Week 14

Fundamentals of
Financial Accounting
(FFA)

BBA 2k21
Example

2
Example
You are given the following additional information:
1. Inventory at 31 December 20X5 was $25,680.
2. Rent was prepaid by $1,000 and light and heat owed was $460 at 31 December 20X5.
3. Following a final review of the receivables at 31 December 20X5, Crown Co decided to write off another
debt of $130. The entity also adjusted the allowance for receivables to $516 at 31 December 20X5.
4. Crown Co estimated that the income tax charge on profit for the year was $7,300.
5. Depreciation is to be provided as follows:
• building – 2% annually, straight-line
• fixtures & fittings – straight line method, assuming a useful economic life of five years with no
residual value
• motor vehicles – 30% annually on a reducing balance basis.
• A full year’s depreciation is charged in the year of acquisition and none in the year of disposal.

Prepare a statement of profit or loss and other comprehensive income for the year ended 31 December
20X5, Statement of Changes in Equity and a statement of financial position as at that date for Crown Co.
3
Prepaid Rent $ 1,000

Prepaid Rent (Dr.) $ 1,000 (SFP)

Rent Expense (CR.) $ 1,000 (SP&L)
and light and heat owed was $460 at 31
December 20X5.
Light & Heat Expense (Dr.) $ 460 (SP&L)
Light & Heat Payables / Accruals (Cr.) $ 460 (SFP)
Following a final review of the receivables at 31 December
20X5, Crown Co decided to write off another debt of $130.

Irrecoverable Debt Expense (Dr.) $ 130 (SP&L)

Trade Receivables (CR.) $ 130 (SFP)
The entity also adjusted the allowance for
receivables to $516 at 31 December 20X5.
Allowance for receivables – Closing $ 516
Allowance for Receivables – Opening $ 588
Reduce (588-516) $ 72

Allowance for receivables (dr.) $ 72

Irrecoverable debt expense (cr.) $ 72
Depreciation
1- Building – 2% annually, straight-line

Cost * 2% = 100,000*2% = $ 2,000

2- Fixture & Fitting

(Cost – Residual Value) / Useful life =
28,000 -0 / 5 $ 5,600
3- motor vehicles – 30% annually on a reducing balance basis.
Carrying Amount = (Cost – Accumulated Deprecation) * 30%
(24000-12240) *30% = $3,528

Total Depreciation = $ 11,128

Depreciation Expense (Dr.) 11,128 (SP&L)
Acc. Depreciation (Cr.) $ 11,128 (SFP)
Crown Co estimated that the income tax
charge on profit for the year was $7,300.

Income Tax Expense (Dr.) $ 7,300 (SP&L)

Income Tax Payable (Accruals) (Cr.) $ 7,300 (SFP)