QUESTION 1 ( 33 marks : 40 minutes) Syarikat Cuci-Cuci Malaysia was started 2 years ago by Encik Pa. Because business has been exceptionally good, Encik Pa decided on July 1. 2012, to expand operations by acquiring an additional truck and hiring two more assistants. To finance the expansion, Encik Pa obtained on July'1, 2012, a RM25,000, 10% bank loan, payable RM10,000 on July 1,2013: and the balance on July 1, 2014, The terms of the loan require the borrower to have RM10,000 more current assets than current liabilities at December 31, 2012. If these terms are not met the bank loan will be refinanced at 15% interest. At December 31, 2012, the accountant for Syarikat Cuci-Cuci Malaysia prepared the following Balance Sheet: SYARIKAT CUCI-CUCI MALAYSIA Balance Sheet December 31, 2012 ASSETS RM RM Current assets Cash 6,500 Accounts receivable 9,000 Janitorial supplies 5,200 Prepaid insurance 4,800 Total current assets 25,500 Property, plant, and equipment Cleaning equipment (net) 22,000 Delivery trucks (net) 34,000 56,000 Total assets 81,500 LIABILITIES and OWNER'S EQUITY Current liabilities Notes payable 10,000 Accounts payable 2.500 Total current liabilities 12,500 Long-term liability Notes payable 15,000 Total liabilities 27,500 Owner's equity Pat Hardy, capital 54,000 Total liabilities and owner's 81,500 equityEncik Pa presented the balance sheet to the bank's loan office on January 2, 2013, confident that the company had met the terms of the loan. The loan officer was not impressed. She said, "We need financial statements audited by a CPA." A CPA was hired and immediately realized that the balance sheet had been prepared from a trial balance and not from an adjusted trial balance. The adjustment data at the balance sheet date consisted of the following: 1. Earned but unbilled janitorial services were RM3,000, 2. Janitorial supplies on hand were RM3,500. 3. Prepaid insurance was a 3-year policy dated January 1,2012. 4. December expenses incurred but unpaid at December 31, RM300. 5. Interest on the bank loan was not recorded 6. The amounts for plant assets were net of accumulated depreciation of RM4,000 for cleaning equipment and RM5,000 for delivery trucks as of January 1, 2012. Depreciation for 2012 was RM2,000 for cleaning equipment and RM5,000 for delivery trucks. Required: a. Prepare a correct Balance Sheet, show all related workings. ( 25 marks ) b. Were the terms of the bank loan met? Explain why. (8 marks )