Question

The following is the Trial Balance of ABC Ltd as at 31 August 2019 SNZ 000S SNZ 000 20.893 20910 50.000 1.100 16.000 Accounts Payable Accounts Receivable Accumulated Depreciation Property. Plant & Equipment Amortisation of Intangibles Asset Revaluation Reserve Cash & Cash Equivalents Cost of Goods Sold Dividends Paid Employees Benefits Finance Expense General and Administration Expenses Intangible Assets Inventories Marketing & Distribution Expenses Mortgage (paid off in equal instalments over 10 years) Property Plant & Equipment Provision for Employee Benefits Rent Received Retained Earnings 31 August 2018 Sales Ordinary Share Capital Term Loan (repayable 1 December 2023) 2375 72 351 4.785 55.001 5674 19068 37794 39.684 20.025 42.583 154756 847 2.163 20.108 199,479 56,450 25,000 433 523 433.523 Additional Information below not yet recognised in the above figures (rounded to '000s as in the Trial Balance above) a. An additional $750 needs to be recorded to recognise additional employee benefits accrued at year and b. Marketing & Distribution include $3.700 costs of an advertising campaign which will not commence until the end of September 2019 c. Deposits included in Sales for work to be carried out in September amounted to $2.000 d. Depreciation on Property Plant and Equipment for the year of $7.300 needs to be recorded e. The Taxation Expense for the year is $6.180 A final dividend for the 2019 year of $5.500 was declared and ratified in August 2019 REQUIRED A. Prepare the journal entries to record the above transactions. Dates and narrations not required B. Prepare the Income Statement showing EBIT in accordance with GAAP for the 2019 year C. Prepare the Balance Sheet in accordance with GAAP for the 2019 year end

Answer 1

Requirement A Credit Adjusting Journal entries Employee Benefits Provision for employee benefits Debit $ 750 $ 750 $ 3,700 Prepaid Marketing costs Marketing and Distribution expenses Ş 3,700 $ 2,000 Sales Unearned Sales revenue 2,000 $ 7,300 Depreciation expense Accumulated Depreciation-PPE 7,300 $ 6,180 Income tax expense Income tax payable 6,180 $ 5,500 Dividends Dividend Payable 5,500

ABC Ltd. Income Statement (multiple-Step) for the year ended Aug 31, 2019 NZ $ (000's) NZ $ (000's) 1,99,479 -2,000 1,97,479 -72,351 1,25,128 Particulars Sales (-) Unearned sales revenue Net Sales (-) Cost of goods sold Gross Income (-) Operating expenses Employee benefits (55001+750) General and Administration expenses Marketing and Distribution expenses (20025-3700) Depreciation expenses Amortisation of Intangibles Total operating expenses 55,751 19,068 16,325 7,300 1,100 99,544 25,584 2,163 Operating Income Non-Operating Items Rent received Total Non-Operating items Earnings before interest and tax (-) Finance expenses Earnings before tax (-) Income tax expense Net Income trnasferred to retained Earnings 2,163 27,747 -5,674 22,073 -6,180 15,893

Requirement C ABC Company Statement of Owner's Equity as on Aug 31, 2019 (in NZ $ 000's) Ordinary Share Capital $ 56,450 $ Particulars Balance at 31 August, 2018 (+) Net Income for the month (-) Dividend Declared (4785+5500) Balance at 31 August, 2019 Retained Earnings 20,108 15,893 -10,285 25,716 Asset Total Revaluation Shareholde reserve r s Equity $ 16,000 $ 92,558 $ 15,893 $ -10,285 $ 16,000 $ 98,166 56,450 $

NZ $ (000's) NZ $ (000's) ABC Company Balance Sheet as on Aug 31, 2019 Particulars Assets Current Assets Cash & Cash equivalents Accounts Receivable Prepaid Marketing and Distribution expenses Inventory Total Current Assets Non-Current Assets Property, Plant and Equipment (-) Accumulated Depreciation-PPE (50000+7300) 2,375 20,910 3,700 39,684 1,54,756 -57,300 97,456 37.794 1,35,250 Total Non-Current Assets 2,01,919 Total Assets Liabilities Current Liabilities Accounts Payable Dividends Payable Income tax payable Unearned Sales revenue Provision for employee benefits (847+750) 20,893 5,500 6,180 2,000 1,597 36,170 Non-Current Liabilities Term Loan Mortgage Total Liabilties 25,000 42,583 1,03,753 Shareholder's Equity Ordinary Share Capital Retained Earnings Asset Revaluation reserve Total Shareholder's Equity 56,450 25,716 16,000 98,166 Total Liabilities and Owners Equity 2,01,919