BFA104 – Accounting Context and Method

Week 13 – Revision
SOLUTIONS
Question 1

General Journal
Date Details Debit Credit
June 30 Rent Revenue 4 000
Unearned Revenue 4 000

Prepaid Expenses 600

Advertising Expense 600

Office Supplies Expense 5 955

Office Supplies 5 955
(7 200 – 1 245)

Depreciation Expense – Office Equipment 1 400

Accum Depreciation – Office Equip 1 400
(12 000 – 5 000 x 20%)

Accrued Revenue 1 500

Interest Revenue 1 500

Interest Expense 950

Accrued Expenses Payable 950

Salaries and Wages Expense 810

Accrued Expenses Payable 810
Question 2

General Journal
Date Details Debit Credit
2016
July 1 Accumulated Depreciation – Equipment 96 500
Equipment 96 500
To establish carrying amount of equipment before
improvements

Equipment 82 000
Cash at Bank 82 000
To record improvements to equipment

2017
Jan 1 Depreciation Expense - Motor Vehicles 15 900
Accumulated Depreciation - Motor Vehicles 15 900
Depreciation to date of disposal
(168 500 – 62 500) x 0.3 x 6/12) = $15 900

Either
Accumulated Depreciation – Motor Vehicles 78 400
Motor Vehicles 78 400
Netting off accumulated depreciation to the asset
Motor Vehicles – carrying amount now $90 100

Motor Vehicles (new) 82 000

Loss on Disposal of Motor Vehicles 8 100
Motor Vehicles (old) 90 100
Trade in of old Motor Vehicle for new Motor Vehicles
at a gain

Motor Vehicles (new) 110 000

Cash at Bank 110 000
Cash payment for new Motor Vehicles

OR Do all in one entry

Jan 1 Motor Vehicles (new) 192 000
Accumulated Depreciation - Motor Vehicles 78 400
Loss on Disposal of Motor Vehicles 8 100
Motor Vehicles (old) 168 500
Cash at Bank 110 000
Trade in of old Motor Vehicles for new Motor
Vehicles at a gain

Mar 1 Motor Vehicle Expense (or Maintenance Expense) 700

Cash at Bank 700
Paid for servicing of Motor Vehicles
 June 30 Depreciation Expense – Motor Vehicles 38 400
Accumulated Depreciation – Motor Vehicles 38 400
Depreciation for six months to 30 June,
192 000 x 40% x 6/12

Depreciation Expense – Equipment 8 700

Accumulated Depreciation – Equipment 8 700
Depreciation of Equipment for year,
(160 500 – 30 000)/15

Question 3

General Journal
Date Details Debit Credit
Dec 31
a. Application 48 000
Share Capital 48 000
Shares allocated to successful applicants

Cash at Bank 48 000

Cash Trust 48 000
Cash from share issue transferred to bank account

Application 12 000
Cash Trust 12 000
Cash paid back to unsuccessful applicants

b. Final Dividend Declared 2 500

Final Dividend Payable 2 500
Final dividend declared at 50 000 shares x $0.05

c. Retained Profits 15 000

Share Capital 15 000
Issue of bonus shares to existing shareholders

d. Income Tax Expense 9 000

Income Tax Payable 9 000
Income tax expense for year

f. Allowance for Doubtful Debts 230

Accounts Receivable 230
Write off of bad debt
 Bad Debts Expense 740
Allowance for Doubtful Debts 740
Adjust allowance for doubtful debts to 4% of
Accounts Receivable
Acc Rec 21 730 - 230 = 21 500
Allow required 21 500 x 0.0 4 = 860
Allow 350 - 230 = 120
Adjustment 860 - 120 = 740

Closing entries
Profit and Loss Summary 9 740
Bad Debts Expense 740
Income Tax Expense 9 000
Close additional expenses to P & L Summary

Profit and Loss Summary 5 260

Retained Profits 5 260
Transfer of profit for year to retained profits

Retained Profits 4 500

Interim Dividend Declared 2 000
Final Dividend Declared 2 500
Transfer of dividends declared from retained profits

Peanuts Ltd
Statement of Financial Position (extract)
As at 31 December 2016
Shareholders’ Equity:
Share Capital (102 500 Shares) 113 000
Retained Profits 37 540
150 540