PROPOSED QUESTIONS SET A QUESTION 1 Serimaju Consulting Company organized as corporation on 18 January 2011 and engaged in the following

transactions during its first two weeks of operation: 18 Issued share in exchange for RM30,000 cash January 22 Borrowed RM20,000 from CIMB bank by issuing a note payable. January 23 Paid RM100 for a media advertisement aired on 24 January January 25 Provided RM1,000 of services to KPM Melaka for cash. January 26 Provided RM2,000 of services to KPM Beranang on account January 31 Collected RM800 cash from KPM Beranang for the services provided on

January 26 January REQUIRED: a) Record or journalize each of these transactions. marks ] [ 12

Solution Q1 (a) DATE 18-Jan 22-Jan PARTICULAR Cash Shares Bank Note Payable 23-Jan Advertisement Cash 25-Jan Cash Revenue 26-Jan Accounts Receivable 2,000 1,000 1,000 100 100 20,000 20,000 DEBIT 30,000 30,000 CREDIT

Revenue 31-Jan Cash Accounts Receivable 53,900 800

2,000

800 53,900

b)

Prepare all the relevant accounts for these transaction. marks]

1 (b) 18Jan 25Jan 31Jan 30,000.00 1,000.00 800.00 31,800.0 Cash 23Jan

Cash Revenue Account Receivable

Advertising Expense

100

Balance c/f

31,700.00 31,800.0

Total

Total Bank

22Jan

Note Payable

20,000.00

Balance c/f

20,000.00 20,000.0

20,000.0 Total 0 Total Advertising Expense 100.00 Balance c/f 100.0 0

23Jan

Advertising Expense

100.00 100.0

Total

Total

26Jan

Revenue Total

Account Receivable 2,000.00 31Jan Cash 2,000.0 Balance c/f Total

800.00 1,200.00 2,000.0

Balance c/f

Shares Capital 30,000.00 18-Jan Cash 30,000.0

30,000.00

Total

Total

30,000.00

Note Payable 22Jan Balance c/f 20,000.00 20,000.0 Bank 20,000.00

Total

Total

20,000.00

Revenue Balance c/f 3,000.00 25-Jan 26-Jan 3,000.0 Total 0 Total 16 x = 8 marks 3,000.00 Cash Account Receivable 1,000.00 2,000.00

QUESTION 2 Sulam Tiri Sdn Bhd is a well known company for selling traditional clothes to the worldwide market. At 31 December 2010, the companys inventory amounted RM440,000. During the first week in January 2011, Sulam Tiri Sdn Bhd made only one purchase and one sale as the following transactions : DATE 3/1/2011 Sold 4 dozens of traditional clothes to Kirana Couture for RM200,000 cash. The cloths consist of 7 different design, which had a total cost to Sulam Tiri Sdn Bhd of RM112,000. TRANSACTION

7/1/2011

Purchased two design of 1 Malaysia batik and four design of Sulaman batik from Kencana Dewi Batik Sdn Bhd. The total cost of this purchase amounted to RM100,000; terms 2/10, n/30.

Sulam Tiri Sdn Bhd records purchases of goods at net cost. The company has full time accounting personnel and uses a manual accounting system. REQUIRED: a) Briefly describe the operating cycle of merchandising company. marks ] [2

Solution Q2

a.) The operating cycle of a merchandising company consist of purchasing goods, selling
that goods to customers and collecting the sales proceeds from these customers. In the process, the business converts cash into inventory, the inventory into accounts receivable and the account receivable into cash. 2 x 1 = 2 marks

b)

Prepare journal entries to record these transactions, assuming that Sulam Tiri uses a perpetual inventory system. [6 marks ]

Journal entries using perpetual inventory system: Date 3/1/2011 Transaction Cash Sales (sold 4 dozen of traditional clothes to Kirana Couture) 3/1/2011 Cost of goods sold Inventory (To record cost of goods sold) 7/1/2011 Inventory Account Payable (Kencana Dewi Batik) 98,000 98,000 112,000 112,000 Debit (RM) 200,000 200,000 Credit (RM)

(Purchased of goods. Term 2/10, n/30)

12 x = 6 marks

c)

Compute the balance in the Inventory control account at 7 January. marks ]

[2

Balance inventory = (RM440,000 RM112,000) + RM98,000 = RM426,000 4 x = 2 marks

d)

Prepare journal entries to record these transactions, assuming that Sulam Tiri uses a periodic inventory system. [ 4 marks ]

Journal entries using periodic inventory system: Date 3/1/2011 Transaction Cash Sales (sold 4 dozen of traditional clothes to Kirana Couture) 7/1/2011 Purchases Account Payable (Kencana Dewi Batik) 98,000 98,000 Debit (RM) 200,000 200,000 Credit (RM)

(Purchased of goods. Term 2/10, n/30) 8 x = 4 marks e) Cost of goods sold using periodic system: Inventory at 1 January Add: Purchases Cost of goods available for sale Less: Inventory at 7 January Cost of goods sold RM440,000 98,000 RM538,000 426,000 RM112,000 4 x = 2 marks

f)

Compute the cost of goods sold for the first week of January, by using periodic system. [ 2 marks ]

Cost of goods sold using periodic system: Inventory at 1 January Add: Purchases Cost of goods available for sale Less: Inventory at 7 January Cost of goods sold RM440,000 98,000 RM538,000 426,000 RM112,000

4 x = 2 marks

g)

Calculate the gross profit margin based on sales transaction on 3/1/2011. [ 4 marks ]

Gross profit margin based on sales transaction on 3/1/2011: Gross profit = Sales Cost of Goods sold = RM200,000 RM112,000 = RM88,000 Gross profit margin = Gross profit /sales = RM88,000 / 200000 = 44% 4 x 1 = 4 marks (Total marks = 20 marks)

QUESTION 3 Part A The shareholders equity of Embassy Bhd as at 31 December 2009, is as follows:Shareholders' equity: 40,000 ordinary shares at RM10 par Share Premium Total issued and paid capital Retained earnings RM 400,000 200,000 600,000 1,700,000

Total shareholders' equity

2,300,000

Transactions affecting shareholders equity during 2010 are as follows:1 Apr The company purchased 2,000 of its ordinary shares from the open market at RM37 per share 1 July The company reissued 1,000 treasury shares at RM48 per share. 1 July The company issued for cash 20,000 of previously unissued RM8 par value ordinary shares at a price of RM47 per share. 1 Dec A cash dividend of RM1 per share was declared, payable on 30 December, to shareholders of record at 14 December. The profit for the year ended 31 December 2010 amounted to RM173,000

REQUIRED: a) Prepare the journal entries to record the transactions affecting shareholders equity that took place during the year. [14 marks]
Solution Q3 part A Date 1-Apr Treasury shares Bank 48,000 940,000 59,000 160,000 780,000 37,000 11,000 Dr 74,000 Cr 74,000

1-Jul

Bank Treasury shares Share Premium

1-Jul

Bank Ordinary shares Share Premium

1-Dec

Dividends

59,000 Dividends payable 69,000 Retained earnings Dividends 173,000 Income Summary Retained earnings marks 28 173,000 x = 14 69,000

b)

Determine the earnings per share. marks]

EPS = 173,000 / 59,000 = RM2.93

[ 2
2 x 1 marks = 2 marks

Part B The shareholders equity section of Primadana Bhds balance sheet appears as follows:-

Shareholders' equity: 8% preference shares, RM100 par value Ordinary shares, RM5 par value Share premium: Preference shares Ordinary shares Retained earnings Total shareholders' equity

RM

RM 12,000,000 14,000,000

360,000 30,800,000

31,160,000 2,680,000 59,840,000

REQUIRED:On the basis of this information, answer the following questions and show any necessary supporting computations: a. How many preference shares have been issued? marks]
Solution Q3 part B

[ 2

a.) Preference shares issued = RM12,000,000 / RM100 = 120,000 shares

2 x 1 marks = 2 marks

b.

What is the total annual dividend requirement on the outstanding preference shares? [ 2 marks] Total : 20 marks
Preference shares annual dividend = RM12,000,000 x 8% = RM960,000 2 x 1 marks = 2 marks (Total marks = 20 marks)

QUESTION 4 Beranang Sdn Bhd adjust it accounts every month. Below is the companys yearend unadjusted trial balance dated 31 December 2010. (Bear in mind the adjusting entries already have been made for the first 11 month of 2010, but have not been made for December).

Beranang Sdn Bhd Unadjusted Trail Balance 31 December 2010 Cash Consulting fees receivable Prepaid Office rent Prepaid dues and subscriptions Supplies Equipment Accumulated depreciation : equipment Notes payable Income taxes payable Unarned consulting fees Share capital Retained earnings Dividends Consulting fees earned Salareis expense Telephone expense Rent expense Income Tax expense Dues and subscriptions expense Supplies expense Depreciation expense: equipment Miscellaneouns expense RM 49,100 23,400 6,300 300 600 36,000 RM

10,200 5,000 12,000 5,950 30,000 32,700 60,000 257,180 88,820 2,550 22,000 51,000 560 1,600 6,600 4,200 353,030

353,030

Other information: 1. On 1 December the company signed a new rental agreement and paid three months rent in advance at a rate of RM2,100 per month. This advanced payment was debited to the Prepaid Office Rent account.

2.

Dues and subscriptions expiring during December amounted to RM50.

3.

An estimate of supplies on hand was made at 31st December; the estimated cost of the unused supplies was RM450.

4.

The useful life of the equipment has been estimated at 5 years (60 months) from date of acquisition.

5.

Accrued interest on Notes Payable amounted to RM100 at year-end. (Set up accounts for Interest Expense and for Interest Payable).

6.

Beranang Sdn Bhd valued at RM2,850 were rendered during December to clients who had made payment in advance.

7.

It is the custom of the firm to bill clients only when consulting work is completed or, in the case of prolonged engagements, at monthly intervals. At 31 December, consulting services valued at RM11,000 had been rendered to clients but not yet billed. No advanced payment has been received from this clients.

8.

Salaries earned by employees but not paid as of 31 December amount to RM1,700.

9.

Income taxes expense for the year is estimated at RM56,000 Of this amount, RM 51,000 has been recognized as expense in prior months, and RM39,000 has been paid to tax authorities. The company plans to pay RM17,000 remainder of its income tax liability on 15 January.

REQUIRED: a) Prepare the necessary adjusting journal entries on 31 December 2010. [10 marks] Solution Q4
a)

Date 31/12/201 0 1.

Account Titles and Explanation

RM 2,1

RM

Rent expense Prepaid Office rent (Rent expense for December 2010)

00

2, 100

2.

Dues and subscriptions expense 50 Prepaid dues and subscriptions 50 (Dues and subscriptions expense for December 2010) 1

3.

Supplies expense

50 150

Supplies (Supplies used during December 2010)

4.

Depreciation expense: 6 equipment 00 Accumulated depreciation : equipment 600 (Depreciation expense: equipment for December 2010 (RM36,000/60 mth) 1

5.

Interest Expense

00

Interest Payable 100 (Interest accrued on notes payable in December 2010) 2,8 50

6.

Unearned Consulting fees

2, Consulting fees Earned 850 (Consulting services performed for Clients in December 2010 who paid in advance)

7.

Consulting fees Receivable

11,0 Consulting fees earned 00 (Consulting services performed in December for which billings have not been made nor payments received) 1,7 00

11,0 00

8.

Salaries Expense

Salaries payable (Salaries accrued in December but not yet paid) 5,0 9. Income Taxes Expense 00

1, 700

5,

Income Taxes Payable 000 (Estimated income taxes accrued on income in December) 36/36 x 10 = 10 marks

b)

Determine the amounts to be reported in the companys year-end adjusted trail balance for each of the following accounts; Consulting Fees Earned Salaries Expense Telephone Expenses Rent Expense Supplies Expense Dues and Subscriptions Expenses Depreciation Expenses: Equipment Miscellaneous Expenses Interest Expenses Income Taxes Expense [ 7 marks]

b) Unadjusted Consulting Fees Earned 257,180 + (6) (7) Salaries Expense Telephone Expense Rent Expense Supplies Expense Dues and Subscriptions Expense Depreciation Expense : Equipment Miscellaneous Expense Interest Expense Income Taxes Expense 88,820 2,550 22,000 1,600 560 6,600 4,200 None 51,000 (5) (9) (1) (3) (2) (4) (8) Adjustment 2,8 50 11,0 00 1,7 00 none 2,1 00 50 50 00 none 00 00 1 5,0 6 1 4,100 1,750 610 7,200 4,200 100 6,000 21 x 1/3 = 7 marks 5 = Adjusted Trial Balance 271 9

,030 0,520 2,550

c) Determine the companys profit for the year ended 31 December 2010. [ 3 marks]
Company Profit Consulting Fees Earned Less:Salaries Expense Telephone Expense Rent Expense Supplies Expense Dues and Subscriptions Expense Depreciation Expense : Equipment Miscellaneous Expense Interest Expense Income Taxes Expense Profit 271,030 90,520 2,550 24,100 1,750 610 7,200 4,200 100 56,000 12 x 1/4 = 3 marks

(187,030) 84,000

d) (Total marks = 20 marks)

QUESTION 5 Hafiz Consulting Sdn Bhd performs adjusting entries every month, but closes it accounts only at year end. The companys year end adjusted trial balance dated 31 December 2010, was: Hafiz Consulting Sdn Bhd Adjusted Trial Balance 31 December 2010 Cash Accounts Receivable Supplies Equipment Accumulated Depreciation: Equipment Accounts payable Income tax payable Share Capital Retained Earnings Dividends Consulting revenue earned Salary expense Supply expense Advertising expense Depreciation Income tax expense RM 91,100 4,500 300 12,000 RM

5,000 1,500 3,500 25,000 45,000 2,000 96,000 52,000 1,200 300 1,000 11,600

REQUIRED: a. Prepare an Income Statement and Statement of Changes in equity for year ended 31 December 2010. Also prepare the companys Balance Sheet dated 31 December 2010. Does the company appear to be liquid? Defend your answer. [20 marks]

Solution Q5
a.)

Hafiz Consulting Sdn Bhd Income Statement for year ended 31 December 2010 96,000.0 Revenue: Operating expenses: 52,000.0 - salary - supply - advertising - depreciation 0 1,200.0 0 300.0 0 1,000.0 0 54,500.0 0 41,500.0 Profit before tax 11,600.0 - income tax Profit for the year 0 29,900.0 0
7 x 1 marks each = 7 marks

Hafiz Consulting Sdn Bhd Statement of Changes in Equity for year ended 31 December 2010

Share capital Balance, 1 January 2010 Profit for the year Dividend 25,000.00

Retained Earnings 45,000.00 29,900.00 (2,000.00)

Balance, 31 Dicember 2010

7 marks

25,000. 00 .00

72,900
7 x 1 mark each =

Hafiz Consulting Sdn Bhd Balance Sheet for year ended 31 December 2010 Assets 91,100.0 Cash Account Receivable Supplies 12,000.0 Equipment Less: depreciation Total assets 0 (5,000.0 0) 0 102,900. 00 7,000.0 0 4,500.0 0 300. 00

Liabilities & Equity

Liabilities 1,500.0 Account Payable Tax Payable Total liabilities 0 3,500.0 0 5,000 .00

Equity 72,900.0 Retained Earning Share capital Total equity: 0 25,000.0 0 97,900 .00

Total Liabilities & Equities

102,900. 00

10 /10x 6 = 6 marks[Total = 20 marks]