Question

ACC201: Financial Accounting

Natsu Pte Ltd (“NPL”) is a company incorporated in Singapore and uses the Singapore Financial Reporting Standards (“FRSs”). Its financial year end is 31 December. It is in the retail business. The unadjusted trial balance of NPL as at 31 December 20X1 was as follows:

Account Title	Debit		Credit
	$		$
Cash	136,000
Accounts receivable	112,400
Inventory	16,600
Purchases	120,000
Purchase returns			5,000
Prepaid rental	24,000
Building	4,800,000
Accumulated depreciation - Building			96,000
Accounts payable			48,400
Share capital			4,000,000
Retained earnings			688,000
Sales revenue			805,800
Salaries expense	504,400
Utilities expense	51,000
Notes payable - short term			100,000
Unearned revenue			10,000
Salaries payable			11,200
	5,764,400		5,764,400

Additional information:

1. 1. NPL uses the periodic inventory system. Stock count done at the end of the year indicated that the ending inventory is $10,000.
2. 2. On 1 September 20X1, the company paid $24,000 to rent a temporary space for a year to store some materials for a project.
3. 3. The 6-month notes payable of $100,000 issued on 1 November 20X1 carries an annual interest rate of 6% to be paid on the maturity date.
4. 4. The company made a sales of $46,000 to a customer during the month of December 20X1. The customer had been billed but would only pay NPL in 20X2. This has not been accrued.
5. 5. For the utilities incurred in December 20X1, the account clerk had made the following entries: Debit Salaries expense $2,800 and Credit Salaries payable $2,800.
6. 5. The unearned revenue of $10,000 was due to a cash payment by customer to NPL in November 20X1 for goods to be delivered in December 20X1. NPL delivered half of the goods in December 20X1.
   6. The building of $4,800,000 was purchased on 1 January 20X0 and depreciated on a straight-line basis over fifty years. NPL expects zero residual value at the end of its useful life.

Required:

b. Prepare the Income Statement for NPL for the year ending 31 December 20X1, incorporating all the necessary adjustments. (14 marks)

Answer 1

Natsu Pte Ltd Adjusting Enteries Date Particulars 31.12.20x1 Rent Expense a/c Dr. To Prepaid rental (Rent expensed) 24000 x 4/12 Debit in $ Credit in $ 8000 8000 1000 31.12.20x1 Interest Expense a/c Dr. To Interest Payable (Interest accrued) 100000 x 6% x 2/12 1000 Dr. 46000 31.12.20x1 Accounts receivable a/c To Sales revenue (Sales accrued) 46000 Dr. Dr, 2800 2800 31.12.20xi Salaries payable a/c Utilities expense a/c To Salaries expense To Accounts payable (Correction Entry) 2800 2800 Dr. 5000 31.12.20x1 Unearned revenue a/c To Sales revenue (Sales recognized) 5000 96000 31.12.20x1 Depreciation Expense - Build a/c Dr. To Accumulated depreciation - Building (To record depreciation) (4800000 - 0)/50 96000

856800 Statement of Income For the period ending 31.12.20x1 Sales revenue Cost of goods sold: Beginning Inventory 16600 Purchases 120000 Purchase returns -5000 131600 Less:Closing Inventory -10000 Gross Profit 121600 735200 Adjusted Trial Balance For the period ending 31.12.2021 Particulars Cash Accounts receivable Inventory Prepaid rental Building Accumulated depreciation - Building Accounts payable Salaries payable Interest Payable Unearned revenue Notes payable - short term Share capital Retained earnings Sales revenue Purchases Purchase returns Salaries expense Rent Expense Interest Expense Utilities expense Depreciation Expense - Build Totals Debit in $ Credit in $ 136000 158400 16600 16000 4800000 192000 51200 8400 1000 5000 100000 4000000 688000 856800 120000 5000 501600 8000 1000 53800 96000 5907400 5907400 Operating Expenses: Salaries expense Rent Expense Utilities expense Depreciation Expense - Build Operating Income Interest Expense Net Income 501600 8000 53800 96000 659400 75800 -1000 74800