FADM / GROUP CASE STUDY/ JOYO Inc.

JOYO INC. Transactions during 2019. All transactions by check unless stated otherwise.
1. Started JOYO Inc on Jan 1 2019 with an authorized capital of 2m stock of $1 each.
2. Issued 300,000 ordinary / equity shares or common stock of $1 each for check
received in full.
3. Issued 100,000 6% preference shares (or preferred stock) of $1 each for check
received in full.
4. Paid preferred dividend as due on 31 December 2019.
5. Issued 800 5% bonds worth $100 each. Interest is paid on 31 December each year.
6. Signed a lease agreement to pay rent at a rate of $5,000 pm. Paid a deposit of $10,000
equal to 2 months rent. Rent expense paid by check at the end of each of the 12
months.
7. Purchased plant and equipment for $120,000. The non current asset is expected to
last for 8 years with 20% residual value. Straight line method of equal depreciation
expense per year is used.
8. Also bought furniture and vehicle in a combined purchase deal for $60,000 by check.
The fair market value of furniture and vehicle on date of transaction was quoted
separately / individually as $30,000 and $45,000 respectively. Both these non current
assets are expected to last for 6 years with no resale value. (Hint: Refer to cost
concept for guidance).
9. Purchased inventory for $290,000 for cash and $120,000 on credit.
10. Sold inventory for $450,000 for check and $250,000 for credit. Inventory cost
$210,000 & $110,000 respectively.
11. Collected by check $130,000 from AR and paid by check $90,000 to AP during the
year.
12. Paid by check for operating expenses for the year $90,000. Unpaid expenses by end of
the accounting year were $7,000.
13. Received advanced deposit from customers $12,000. The actual sale will be made in
January 2020. Record transaction using AR column.
14. Paid advance deposit to inventory suppliers for $15,000. The actual purchase of
inventory will occur in January 2020. Record transaction using AP column
15. Inventory worth $2000 was found to be defective and hence discarded / thrown away.
16. 1 staff member resigned. Paid severance package by check $3,000.

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17. Non current asset worth $10,000 was destroyed by fire. The insurance company has
admitted claim i.e. agreed to pay $9,000 in full settlement. Balance $1,000 loss is
born by JOYO Inc.
18. One of the customers who owed $3,000 has filed for bankruptcy and only $2,000 will
be probable recovery in January 2020 from him. (Hint: Based on prudence concept,
record probable loss of $1,000 in the year 2019).
19. Company received an award for one of its product in a competition.
20. Competitors have introduced a better and a cheaper substitute of a product in the
market which is expected to reduce sales of JOYO Inc by 10% next year.
21. Salary to staff paid each month in check added to $68,000.
22. Paid insurance premium of $24,000 for 18 months ending 30 June 2020.
23. Year end inventory included inventory at historical cost of $5,000 which was
damaged and deemed to have a net realisable value of $1,000 only.
24. Government announced change in policy following which the stock price increased
by $0.06 per stock on last day of accounting year.
After the end of accounting year, the accountant has noticed following transactions and
events;
25. A customer who has been sent inventory during last week of December was not billed
for $32,000. The invoice dated 31 December is yet to be recorded. Cost of sales also
need to be recorded for $11,000.
26. Electricity bill for Dec 2019 was received in Jan 2020 for $6,000 has not been
accounted yet.
27. Purchased another business on 31 Dec 2019 for an agreed price of $125,000 by check.
The details of assets and liabilities taken over are as follows;
Book value Fair market value
$’000 $’000
Office equipment 19 13
Furniture 3 2
Building 30 60
Vehicle 25 20
Inventory 6 5
AR 10 10
8% Loan (repayable in 5 years) 15 15

No further depreciation need to be provided on the above non current assets for the year
2019. 8% Interest till 31 December 2019 on loan was already paid by the seller. Record
excess amount paid as Goodwill.

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28. Provide for tax expense & liability of $9,000.

29. Transfer net income to retained income.
30. Paid interim common dividend worth $22,000 by check in October 2019.
31. Issued 1 bonus stock for every 10 common stock held on all stock in November 2019.
32. In mid December the management undertook a stock split of 5 for 1 on all common
stock. Please record stock split in your answer.
During the meeting held on 31 December 2019, Board Of Directors have decided to;
33. Re-organise a key business processes which has a promise of saving $13,000 in
operating expenses in next year.
34. Transfer from net income to general reserve $11,000.
35. Transfer from net income to dividend equalisation reserve $7,000.
36. Propose a final common dividend of $22,000. It has not been approved by the stock
holders yet.

END OF TRANSACTIONS.

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 2019. (12 marks)
b) Income statement for the year ended 31 December 2019. (12 marks)
c) Statement of Cash Flows detailing operating, investing and financing activities
for the year ended 31 December 2019. (12 marks)
d) Statement of Changes in Owners Equity for the year ended 31 December
2019. (8 marks)

(Total 100 marks)

Convert to % as per syllabus.

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

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