Question: #1

Why depreciation on fixed assets should be brought into account? Discuss in detail the several methods of providing for depreciation.

You own a bakery and you’ve just bought a big Elba oven for the baking at a cost of RM30,200. It estimated disposal value or scrap value is RM200. Elba gives warranty of 3 years but it can be used for five years in the business. At the same time Users’ manual indicates that the oven can be used for 12,000 baking hours. Since you’ve just started the business, your estimate for using the oven will be

Year Baking hours
1 1400
2 1800
3 2400
4 2800
5 2600

Prepare depreciation schedules based on the information given above and chose the most suitable method with supporting reasons.

Question #2

You are now working as account assistant in a hotel and your hotel provide accommodation on credit to corporate clients. Your account receivable at the financial year end amounted to RM80,000. Your manager says, bad and doubtful debts should not be included in the financial statements as it will reduce the profit of the hotel. Discuss with relevant accounting examples and related accounting procedures process to be recorded.

ABC retail shop started on 1st January 2015 and following information was provided by the owner:

Financial year ended 31 Dec 2015 31 Dec 2016 31 Dec 2017 31 Dec 2018
Credit sales $180,000 $260,000 $220,000 $300,000
Sales returns $5,000 $8,000 $6,000 $9,000
Cash received from credit customers $150,000 $235,000 $210,000 $265,000
Bad debts to be written off $500 $600 $1,000 $1,200
Allowance for doubtful debts to be provided at % 4% 4% 3% 5%


Prepare the following account for four years (2015 to 2018) using the information above

  1. Accounts receivables account
  2. Bad debts account
  3. Allowance for doubtful debts account
  4. Income statement extracts
  5. Statement of Financial Position extracts




Individual Assignment
The trial balance of YOUR COMPANY (UCOM) at 31 December 2017 Dr Cr
$ $
Capital account (at 1st Jan 2017) Drawings by owner 40,000 170,700
Purchases 200,000  
Returns inwards 12,800
Returns outwards 10,000
Discounts 20,000 19,000
Credit sales 230,000
Cash sales 380,000
Custom duties 6,000  
Carriage inwards 12,000
Carriage outwards 18,000
Wages and salaries 75,000  
Loan interest 13,500
Light and heat 18,000
Rent 16,200  
Insurance and road taxes 16,000
Bad debts 2,800  
Doubtful debt allowance 6,000
Inventory 88,000
Trade Receivables 100,700  
Trade Payables 50,000
Cash at bark 96,800
Cash in hand 37,800  
Furniture and equipment
Cost 140,000
Depreciation at 1st January 2017   50,400
New van (balance paid) 116,000
Old motor van
Cost 73,000
Depreciation at 1st January 2017   36.5
12% Loan repayable in 10 years   150,000
1,102,600 1,102,600



You ascertain the following information:

  1. Closing inventory has been valued for accounts purposes at $24,500.
  2. Loan interest to be accrued accordingly.
  3. Depreciation on furniture and equipment is to be provided using 20% reducing balance basis.
  4. Depreciation on motor vehicles is to be provided using 10% Straight Line proportionate (daily) basis. (both old and new). Old motor van was sold on (Your birthday – taken as 1st Dec-2017) and trade-in price was $30,000. New van was acquried on the day you sold old van and paid the balance by cheque. You are required to determine the cost of new van.
  5. One of the account receivables, John is declared bankrupt on 5th Jan 2018 and $700 was still owing at 31 Dec 2017 and need to be written off as bad.
  6. 5% of the cb sing trade receivables total is to be doubtful.
  7. An accrual of $4,800 is required in respect of light and heat.
  8. An accrual of $19,800 is required in respect of wages.
  9. A quarters rent to 31 January 2018 amounting to $3,600 was paid on 15th November 2017.
  10. road tax and insurance renewals of company separately paid by cheques

=>         new van road tax and insurance (same as date on note:d  – taken as 1st Dec-2017)              3,650
Public liability and indeminity insurance (paid on 7th July for the year to 31 August 2018)    9,000

You are required to prepare:

  1. Income Statement for the year ended 31 December 2017.
  2. Statement of Financial Position as at 31 December 2017.


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