Question

The balances in the accounts of Maybe Ltd at 30 June 2019 and 30 June 2020 are:

	2020 ‘000	2019 ‘000
Sales (all on credit)	300	420
Cost of Goods Sold	156	132
Doubtful Debts expense	30	36
Interest Expense	24	36
Salaries	36	30
Depreciation	12	18
Cash	172.80	166.80
Inventory	216	192
Accounts Receivable	324	300
Allowance for Doubtful Debts	36	42
Land	180	180
Plant	120	108
Accumulated Depreciation	24	36
Bank Overdraft	24	22.80
Accounts Payable	240	228
Accrued Salaries	26.40	21.60
Long term loan	108	84
Share Capital	144	120
Opening Retained Earnings	368.40	224.40

Other information:

Share capital is increased by the bonus issue of 24 000 shares for $1.00 each out of retained earnings. Plant is acquired during the period at a cost of $36 000, while plant with a carrying amount of $nil (cost of $24 000, accumulated depreciation of $24 000) is scrapped.

Required:

a)      Reconstruct the allowance for doubtful debts and accounts receivable.

(6.5 marks)

b)      Reconstruct inventory and accounts payable

c)      Reconstruct accrued salaries

d)      Reconstruct property, plant and equipment and a

Answer 1

Answer :

(a).

Opening balance of allowance for doubtful debts	42000
Add : Bad debts expense	30000
Less : Written off during the year (b/f)	-36000
Ending balance of allowance for the doubtful debt	36000
Opening balance of accounts receivables	300000
Add : Credit sales	300000
Less : Written off	-36000
Less : Collections from customers	-240000
Ending balance for accounts receivables	324000

(b)

Cost of goods sold	156000
Add : Ending inventory	216000
Less : Opening inventory	-192000
Purchase of inventory	180000
Beginning balance of accounts payable	228000
Add : Purchases	180000
Less : Payments to suppliers	-168000
Ending accounts payable	240000

(c)

Beginning accrued salaries	21600
Add : Salaries expense for the year	36000
Less : Payament for salaries	-31200
Ending accrued salaries	26400

(d)

Plant beginning balance	108000
Add : Purchases	36000
Less : Scrap	-24000
Ending balance of plant equipment	120000
Beginning accumulated depreciation	36000
Add : Deprecition for the year	12000
Less : Depreciation on scrapped	-24000
Ending accumulate depreciation	24000