Journal entries

AC 3202 Corporate Accounting I, Semester B, 2017/2018 Week 3 Presentation of financial statements assignments

Listed below is Apple Ltd.’s unadjusted trial balance at 31 December 2016.

  Dr. Cr.
Accounts Receivables 48,000  
Prepaid Insurance 10,000  
Inventory 12,400  
Cash 16,000  
Freehold Land (at cost) 200,000  
Office Building (at cost) 336,000  
Purchases (net) 258,000  
Advertising expenses 16,000  
Operating expenses 12,000  
Interest expense 1,000  
Other Administrative expenses 26,000  
Insurance expense 4,000  
Wages expense 42,000  
Accounts Payable   38,000
Loans Payable (due in 2018)   20,000
Share Capital (no par value)   280,000
Retained Profits   102,400
Sales   414,000
Accumulated depreciation – Buildings   126,000
Allowance for bad debts   1,000
  $981,400 $981,400
     

 

Additional information:

  1. Included in Sales are $28,000 for goods (cost: $18,000) shipped, terms FOB destination, to a customer on 29 December 2016.  The customer received the goods on 2 January 2017 and has 30 days to settle payment.

  1. Apple Ltd. decided to revalue its freehold land for the first time and to reflect the valuation in the 2016 financial statements.  The land has a fair value of $235,000 at 31 December 2016.

  1. Depreciation of 10% on cost on a straight-line method is to be provided for the Office Building.

  1. It was determined that the “Allowance for bad debts” account at 31 December 2016 should be $1,200.

  1. The interest expense relates to the Loan Payable (due in 2018) obtained two years ago at interest of 10% per annum payable annually on 30 June.

  1. The Prepaid Insurance represents insurance paid for the period May 2016 to February 2017 for the Office Building.

  1. Accrue $1,500 tax payable for 2016.

  1. On December 30 2016, the board of directors declared dividends of $10,000.

  1. Inventory based on a physical count of goods in the warehouse on 31 December 2016 was determined to be $32,000.  Included in the physical count were $10,000 goods on consignment from Stanley Co.

  1. The bad debt expenses should be classified as administrative expenses.  The wages expense should be allocated 70% to administrative expenses and 30% to selling and distribution expenses.

Required:

  1. Prepare journal entries necessary for the preparation of the 2016 financial statements.
  2. Prepare the Statement of profit or loss and other comprehensive income (single statement approach) (classification of expenses by function) for the year ended 31 December 2016.
  3. Prepare the Statement of changes in equity for the year ended 31 December 2016.
  4. Prepare the classified Statement of financial position (format A – L = E) as at 31 December 2016.