Power Pte Ltd is the sole distributor of a brand of power banks in Singapore. The accountant

met an accident recently and the director approached you for help.

He furnished you with the following unadjusted trial balance. The company uses the perpetual

inventory system and assign costs to inventory and cost of goods sold based on specific

identification. It also uses the allowance method to account for bad debts and provides for

warranty expenses every time a sale is made.

Power Pte Ltd$$s unadjusted Trial Balance as at $31$ December $2023$

Power Pte Ltd$\text{'}$s unadjusted Trial Balance as at $31$ December $2023$

$\backslash$table$[[,$Debit $($$$),$Credit $($$$)],[$Machine at cost$,104,000,],[$Motor vehicles at cost$,160,000,],[$Accumulated depreciation $-$ Motor vehicles,,$24,000],[$Cash$,64,000,],[$Share capital,,$120,000],[$Retained earnings, $31$ Dec $2022,,166,320],[$Bank loan $($long term$),,80,000],[$Inventory$,96,000,],[$Cost of goods sold,$192,000,],[$Warranty expense,$30,720,],[$Estimated warranty liability,,$4,000],[$Sales$,,384,000],[$Other expenses,$93,600,],[$Interest expense,$2,000,],[$Allowance for doubtful debts,,$1,600],[$Accounts receivable,$73,600,],[$Accounts payable,,$36,000],[$Total$,815,920,815,920]]$Debit $($$$)$ Credit $($$$)$

Machine at cost $104,000$

Motor vehicles at cost $160,000$

Accumulated depreciation $-$ Motor vehicles $24,000$

Cash $64,000$

Share capital $120,000$

Retained earnings, $31$ Dec $2022166,320$

Bank loan $($long term$)80,000$

Inventory $96,000$

Cost of goods sold $192,000$

Warranty expense $30,720$

Estimated warranty liability $4,000$

Sales $384,000$

Other expenses $93,600$

Interest expense $2,000$

Allowance for doubtful debts $1,600$

Accounts receivable $73,600$

Accounts payable $36,000$

Total $815,920815,920$

After discussing with the director, you are given the following additional information.

$($i$)$ The company made additional sales on $28$ December. Both the sales and the

cost of goods sold were not recorded in the accounts. Based on the specific

identification cost flow assumption, the value of the ending inventory following

the sales should be $$56,000$ and not $$96,000$ as shown in the unadjusted trial

balance.

Power Pte Ltd sets its selling price at the inventory cost plus a markup of $50\%.$

$75\%$ of the sales on $28$ December were on credit and the balance were cash

sales.

$($ii$)$ The company estimated that warranty expenses average $8\%$ of sales.

$($iii$)$ The machine that costs $$104,000$ was acquired on $1$ January $2023.$ This cost

includes $$2,500$ maintenance costs for the year ending $31$ December $2023.$

However, the cost of $$500$ to transport the machine from the supplier's

warehouse to the company$$s premises at the time of purchase was treated as

expense and included in the $$Other expenses Account$.$

$($iv$)$ No depreciation has been charged for the year ended $31$ December $2023.$

$$ The company depreciates the machine using the straight$-$line method.

The machine is expected to have a residual value of $$7,500$ at the end of

its useful life of $5$ years.

$$ The company depreciates motor vehicles using the double$-$declining

method with an assumed useful life of $4$ years and residual value at $10\%$

of the cost.

$($v$)$ In the month of December, the company issued from the inventory, parts costing

$$1,500$ to replace defective goods covered under warranty.

$($vi$)$ The bank loan carries an annual interest of $5\%,$ payable twice a year on every

$30$ June and $31$ December. As the company has yet to receive the bank

statement, the Cash account shown in the unadjusted trial balance has not taken

this into account.

$($vii$)$ Included in the sales was $$3,000$ deposit received from a customer in November

for goods to be delivered in January $2024.$

$($viii$)$ Power Pte Ltd estimated that $4\%$ of accounts receivable owing on $31$ December

$2023$ will be uncollectible.

Required:

Analyse the above and present the necessary entries for Power Pte Ltd for the year ending $31$

December $2023.$

Show all workings.