N11123E1 SECTIONB Answer both questions Total marks availabl

N11123-E1 SECTIONB Answer both questions Total marks available Total 50 marks 21. The principal business activities of Shanghai PLC is trading and shown below: distribution of electric ) at 31 December 2015 is $\'000 Bank Inventory at 1 January 2015 Motor vehicles, at cost Accumulated depreciation on motor vehicles Selling and distribution expenses Administrative expenses Revenue Purchases Allowance for doubtful debts Debenture interest Share premium account Land and buildings, at cost Trade recelvable Trade payable Cash Retained profits Interim preference dividend Ordinary shares of $1 each 6% Preference shares of $1 each 8% Debenture 2030 1,497 4,488 3,550 1,654 1,234 605 25,650 17,955 250 160 4,000 25,000 4,280 3,740 4,630 150 10,000 5,000 4,000 The following additional information should be taken into consideration () Inventory. The inventory at 31 December 2015 is valued at $4,760,000. (ii) Non-current assets are depreciated as follows:- Land and buildings Motor Vehicles NIL (Freehold) 20% per annum on costs. (il) Asset value. Based on an independent valuation report, one of the buildings has (iv) Accounts Receivable. The allowance for doubtful debts is to be maintained at 590 (v) Expenses. Selling and distribution expenses paid during the year include insurance suffered an impairment loss of $200,000 on 31 December 2015. of the remaining trade receivable at the 31 December 2015 cover for the company\'s motor vehicle amounting to $30,000. This covers the 6 month period from 1 October 2015. There were no other prepayments. Turn Over N11123-E1

Solution

Adjusting Journal entries Debit Credit ii. Depn.-Motor vehicles 710 Acc. Depn.-Motor vehicles 710 (3550*20%) iii. Bldg. Impairment loss 200 Land& Bldgs 200 (write-down) iv. Allowance for Doubtful debts 36 Excess bad debts provision written back 36 (250-(4280*5%)) v. Prepaid Insurance 15 Selling& Distn.exp. 15 (30*3 mths./6mths) vi. Debenture Interest 160 Debenture interest payable 160 vii. Income tax expense 1385 Income tax provision 1385 viii. Retained profits 1300 Ordinary dividend payable10000*10% 1000 Pref. dividend payable 5000*6% 300 Trial balance Unadjusted Adjustments Adjusted trial balance Debit Credit Debit Credit Debit Credit Bank 1497 1497 Cash 5 5 Inventory 4488 4488 Trade receivable 4280 4280 Allowance for Doubtful debts 250 -36 214 Prepaid insurance 15 15 Trade payable 3740 3740 Debenture interest payable 160 160 Income tax provision 1385 1385 Ordinary dividend payable 1000 1000 Pref. dividend payable 300 300 Motor vehicles at cost 3550 3550 Acc. Depn.-Motor vehicles 1654 710 2364 Land& Bldgs.at cost 25000 -200 24800 Ordinary shares of $ 1 each 10000 10000 6% pref. shares of $ 1 each 5000 5000 Share premium a/c 4000 4000 8% Debenture 2030 4000 4000 Retained profits 4630 1300 3330 Selling& distn.exp. 1234 -15 1219 Adm.exp. 605 605 Revenue 25650 25650 Purchases 17955 17955 Debenture Interest 160 160 320 Interim preference dividend 150 150 Depn.-Motor vehicles 710 710 Bldg. Impairment loss 200 200 Excess bad debts provision written back 36 36 Income tax expense 1385 1385 Total 58924 58924 3555 3555 61179 61179 Statement of Profit or Loss for the Year ended Dec.31,2015 Revenue 25650 Inventory consumed: Beginning Inventory 4488 Add: Purchases 17955 Less: Ending Inventory -4760 17683 Gross Margin 7967 Less: Operating expenses: Selling& distn.exp. 1219 Adm.exp. 605 Depn.-Motor vehicles 710 Bldg. Impairment loss 200 Excess bad debts provision written back -36 2698 Operating Income 5269 Less: Non-operating expense: Debenture Interest 320 Net profit 4949 Less: Income tax expense 1385 Net income to retained earnings 3564 Statement of changes in Equity Year ended Dec.31,2015 Beginning balance Ordinary shares of $ 1 each 10000 6% pref. shares of $ 1 each 5000 Share premium a/c 4000 Retained profits 4630 23630 Add:Current year profits 3564 Less: Dividends: Interim preference dividend 150 Ordinary dividend payable 1000 Pref. dividend payable 300 1450 Closing balance 25744 Statement of Financial Position as at Dec.31,2015 Assets: Bank 1497 Cash 5 Inventory 4760 Trade receivable 4280 Less: Allowance for Doubtful debts -214 Prepaid insurance 15 Motor vehicles at cost 3550 Less:Acc. Depn.-Motor vehicles -2364 Land& Bldgs.at cost 24800 Total assets 36329 Liabilities & Equity Trade payable 3740 Debenture interest payable 160 Income tax provision 1385 Ordinary dividend payable 1000 Pref. dividend payable 300 8% Debenture 2030 4000 Equity: Ordinary shares of $ 1 each 10000 6% pref. shares of $ 1 each 5000 Share premium a/c 4000 Retained profits 6744 Total Liabilities & Equity 36329