Final Assessment-N0 2

Subject: Financial Accounting

QUESTION 1: List source of data and preparation method to present item “Inventory” in
Balance Sheet. Make example for illustration.

QUESTION 2: On 1st December: Handing over an equipment to Sales Department. This

equipment was purchased on credit at total price of 880,000 (including 10% VAT).
Transportation expenses: 10,000. Installment and testing expense incurred: 30,000. Staff
training cost for the equipment usage: 50,000. The company’s accountant recorded cost
of fixed asset: 880,000. Did the accountant record exactly? If it did not, write correct
entry for the transaction

Knowing that: The equipment’s useful life is 10 years and company A applies straight
line method for FA depreciation. Make assumption if needed.

QUESTION 3: Christmas ltd. applies deductible VAT method and perpetual inventory
system. In 2021, the following information as below: (Unit: CU)

1. Purchased on credit 10,000 kg material A with price exclusive of VAT: 55/kg

2. Sent 8,000 kg material A for direct production
3. Direct labor cost incurred: 500,000
4. Manufacturing overhead cost incurred: 255,000
5. During the year, there were 1,000 finished products was put into the warehouse
and 50 units work in progress (total cost of the work in progress: 85,000)
6. During the year, ABC:
- Sold on credit 500 finished goods to Bell Ltd. with price exclusive of VAT:
X/product
- Sold 350 goods to customer Candy Cane Ltd. with price exclusive of VAT of
Y/product; the payment was made at date of sale
- Received 20 returned goods from Bell ltd.
7. Administrative expenses incurred: 500,000
8. Selling expenses incurred: 200,000
Required:

1. Replace X,Y with suitable amount, so the company would make profit.
2. Prepare journal entries (included closing entries to calculate cost of goods
manufactured and determine the business’s performance) from the given information.

3. Prepare Income Statement

Noted that:

Beginning balances are as follows: Account 152 (material A): 1,200 x 45; Account 154:
100,000; Account 155: 200 x 1,020

The company applies FIFO method for calculating cost of inventory, CIT rate 20%

- There is no different between profit before tax and taxable income except for 30,000
administrative expeses (which is non deductible expenses)