Question

SECTION B - ANSWER ALL QUESTIONS Question 1 Mutiara Sdn. Berhad is a trading company and the company operates in a rented shop space in Damansara. The following information is the company's unadjusted year-end trial balance dated December 31, 2017. Mutiara Sdn. Berhad Unadjusted Trial Balance as at 31 December, 2017 RM RM Accounts receivable 690,000 Allowance for doubtful debt 10,500 Accounts payable 242,000 Administrative expense 175,000 Cash and cash equivalent 79,079 Cost of goods sold 620,000 Income tax expense 26,000 5.5% 5-year investment 60,000 Merchandise inventory (December 31, 2017) 150,000 Freehold land 100,000 Machinery and equipment 161,360 Accumulated depreciation: machinery and equipment 19,760 Ordinary dividend 66,000 Ordinary share capital 200.000 Patent, net 20,000 8% Bonds payable - 5 years 100,000 Discount on bonds payable 3.221 Retained earnings (January 1, 2017) 110,540 Rent revenue 18,000 Revaluation reserve (January 1, 2017) 154,000 Sales revenue 1,480,000 Sales returns and allowances 40,000 Selling expense 140,000 Supplies 4,140 2,334,800 2,334,800

Answer 1

Req a) Journal entries:
Date	Accounts Title	Debit (RM)	Credit (RM)
1	Selling expenses	22000
	Accounts payable		22000
	(selling expenses made payable)
2	Supplies expenses	2300		(4140-1840)
	Supplies		2300
	(supplies expenses recorded)
3	Cash	200000
	Ordinary share capital		200000
	(new shares issued fully paid)
4	Freehold land	80000
	Revaluation reserve		80000
	(land recorded at the fair value)
5	Allowance for Doubtful Debt	2300
	Accounts receivable		2300
	(AR written off)
5	Bad Debt expenses	5554		(690000-2300)*2% - (10500-2300)
	Allowance for Doubtful Debt		5554
	(allowance for Doubt Acc. Raised to 13754)
6	Interest receivable	3300		(60000*5.5%)
	Interest revenue		3300
	(interest on LT Investment recoreded for the year)
7	Cost of goods Sold	21240		(161360-19760)*15%
	Acc. Dep. - Machi & Equip		21240
	(depre. On M&E recorded @ 15% on DBM)

Adjusted Trial balance:
Acc Title	Unadjusted T/B		Adjustment		Adjusted T/B
	Debit	Credit	Debit	Credit	Debit	Credit
AR	690000			2300	687700
Allow. for DD		10500	2300	5554		13754
AP		242000		22000		264000
Admin Exp.	175000				175000
Cash & Cash equi.	79079		200000		279079
Cost of goods sold	620000		21240		641240
Income tax exp.	26000				26000
5.5% 5 yr Investment	60000				60000
Merc. Inventory	150000				150000
Freehold Land	100000		80000		180000
Machinery and Equipment	161360				161360
Acc Dep - Machi & Equip		19760		21240		41000
Ordinary dividend	66000				66000
Ordinary Share capital		200000		200000		400000
Patent, net	20000				20000
8%, Bonds payable, 5 yrs		100000				100000
Discount on Bond payable	3221				3221
Retained earnings		110540				110540
Rent revenue		18000				18000
Revaluation reserve		154000		80000		234000
Sales revenue		1480000				1480000
Sales returns & allow.	40000				40000
Selling expense	140000		22000		162000
Supplies	4140			2300	1840
Supplies exp.			2300		2300
Bad Debt exp.			5554		5554
Interest receivable			3300		3300
Interest revenue				3300		3300
Total	2334800	2334800	336694	336694	2664594	2664594

b)
Comprehensive Statement of Income:
	Amount RM
Sales revenue	1480000
less:Sales returns & allow.	40000
Net Sales	1440000
Less:Cost of goods sold	641240
Gross Profit	798760
Less: Selling expenses:
Selling expense	162000
Bad Debt exp.	5554
Income before Admin exp.:	631206
Less:Adminstration expenses:
Supplies exp.	2300
other expenses	175000
Income before other income	453906
Add: Other income:
Interest revenue	3300
Rent revenue	18000
Income before taxes	475206
less: Income tax exp.	26000
Net Income	449206

Statement of changes in Equity:
	Ordinary Share capital	Retained Earnings	Revaluation reserve	Total Equity
Opening balance	200000	110540	154000
share issue	200000
fair value adj.			80000
Net Income		449206
Ordinary dividend		-66000
Closing balance	400000	493746	234000	1127746

Balance Sheet:
Assets:	Amount RM
Cash & Cash equi.	279079
Accounts Receivable	687700
Allow. for DD	-13754
Merc. Inventory	150000
Supplies	1840
Interest receivable	3300
Current Assets	1108165
Investments:
5.5% 5 yr Investment	60000
PPE:
Freehold Land	180000
Machinery and Equipment	161360
Acc Dep - Machi & Equip	-41000
Patent, net	20000
Total Assets	1488525
Liabilities & Equity:	Amount RM
Accounts payable	264000
Current Liabilities	264000
8%, Bonds payable, 5 yrs	100000
Discount on Bond payable	-3221
Equity capital:
Ordinary Share capital	400000
Retained Earnings	493746
Revaluation reserve	234000
Total Liabilities & Equity	1488525

c) The revenue and expense items are recognised on accrual basis, which

means that all revenues and expenses that belongs to the current year/

period are brought to the Income statement. All the advance payments

received for revenues and prepayment of expenses are forwarded to the

future year/period through balance sheet.