frank wood's business accounting hk edition (3rd edition) solution

8/4/2019 Frank Wood's Business Accounting HK Edition (3rd Edition) Solution

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Frank Woods Business Accounting 1 Solutions Manual Hong Kong Edition Third Edition Pearson Education Limited 2006

Question 1-2A

Fixtures $1,200 + Van $6,000 + Inventory $2,800 + Bank $200 + Cash $175 = Total assets $10,375.

Loan $2,500 + Creditors $1,600 + Capital (difference) $6,275 = $10,375.

Question 1-4A

ABao BalanceSheetasat30June20X6

$ $Fixed assetsEquipment 3,400

Current assetsInventory of goods 3,600Debtors 4,500Cash at bank 2,800

10,900 Less Current liabilities

Creditors (4,100) 6,80010,200

Capital 10,200

Question 1-6A

Effectupon

Assets Liabilities Capital

(a) + Van + Creditors

(b) Cash Loan from F Du

(c) + Inventory Bank

(d) + Cash + Capital

(e) + Inventory Debtors

(f) + Inventory + Creditors

(g) Cash Capital

(h) Bank Creditors


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2 Frank Woods Business Accounting 1 Solutions Manual Hong Kong Edition Third Edition Pearson Education Limited 2006

Question 1-8A

JHo BalanceSheetasat7December20X9

$ $Fixed assets

Equipment ($6,200 + $110) 6,310

Car 7,300 13,610Current assets

Inventory of goods ($8,100 + $380) 8,480Debtors ($4,050 $640 $90) 3,320Bank ($9,100 $380 $1,150 + $640 + $1,300) 9,510Cash ($195 + $90 + $200) 485


Creditors ($2,800 + $110 $1,150) (1,760) 20,03533,645

Capital 33,645

Question 2-3A

Bank

$ $(1) Capital 16,000 (2) Van 6,400(25) Cash 400 (12) Cash 180

(19) Carton Cars Ltd 7,100(30) Office fixtures 480

OfficeFixtures$

(5) Old Ltd 900(15) Cash 120(30) Bank 480

Capital

$(1) Bank 16,000

Cash

$ $(12) Bank 180 (15) Office fixtures 120(21) Loan: B Bei 500 (25) Bank 400

Vans

$(2) Bank 6,400(8) Carton Cars Ltd 7,100


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OldLtd

$(5) Office fixtures 900

CartonCarsLtd

$ $(19) Bank 7,100 (8) Van 7,100

Loan:BBei

$(21) Cash 500

Question 2-4A

Bank

$ $(1) Capital 9,000 (8) Cash 200

(2) Loan: B Bao 2,000 (15) Loan: B Bao 500(17) Clearcount Ltd 420

Loan:BBao

$ $(15) Bank 500 (2) Bank 2,000(24) Cash 250

DisplayEquipment

$(5) Clearcount Ltd 420

Capital

$(1) Cash 750(1) Bank 9,000

Cash

$ $(1) Capital 750 (3) Computer 600(8) Bank 200 (24) Loan: B Bao 250

Computer

$(3) Cash 600

ClearcountLtd

$ $(17) Bank 420 (5) Display equipment 420


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FChung

$(31) Printer 200

Printer

$(31) F Chung 200

Question 3-2A

Cash

$ $(1) Capital 7,400 (2) Bank 7,000(19) Sales 54 (7) Purchases 362

Purchases

$

(4) J Wat 410(7) Cash 362

ReturnsOutwards

$(12) J Wat 42

JWat

$ $(12) Returns outwards 42 (4) Purchases 410(29) Bank 368

LLee

$(10) Sales 218

Bank

$ $(2) Cash 7,000 (5) Van 4,920(24) Loan: F Ho 1,500 (29) J Wat 368

(31) Fun Ltd 820

Sales

$(10) L Lee 218(19) Cash 54


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Fixtures

$(22) Fun Ltd 820

Van

$(5) Bank 4,920

Loan:FHo

$(24) Bank 1,500

FunLtd

$ $(31) Bank 820 (22) Fixtures 820

Capital

$(1) Cash 7,400

Question 3-4A

Bank

$ $(1) Capital 18,000 (21) Printer 620(18) Cash 250 (29) B Hon 1,373

Cash

$ $(5) Sales 210 (18) Bank 250(12) Sales 305

BHon

$ $(6) Returns outwards 82 (2) Purchases 1,455(29) Bank 1,373

GSze

$ $(28) Returns outwards 47 (3) Purchases 472(8) Purchases 370

PSin

$ $(10) Sales 483 (23) Returns inwards 160


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HChan


AChoi

$(31) Machinery 419

Capital

$(1) Bank 18,000

Purchases

$(2) B Hon 1,455(3) G Sze 472(8) G Sze 370

Sales

$(5) Cash 210(10) P Sin 483(12) Cash 305(22) H Chan 394

ReturnsInwards

$(23) P Sin 160(25) H Chan 18

ReturnsOutwards

$(6) B Hon 82(28) G Sze 47

Machinery

$(31) A Choi 419

Printer $

(21) Bank 620


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Question 4-3A Dr

$ $Jul 1 Bank 5,000

Cash 1,000Capital 6,000

" 2 Stationery 75

Bank 75" 3 Purchases 2,100

T So 2,100

" 4 Cash 340Sales 340

" 5 Insurance 290Cash 290

" 7 Computer 700J Ho 700

" 8 Expenses 32Bank 32

" 10 C Bao 630Sales 630

" 11 T So 55Returns outwards 55

" 14 Wages 210Cash 210

" 17 Rent 225Bank 225

" 20 Bank 400C Bao 400

" 21 J Ho 700Bank 700

" 23 Stationery 125News Ltd 125

" 25 F Tang 645Sales 645

" 31 News Ltd 125Bank 125

Question 4-4A

Bank

$ $(1) Capital 11,000 (5) Stationery 62(24) K Fong 250 (16) Rates 970(28) Rates 45 (19) Rent 75

(28) J Leung 830(28) D Ma 415(28) B Bo 6,100


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Cash

$ $(1) Capital 1,600 (3) Purchases 370

(4) Rent 75(7) Wages 160(11) Rent 75(18) Insurance 280

(21) Motor expenses 24(23) Wages 170

Capital

$(1) Bank 11,000(1) Cash 1,600

Rent

$(4) Cash 75

(11) Cash 75(19) Bank 75

Wages

$(7) Cash 160(23) Cash 170

Stationery

$(5) Bank 62

Rates

$ $(16) Bank 970 (28) Bank 45

Insurance

$(18) Cash 280

Van

$(20) B Bo 6,100

MotorExpenses

$(21) Cash 24


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Purchases

$(2) J Leung 830(2) D Ma 610(2) P Lo 590(3) Cash 370

Sales$

(6) D To 370(6) B Ho 290(6) K Fong 410(15) T Lee 205(15) F Sin 280(15) G Man 426

ReturnsOutwards

$

(10) D Ma 195

ReturnsInwards

$(13) B Ho 35

JLeung

$ $(28) Bank 830 (2) Purchases 830

DMa


PLo

$(2) Purchases 590

BBo

$ $(28) Bank 6,100 (20) Van 6,100

DTo

$(6) Sales 370

BHo



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KFong

$ $(6) Sales 410 (24) Bank 250

TLee

$(15) Sales 205

FSin

$(15) Sales 280

GMan

$(15) Sales 426

Question 4-6A

(A) Goods bought on credit $27,000.

(B) Borrowed $35,000 and immediately spent it on land and buildings $35,000.

(C) Sold goods costing $20,000 for $30,000 on credit.

(D) Debtors paid $13,000.

(E) Debtors paid $2,000; this amount was taken by proprietors.

(F) Took $5,000 drawings by cheque and paid off $3,000 accrued expenses by cheque.

(G) Equipment costing $30,000 sold for $21,000 paid by cheque.

(H) Goods taken for own use $1,000.

(I) Took $6,000 cash as drawings. Could also be $6,000 cash stolen thus reducing cash and causing a loss.

Question 5-6A

GWoo

$ $(1) Sales 310 (19) Bank 310(21) Sales 90 (31) Balance c/d 90

400 400

(1) Balance b/d 90

KHung

$ $(1) Sales 42 (31) Balance c/d 633(8) Sales 161(21) Sales 430

633 633

(1) Balance b/d 633


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FDai

$ $(1) Sales 1,100 (10) Returns inwards 31(8) Sales 224 (19) Bank 750

(31) Balance c/d 5431,324 1,324

(1) Balance b/d 543

MLok


(12) Cash 227309 309

TSo


190 190

JLee

$ $(31) Balance c/d 278 (2) Purchases 63

(9) Purchases 215278 278

(1) Balance b/d 278

PTin

$ $(28) Bank 180 (2) Purchases 210(31) Balance c/d 30

210 210

(1) Balance b/d 30

FRuan

$ $(15) Returns outwards 21 (2) Purchases 190(28) Bank 100 (9) Purchases 164(31) Returns outwards 18

(31) Balance c/d 215354 354

(1) Balance b/d 215

Woo, Hung and Dai are debtors. Lee, Tin and Ruan are creditors.


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Question 5-7A

GWoo

Dr Cr Balance20X7 $ $ $May 1 Sales 310 310 Dr" 19 Bank 310 0

" 21 Sales 90 90 Dr

KHung

Dr Cr Balance20X7 $ $ $May 1 Sales 42 42 Dr" 8 Sales 161 203 Dr" 21 Sales 430 633 Dr

FDai

Dr Cr Balance

20X7 $ $ $May 1 Sales 1,100 1,100 Dr" 8 Sales 224 1,324 Dr" 10 Returns inwards 31 1,293 Dr" 19 Bank 750 543 Dr

MLok

Dr Cr Balance20X7 $ $ $May 1 Sales 309 309 Dr" 10 Returns inwards 82 227 Dr" 12 Bank 227 0

TSo

Dr Cr Balance20X7 $ $ $May 2 Purchases 190 190 Cr" 15 Returns outwards 15 175 Cr" 28 Bank 175 0

JLee

Dr Cr Balance

20X7 $ $ $May 2 Purchases 63 63 Cr" 9 Purchases 215 278 Cr

PTin

Dr Cr Balance20X7 $ $ $May 2 Purchases 210 210 Cr" 28 Bank 180 30 Cr


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FRuan

Dr Cr Balance20X7 $ $ $May 2 Purchases 190 190 Cr" 9 Purchases 164 354 Cr" 15 Returns outwards 21 333 Cr" 28 Bank 100 233 Cr

" 31 Returns outwards 18 215 Cr

Question 6-2A

Bank

$ $(1) Capital 15,000 (6) Rent 175(28) T Pok 71 (7) Rates 130(28) J Fan 42 (23) J Sin 272(30) Capital 900 (23) F Bo 1,200

(23) T Ren 500

(25) Van 6,200(30) Balance c/d 7,536

16,013 16,013

(1) Balance b/d 7,536

Cash

$ $(5) Sales 610 (17) Wages 290(26) Loan: B Ban 750 (30) Balance c/d 1,070

1,360 1,360


Purchases

$ $(3) J Sin 290 (30) Balance c/d 3,225(3) F Bo 1,200(3) T Ren 610(3) R Chen 530(19) R Chen 110(19) T Ren 320(19) F Jia 165

3,225 3,225



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Sales

$ $(30) Balance c/d 2,383 (5) Cash 610

(11) T Pok 85(11) J Fan 48(11) T Gao 1,640

2,383 2,383


Capital

$ $(30) Balance c/d 15,900 (1) Bank 15,000

(30) Bank 90015,900 15,900


Rent

$ $(6) Bank 175 (30) Balance c/d 175

(1) Balance b/d 175

Rates

$ $(7) Bank 130 (30) Balance c/d 130

(1) Balance b/d 130

Wages

$ $(17) Cash 290 (30) Balance c/d 290

(1) Balance b/d 290

ReturnsOutwards

$ $(30) Balance c/d 45 (18) J Sin 18

(18) R Chen 2745 45

(1) Balance b/d 45

ReturnsInwards

$ $(20) J Fan 6 (30) Balance c/d 20(20) T Pok 14

20 20

(1) Balance b/d 20


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Vans

$ $(21) Turnkey Motors 4,950 (30) Balance c/d 11,150(25) Bank 6,200

11,150 11,150


JSin


290 290

FBo

$ $(23) Bank 1,200 (3) Purchases 1,200

TRen

$ $(23) Bank 500 (3) Purchases 610(30) Balance c/d 430 (19) Purchases 320

930 930

(1) Balance b/d 430

RChen

$ $(18) Returns outwards 27 (3) Purchases 530(30) Balance c/d 613 (19) Purchases 110

640 640(1) Balance b/d 613

FJia

$ $(30) Balance c/d 165 (19) Purchases 165

(1) Balance b/d 165

TPok

$ $

(11) Sales 85 (20) Returns inwards 14(28) Bank 71

85 85

JFan


(28) Bank 4248 48


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TGao

$ $(11) Sales 1,640 (30) Balance c/d 1,640


TurnkeyMotors

$ $(30) Balance c/d 4,950 (21) Van 4,950


Loan:BBan

$ $(30) Balance c/d 750 (26) Cash 750

(1) Balance b/d 750

TrialBalanceasat30November20X7

Dr $ $Bank 7,536Cash 1,070Purchases 3,225Sales 2,383Returns outwards 45Returns inwards 20Capital 15,900 Vans Rent 175Rates 130

Wages R Chen 613T Ren 430F Jia 165T Gao 1,640Turnkey Motors 4,950Loan: B Ban 750

25,236 25,236


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Question 6-4A

EPak CorrectedTrialBalanceasat31December20X9

Dr Cr

$ $

Motor vehicles 30,000Office equipment 10,000Sales 402,400Purchases 287,220Sales returns 1,460Purchases returns 390Carriage inwards 200Carriage outwards 780 Wages Insurance 3,000Rent and rates 5,270Lighting and heating 4,810

Drawings 35,000Commission received 2,410Bank overdraft 26,400Cash in hand 150Motor vehicle expenses 7,070General expenses 5,300Capital 32,700Debtors 52,800Creditors 23,950

488,250 488,250

Question 7-3A

BMui TradingandProfitandLossAccountfortheyearended31December20X8

$ $Sales 235,812 Less Cost of goods sold:

Purchases 121,040 Less Closing inventory (14,486) (106,554)Gross profit 129,258

Less Expenses:Salaries 39,560Rates 2,400Motor expenses 910General expenses 305Insurance 1,240 (44,415)

Net profit 84,843


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Question 7-4A

GGo TradingandProfitandLossAccountfortheyearended30June20X8

$ $Sales 382,420

Less Cost of goods sold:Purchases 245,950 Less Closing inventory (29,304) (216,646)Gross profit 165,774 Less Expenses:

Salaries and wages 48,580Equipment rental 940Insurance 1,804Lighting and heating 1,990Motor expenses 2,350Sundry expenses 624 (56,288)

Net profit 109,486

Question 8-3A

BMui BalanceSheetasat31December20X8

$ $Fixed assets

Premises 53,000Car 4,300 57,300

Current assetsInventory 14,486Debtors 21,080Bank 2,715Cash 325


Creditors (11,200) 27,40684,706

Capital

Balance at 1.1.20X8 23,263

Add Net profit 84,843108,106

Less Drawings (23,400)84,706


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Question 8-4A GGo BalanceSheetasat30June20X8

$ $Fixed assets

Building 174,000Fixtures 4,600

Lorry 19,400 198,000Current assets

Inventory 29,304Debtors 44,516Bank 11,346


Creditors (23,408) 61,758259,758

Capital

Balance at 1.7.20X7 194,272

Add Net profit 109,486303,758


Question 8-6A GHung BalanceSheetasat30June20X9

$ $ $Fixed assets

Office equipment 5,000Motor vehicles 5,400 10,400

Current assets

Inventory 6,900Debtors 16,255Cash in hand 55


Creditors 10,930Bank overdraft 3,230 (14,160)

Net current assets 9,050

19,450Less Long-term bank loan (2,000)17,450

Capital

Balance as at 1.7.20X8 12,000Add Net profit 34,250

46,250Less Drawings (28,800)

17,450


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Question 8-8A

Capital at 1 January 20X9

= $(18,000 + 4,800 + 24,000 + 760 + 15,600 8,000 6,000)

= $49,160

Capital at 31 December 20X9

= $(16,200 + 5,800 + 28,000 + 240 + 4,600 + 16,000 11,000 2,000)= $57,840

$Increase in capital ($57,840 $49,160) 8,680Add Drawings ($200 52) 10,400

19,080Less Capital introduced (4,000)Net profit 15,080

ATrader

BalanceSheetasat31December20X9

$ $Fixed assets

Fixtures 16,200Motor vehicle 16,000 32,200

Current assets

Inventory 28,000Debtors 5,800Bank 4,600Cash 240

38,640

Less Current liabilitiesCreditors (11,000) 27,640

59,840 Less Long-term liabilities

Loan from B Bao (2,000)57,840

Capital account

Balance at 1 January 20X9 49,160Add Capital introduced 4,000

Net profit 15,08068,240



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Question 9-2A

SunnyRayCompany TradingandProfitandLossAccountfortheyearended31December20X2

$ $ $Sales 180,000 Less Cost of goods sold:

Inventory as at 31 December 20X1 70,000 Add Purchases 119,000 Less Returns outwards (12,000) 107,000

177,000Carriage inwards 1,500

178,500 Less Inventory as at 31 December 20X2 (80,000) (98,500)Gross profit 81,500 Less Expenses:

Wages 15,000Insurance 2,000Rent 6,000

Office expenses 2,500Lighting 3,000Printing 4,000Stationery 1,000Carriage outwards 4,500 (38,000)

Net profit 43,500

Question 9-5A

TFong

TradingandProfitandLossAccountfortheyearended31March20X9$ $ $

Sales 276,400 Less Cost of goods sold:

Opening inventory 52,800 Add Purchases 141,300 Less Returns outwards (2,408) 138,892

Carriage inwards 1,350193,042

Less Closing inventory (58,440) (134,602)Gross profit 141,798 Less Expenses:

Wages and salaries 63,400Carriage outwards 5,840Rates 3,800Communication expenses 714Commissions paid 1,930Insurance 1,830Sundry expenses 208 (77,722)

Net profit 64,076


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BalanceSheetasat31March20X9

$ $Fixed assets

Buildings 125,000Fixtures 1,106 122,106

Current assets

Inventory 58,440

Debtors 45,900Bank 31,420Cash 276


Creditors (24,870) 111,166237,272

Capital

Balance at 1.4.20X8 210,516Add Net profit 64,076

274,592


Question 9-6A

BChan TradingandProfitandLossAccountfortheyearended30September20X8

$ $ $Sales 391,400Less Returns inwards (2,110) 389,290 Less Cost of goods sold:

Opening inventory 72,410 Add Purchases 254,810 Less Returns outwards (1,240) 253,570

Carriage inwards 760326,740

Less Closing inventory (89,404) (237,336)Gross profit 151,954 Less Expenses:

Wages and salaries 39,600Carriage outwards 2,850

Motor expenses 1,490Rent 8,200Telephone charges 680Insurance 745Office expenses 392Sundry expenses 216 (54,173)

Net profit 97,781


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BalanceSheetasat30September20X8

$ $Fixed assets

Van Office equipment 7,470 13,120

Current assets

Inventory 89,404

Debtors 38,100Bank 4,420Cash 112


Creditors (26,300) 105,736118,856

Capital

Balance as at 1.10.20X7 49,675Add Net profit 97,781

147,456


Question 9-8A

(a)(b) Capital

$Jul 1 Balance b/d 9,700

Inventory

$Jul 1 Balance b/d 5,000

OKLtd

$ $Jul Bank 3,000 Jul 1 Balance b/d 500" 31 Balance c/d 1,400 Purchases 3,900

4,400 4,400

Aug 1 Balance b/d 1,400

ABLtd $ $

Jul 1 Balance b/d 300 Jul Bank 300Sales 600 " 31 Balance c/d 600

900 900

Aug 1 Balance b/d 600


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Equipment

$ $Jul 1 Balance b/d 3,700 Jul 31 Balance c/d 3,700


Bank

$ $Jul 1 Balance b/d 1,200 Jul OK Ltd 3,000

Sales 3,200 General expenses 500AB Ltd 300 " 31 Balance c/d 1,200

4,700 4,700


Sales

$ $Jul 31 Balance c/d 3,800 Jul Bank 3,200

AB Ltd 600

3,800 3,800Aug 1 Balance b/d 3,800

Purchases

$ $Jul OK Ltd 3,900 Jul 31 Balance c/d 3,900


GeneralExpenses

$ $

Jul Bank 500 Jul 31 Balance c/d 500 Aug 1 Balance b/d 500

(c) MsChu TrialBalanceasat31July

Dr $ $

Equipment 3,700Inventory 5,000Bank 1,200General expenses 500

Purchases 3,900 AB Ltd OK Ltd 1,400Sales 3,800Capital 9,700

14,900 14,900


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(d) TradingandProfitandLossAccountforJuly


Opening inventory 5,000 Add Purchases 3,900

8,900

Less Closing inventory (6,200) (2,700)Gross profit 1,100Less General expenses (500)Net profit 600

(e) BalanceSheetasat31July

$ $Fixed assets

Equipment 3,700

Current assets

Inventory 6,200

Debtor 600Bank 1,200

8,000 Less Current liability

Creditor (1,400) 6,60010,300

Capital 9,700Add Net profit 600

10,300

Question 10-6A

(a) Accruals concept

The accruals concept states that revenues and expenses are recognised in the profit and loss account in theperiod in which they have been earned, and not when they are received or paid. It also means thatrevenues should be matched against the expenses incurred in earning those revenues.

Example: Telephone bills received for the month of December 20X7 but not paid by year end are to berecognised as expenses for the year ended 31 December 20X7 and matched against revenuesearned during that year.

(b) Money measurement concept

The money measurement concept states that accounting is concerned only with transactions that can bemeasured in monetary units, and that general agreement can be obtained in respect of the monetary valuesof such transactions.

Example: Accounting can record the value of a motor vehicle but not the value of quality management orgood labour relations, even though such an asset can bring benefits to the business throughhigher profits.


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(c) Substance over form concept

When the legal form of a transaction differs from its real substance, accounting should show the transactionin accordance with its real substance, that is, how the transaction affects the economic situation of thebusiness, so long as it is legally permissible to do so.

Example: Machinery acquired under a financial lease will be recorded as an asset with an associatedliability, even though the legal ownership of the machinery does not pass to the lessee until thelessee has made the final instalment payment under the lease agreement.

(d) Consistency conceptThe consistency concept states that when a business has once fixed a method for the accounting treatmentof an item, it will enter all similar items that follow in exactly the same way from one period to another. Themethod used can be changed if it can be demonstrated that the change will result in a more appropriatepresentation of events or transactions, or is required by a new accounting standard.

Example: The depreciation methods and rates adopted for different classes of fixed assets should remain thesame from one period to another unless there are compelling reasons to change them.

(e) Duality concept

The duality concept means that there are two aspects of accounting, one represented by the assets of thebusiness and the other by the claims against it. These two aspects are always equal to each other.

Example: The payment of cash to a trade creditor requires the recording of a decrease in trade creditorsbalance and an equal decrease in cash.

(f) Prudence concept

The prudence concept ensures that financial statements are neutral, that is, gains and losses are neitheroverstated nor understated. For revenues or gains, they should not be anticipated and recorded in the booksunless their realisation is reasonably certain. For expenses or losses, they should be anticipated andprovided for, even if exact amounts are not available.

Example: In inventory valuation, if the net realisable value of inventory is higher than the cost, the gain willnot be recognised until the inventory is sold. On the other hand, if the net realisable value islower than the cost, the loss will be recognised immediately.

Question 11-2A

NameofAccount (a)TypeofAccount (b)Balance

Drawings Personal Debit

Furniture Real Debit

Rent Nominal Debit

Sales Nominal Credit

William Ng (supplier) Personal Credit

Discounts allowed Nominal Debit

Dickson Lo (customer) Personal Debit

Cash Real Debit

HSBC (overdraft) Personal Credit


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Question 13-2A

CashBook

Cash Bank Cash Bank$ $ $ $

(1) Balances b/d 295 4,240 (3) Bank 200

(2) Sales 310 (5) Postage 80(3) Cash 200 (6) Office equipment 310(4) F Bei 194 (7) L Kan 94(9) Rates 115 (11) Cash 150(11) Bank 150 (12) Wages 400(13) Sales 430 (14) Motor expenses 81(16) J Chow (loan) 1,500 (28) General expenses 35(20) K Wu 174 (30) Insurance 320

(30) Balances c/d 1,970 3,9682,685 4,923 2,685 4,923

Question 13-4A

CashBook

Discount Cash Bank Discount Cash B$ $ $ $ $ $

(1) Balances b/d 420 4,940 (5) Rent 340(2) S Ba 41 779 (6) M Poon 9 351(2) L Ping 16 304 (6) G Guo 24 936(2) G Ho 22 418 (6) F Bo 10 390(2) M Ren 52 988 (8) Cash 400(3) Sales 740 (14) Wages 540(8) Bank 400 (16) R To 15 295(10) Sales 1,260 (16) F Du 12 400(12) B Au 4 276 (20) Fixtures 4,320(29) A Lin 324 (24) Lorry 14,300(30) Sales 980 (30) Stationery 56(30) Balance c/d 12,623 (30) Balance c/d 2,124

135 3,060 21,392 70 3,060 21,392

DiscountsAllowed

$

(30) Total for the month 135

DiscountsReceived

$(30) Total for the month 70


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Question 13-6A

(a) CCheng CashBook

Discount Cash Bank Discount Cash B20X9 $ $ $ 20X9 $ $ $

May 1 Balance b/d 400 May 1 Balance b/d 14,000" 3 D Hui 80 3,920 " 1 Travelling" 10 Sales 1,800 expenses 60" 11 Sales 300 " 4 Petty cash" 29 S Kam 1,400 book 100" 31 Balance c/d 19,784 " 5 Telephone 820

" 6 B Li 32 3,168" 9 Salaries 1,750" 11 Purchases 200" 12 Jayson Lo 34 1,666" 16 Rent 1,650" 17 Stamps 100

" 23 Wages 1,850" 25 Drawings 140" 28 Overdraft

interest 500" 31 S Kam:

dishonouredcheque 1,400

" 31 Balance c/d 20080 700 26,904 66 700 26,904

Jun 1 Balance b/d 200 Jun 1 Balance b/d 19,784

(b)General Ledger DiscountsAllowed

20X9 $May 31 Total for the month 80

DiscountsReceived

20X9 $May 31 Total for the month 66

(c)Sales Ledger

SKam 20X9 $ 20X9 $May 1 Balance b/d 1,400 May 29 Bank 1,400

" 31 Bank: Dishonoured cheque 1,400 " 31 Balance c/d 1,400

Jun 1 Balance b/d 1,400


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Question 14-2A

(a)Invoice summaries: APoon

$22 metres plastic tubing $10 220

6 sheets foam rubber $30 1804 boxes vinyl padding $50 200600

Less Trade discount 25% (150)450

BKong

$50 lengths polythene sheeting $20 1,0008 boxes vinyl padding $50 40020 sheets foam rubber $30 600

2,000Less Trade discount 20% (400)

1,600

ALai

$4 metres plastic tubing $10 4033 lengths polythene sheeting $20 66030 sheets foam rubber $30 900


1,200

LMao

$29 metres plastic tubing $10 290

MAu

$32 metres plastic tubing $10 32024 lengths polythene sheeting $20 48020 boxes vinyl padding $50 1,000

1,800

Less Trading discount 33 13% (600)1,200


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(b) SalesDayBook

$ Jun 1 A Poon

" 5 B Kong 1,600" 11 A Lai 1,200" 21 L Mao 290" 30 M Au 1,200

4,740

Sales Ledger APoon

20X9 $Jun 1 Sales 450

BKong

20X9 $Jun 5 Sales 1,600

ALai 20X9 $Jun 11 Sales 1,200

LMao

20X9 $Jun 21 Sales 290

MAu

20X9 $Jun 30 Sales 1,200

(c)General Ledger Sales

20X9 $Jun 30 Total for the month 4,740

Question 15-2A

Workings: Invoices

FDai $

2 sets golf clubs $800 1,6005 footballs $40 200


1,350


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GSo

$6 cricket bats $60 3606 ice skates $35 2104 rugby balls $30 120

690Less Trade discount 20% (138)

552

FHo

$6 sets golf trophies $90 5404 sets golf clubs $900 3,600

4,140Less Trade discount 33 13% (1,380)

2,760

LTo

$5 cricket bats $52 260Less Trade discount 25% (65)

195

MMo

$8 goal posts $80 640Less Trade discount 40% (256)

384

(a) PurchasesDayBook $

(2) F Dai 1,350(11) G So 552(18) F Ho 2,760(25) L To 195(30) M Mo 384

5,241

(b)Purchases Ledger FDai

$(2) Purchases 1,350

GSo

$(11) Purchases 552


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FHo

$(18) Purchases 2,760

LTo

$(25) Purchases 195

MMo

$(30) Purchases 384

(c)General Ledger Purchases

$(30) Total for the month 5,241

Question 15-4A

(a) PurchasesDayBook

$(9) C Choy 240(16) A Chan 160(31) M Nam 50

450

SalesDayBook

$(1) M Ma 45(7) R Lau 200(23) T Young 160

405

(b)Purchases Ledger CChoy

$(9) Purchases 240

AChan$

(16) Purchases 160

MNam

$(31) Purchases 50


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Sales Ledger MMa

$(1) Sales 45

RLau

$

(7) Sales 200

TYoung

$(23) Sales 160

(c)General Ledger Purchases


Sales


Question 16-2A

SalesDayBook

$(3) E Cha 510

(3) E Pat 246(3) F Tung 356(8) A Go 307(8) H Guo 250(8) J Fung 185(20) E Pat 188(20) F Pao 310(20) E Lee 420

2,772

ReturnsInwardsDayBook

$(14) E Pat 18(14) F Tung 22(31) E Pat 27(31) E Cha 30

97


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PurchasesDayBook

$(1) K Ho 380(1) M Ko 500(1) N So 106(5) R Mo 200(5) J Chan 180

(5) D Eu 410(5) C Du 66(24) C Fung 550(24) K Cheung 900

3,292

ReturnsOutwardsDayBook

$(12) M Ko 30(12) N So 16(31) J Chan 13(31) C Du 11

70

Sales Ledger ECha


EPat

$ $(3) Sales 246 (14) Returns inwards 18(20) Sales 188 (31) Returns inwards 27

FTung


AGo

$(8) Sales 307

HGuo

$(8) Sales 250

JFung

$(8) Sales 185


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FPao

$(20) Sales 310

ELee

$(20) Sales 420

Purchases Ledger

KHo

$(1) Purchases 380

MKo

$ $(12) Return outwards 30 (1) Purchases 500

NSo

$ $(12) Return outwards 16 (1) Purchases 106

RMo

$(5) Purchases 200

JChan

$ $(31) Returns outwards 13 (5) Purchases 180

DEu

$(5) Purchases 410

CDu

$ $(31) Returns outwards 11 (5) Purchases 66

CFung

$(24) Purchases 550

KCheung

$(24) Purchases 900


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General Ledger Sales


ReturnsInwards

$

(31) Total for the month 97

Purchases


ReturnsOutwards


Question 16-4A

(a) KKing SalesDayBook

Invoice No Details Amount

20X9 $ $Jun 2 M Chan 1,100 Less 15% trade discount 369 (165) 935

" 9 N Sin 370 400

" 13 E Lam 2,000 Less 20% trade discount 372 (400) 1,600

" 16 R Man 550 Less 10% trade discount 376 (55) 495

" 24 J Kung 4,300 Less 20% trade discount 381 (860) 3,440

" 26 M Chan 1,600 Less 20% trade discount 384 (320) 1,280

" 30 Transferred to sales account 8,150

SalesReturnsDayBook

Note No Details Amount

20X9 $ $Jun 23 M Chan 100 Less 15% trade discount 50 (15) 85

" 29 N Sin 51 70

" 30 Transferred to sales returns account 155


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(b)General Ledger Sales

20X9 $Jun 30 Total for the month 8,150

SalesReturns

20X9 $

Jun 30 Total for the month 155

(c)Sales Ledger MChan

20X9 $ 20X9 $Jun 1 Balance b/d 830.00 Jun 23 Sales returns 85.00" 2 Sales 935.00 " 30 Bank 2,841.60" 26 Sales 1,280.00 " 30 Discount ($2,960 4%) 118.40

3,045.00 3,045.00

Question 17-3A20X7 $ $ Apr 1 Fixtures Dr 180,900 : J Ha Cr 180,900

" 4 Drawings Dr 50,000 : Purchases Cr 50,000" 9 Purchases Dr 2,800 : Drawings Cr 2,800" 12 Office equipment Dr 50,000 : K Lam Cr 50,000" 18 J Ha Dr 6,500 : Fixtures Cr 6,500" 24 Cash Dr 6,800 : J Chan Cr 6,800" 30 Office equipment Dr 219,000 : Super Offices Cr 219,000

Question 17-5A

TheJournal

Dr $ $

1 Computer 26,800Hi-Tech Co 26,800

2 Drawings 2,000Cash 2,000

3 Computer software 1,250

Licence fee 500A-Tech Company 1,750

4 Cash 600Jackson Lee 600

5 Motor car (new) 130,000Motor car (old) 20,000Grandrace Motors 110,000


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Dr $ $

6 Sure Win Co 8,000Full Gain Co 8,000

7 Bellson Ltd 3,000Office fixtures 3,000

8 Drawings 3,500

Purchases 2,000Cash 1,500

Question 18-3A

(a) LeonLeung PettyCashBook

Voucher Motor Car Postage &Receipts Date Details No Total Expenses Travelling Cleaning Stationery Ledger

$ 20X7 $ $ $ $ $ $60.00 Aug 1 Balance b/d

440.00 " 1 Bank" 3 Cleaners wages 334 40.00 40.00" 4 Stamps 335 24.00 24.00" 5 A Lee

creditor 336 16.50 16.50" 7 Ball pens 337 12.00 12.00" 9 Petrol 338 30.00 30.00" 11 Motor car

accessories 339 50.20 50.20" 13 Envelopes 340 12.90 12.90

" 14 Taxi fares 341 20.00 20.00" 17 Cleaners wages 342 80.00 80.00" 19 MTR fares 343 35.00 35.00" 23 Petrol 344 32.00 32.00" 27 Dennis Kong

creditor 345 63.20 63.20" 28 Cleaning

materials 346 55.00 55.00470.80 112.20 55.00 175.00 48.90 79.70

" 31 Balance c/d 29.20500.00 500.00

29.20 Sept 1 Balance b/d

(b)Purchases Ledger DennisKong

20X7 $ 20X7 $ Aug 27 Petty cash 63.20 Aug 1 Balance b/d 63


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Question 18-4A

(a) HenryLo PettyCashBook

Voucher Postage &

Receipts Date Details No Total Cleaning Stationery Travelling Ledger

$ 20X8 $ $ $ $ $ $244.80 Jan 1 Balance b/d755.20 " 1 Bank

" 1 Floor cleaning 718 75.60 75.60" 3 Box files and pencils 719 113.60 113.60" 6 Taxi fares 720 131.40 131.40" 9 Ferry fares 721 32.60 32.60" 9 Reimbursement of taxi

18.00 fares by staff " 13 M Ho creditor 722 32.00 32.00" 14 Cleaners wages 723 320.00 320.00" 22 MTR fares 724 54.00 54.00

" 25 Stamps 725 24.00 24.00" 27 Photocopy paper 726 30.00 30.00" 29 Paul Chan creditor 727 52.00 52.00

10.00 " 31 Box files sold to staff 865.20 395.60 167.60 218.00 84.00

" 31 Balance c/d 162.801,028.00 1,028.00

162.80 Feb 1 Balance b/d837.20 " 1 Bank

(b)General Ledger

Travelling

20X8 $ 20X8 $Jan 1 Balance b/d 5,200.00 Jan 9 Petty cash 18.00" 31 Petty cash 218.00 " 31 Balance c/d 5,400.00

5,418.00 5,418.00

PostageandStationery

20X8 $ 20X8 $Jan 1 Balance b/d 512.00 Jan 31 Petty cash 10.00" 31 Petty cash 167.60 " 31 Balance c/d 669.60

679.60 679.60

(c) The cashier responsible for the payment of petty cash claims should undertake a check of supportingvouchers related to such expense claims.


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Question 19-3A

(a) ColumnarPurchasesDayBook CPDB 1

Computer Audio & Video Household Date Name of Business Total Accessories Accessories Applian

20X6 $ $ $ $

Jan 1 AB Ltd 430 430" 4 JY Co 1,600 1,600" 6 DY Co 2,400 2,400" 6 MN Co 1,800 1,800" 6 EG Ltd 800 800" 8 AB Ltd 900 900" 15 Hi-Tech Ltd 96 96" 17 Hi-Tech Ltd 102 102" 19 Soundbest Co 430 430" 21 Comlink Co 850 850

9,408 3,780 628 5,000

ColumnarSalesDayBook CSDB 1

Computer Audio & Video Household

Date Name of Business Total Accessories Accessories Applian

20X6 $ $ $ $Jan 9 Albert Yu Co 570 570" 9 TST Co 87,000 87,000" 13 HKSC Ltd 1,200 1,200" 20 F Luk Co 170 170" 25 Belford Co 260 260" 25 Longlife Ltd 180 180" 26 Eatwell Restaurant 2,600 2,600

" 29 Beauty Co 490 49092,470 87,750 1,630 3,090

(b)General Ledger Purchases:ComputerAccessories

20X6 $Jan 31 Total for the month CPDB 1 3,780

Purchases:AudioandVideoAccessories

20X6 $Jan 31 Total for the month CPDB 1 628

Purchases:HouseholdAppliances

20X6 $Jan 31 Total for the month CPDB 1 5,000

Sales:ComputerAccessories

20X6 $Jan 31 Total for the month CSDB 1 87,750


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Sales:AudioandVideoAccessories


Sales:HouseholdAppliances


Question 19-4A

GGoh PurchasesAnalysisBook

Lighting & Motor CarriageTotal Purchases Telephone Heating Expenses Stationery Inwards

20X8 $ $ $ $ $ $ $ Aug 1 J So 108 108" 3 T Ho 210 210" 4 BT 65 65" 5 F Lo 195 195" 6 Topp Garages 265 265" 8 Gilly Shop 19 19" 10 Topp Garages 364 364" 12 PowerNorth Ltd 39 39" 15 G Fang 181 181" 17 B&T Ltd 13 13" 18 T Pao 222 222" 19 Overnight

Couriers Ltd 46 46

" 21 J Mo 12 12" 23 H Kan 193 193" 27 PMP Ltd 38 38" 31 Topp Garages 66 66

2,036 1,109 65 52 695 31 84

Question 22-2A

Capital: a, c, f.

Revenue: b, d, e, g.

Question 22-4A

See text for how to distinguish between capital and revenue expenditure.

(a) Cost of repairs is always revenue; an extension to an asset is always capital.

(b) This is capital expenditure in the same way as buying a van to replace a van is capital expenditure.

(c) This is capital expenditure because the asset was improved by the expenditure.


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Question 22-7A

(a) Revenue (g) Capital

(b) Revenue (h) Revenue

(c) Capital (i) Revenue

(d) Revenue (j) Capital

(e) Capital (k) Revenue

(f) Revenue (l) Capital

Question 22-10A

(a) Capital (f) Capital

(b) Revenue (g) Revenue

(c) Revenue (h) Revenue

(d) Revenue (i) Capital

(e) Capital

Question 22-11A

(a) Premises

$ $Balance b/d 521,100 Balance c/d 782,100Survey fees 1,500Legal fees 3,000Cost of site 90,000 Architects fees 8,700

Subcontractor charges 69,400Transfer from wages 11,600Stock of materials used 76,800

782,100 782,100

Plant

$ $Balance b/d 407,500 Balance c/d 608,360 Vendor of Press A 87,300Transport cost (Press A) 2,900Installation costs (Press A) 2,310 Vendor of Press B 105,800Installation costs (Press B) 2,550

608,360 608,360

(b) Cash discount of 2% on Press A. Connected with financing and not the cost of plant. Similarly, debentureinterest is not applicable. The $4,700 demolition cost, and $1,400 plus $1,750 cost of hiring lifting gear arenot shown separately as they are included in other figures used above.


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Question 22-13A

$ $(a) Computers 7,000

Cabling 300Installation 500

7,800 Less Cash discount (2 12%) (195) 7,605

Printers (3 $125) 375Software 350Amount capitalised 8,330

$Amount charged to revenue:Consumables ($250 $50) 200Training 500

700

(b) When an amount is not considered to be material i.e. it is not of interest to the users of the financialstatements it may be treated as a revenue expense rather than being capitalised. In this case, it might be

considered that the cost of the cabling ($300 212% = $292.50) was not material the business may, for

example, use $300 as the minimum amount to be capitalised, anything costing less than this being treated asa revenue expense.

Question 23-4A

(a) BadDebts

20X7 $ 20X7 $Dec 31 Various debts 1,240 Dec 31 Profit and loss 1,240

20X8 20X8Dec 31 Various debts 2,608 Dec 31 Profit and loss 2,60820X9 20X9Dec 31 Various debts 5,424 Dec 31 Profit and loss 5,424

(b) ProvisionforDoubtfulDebts

20X7 $ 20X7 $Dec 31 Balance c/d 1,640 Dec 31 Profit and loss ($41,000 4%) 1,64020X8 20X8Dec 31 Balance c/d ($76,000 6%) 4,560 Jan 1 Balance b/d 1,640

Dec 31 Profit and loss 2,920

4,560 4,56020X9 20X9Dec 31 Profit and loss 160 Jan 1 Balance b/d 4,560" 31 Balance c/d ($88,000 5%) 4,400

4,560 4,560


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(c) BalanceSheet(extracts)

20X7 20X8 20X9$ $ $ $ $ $

Debtors 41,000 76,000 88,000Less Provision for doubtful debts (1,640) 39,360 (4,560) 71,440 (4,400) 83,600

Question 23-6A

(a) JournalEntries

Dr 20X3 $ $

(2) Dec 31 Bad debts 2,500Mr Chan (debtor) 2,500

(3) Dec 31 Profit and loss ($250,000 5%) 12,500Provision for doubtful debts 12,500

20X4(4) Mar 5 Mr Chan (debtor) 2,500

Bank 2,500Bad debts recovered 2,500Mr Chan (debtor) 2,500

(5) Dec 27 Bad debts 1,225Mr Wong (debtor) 1,225

(6) Dec 31 Provision for doubtful debts 4,100Profit and loss ($12,500 $420,000 2%) 4,100

(b)(i) ProfitandLossAccountExtractfortheyearended31December20X4

$

Other incomeDecrease in provision for doubtful debts 4,100Bad debts recovered 2,500Operating expenses

Bad debts 1,225

(ii) BalanceSheetExtractasat31December20X4

$Current assets

Debtors 420,000Less Provision for doubtful debts (8,400)

411,600

(c) (i) Creating a provision for doubtful debts can avoid overstating profits and debtors. (Prudence concept)

(ii) Creating a provision for doubtful debts can relate any loss for the period with the related sales in thesame period. (Matching concept)


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Question 23-8A

(a) DebtorsLedgerControlAccount

20X2 $ 20X3 $Apr 1 Balance b/d 1,069,000 Mar 31 Returns inwards 18,60020X3 " 31 Bank ($1,350,000 $35,000) 1,315,000

Mar 31 Sales (balance) 1,418,600 " 31 Discounts allowed 96,000" 31 Bad debts 2,500" 31 Creditors ledger control: Set off 87,500" 31 Balance c/d 968,000

2,487,600 2,487,600

(b) ProvisionforDoubtfulDebtsAccount

20X3 $ 20X2 $Mar 31 Profit and loss 11,100 Apr 1 Balance b/d 30,420" 31 Balance c/d (W1) 19,320

30,420 30,420

(c) BadDebtsAccount

20X3 $ 20X3 $Mar 31 Debtors ledger control 2,500 Mar 31 Profit and loss 2,500

(d) ProvisionforCashDiscountsAllowedAccount

20X3 $ 20X2 $Mar 31 Balance c/d ($500,000 99% 2%) 9,900 Apr 1 Balance b/d 8,000

20X3Mar 31 Profit and loss 1,900

9,900 9,900

(e) DiscountsAllowedAccount

20X3 $ 20X3 $Mar 31 Debtors ledger control 96,000 Mar 31 Profit and loss 96,000

(f) BadDebtsRecoveredAccount

20X3 $ 20X3 $Mar 31 Profit and loss 35,000 Mar 31 Bank 35,000


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(W1) Provision for doubtful debts as at 31 March 20X3Estimated

percentage Provision

Period debt owing Amount doubtful

$ % $Less than 1 month 500,000 1 5,0001 month to 2 months 280,000 2 5,6002 to 3 months 124,000 3 3,720

3 to 6 months 28,000 5 1,400Over 6 months 36,000 10 3,600

968,000 19,320

Question 24-4A

(a) Straight line $Photocopier cost 23,000Yr 1 Depreciation (4,750)*

18,250Yr 2 Depreciation (4,750)



4,000

*Calculation: $23,000 $4,0004 =$19,000

4 = $4,750

Question 24-5A

(a) Reducing balance $

Printer cost 800Yr 1 Depreciation (60% of $800) (480)

320Yr 2 Depreciation (60% of $320) (192)




8

(b) Straight line $Printer cost 800

Yr 1 Depreciation (160)*640

Yr 2 Depreciation (160)480



Yr 5 Depreciation (160)

*Calculation: $8005 = $160

(b) Reducing balance $Photocopier cost 23,000Yr 1 Depreciation (35% of $23,000) (8,050)

14,950Yr 2 Depreciation (35% of $14,950) (5,233)



4,105


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Question 24-6A

(a) Reducing balance $Bus cost 56,000Yr 1 Depreciation (25% of $56,000) (14,000)


31,500

Yr 3 Depreciation (25% of $31,500) (7,875)23,625

Yr 4 Depreciation (25% of $23,625) (5,906)17,719

(b) Straight line $Bus cost 56,000Yr 1 Depreciation (9,500)*




18,000

*Calculation: $56,000 $18,0004 =$38,000

4 = $9,500

Question 24-10A

(a) (i) Straight line: $100,000 $20,000 = $80,000 4 = $20,000 depreciation per year.

Cost / NBV Depreciation NBV

$ $ $31.12.20X3 100,000 20,000 80,00031.12.20X4 80,000 20,000 60,00031.12.20X5 60,000 20,000 40,000

(ii) Reducing balance: Percentage = 1 $20,000$100,000

4

= 33%

Cost / NBV Depreciation NBV

$ $ $31.12.20X3 100,000 33,000 67,00031.12.20X4 67,000 22,110 44,89031.12.20X5 44,890 14,814 30,076

(b) Straight line Reducing balance$ $Sale proceeds 45,000 45,000Balance b/d at 1.1.20X6 (40,000) (30,076)Gain on sale 5,000 14,924


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(c) See text. Straight line is more appropriate when the economic benefits of using an asset reduce evenly overits useful economic life, such as in the case of office furnishings which will deteriorate gradually throughwear and tear. Reducing balance is more appropriate when the economic benefits of using an asset reducerapidly from the start, such as in the case of a motor vehicle the cost of maintaining it, for example, isvery low at the start and, generally, higher the longer it is in use.

(d) Net book value represents an estimate of the remaining economic value of an asset expressed financially ona basis which is usually directly related to its original cost, original estimate of its residual value, andoriginal estimated useful economic life.

Question 24-11A

Forklift trucksA B C D

Bought 1.1.20X3 2,40020X3 Depreciation 30% for 9 months (540)

1,860Bought 1.5.20X4 2,500

20X4 Depreciation 30% $1,860 (558)

30% for 5 months (313)1,302 2,187Bought 1.10.20X4 3,200

20X5 Depreciation 30% $1,302 (391)30% $2,187 (656)30% for 12 months (960)

911 1,531 2,240Bought 1.4.20X6 3,600

20X6 Depreciation 30% $911 (273)30% $1,531 (459)30% $2,240 (672)30% for 6 months (540)

638 1,072 1,568 3,060

20X6 Total depreciation provision = $(273 + 459 + 672 + 540) = $1,944

Question 25-3A

(a) Machinery

20X5 $ 20X5 $Jan 1 Bank 2,800 Dec 31 Balance c/d 2,80020X6 20X6Jan 1 Balance b/d 2,800 Dec 31 Balance c/d 6,300Oct 1 Bank 3,500

6,300 6,300


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(b) Fixtures

20X5 $ 20X5 $Jan 1 Bank 290 Dec 31 Balance c/d 910

Jul 1 Bank 620910 910

20X6 20X6Jan 1 Balance b/d 910 Dec 31 Balance c/d 1,040

Dec 1 Bank 1301,040 1,040

(c) ProvisionforDepreciation:Machinery

20X5 $ 20X5 $Dec 31 Balance c/d 420 Dec 31 Profit and loss ($2,800 15%) 42020X6 20X6Dec 31 Balance c/d 1,302 Jan 1 Balance b/d 420

Dec 31 Profit and loss 882*1,302 1,302

$*$(2,800 420) 15% = 357$3,500 15% = 525

882

ProvisionforDepreciation:Fixtures

20X5 $ 20X5 $Dec 31 Balance c/d 46 Dec 31 Profit and loss ($910 5%) 4620X6 20X6Dec 31 Balance c/d 96 Jan 1 Balance b/d 46

Dec 31 Profit and loss 50*96 96

$*$(910 46) 5% = 43.20$130 5% = 6.50

49.70 rounded to $50.

(d) BalanceSheets(extracts)

$ $31 December 20X5

Machinery at cost 2,800Less Accumulated depreciation (420) 2,380

Fixtures at cost 910Less Accumulated depreciation (46) 864

31 December 20X6

Machinery at cost 6,300Less Accumulated depreciation (1,302) 4,998Fixtures at cost 1,040Less Accumulated depreciation (96) 944


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Question 25-7A

Workings:$

AAT 101 Cost Less Estimated residual value (2,500)

Estimated total depreciation 6,000

Estimated life: 5 yearsDepreciation charge per year 1,200

$

Accumulated depreciation at 1.4.20X6 (2 years 6 months $1,200 p.a.) 3,000Depreciation 1.4.20X6 to 30.6.20X6 (3 months $1,200 p.a.) 300Depreciation to 30.6.20X6 3,300Cost was 8,500Written-down value on disposal 5,200Trade-in allowance (5,000)Loss on disposal 200

$DJH 202 Cost 12,000 Less Estimated residual value (2,000)

Estimated total depreciation 10,000

Estimated life: 8 yearsDepreciation charge per year 1,250

Accumulated depreciation at 1.4.20X6 (2 years $1,250 p.a.) 2,500Remainder of estimated depreciation 7,500Adjust to cover 4 years in future:

i.e. $7,500 4, yearly charge is now 1,875

Depreciation for the year to 31 March 20X7$

AAT 101 As above DJH 202 As above 1,875KGC 303 Cost $15,000 Residual value $4,000 = $11,000 5 years = $2,200 p.a.

For 9 months 30.6.20X6 to 31.3.20X7 = $2,200 912 1,6503,825

(a)(Dates omitted) TheJournal

Dr $ $

Motor vehicles 15,000Motor vehicle disposals 5,000Pinot Finance 6,000Bank 4,000

Purchase of vehicle KGC 303.

Motor vehicle disposals 8,500Motor vehicles 8,500

Cost of vehicle AAT 101.


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Provision for depreciation: Motor vehicles 3,300Motor vehicle disposals 3,300

Depreciation to date of vehicle AAT 101 on disposal.

Profit and loss 200Motor vehicle disposals 200

Loss on disposal of vehicle AAT 101.

(b) Profit and loss 3,825

Provision for depreciation: Motor vehicles 3,825Depreciation on motor vehicles for the year to 31 March 20X7.

(c)(Dates omitted) MotorVehicles

$ $Balance b/d 20,500 Motor vehicles disposals 8,500Purchase of KGC 303 15,000 Balance c/d 27,000

35,500 35,500

ProvisionforDepreciation:MotorVehicles

$ $Motor vehicle disposals 3,300 Balance b/d ($3,000 + $2,500) 5,500Balance c/d 6,025 Profit and loss 3,825

9,325 9,325

Question 25-10A

(a)(i) MachineryAccount

20X3 $ 20X3 $Jan 1 Balance b/f 300,000 Dec 31 Balance c/f 480,000

Mar 1 Bank 180,000480,000 480,000

(ii) MotorVehiclesAccount

20X3 $ 20X3 $Jan 1 Balance b/f 206,000 Oct 1 Disposal 120,000Jul 1 Bank 360,000 Dec 31 Balance c/f 446,000

566,000 566,000

(iii) ProvisionforDepreciationonMachineryAccount

20X3 $ 20X3 $Jan 1 Balance c/f 168,000 Jan 1 Balance b/f 72,000

Dec 31 Profit and loss[($300,000 + $180,000) 20%] 96,000

168,000 168,000


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(iv) ProvisionforDepreciationonMotorVehiclesAccount

20X3 $ 20X3 $Oct 1 Disposal 78,840 Jan 1 Balance b/f 106,000Dec 31 Balance c/f 152,812 Dec 31 Profit and loss

{[($206,000 $120,000) ($106,000 $78,840) + $360,000] 30%} 125,652

231,652 231,652

(v) MotorVehiclesDisposalAccount

20X3 $ 20X3 $Oct 1 Motor vehicles 120,000 Oct 1 Provision for depreciation 78,840

" 1 Bank 15,000" 1 Profit and loss: Loss on disposal 26,160

120,000 120,000

(b) The purpose of providing depreciation on fixed assets is to apply the matching principle to fixed assets. Thebenefits arising from the use of fixed assets are spread over the periods of their useful lives in the business

so that the costs incurred in obtaining the fixed assets can be matched against the benefits.

Question 25-12A

(a) PlantandMachineryAccount

20X3 $ 20X3 $Jan 1 Balance b/d 500,000 Aug 1 Plant disposal 120,000Apr 15 Cash 115,000 Dec 31 Balance c/d 860,000Sept 1 Cash 350,000Nov 1 Cash 15,000

980,000 980,000

OfficeEquipmentAccount

20X3 $ 20X3 $Jan 1 Balance b/d 180,000 May 5 Disposal 18,000Mar 1 Cash 32,000 Dec 31 Balance c/d 214,000May 5 Disposal 11,000" 5 Cash 9,000

232,000 232,000

PlantandMachineryProvisionforDepreciationAccount

20X3 $ 20X3 $ Aug 1 Disposal (W1) 58,560 Jan 1 Balance c/d 95,0Dec 31 Balance c/d 201,152 Dec 31 Profit and loss 164,712

259,712 259,712


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OfficeEquipmentProvisionforDepreciationAccount

20X3 $ 20X3 $May 5 Disposal (W2) 3,600 Jan 1 Balance b/d 36,000Dec 31 Balance c/d 53,800 Dec 31 Profit and loss 21,400

57,400 57,400

DisposalofPlantandMachineryAccount

20X3 $ 20X3 $ Aug 1 Plant and machinery 120,000 Aug 1 Provision for depreciation 58,560" 1 Cash (repairs) 5,000 " 1 Cash 100,000

Dec 31 Profit and loss 33,560158,560 158,560

DisposalofOfficeEquipmentAccount

20X3 $ 20X3 $May 5 Office equipment 18,000 May 5 Provision for depreciation 3,600

" 5 Office equipment 11,000

" 31 Profit and loss 3,40018,000 18,000

RepairsandMaintenanceAccount

20X3 $ 20X3 $Sept 1 Cash (W3) 8,000 Dec 31 Profit and loss 44,000Nov 1 Cash (W4) 36,000

44,000 44,000

Workings:

(W1) $120,000 20% + $120,000 80% 20% + $120,000 80% 80% 20% = $58,560

(W2) $18,000 10% 2 = $3,600(W3) $48,000 424 = $8,000

(W4) $51,000 $15,000 = $36,000

(b) ProfitandLossAccount(extract)fortheyearended31December20X3

$Income:

Profit on disposal of plant and machinery 33,560

Expenses:

Depreciation plant and machinery 164,712

Depreciation office equipment 21,400Loss on disposal of office equipment 3,400Repairs and maintenance 44,000

(c) Depreciation is the systematic allocation of the depreciable amount of a fixed asset over its estimated usefullife. Depreciation is necessary because of the need to match the revenues of the period with the costsincurred in earning them.


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Question 25-13A

(a)Cost of Machine M003:

$List price 585,000Trade discount (35,000)Transportation charges 12,000

Installation and set-up 25,000587,000

Cost of Machine M004:$

Drafting and design 50,000Construction:Materials and components 200,000Direct wages 80,000Overheads 120,000

Installation and testing 30,000480,000

(b)(i) Machinery

20X3 $ 20X3 $ Jan 1 Balance b/d 730,000 Jul 1 Disposal of M001 450,00 Jul 1 Purchase of M003 587,000 Dec 31 Balance c/d 1,347,00Nov 1 Construction of M004 480,000

1,797,000 1,797,000

(ii) ProvisionforDepreciation

20X3 $ 20X3 $

Jul 1 Disposal of M001 (W1) 219,600 Jan 1 Balance b/d (W1) 320,400Dec 31 Balance c/d 374,040 Dec 31 Depreciation (W2) 273,240593,640 593,640

Workings:

(W1) Accumulated depreciation as at 31 December 20X2: 20X0 20X1 20X2 Total

$ $ $ $M001 90,000 72,000 57,600 219,600M002 56,000 44,800 100,800

320,400(W2) Depreciation for the year 20X3:

$M002 $(280,000 100,800) 20% 35,840M003 $587,000 20% 117,400M004 $480,000 25% 120,000

273,240


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(iii) DisposalofMachinery

20X3 $ 20X3 $ Jul 1 Machinery 450,000 Jul 1 Provision for depreciation 219,60

" 1 Profit on disposal 69,600 " 1 Trade-in value 300,000519,600 519,600

Question 26-2A

(a) Stationery

20X7 $ 20X8 $ Jul 1 Inventory b/d 60 Jun 30 Profit and loss 220X8 " 30 Inventory c/d 95 Jun 30 Cash and bank 240

300 300

(b) GeneralExpenses

20X8 $ 20X7 $ Jun 30 Cash and bank 470 Jul 1 Owing b/d

" 30 Owing c/d 60 20X8Jun 30 Profit and loss 498

530 530

(c) RentandRates

20X8 $ 20X7 $ Jun 30 Cash and bank 5,410 Jul 1 Owing b/d: Rent 22

" 30 Rates owing c/d 393 Rates 19120X8

Jun 30 Profit and loss 5,022" 30 Rent prepaid c/d 370

5,803 5,803

(d) MotorExpenses

20X8 $ 20X7 $ Jun 30 Cash and bank 1,410 Jul 1 Owing b/d

" 30 Owing c/d 67 20X8Jun 30 Profit and loss 1,385

1,477 1,477

(e) CommissionReceivable

20X7 $ 20X8 $ Jul 1 Accrued b/d 50 Jun 30 Cash and bank 1,120X8 " 30 Accrued c/d 82 Jun 30 Profit and loss 1,132

1,182 1,182


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Question 26-5A

JWong TradingandProfitandLossAccountfortheyearended31March20X9

$ $ $Sales 127,245

Less Returns inwards (3,486) 123,759 Less Cost of goods sold:Opening inventory 7,940

Add Purchases 61,420 Less Returns outwards (1,356) 60,064

68,004 Less Closing inventory (6,805) (61,199)Gross profit 62,560Add Discounts received 62

62,622 Less Expenses:

Wages and salaries ($39,200 + $3,500) 42,700

Rent and insurance ($8,870 $600) 8,270Carriage outwards 3,210General office expenses ($319 + $16) 335Discounts allowed 2,480Provision for doubtful debts 110Depreciation: Fixtures and fittings 190

Van 1,400 1,590 (58,695)Net profit 3,927

BalanceSheetasat31March20X9

$ $ $

Fixed assetsFixtures and fittings 1,900Less Accumulated depreciation (190) 1,710 Van Less Accumulated depreciation (1,400) 4,200

5,910Current assets

Inventory 6,805Debtors 12,418Less Provision for doubtful debts (740) 11,678Prepaid expenses 600Cash in hand 140


Creditors 11,400Expenses owing ($3,500 + $16) 3,516Bank overdraft 2,490 (17,406)

Net current assets 1,8177,727


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$Financed by:Capital

Balance at 1.4.20X8 25,200Add Net profit 3,927


7,727

Question 26-7A

LightingandHeating

20X6 $ 20X6 $ Jan 1 Balance b/d 192 Dec 31 Profit and loss 2,2Dec 31 Bank (electricity) 1,300 " 31 Inventory c/d 205" 31 Bank (oil) 810" 31 Owing c/d 162

2,464 2,464

Insurance

20X6 $ 20X6 $ Jan 1 Balance b/d 1,410 Jun 30 Bank Dec 31 Bank (fire) 1,164 Dec 31 Profit and loss 2,617" 31 Bank (general) 1,464 " 31 Prepaid c/d 1,339*

4,038 4,038

$* Prepaid calculated: Fire 5 months $1,164 512 485

General 7 months $1,464 712 854

1,339

Question 26-8A

No set answer.

Note: Avoid very technical language as it is for a non-accountant. Keep it fairly brief.

(a) Assets means the resources possessed by the business, but there is one important qualification to thisstatement. That is the asset must have cost the business something that can easily be measured in monetaryterms. Whilst, therefore, your skill and knowledge may be an asset in ordinary everyday language, itcannot be classed as an asset in an accounting sense as it did not cost the business anything.

(b) The house you live in, we assume, is not used at all for your business. It cannot therefore be included as abusiness asset. Accordingly the increase in the value is also irrelevant.

If the house is owned by the business it would be included as an asset at $30,000 until a proper revaluationtakes place.

(c) Assets are called fixed assets when they are of long life, are to be used in the business and were not boughtwith the main purpose of resale. Examples are buildings, machinery, motor vehicles, and fixtures andfittings.


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On the other hand, assets are called current assets when they represent cash or are primarily for conversioninto cash or have a short life. An example of a short-lived asset is that of the inventory of oil held to powerthe boilers in a factory, as this will be used up in the near future. Other examples of current assets are cashitself, inventories of goods, debtors and bank balances.

(d) Some vehicles may have been bought specifically for resale, and are therefore current assets. Other vehicles,such as a breakdown truck, have been bought for use, not resale, and are consequently fixed assets. Seedefinitions in (c) above.

(e) The profit in the profit and loss account is calculated by matching up sales for the year with those costs thathave been incurred in order to achieve the sales. Some of the costs were paid for in a previous year, someitems are still owed for. This means that costs do not mean items paid for in the year. Similarly, a lot of saleswill still be owed for see debtors so that this does not equal cash received in the year.

As many items in the profit and loss account do not equal cash received or paid out, then obviously there isnot necessarily any easy comparison between profit and cash and bank balances.

(f) No, that is not true. Depreciation represents the part of the cost used up in the year. As equipment may lastfor several years, only part of the cost will be charged against one year.

The remaining value of the equipment is shown in your balance sheet. The total costs will be chargedagainst your profits, but spread over several years. The total costs will only be charged once against theprofits.

Question 26-9A

MrYousef TradingandProfitandLossAccountfortheyearended31May20X6


Stock, 1 June 20X5 11,927Add Purchases 82,350

Carriage inwards 2,21196,488

Less Stock, 31 May 20X6 (13,551) (82,937)Gross profit 55,141Less Carriage outwards ($5,144 $2,211) 2,933

Salaries and wages 26,420Rent, rates and insurance ($6,622 + $210 $880) 5,952Postage and stationery 3,001Advertising 1,330Bad debts 877Provision for doubtful debts 40

Depreciation ($58,000 15%) 8,700 (49,253)Net profit 5,888


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BalanceSheetasat31May20X6

$ $ $Fixed assets

Equipment at cost 58,000Less Depreciation to date (27,700) 30,300

Current assets

Stock 13,551

Debtors 12,120Less Provision for doubtful debts (170) 11,950Prepayments 880Bank 1,002Cash 177


Creditors 6,471Expenses accrued 210 (6,681)

Working capital 51,179

Financed by:CapitalBalance at 1 June 20X5 53,091Add Net profit 5,888


51,179

Question 26-12A

(a) BadDebtsAccount

20X0 $ 20X0 $ Jul 8 Mr Chan 1,900 Dec 31 Profit and loss 6,7Oct 19 Mr Lee 4,800

6,700 6,70020X1 20X1May 5 Mr Cheung 7,500 Dec 31 Profit and loss 8,020Nov 28 Mr Wong 520

8,020 8,020

ProvisionforDoubtfulDebtsAccount

20X0 $ 20X0 $Dec 31 Balance c/d 6,000 Dec 31 Profit and loss ($120,000 5%) 6,000

6,000 6,00020X1 20X1Dec 31 Profit and loss Jan 1 Balance b/d 6,000

($6,000 $180,000 2%) 2,400" 31 Balance c/f 3,600

6,000 6,000


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BadDebtsRecoveredAccount

20X1 $ 20X1 $Dec 31 Profit and loss 1,900 Mar 5 Mr Chan 1,900

(b) AccountancyFeeAccount

20X2 $ 20X2 $ Jun 30 Balance b/f 12,000 Jun 30 Profit and loss ($12,000 6

12) 6,000

" 30 Balance c/f 6,00012,000 12,000

WagesAccount

20X2 $ 20X2 $ Jun 30 Balance b/f 50,000 Jun 30 Profit and loss 58,00

" 30 Balance c/f 8,00058,000 58,000

RentalIncomeAccount

20X2 $ 20X2 $ Jun 30 Profit and loss 240,000 Jun 30 Balance b/f 220,00

" 30 Balance c/f 20,000240,000 240,000

Question 26-13A

(a) InsuranceAccount

20X2 $ 20X2 $

Dec 31 Balance b/f 10,000 Dec 31 Profit and loss ($10,000 312 ) 2,500" 31 Balance c/d 7,500

10,000 10,000

ElectricityAccount

20X2 $ 20X2 $Dec 31 Balance b/f 1,500 Dec 31 Profit and loss 2,000" 31 Balance c/d 500

2,000 2,000

CommissionIncomeAccount 20X2 $ 20X2 $Dec 31 Rental income 10,000 Dec 31 Balance b/f 50,000" 31 Profit and loss 40,000

50,000 50,000


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ProvisionforBadDebtsAccount

20X2 $ 20X2 $Dec 31 Balance c/f 10,000 Dec 31 Balance b/f 8,000

" 31 Profit and loss 2,00010,000 10,000

(b) According to the accruals concept, revenue and expenses are accrued (i.e. recognised as income when

earned or costs as incurred, not as money is received or paid). They match with one another so far as theirrelationship can be established. Revenue and profits dealt with in the profit and loss account are matchedwith associated costs and expenses for the same period.

As part of the insurance premium paid related to 20X3, that part of expense should be recorded in the 20X3profit and loss account in accordance with the accruals concept. Similarly, although the electricity expenseof $500 was unpaid at 31 December 20X2, this should still be recorded in the 20X2 profit and loss accountaccording to the accruals concept.

Question 27-3A

(a) FIFO: 15 $19 = $285

(b) LIFO:

Inventory after each transactionReceived Issued $ $

Jan 120 $16 120 $16 1,920Apr 80 $18 120 $16 1,920

80 $18 1,440 3,360Jun 45 $16

80 $18 75 $16 1,200125

Oct 150 $19 75 $16 1,200150 $19 2,850 4,050

Nov 60 $16150 $19 15 $16 240210

(c) AVCO:

Average cost per No of units Total valueReceived Issued unit of inventory in inventory of inventory

$ $Jan 120 $16 16 120 1,920Apr 80 $18 16.80 200 3,360Jun 125 16.80 75 1,260Oct 150 $19 18.27 225 4,110

Nov 210 18.27 15 274


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Question 27-4A

TradingAccountfortheyearended

FIFO LIFO AVCO (All methods)$ $ $ $ $

Purchases 6,210 6,210 6,210 Sales 125 $22 2,750

Less Closing inventory (285) (240) (274) 210 $25 5,250 8,000Cost of goods sold 5,925 5,970 5,936Gross profit 2,075 2,030 2,064

8,000 8,000 8,000 8,000

Question 27-6A

CobdenLtd ComputationofStockasat31May20X9

Increase Decreas$ $

(1) No adjustment needed Q Cost lower than net realisable value (2) Reduction to net realisable value ($200 + $40 $110) 130(3) Arithmetic corrected 72 126(4) Omitted items 2,010 (5) Transposition error 9(6) Goods omitted 638 (7) Hired item not to be included 347(8) Samples to be excluded 63(9) Sale or return items reduced to cost ($602 $418) 184(10) Goods held simply on sale or return basis 267

2,720 1,126 1442443

Net increase 1,594Stock as originally computed 87,612

89,206


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Question 27-7A

(a) MarySmith TradingandProfitandLossAccountforthe3monthsended30November20X9

FIFO $ $ $ $

Sales 15,840 15,840Less Cost of sales (Note 1) (10,408) (11,392)Gross profit 5,432 4,448Less Overhead expenses 1,520 1,520

Sales commission (Note 2) 136 111Depreciation of lawn mower (Note 3) 12 (1,668) 14 (1,645)

Net profit 3,764 2,803

Note 1

(FIFO) Closing stock 10 $489 4,8901 $350 (net realisable value) 350

5,240Purchases (12 $384 + 8 $450 + 16 $489) 16,032Less Taken for business use 384

Closing stock 5,240 (5,624)Cost of sales 10,408

(LIFO) Closing stock 10 $384 3,8401 $350 (net realisable value) 350

4,190Purchases 16,032Less Taken for business use 450

Closing stock 4,190 (4,640)Cost of sales 11,392

Note 2Sales commission: FIFO 2 12% $5,432 = $135.80, rounded to $136LIFO 2 12% $4,448 = $111.20, rounded to $111

Note 3

Depreciation: FIFO $384 18 3 months = $12.00LIFO $450 18 3 months = $14.06, rounded to $14

(b) Mary Smiths income, 3 months to 31 August 20X9:

Salary $3,750 ($1,5000 14 ) + Interest $175 ($7,000 10% 14 ) = $3,925

Business profit, 3 months to 30 November 20X9: $3,764

(c) FIFO:Advantage: related to actual movements of goods; therefore closing stock is nearer to actual currentprice levels.

Disadvantage: during inflation profits include holding gains.

LIFO:Advantage: cost of sales is nearer to current price levels.

Disadvantage: not related to actual movement of goods; therefore stock valuation will not match upto current price levels.


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Question 28-2A

(a) CashBook

20X7 $ 20X7 $ Jun 1 Balance b/d 1,410 Jun 5 L Ho

" 7 J Ma 62 " 12 J Leung 519

" 16 T Wong 75 " 16 T Sin 41" 28 F So 224 " 29 Blister Disco 22" 30 G Chan 582 " 29 SLM: Standing order 52" 30 Flynn: Traders credit 64 " 30 Bank charges 43

" 30 Balance c/d 1,5602,417 2,417

(b) BankReconciliationStatementasat30June20X7

$Balance in hand per cash book 1,560Add unpresented cheque 22

1,582Less Bank lodgement not yet entered on bank statement (582)Balance in hand as per bank statement 1,000

Question 28-4A

(a) BankAccount

20X1 $ 20X1 $Oct 31 Wong 6,310 Oct 31 Balance b/d 11,260" 31 Balance c/d 27,676 " 31 Credit side undercast 1,190

" 31 Cheque dishonoured Hung Kee 13,200

" 31 Electricity 5,680" 31 Telephone 2,600" 31 Overdraft interest 56

33,986 33,986

(b) BankReconciliationStatementasat31October20X1

$ $ Adjusted bank account balance 2Add Unpresented cheques

# 168122 12,400# 168126 12,800# 168130 4,768 29,968

2,292Less Cheque paid in but not yet cleared (7,600)Balance as per bank statement 5,308 OD


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(c) In an imprest system, a fixed amount of money (petty cash float) is set to meet the petty cash expenses fora period, usually two weeks or a month depending on the frequency of transactions and the amount of thepetty cash float. At the end of the period, the petty cash fund is reimbursed with the exact amount ofdisbursements, and is thus made up again to its original fixed amount.

Question 28-5A

(a) BankAccount

20X3 $ 20X3 $Sept 30 Balance b/d 512,000 Sept 30 Overdraft interest (1) 750" 30 Debit side undercast (6) 100,000 " 30 Post-dated cheque (3) 26,500" 30 Cheque entered twice (7) 1,520 " 30 Posting error (4) 9,090

" 30 Cheque dishonoured (5) 80,000" 30 Balance c/d 497,180

613,520 613,520

(b) BankReconciliationStatementasat30September20X3

$Updated bank account balance 497,180Add Unpresented cheques (9) 360,500

857,680Less Cheque deposited but not yet credited (2) (1,200,000)Overdraft as per original bank statement (342,320)Add Bank error in deducting standing payment (8) 6,000Overdraft as per adjusted bank statement (336,320)

Question 28-7A

(a) CashatBankAccount

20X2 $ 20X2 $Dec 31 Balance b/f 180,000 Dec 31 Bank charge (2) 200" 31 Trade debtors (5) 6,600 " 31 Overdraft interest (4) 1,200" 31 Trade creditors (7) 500 " 31 Trade debtors (6) 7,500

" 31 Rent (8) 5,000" 31 Balance c/f 173,200

187,100 187,100

(b) BankReconciliationStatementasat31December20X2

$ $Balance as per correct cash book 173,200Add Unpresented cheque (1) 1,500

174,700Less Uncredited cheque (3) 4,200

An error by the bank (9) 1,200 (5,400)Balance as per bank statement 169,300


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(c) A bank reconciliation statement provides:

verification of the firms records with explanation on aspects not yet known by the bank, that is,deposits not yet credited and unpresented cheques

verifying the amount recorded as received and paid have been received and paid

checking the time differences between when amounts recorded as received are banked and amountsrecorded as paid are withdrawn

updating the firms records for aspects not yet known by the firm, that is, direct deposits such as

interest received, and direct withdrawals such as bank fees and dishonoured cheques

checking for errors in either the firms records or the banks records (the latter are reported by thebank statement)

Question 29-2A

SalesLedgerControl

$ $Balance b/d 28,409 Bad debts 342

Sales journal 26,617 Bank 24,293Bank: Dishonoured cheques 120 Discounts 416

Returns inwards 924Set-offs against purchases ledger 319Balance c/d 28,852

55,146 55,146

Question 29-6A

GeneralJournal

Particular Dr Cr

$ $(1) Purchases ledger control 2,500

Sales ledger control 2,500

(2) Sales ledger control 1,000Bank 1,000

(3) Bad debts ($2,000 2) 4,000Sales ledger control 2,000Purchases ledger control 2,000

(4) Discounts allowed 800

Sales ledger control 800(5) Sales 3,500

Sales ledger control 3,500

(6) Purchases ledger control 6,000Purchases returns 6,000

(7) Sales ledger control ($5,400 $4,500) 900Bank 900


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(b) SalesLedgerControlAccount

$ $Balance b/f (derived) 39,160 Purchases ledger control: Set off (1) 2,500Bank: Refund to debtor (2) 1,000 Bad debts (3) 2,000Bank: Debtor settlement overstated (7) 900 Discounts allowed (4) 800

Sales (5) 3,500Balance c/f 32,260

41,060 41,060

CorrectedListofDebtorsBalances

$ $Balance b/f 34,860Add Incorrect posting to a debtor (7) 900

35,760Less Purchases ledger: Set off (1) 2,500

Refund to a debtor omitted (2) 1,000 (3,500)Corrected sales ledger balance 32,260

(c) PurchasesLedgerControlAccount

$ $Sales ledger control: Set off (1) 2,500 Balance b/f (derived) 22,860Purchases returns undercast (6) 6,000 Bad debt error (3) 2,000Balance c/f 16,360

24,860 24,860

CorrectedListofCreditorsBalances

$Balance b/f 18,860

Less Sales ledger: Set off (1) (2,500)Corrected purchases ledger balance 16,360

Question 29-8A

(a) JournalEntries

Dr $ $

(1) Sales ledger control account 1,800Sales account 1,800

(2) Returns inward account ($1,960 $690) 1,270Sales ledger control account 1,270

(3) Discounts allowed account ($2,100 2) 4,200Sales ledger control account 4,200

(4) No entry is required.




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Dr $ $



(9) Purchases ledger control account 3,160Sales ledger control account 3,160


(11) Bad debts account 5,125Sales ledger control account 5,125

(b) ListofSalesLedgerBalancesasat31October20X4

$ $Original balance b/f 200,000Add (5) Error in posting to wrong side ($4,000 2) 8,000

(7) Error for a debit balance treated as a credit balance ($500 2) 1,000(8) Omission of a customers balance 5,000 14,000

214,000

Less (4) Error in sales amount ($4,360 $3,460) 900(6) Error in casting 200(10) Error in posting of a debtors settlement 4,800 (5,900)

208,100

(c) SalesLedgerControlAccount

20X4 $ 20X4 $Oct 31 Original balance (balancing figure) 220,055 Oct 31 Returns inward (2) 1,270" 31 Sales (1) 1,800 " 31 Discounts allowed (3) 4,200

" 31 Purchases ledger control set off (9) 3,160" 31 Bad debts (11) 5,125

" 31 Revised balance 208,100221,855 221,855

Question 30-3A

$ $(a) B Wong Dr 1,410 : A Wang Cr 1,410(b) Cash Dr 94 : Bank Cr 94(c) D Fung Dr 734 : D Fong Cr 734(d) L Hong Dr 72 : Purchases Cr 72(e) G Tai Dr 128 : Cash Cr 128

(Needs double the amount to cancel out the error and replace it with the correct amount.)(f) Sales Dr 320 : Fittings Cr 320(g) Cash Dr 400 : Bank Cr 400

(Needs double the amount.)(h) Purchases Dr 1,182 : Fixtures Cr 1,182


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Question 30-5A

$ $(a) Commissions received Dr 430 : Rent received Cr 430(b) Bank charges Dr 34 : Rates Cr 34(c) Motor expenses Dr 37 : Bank Cr 37(d) Fax machine Dr 242 : Purchases Cr 242(e) Returns inwards Dr 216 : Returns outwards Cr 216

(f) Capital Dr 2,000 : Loan: G Ho Cr 2,000(g) Loan interest Dr 400 : Van Cr 400(h) Drawings Dr 168 : Purchases Cr 168

(Needs double the amount.)

Question 30-6A

(a) ThomasSmith CorrectedTrialBalanceasat31March20X8

Dr $ $Stock in trade, 1.4.20X7 10,700Discounts allowed 310Discounts received 450Provision for doubtful debts 960Purchases 94,000Purchases returns 1,400Sales 132,100Sales returns 1,100Freehold property: At cost 70,000

Provision for depreciation 3,500

Motor vehicles: At cost 15,000Provision for depreciation 4,500

Capital: Thomas Smith 84,600Bank 7,100Trade debtors 11,300Trade creditors 7,600Establishment and administrative expenditure 16,600Drawings 9,000

235,110 235,110


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(b)(Dates omitted) TheJournal

Dr $ $

Stock 1,300Capital 1,300

Being adjustment for items on mislaid stock lists.

Trade creditors 210

Purchases returns 210Being goods returned to J Hardwell Ltd.

Sales 1,000Trade debtors 1,000

Being reversal of trade samples sent to John Grey wronglytreated as a sale.

Trade samples 1,000Purchases 1,000

Being correction of treatment of trade samples.

Repairs and renewals 150Purchases 150

Being correction of treatment of paint used to paint stockroomwrongly charged to purchases.

Question 31-2A

(a)(Narratives omitted) TheJournal

Dr $ $

(1) Sales 125Office equipment 125

(2) Suspense 10Purchases 10

(3) Drawings 140Purchases 140

(4) Bank charges 22Suspense 22

(5) Suspense 90K Lam 90

(b) Suspense

$ $Purchases 10 Balance 78K Lam 90 Bank charges 22

100 100


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frank wood's business accounting hk edition (3rd edition) solution

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