Question

In: Accounting

Mr. Chai sells various types of toys throughout Malaysia, three of the accounts in the ledger...

Mr. Chai sells various types of toys throughout Malaysia, three of the accounts in the ledger of Mr. Chai indicted the following:

Balance at 1 January 2020:

  1. Insurance paid in advance RM562
  2. Wages outstanding RM306
  3. Rent rreceivable, received in advance RM36

During 2020, Mr. Chai:

  1. Paid for insurance RM1019 by bank standing order
  2. Paid RM15000 wages in cash
  3. Received RM2600 rent by cheque from the Ferdy

At 31 December 2020:

  1. Insurance prepaid was RM345
  2. Wages accrued amounted to RM419
  3. Rent receivable was RM106

Required:

  1. Prepare the prepaid insurance, accrued wages and rent receivable accounts for the year ended 31 December 2020
  2. Prepare the income statement extract showing clearly the amounts of insurance expense, wages expense and rent revenue for the year ended 31 December 2020
  3. Explain the effects on the financial statements of accounting for:
  1. The expenses accrued at year end
  2. The income received in advance at year end
  1. Explain the purpose of accounting for:
  1. The expenses accrued at year end
  2. The income received in advance at year end

Solutions

Expert Solution

Rent Receivable is Current Asset ,

As it had rent receivable opening balance as income received in advance the balance is in credit side of rent receivable account(Income received in advance- Current liability)

General Norm: All Liabilities should have credit opening balances and All Assets will have debit opening balances

But in this case Only because rent was received in advance the usual debit side balance turned as opening credit balance as receiving income in advance is current liability .Hence the credit opening balance


Related Solutions

Mr. Chai sells various types of toys throughout Malaysia. Three of the accounts in the ledger...
Mr. Chai sells various types of toys throughout Malaysia. Three of the accounts in the ledger of Mr. Chai indicated the following; Balances at 1 January 2020: (i)           Insurance paid in advance RM562 (ii)      Wages outstanding RM306 (iii)     Rent receivable, received in advance RM36 During 2020, Mr. Chai: (i)           Paid for insurance RM1,019, by bank standing order (ii)      Paid RM15,000 wages, in cash (iii)     Received RM2,600 rent, by cheque, from the tenant At 31 December 2020: (i)           Insurance prepaid was...
Question 1 Mr. Chai sells various types of toys throughout Malaysia. Three of the accounts in...
Question 1 Mr. Chai sells various types of toys throughout Malaysia. Three of the accounts in the ledger of Mr. Chai indicated the following; Balances at 1 January 2020: (i)        Insurance paid in advance RM562 (ii)       Wages outstanding RM306 (iii)      Rent receivable, received in advance RM36 During 2020, Mr. Chai: (i)           Paid for insurance RM1,019, by bank standing order (ii)       Paid RM15,000 wages, in cash (iii)      Received RM2,600 rent, by cheque, from the tenant At 31...
Question In auditing various accounts, there may be a choice of the types or amounts of...
Question In auditing various accounts, there may be a choice of the types or amounts of evidence available to evaluate management's assertions. Requirements: For the following two accounts, describe some high-quality forms of evidence that the auditor should obtain. (1) The net balance in accounts receivable (2) The accounts payable
Case: A New Business Mr. Khalid, a young entrepreneur who has worked in various restaurants throughout...
Case: A New Business Mr. Khalid, a young entrepreneur who has worked in various restaurants throughout high school and college, has decided to develop a new food service concept that focuses primarily on takeout of home-cooked food for busy professionals on their way home from work. The restaurant would also have a small dining area for customers who wish to eat the food there. Because this prospective business will have to compete with other traditional local restaurants, Mr. Khalid wants...
Three of the accounts in the ledger of John Dier indicated the following balances at 1...
Three of the accounts in the ledger of John Dier indicated the following balances at 1 January 2013:  Insurance paid in advance K562  Wages outstanding K306  Rent receivable, received in advance K36 During 2013 John Dier: i. ii. iii. Paid for insurance K1,019 by bank standing order; Paid K15,000 wages in cash Received K2,600 rent by cheque from the tenant At 31 December, insurance prepaid was K345.On the same day receivable in arrears was K105 and wages...
Pepper’s Products manufactures and sells two types of chew toys for pets, Squeaky and Silent. In...
Pepper’s Products manufactures and sells two types of chew toys for pets, Squeaky and Silent. In May, Pepper’s Products had the following costs and revenues: Pepper's Products Income Statement For the Month of May Squeaky Silent Total Sales revenue $ 149,000 $ 170,000 $ 319,000 Direct materials 19,000 22,000 41,000 Direct labor 80,000 20,000 100,000 Overhead costs Administration 20,000 Production setup 45,000 Quality control 15,000 Distribution 20,000 Operating profit $ 78,000 Pepper’s Products currently uses labor costs to allocate all...
why does a business hse a subsidairy ledger for accounts receivable? What types of information will...
why does a business hse a subsidairy ledger for accounts receivable? What types of information will be kept there?
Question 3 (16 marks) Mr Bean Mart produces and sales four types of toys namely Blaze...
Question 3 Mr Bean Mart produces and sales four types of toys namely Blaze (B), Pinocchio (P), Paw Patrol (PP) and Scooby (S). Information relating to the production of these toys is given as follows:              B                     P                      PP                   S Sales price/ unit                                    $200                 $250                  $180                $400 Materials required per unit                      $100                  $150                 $110                 $220 Direct labour ($10 per hour)                     $40                    $50                  $20                  ...
Pepper’s Products manufactures and sells two types of chew toys for pets—Squeaky and Silent. In May,...
Pepper’s Products manufactures and sells two types of chew toys for pets—Squeaky and Silent. In May, Pepper’s Products had the following costs and revenues. Pepper's Products Income Statement For the Month of May Squeaky Silent Total Sales revenue $ 145,000 $ 155,000 $ 300,000 Direct materials 19,000 18,000 37,000 Direct labor 70,000 30,000 100,000 Overhead costs Administration 20,000 Production setup 64,000 Quality control 15,000 Distribution 20,000 Operating profit $ 44,000 Pepper’s Products currently uses labor costs to allocate all overhead...
Pearl Products Limited of Shenzhen, China, manufactures and distributes toys throughout South East Asia. Three cubic...
Pearl Products Limited of Shenzhen, China, manufactures and distributes toys throughout South East Asia. Three cubic centimeters (cc) of solvent H300 are required to manufacture each unit of Supermix, one of the company’s products. The company now is planning raw materials needs for the third quarter, the quarter in which peak sales of Supermix occur. To keep production and sales moving smoothly, the company has the following inventory requirements: The finished goods inventory on hand at the end of each...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT