Chapter 11 Financial accounting with adjustment

Question 1 Fuguang
An unadjusted trial balance of Fuguang Sdn. Bhd as at 31 December 2019 is as follows.

Fuguang Sdn. Bhd.

Trial Balance as at 31 December 2019
RM RM
Debit Credit
Sales 200,000
Purchases 60,000
Return Inwards and Return Outwards 450 600
Bank 244,000
Debtors 8,000
Creditors 7,400
Capital 70,000
Drawings 500
Rent income 5,550
Interest expense 10,000
Wages 29,000
Maintenance 12,000
Equipment 18,000
Motor vehicles 120,000
Accumulated depreciation:
Equipment 9,000
Motor Vehicle 36,000
Bank Loan (10%) 200,000
Commission 3,000
Carriage inwards 1,000
Discount allowed 1,900
Stock 20,550
Bad debts 150
528,550 528,550

Additional information:

i. The remainder of interest on bank loan is still outstanding.

ii. Wages expense still owing amounting to RM1,500.
iii. There are bad debts of RM350 on debtor balance that have not been entered in the
ledger.
iv. Stock at 31 December 2019 was valued at RM9,500.
v. Depreciation for the fixed assets has yet to be provided as follows by using straight line
method:
a. Equipment 10%
b. Motor Vehicle 15%
Required:
1. Prepare the Statement of Comprehensive Income for the year *45,950
2. Prepare the Statement of Financial Position * 334,350

Question 2. Lego

Lego Station Games Enterprise

Trial Balance as at 31 December 2019
Debit (RM) Credit (RM)
Capital, 1 January 2019 31,000
Drawings 990
Stock 7,800
Carriage inwards 500
Carriage outwards 200
Debtors 6,500
Creditors 2,480
Wages payable 890
Return 560 820
Bad debts 300
Premises 24,000
Cash at bank 8,900
Petty cash 50
Discounts 120 340
Wages for packing goods purchased 620
Salaries 13,000
Lighting 600
Sales 74,000
Unearned sales 610
Purchases 38,000
Insurance 8,000
110,140 110,140

Pauline is running the business of Lego Station Games Enterprise. This are the balances
extracted from her book as at 31 December 2019. You are required to prepare an adjusted
Income Statement and Balance Sheet as at 31 December 2019, after considering the following
adjustments:

i. A stock take valued the closing stock at RM5,880.

ii. Commercial Bank Ltd returned a dishonoured cheque of RM220 which had been given
by a debtor.
 iii. On 30 December 2019, a credit note of RM120 was sent to a customer for the return of
defective goods that previously sold on credit. The details of the credit note had been
overlooked.
iv. Create a provision for doubtful debts of 2% of debtors.
v. Withdrew RM70 from the bank to reimburse the petty cash which operates on the
Imprest System.
vi. RM500 of insurance is yet to be expired.
vii. Allow depreciation on the premises at the rate of 10% per annum on cost.

Required:
1. Prepare the Statement of Comprehensive Income for the year *9,188
2. Prepare the Statement of Financial Position * 43,178

Question 3 Shindig Plc

The following trial balance was extracted from the nominal ledger of Shindig Plc, a
computer games manufacturer, on 31 December 2018.

RM RM
Patent rights 440,000
Work in progress inventories, 1 January
180,500
2018
Leasehold buildings 888,000
Equity share capital – RM1 nominal value 500,000
5% Preference share capital (redeemable) – @ 100,000 units 100,000
Revenue 2,800,000
Staff costs 651,100
Accumulated depreciation on buildings, 1 January 2018 59,200
Inventories of finished games, 1 January
168,550
2018
Consultancy fees paid 35,000
Computers 165,000
Accumulated depreciation on computers, 1 January 2018 66,000
Provision for Income tax , 1 January 2018 18,000
Equity dividend paid, 30 September 2018 85,000
Bank account 685,000
Trade receivables 354,800
Trade payables 258,400
Purchases 1,864,500
Retained earnings, 1 January 2018 1,715,850
5,517,450 5,517,450

The following additional information is available.

Closing finished inventories are valued at cost of RM180,000 whilst work in
1 progress is RM140,000. These valuations do not take into account the fact that,
at the year-end physical inventory count, it was discovered that 10 computer
 games consoles with a cost RM500 each had been badly damaged. These items
have a scrap value of RM50 each.

The patent rights were acquired on 1 January 2018 in respect of a program with
2
a 3-year lifespan.

Buildings are depreciated over 30 years. Computers are depreciated over 5

3
years.

Shindig Plc received notice on 31 December that one of its customers, X

Limited, had gone into liquidation. This customer owed RM45,000 at the year
4
end. Shindig Plc decided to create a provision for doubtful debts for another
customer Y Limited, who owes RM18,765.

5 Provision for income tax in relation to 31 December 2018 of RM120,000.

During the year, Shindig Plc made a 1 for 10 bonus issue of equity shares @
6
RM1 per share. This has not been reflected in the accounts.

A cheque was issued to a supplier in the amount of RM5,000 on 28 December

7
2018. This was not recorded in the books of Shindig Plc.

There has been a lot of publicity surrounding Shindig Plc's newest game,
"Warpaint", which is due to be released in March 2018. Due to the high level
of interest Shindig Plc have allowed customers to pay for the game in advance
8
to ensure that they receive their copy of the game on the release date.
RM35,000 of the revenue recorded in the trial balance relates to advance sales
of "Warpaint."

Shindig Plc sold a product with a warranty of two years. It is estimated that the
9
warranties will be invoked at a cost of RM10,000.

10 Redeemable share dividend was yet to be provided

Requirements:
Prepare the statement of profit or loss (-RM209,182) for Shindig Plc for the year ended 31
December 2018 and the statement of financial position (RM2,445,068) at that date.

Question 4 Tonton
The following information has been extracted from the books of Tonton, a limited liability
company, as at 31 October 2016.

Dr Cr
RM’000 RM’000
Cash 15
Insurance expenses 675
Inventory at 1 November 2015 350
 Wages and salaries 60
Energy expenses 66
Utilities expenses 50
General expenses 75
Discounts received 50
Retained earnings at 1 November 2015 515
Provision for doubtful debts 40
Sales revenue 5,780
Telephone expenses 80
Property expenses 100
Bank 94
Returns inward 95
Trade payables 290
Loan note interest 33
Trade receivables 900
Purchases 3,570
7% Loan notes 470

Bad debts 150

Ordinary shares @ 1,800,000 units 1,800
Accumulated depreciation at 1 November 2015
Buildings 360
Motor Vehicles 80
Furniture and equipment 420
Land 740
Buildings 1,500
Motor vehicles 240
Furniture and equipment 1,200
9,899 9,899

You have also been provided with the following information:

Inventory at 31 October 2016 was valued at RM275,000 based on its original cost.
1 However, RM45,000 of this inventory has been in the warehouse for over two years
and the estimated market price is RM20,000.
Depreciation is to be charged as follows:
2 (i) Motor vehicles at 10% of written down value.
(ii) Furniture and equipment at 10% of cost.
 (iii) Buildings are depreciated at 2% of cost.
At 31 October 2016 the buildings were professionally revaluated to RM2,000,000
3 after charging current year depreciation and the directors wish this valuation to be
incorporated into the accounts.
During the year a bonus issue of one for eight at RM1 per share was made to
4
ordinary shareholders. This has not been entered into the books.
5 The utilities expenses include RM5,000 which relates to November 2016.
6 Provision for doubtful debts is to be increased to 5% of trade receivables.
There are general expenses outstanding of RM15,000 for the year ended 31 October
7
2016.
Partial of the land which cost RM300,000 has been sold on the year for RM750,000
8
by cash. The whole record has been ignore from the account.

Required:
i. Prepare the Statement of Comprehensive Income for the year ended 31 October 2016.
*1,045
ii. Prepare the Statement of Financial Position as at 31 October 2016 *5,119

Question 5 Hexham plc

The following trial balance was extracted from the nominal ledger of Hexham plc on
31/3/2018: RM RM
Sales 1,150,000
Inventories at 1 April 2017 75,000
Purchases 465,000
Distribution costs 220,000
Administrative expenses 340,000
Irrecoverable debts expense 36,000
Loan interest paid 8,000
Land and buildings cost 600,000
Plant and equipment cost 340,000
Land and buildings accumulated 96,000
depreciation
Plant and equipment accumulated depreciation 63,000
Trade receivables 60,000
Allowance for receivables 5,000
Bank 24,000
Equity share capital (RM1 shares) 400,000
8% Bank loan 200,000
Retained earnings at the beginning of the
year 161,000
Equity dividends paid 15,000
Accounts payable 54,000
Advance deposits from customers 6,000
2,159,000 2,159,000
 The following adjustments have yet to be accounted for:
1 Hexham plc holds two lines of inventory at 31 March 2018.
Item CX100 Y200
Total cost 16,200 76,000
Selling price 15,000 83,600
Hexham plc paid an annual insurance premium of RM16,800 for the year 1 September 2017
2
to 31 August 2018. This payment is included in administrative expenses.
3 The cost of the land was RM200,000. The company's depreciation policy is as follows:
·Buildings Straight-line over 50 years
·Plant and equipment 10% straight-line
At the year end, trade receivables include a balance of RM4,800 which is considered
4 irrecoverable. Hexham Plc wishes to adjust the allowance for receivables at 31 March 2018
to RM2,760.
The bank loan was received on 1 July 2017 and is repayable in full in five years. Interest is
5
charged at a fixed rate of 8% per annum.
6 Income tax for the year ended 31 March 2018 is estimated at RM10,000.
The bank reconciliation performed at 31 March 2018 revealed that Hexham plc had
7
accounted for a cheque for RM4,500 sent to a credit supplier as RM5,400.
Hexham plc products come with a 6 months’ warranty. Management estimates totalled at a
8
cost of RM15,000 to Hexham Plc.
Hexham plc paid rent of RM25,000 on 27 March 2018 which covers the period 1 April 2018
9
to 30 June 2018. This is included in administrative expenses.
Prepare the statement of profit or loss and the statement of financial position at that date.

Question 6 Ben.Co
The following information has been extracted from the books of Ben, a limited liability
company, as at 31 March 2018.

Dr Cr
RM’000 RM’000
Cash 67
Insurance expenses 36
Stock 60
General expenses 23
Electronic expenses 45
Marketing expenses 42
Wages and salaries 125
Discounts received 13
Retained earnings 400
 Allowance for receivables 18
Internet expenses 65
Repair and maintenance 103
Bank 55
Returns inward 54
Debtors and Creditors 600 508
Loan note interest 20
Purchases and sales 1,750 2,230
4% Loan notes 500
Bad debts 1
Ordinary shares @ 700,000 units 700
Accumulated depreciation:
Buildings 105.75
Motor Vehicles 28.25
Machinery 40
Redeemable share capital 50
Land at cost 610
Buildings at cost 705
Motor vehicles at cost 142
Machinery 200
4,648 4,648

You have also been provided with the following information:

i. Inventory at 31 March 2018 was valued at RM45,000 based on its original cost.
However, RM15,000 of this inventory has been in the warehouse for over two years
and the directors have agreed to sell it for a cash price of RM10,000.
ii. The marketing expenses include RM5,000 which relates to April 2018.
iii. Based on past experience the allowance for receivables is to be increased to 5% of
trade receivables.
iv. There are wages and salaries outstanding of RM40,000 for the year ended 31 March
2018.
v. Depreciation is to be charged as follows:
a. Building are depreciated at 5% of cost
b. Machinery at 20% of cost.
c. .Motor vehicles at 20% of written down value.
vi. At 31 March 2018 the buildings were professionally revaluated to RM1,800,000
after charging current year depreciation and the directors wish this valuation to be
incorporated into the accounts.
vii. During March 2018 a bonus issue of one for ten was made to ordinary shareholders
@ RM1 per share. This has not been entered into the books.

Required:
 1. Prepare the Statement of Comprehensive Income for the year * -186,000
2. Prepare the Statement of Financial Position *3,303,000

Question 7 Jayne Plc

The following trial balance was extracted from the nominal ledger of Jayne Plc on 31 December
20X2.

RM RM
Accrued commission at 31 December 20X2 2,500
Administration expenses 198,076
Purchases 426,772
Cash and bank 15,477
Payables 49,809
Receivables 12,691
Distribution costs 61,554
Preference dividend 3,600
Equity dividend 4,000
Building and Land 157,680
10% loan (repayable in 10 years) 33,000
RM1 equity share capital 11,000
60% RM1 preference share capital (irredeemable) 6,000
Accumulated depreciation at 31 December 20X1 40,630
Accumulated profits at 31 December 20X1 41,890
Inventories at 31 December 20X1 46,349
Revenue 726,370
Corporation tax payable at 31 December 20X1 15,000
926,199 926,199

1. One of warehouse has been sold for RM1,350. The cost of the warehouse is RM2,000 and
carrying amount of RM1,100. No record on this transaction
2. The non-current assets account includes freehold land which cost RM25,000. Depreciation is
charged at 20% on the carrying amount of depreciable assets in use at the year end.
3. A bonus issue of 1 for 5 equity shares made during the year out of the retained earnings account
has not been reflected above.
4. Included in administrative expenses is a rates payment of RM1,500 for one year to 1 April 20X3.
5. An invoice for insurance of RM1,200 for the year to 31 December 20X2 was received and pay
on 5 January 20X3.
6. The following accruals are to be made.
a. (i) Loan interest (12 months)
b. (ii) Corporation tax of RM12,000
7. The corporation tax liability of RM15,000 at 31 December 20X1 was settled at RM15,400 in
September 20X2. The payment was debited to administration expenses.
8. At 31 December 20X2 Jayne plc considers an amount owing of RM453 from Mr Maguire cannot
be recovered, and a further allowance for irrecoverable debts of 3% of the remaining receivables
is necessary.
9. Jayne Plc received a letter in December 20X2 from the solicitor of a former employee claiming
that their client was unfairly dismissed. Jayne Plc's legal advisors estimate that there is a 70%
 chance that the claim will be successful and they estimate that the award to the claimant will be
RM20,000.
10. A cheque for RM12,000, sent to a supplier, was incorrectly recorded as RM21,000. This error
has not been corrected in the books of Jayne Plc.
11. Closing inventory amount to 39,323
Prepare the Financial Statement for the year ended 31 December 20X2.

Question 8 Skylar Plc

Trial balance as at 31 October 20X7
RM`000 RM`000
Share capital 15,000
Trade payables 3,348
Trade receivables 6,690
Accruals rental at 31 October 20X7 387
5% bank loan 20,000
Cash at bank 7,997
Retained earnings 12,345
Property (freehold buildings) cost 20,000
Plant and equipment cost 38,460
Property (freehold buildings) – accumulated depreciation 2,500
insurance 48
Plant and equipment – accumulated depreciation at 1 November 20X6 21,128
Interest 750
Sales 50,197
Purchases 30,946
Distribution costs 6,654
Administrative expenses 3,604
Inventories as at 1 November 20X6 8,456
Dividends 1,300
124,905 124,905

1. Depreciation has not yet been charged. Plant is depreciated on a 10% straight line basis.
Freehold buildings are depreciated over their useful life of 40 years.
2. The posting of the credit sales for October 20X7 of RM3,564,000 to the nominal ledger has not
yet been done.
3. The inventories at the close of business on 31 October 20X7 had a sales value of RM12,232,500,
for a line of goods that is sold on a mark-up of 25%.
4. The company paid RM48,000 insurance costs in June 20X7, which covered the period from 1
July 20X7 to 30 June 20X8.
5. Interest on the bank loan for the last three months of the year has not been included in the
accounts in the trial balance.
6. The income tax charge for the year has been calculated as RM1,254,000.
7. A cheque received from customer Broke Plc for RM15,000 on 27 October 20X7, which was
recorded in the books of Skylar Plc, has not cleared.
A liquidator was appointed to Broke Plc on 30 October 20X7 and he has confirmed that the
cheque will not be reissued. Management have advised that Broke Plc's total outstanding
balance of RM30,000 should be written off as an irrecoverable debt.
 8. During the year Skylar Plc renewed its contract with its distributer - haulage company. The
contract commenced on 1 September 20X7 and no payment has been made to haulage company
to date. The annual contract fee is RM200,000.
9. All of Skylar's goods come with a 12 months’ warranty. Management estimate that 2% of these
warranties will be exercised, and the cost of repair or replacement of these goods will be
RM250,000 in total.
Prepare the Statement as at 31 October 20X7.

Question 9 Corolla
RM`000 RM `000
Share capital (RM1 per share) 20,000
Trade payables 2,798
Land and buildings – cost 35,152
Land and buildings – accumulated depreciation at 1 November 20X7 7,000
Plant and equipment – cost 12,500
Plant and equipment – accumulated depreciation at 1 November 20X7 7,400
Trade receivables 5,436
Accruals at 31 October 20X8 436
8% bank loan repayable in 10 years 15,000
Cash at bank 9,774
Retained earnings 14,801
Interest paid 600
Advertising 45
Revenue 58,411
Purchases 41,620
Distribution costs 5,443
Administrative expenses 4,744
Inventories as at 1 November 20X7 9,032
Dividends 1,500
125,846 125,846

1. The inventories at the close of business on 31 October 20X8 were valued at RM7,878,000.
2. Land, which is non-depreciable, is included in the trial balance at a cost of RM15,152,000.
Depreciation is to be provided for the year as follows:
a. Buildings 2% per annum straight line basis
b. Plant and equipment 20% per annum reducing balance basis
3. The company began another series of television advertising for the company's range of products
on 1 October 20X8 at a cost of RM45,000. The adverts were to run for three months and were
to be paid for in full at the end of December 20X8.
4. Interest on the bank loan for the last six months of the year has not been included in the accounts
in the trial balance.
5. The corporation tax charge for the year has been calculated as RM970,000.
6. During the year, Corolla Plc made a 1 for 4 bonus issue of equity shares. This has not been
reflected in the accounts.
7. Management have decided that a provision for doubtful debts of 5% of trade receivables should
be set up.
 8. Corolla Plc paid an insurance premium for annual cover up to 30 June 20X9. The cheque, for
RM45,000 was incorrectly treated as a supplier payment.

Prepare the statement of profit or loss for Corolla Plc for the year ended 31 October 20X8 and the
statement of financial position at that date.

Question 10 Ford
Trial balance for the year ended 31 March 20X6

RM RM
Purchases 4,450,000
Administrative expenses 410,500
Distribution costs 375,000
Inventories at 1 April 20X5 113,400
Freehold land and buildings
Cost (land RM1,750,000) 2,550,000
Accumulated depreciation at 1 April 20X5 480,000
Plant and machinery
Cost 620,000
Accumulated depreciation at 1 April 20X5 337,000
Borrowings 200,000
Trade receivables 37,500
Trade payables 25,400
Retained earnings at 1 April 20X5 312,500
Equity share capital – 50p nominal value 400,000
Preference share capital – 5% irredeemable RM1 shares 200,000
Dividend 20,000
Cash and cash equivalents 43,500
Revenue 6,700,000
Finance costs 35,000
8,654,900 8,654,900

The following additional information is relevant.

The borrowings are repayable in ten equal yearly instalments, commencing on 1 April
1
20X6.
2 Revenue is made up of the following.
Tuition fees RM1,500,000 300,000-150,000=150,000
Book sales RM5,100,000
Advances RM100,000
The tuition fees all relate to courses held during the year except for fees of RM300,000 which
relate to a ten-week course. Five weeks of this course had already been held by the year end.
The remainder is to be held in June 20X6.
The advances relate to a new publication which Ford Plc has commissioned and advertised
heavily but which is not yet in production.
 There were no movements of non-current assets during the year. Plant is depreciated on a
3 10% straight line basis, taking into account the month of sale or purchase. Freehold buildings
are depreciated over their useful life of 40 years.
At the year end the company was in the process of a legal action by one of its competitors
which claims that Ford’s textbook has breached copyright. The case is not due to be decided
4
until June 20X6 but Ford Plc’s legal advisors think that the company has a 70% chance of
losing the case and estimates that this would cost Ford Plc RM100,000.
One of Ford Plc’s customers who owed RM10,000 at the year-end was declared insolvent on
5
1 March 20X6. The liquidator does not expect to pay any money to creditors.
Closing inventories at cost amounted to RM120,000. Within this valuation is an over-
6
allocation of fixed overheads, of RM10,000.
7 The following should be provided for at the year end.
· Income tax of RM350,000
· The preference dividend
Ford Plc employed the services of a training and consultancy firm for a six months period
commencing on the 1 February 20X6 for a total fee of RM60,000. 50% of this fee is due for
8
payment on 1 April 20X6, while the balance is to be paid within 30 days of the contract’s
conclusion. No record has been made in respect of this in the books of Ford Plc.
Ford Plc rent some additional office space for administrative staff. Rent is due in 30 June
9 20x6. Ford Plc made a payment of RM20,000 on 1 January 20X6 for 6 months, and this has
been included in administrative expenses.
During the year, Ford Plc issued a 1 for 4 bonus issue from retained earnings. This has not
10
been reflected in the accounts.

Prepare the statement of profit or loss for Ford plc for the year ended 31 March 20X6 and the statement
of financial position at that date.

Question 11 Jingle Enterprise

Jingle Enterprise accounting year start from February until January. Following is the statement
of financial position for the company as at 31 January 2018.
Statement of Financial Position
Non-current assets
Motor vehicle 25,000
Building 88,600 113,600
Current assets
Debtors 5,400
Inventories 12,000
Cash 5,100 22,500
136,100

Capital 100,000
Current liabilities
Bank overdraft 10,000
Trade payables 26,100 36,100
136,100
The following additional information as at 31 January 2018 is available:
1. Goods were purchased on credit at a list price of RM147,005, trade discount
received was 3% on list price.
2. There was a settlement discount received of 4% on settling an invoice of RM95,840.
These were the only payments to suppliers in the period.
3. Closing inventories of goods were valued at RM9,845.
4. All sales were on credit and amounted to RM248,035.
5. Outstanding receivables balances at the end amounted to RM35,780 of which
RM2,548 were to be written off. An allowance for receivables is to be made
amounting to 2% of the remaining outstanding receivables.
6. Cash payments were made in respect of the following expenses.
a. Stationery, postage and wrapping 51,110
b. Telephone charges 5,781
c. Electricity 17,650
d. Cleaning and refreshments 3,000
7. Cash drawings by the proprietor amounted to RM8,450.
8. The outstanding bank overdraft balance as at beginning was paid off. Interest
charges and bank charges on the overdraft amounted to RM150.
9. Depreciation for the fixed assets has yet to be provided. All the assets will be charge
10% using straight line method.

Required:
1. Prepare the Statement of Comprehensive Income for the year * 14,855
2. Prepare the Statement of Financial Position *179,260

Question 12 BeeSim
BeeSim accounting year start from July until June. Following is the statement of financial
position for the company as at 31 July 2018.
Statement of Financial Position

Non-current assets
Motor vehicle 54,000
Accumulated depreciation 5,400 48,600
Building 450,000
Accumulated depreciation 45,000 405,000
Current assets 453,600
Inventories 25,400
Cash 68,910 94,310
547,910

Capital 100,000
Non-Current liabilities
5% Loan 400,000
Current liabilities
Bank overdraft 12,000
 Trade payables 35,910 47,910
547,910

The following additional information as at 31 July 2018 is available:

1. Goods were purchased on credit at a list price of RM203,000, trade discount received
was 3% on list price.
2. There was a settlement discount received of 5% on settling an invoice of RM80,000.
These were the only payments to suppliers in the period.
3. Closing inventories of goods were valued at RM18,450.
4. All sales were on credit and amounted to RM841,031.
5. Outstanding receivables balances at the end of the year amounted to RM86,250 of
which RM3,540 were to be written off. An allowance for receivables is to be made
amounting to 2% of the remaining outstanding receivables.
6. Cash payments were made in respect of the following expenses.
a. Office supplies 1,500
b. Internet 1,200
c. Electricity 6,480
d. Repair and maintenance 5,640
e. loan interest 14,000
7. Cash drawings by the proprietor amounted to RM10,000.
8. The outstanding overdraft balance as at beginning was paid off. Interest charges and
bank charges on the overdraft amounted to RM250.
9. 30% the bank loan interest is still outstanding.
10. Depreciation for the fixed assets has yet to be provided. All the assets will be charge
5% using straight line method.

Required:
1. Prepare the Statement of Comprehensive Income for the year * 575,707
2. Prepare the Statement of Financial Position * 1,224,527