Question 1 (70 marks) Fortune Limited is an agency company which acts as broker for buying...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Question 1 (70 marks) Fortune Limited is an agency company which acts as broker for buying and selling of properties in Hong Kong. Two types of revenue accounts are opened. The Company charges and receives 1% commission of the transaction price of the property as "Commission revenue" from both buyer and seller for each transaction. The Company also receives advertisement fees as "Advertisement fees earned" from the property developer. The Company records all its unpaid bills in Accounts payable. Adjusting entries are performed on a monthly basis. Closing entries are performed annually on December 31. Below is the Company's unadjusted trial balance at the year ended 31 December 2021. Account Title Cash Commission receivable Unexpired medical insurance Office supplies Office equipment Accounts payable 5% Notes payable Interest payable Unearned advertisement fee Income taxes payable Share capital ($3 per share) Retained earnings Advertisement fees earned Commission revenue Salaries expense Medical insurance expense Rent expense Office supplies expense Fortune Limited Unadjusted Trial Balance 31 December 2021 Electricity expense Interest expense Marketing expense Income taxes expense Page 2 Debit $ 216,150 200,500 12,000 28,100 259,200 Credit $ 76,000 150,000 6,875 3,000 34,000 300,000 198,400 384,000 348,500 365,000 60,000 138,000 4,950 21,000 6,875 155,000 34,000 $1,500,775 $1,500,775 (1) The Company borrowed $150,000 by signing a 3-year notes payable with annual interest rate of 5% on 1 January 2021. The note is due on 31 December 2023 and the interest is paid annually at year end. No entry was made for the interest payment and the adjustment for December. (2) The Company pays medical insurance premium for its employees six months in advance. The last medical insurance premium was paid on 1 August 2021. (3) (4) During December 2021, the Company purchased supplies costing $2,000 by cash. No entry has been made. Office supplies on hand at year end was $20,000. Accrued and unrecorded electricity bill amounting to $2,200 for December has been received. The payment is due on 4 January 2022. (5) The office equipment was bought on 1 February 2021 with useful life of 6 years and no residual value. The Company adopts straight-line method. No adjusting entries have been made after the purchase of office equipment. (6) On 1 December 2021, the Company has employed a part-time staff to work from 1 December 2021 to 30 June 2022 with hourly rate of $300. The total salaries will be paid at the contract end day. In December 2021, the part-time staff has worked for 50 hours. (7) The accountant estimates that the total income taxes expense for the entire year should be $56,000. The amount will be due in mid of April 2022. (8) On 31 December 2021, the Company declared and paid a dividend of $2 per share. No entry has been made. (9) On 28 December 2021, Joey has purchased a residential property in Olympic station at the purchase price of $8,000,000 through Fortune Limited. Fortune Limited will receive the commission from both buyer and seller on 1 March 2022. (10) Evergreen Property promotes its new residential property, Grand Century, by placing advertisement on the online platform of Fortune Limited starting from 1 December 2021 to 31 January 2022 for an agreed monthly fee of $46,500. The total 2-month amount was received on 31 December 2021. No entry was made. Required: (a) (b) Prepare the necessary adjusting journal entries on 31 December 2021 to bring the financial records of Fortune Limited up-to-date. Use the account titles given in the Trial Balance or create new accounts where appropriate. Show your workings. Explanations are NOT required. (24 marks) Prepare the income statement for the year ended 31 December 2021, showing breakdown of items under the captions of Revenues, Expenses, Profit before Taxes, Profit after Taxes. Page 3 (c) (d) (14 marks) Prepare the statement of financial position as of 31 December 2021, showing breakdown of items under the captions of Total Assets, Total Liabilities, Total Shareholders' Equity and Total Liabilities & Shareholders' Equity. (20 marks) Record its year-end closing journal entries. Explanations are NOT required. (12 marks) Question 1 (70 marks) Fortune Limited is an agency company which acts as broker for buying and selling of properties in Hong Kong. Two types of revenue accounts are opened. The Company charges and receives 1% commission of the transaction price of the property as "Commission revenue" from both buyer and seller for each transaction. The Company also receives advertisement fees as "Advertisement fees earned" from the property developer. The Company records all its unpaid bills in Accounts payable. Adjusting entries are performed on a monthly basis. Closing entries are performed annually on December 31. Below is the Company's unadjusted trial balance at the year ended 31 December 2021. Account Title Cash Commission receivable Unexpired medical insurance Office supplies Office equipment Accounts payable 5% Notes payable Interest payable Unearned advertisement fee Income taxes payable Share capital ($3 per share) Retained earnings Advertisement fees earned Commission revenue Salaries expense Medical insurance expense Rent expense Office supplies expense Fortune Limited Unadjusted Trial Balance 31 December 2021 Electricity expense Interest expense Marketing expense Income taxes expense Page 2 Debit $ 216,150 200,500 12,000 28,100 259,200 Credit $ 76,000 150,000 6,875 3,000 34,000 300,000 198,400 384,000 348,500 365,000 60,000 138,000 4,950 21,000 6,875 155,000 34,000 $1,500,775 $1,500,775 (1) The Company borrowed $150,000 by signing a 3-year notes payable with annual interest rate of 5% on 1 January 2021. The note is due on 31 December 2023 and the interest is paid annually at year end. No entry was made for the interest payment and the adjustment for December. (2) The Company pays medical insurance premium for its employees six months in advance. The last medical insurance premium was paid on 1 August 2021. (3) (4) During December 2021, the Company purchased supplies costing $2,000 by cash. No entry has been made. Office supplies on hand at year end was $20,000. Accrued and unrecorded electricity bill amounting to $2,200 for December has been received. The payment is due on 4 January 2022. (5) The office equipment was bought on 1 February 2021 with useful life of 6 years and no residual value. The Company adopts straight-line method. No adjusting entries have been made after the purchase of office equipment. (6) On 1 December 2021, the Company has employed a part-time staff to work from 1 December 2021 to 30 June 2022 with hourly rate of $300. The total salaries will be paid at the contract end day. In December 2021, the part-time staff has worked for 50 hours. (7) The accountant estimates that the total income taxes expense for the entire year should be $56,000. The amount will be due in mid of April 2022. (8) On 31 December 2021, the Company declared and paid a dividend of $2 per share. No entry has been made. (9) On 28 December 2021, Joey has purchased a residential property in Olympic station at the purchase price of $8,000,000 through Fortune Limited. Fortune Limited will receive the commission from both buyer and seller on 1 March 2022. (10) Evergreen Property promotes its new residential property, Grand Century, by placing advertisement on the online platform of Fortune Limited starting from 1 December 2021 to 31 January 2022 for an agreed monthly fee of $46,500. The total 2-month amount was received on 31 December 2021. No entry was made. Required: (a) (b) Prepare the necessary adjusting journal entries on 31 December 2021 to bring the financial records of Fortune Limited up-to-date. Use the account titles given in the Trial Balance or create new accounts where appropriate. Show your workings. Explanations are NOT required. (24 marks) Prepare the income statement for the year ended 31 December 2021, showing breakdown of items under the captions of Revenues, Expenses, Profit before Taxes, Profit after Taxes. Page 3 (c) (d) (14 marks) Prepare the statement of financial position as of 31 December 2021, showing breakdown of items under the captions of Total Assets, Total Liabilities, Total Shareholders' Equity and Total Liabilities & Shareholders' Equity. (20 marks) Record its year-end closing journal entries. Explanations are NOT required. (12 marks)
Expert Answer:
Related Book For
Financial Accounting An Integrated Statements Approach
ISBN: 978-0324312119
2nd Edition
Authors: Jonathan E. Duchac, James M. Reeve, Carl S. Warren
Posted Date:
Students also viewed these accounting questions
-
Equipment acquired on January 3, 2007, at a cost of $265,500, has an estimated useful life of eight years and an estimated residual value of $31,500. (a) What was the annual amount of depreciation...
-
Equipment acquired on January 4, 2009, at a cost of $425,000, has an estimated useful life of nine years and an estimated residual value of $65,000. a. What was the annual amount of depreciation for...
-
Equipment acquired on January 3, 2004, at a cost of $96,000, has an estimated useful life of six years and an estimated residual value of $6,000. a. What was the annual amount of depreciation for the...
-
Compare and contrast megaloblastic anemia caused by vitamin B12 deficiency and that caused by folic acid deficiency. (10)
-
What is the difference between productivity in this new clip and real GDP per person? Americans work longer hours than workers in other rich nations. Americans also produce more per person over the...
-
Why would a company choose to distribute a stock dividend instead of a cash dividend?
-
A viscosity motor/pump is shown in Fig. P6.84. The rotor is concentric within a stationary housing. The clearance \(h\) between the housing and the rotor is small compared to the width \(w\) and...
-
A meta-analysis (Anderson & Bushman, 2001) reported that the average correlation between time spent playing violent video games (X) and engaging in aggressive behavior (Y) in a set of 21...
-
32) Refer to the drawing of an elevated centrifugal pump taking suction from the bottom of an open storage tank containing water at 66F (see figure below). Assume standard atmospheric pressure. The...
-
Problem 1 Company A purchases 10,000 shares of Company B common stock for $100,000 cash. This investment represents 30% of Company B's common stock. Complete the journal entry to record the purchase...
-
Using all the data below answer this question related to Kimberly Clark. What Promotional decision should Kimberly Clark take to drive sales. Would it be Advertising, personal selling, sales...
-
Label each of the following statements true, false, or uncertain. Explain briefly. a. The \(I S\) curve shifts up with an increase in G, up with an increase in \(T\), and up with an increase in...
-
You would like to estimate the weighted average cost of capital for a new airline business. Based on its industry asset beta, you have already estimated an unlevered cost of capital for the firm of...
-
Label each of the following statements true, false, or uncertain. Explain briefly. a. Writing the production function in terms of capital and effective labor implies that as the level of technology...
-
Your company operates a steel plant. On average, revenues from the plant are $41 million per year. All of the plants costs are variable costs and are consistently 78% of revenues, including energy...
-
Label each of the following statements true, false, or uncertain. Explain briefly. a. The change in employment and output per person in the United States since 1900 lends support to the argument that...
-
The COVID-19 pandemic has been impacting everywhere, everyone is forced to work from their homes. The interaction to each other happened using digital technology such as online meetings, email, and...
-
D Which of the following is considered part of the Controlling activity of managerial accounting? O Choosing to purchase raw materials from one supplier versus another O Choosing the allocation base...
-
Using data in Exercise 8-4, assume that the allowance for doubtful accounts for Vandalay Industries has a credit balance of $8,195 before adjustment on November 30. Journalize the adjusting entry for...
-
Estée Lauder Inc. is one of the worlds leading manufacturers and marketers of skin care, makeup, and hair products. Estée Lauder products are sold in over 130 countries and...
-
Synthesis Systems Co. offers its services to residents in the Dillon City area. Selected accounts from the ledger of Synthesis Systems Co. for the current fiscal year ended October 31, 2006, are as...
-
Enthalpy of superheated steam is given by (a) \(h_{g}+c_{p s} \ln \frac{\mathrm{T}_{\text {sup }}}{\mathrm{T}_{s}}\) (b) \(h_{f}+h_{f g}\) (c) \(s_{g}+x s_{f g}\) (d) \(x s_{f}\)
-
What do you understand by the term priming ?
-
Determine the change in internal energy when one \(\mathrm{kg}\) of steam expands from \(10 \mathrm{bar} 300^{\circ} \mathrm{C}\) to 0.5 bar and 0.9 dry. Take \(c_{p s}=2.1 \mathrm{~kJ} /...
Study smarter with the SolutionInn App