Question

QUESTION 7 (34 marks) Chan Corporation is a well-established merchandizing company that specializes in home appliance. The company prepares its financial statements and adjusting entries at June 30 each year. The trial balance of the Chan Corporation at June 30, 2019 is presented on the page next. You are also required to take into consideration the following information: (1) At July 1, 2016, 6%, $100 par value, 30,000 cumulative preference shares were authorized. 10,000 shares were issued and outstanding. There was no change in the financial year 2018/2019. At July 1, 2016, 100,000 ordinary shares of $20 par value were authorized. 80,000 shares were issued and outstanding. There were changes in the financial year 2018/2019. You are required to account for these changes in the financial records. In addition to the account titles used in the trial balance, the Chan Corporation also uses the following account titles: Depreciation expense: Building Depreciation expense: Equipment Dividends Dividends payable Interest expense Interest payable Interest receivable Interest revenue Income taxes expense Income taxes payable Prepaid rent Salary payable Share premium: Treasury shares Supplies Supplies expense Utilities expense

Answer 1

Credit 74 75 76 Date Account title & explanation 2-May Treasury Stock Cash Debit 40,000 40,000 8-Jun Cash 78 79 30,000 Treasury Stock Share Premium - Treasury Shares 24,000 6,000 80 6,000 81 82 83 84 25-Jun Utilities expense Accounts Payable 6,000 13,500 30-Jun Interest Expense Interest Payable 86 13,500 450 88 89 30-Jun Interest Receivable Interest Revenue 450 90 91 48,000 30-Jun Unearned Sales Revenue Sales Revenue 92 48,000 93 94 170,000 30-Jun Salaries Expense Salaries Payable 170,000 96 97 70,400 30-Jun Insurance expense Prepaid insurance 98 70,400

100 140,000 30-Jun Depreciation Expense - Equipment Accumulated Depreciation -Equipment 101 140,000 100,000 102 103 104 105 106 30-Jun Depreciation Expense - Building Accumulated Depreciation - Building 100,000 314,515 30-Jun Income Tax Expense (3145150*10%) Income Tax Payable 18,248,000 450 314,515 108 200,000 109 110 30-Jun Dividend Dividend Payable 200,000 12,600,000 1,722,000 395,400 126,400 140,000 100,000 6,000 13,500 3,145,150 111 1122) 113 114 115 Cash 648,000 30,000 40,000 116 638,000 117

125 1,000,000 Chan Corporation Shareholders' Equity Section 30-Jun-19 Shareholders' equity 6% Preferred stock, $100 par, authorized 30.000 shares, issued and outstanding10,000 shares Ordnary Shares. $20 par, authorized 100.000 shares, issued 80,000 shares and 79,400shares outstanding Share Premium - Ordinary Shares Share Premium - Treasury Stock Total Paid In Capital Retained Earnings Less Treasury Stock at Cost (400 * 40) Total Shareholders' Equity 129 131 1,600,000 1,200,000 6,000 3,806,000 3,902,635 (16,000) 7,692,635 135 136