The following account balances are taken from the ledger of Maxwell Limited on 31 December 2018,...

Transcribed Image Text:

The following account balances are taken from the ledger of Maxwell Limited on 31 December 2018, the end of its fiscal year: Maxwell Limited Trial Balance As on 31 December 2018 S'm S'm Investment property 336 Buildings (at cost) 100 Accumulated depreciation - buildings 20 Plant and machinery (at cost) 140 Accumulated depreciation - plant and machinery 22 Cash 40 Accounts receivable 120 Allowance for bad debts 10 10 Inventories 130 Accounts payable Salary payable Loans Share capital (no par value) Retained earnings 400 Sales twowe 40 37 200 32 450. Cost of goods sold 180 Salaries expense 50 Distribution costs 60 Rent expense (office building) 30 Utilities expense 15 Other operating expense 10 Total 1,211 1,211 Information necessary to prepare the year-end adjusting entries and 2018 financial statements: 1. 2. 3. 4. 5. 6. 7. Depreciation is to be provided on a straight-line basis as follows: 5% per annum on cost for buildings and 10% per annum on cost for plant and machinery. There were no additions or disposals to buildings during the year. Included in the $140 million "Plant and machinery" account is one machine (cost: $40 million) purchased on 1 July 2017 which was sold at year-end for $31 million with cash to be received in January 2019. No entry has been recorded for this disposal transaction. It was determined that the "Allowance for bad debts" account at year-end should be $12 million. Maxwell Limited adopted the fair value model for its investment property. The fair value of the investment property held by Maxwell Limited on 31 December 2018 was $350 million. The changes in fair value of investment property are recognized as "other income". The Loans used in financing the operations are due to a bank. According to the terms of the loan agreement, Maxwell Limited will have to repay $50 million of the total by 30 June 2019. The interest rate of the loan is stipulated at 8% per annum calculated on 31 December each year and is payable in January in the following year. The amount of tax to be provided for the year is $12 million. The bad debt expenses should be classified as administrative expenses. The depreciation expenses should be allocated to other operating expenses. The salaries expense should be allocated 50% to administrative expenses and 40% to distribution costs and 10% to operating expenses. REQUIRED (a) (b) Prepare journal entries necessary for the preparation of Maxwell's 2018 financial statements. - Prepare the statement of profit or loss and other comprehensive income (single statement approach classifying costs by function) and the statement of changes in equity (columnar format) for the year ended 31 December 2018 and the classified statement of financial position (format A - L = E) as on 31 December 2018 for Maxwell Limited. The following account balances are taken from the ledger of Maxwell Limited on 31 December 2018, the end of its fiscal year: Maxwell Limited Trial Balance As on 31 December 2018 S'm S'm Investment property 336 Buildings (at cost) 100 Accumulated depreciation - buildings 20 Plant and machinery (at cost) 140 Accumulated depreciation - plant and machinery 22 Cash 40 Accounts receivable 120 Allowance for bad debts 10 10 Inventories 130 Accounts payable Salary payable Loans Share capital (no par value) Retained earnings 400 Sales twowe 40 37 200 32 450. Cost of goods sold 180 Salaries expense 50 Distribution costs 60 Rent expense (office building) 30 Utilities expense 15 Other operating expense 10 Total 1,211 1,211 Information necessary to prepare the year-end adjusting entries and 2018 financial statements: 1. 2. 3. 4. 5. 6. 7. Depreciation is to be provided on a straight-line basis as follows: 5% per annum on cost for buildings and 10% per annum on cost for plant and machinery. There were no additions or disposals to buildings during the year. Included in the $140 million "Plant and machinery" account is one machine (cost: $40 million) purchased on 1 July 2017 which was sold at year-end for $31 million with cash to be received in January 2019. No entry has been recorded for this disposal transaction. It was determined that the "Allowance for bad debts" account at year-end should be $12 million. Maxwell Limited adopted the fair value model for its investment property. The fair value of the investment property held by Maxwell Limited on 31 December 2018 was $350 million. The changes in fair value of investment property are recognized as "other income". The Loans used in financing the operations are due to a bank. According to the terms of the loan agreement, Maxwell Limited will have to repay $50 million of the total by 30 June 2019. The interest rate of the loan is stipulated at 8% per annum calculated on 31 December each year and is payable in January in the following year. The amount of tax to be provided for the year is $12 million. The bad debt expenses should be classified as administrative expenses. The depreciation expenses should be allocated to other operating expenses. The salaries expense should be allocated 50% to administrative expenses and 40% to distribution costs and 10% to operating expenses. REQUIRED (a) (b) Prepare journal entries necessary for the preparation of Maxwell's 2018 financial statements. - Prepare the statement of profit or loss and other comprehensive income (single statement approach classifying costs by function) and the statement of changes in equity (columnar format) for the year ended 31 December 2018 and the classified statement of financial position (format A - L = E) as on 31 December 2018 for Maxwell Limited.