AY1718 Finals (Actual) Sem 1 Solutions

ACC1701
Financial Accounting
AY18/19 Sem 1 Finals Revision Session
AY17/18 Sem 1 Finals Paper
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Q1.
a. Prepare all necessary journal entries as at 31 December 2017, Ignore dates, descriptions and closing entries. Create
new accounts where necessary, unless otherwise stated.
1 Jan 1 Sep 31 Nov 31 Dec 1 Sep

12 month prepaid (1 Sep 17 – 1 Sep 18)
3 Month 9 Month ($89,100)
1 Month
9 Month : $89,100
1 Month : 89,100 / 9 = $9,900
Journal Entry Debit Credit

Dr. Rent Expense 9,900
Cr. Prepaid Rent 9,900
Q1.
1 Jan 1 July 1 Dec 31 Dec

6 month (X) 6 month (1.05X)
5 month (1.05X) ??????
6 X + 5(1.05X) = 11.25X = $158,400
X = $158,400 / 11.25 = $14,080
December expense = 1.05 X = $14,784

Dr. Salary Expense 14,784
Cr. Salary Payable 14,784
Q1.
1 Year 6 Year
6 Year = $19,440 (No residual value)
Yearly Depreciation : $19,440 / 6 = $3,240

Monthly Depreciation : $3,240 / 12 = $270

Dr. Depreciation Expense 270
Cr. Accumulated Depreciation - Furniture 270
Q1.
31 Nov 31 Dec
$2,804 $2,200
Supply Expense = $2,804 – $2,200 = $604

Dr. Supplies Expense 604
Cr. Supplies 604
Q1.
1 Nov 31 Dec
Dr Cash $8,900 Deliver
Cr Unearned Revenue $8,900
COGS : $8,900 – $55(100) = $3,400

Dr. Unearned Revenue 8,900
Cr. Revenue 8,900

Dr. Cost of Goods Sold 3,400
Cr. Inventory 3,400
Q1.
ONLY $650 debt owed by Wook Pte Ltd is uncollectible. Rest are healthy
Allowance for Bad Debt

Dr Cr
270
380
650

Dr. Bad Debt Expense 380
Cr. Allowance for Bad Debts 380
Q1.
Given Land : $815,600
Revaluation Gain : $835,000 - $815,600 = $19,400

Dr. Land 19,400
Cr. Asset Revaluation Gain 19,400
Q1.
Given investment in So Pte Ltd: $70,000
Fair Value Gain: $98,000 – 70000 = $28,000

Dr. Investment in So Pte Ltd 28,000
Cr. Fair Value Gain 28,000
Q1.

Dr. Dividend Receivable 3,000
Cr. Dividend Income 3,000
Q1.
Date of Declaration of dividend – DR Retained Earnings & CR Div Payable

Date of Dividends record – No JE
Date of Payment of dividend – DR Div Payable & CR Cash

Dr. Retained Earning 16,000
Cr. Dividend Payable 16,000
Q1.
b. Prepare the Statement of
Comprehensive Income for the
year ended 31 December 2017
Q1.
c. Prepare the Statement of Change in Equity for the year ended 31 December 2017.
Ensure that the full disclosure principle is adhered to.
Q2.
Part 1
Total cost of N96 inventory: $72,000
Estimated Selling Price: $72,000 x 55% = $39,600 31st Dec 2017
Estimate Cost to Sell: $72,000 x 1% = $720
NRV = Estimated Selling Price – Estimated Cost to Sell Dr COGS 33,120
= $39,600 – $720 = $38,880
Recognise Loss: $72,000 – $38,880 = $33,120
Cr Inventory 33,120
Q2.
1 July 2017
Dr Impairment Loss on Machine 8,675
Cr Accum Impairment & Depre–Machine 8,675
31st Dec 2017

Dr Depre Expense 1425
Cr Accumulated Depre 1425
Part 2
Recoverable Amount (Greater of “fair vale less cost to sell” and its “value in use”): $7,075
Depreciation Expense (1 Jan – 31 June): 0.5 x ($18,000-$3,000) / 10 = $750
Accumulated Depre as of 1 July: 1.5 x ($18,000-$3,000) / 10 = $2,250
Carrying Value: $18,000 – $2,250 = $15,750 (Rmb Carrying amt = Cost – accum depre)
Impairment Loss: $15,750 – $7,075 = $8,675 (Rmb Impairment loss = Carrying amt – recoverable amt)
Depreciation from 1st July to 31st Dec: 0.5 x ($7,075 – $1,000) / 4.5 = $675
Total Deprecation for 2017: 750 + 675 = 1425
Q2.
Part 3
Yeon:
Lawyer advised that “likely to be dismissed” – remote.
- No actions needed
Yo Pte Ltd: Highly Probable – Make Provision
Dr Estimated Lawsuit Loss 200,000

Cr Provision for Damages 200,000
Q2.
b. Prepare the classified Statement

of Financial Position as at year
ended 31 December 2017. Assume
no taxes
Q2.
Part 1
IAS 2 Inventories
Rule: Inventories should be recorded at the lower of historical cost and net realisable value (NRV).
Impairment loss of inventory must be recognised in Income Statement.

If omitted, Inventory (Balance Sheet) will be overstated. Profit (Income statement) overstated ->
Retained Earnings (Balance Sheet) overstated.
Q2.
Part 2
The reported value (NBV) of a PPE should not be higher than it’s recoverable amount (greater of its
'fair value less costs to sell' and its 'value in use’). The PPE must be written down to its recoverable
amount if it is lower than the PPE's carrying amount.
After the write-down, the periodic depreciation should be revised to reflect the most updated
estimates of the remaining life-span and residual value of the PPE.
Accumulated depreciated understated, Net Machine overstated. Profit Overstated and RE

Overstated.
Q2.
Part 3
IAS 37. contingent liability. (FYI)
Probable and can be reliably estimated = create provision. Possible = disclosure note with
estimated impact. Remote= no action
Yeon - no impact
Yo pte ltd - profit overstated, RE overstated, liability understated
Q3. Prepare the Statement of Cash Flows for the year ended 31st December 2017
Materials needed to do cash flow statement:
1. Balance Sheet
2. Income Statement
Materials Provided:
1. Balance Sheet
2. Income Statement (Find it)

Additional Information #1
1. Sold Equipment for cash of $4000
2. Fully Depreciated
Implications:
- Sale of Equipment
Dr Cash 4,000
Dr Accumulated Depreciation 36,300 (37,800 – 1,500)
Cr Equipment 37,800
Cr Gain on Disposal 2,500 (4,000-1,500)

1. Bought land at $559,100
2. 10% in cash (2017), 90% Shares
Implications:
Dr Land 559,100
Cr Cash 55,910 (0.1 x 559100)
Cr Share Capital 503,190 (559100 x 0.9)

1. No new short term notes payable
2. Company repaid a portion of short term notes
payable
Implications:
All changes in short term notes payable are due to
repayment
Dr Short Term Notes Payable 3,300
Cr Cash 3,300
1. All treasury shares reissued at cost
Implications:
Dr Cash 20,100
Cr Treasury Shares 20,100

1. Interest Received $1,900
2. Interest Payment $3,240

1. Profit Before Tax: $72,352
2. Income tax expense: $11,520

Steps to Preparing Indirect Cash Flow

1. Start with Profit Before Tax
2. Add back Depreciation &
Amortization (if any)
3. Add / Subtract other non-cash items
(if any)
4. Gain or Losses on sale of assets
5. Remove interest, tax & dividend
revenue/expense items
6. Changes in Current Asset and
Current Liability (excluding notes
payable)
7. List all Interest, Dividend & Tax
receipt and payment
Steps to Preparing Investing Activities
1. Changes in Long Term Assets
i. Inflow
ii. Outflow
2. Short term assets which are
investments by nature
Steps to Preparing Financing Activities
1. Changes in Paid Up Capital and
treasury shares
2. Changes in Long Term Debt
3. Changes in Short Term Notes Payable
4. Changes in Retained Earning

Q3.
Prepare the Statement of

Cash Flows for the year ended
31st December 2017

AY1718 Finals (Actual) Sem 1 Solutions

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AY1718 Finals (Actual) Sem 1 Solutions

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ACC1701

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1 Jan 1 Sep 31 Nov 31 Dec 1 Sep

Journal Entry Debit Credit

1 Jan 1 July 1 Dec 31 Dec

X = $158,400 / 11.25 = $14,080

December expense = 1.05 X = $14,784

Journal Entry Debit Credit

Yearly Depreciation : $19,440 / 6 = $3,240

Journal Entry Debit Credit

Supply Expense = $2,804 – $2,200 = $604

Journal Entry Debit Credit

COGS : $8,900 – $55(100) = $3,400

Journal Entry Debit Credit

Allowance for Bad Debt

Journal Entry Debit Credit

Given Land : $815,600

Revaluation Gain : $835,000 - $815,600 = $19,400

Journal Entry Debit Credit

Given investment in So Pte Ltd: $70,000

Fair Value Gain: $98,000 – 70000 = $28,000

Journal Entry Debit Credit

Journal Entry Debit Credit

Date of Declaration of dividend – DR Retained Earnings & CR Div Payable

Journal Entry Debit Credit

31st Dec 2017

Yo Pte Ltd: Highly Probable – Make Provision

Dr Estimated Lawsuit Loss 200,000

b. Prepare the classified Statement

Impairment loss of inventory must be recognised in Income Statement.

Accumulated depreciated understated, Net Machine overstated. Profit Overstated and RE

Materials needed to do cash flow statement:

2. Income Statement (Find it)

1. Sold Equipment for cash of $4000

Dr Accumulated Depreciation 36,300 (37,800 – 1,500)

Cr Gain on Disposal 2,500 (4,000-1,500)

1. Bought land at $559,100

2. 10% in cash (2017), 90% Shares

Cr Cash 55,910 (0.1 x 559100)

Cr Share Capital 503,190 (559100 x 0.9)

1. No new short term notes payable

2. Company repaid a portion of short term notes

All changes in short term notes payable are due to

Dr Short Term Notes Payable 3,300

1. All treasury shares reissued at cost

Cr Treasury Shares 20,100

1. Interest Received $1,900

2. Interest Payment $3,240

1. Profit Before Tax: $72,352

2. Income tax expense: $11,520

Steps to Preparing Indirect Cash Flow

Steps to Preparing Investing Activities

1. Changes in Long Term Assets

2. Short term assets which are

Steps to Preparing Financing Activities

1. Changes in Paid Up Capital and

2. Changes in Long Term Debt

3. Changes in Short Term Notes Payable

4. Changes in Retained Earning

Prepare the Statement of

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