Part I (24 marks) Norwest Ltd ("Norwest") received the bank statement from Hongkong Bank showing a balance of $59,782 at 31 January 2021. The cash account in the general ledger of Norwest showed a balance of $45,202 as at 31 January 2021. Norwest adjusts its account annually and its year end date is on 31 December. There were no outstanding checks and deposits in transit at the end of December 2020. The following information is also provided 1. Two checks amounted to $1,400 and $4,200 were mailed to the bank for deposit but had not reached the bank before 31 January 2021. 2. Total checks issued by Norwest were $25,000 and the checks cleared by the Hongkong Bank were $20,500. 3. The bank statement showed that a check of $6,300 issued by Beautiful Ltd, a customer of Norwest, was deducted from the bank account of Norwest because of insufficient fund. 4. A 3-month note receivable made on 1 November 2020 of $23,000 and all 3 months accrued interests of $300 ($100 for each month) were collected and credited directly to Norwest's bank account on 31 January 2021. No interest payment was received by Norwest since 1 November 2020. 5. Dividend income on investment of $600 was directly credited by the bank. 6. An error was discovered in the cash account, in which the payment of $4,100 for rent expense was erroneously recorded as $3,000. 7. The bank has incorrectly debited an amount of $820 to Norwest's bank account for a check issued by "Northwest" Ltd. Required: (a) Prepare a bank reconciliation statement as at 31 January 2021. Show your workings (16 marks) (b) Prepare the journal entries that should be made in the accounting records of Norwest Ltd as a result of the above bank reconciliation (8 marks) Part II (16 marks) The information below was extracted from the unadjusted trial balance as at 31 December 2020 of Happy Ltd. No adjusting entry has been made for the Allowance for Impairment account in 2020. Accounts receivable 600,000 Net sales (70% on credit) 900,000 Allowance for impairment (Credit balance) 18,000 I (a) Considering the following two independent situations: 0 An aging analysis indicated that $40,000 of the accounts receivable at year end will be uncollectible. Assume Happy Lid uses statement of financial position approach (6 marks) (ii) It is estimated that 2% of net credit sales for the year will become uncollectible. Assume Happy Lid uses income statement approach. (6 marks) For each of the above independent situation, (1) prepare the adjusting entries to record the estimated uncollectible accounts for the year 2020 and (2) present the Account Receivable with the estimated collectible amount in the Statement of Financial Position vertically at 31 December 2020 of Happy Ltd. (b) If Happy Ltd's Allowance for Impairment account has a debit balance of $16,000 prior to making any adjustment to record impairment loss of receivable, using the same information as (a)(i) above, prepare the adjusting entries to record the estimated uncollectible accounts for the year. (4 marks) Part I (24 marks) Norwest Ltd ("Norwest") received the bank statement from Hongkong Bank showing a balance of $59,782 at 31 January 2021. The cash account in the general ledger of Norwest showed a balance of $45,202 as at 31 January 2021. Norwest adjusts its account annually and its year end date is on 31 December. There were no outstanding checks and deposits in transit at the end of December 2020. The following information is also provided 1. Two checks amounted to $1,400 and $4,200 were mailed to the bank for deposit but had not reached the bank before 31 January 2021. 2. Total checks issued by Norwest were $25,000 and the checks cleared by the Hongkong Bank were $20,500. 3. The bank statement showed that a check of $6,300 issued by Beautiful Ltd, a customer of Norwest, was deducted from the bank account of Norwest because of insufficient fund. 4. A 3-month note receivable made on 1 November 2020 of $23,000 and all 3 months accrued interests of $300 ($100 for each month) were collected and credited directly to Norwest's bank account on 31 January 2021. No interest payment was received by Norwest since 1 November 2020. 5. Dividend income on investment of $600 was directly credited by the bank. 6. An error was discovered in the cash account, in which the payment of $4,100 for rent expense was erroneously recorded as $3,000. 7. The bank has incorrectly debited an amount of $820 to Norwest's bank account for a check issued by "Northwest" Ltd. Required: (a) Prepare a bank reconciliation statement as at 31 January 2021. Show your workings (16 marks) (b) Prepare the journal entries that should be made in the accounting records of Norwest Ltd as a result of the above bank reconciliation (8 marks) Part II (16 marks) The information below was extracted from the unadjusted trial balance as at 31 December 2020 of Happy Ltd. No adjusting entry has been made for the Allowance for Impairment account in 2020. Accounts receivable 600,000 Net sales (70% on credit) 900,000 Allowance for impairment (Credit balance) 18,000 I (a) Considering the following two independent situations: 0 An aging analysis indicated that $40,000 of the accounts receivable at year end will be uncollectible. Assume Happy Lid uses statement of financial position approach (6 marks) (ii) It is estimated that 2% of net credit sales for the year will become uncollectible. Assume Happy Lid uses income statement approach. (6 marks) For each of the above independent situation, (1) prepare the adjusting entries to record the estimated uncollectible accounts for the year 2020 and (2) present the Account Receivable with the estimated collectible amount in the Statement of Financial Position vertically at 31 December 2020 of Happy Ltd. (b) If Happy Ltd's Allowance for Impairment account has a debit balance of $16,000 prior to making any adjustment to record impairment loss of receivable, using the same information as (a)(i) above, prepare the adjusting entries to record the estimated uncollectible accounts for the year. (4 marks)
