The following balances were extracted from the accounting records of Chips Inc.
ID: 2573570 • Letter: T
Question
The following balances were extracted from the accounting records of Chips Inc. as of December 31, 2016. Prepare the balance sheet and income statement after taking the adjustments listed below A-I into consideration.
5,000
Prepare the balance sheet and income statement after taking the following adjustments into consideration.
(A) The closing inventory December 31 2016 was valued at 19,300.
(B) Preference and ordinary dividends were paid halfway through the year, as well as debenture interest, but an accrual should be made for the balance of the debenture interested for year. The company proposes a final dividend of 8,000 of ordinary shares.
(C) The audit fee has been agreed at 5,000.
(D) Insurance (included in administrative expenses) has been paid in advance and 950 relates to 2017.
(E) Accrued expenses of 480 for telephone services (included in administration expenses) and 620 for light and heat (included in distribution costs) have not yet been taken into account.
(F) The trade receivables balance includes 1200 of bad debts, which should be written off.
(G) Depreciation of 25 percent on a straight-line basis should be charged on the motor vehicles (which are vans used in distribution activities).
(H) The market value (fair value) of the investments at December 31 2016 amounts to 44,100.
(I) It is estimated that the income tax charge for 2016 will be 20,000.
100,000 Ordinary Shares 100,000 10 % Preference Shares 50,000 12 % Debenture (Long Term Debt) 50,000 Premises 130,000 Motor Vehicles (Gross Cost 48,000) 36,000 Purchases 219,700 Administration Expenses 73,200 Distribution Costs 102,600 Sales 476,900 Trade Receivables 39,250 Trade Payables 23,600 Inventory at January 1 2016 21,250 Bank Balance (Asset) 70,420 Investments (At Cost) 45,800 Reserves 48,220 Debenture Interest 3,000 Preference Dividend 2,500 Ordinary Dividend5,000
Explanation / Answer
Balance Sheet
Motor Vehicle
(Cost $48000)
B. Income Statement :
Liabilities Amount $ Assets Amount $ Ordinary Shares 100000 Shares 100000 Premises 130000 10 % Preference Shares 50000Motor Vehicle
(Cost $48000)
24000 12 % Debenture (Long Term Debt) 50000 Trade Recievable 38050 Accrued Preference Dividend 2500 Investment 44100 Accrued Debenture Interest 3000 Bank 70420 Proposed Dividend 8000 Stock 19300 Reserves 63620 Prepaid Insurance 950 Trade Payable 23600 Audit Fees Payable 5000 Other Accrued Expenses 1100 Income Tax Provision 20000 Total 326820 326820Related Questions
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