Peru Ltd Had the Following Transactions During the Month of September: Financial Accounting Assignment SMU, Singapore

Peru Ltd had the following transactions during the month of September. The business is registered for GST and all transactions provided below are INCLUSIVE of GST.

September

Required:

1. Record the transactions for the month of September in the journals provided below Total the special journals. Ignore narrations. Round amounts to the nearest whole $.
2. Post the necessary entries to the GST Collected account in General Ledger. Balance and total the account.
3. Since all necessary detail is recorded in subsidiary ledgers for customers, Accounts Receivable Control account in the general ledger could be dispensed with. Discuss.

GENERAL JOURNAL-
SALES JOURNAL
CASH RECEIPTS JOURNAL
GST Collected Ledger Account

QUESTION 2 

On 1 July 2019, Argentina Ltd reported the following information in its statement of financial position:

Argentina Ltd. uses the straight-line method of depreciation. The estimated useful life of the buildings is 40 years, with an estimated residual value of $20,000. The estimated useful life of the machinery is 4 years with an estimated residual value of $8,000. The entity’s balance date is 30 June.

Required:

  Prepare general journal entries to record the following events. Ignore narrations. Remember to prepare all the journal entries required to correctly record these events.

1. On 30 June 2020, the directors of Argentina Ltd decided to switch the valuation method from the cost model to the revaluation model for their land. The land was revalued to its fair value of $1,200,000. (3 Marks)
2. On 30 June 2020, the entity conducted an impairment test on the buildings. The fair value was assessed at $460,000 with further costs to sell the building determined to be $30,000 and value in use estimated at $450,000.     
3. On 31 December 2020, owing to a change of product mix the machinery was sold for $50,000.
4. If Argentina Ltd had to revalue the land downwards by $400,000 on 30 June 2021, explain how you would account for this downward revaluation.

QUESTION 3    

Financial statement data for Brazil Ltd are provided below:

Brazil Ltd

Statement of financial positions

30 June 2020

Brazil Ltd

Profit or Loss Statement

for the year ended 30^th June 2020

Additional information: 

1. New plant assets were purchased for cash in 2019 – 20.
2. Old plant assets costing $25,000 were sold for cash. The carrying amount on the date of sale was $13,000.
3. Notes with a face value of $30,000 were converted into $30,000 of ordinary shares.
4. A cash dividend was declared and paid during the year.
5. Accounts payable pertain to merchandise purchases.
6. The Income-tax was paid in cash during the period.

REQUIRED:

1. Prepare a statement of cash flows for the year ended 30^th June 2020 using the direct method.
2. Wayne Smith is reviewing the statement of cash flows for his business. The statement has been provided by his accountant. Wayne is concerned that the statement shows net cash outflows for investing activities. Should Wayne be concerned about this result?

QUESTION 4       

The following information relates to the June 2020 cash transactions for Uruguay Ltd.

The following unpresented cheques (outstanding cheques) appeared on the 31^st May 2020 bank reconciliation:

1. All cheques except for cheque no. 6558 are included in the 30^th June bank statement. On 31^st May, a deposit of $5,163.00 was outstanding.
2. In the company’s records, the cash balance at 31^st May was $39,659.56.
3. Total cash payments were $99,565.60 for the month of June.
4. Total cash receipts for June were $104,291.40, but $3,964.90 of these were received on 30^th June are outstanding as they have not yet been credited by the bank.
5. The bank statement on 30^th June shows a closing balance of $53,852.26.
6. The following information only appeared on the bank statement in June, service charges of $64.80; a $190.80 returned cheque due to insufficient funds in the drawer’s account; and the 31^st May deposit of $5,163.00 which was credited by the bank on 1^st June.
7. Cheque no. 6585, written for telephone expenses on 20^th June, and recorded by the company at $1,978.00, was correctly paid by the bank as $1,996.00
8. The June bank statement shows a debit of $1,165.00 for a cheque which was not written by Uruguay Ltd, but which was incorrectly debited to their account by the bank.
9. The following cheques are included in the company’s records but do not appear on the company’s bank statement for June:

Required:

1. Prepare the cash bank account in the general ledger as a result of the adjustments required to balance the account to the bank statement for the month of June 2020.
2. Prepare the bank reconciliation as at 30^th June 2020.
3. A manager of a small online business believes that because most of the transactions take place using electronic transfers instead of cash or cheques, the business no longer needs to do a bank reconciliation each month. Discuss.

BANK RECONCILIATION STATEMENT

QUESTION 5

Venezuela Ltd sells outdoor furniture. The company is not registered for GST. The accounting records at 30 June 2020 reveal the following balances:

In the past, the company’s yearly bad debts expense had been estimated at 2% of credit sales. It was decided to compare that method with an ageing of the accounts receivable method. The following analysis was obtained in relation to the accounts receivable:

Prepare journal entries for the following (ignore narrations):
Required:

1. Write off $550 owing from J. Brooks as uncollectible.
2. The record collection of $1,500 in full settlement of J. Fuller’s account, previously written off.
3. Received 40% of the $900 balance owing by W. Chan and wrote off the remainder as uncollectible.
4. Assume the business uses the percentage of sales method to estimate uncollectible accounts, prepare the journal entry for the year ended 30 June 2020.
5. Show how Accounts Receivable would be reported in the balance sheet at 30 June 2020.

Assume the same facts except that instead of using the percentage of sales method to estimate uncollectible accounts, the business uses the aging method. Prepare the journal entry for the year ended 30 June 2020 (show workings).