2. True (T) or False (F) statements (20 marks) You are provided the financial information and statements below for the year ended 31 March 2022 for Happiness Ltd. Using the template provided below, indicate for each of the statements whether it is True (T) or False (F), If the statement is false, rewrite the statement to make it true, otherwise leave it blank. Item Financial information and related statements (a) Financial Information: On 1 April 2021, the opening balance of interest payable was $10,000. During the financial year, Happiness Ltd recognised $50,000 for its interest expense in the Income Statement. On 31 March 2022, the Balance Sheet has a liability of "Interest payable" with a closing balance of $6,000. Statement: Therefore, during this financial year, $50,000 cash has been paid out for interest expense.. Rewrite statement: TZE (b) Financial Information: Happiness Ltd acquired a specialised machinery with a six-year useful life on 1 April 2019 for $320,000. At the end of its useful life, the machinery will have a $20,000 residual value. The machinery is depreciated on a straight-line basis. On 31 March 2022, the machinery was revalued to $350,000. Statement: Therefore, the related journal entries for the machinery in this financial year are: Dr Depreciation expense $50,000 Cr Accumulated depreciation $50,000 Dr Accumulated depreciation $150,000 Cr Machinery $150,000 Dr Machinery Cr Asset Revaluation reserve (OCI) $200,000 $200,000 Rewrite statement: Q2 continued: Item Einancial information and related Statements (c) Financial Information: On 1 April 2021, the opening balance of the goodwill was $1,000,000. At the end of the financial year, Happiness Lad believed that the goodwill had been impaired by $100,000 and recognised the impairment expense in its Income Statement. This is the first time that Happiness Ltd has recognised goodwill impairment. Statement: Therefore, on 31 March 2022, the Balance Sheet has an asset "Goodwill" with a net carrying amount of $900,000. Rewrite statement: TZE (d) Financial Information: Happiness Lid owns a rental property providing rent revenue for the business. On 1 April 2021, the opening balance of the rent revenue received in advance was $15,000. During the year, $80,000 cash was received from the tenant. On 31 March 2022, the Balance Sheet has a liability "Revenue received in advance" with a closing balance of $25,000. Statement: Therefore, only $70,000 was recognised as rent expense related to this financial year in the Income Statement. Rewrite statement: (e) Financial Information; On 1 April 2020, Happiness Ltd purchased a piece of land for $600,000. On 31 March 2021, the land was revalued to $700,000. At the end of this financial year (31 March 2022), the land value has gone up again and was revalued to $850,000. Statement: Therefore, on 31 March 2022, the disclosure on financial statements related to the land is below: Balance Sheet: Asset-Land $850,000 Equity Asset revaluation reserve (ARR): $250,000 Statement of Other comprehensive income increase on ARR-OCI account: $250,000 Rewrite statement Q2 continued: Item Financial information and related Statements (f) Einancial Information: During the year, Happiness Lad spent $400,000 cash for developing a project. Because the asset recognition criteria were satisfied, Happiness Ltd has recognised this whole amount as a development asset on balance date. Statement: Therefore, on 31 March 2022, the Balance Sheet has an asset "Development asset" with a carrying amount of $400,000. Rewrite statement: T/F FINANCIAL INtermanen: Us prepayment for insurance was $5,000. During the year, Happiness Ltd prepaid $25,000 cash for the insurance. On 31 March 2022, the Balance Sheet has an asset "Prepayment for insurance" with a value of $7,000. Statement: Therefore, for the year ended 31 March 2022, Happiness Ltd recognised $25,000 "Insurance expense" in the Income Statement. Rewrite statement: (h) Financial Information: On 1 April 2021, the opening balance of the provision for warranty was $80,000. During the year, Happiness Ltd recognised $100,000 for its warranty expense in the Income Statement. At the end of the financial year, $150,000 has been paid out for warranty claims Statement: Therefore, on 31 March 2022, the Balance Sheet has a liability "Provision for warranty" with a closing balance of 50,000. Rewrite statement: 02 continued: Item Financial information and related Statements (i) Financial Information: On 1 April 2021, the opening balance of inventory was $150,000. During the year, Happiness Ltd purchased $900,000 products for sale. At the end of the financial year, the closing inventory has a balance of $100,000. Statement: Therefore, for the year ended 31 March 2022, Happiness Ltd recognises $900,000 "Cost of Goods sold" in the Income Statement. On 31 March 2022, the Balance Sheet has an asset "Inventory" with a value of $100,000. Rewrite statement (j) Financial Information: On 1 April 2021, the opening balance of the allowance for doubtful debts (DD) was $40,000. During the year, Happiness Ltd recognised $60,000 for doubtful debts expense in the Income Statement At the end of the financial year, 564,000 accounts receivable has been written off as bad debts against allowance for DD account. Statement: Therefore, on 31 March 2022, the Balance Sheet has a contra asset account "Allowance for DD" with a closing balance of $36,000. Rewrite statement Page 2 of 13 IZE