QUESTION $1$

Question $3(11$ MARKs$)$

Entity A is a famous property developer which listed in Hong Kong for over a half$-$century. It is financed by several debts from a local bank,

Bank C$.$ On $31$ December $2022,$ the outstanding debts are listed below:

$10\%,10-$year long$-$term debt of $$9,100,000$ which was borrowed on $30$ June $2018.$

$12\%,5-$year long$-$term debt of $$9,700,000$ which was borrowed on $31$ March $2020.$

$15\%,2-$year long$-$term debt of $$9,300,000$ which was borrowed on $1$ July $2021.$ It is specifically related to this commercial tower

project on $1$ January $2022.$ The fund is re$-$invested and earns investment income at a rate of $9\mathrm{.}00\%$ per annum. The income for

$2021$ and $2022$ was deposited to Entity A on $15$ January $2022$ and $15$ July $2022$ respectively.

According to the accounting records, on $1$ June $2021,$ Entity A contracted with Entity B to construct a commercial tower for $$25,500,000$ on

a piece of land at Central in Hong Kong Island that Entity A had already purchased for more than $10$ years.

On $15$ December $2021,$ during the construction management meeting, the construction team agreed to start the construction on $1$ January

The original construction period was estimated at two years. However, the team applied a new building technology so that the

construction period can be shortened to one year only. Thus, the team revised the estimated completion date to $31$ December $2022.$

Entity A was to make six payments of construction expenditures in the year $2022,$ with the last payment scheduled for the date of

completion. It paid $$1,200,000,$$$2,500,000,$$$7,500,000,$$$4,200,000,$$$4,600,000$ and $$5,500,000$ on $1$ January $2022,28$ February $2022,$

$30$ June $2022,1$ August $2022,30$ September $2022$ and $1$ December $2022$ respectively.

The general borrowings of the $10-$year and $5-$year long$-$term debts were kept in a current account for daily use. No interest revenue was

generated.

The annual interest payments on the debts to Bank $C$ are always settled by direct bank transfer on $15$ January after the end of the

reporting period.

Finally, the construction was completed on schedule.

The end of the reporting period is $31$ December.

REQUIRED

According to the relevant HKAS$/$HKFRS$,$ prepare the journal entries of Entity A on $1$ January $2022,15$ January $2022,15$ July $2022,1$

December $2022$ and $31$ December $2022$ respectively.

ACCOUNT NAMES FOR INPUT:

$|$ Building under construction $|$ Bank $|$ Receivable $|$ Payable $|$ Retained earnings $|$

$|$ No entry $|$ Investment income $|$ Investment expense $|$ Interest revenue $|$ Interest expense $|$

$|$ Depreciation $|$ Accum. depreciation $|$ Interest payable $|$ Interest receivable $|$

$|$ Loss on disposal $|$ Gain on disposal $|$ Revaluation surplus $|$ Revaluation deficit $|$