CASE STUDY/ HEALTH PHARMA Ltd.

HEALTH PHARMA Ltd. Transactions during 2020. All transactions by check unless
stated otherwise. Each NCA related transaction should be recorded in spreadsheet using a
separate line. NCA are depreciated using straight line method of depreciation.
1. Started HEALTH PHARMA Ltd on Jan 1 2020 with an authorized capital of 1m
shares of $1 each.
2. Issued 150,000 ordinary / equity shares $1 each for check received in full.
3. Issued 50,000 6% preference shares of $1 each for check received in full. Preference
dividend transaction is listed later.
4. Issued 100 5% Bonds worth $200 each. Interest is paid on 31 December each year.
5. Purchased plant and equipment for $100,000 paid by a further issue of $100,000
ordinary shares. The Plant & Equipment is expected to last for 4 years with 20%
residual value.
6. Purchased patent worth $82,000. Paid $12,000 by check. The vendor agreed to treat
balance $70,000 as a loan. Patent is expected to be useful for 8 years with a resale
value of $2,000. Amortisation expense of $10,000 should be recorded. Interest on
loan paid at end of the year $7,000.
7. Paid preferred dividend as due on 31 December 2020.
8. Also bought for cash furniture (3 years useful life) and vehicle (4 years useful life) in
a combined purchase deal for $40,000 by check. The fair market value of furniture
and vehicle on date of transaction was quoted separately / individually as $30,000 and
$20,000 respectively. Furniture & vehicle have no resale value.
9. Purchased inventory for $150,000 for cash and $90,000 on credit.
10. Sold inventory for $210,000 for check and $290,000 for credit. Inventory cost
$125,000 & $65,000 respectively.
11. Collected by check $110,000 from AR and paid by check $60,000 to AP during the
year.
12. Paid by check for operating expenses for the year $73,000. Unpaid operating expenses
by end of the accounting year were $27,000.
13. Received cash as advanced deposit from customers $11,000. The actual sale will be
made in January 2021. Record transaction using Bank & AR column.
14. Paid in December 2020 advance deposit to inventory suppliers for $14,000. The actual
purchase of inventory will occur in January 2021. Record transaction in 2020 using
Bank & AP column
15. Inventory worth $11,000 was destroyed by fire. The insurance company has admitted
claim i.e. agreed to pay in 2021 $8,000 in full settlement. Balance $3,000 loss is born
by HEALTH PHARMA Ltd.

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16. One of the customers who owed $4,000 has filed for bankruptcy and only $3,000 will
be probable recovery in January 2021 from him. (Hint: Based on prudence concept,
record probable loss of $1,000 in the year 2020).
17. Salary to staff paid each month in check added to $36,000.
18. Paid insurance premium of $9,000 for 18 months ending 30 June 2021.
19. Year end inventory included inventory at historical cost of $7,000 which was
damaged and deemed to have a net realisable value of $3,000 only.
After the end of accounting year, the accountant has noticed following transactions and
events;
20. Provide for tax expense & liability of $17,000.
21. Transfer net profit to retained profit.
22. Paid interim ordinary dividend worth $14,000 by check in October 2020.
23. Issued 1 bonus share for every 10 ordinary share held on all shares in November 2020.
24. In mid December the management undertook a share split of 2 for 1 on all ordinary
shares. Please record stock split in your answer.
During the meeting held on 31 December 2020, Board of Directors have decided to;
25. Re-organise a key business processes which has a promise of saving $30,000 in
operating expenses in next year.
26. Transfer from retained profit to general reserve $21,000.

END OF TRANSACTIONS.

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Required:
i. Enter the above transactions in the spread sheet. If a transaction can not be
recorded, state briefly why. (40 marks)
ii. Code the transactions in the spreadsheet with Dr & Cr. Colour code debit and
credit. (Hint; ensure $ debit = $ credit for each transaction.) (8 marks)
iii. Highlight the areas of the spreadsheet which will be reported under each of the
four financial statements. (8 marks)
iv. Prepare the four financial statements.
a) Balance Sheet as at 31 December 2020. (12 marks)
b) Income statement for the year ended 31 December 2020. (12 marks)
c) Statement of Cash Flows detailing operating, investing and financing activities
for the year ended 31 December 2020. (12 marks)
d) Statement of Changes in Owners Equity for the year ended 31 December
2020. (8 marks)

(Total 100 marks)

Convert to % as per syllabus.

Upload your single excel file per group in the BB within the dateline.

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