Cha Shi Jian Trading Co Trial Balance as at 31 Mach 2021 DR CR RM RM Owner's equitY, LM. Teh 3,800,000 Owner's drawings, L.M. Teh 50,000 Office building, at cost 5,370,000 Accumulated depreciation-Office building 537,000 Motor vehicles, at cost 370,000 Accumulated depreciation-Maotor vehicles 94,000 Equipment, at cost 1,960,000 Accumulated depreciation-Equipment 730,000 Accounts receivable 942,000 Inventory, 1 April 2020 1,880,000 Prepaid insurance 160,000 Bank overdraft 294,000 Accounts payable 722,000 5% Mortgage loan (due 31 December 2025) 3,000,000 Purchases 7,978,000 Sales 12,260,000 Auditors' remuneration 135,000 Sundry expenses 132,000 Pay and allowances 1,140,000 Sales returns 650,000 Utility expenses 160,000 Advertising expenses 195,000 Office expenses 100,000 Mortgage loan interest 150,000 Income tax expense 65,000 21,437,000 21,437,000 Adjustments required for the year ended 31 March 2021 are as follows: i As at 31 March 2021, the value of Inventory was RM1,100,000. ii. Utility bills for the month of March 2021 amounting to RM10,000 remain outstanding at year end. iii. 70% of the prepaid insurance expired during the year ended 31 March 2021. iv. Cha Shi Jian decided to provide for doubtful debts at 3% of Accounts Receivable. v. Depreciation has not been provided for the year. The rates are as follows: • Office building: 2% per annum, straight-line method, • Motor vehicles: 15% per annum, straight-line method, and • Equipment: 10% per annum, reducing balance method.
Cha Shi Jian Trading Co Trial Balance as at 31 Mach 2021 DR CR RM RM Owner's equitY, LM. Teh 3,800,000 Owner's drawings, L.M. Teh 50,000 Office building, at cost 5,370,000 Accumulated depreciation-Office building 537,000 Motor vehicles, at cost 370,000 Accumulated depreciation-Maotor vehicles 94,000 Equipment, at cost 1,960,000 Accumulated depreciation-Equipment 730,000 Accounts receivable 942,000 Inventory, 1 April 2020 1,880,000 Prepaid insurance 160,000 Bank overdraft 294,000 Accounts payable 722,000 5% Mortgage loan (due 31 December 2025) 3,000,000 Purchases 7,978,000 Sales 12,260,000 Auditors' remuneration 135,000 Sundry expenses 132,000 Pay and allowances 1,140,000 Sales returns 650,000 Utility expenses 160,000 Advertising expenses 195,000 Office expenses 100,000 Mortgage loan interest 150,000 Income tax expense 65,000 21,437,000 21,437,000 Adjustments required for the year ended 31 March 2021 are as follows: i As at 31 March 2021, the value of Inventory was RM1,100,000. ii. Utility bills for the month of March 2021 amounting to RM10,000 remain outstanding at year end. iii. 70% of the prepaid insurance expired during the year ended 31 March 2021. iv. Cha Shi Jian decided to provide for doubtful debts at 3% of Accounts Receivable. v. Depreciation has not been provided for the year. The rates are as follows: • Office building: 2% per annum, straight-line method, • Motor vehicles: 15% per annum, straight-line method, and • Equipment: 10% per annum, reducing balance method.
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
Chapter7: Operating Assets
Section: Chapter Questions
Problem 4MCQ
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Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
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