Question

Question 6 (Note this question is from the Week 12 Tutorial) The following information relates to Moon Light Ltd. (a) At the beginning of the accounting period the company has a salary payable liability of $200 and at the reporting date a salary payable of $360. During the year the salary expense shown in the income statement was $400. (b) At the beginning of the accounting period the company has property, plant and equipment (PPE) with a carrying amount of $400. At the end of the accounting period, the carrying amount of the PPE is $1,200. During the year depreciation charged was $80, a revaluation surplus of $240 was recorded and PPE with a carrying amount of $60 was sold for $80. (c) At the beginning of the accounting period the company has retained earnings of $2,000 and at the end of the accounting period the balance of the retained earnings is $2,800. The reported profit for the year was $1,800. (d) Moon Light Ltd also provides you with the following information on its sales and collection of accounts receivable: Sales for the year $16,000 Discounts provided to customers for early payment $400 Doubtful debts expense for the year $200 Opening balance of accounts receivable $3,600 Closing balance of accounts receivable $3,200 Opening balance of the allowance for doubtful debts $360 Closing balance of the allowance for doubtful debts $320 Required: (a) Calculate the cash paid for salary. (b) Calculate the cash paid to purchase new PPE. (c) Calculate the dividend paid. (d) Calculate the cash collected from customers.

Answer 1

a. Calculation of cash paid for salary:

Opening salary payable                                                                                 = $200

Add: Salary expense during the current year = $400

Less: Closing salary payable = ($360)

Cash paid for salary during the current year = $240.

b. Calculation of cash paid to purchase new PPE:

Closing balance of PPE                                                                                   = $1200

Less: Opening balance of PPE = ($400)

Less: Revaluation surplus = ($240)

Add: Depreciation for the current year = $80

Add: Carrying amount of PPE sold = $60

Cash paid for PPE                                                                                             = $700.

c. Calculation of dividends paid:

Opening balance of retained earnings                                                    = $2000

Add: current year reported earnings                                                       = $1800

Less: closing balance of retained earnings                                             = ($2800)

Dividends paid during the current year                                                  = $1000.

d. Calculation of cash collected from customers:

Opening balance of accounts receivable                                                                = $3600

Less: Opening balance of allowance for doubtful debts = ($360)

Less: Doubtful debts expense for the current year = ($200)

Add: closing balance of allowance for doubtful debts = $320

Add: Closing balance of accounts receivable = $3200

Add: Current year sales = $16000

Less: discount given on sales = ($400)

Cash collected from customers during the current year = $15760