7111AFE_Solution_Topic10_new

7111AFE_Solution_Topic10_new - 7111AFE Tutorial Solution...

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7111AFE Tutorial Solution: Topic 10 (10-15 min.) E 18-2 O+ a. Collection of account I+ i. Sale of land receivable F+ b. Issue of long-term bill NIF j. Acquisition of equipment payable to borrow cash by issue of bill payable N c. Depreciation of equipment F– k. Payment of long-term debt I– d. Purchase of long-term investment NIF l. Acquisition of building by issue of ordinary shares F+ e. Issue of ordinary shares I– m. Purchase of equipment for cash O– f. Payment of account O– n. Payment of wages to payable employees F+ g. Issue of preference O+ o. Collection of cash interest shares for cash F– h. Payment of cash dividend I+ p. Sale of building
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P18-3 PREPARING AN INCOME STATEMENT, BALANCE SHEET AND CASH FLOW STATEMENT – DIRECT METHOD (Obj. 3, 4) (40 min.) Req. 1 Scott Co. Ltd Income Statement For the Year Ended 31 December 20X8 Sales revenue (2,000 × $200) $400,000 Cost of goods sold 260,000 Salary expense 45,000 Depreciation expense ($150,000 / 5) 30,000 Rent expense 20,000 Income tax expense 10,000 Net profit $ 35,000 Req. 2 Scott Co. Ltd Balance Sheet As at 31 December 20X8 ASSETS LIABILITIES Current: Current: Cash $268,000* Accounts payable Accounts receivable ($120,000 – $60,000) $ 60,000 (2,000 × $200 × .20) 80,000 Salary payable 4,000 Inventory 120,000 Total current liabilities 64,000 Total current assets 468,000 Total liabilities SHAREHOLDERS’ EQUITY Non-current: Ordinary shares 500,000
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7111AFE_Solution_Topic10_new - 7111AFE Tutorial Solution...

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