Question 1 (40 marks) Joyce Corporation engages in the provision of repair services. The Corporation prepare adjusting entries at the end of each month. The unadjusted trial balance for Joyce Corporation as at the end of the financial year, 31 December 2019, is shown as below: Unadjusted Trial Balance Account Titles Dr (S) Cr (S) Cash 601,600 Accounts receivable 423,600 Note receivable (10-month, 9%, due on 31 March 2020) 440,000 Interest receivable 40,000 Inventory 448,000 Supplies 66,880 Prepaid insurance 72,000 Equipment 492,000 Accumulated depreciation, equipment 218,000 Accounts payable 416,800 Income tax payable 24.000 Share capital (S4 value per share) 580,000 Retained earnings 868,000 Repair service revenues 966,280 Interest revenue 19.800 Rent expense 160,000 Advertising expense 228,800 Depreciation expense 14,000 Salaries expense 82,000 Income tax expense 24,000 Total 3,092,880 3,092.880 The following events have not yet been incorporated to the above unadjusted trial balance: 1. On 31 December 2017, supplies remaining on hand amounted to $26,000. 2. Prepaid insurance represents a 4-year insurance premium paid on 1 April 2019 and effective on the same date. No insurance expense has yet been recorded in 2019. 3. Note receivable represents a loan lent to its subsidiary company on 1 June 2019. Interest on note receivable will be received from the subsidiary company on 31 March 2020. 4. On 31 December 2019, Joyce Corporation declared cash dividends of S2 per share to share capital outstanding on the same date. Payment will be made to shareholders on 26 February 2020. 5. Several employees worked overtime during Christmas holiday, and Joyce Corporation agreed to pay a total overtime of $1,400 to them. Payment will be made on 9 January 2020. 6. Depreciation expense for the month in respect of the equipment amounted to $18,000. 7. Income tax expense for the whole year 2019 is estimated at $19,500 and the same will be paid in April 2020 8. On 31 December 2019, Joyce Corporation entered into a strategic agreement with Peter Corporation. The agreement stated that Peter Corporation will refer customers to Joyce Corporation starting from June 2020, with anticipated monthly repair revenue to be not less than $40,000. Accordingly Joyce Corporation will pay commission on 2% of the monthly repair revenue to Peter Corporation. Page 3 of 7 Required: (a) Prepare the necessary adjusting/additional entries at 31 December 2019. (16 marks) (b) Taking into account all necessary adjustments, prepare the Income Statement of Joyce Corporation for the year ended 31 December 2019. (12 marks) (e) Prepare the closing entries for Joyce Corporation for the year ended 31 December 2019. (10 marks) (d) Calculate the amount of retained earnings as at 31 December 2019. (2 marks)
