Назад
Answers to practice questions
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2 Suspenseaccount 1,000
Telephoneexpenses1,000

Correctionoferror:telephoneexpensesoverstatedby$1,000. 

3 Suspenseaccount 1,100
Purchasereturns550
Salesreturns550

Correctionoferror.Purchasereturnsof$550incorrectly
recordedasadebitentryinsalesreturns.


4 Equipment 2,000
Repairsand
maintenance2,000

Correctionoferror.Equipmentpurchasecostsincorrectly
recordedasrepairsandmaintenanceexpenses


5 Suspenseaccount 450
Rentexpenses450

Correctionoferror:rentexpensesoverstatedby$450.

6 Interestexpense 200
Bankaccount200

Transactionomittedfromtheledger.
Suspenseaccount
$ $
Telephoneexpenses 1,000 Openingbalance 2,450
Purchasereturns 550 (864,600862,150)
Salesreturns 550 Purchases 100
Rentexpenses 450
2,550 2,550
Tutorial notes
(1) In the trial balance, total debits exceed total credits by $2,450. A suspense
account is therefore opened with a credit balance of $2,450, to make the total
debits and credits equal.
(2) It helps to think about the ledger account that needs correcting first, and then
make the suspense account entry as the matching debit or credit. For example,
since purchases were under-stated in the purchases account, the correction
must be to increase the debit side of the purchases account by $100. The
matching double entry is a credit in the suspense account.
(3) You also need to recognise that one of the errors and the omission can be
corrected without using a suspense account, because the error/omission has
not made the total debits and credits unequal.
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8 Control accounts
(a)
Tradepayablescontrolaccount
 $ $
6 Bank 700 2 Purchases 4,590
7 Bank 350 9 Purchases 2,403
7 Discountreceived 25
9 Purchasereturns 400
Balancec/d 5,518
 6,993 6,993
 Balanceb/d 5,518
Tradereceivablescontrolaccount

$ $
3 Sales 4,953 4 Bank 723
12 Sales 1,005 4 Discountsallowed 30
 5 Bank 1,500
 10 Salesreturns 270
 Balancec/d 3,435
 5,958 5,958
Balanceb/d 3,435
(b)
Receivablesledgerbalancesat31May
$
BaileyStores(75372330) 0
Fastshop(1,120+1,005) 2,125
Spencers(3,0801,500270) 1,310
Totalbalances 3,435
=Receivablescontrolaccountbalance:mainledger
Payablesledgerbalancesat31May
$
Ellis(810700) 110
MendezTrading(1,305+753) 2,058
Gibson(37535025) 0
Dynasty(1,140+1,650400) 2,390
Liners 960
Totalbalances 5,518
=Tradepayablescontrolaccountbalance:mainledger
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9 Control account reconciliation
Error Debit Credit
 $ $
1 SupplierAaccount(purchasesledger)1,850

Omissionofapurchaseoncreditfromthe
supplier’saccount.


2 SupplierBaccount(purchasesledger) 2,000

Omissionofapaymentinthesupplier’s
account.


3 SupplierCaccount(purchasesledger) 300

Omissionofadiscountreceivedfromthe
supplier’s
account.


4 Tradepayables 1,500
Purchasereturns1,500

Omissionofatransactionfromthemainledger.
$
Initialbalanceonthetradepayablescontrolaccount 79,500
Adjustforomissionofpurchasereturns 1,500
Adjusted(=correct)balanceontheaccount 78,000
10 SWAN
SWAN
Incomestatementfortheyearended31DecemberYear7
$ $
Salesl 50,261
Less:Returnsinwards(240)
 50,021
Openinginventoryat1JanuaryYear7 2,720
Purchaseslessreturns(seeworking1) 33,136
35,856
Carriageinwards 546
36,402
Less:Closinginventoryat31December (4,270)
Costofsales(32,132)
Grossprofit17,889
Salariesandwages(5,226+426) 5,652
Rent(626100) 526
Depreciation,motorvans:(25%x$2,000) 500
Depreciation,fixturesandfittings:(5%x$4,000) 200
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Motorvehicleexpenses(seeworking2) 690
Carriageoutwards 720
Discountsallowed 65
Discountsreceived (59)
Interestonbankoverdraftandbankcharges 56
Baddebts 240
Increaseinallowanceforirrecoverabledebts(260162) 98
 (8,688)
Netprofit9,201
Workings
W1 Purchases less returns
$
Purchasesinthetrialbalance 33,436
Less:goodstakenbytheownerforhisownuse (180)
33,256
Less:purchasereturns (120)
33,136
W2 Motor vehicle expenses
$
Expensesinthetrialbalance 920
Less:costofprivatemotoring:(25%) (230)
Businessexpenseincomestatement 690
W3 Drawings
$
Drawingsincash(trialbalance) 2,459
Goodstakenforprivateuse 180
Costofprivatemotoring:(25%) 230
Totaldrawings 2,869
SWAN
Statementoffinancialpositionasat31DecemberYear7
$ $
Noncurrentassets:
Freeholdlandatcost10,300
Motorvansatcost 2,000
Lessaccumulateddepreciation(500+500) (1,000)
Netbookvalue(carryingamount)1,000
Fixturesandfittingsatcost 4,000
Lessaccumulateddepreciation(200+200) (400)
Netbookvalue(carryingamount)3,600
14,900
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Currentassets:
Inventor
y
4,270
Receivables(7,009allowance260) 6,749
Pre
p
a
y
ment(rent) 100
Cashatbank 55
11,174
Totalassets 26,074
Ca
p
ital
At1Januar
y
Year7 10,059
Net
p
rofitforthe
y
ear 9,201
19,260
Drawin
g
s(seeworkin
g
3) (2,869)
At31DecemberYear7 16,391
Currentliabilities
Bankoverdraft 2,522
Pa
y
ables 6,735
Accruedwa
g
esandsalaries 426
9,683
Totalca
p
italandliabilities 26,074
11 Steven Chee
StevenChee
Incomestatementfortheyearended31MayYear6
$ $
Sales402,200
Openinginventoryat1JuneYear5 50,000
Purchaseslessreturns(250,00015,000) 235,000
285,000
Less:Closinginventoryat31MayYear6 (42,000)
Costofsales(243,000)
Grossprofit159,200
Wagesandsalaries(61,800+accrual800) 62,600
Otheroperatingexpenses(17,700prepayment300) 17,400
Depreciation,landandbuildings:(1.5%x$120,000) 1,800
Depreciation,equipment:(25%x(80,00038,000)) 10,500
Discountsallowed 18,000
Discountsreceived (4,800)
Loaninterest 2,100
Baddebts 4,600
Increaseinallowanceforirrecoverabledebts(see
working) 260
(112,460)
Netprofit46,740
Working:
$
Allowanceforirrecoverabledebtsat31MayYear6:(2%x38,000) 760
Allowanceforirrecoverabledebtsat1JuneYear5 500
Increaseinallowance 260
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StevenChee
Statementoffinancialpositionasat31MayYear6
Noncurrentassets Cost Accumulated
depreciation

$ $ $
Landandbuildings 120,00021,800 98,200
Equipment 80,00048,500 31,500
200,00070,300 129,700
Currentassets:
Inventory42,000
Tradereceivables 38,000
Lessallowanceforirrecoverabledebts (760)
37,240
Prepayment(operatingexpenses)300
Bank1,300
Cashinhand300
81,140
Totalassets210,840
Capital
At1JuneYear5121,300
Netprofitfortheyear46,740
168,040
Drawings (24,000)
At31MayYear6144,040
Noncurrentliabilities
7%longtermloan30,000
Currentliabilities
Tradepayables36,000
Accruedwagesandsalaries800
36,800
Totalcapitalandliabilities210,840
12 Herbert
Herbert
Incomestatementfortheyearended31MayYear6
$ $
Sales405,000
Openinginventoryat1JuneYear5 27,400
Purchases(seeworking1) 258,560
285,960
Less:Closinginventoryat31MayYear6 (25,900)
Costofsales(260,060)
Grossprofit144,940
Wagesandsalaries(52,360+accrual140) 52,500
Otheroperatingexpenses(seeworking2) 38,500
Depreciation,landandbuildings:(1%x$90,000) 900
Depreciation,equipment:(15%x$57,500) 8,625
Carriageout 5,310
Discountsallowed 3,370
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Discountsreceived (4,420)
Loaninterest 1,560
Baddebts 1,720
Increaseinallowanceforirrecoverabledebts(seeworking3) 2,030
(110,095)
Netprofit34,845
Workings
W1 Purchases
$
Purchasesinthetrialbalance 259,600
Less:goodstakenbytheownerforhisownuse (1,040)
258,560
W2 Other operating expenses
$
Expensesinthetrialbalance 38,800
Add:accrual 200
Less:prepayment (500)
Expensesintheincomestatement 38,500
W3 Change in allowance for irrecoverable debts
$
Allowanceforirrecoverabledebtsat31MayYear6:(5%x
46,200)
2,310
Allowanceforirrecoverabledebtsat1JuneYear5 280
Increaseinallowance 2,030
Herbert
Statementoffinancialpositionasat31MayYear6
Noncurrentassets:
Cost Accumulated
depreciation

$ $ $
Landandbuildings 90,000 13,400 76,600
Equipment 57,500 41,125 16,375
147,500 54,525 92,975
Currentassets:
Inventory25,900
Tradereceivables(46,2002,310)43,890
Prepayment(operatingexpenses)500
Cashinhand 151
70,441
Totalassets163,416
Capital
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At1JuneYear594,501
Netprofitfortheyear34,845
129,346
Drawings(28,930+1,040)(29,970)
At31MayYear699,376
Noncurrentliabilities:
10%loan15,600
Currentliabilities
Bankoverdraft14,500
Tradepayables33,600
Accruals(140wages+200operatingexpenses) 340
48,440
Totalcapitalandliabilities163,416
Tutorial note
In the statement of financial position, the accrued operating expenses and the
prepaid operating expenses should not be set off against each other. Include the
prepayment and the accrual in full in the statement of financial position.
13 Bell
Workings
Allowanceforirrecoverabledebtsat31JulyYear7:
$
Specificallowancestobemade(230+562+56) 848
Generalallowance:2%x$(32,456‐848) 632
Totalallowanceat31JulyYear7 1,480
Allowanceforirrecoverabledebtsaccount
Date
$
Date
$
 1.8.Yr6 Balanceb/d 1,420
31.7.Yr7 Balancec/d(see
workings)
1,480 31.7.Yr7 Incomestatement
(increaseinallowance)
60
 1,480 1,480
 1.8.Yr7 Balanceb/d 1,480
Baddebtsaccount
Date
$
Date
$
Accountsreceivable 723 30.7.Yr7 Incomestatement
(baddebtswrittenoff)
723
 723 723
Extractsfromfinancialstatements
Incomestatement
$
Baddebtswrittenoff 723
Increaseinallowanceforirrecoverabledebts 60

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Statementoffinancialposition
Currentassets: $
Tradereceivables 32,456
Less:allowanceforirrecoverabledebts (1,480)
30,976
14 Team company financial statements
TeamCompany
Incomestatementfortheyearended31DecemberYear5
$ $
Sales1,292,000
Openinginventoryat1JanuaryYear5 39,000
Purchases 550,000
589,000
Less:Closinginventoryat31DecemberYear5 (35,000)
Costofsales(554,000)
Grossprofit738,000
Administrativeexpenses(241,0004,000prepayment) 237,000
Distributionexpenses(116,000+7,500accrual) 123,500
Depreciation,landandbuildings:(10%×$920,000) 92,000
Badanddoubtfuldebts(seeworking1) 21,500
Bondinterest(6%×$400,000) 24,000
(498,000)
Profitbeforetaxation240,000
Taxation(30%estimate)(72,000)
Profitaftertaxation168,000
Workings
W1 Bad and doubtful debts
$
Allowanceforirrecoverabledebtsat31DecemberYear5:(2%×$200,000) 4,000
Allowanceforirrecoverabledebtsat1JanuaryYear5 6,000
Reductioninallowance (2,000)
Baddebtswrittenoff 23,500
Badanddoubtfuldebtsexpense 21,500
W2 Retained earnings
$
Retainedearningsat1JanuaryYear5 103,000
Profitfortheyear 168,000
271,000
Dividendspaidintheyear (105,000)
Retainedearningsat31DecemberYear5 166,000
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W3 Current liabilities and accruals
$
Tradepayablesinthetrialbalance 73,500
Taxationpayable 72,000
Accruedinterest(24,00012,000paid) 12,000
Accrueddistributionexpenses 7,500
Totalpayablesandaccruals 165,000
TeamCompany
Statementoffinancialpositionasat31DecemberYear5
Noncurrentassets:
$ $
Plantandmachineryatcost920,000
Accumulateddepreciation($215,000+$92,000)(307,000)
613,000
Currentassets:

Inventory 35,000
Tradereceivables(200,0004,000allowance) 196,000
Prepayment 4,000
Bank 58,000
293,000
Totalassets
 906,000

Equityandliabilities

Sharecapital(ordinarysharesof$0.50each)120,000
Sharepremium55,000
Retainedearnings(seeworking2)166,000
Totalequity
 341,000
Noncurrentliabilities
Bonds400,000
Currentliabilities
Tradepayablesandaccruals(seeworking3)165,000
Totalcapitalandliabilities
 906,000
15 Blot Company
Workings
Costofsales
Distribution
costs
Administrativ
eexpenses
$000$000$000
Openinginventory 78
Purchases 1,055
Purchasereturns (25)
Closinginventory (62)
1,046
Wagesandsalaries(0:70:30)11248
Officeexpenses 236