Question 1 (31 marks) Part I (20 marks) Serenity Company (Serenity") is a shop selling electrical goods and adopts perpetual inventory method. As at 30 November 2021, the inventory account has a balance of $230,000 (Dr.). Below are transactions of Serenity in December. Prepare the journal entries of the transactions. December 1 Received $500 from a customer to settle an outstanding account. 3 Purchased electric cookers from Teta Company for $10,000 on account. 5 5 10 Returned two defective cookers to Teta Company purchased on 3 December at $450 per piece. A customer returned two pieces of goods to Serenity. The customer originally bought the goods at $600 per piece, now received a cash refund. Serenity sold the goods at 20% gross profit rate. Paid the amount owed to Teta Company. Sold all the cookers bought from Teta Company this month on credit at 20% gross profit rate. Serenity conducted an inventory count and found there was $215,960 inventory on hand. 15 20 31 Part II (11 marks) Arppel Company uses a periodic inventory system and closes its accounts annually on 31 December. Below are extracted from the books of the Company: Account balance as at 31 Dec 2020 Inventory $42,000 Account balance as at 31 Dec 2021 Purchases S440,000 Sales $890,000 Sales Returns $22.000 A complete physical inventory taken as at 31 December 2021 indicates goods costing $48,000 remains in stock Required: (a) Compute () the cost of goods sold: (ii) gross profit, and (ii) the gross profit rate (in %) for the year 2021. Show workings. (6 marks) (b) Prepare two closing entries to create the Cost of Goods Sold account and update the Inventory account (5 marks) Question 2 (33 marks) Part 1 (20 marks) Balance of the Cash account of Isofac Company on 31 August 2022 was $42,650, while balance of its bank statement on the same day was $40,400. Isofac adjusts its book monthly. Below is some additional information for August There were no outstanding checks and deposit in transit at the end of 31 July 2022 (1) The Company has correctly issued and recorded a check no.113 in the amount of $8,600 to purchase inventories from a supplier. But the bank statement showed the bank has cleared this check incorrectly as $6,800. (2) The total deposit shown in the bank statement was S158,000 while the accounting records of Isofac showed the total deposit made in August was $183,000. (3) Papal, a customer of Isofac, directly deposited $500 to Isofac's bank account to settle its outstanding account (4) Three checks no. 54. S100, no.56, 5200, no.60, 5800, issued by Isofac were not found on the bank statement (5) A $1,500 check issued by a customer Shine Ltd. in favour of Isofac was returned by the bank because of insufficient fund. (6) On 1 March, 2022 Isofact signed a 9% 6-month note receivable of S20,000. The note and full amount of the interest was credited directly to Isofae's bank account on 31 August (1) The bank debited Isofac's account $50 for bank charges. Required: (a) Prepare the bank reconciliation statement as at 31 August 2022 (12 marks) (b) Prepare the necessary adjusting journal entries to update the accounting record. (8 marks) Part II (13 marks) Singer Company adjusts its account annually. Below is extracted from the trial balance of the Company as at 31 December, 2021 prior to year end adjusting entries. Accounts receivable $335.000 Allowance for impairment S7,300 (Dr) An aging analysis on the probability of uncollectible amount is broken down as follows: % of Amount past due Accounts Receivable uncollectible Not yet due 95,000 1% 1-30 days 150,000 2% 31-60 days 85,000 5% Over 60 days 5.000 10% Required: (a) What is the total estimated uncollectible amount of accounts receivable? (2 marks) (b) Prepare journal entries to record impaiment loss of receivable in 2021 using Statement of Financial Position approach. (4 marks) (e) Prepare a partial statement of financial position as at 31 December 2021 on the accounts receivable. (3 marks) (d) Prepare journal entries to record impairment loss of receivable in 2021 assuming the balance of the Allowance for Impairment account is $7.300 (Cr.) prior to adjustment. (4 marks) Question B3 (36 marks) Part I (30 marks) On 25 March 2020, Miracle Company bought a machine at $1,350,000 with an estimated useful life of 15 years and no residual value. The machine is expected to operate 270,000 hours. The company adjusts its account annually with the year-end date on 31 December Required: (a) Compute (show workings) depreciation expenses for the machine in 2020 and 2021 by: ) Straight-line (using half year convention); (6 marks) 150%-declining-balance (calculate to the nearest whole month); and (6 marks) Units-of-output method (hours of operation: 12,000 in 2020; 18,000 in 2021) (6 marks) (b) Assume Miracle Company adopts the straight-line method in (a)(i) above. On 5 April 2022 the machine was disposed for $1,150,000 cash. 0 Journalize depreciation of the machine for 2022 before the disposal. (4 marks) (ii) Joumalize disposal of the machine on 5 April 2022. (8 marks) Part II (6 marks) (iii) MCC company uses straight-line depreciation (round to the nearest whole month) and adjusts its accounts annually on 31 December. On 1 January 2016, MCC purchased a van for $450,000 which has an estimated useful life of 9 years and no residual value. On 1 January 2021, the company incurred the following expenditure on the van: (1) $1,500 for annual maintenance and servicing (ii) $60,000 to upgrade the van with a new and more powerful engine (iii) $1,000 to paint the van after 5 years of use. On 1 January 2021, the useful life of the van was revised to 13 years with a residual value of $15,000. Required: (a) What is the book value of the van as at 31 December 2020? (2 marks) (b) Journalize annual depreciation of the van on 31 December 2021. Show workings. (4 marks) -The end