Question Al Part I Moonflower Limited ("Moonflower) is beauty salon business. The company adjusts its accounts monthly while closing entries are performed annually on 31 December. The company's unadjusted trial balance dated 31 December 2021 was shown below: Credit (S) Moonflower Limited Unadjusted Trial Balance 31 December 2021 Accounts Name Debit (S) Cash 264,690 Accounts Receivable 422,500 Office Supplies 4,600 Prepaid Insurance 18,000 Land 500,000 Equipment 1,440,000 Accumulated Depreciation: Equipment Notes Payable (Due on 31 December 2023) Accounts Payable Income Taxes Payable Unearned Service Revenue Share Capital Retained Earnings Rental Revenue Earned Service Revenue Earned Beauty Products Expense 865,500 Depreciation Expense: Equipment 110,000 Salaries Expense 438,000 Office Supplies Expense 26,900 Interest Expense 8,250 Insurance Expense 30,000 Rent Expense 202,700 Income Taxes Expense 28,000 4.359,140 290,000 330,000 131,950 24,150 55,000 1,300,000 227,890 7,000 1,993,150 4.359.140 The following events have not yet been recorded to the above unadjusted trial balance: (1) Office supplies on hand on 31 December 2021 were $2,400. (2) $45,000 of the unearned service revenue was now earned on 31 December 2021. Question Al (continued) (3) Equipment was bought at the start of the business and is to be depreciated over a period of twelve years with no residual value. Straight-line depreciation method is used. (4) A 1-year insurance contract was purchased on 1 June 2021, with the coverage commenced on the same date. (5) On 31 December 2021, the company signed an agreement with Hong Kong Elderly Home to provide foot massage services for their patients in 2022. This is expected to generate revenue of $60,000. (6) Dividends of $75,000 were declared and will be paid on 31 March 2022. (7) On 31 December 2021, Moonflower received $10,500 from a customer to provide service in 2022. No entries have been made. (8) On 1 January 2021, the company borrowed $330,000 by signing a note payable. Interest on the note payable is 5% p.a. that has to be paid half-yearly, i.e. on every 1 January and 1 July. The first payment on interest was already made on 1 July 2021, and no adjusting entries were made to the books since that payment. (9) Income taxes expense for the year amounted to $39,500. The unpaid amount is due in March 2022 Required: Prepare the necessary adjusting entries on 31 December 2021. Explanations are NOT required. Round your answers to the nearest integer if necessary. For any event does not require adjustment, please state "No entry with explanation. (18 marks) Part II SUN Corporation (SUN) is authorized to sell 500,000 its $10 par value ordinary shares and 25,000 shares of $100 par value, 6% preference shares. As at the end of the current year, the company has actually sold 300,000 ordinary shares at $13 per share and 22,500 preference shares at $100 per share. In addition, of the 300,000 ordinary shares that have been sold, 25,000 shares have been repurchased at $80 per share and are currently being held in treasury to be used to meet the future requirements of a share option plan that the company intends to implement Required: Prepare the shareholders' equity section of SUN's Statement of Financial Position to reflect the transactions you have recorded. (7 marks) Question A2 Part I Below are extracted from the statement of financial position and income statement of ABC Company ABC Company Statement of Financial Position 31 December 2021 ($ in million) 2021 Cash 44 Accounts receivable 61 Inventory 75 Prepaid expenses 25 Plant & equipment (net) 400 605 2020 43 63 85 20 415 626 ABC Company Income Statement For the year ended 31 December 2021 (Sin million) Net sales (80% on credit) 406.5 Cost of goods sold (225) Gross profit 181.5 Operating expenses (100) Operating profit 81.5 Interest expense _(10) Profit before tax 71.5 Income tax expense (12) Net profit 59.5 Accounts payable Income taxes payable Long-term liabilities Ordinary shares ($10 par) Retained earnings 125 38 140 140 162 605 150 40 176 140 120 626 Additional Information: As at 31 December 2021 market price per ordinary share was $16. A dividend of $28 million was declared and paid during 2021. Required: Using the information given above, compute the following ratios of the company for 2021. Show detailed workings. Answer of (c) and (d) should be in %. Round all your answers to 2 decimal places, or otherwise, marks will be deducted. (a) Accounts receivable turnover (2 marks) (b) Interest coverage ratio (2 marks) (c) Dividend yield ratio (2 marks) (d) Return on equity (2 marks) Question A2 (continued) Part II NFL Company received the bank statement from Bank Agricole. As at 31 March 2022, the bank balance was $35,025. The cash account in the general ledger of NFL showed a balance of $31,196. NFL adjusts its accounts monthly and closes its accounts annually. The bank statement provided the following information: (1) The deposits received by Bank Agricole in March was $3,488 whereas the general ledger of NFL showed the deposits of $4,460. (2) A bank service charge $40 showed in the bank statement. The accountant found that the bank made an error and the service charge should be $100. (3) A $900 check marked NSF was returned to Bank Agricole. The bank charged a handling fee of $20 on the statement. (4) Check no. 0205 was actually written by NFL in the amount of $320 for the purchase of cleaning supplies but was erroneously recorded in the general ledger as $302. (5) The following checks issued by NFL were still outstanding: Check number 0199 0201 0211 0215 Amount (S) 1,240 1,293 95 703 (6) On 31 March, Bank Agricole directly credited to the account of NFL an interest-bearing note receivable from a customer of NFL totalled $2,448 for settling the 4% p.a., 6-month note receivable of $2,400 made on 1 October 2021. No payment had ever received from the customer before. (7) There were no outstanding checks and deposits in transit at the end of February 2022. Required: (a) Prepare the bank reconciliation statement for the month of March 2022. (8 marks) (b) Prepare the necessary adjusting journal entries to update the accounting record. (9 marks) Question A4 Part I Surabaya Corporation, an Indonesia mining company bought a new grinding mill for $7,300,000 on 4 August 2019. The company estimated that the mill had a useful life of 10 years with a residual value of $100,000. It also estimated the mill can produce a maximum of 4,800,000 tons of mining products during its entire useful life. The fiscal year of the company ends on 31 December Required: (a) Compute the depreciation expense on the mill in 2019 and 2020 respectively, using the following methods: (1) Straight-line (calculated to the nearest whole month); (5 marks) (ii) 150% declining-balance calculated to the nearest whole month); and (5 marks) (iii) Units-of-output method (2019: 340,000 tons, 2020: 550,000 tons). (2 marks) (b) Assume Surabaya Corporation adopted the straight-line depreciation method for the mill bought on 4 August 2019. Effective from 1 February 2021, the company revises the mill's total useful life to 6.5 years with a new residual value of $20,000. Compute the total depreciation expense in 2021. (6 marks) Part II In 2018, Nortel Logistics Corporation purchased a forklift truck for $553,000. It had an estimated useful life of four years and a $25,000 residual value. The company uses straight-line depreciation method and applies the half-year convention in the year of purchase. On 1 July 2021, the company sold the truck for $165,000 cash. The company adjusts its accounts annually with the year-end on 31 December. Required: Prepare the journal entries at the time of sale. (7 marks) Question A3 To answer this question, you need to (1) refer to the following chart of accounts and (2) use gross method to record purchase of merchandise. Chart of Account 1. Accounts Payable 2. Accounts Receivable 3. Cash 4. Cost of Goods Sold 5. Freight In 6. Freight Out 7. Inventory 8. Purchases 9. Purchase Discounts 10. Purchase Returns and Allowances 11. Sales 12. Sales Discounts 13. Sales Returns and Allowances K-Mart store completed the following transactions in March 2022. Mar 2 K-Mart purchased merchandise inventory for $1,200 on credit with terms of 2/10, net 30. 2 K-Mart paid a $75 freight charge to transport merchandise to its store. 4 K-Mart returned $300 merchandise purchased on Mar 2 because of defects. 8 K-Mart paid its supplier for purchase on Mar 2. 10 K-Mart sold $2,400 merchandise on credit with terms of 3/15, net 90. The cost of the merchandise was $1,600. 10 K-mart shipped the above merchandise to the customer's warehouse and paid $100 transportation cost. 18 The customer returned part of the merchandise bought on Mar 10. The returned items sell for $800 and cost $600. 22 The customer paid the merchandise bought on Mar 10. 31 A physical count taken at the end of March revealed $250 merchandise was damaged. Required: Prepare journal entries for the above transactions for K-Mart store, using (a) perpetual inventory method. (b) periodic inventory method. (13 marks) (12 marks)