Subject 1 (44%) ABC corporation was founded on January 1, 2013. ABC provides telecommunication services. The unadjusted and adjusted trial balances of ABC as of December 2018, are as follows: ABC trial balances December 31, 2018 Unadjusted Debit () Credit () 40.000 21.250 6,500 - 22,000 - 4,280 12.000 20,000 13.210 3,000 - Equipment Accumulated Depreciation equipment Supplies Accounts receivable Prepaid insurance expenses Cash Share capital Retained carnings Accounts payable Interest payable Notes payable Salaries and wages payable Uneamed services revenue Rents payable Service revenue Salaries and wages expense Insurance expenses Interest expenses Depreciation expenses Supplies expense Rent expenses Adjusted Debit () Credit () 40.000 25,500 3,800 25.000 2.630 12,000 20,000 - 13.210 3.000 230 6,000 2.300 - 4,500 3,000 33,500 12,300 1,650 910 4.250 5,700 3,000 111.240 111,240 6,000 - - 9,000 26,000 10,000 - 680 - 3.000 98.460 98,460 Required: A. 1. Post the adjusting journal entries that were made. (16%) 2. Prepare the income statement for the year ending December 31, 2018 and the statement of financial position (balance sheet) at December 31, 2018. Assume that the annual income tax rate is 20% (14%) 3. Determine a. the residual value of the equipment, assuming that the useful life of the equipment is 9 years and was acquired the date ABC was founded. (2%) b. the balance in "Salaries and wages payable" on December 31, 2017, assuming that ABC paid 14,000 in salaries and wages in 2018. (2%) B. Both Financial Accounting Standard Board (FASB) and International Accounting Standards Board (IASB) recognize cost and fair value as valuation bases for the elements of financial statements. In particular, nonmonetary assets are usually valued at cost while monetary assets can be valued at fair value. Explain: the rationale for the application of cost concept to nonmonetary assets and the rationale for the application of fair value option for monetary assets. (word limit: 500 words) (10%) . Subject 1 (44%) ABC corporation was founded on January 1, 2013. ABC provides telecommunication services. The unadjusted and adjusted trial balances of ABC as of December 2018, are as follows: ABC trial balances December 31, 2018 Unadjusted Debit () Credit () 40.000 21.250 6,500 - 22,000 - 4,280 12.000 20,000 13.210 3,000 - Equipment Accumulated Depreciation equipment Supplies Accounts receivable Prepaid insurance expenses Cash Share capital Retained carnings Accounts payable Interest payable Notes payable Salaries and wages payable Uneamed services revenue Rents payable Service revenue Salaries and wages expense Insurance expenses Interest expenses Depreciation expenses Supplies expense Rent expenses Adjusted Debit () Credit () 40.000 25,500 3,800 25.000 2.630 12,000 20,000 - 13.210 3.000 230 6,000 2.300 - 4,500 3,000 33,500 12,300 1,650 910 4.250 5,700 3,000 111.240 111,240 6,000 - - 9,000 26,000 10,000 - 680 - 3.000 98.460 98,460 Required: A. 1. Post the adjusting journal entries that were made. (16%) 2. Prepare the income statement for the year ending December 31, 2018 and the statement of financial position (balance sheet) at December 31, 2018. Assume that the annual income tax rate is 20% (14%) 3. Determine a. the residual value of the equipment, assuming that the useful life of the equipment is 9 years and was acquired the date ABC was founded. (2%) b. the balance in "Salaries and wages payable" on December 31, 2017, assuming that ABC paid 14,000 in salaries and wages in 2018. (2%) B. Both Financial Accounting Standard Board (FASB) and International Accounting Standards Board (IASB) recognize cost and fair value as valuation bases for the elements of financial statements. In particular, nonmonetary assets are usually valued at cost while monetary assets can be valued at fair value. Explain: the rationale for the application of cost concept to nonmonetary assets and the rationale for the application of fair value option for monetary assets. (word limit: 500 words) (10%)
