Question

The following shows the unadjusted Trial Balance of Services as at 31 August 2020 is as follows:

Services Unadjusted Trial Balance as at 31 August 2020
	Debit	Credit
	RM	RM
Cash at Bank	70,400
Account Receivable	100,600
Provision for Doubtful Debts		4,000
Premises	220,000
Furniture	40,000
Accumulated Depreciation - Depreciation		8,000
Accounts Payable		80,000
Unearned Revenue		24,000
Loan @ 6% interest		100,000
Capital, Services		200,000
Drawings	3,000
Revenue		103,000
Prepaid Insurance	36,000
Utility expense	21,000
Salary Expense	25,000
Interest Expense	3,000
	519,000	519,000

The following adjustments have not been considered for the year ended 31 August 2020:

· Provision for doubtful debts is to be estimated at 4% of total Debtors.

· Accrued Salaries Expenses, RM5,000.

· Insurance paid in advance for the month has expired. RM36,000 insurance was paid in advance for a twelve (12) months period starting 1st January 2020.

· Furniture was purchased on 1 January 2019. Depreciation on the Machinery is required to be recorded using the straight-line method. Assume a useful life of five years with a zero-salvage value.

· RM12,000 unearned revenue has been earned during the period.

· Interest Expense for the month of July and August has not been recorded yet.

Required:

1) Prepare the adjusting entries for the above adjustments. (Show workings)

2) Prepare Services Statement of Comprehensive Income (Income Statement) for the year ended 31 August 2020.                 

3) Prepare Services Statement of Financial Position as at 31 August 2020

Answer 1

Services Adjusting Enteries Date Particulars Debit in RM Credit in RM 31.8.2020 Bad Debts Expense 24 Provision for Doubtful Debts 24 (Bad debts estimated ) 100600 x 4% = 4024 - 4000 Provision for Doubtful Debts = 4000 Debit in RM Credit in RM 70400 100600 4024 12000 220000 40000 16000 80000 5000 31.8.2020 Salary Expense Salary Payable (Salary accrued) 5000 24000 31.8.2020 Insurance Expense Prepaid Insurance (Insurance expired) 36000 X 8/12 24000 Adjusted Trial Balance For the period ending 31.8.2020 Particulars Cash at Bank Account Receivable Provision for Doubtful Debts Prepaid Insurance Premises Furniture Accum. Deprec. -Furn. Accounts Payable Salary Payable Unearned Revenue Interest Payable Loan @ 6% interest Capital, Services Drawings Revenue Utility expense Salary Expense Interest Expense Bad Debts Expense Insurance Expense Depreciation Expense Totals 5000 12000 1000 100000 200000 8000 31.8.2020 Depreciation Expense Accum. Deprec. -Furn. (To record depreciation) 40000 / 5 8000 3000 115000 21000 12000 30000 31.8.2020 Unearned Revenue Revenue (Revenue earned) 12000 4000 24 24000 8000 1000 31.8.2020 Interest Expense Interest Payable (Interest accrued) 100000 x 6% x 2/12 1000 533024 533024

115000 Amounts Amounts Statement of Income For the period ending 31.8.2020 Revenue Less: Utility expense 21000 Salary Expense 30000 Interest Expense 4000 Bad Debts Expense 24 Insurance Expense 24000 Depreciation Expense 8000 Net Income Balance sheet As at 31.8.2020 Assets Current Assets Cash at Bank Account Receivable Provision for Doubtful Debts Prepaid Insurance Amounts Amounts Liabilities Current Liabilities 70400 Accounts Payable 100600 Salary Payable -4024 Unearned Revenue 12000 178976 Interest Payable 80000 5000 12000 1000 98000 87024 27976 100000 Non Current Liabilities Loan @ 6% interest 220000 Owner's Equity 24000 Capital, Services 422976 Total Liabilities & Equity Non Current Assets Premises Furniture Accum. Deprec. -Furn. Total Assets Statement of Owner's Equity For the period ending 31.8.2020 Capital, Services 200000 Net Income 27976 40000 - 16000 224976 422976 227976 Drawings -3000 224976