Question 1 On 1 January 20x1, Sunrise Company purchased a new machinery for $50,000. They expect to use it for FIVE years and the estimated residual value of the machinery is $3,000. Required: 1. What is the net book value of the machinery on 31 December 20x3 if Sunrise Company uses the straight line method of depreciation? Show workings. (3 marks) 2. What is the depreciation expense on 31 December 20x3 if Sunrise Company uses the reducing balance method of depreciation and the depreciation rate is 20%. Show workings. (6 marks) 3. What is the profit or loss on disposal if Sunrise Company uses the straight line depreciation method and sells the machinery for $10,500 during the year ended 31 December 20x4. Full year depreciation is charged in the year of disposal. Show workings. marks) (6 Question 2 The trial balance of Harris as at 31 December 20x1 showed a difference which was posted to a suspense account. Drafted final accounts for the year ended 31 December 20x1 were prepared showing a net profit of $47,240. The following errors were subsequently found: 1. Sales of $450 to Thomas Chan had been debited to Thomson Chan. 2. A payment of $275 for electricity charges had been entered on the debit side of the electricity account as$375. 3. The sales journal had been undercast by $2.000 4. Repairs to a machine amounting to $390 had been charged to Machinery account. 5. A cheque for $1,500 being rent received from Atlas Ltd had only been entered in the Cash Book. 6. Purchases from K Ltd of $765 had been completely omitted. Required: 1. Prepare journal entries, without narratives, necessary to correct the above errors. (20 marks) 2. Show the effect of each of these adjustments on the net profit in the drafted financial statements and the corrected profit for the year ended 31 December 20x1. (15 marks) Question 3 The following is the trial balance of Lift Ltd as at 31 December 20x9 Lift Ltd : Trial balance as at 31 December 20X9 250.000 S000 36313 Issued ordinary share capital shares ) I preference shares (SI share ) Retained earnings Freshold land Other current Sales Rev Purchases Inventory 1.1 30X B15 100 T|| 165 090 141 ORO 32877 III 8,780 Salaries General expenses Directors remuneration 109 Dehenture Dehenture interest Dehtors and Creditors 1100.000 1 23.976 21,211 General reserve 65,000 Provision for depreciation of other non-current assets | 45,800 Interim dividends 11,000 1883,6241883.624 Additional information: 1. Inventory held at 31 December 20X9 was $23,444. 2. Depreciation is to be provided on other non-current assets at 5% using reducing balance. The company does not charge depreciation on freehold land. 3. Taxation for the year to be $9,100. 4. A transfer of $10,000 was to be made to the general reserve 5. Salaries accrued at the year-end were $2,233. 6. Rent prepaid for the following year was $820. Required: 1. Prepare the income statement of Lift Ltd for the year ended 31 December 20x9. (18 marks) 2. Prepare the statement of changes in equity of Lift Ltd for the year ended 31 December 20x9. (7 marks) 3. Prepare the balance sheet of Lift Ltd as at 30 December 20x9. (25 marks)
