BHMH2101 Financial Accounting
2021/22 Semester 2
Assignment 2
Cover Page
Lecture Class:
Tutorial Class: A / B / C (Circle the appropriate options)
Student Name:
Student Number:
Instructions:
Submission Deadline: 5 p.m., 15 April 2022 (Friday)
Submit the Assignment online via the submission link under the individual class Moodle at or before the
submission deadline.
Subject Lecturers Lecture Class Pigeon Hole No. Location of Pigeon Hole
Barbara Ngai B01, B02 WK-027 13/F, North Tower
Benjamin Wong B03, B04 13/F, North Tower
Daphne Wong B05, B09, B10 WK-0123 13/F, North Tower
James Chow B06, B07 WK-212 10/F, North Tower
Anthenian Chiu B08, B11,B12 WK-234 10/F, North Tower
Attach this cover page when you submit the assignment and no need to include your question paper.
Make sure that you have submitted the correct and entire file and use the file name BHMH2101_A2_student
ID (e.g. BHMH2101_A2_21123456A).
Only the last submission you submitted under Moodle will be counted.
Show all your workings.
Answers must be hand-written in blue/black colour pen (or i-pen) on A4-size single-lined paper in one file
with PDF format. Students are reminded NOT to use computer to print out answers nor to write them up
by pencil. In case of not following this rule, 20% of the total marks awarded will be deducted.
For any late submission of assignment, penalties will be strictly applied as below:
Late Submission Penalty
15 Apr (Fri) 5:01pm - 16 Apr (Sat) 5:00pm Deduct 20% of the total marks awarded
16 Apr (Sat) 5:01pm – 17 Apr (Sun) 5:00pm Deduct 40% of the total marks awarded
17 Apr (Sun) 5:01pm – 18 Apr (Mon) 5:00pm Deduct 60% of the total marks awarded
18 Apr (Mon) 5:01pm – 19 Apr (Tue) 5:00pm Deduct 80% of the total marks awarded
After 19 Apr (Tuesday) 5:00pm No marks will be awarded
No marks will be given to students who copy from others’ work. The same rule also applies to those who let
others copy their work.
Question 1 (31 marks)
Part I (20 marks)
Serenity Company (“Serenity”) is a shop selling electrical goods and adopts perpetual inventory
method. As at 30 November 2021, the inventory account has a balance of $230,000 (Dr.). Below
are transactions of Serenity in December. Prepare the journal entries of the transactions.
December
1 Received $500 from a customer to settle an outstanding account.
3 Purchased electric cookers from Teta Company for $10,000 on account.
5 Returned two defective cookers to Teta Company purchased on 3
December at $450 per piece.
10 A customer returned two pieces of goods to Serenity. The customer
originally bought the goods at $600 per piece, now received a cash refund.
Serenity sold the goods at 20% gross profit rate.
15 Paid the amount owed to Teta Company.
20 Sold all the cookers bought from Teta Company this month on credit at
20% gross profit rate.
31 Serenity conducted an inventory count and found there was $215,960
inventory on hand.
Part II (11 marks)
Arppel Company uses a periodic inventory system and closes its accounts annually on 31
December. Below are extracted from the books of the Company:
Account balance as at 31 Dec 2020
Inventory $42,000
Account balance as at 31 Dec 2021
Purchases $440,000
Sales $890,000
Sales Returns $22,000
A complete physical inventory taken as at 31 December 2021 indicates goods costing $48,000
remains in stock.
Required:
(a) Compute (i) the cost of goods sold; (ii) gross profit; and (iii) the gross profit rate (in %) for
the year 2021. Show workings. (6 marks)
(b) Prepare two closing entries to create the Cost of Goods Sold account and update the Inventory
account. (5 marks)
Question 2 (33 marks)
Part I (20 marks)
Balance of the Cash account of Isofac Company on 31 August 2022 was $42,650, while balance of its bank
statement on the same day was $40,400. Isofac adjusts its book monthly. Below is some additional
information for August:
There were no outstanding checks and deposit in transit at the end of 31 July 2022
(1) The Company has correctly issued and recorded a check no.113 in the amount of $8,600 to purchase
inventories from a supplier. But the bank statement showed the bank has cleared this check incorrectly
as $6,800.
(2) The total deposit shown in the bank statement was $158,000 while the accounting records of Isofac
showed the total deposit made in August was $183,000.
(3) Papal, a customer of Isofac, directly deposited $500 to Isofac’s bank account to settle its outstanding
account.
(4) Three checks no. 54, $100; no.56, $200; no.60, $800, issued by Isofac were not found on the bank
statement.
(5) A $1,500 check issued by a customer Shine Ltd. in favour of Isofac was returned by the bank because
of insufficient fund.
(6) On 1 March, 2022 Isofact signed a 9% 6-month note receivable of $20,000. The note and full amount
of the interest was credited directly to Isofac’s bank account on 31 August.
(7) The bank debited Isofac’s account $50 for bank charges.
Required:
(a) Prepare the bank reconciliation statement as at 31 August 2022. (12 marks)
(b) Prepare the necessary adjusting journal entries to update the accounting record. (8 marks)
Part II (13 marks)
Singer Company adjusts its account annually. Below is extracted from the trial balance of the Company
as at 31 December, 2021prior to year end adjusting entries.
Accounts receivable $335,000
Allowance for impairment $7,300 (Dr)
An aging analysis on the probability of uncollectible amount is broken down as follows:
% of
Amount past due Accounts Receivable uncollectible
Not yet due 95,000 1%
1-30 days 150,000 2%
31-60 days 85,000 5%
Over 60 days 5,000 10%
Required:
(a) What is the total estimated uncollectible amount of accounts receivable? (2 marks)
(b) Prepare journal entries to record impairment loss of receivable in 2021 using Statement of Financial
Position approach. (4 marks)
(c) Prepare a partial statement of financial position as at 31 December 2021 on the accounts receivable.
(3 marks)
(d) Prepare journal entries to record impairment loss of receivable in 2021 assuming the balance of the
Allowance for Impairment account is $7.300 (Cr.) prior to adjustment. (4 marks)
Question B3 (36 marks)
Part I (30 marks)
On 25 March 2020, Miracle Company bought a machine at $1,350,000 with an estimated useful life of 15
years and no residual value. The machine is expected to operate 270,000 hours. The company adjusts its
account annually with the year-end date on 31 December.
Required:
(a) Compute (show workings) depreciation expenses for the machine in 2020 and 2021 by:
(i) Straight-line (using half year convention); (6 marks)
(ii) 150%-declining-balance (calculate to the nearest whole month); and (6 marks)
(iii) Units-of-output method (hours of operation: 12,000 in 2020; 18,000 in 2021) (6 marks)
(b) Assume Miracle Company adopts the straight-line method in (a)(i) above. On 5 April 2022 the machine
was disposed for $1,150,000 cash.
(i) Journalize depreciation of the machine for 2022 before the disposal. (4 marks)
(ii) Journalize disposal of the machine on 5 April 2022. (8 marks)
Part II (6 marks)
MCC company uses straight-line depreciation (round to the nearest whole month) and adjusts its accounts
annually on 31 December. On 1 January 2016, MCC purchased a van for $450,000 which has an estimated
useful life of 9 years and no residual value. On 1 January 2021, the company incurred the following
expenditure on the van:
(i) $1,500 for annual maintenance and servicing
(ii) $60,000 to upgrade the van with a new and more powerful engine
(iii) $1,000 to paint the van after 5 years of use.
On 1 January 2021, the useful life of the van was revised to 13 years with a residual value of $15,000.
Required:
(a) What is the book value of the van as at 31 December 2020? (2 marks)
(b) Journalize annual depreciation of the van on 31 December 2021. Show workings. (4 marks)
-The end-