Question

QUESTION (30 MARKS) Techno Active Sdn Bhd is the manufacturing and selling computer and laptop accessories company. The current liability section for Techno Active Sdn Bhd as at 31 December 2018 is shown below. Statement of Financial Position As at 31 December 2018 Current Liabilities Notes Payable (1) Trade payables Salary Payables Utilities payable Interest Payable RM 125,000 78,000 15,000 4,500 2,970 During 2019, the following transactions related to liabilities occurred. On 1 February 2019, pay notes payable (1) RM125,000 together with the interest payable for the notes. The interest for the notes for the month on January 2019 is RM279. For the year 2019, TechnoActive pay trade payables amounted to RM175,390 by cheque.

Answer 1

	(a)
	Journal Entry in the books of TechnoActive Sdn Bhd for the year ended on 31st Dec, 2019
					Amount in RM
	Date	Particulars		Ref	Debit	Credit
i)	01-Feb	Notes Payable A/c	Dr.		125000
		Interest Payable A/c			2970
		Interest Expense A/c	Dr.		279
		To Bank A/c				128249
		(Being notes payable paid with interest)
ii)		Trade Payables A/c	Dr.		175390
		To Bank A/c				175390
		(Being Trade Payables paid by cheque)
iii)		Raw Materials Inventory A/c	Dr.		143240
		To Trade Payables A/c				143240
		(Being material purchased on credit)
iv)	01-Dec	Bank A/c	Dr.		25000
		To Unearned Income A/c				25000
		(Being Advance received from customer for manufacturing computer accessories)
v)		Utility Payables A/c	Dr.		2300
		To Bank A/c				2300
		(Being utilities payable paid)
	31-Dec	Utilities Expense A/c	Dr.		2570
		To Utilities Payable A/c				2570
		(Utilities expenses booked)
vi)		Salary Payable A/c			15000
		To Bank A/c	Dr.			15000
		(Being Salary Payable paid)
vii)	01-Sep	Bank A/c	Dr.		75000
		To Notes Payable A/c				75000
		(Being Notes payable received from IndahBank)
viii)		Trade Receivables A/c	Dr.		739700
		To Sales A/c				704476
		To Sales Tax Payable A/c				35224
ix)	31-Dec	Warranty Expense A/c	Dr.		35224
		To Esitmated Warranty Liability A/c				35224
		(Being Warranty Expenses @5% of 704476 (Sales) are booked)
(b)	31-Dec	Interest Expense A/c	Dr.		1500
		To Interest Payable A/c				1500
		(Being Interest Exp booked on notes payable @ 6% on RM 75000 for 4 months)
(C)		Current Liability Section of TechnoActive Sdn Bhd as on 31st Dec, 2019
		Particulars			Amount in RM
		Notes Payable			75000
		Trade Payables			45850
		Salary Payables			0
		Utility Payables			4770
		Interest Payable			1500
		Unearned Income			25000
		Estimated Warranty Liability			35224
		Sales Tax Payable			35224
		Total			187344
D)	In case the Co. 'TechnoActive Sdn Bhd has erred in understating the Interest Expense, then, it can rectify the same by passing adjustment entry.
	Notes:	It is presumed that 6% is per annum rate accordingly interest is calculated for 4 months.
E)	Reasons for accounting the warranty expenses in Company's Books:
	1	Obligation for the Company: When a company gives warranty, then it's the company's obligation to replace or repair the product if it is defective. That obligation generates liability on the company at the time of sale, therefore, it should be accounted in books on estimation basis.
	2	Matching Principle: As per matching principle, revenues should match with expenses. Therefore, to comply with this matching principle, the company shall book warranty expenses.