Corporate Accounting Assignment -
Question 1 - Dr. Kelvin opened a dental clinic on August 1, 2018. The business transactions for August are shown below:
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August 1
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Dr. Kelvin invested $280,000 cash in the business in exchange for 1,000 shares of capital stock.
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August 4
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Land and a building were purchased for $400,000. Of this amount, $60,000 applied to the land and $340,000 to the building. A cash payment of $80,000 was made at the time of the purchase, and a note payable was issued for the remaining balance.
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August 9
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Medical instruments were purchased for $75,000 cash.
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August 16
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Office fixtures and equipment were purchased for $25,000. Dr. Kelvin paid $10,000 at the time of purchase and agreed to pay the entire remaining balance in 15 days.
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August 21
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Office supplies expected to last several months were purchased for $4,200 cash.
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August 24
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Dr. Kelvin billed patients $13,000 for services rendered. Of this amount, $1,000 was received in cash, and $12,000 was billed on account (due in 30 days)
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August 27
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A $450 invoice was received for several newspaper advertisements placed in August. The entire amount is due on September 8.
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August 28
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Received a $500 payment on the $12,000 account receivable recorded August 24.
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August 31
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Paid employees $2,200 for salaries earned in August.
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A partial list of account titles used by Dr. Kelvin includes
Cash
Accounts receivable
Office supplies
Medical instruments
Office fixtures and equipment
Land
Building
Notes payable
Accounts payable
Capital stock
Service revenue
Advertising expenses
Salary expenses
Required
a. Prepare journal entries for each transaction up to 31 August 2018.
b. Post each transaction to the appropriate ledger accounts (use T account format).
c. Prepare trial balance dated August 31, 2018.
Question 2 - The following balances have been extracted from the ledgers of CGC Ltd on 30 September 2018
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$
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$
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Trade payable
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27,900
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Sales Revenue
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240,000
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Land at cost
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54,000
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Building at cost
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114,000
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Furniture & fittings at cost
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66,000
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Bank overdraft
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18,000
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Provision for depreciation
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Buildings
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18,000
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Furniture & fittings
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30,000
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Bank interest received
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5,292
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Retained earnings at 1.10.2017
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6,000
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Allowance for doubtful accounts
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2,448
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Cash in hand
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696
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Inventory 1.10.2017
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42,744
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Rates
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6,372
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Wages and salaries
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24,000
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Insurance
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5,688
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Sales return
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1,116
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Distribution expenses
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1,308
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Trade receivable
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37,920
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Purchases
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131,568
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Debenture interests expenses
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1,200
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Bad debts
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2,028
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5% debenture 2023
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48,000
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ordinary shares capital
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60,000
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Revaluation reserves
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_______
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33,000
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488,640
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488,640
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Other relevant information
1. Closing inventory on 30.9.2018 was valued at $46,638. Periodic inventory system was used.
2. Insurance paid in advance was $300, and wages accrued was $840.
3. Depreciation is to be provided at 10% on cost of buildings, and at 20% on carrying amount of furniture and fittings.
4. The land was revalued to 154,000.
5. Debenture interest expense outstanding for the year is $1,200.
6. The profit tax charge for the year is $20,000 which had not been provided in the books.
7. Bad debt expenses, depreciation, insurance, rates, wages and salaries are classified as administrative expenses.
Required - Prepare the Statement profit or loss and Other Comprehensive Income and Statement of Financial Position for the year ended September 30, 2018 based on the format specified in HKAS 1 (Revised).
Question 3 - Discuss the following statement in accordance with the relevant generally accepted accounting principle. Write not more than 500 words.
'Experienced and loyal employees have been called the most value asset of a business. However, accountants leave them off the asset in the Statement of Financial Position.'
Question 4 - On January 1, 2016, Sliver Limited purchased a piece of equipment for production of goods. The purchase price of the equipment was $670,000. Sliver Limited paid cash on the date of purchase. Sliver Limited estimated that the equipment has an expected useful life of 4 years with a residual value of $30,000 on December 31, 2019. On February 15, 2018, Silver Limited disposed of equipment for cash amount of $358,000.
Silver Limited adopts revaluation model for measuring equipment. For items with revaluation, it is Sliver Limited's policy to eliminate accumulated depreciation against gross carrying amount of asset in a revaluation.
Silver Limited usually depreciates equipment of similar type on a straight line basis. Full year of depreciation is to be charged in the year of purchase and none to be charged in the year of disposal.
Silver Limited revalued the equipment twice on December 31, 2016 and December 31, 2017 and the revalued amounts were $528,000 and $370,000 respectively.
Required - In accordance with the requirement of HKAS 16 (IAS 16) 'Property, Plant and Equipment ', prepare all journal entries that Sliver Limited should make relating to the equipment:
a. For the year ended December 31, 2016 and 2017.
b. For the disposal of the equipment on February 15, 2018.