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ACCTN202-25A (HAM) - Intermediate Financial Accounting
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Big Limited entered into a non-cancellable, seven-year lease agreement with Small Limited on 1 January 2020. The lease was for a factory equipment that is expected to have an economic life of eight years, after which time it will have no salvage value. There is a bargain option, which Small Limited will be able to exercise at the end of the seventh year, for $140,000. Big Limited manufactured the equipment at a cost of $3,200,000. There are to be seven annual instalments of $1,300,000 per annum to be paid at the end of each year. Included in the annual lease payment is an amount of $20,000 per annum representing payment to Big Limited for the insurance and maintenance of the equipment. The equipment is to be depreciated using straight-line method. The rate of interest implicit in the lease is 15 per cent. The journal entries in the books of Small Limited to record the annual lease payments paid for years ended 31 December 2020 are:
Big Limited entered into a non-cancellable, seven-year lease agreement with Small Limited on 1 January 2020. The lease was for a factory equipment that is expected to have an economic life of eight years, after which time it will have no salvage value. There is a bargain option, which Small Limited will be able to exercise at the end of the seventh year, for $140,000. Big Limited manufactured the equipment at a cost of $3,200,000. There are to be seven annual instalments of $1,300,000 per annum to be paid at the end of each year. Included in the annual lease payment is an amount of $20,000 per annum representing payment to Big Limited for the insurance and maintenance of the equipment. The equipment is to be depreciated using straight-line method. The rate of interest implicit in the lease is 15 per cent. The journal entries in the books of Big Limited to record the lease transaction on 1 January 2020 are:
The following of balances are from the accounting records of Hillcrest Supplies Limited as at 1 April 2022:
|
$
|
|
Contributed Equity
|
7,000,000
|
Credit Balance
|
Retained Earnings
|
320,000
|
Credit Balance
|
Revaluation Reserve for Property plant and Equipment
|
1,000,000
|
Credit Balance
|
Treasury Stock
|
280,000
|
Debit Balance
|
Additional information for the year ended 31 March 2023:
· Additional ordinary shares were issued for $1.230,000
· Profit for the year is $2,725,720
· Dividends for the year $300,000
· Revaluation loss on land $900,000. The revaluation reserve $1,000,000 as at 1 April 2022 was in relation to previous revaluation of land
· Revaluation gain on financial assets available for sale $500,000
The net change in retained earnings for the year ended 31 March 2023 is:
Which of the following is not disclosed in the Statement of Changes in Equity?
I. The amounts of transactions with owners in their capacity as owners, showing separately contributions by and distributions to owners
II. For each component of equity, a reconciliation between the carrying amount at the beginning and the end of the period
III. Revaluation Gain relating to financial assets held for trading
IV.
The following of balances are from the accounting records of Hillcrest Supplies Limited as at 1 April 2022:
|
$
|
|
Contributed Equity
|
7,000,000
|
Credit Balance
|
Retained Earnings
|
320,000
|
Credit Balance
|
Revaluation Reserve for Property plant and Equipment
|
1,000,000
|
Credit Balance
|
Treasury Stock
|
280,000
|
Debit Balance
|
Additional information for the year ended 31 March 2023:
· Additional ordinary shares were issued for $1.230,000
· Profit for the year is $2,725,720
· Dividends for the year $300,000
· Revaluation loss on land $900,000. The revaluation reserve $1,000,000 as at 1 April 2022 was in relation to previous revaluation of land
· Revaluation gain on financial assets available for sale $500,000
The net changes in contributed equity for the year ended 31 March 2023 is:
The following of balances are from the accounting records of Hillcrest Supplies Limited as at 1 April 2022:
|
$
|
|
Contributed Equity
|
7,000,000
|
Credit Balance
|
Retained Earnings
|
320,000
|
Credit Balance
|
Revaluation Reserve for Property plant and Equipment
|
1,000,000
|
Credit Balance
|
Treasury Stock
|
280,000
|
Debit Balance
|
Additional information for the year ended 31 March 2023:
· Additional ordinary shares were issued for $1.230,000
· Profit for the year is $2,725,720
· Dividends for the year $300,000
· Revaluation loss on land $900,000. The revaluation reserve $1,000,000 as at 1 April 2022 was in relation to previous revaluation of land
· Revaluation gain on financial assets available for sale $500,000
The following of balances are from the accounting records of Hillcrest Supplies Limited as at 1 April 2022:
|
$
|
|
Contributed Equity
|
7,000,000
|
Credit Balance
|
Retained Earnings
|
320,000
|
Credit Balance
|
Revaluation Reserve for Property plant and Equipment
|
1,000,000
|
Credit Balance
|
Treasury Stock
|
280,000
|
Debit Balance
|
Additional information for the year ended 31 March 2023:
· Additional ordinary shares were issued for $1.230,000
· Profit for the year is $2,725,720
· Dividends for the year $300,000
· Revaluation loss on land $900,000. The revaluation reserve $1,000,000 as at 1 April 2022 was in relation to previous revaluation of land
· Revaluation gain on financial assets available for sale $500,000
The net change in reserves for the year ended 31 March 2023 is:
Hill Limited was considering writing off $8,000 debts owed by Mill Limited as at 31 December 2020. On 18 March 2021, Hill Limited received notice that Mill Limited has become insolvent. The insolvency of Mill Limited as at 18 May 2020 should be accounted for as:
Samy Limited has a balance sheet date of 31 December 2020. The financial statements of the company were authorised for issue on 31 March 2021. On 24 January 2021, the company received an invoice from a supplier for $70,000 for goods delivered in December 2020. The goods were included in closing inventory at 31 December 2020 at an estimated cost of $67,000. The transaction on 24 January 2021 is:
Raja Limited has a balance sheet date of 31 December 2020. The financial statements of the company were authorised for issue on 31 March 2021.On 12 February 2021, the company settled a negligence claim of $38,000 lodged by one of its customers. The claim was made on 26 October 2020 by a customer who was hurt when tools in the repair workshop accidently fell on the customer. The settlement of negligence on 12 February 2021 is: