Please show clearly with steps :) PART A ONLY
QUESTION 2: CASH AND ASSOCIATED ISSUES This question includes two parts, Part A and Part B. Both are compulsory. Part A-Statement of Cash Flows Set out below are Blue Ltd's financial statements for the year ended 31 December. Blue Ltd Comparative Balance Sheets as at 31 December 2019 2018 $ Assets Cash at bank Accounts receivable (net) Prepaid expenses Inventory Equipment Accumulated depreciation - Equipment Total Assets $ 56,000 123,000 10,000 52,000 270,000 (118,000) $ 393,000 47,000 107,000 9,000 46,000 262,000 (109,000) 362,000 $ $ $ Liabilities and Shareholders' Equity Accounts payable Accrued expenses payable Income taxes payable Notes payable Ordinary shares Retained earnings Total Liabilities and Shareholders' Equity 18,000 5,000 7,000 120,000 213,000 30,000 393,000 11,000 9,000 5,000 130,000 200,000 7,000 362,000 $ $ Blue Ltd Statement of Profit or Loss for the Year Ended 31 December 2019 Sales Gain on sale of equipment $ 1,339,000 3,000 1,342,000 $ Less: Cost of sales Operating expenses (excluding depreciation) Depreciation expense Interest expense Income taxes expense Net profit after tax 908,000 346,000 24,000 14,000 12,000 (1,304,000) $ 38,000 The following additional information was provided: (a) All sales and purchases of inventories were on account. (b) Accounts payable pertains to inventory creditors. (c) Old equipment with a cost of $24,000 was sold for $12,000 cash, resulting in a gain of $3,000. New equipment was purchased using cash during the year. (d) A cash dividend was declared and paid during the year. (e) Notes payable in the amount of $10,000 were repaid by cash during the year. (f) Additional shares were issued for cash during the year. (g) Interest expenses were settled in cash. Required: For the purpose of this question, please ignore GST. Show all your workings. (1) Prepare a Statement of Cash Flows for Blue Ltd for the year ended 31 December 2019 using the direct method. (17 marks) Prepare a reconciliation of net profit after tax to net cash provided from operating activities. (5 marks) Part B - Bank Reconciliation On 31 May Shine Ltd had a cash balance as per company records of $4,985 debit. The bank statement on that date showed a balance per bank of $7,868 in funds. A comparison of the statement with the cash account revealed the following facts: (a) Unpresented cheques at 31 May totalled $1,276, and outstanding deposits were $850. (b) Cash sales of $836 during the month were deposited in the bank. The cash receipts were incorrectly journalised and posted by the company for $863. The bank credited Shine Ltd for the correct amount. (c) A $3,000 note receivable was collected by the bank for Shine Ltd on 31 May plus $150 interest. The bank charged a collection fee of $20. These transactions had not been processed through the company's books. No interest has been accrued on the note. (d) Shine Ltd issued a cheque for $528 to Lee Ltd in payment of an outstanding accounts payable balance. The cheque, which cleared the bank in May, was incorrectly journalised and posted by the company for $582. On 31 May the bank statement showed a dishonoured cheque of $700 that had been issued by Diego Ltd, a customer, to Shine Ltd. Required: For the purpose of this question, please ignore GST. Narrations for journals are NOT required but show ALL your workings. (1) Prepare the Bank Reconciliation Statement for Shine Ltd as at 31 May proceeding to the correct cash balance. (5 marks) Prepare the necessary adjusting entries in the books of Shine Ltd's based on the reconciliation assuming the company's accounts have not been closed. (4 marks) QUESTION 2: CASH AND ASSOCIATED ISSUES This question includes two parts, Part A and Part B. Both are compulsory. Part A-Statement of Cash Flows Set out below are Blue Ltd's financial statements for the year ended 31 December. Blue Ltd Comparative Balance Sheets as at 31 December 2019 2018 $ Assets Cash at bank Accounts receivable (net) Prepaid expenses Inventory Equipment Accumulated depreciation - Equipment Total Assets $ 56,000 123,000 10,000 52,000 270,000 (118,000) $ 393,000 47,000 107,000 9,000 46,000 262,000 (109,000) 362,000 $ $ $ Liabilities and Shareholders' Equity Accounts payable Accrued expenses payable Income taxes payable Notes payable Ordinary shares Retained earnings Total Liabilities and Shareholders' Equity 18,000 5,000 7,000 120,000 213,000 30,000 393,000 11,000 9,000 5,000 130,000 200,000 7,000 362,000 $ $ Blue Ltd Statement of Profit or Loss for the Year Ended 31 December 2019 Sales Gain on sale of equipment $ 1,339,000 3,000 1,342,000 $ Less: Cost of sales Operating expenses (excluding depreciation) Depreciation expense Interest expense Income taxes expense Net profit after tax 908,000 346,000 24,000 14,000 12,000 (1,304,000) $ 38,000 The following additional information was provided: (a) All sales and purchases of inventories were on account. (b) Accounts payable pertains to inventory creditors. (c) Old equipment with a cost of $24,000 was sold for $12,000 cash, resulting in a gain of $3,000. New equipment was purchased using cash during the year. (d) A cash dividend was declared and paid during the year. (e) Notes payable in the amount of $10,000 were repaid by cash during the year. (f) Additional shares were issued for cash during the year. (g) Interest expenses were settled in cash. Required: For the purpose of this question, please ignore GST. Show all your workings. (1) Prepare a Statement of Cash Flows for Blue Ltd for the year ended 31 December 2019 using the direct method. (17 marks) Prepare a reconciliation of net profit after tax to net cash provided from operating activities. (5 marks) Part B - Bank Reconciliation On 31 May Shine Ltd had a cash balance as per company records of $4,985 debit. The bank statement on that date showed a balance per bank of $7,868 in funds. A comparison of the statement with the cash account revealed the following facts: (a) Unpresented cheques at 31 May totalled $1,276, and outstanding deposits were $850. (b) Cash sales of $836 during the month were deposited in the bank. The cash receipts were incorrectly journalised and posted by the company for $863. The bank credited Shine Ltd for the correct amount. (c) A $3,000 note receivable was collected by the bank for Shine Ltd on 31 May plus $150 interest. The bank charged a collection fee of $20. These transactions had not been processed through the company's books. No interest has been accrued on the note. (d) Shine Ltd issued a cheque for $528 to Lee Ltd in payment of an outstanding accounts payable balance. The cheque, which cleared the bank in May, was incorrectly journalised and posted by the company for $582. On 31 May the bank statement showed a dishonoured cheque of $700 that had been issued by Diego Ltd, a customer, to Shine Ltd. Required: For the purpose of this question, please ignore GST. Narrations for journals are NOT required but show ALL your workings. (1) Prepare the Bank Reconciliation Statement for Shine Ltd as at 31 May proceeding to the correct cash balance. (5 marks) Prepare the necessary adjusting entries in the books of Shine Ltd's based on the reconciliation assuming the company's accounts have not been closed. (4 marks)
