Question

Budi Enterprise is a private investigation business owned by Mr. Budiman. The business is in operation since the last six years, but all accounts and financial statements have been prepared by an external accounting firm. It is your responsibility as a new manager with accounting background to prepare the accounts and financial statements to reduce the business’s cost. It is normal practice for the business where some clients are pay in advance for the company’s services, while other clients make payments after the services have been rendered. Advanced payments from clients are credited to the Unearned Fees account. The balances of the accounts appear in the ledger of Budi Enterprise as at 31 December 2019 are as follows:

Accounts	RM
Cash	8640
Accounts Receivables	2,650
Supplies	5,350
Prepaid Insurance	2,890
Motor Vehicles	45,000
Accumulated Depreciation- Motor Vehicles	27,000
Building	120,500
Accumulated Depreciation- Building	43,380
Accounts Payables	14,990
Unearned Fees	24,000
Wages Payables	1,760
Capital, Budiman	58,000
Drawings, Budiman	8,320
Revenue	46,480
Wages Expense	20,180
Insurance Expense	2,080

.The following transactions are related to year-end adjustments:

1. The amount of insurance premiums expired during the year are RM1,240.

2. The estimated useful life for motor vehicles and buildings are 5 years and 10 years respectively. The scrap value for buildings is 10% of the original cost and there is no scrap value for motor vehicles. Budi Enterprise uses straight-line method to depreciate its fixed assets.

3. Wages accrued on December 31 are RM2,840.

4. Supplies on hand at December 31 are RM560.

5. Fees earned but unbilled on December 31 is RM7,500.

6. Unearned fees of RM20,000 is earned at 31 December 2019.

REQUIRED:

(a) Prepare the Statement of Profit or Loss and Other Comprehensive Income of Budi Enterprise for the year ended 31 December 2019.

(b) Prepare the Statement of Financial Position of Budi Enterprise as at 31 December 2019.

Answer 1

(a)		Statement of Profit or Loss and Other Comprehensive
					$	$
	Revenue		(46480+7500+20000)			73980
	Less: Expenses
	Wages expense		(20180+2840)		23020
	Insurance expense		(2080+1240)		3320
	Supplies expense			(Note:1)	4790
	Depreciation expense				16245	47375
	Net profit					26605
	Note:1
	Supplies expense=Supplies as per TB-Supplies on hand=5350-560=$ 4790
	Note:2
	Depreciation expense=(Cost-Scrap value)/Useful life
	Motor vehicles:
	Depreciation expense=(27000-0)/5=$ 5400
	Building:
	Scrap value=Cost*10%=120500*10%=$ 12050
	Depreciation expense=(120500-12050)/10=$ 10845
	Total depreciation=5400+10845=$ 16245

(b)		Statement of Financial Position
								$	$	$
		Assets
	Current assets:
	Cash								8640
	Accounts receivables			(2650+7500)					10150
	Supplies			(5350-4790)					560
	Prepaid insurance			(2890-1240)					1650
	Total current assets									21000
	Property,plant and equipment:
	Motor vehicles							45000
	Less:Accumulated Depreciation- Motor Vehicles					(27000+5400)		32400	12600
	Building							120500
	Less:Accumulated Depreciation- Building					(43380+10845)		54225	66275
	Total property,plant and equipment									78875
	Total assets									99875
		Liabilities and owner's equity
	Current liabilities:
	Accounts payables								14990
	Unearned fees					(24000-20000)			4000
	Wages Payables					(1760+2840)			4600
	Total current liabilities									23590
	Owner's equity:
	Capital, Budiman		(Incl.net profit)			(58000+26605)			84605
	Drawings, Budiman								-8320	76285
	Total liabilities and owner's equity									99875