|
Allowance for receivables
$
$
Bal b/f
5,000
Profit or loss
1,965
Bal c/f
3,035
–––––
–––––
5,000
5,000
–––––
–––––
Bal b/f
3,035
37
B
This is an example of an irrecoverable debt being written off. Credit the
receivables account in order to clear the debt and debit the irrecoverable
debts account with the amount of the debt written off.
38
A
The bad debt of $1,582 already been removed from receivables during the
year. The specific allowance of $900 (it has not yet been written off as
bad) will be offset against receivables in the year-end financial accounts.
Chapter 24
KAPLAN PUBLISHING
521
Books of prime entry and control accounts
39
C
40
B
41
$30,000
Receivables
$
$
Bal b/f
22,000 Bank
115,000
Sales
120,000
Dishonoured cheque
9,000 Contra
6,000
Bal
c/f
30,000
––––––
––––––
151,000
151,000
––––––
––––––
Bal b/f
30,000
Note that discount received relates to early payment of trade payables,
and is therefore not relevant.
Control account reconciliations
42
A
$8,500 – ($400 × 2) = $7,700
43
$36,725
Receivables’ ledger control account
$
$
Bal b/f
32,750 Bal b/f
1,275
Sales
125,000
Bank
123,050
Refunds to customers
1,300
Bal c/f
2,000 Bal c/f
36,725
––––––
––––––
161,050
161,050
––––––
––––––
Bal b/f
36,725 Bal b/f
2,000
PRACTICE ANSWERS
522
KAPLAN PUBLISHING
44
B
45
A
46
A
The other three lists all contain one item which should appear on the debit
side of the account.
Bank reconciliations
47
D
Bank – cash book
$
$
Bal b/f (i)
5,670
Bank charges (ii)
250
Bal c/f
5,920
––––––
––––––
5,920
5,920
––––––
––––––
Bal b/f
5,920
$
Balance per bank statement (ß)
(6,100)
Add:
Error (iii)
(40)
Add:
Outstanding cheques (iv)
(325)
Less: Outstanding
lodgements(v)
545
––––––
Balance per cash book
(5,920)
––––––
48
C
$
Balance per bank statement (ß)
($2,360) old
Add:
Outstanding cheques
($1,420)
––––––
Balance per cash book (3,600 + 180)
($3,780) old
––––––
Chapter 24
KAPLAN PUBLISHING
523
49
$1,405 debit
Bank – cash book
$
$
Sales
1,450
Bal b/f
485
Receivables
2,400 Payables (0.95 × 1,800)
1,710
Dishonoured
cheques
250
Bal c/f
1,405
––––––
––––––
3,850
3,850
––––––
––––––
Bal b/f
1,405
50
D
Bank – cash book
$
$
Standing order
125 Bal b/f
5,675
Dishonoured
cheque
900
($450 × 2)
Bal c/f
6,450
––––––
––––––
6,575
6,575
––––––
––––––
Bal b/f
6,450
51
$700 overdrawn
The bank reconciliation should have been calculated as follows:
$
Overdraft per bank statement
(38,600)
Add deposits not yet credited
41,200
––––––
Less outstanding cheques
2,600
(3,300)
––––––
Overdraft per cash book
(700)
––––––
52
A
Items 3 and 4 relate to timing differences only and would appear in the
bank reconciliation.
PRACTICE ANSWERS
524
KAPLAN PUBLISHING
Correction of errors and suspense accounts
53
Ledger
Account:
$
Debit
Payables’ ledger control account
90
Credit
Purchases
returns
90
54
A
Suspense
$
$
Bal b/f (ß)
210 Gas (420 – 240)
180
Interest receivable
70 Cash refund to reduce
sales ($50) and to restore
purchases ($50)
100
–––––
–––––
280
280
–––––
–––––
55
$11,755
Draft profit for the period
$12,355
Six months’ rent 6/12 × 800
($400)
Closing Inventory adjustment (1,000 – 800)
($200)
––––––
$11,755
––––––
56
C
57
D
58
B
The profit will be understated by the following amount:
$
Amount charged in error to the repairs account
38,000
Less depreciation chargeable on the plant
(3/12 × 20% × $38,000)
(1,900)
––––––
36,100
––––––
Chapter 24
KAPLAN PUBLISHING
525
59
$700 credit
Suspense
$
$
Increase cash sales
($6,500 – $5,600)
900 Balance per T B
($836,200 – $824,700)
11,500
Reduce receivables
($19,000 – $9,100)
9,900
Suspense balance c/fwd
700
––––––
––––––
280
11,500
––––––
––––––
60
B
Items 1 and 3 would result in an imbalance in the trial balance and
therefore require an entry to the suspense account. Items 2, 4 and 5 do
not affect the balancing of the accounts.
Statement of financial position and statement of profit or loss
61
C
62
C
63
A
64
C
65
C
From trial balance to financial statements
66
$
Depreciation charge
11,600
(2% × $580,000)
Carrying amount
452,400
$580,000 – ($116,000 + $11,600)
67
$
Depreciation charge
9,375
25% × $37,500 ($50,000 – $12,500)
Carrying amount
28,125
$50,000 – ($12,500 + $9,375)
PRACTICE ANSWERS
526
KAPLAN PUBLISHING
68
$
Irrecoverable debt expense
4,230
Carrying amount
21,470
$
Irrecoverable debts $1,800 + 3,200 =
5,000
Decrease in allowance for receivables
(770)
––––––
Total irrecoverable debt expense
4,230
––––––
Receivables ($25,800 – 3,200)
22,600
Less: Closing allowance for receivables
(1,130)
––––––
Net closing receivables
21,470
––––––
Allowance for receivables:
Closing allowance for receivables
1,130
Opening allowance for receivables
1,900
Decrease in allowance for receivables to P&L
770
69
B
Charge for the
year
Closing
$
$
Rent
36,000
Rent
accrual
2,000
(12 × $3,000)
Due
36,000
Paid
34,000
––––––
Accrual
2,000
––––––
Insurance 24,000 Insurance
prepayment 6,000
Paid
30,000
Due
24,000
––––––
Prepayment
6,000
––––––
Chapter 24
KAPLAN PUBLISHING
527
Company accounts
70
$
Profit or loss charge
18,000
Statement of financial position
23,000
$
2005 estimate
23,000
Overprovision 2004
(5,000)
––––––
18,000
––––––
Tax liability
23,000
71
B
$
Preference dividends (6% × 1,000,000
=
60,000
Ordinary dividends (16,000,000 × 0.02)
= 320,000
––––––
Total dividend
= 380,000
––––––
72
B
73
A
74
$100,000
$
Profit after tax (balancing figure)
100,000
Dividends
(50,000)
––––––
Profit for year
50,000
Accumulated profit b/f
50,000
––––––
Accumulated profit c/f
100,000
––––––
PRACTICE ANSWERS
528
KAPLAN PUBLISHING
Accounting standards
75
D
76
C
77
C
78
C
79
A
80
C
81
C
82
D
Statements 2, 3 and 5 are correct
83
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