Question
Part A The following section is taken from RedUnion Ltds statement of financial position at 31 December, 2020. Share capital 5 000 000 Reserves 212
Part A
The following section is taken from RedUnion Ltds statement of financial position at 31 December, 2020.
Share capital | 5 000 000 |
Reserves | 212 000 |
Retained earnings | 42 000 |
The directors approved a transfer of $20 000 to reserves. This was recorded in the ledger and is the only item affecting reserves during the year.
Cash dividends declared for the year ended 31 December 2020 were $21 000.
RedUnion Ltds profit for the year ended 31 December 2020 was $60 000.
Required:
1) Journalize the dividends declared. (1 marks)
2) Prepare a statement of the changes in retained earnings as at 31 December 2020. (3 marks)
Part B
Prepare journal entries for the following two transactions: (3 marks)
On 4 September, XYZ Ltd issued a $12 000, 10%, 3-month note to purchase inventory costing $20 000. The remaining amount was paid by cash.
On 30 September, XYZ Ltds employees earned wages of $30 000, assuming that these wages earned will be paid on 5 October. PAYG withheld tax was at the amount of $2 400.
Part C
Ross Ltd and Yang Ltd, two entities of roughly the same size, are both involved in the manufacture of dancing shoes. Each entity depreciates its PPE assets using the straight-line method. An investigation of their financial statements reveals the following information.
| Ross Ltd | Yang Ltd |
Profit | 900 000 | 560 000 |
Sales | 12 600 000 | 10 300 000 |
Total assets (average) | 3 750 000 | 4 480 000 |
PPE assets (average) | 2 000 000 | 3 360 000 |
Accumulated depreciation | 937 500 | 1 420 000 |
Depreciation expense | 130 000 | 420 000 |
1) For each entity, calculate average age of PPE assets and average useful life (2 marks)
2) Comment on how to interpret these ratios (1 marks) Word limit: 100
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