

Accounts payable (W1) 99,410 0.5

Accounts receivable (W2) 173,120 0.5

Bank overdraft (W3) 4,820 0.5

Capital at 1 November 2010 371,575 0.5

Cash in hand (W4) 8,975 0.5

Discounts allowed 20,640 0.5

Discounts received 12,090 0.5

Carriage inwards 16,920 0.5

Drawings (W5) 48,300 0.5

Premises 251,100 0.5

Inventory at 1 November 2010 15,060 0.5

Purchases (W6) 254,590 0.5

Sales (W7) 462,070 0.5

Rent and rates 5,580 0.5

Wages and salaries (W8) 155,680 0.5

949,965 949,965 0.5


Workings:(W1) $66,885 + $47,550 − $15,025(W2) $198,120 − $25,000(W3) $61,945 + $15,025 + $4,000 − $76,150(W4) $2,220 + $69,405 + $25,000 − $11,500 − $76,150(W5) $31,800 + $11,500 + $5,000(W6) $212,040 + $47,550 − $5,000(W7) $392,665 + $69,405(W8) $151,680 + $4,000

(b)Stephen Chow

Income Statement for the year ended 31 October 2011$ $ $



Carriage inwards($16,920 − $2,000) 14,920 269,510 0.5




462,070 462,070Discounts allowed 20,640 Gross profit b/d 188,385 0.5 0.5

Rent and rates ($5,580 × 21 ) 2,790 Discounts received 12,090 0.5 0.5

Wages and salaries ($155,680 + $3,500) 159,180 0.5


200,475 200,475

Stephen ChowBalance Sheet as at 31 October 2011

$ $ $ $Non-current assets CapitalPremises 251,100 Balance as at 1 November 2010 371,575 0.5 0.5


Current assets 389,440Inventory 10,885 Less Drawings (51,090 ) 0.5 0.5Accounts receivable 173,120 ($48,300 + $2,790) 338,350 0.5

Prepayments 2,000 0.5

Cash 8,975 194,980 Current liabilities 0.5


Accruals 3,500 0.5

Bank overdraft 4,820 107,730 0.5

446,080 446,080


frankwood question bank dse

Documents

year tenancy agreement

income statement extract

rent owing amounted

gross profit ratio

balance sheet extract

income statement

current ratio

quick ratio