BHMH2101 2020/21 S2 Take-home Test B

BHMH2101 Financial Accounting

2020/21 Semester 2
Take-home Test (Version B)
Cover Page

Lecture Class:

Tutorial Class: A / B / C (Circle the appropriate options)

Student Name:

Student Number:

Important points to follow

1. Total test duration (90 minutes): Test time (75 minutes) and submission time (15 minutes)
19:30 - 21:00 (Class B08-13), 29 March 2021 (Monday)
19:45 - 21:15 (Class B01-07), 29 March 2021 (Monday)
2. Submit your answers online via the submission link under the individual Lecture Class Moodle at or
before the submission deadline. No late submission is accepted.
3. MUST include this cover page when you submit the take-home test. No need to submit the question
paper.
4. Answers must be hand-written in blue/black colour pen on A4-size single-lined paper (prepared
on your own) in one file with PDF format. You are reminded NOT to use computer to print out
answers. In case of not following this rule, 20% of the total scored marks will be deducted.
5. Make sure that you have submitted the correct and entire PDF file and use the file name
BHMH2101_TEST_Student ID (e.g. BHMH2101_TEST_20123456A).
6. Only the last submission you made within the designated timeslot will be counted.

Pigeon Hole
Subject Lecturers Lecture Class Location of Pigeon Hole
No.
Barbara Ngai B01, B02 WK-027 13/F, North Tower
Ben KF Wong B03, B04
Anthenian Chiu B05, B06, B07 13/F, North Tower
Benjamin Wong B08, B09 WK-212 10/F, North Tower
Daphne Wong B10, B11 WK-234 10/F, North Tower
James Chow B12, B13 WK-253 10/F, North Tower

Declaration of Original Work

By submitting this assignment to the subject lecturer through Moodle, you hereby declare that the work in this
assignment is completely your own work. No part of this assignment is taken from other people’s work
without giving them credit.

You understand that an infringement of this declaration leaves you subject to disciplinary actions such as mark
deduction, disqualification or even expulsion by the College.

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BHMH2101 2020/21 S2 Take-home Test B

Total Marks: 100 marks

Question 1 (100 marks)
Penguin Company is engaged in organizing drama programs for children. The company adjusts its
accounts monthly and prepares closing entries annually on 31 December. The following is the
unadjusted trial balance dated 31 December 2020:
Debit ($) Credit ($)
Cash 212,270
Accounts Receivable 176,875
Supplies 6,200
Prepaid Rent 13,500
Land 976,000
Equipment 720,000
Accumulated Depreciation: Equipment 217,500
6% 3-year Notes Payable (Due on 31 December, 2022) 250,000
Accounts Payable 100,215
Income Taxes Payable 18,110
Unearned Service Revenue 41,250
Share Capital (@$2 per share) 1,000,000
Retained Earnings 161,195
Service Revenue Earned 1,475,150
Supplies Expense 49,125
Depreciation Expense: Equipment 44,000
Salaries Expense 328,500
Advertising Expense 20,175
Interest Expense 11,250
Insurance Expense 22,500
Rent Expense 652,025
Income Taxes Expense 31,000
TOTAL 3,263,420 3,263,420
Information on adjusting entries:
(1) Additional supplies of $1,150 were purchased on account on 29 December 2020 and no entries
have been made.

(2) The owner of Penguin Company paid $25,000 by his private bank to buy a car for his daughter’s
use.

(3) A 8-month rental agreement of a storage room was prepaid on 1 July 2020 and commenced on
the same day.

(4) Equipment is expected to be depreciated over a period of 15 years.

(5) Supplies on hand on 31 December 2020 were $5,500.

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BHMH2101 2020/21 S2 Take-home Test B

(6) $12,500 of the unearned service revenue was now earned as service provided on 31 December
2020.

(7) Accrued, unpaid and unrecorded salaries at 31 December 2020 amounted to $10,500.

(8) Interest on 6% 3-year notes payable of $250,000 is payable at the beginning of next quarter (i.e.
the interest payments were paid on 1 April, 1 July and 1 October during the year). No interest
adjusting entries has been made after the last payment.

(9) On 31 December 2020, Penguin Company declared a dividend of $0.4 per share. 20% of the
total amount was paid on the same date and the remaining balance will be paid on 31 January
2021.

(10) Estimated income taxes expense for the entire year amounted to $29000. The amount is due
for payment in February 2021.
Required

(a) Update the Company’s records on 31 December 2020 by preparing the necessary adjusting
entries for the above items. Explanations are NOT required. If any item does not require
adjustment, state “No entry” and name the accounting principle/concept to support your answer.
NO NEED to explain the reasons. (60 marks)

(b) Prepare the Income Statement for the year ended 31 December 2020, showing the breakdown
of items under the captions of Revenues, Expenses, Profit before Taxes, Profit after Taxes.
(22 marks)

(c) Compute the balance of the following items as at 31 December 2020 (show your workings):

(i) Ending Retained Earnings (3 marks)

(ii) Net book value of Equipment (3 marks)

(d) Identify the effect of the above adjusting entries in part (a)(6) and (9) on each of the financial
statement elements described in the column headings in the table below. Use the symbols “I”
for increase, “D” for decrease and “NE” for no effect. No dollar amount is required. Copy the
following table for answering this part.

Income Statement Statement of Financial Position

Entries Revenue Expense Profit Assets Liabilities Equity
(6)
(9)
(12 marks)

~ END OF TAKE-HOME TEST ~

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