1. Accounting transactions and financial statements (42 marks) Ten Rings Ltd is a small wholesale business selling premium jewellery boxes. The balance sheet at the end of December 2021 is shown below. Ten Rings Ltd - Balance Sheet as at 31 December, 2021 Assets Liabilities & Owner's Equity Current Assets: Current Liabilities: Cash $80,000 Accounts Payable $18.000 Accounts Receivable $50,000 Inventory $42.000 Non-current Assets: Non-current Liabilities: Office equipment - Cost $10,000 Bank Loan $90,000 Less Accumulated ($2.400) Depreciation Office equipment - Net $7.600 Owner's Equity: Share Capital $50,000 Retained Earnings $21.600 Total Assets $179.600 Total Liab' & OE $ 179.600 Required: (a) Transactions for January 2022 are given below (ignore taxes). Prepare journal entries to account for these transactions, and indicate the impact on the Cash Flow Statement if there is any. The first transaction is done for you in the template as an example. (18 marks) 1 January, collected $10.000 cash from accounts receivable. (11) 1 January, prepaid rent $12,000 for the next 3 months. 2 January, sold a piece of office equipment for $1.000 cash. The disposed equipment has a cost of $2.000 and accumulated depreciation of $700. (iv) 2 January, paid $7,000 of accounts payable, which related to inventory purchased in 2021. (v) 5 January, repaid part of the bank loan $40,000. (vi) 7 January, purchased $25,000 of inventory on credit, which is payable in February 2022. (vii) 8 January, sold $23,000 worth of inventory for $45.000 cash. (vill) 20 January, purchased new office equipment for $5,000 cash. (ix) 22 January, paid salary and other expenses $8.000 for the month. 28 January, sold 516,000 worth of inventory for $30.000 on credit receivable in February 2022. (xi) 29 January, a customer ordered some boxes and paid a deposit of $6,000. The delivery of the order will take place in March 2022. (xii) 31 January, the following adjustments needed to be recorded: Accrued interest expense $500 for the month of January, which is payable in February 2022. Depreciation expense $600 for office equipment in January Rental expense for the month of January Q1(a)Template for Journal Entries: Date Dr Cr Dr S Crs Note: Cash inflow from operating () 1-Jan Dr Cash 10,000 Cr Accounts Receivable 10,000 (11) 1-Jan (111) 2-Jan (iv) 2-Jan () 5-Jan (vi) 7-Jan ola Template for Journal entries continued: Date Dr Cr Dr S Crs Note: (v11 8-Jan (v111 20- Jan 22- Jan (1x) 28- Jan (x 29- Jan (xi) (xii 31- Jan QI Continued: (b) Prepare the following THREE financial statements, using the templates below: Income Statement for the month of January 2022 Statement of Cash Flows for the month of January 2022, Balance Sheet as at 31 January 2022. (hint: you need to work out the closing balance of each asset, liability and owner's equity, which includes opening balance and the change during the current financial period. SHOW your workings. You can either use the formula or T-account to work out the balance.) (20 marks) Ten Rings Ltd Income Statement for the month of January 2022 Revenue Less Cost of Goods Sold = Gross Profit Less Other Operating Expenses or losses Total Other Operating Expenses or losses Profit Q1 (b) Continued: Ten Rings Ltd Statement of Cash Flows for the month of January 2022 Operating Cash Flows Receipts from customers Payment to inventory suppliers Payment for rent Payments for salary and other expenses Total Operating Cash Flows Investing Cash Flows Total Investing Cash Flows Financing Cash Flows Total Financing Cash Flows Net change in cash held during January + Opening Cash Balance from 31 Dec 2021 Closing Cash Balance on 31 Jan 2022 Q1(b) Continued: Ten Rings Ltd Balance Sheet as at 31 January 2022 Assets $ Liabilities and Owner's Equity $ $ Current Assets: Current Liabilities Non-current Assets: Non-current Liabilities: Owner's Equity Total Assets Total Liab' & OE Qi Continued: (c) Explain why Ten Rings Ltd's profit in the Income Statement does NOT equal "Total Operating Cash Flows" from the Statement of Cash Flows. Use the business transactions in January to illustrate your points. (Maximum words: 200 words) (4 marks)