Financial Accounting and Reporting III

Liability
Question 1

On January 2005, Mona started a business, Sri Cemerlang Trading, which sells sports equipment. The
company purchased all stocks from suppliers through cash and credit basis. However, the business
sells its products in cash basis only. The accounts payable account is used for recording purchases of
stocks only, while other current liabilities are accrued in separate accounts.

On 12 August 2012, Sri Cemerlang Trading purchases RM20,000 of merchandise on account.

Purchased terms were 2/10, n/30.

Question:
a. How much will the Sri Cemerlang Trading have to pay for merchandise if it pays on August 20?
b. How much will the Sri Cemerlang Trading have to pay for the merchandise if it pays on
September 3?

Question 2

For the following scenario, what information about that entity’s accounts payable would you find useful?
What do you think that information would be useful?

Bergaya Akessori Sdn Bhd is a small manufacturer of women’s casual-wear jewelry, including
bracelets, necklaces, earrings, and other moderately priced accessory items. Puan Nisa Maisarah, the
owner, purchases the inventory on credit terms, 5/10 n/30 from a supplier in Hong Kong. She does not
have sufficient cash in order to pay off the whole debt within the discounted period given by the
supplier. Therefore, she is contemplating on whether to partially settle the debt within the discount
period or settle off the whole amount after one month period of purchased.

Question 3

Lilo Sdn Bhd had purchased goods from Nuruu Sdn Bhd amounted to RM12,000. Only 20% of the
amount of goods paid in cash and the remaining balance will be paid for the next three months.

Required:-
i) Is Nuruu SdnBhd is financial liability to Lilo Sdn Bhd?
ii) Can Nuruu Sdn Bhd be classified as A/C Payable in Lilo Sdn Bhd book of account?
Question 4

Encik Hashim and Encik Muhammad Afiq started a business Cerah Lighting House Sdn Bhd with the
total paid up capital of RM100,000. The business is located at centre of Bandar Kuantan. As a start, the
company decided to purchase a stock of various types of lamps from the local suppliers elsewhere in
Kuala Lumpur. The following are the transactions for the month of July 2013:-

Bought 1,000 units of table lamps at a price of RM60 each from FH Sdn Bhd on credit
Bought 500 units of ceiling lights at a price of RM30 each from SJ Sdn Bhd on cash basis

Required:-
i) Is there an element of liability exist from the above scenario?
ii) What is the classification of the element?
iii) How do you know the element of liability exist from the above scenario?

Question 5

Hashim and Maria started a business of Haria Sdn Bhd with the paid up capital of RM200,000. The
main business operation is concentrated on selling hardware and providing plumbing services. On 1st
January 2013, the company entered into a contract with Nona Sdn Bhd to supply stock of hardware for
two years. Below are the transactions for July 2013:-

2/7/2013 Purchased merchandise on account from Nona Sdn Bhd RM30,000 and signing a 9% -
2 month RM30,000 note payable as a method of payment.

25/7/2013 Purchased merchandise from Rima Irama Sdn Bhd RM1,000. It is policy of the
company to pay 50% of the amount for the purchase below RM5,000.

Required:-
i) Is there an element of liability exist in the above scenario?
ii) Provide justification to support your answer in (i).
iii) What is the classification of the element exist in this scenario?

Question 6

On 6 April 2013, Magneto Bhd placed an order of goods amounted to RM30,000 from Firestar Sdn
Bhd. The amount was to be paid three months from the invoice date. Magneto Bhd received the
goods on 10 April 2013. However, after a physical inspection, a part of the goods amounted to
RM10,000 did not met the criteria specified by Magneto Bhd. The goods were then returned to Firestar
Sdn Bhd on 15 April 2013.

Requirement:
a. When should Magneto Bhd recognize Firestar Sdn Bhd as an account payable in its books of
accounts?
b. Based on your answer above, how much is the amount payable that should be recorded by
Magneto Bhd?
Question 7

Cannonball Sdn Bhd’s financial year ends on 30 June every year. In the company’s books of accounts,
the total accounts payable was RM350,000 for the year ended 30 June 2013. However, goods
purchased on credit amounted to RM30,000 were still in transit on the particular date.

Required:
How much is the amount of payables that should be recognized by Cannonball Sdn Bhd on 30 June
2013? Justify your answer.

Question 8

On 15 February 2012, AdZ Enterprise purchased raw material from Zhaf’s Sdn Bhd. The selling price of
raw material is RM58,500 with payment terms of 2/10, n/30.

i. Calculate the amount of accounts payable that need to be record in the book of account AdZ
Enterprise.