machinery that com RM60,000. It is the policy of the business to charge depreciation over its useful life of 5 years. At the end of its useful life, it is estimatel EXERCISES 3 Mia Trading owns you 15.com Answer the foliowing questions. 1 An asset was purchased on 1 July 20x7 for a cash price of RM104,000. It is a policy of the business to depreciate its asset using the reducing balance method at the rate of 15% per annum on a yearly basis. Calculate the asset's net book value on 31 December 20x9, assuming that the business closes its account on that date. A RM63,869 B RM63,877 CRM63,883 D RM63,889 2 A machinery was purchased for RM10,000. The transportation cost incurred was RM400 and an additional RM1,200 was paid to have it installed, ready for its intended use. After being used for three months, it broke down and had to be repaired at a cost of RM200. In the Statement of Financial Position at the end of the period, the cost of the machinery would be shown as A RM10,400 B RM10,200 CRM11,400 DRM11,600 that its residual value is RM4,000. What is the depreciation charge during the year? A RM12,000 B RM12,800 C RM11,200 DRM800 4. Which of the following can be considered as a capital expenditure? I Purchase price of machinery II Cost of upgrading the machinery III Cost of maintaining the machinery IV Installation cost of machinery A I, II and III only B I, III and IV only C II, III and IV only D I, II and IV only 5 Depreciation is a process of A asset devaluation B cost accumulation C cost allocation Dasset valuation 231 6 Which of the following expenses could be Chapter 9 Accounting for Non-current Assets and Depreciation A RM100,000 CRM150,000 considered a capital expenditure? B RM130,080 D RM111,920 A Petrol costs for a motor van B Depreciation of a motor van 9 The carrying value of a depreciable asset is the difference between C Repairs to a motor van D Installation of an air conditioner unit in a A depreciation and accumulated depreciation B cost and accumulated depreciation motor van C cost and depreciation 7 All of the following expenses are regarded as D None of the above capital expenditure, except 10 Which of the following expenditure incurred A Cost to acquire a machine in connection with the acquisition of a building B Depreciation of office equipment should be charged to the expense account? C Extension to an office building A Legal fees on the building purchased D Installation of an air-conditioning system B Expenses incurred in the construction of 8 The depreciation rate for motor vehicles is 15% parking space for staff per annum calculated on cost. A motor vehicle C Fire insurance on the building which was bought 3 years ago has a carrying D Installation cost of an air-conditioning (book) value of RM82,500. What is the cost of system for the building the motor vehicle? What is the ending balance of allowance for doubtful debts as at 31 December 20x7? What is the journal entry to record the amount Chapter 10 Bad Debts. Allowance for Doubt Debts, and Allowance for Discount 257 1 4 RM1,150 B RM650 CRM520 DRM690 2 of returns inwards? A Debit Accounts receivable RM3,000 Credit Returns inwards RM3,000 B Debiteturns inwards RM3,000 Crea Accounts receivable RM3,000 C Debird debts RM1,000 CreReturns inwards RM1,000 D Debit 3.eturns inwards RM3,000 Credit Bad debts RM3,000 3 What is the amount of sales to be included in the accounts receivable account? A RM75,000 BRM100,000 CRM70,000 DRM85,000 4 Which of the following is the correct journal entry to write off a debtor who has been declared as bankrupt? Debit Credit A Bad debt expense Accounts receivable B Accounts receivable Bad debt expense C Doubtful debts Accounts receivable expense D Accounts receivable Allowance for doubtful debts 5 Anis supplies stationery to her customers on credit. Based on previous years' trends, 2% of her accounts receivable will turn bad. To be prudent, she wants to record this potential Joss in her books. Which of the following is the correct journal entry to record this estimate? Debit Credit A Bad debt expense Accounts receivable B SPLOCI Allowance for doubtful debts Allowance for Accounts receivable doubtful debts D Allowance for SPLOCI doubtful debts 6 The following is the trial balance extract of Dahlia Enterprise as at 31 July 20x8: Particulars Debit Credit (RM) (RM) Accounts receivable 39,600 Allowance for doubtful debts 1,800 (1 August 20x7 It is the policy of Delima Enterprise to provide for doubtful debts at 5% on accounts receivable. Calculate the amount of doubtful debts that will be recorded in the Statement of Profit or Loss and Other Comprehensive Income for the year ended 31 July 20x8. A Debit RM180 B Credit RM180 C Debit RM1.980 D Credit RM1.980 7 An allowance for doubtful debts account is created to estimate A the amount of expected bad debts. B the amount of expected bad debts recovered. Cthe expected number of debtors. Dthe expected number of creditors. 8 Your friend Normala has just started a business and she asked you the following question related to her business accounting records: What are 'bad debt' and 'doubtful debt? Explain the differences between the two terms to her. 255 Fundamo Finance Accounting 9 The following information is available for Anis Printing as at 30 June 20x8: Accounts receivable Allowance for doubtful Bad debts to be as at 30 June 20x8 debts at 1 July 20x7 written off RM50,450 RM3,000 RM450 Allowance for doubtful debts 2% Choose the correct entry: Debit Credit A SPLOCI RM1,000 Allowance for doubtful debts RM1,000 B Allowance for doubtful debts RM1,000 SPLOCI RM1,000 C SPLOCI RM2,000 Allowance for doubtful debts RM2,000 D Allowance for doubtful debts RM2,000 SPLOCI RM2,000 10 The following double entries are extracted from the books of Ping Wai Trading: Transactions Debit Credit I To record bad debts of RM 300 Bad debts RM300 Accounts receivable RM300 II To increase doubtful debts SPLOCI RM500 Doubtful debts allowance from RM200 to RM500 allowance RM500 III To reduce discounts allowable from SPLOCI RM200 Allowance for discounts RM900 to RM700 allowable RM200 IV To record discounts received of Accounts payable RM250 SPLOCI RM250 RM250 RM100 V To record discounts given of RM100 Accounts receivable RM100 SPLOCI Choose the entry or entries to be corrected: AI and IV only CII, III and V only B I, II and V only D All of the entries EXERCISES A contra entry B imprest system C prudent Dconservatism 4 period vehicle D utility bills the following questions. A petty cash float is maintained to pay for C down payment of the business motor The month petty cash float of a business is 4 Debiting the petty cash book with the exact small amount of expenditure for a given B the monthly salary of a cashier RM1,000. Wat is the amount to be reimbursed at the end of the month if total payment for the 3 The following is a summary of Adam Cafe's petty cash transactions for a week: Income RM Opening balance 600 Sale of stamps 20 Sale of paper 60 Expenditure RM Travelling expenses 200 Subsistence expenses 180 Petty cash is maintained using the imprest system. What sum should be reclaimed by the cashier at the end of the week? A RM380 C RM600 B RM300 D RM200 month was M750? A RM350 B RM1.750 CRM750 DRM1,000 5 An analytical petty cash book A is used instead of three-column cash book. B is not part of the double-entry system. Clists different petty expenses under their relevant headings D is always run on the imprest system. 6 Under the imprest system, the cash is A increased every week. B reduced every week. C used up completely before being restored. Dalways restored to the original amount. 7 Which of the following statements is incorrect? A The petty cash book records cash received and paid. B The petty cash book is written up using petty cash receipts and petty cash vouchers. C The petty cash book is a book of prime entry DThe petty cash book records cheques received and paid. 8 Aminah Mart does not operate an imprest system. The secretary informs you that at the beginning of the month, there was RM10 cash in the cash box. She also informs you that she took out the following sums from the cash register on the following dates: 5/3/20x8 RM30 16/3/20x8 RM50 21/3/20x8 RM20 23/3/20x8 RM100 amount spent in the previous period is an example of 9 The closing balance of the petty cash book is 10 Which of the following explains the imprest 272 Fundamentals of Financial Accounting During the same month, the secretary paid for the following items: considered as Purchased coffee RM8 A expense B income Payment for travel expenses RM35 asset Payment for sundry stationeries RM18 D liability Payment for sugar, cream and milk RM28 Payment for stamps and envelopes RM36 system of operating petty cash? Payments for biscuits RM12 A Daily expenditure cannot exceed a certain Payment for laundry of praying mats RM58 amount. She also put back RM10 into the cash register B The exact amount of expenditure is on 25/3/20x8 in change as the cashier required reimbursed at certain intervals to maintain RM5 notes and she had some in petty cash. a fixed float. How much is in petty cash at the end of the C All expenditure out of the petty cash must month? have proper authorisation. A RM20 CRM15 D Frequent equal amounts of cash are B RM5 D None of the above transferred into petty cash at intervals. out in e cash book? Y .) EXERCISES Answer the following questions. 1 The following items will result in a difference between the balances in the bank statement and the cash book, except A Interest charges B Standing order C Dishonoured cheque D Outstanding cheque 2 The following are the reasons for dissimilarity between balances in the bank statement and the cash book, except A Direct debit B Credit transfer C Cheque cleared D Dishonoured cheque 3 Uncredited cheques are A cheques issued by a business but not yet cashed out by creditors. B cheques that are already deposited into a business's bank account but not yet recorded in the bank statement. C bank charges on the services provided by the bank. D instructions given by a business to make regular payments on its behalf to its creditors. 4 Direct debit means A instructions by the business to the bank to pay a fixed regular amount of money at stated dates to persons, businesses or companies. B instructions to the bank to release amounts of money requested by creditors from time to time. C the direct transfer of money from the business's bank account into its creditors' bank account D the direct transfer of money into the business's bank account by its debtors. 8 A cheque drawn by the business for 3 for payment of a liability was recorded into journal as RM906. This item would be in content 9 A cheque received from a debtor on 29 Mard 20x8 was credited into the bank on 31 January 5 A bank reconciliation statement is a statement that is A drawn up by the business to verify the cash book balance with the bank statement in the bank reconciliation as a/an balance. A deduction by the bank B drawn up by the bank to verify the cash B addition by the bank book. C deduction by the business Csent by the bank when the business has Daddition by the business made an error a D sent by the bank when the account is overdrawn. 20x7. However, on 7 April 20x8, the bank 6 In preparing a bank reconciliation statement, returned the cheque. This is known as which of the following items will not be A unpresented cheque included in updating the cash book? Buncredited lodgement A Interest charges Cdishonoured cheque B Unpresented cheque D unrecorded deposit C Bank charges 10 The bank reconciliation statement shows a D Standing order debit balance of RM2,470 as per the cash book, 7 To deposit money in your business's bank unpresented cheques amounting to RM858, account, you should use and a credit balance of RM1,198 as per the bank A a cheque book statement. What is the amount of the deposits B a bank statement not yet credited? a deposit slip A RM2,810 CRM4,526 Da withdrawal slip B RM2,130 D RM414 PROBLEM QUESTIONS Complete all the questions provided. Action