Question 1 White Limited is established in a special location in Hong Kong. The telephone fee comprises of a call charge and a monthly rental. White Ltd commenced trading on 1 July Year 3 and draws up its accounts for the year ended 30 June Year 4. During its first year of trading the company pays total telephone expenses of $3,500. The three-month bill paid in May Year 4 includes calls of $800 for the quarter up to 30 April Year 4 and advance rental of $660 to 31 July Year 4. The bill received in August Year 4 includes calls of $900 for the quarter up to 31 July Year 4 and advance rental of $660 to 31October Year 4. Required Show calculations of the telephone expense to be recorded in the profit and loss account and the balance sheet of White Ltd for its first year of trading. Question 2 Plastics Ltd pays rent for a warehouse used for storage. The quarterly charge for security guard services is $800. The security firm sends an invoice on 31 March, 30 June, 30 September and 31 December. Plastics Ltd always pays the rent five days after the invoice is received. The security services have been used for some years. Plastics Ltd has an accounting year end of 31 December. The opening balance of cash, current liability and ownership interest can be assumed to be all zero. Required Prepare a spreadsheet to show how the transactions of one year in respect of security services are recorded. Question 3 The following file of papers was found in a cupboard of the general office of Green Ltd at the end of the accounting year. Explain how each would be treated in the financial statements and state the total amount to be reported as an accrued liability on the balance sheet date. The year-end is 31 December Year 1. item Description Amount $ Invoice dated 23 December for goods received 21 December. 2 Invoice dated 23 December for goods to be delivered on 3 January Year 2 310 Foreman's note of electricity consumption for month of December - no invoice yet 100 received from electricity supply company. 4 Letter from employee claiming overtime payment for work on 1 December and note from personnel office denying entitlement to payment. Telephone bill dated 26 December showing calls for October to December. Telephone bill dated 26 December showing rent due in advance for period January to March Year 2 7 Note of payment due to cleaners for final week of December (to be paid on 3 January 48 under usual pattern of payment one week in arrears). 8 Invoice from supplier for promotional calendars received 1 December (only one-third have yet been sent to customers). Letter dated 21 December Year 1 to customer promising a cheque to reimburse 280 damage caused by faulty product - cheque to be sent on 4 January Year 2. Letter dated 23 December promising donation to local charity - amount not yet paid. 1 260 3 58 5 6 290 90 300 9 10 60
