• (1) The company operates from a rented premise. The company paid

• (2) On 1 April 20X3, the company paid $2,400 to purchase a one-year fire insurance for the rented premise, commencing on the same date. The accounts clerk forgot to enter this transaction.

• (3) On 1 July 20X3, the company issued $200,000 of 4%, 5-year bonds at par. Interest payment occurs twice yearly on 1 July and 1 January, with the first interest payment to be made on 1 January 20X4.

• (4) On 23 December 20X3, a cash amount of $23,000 was received from a customer on an outstandingaccount.

• (5) During the Annual General Meeting held on 2 December 20X3, the shareholders approved theproposal by the board of directors for dividends of $60,000 to be paid to shareholders in January20X4.

• (6) On 28 December 20X3, the company made a cash purchase of $73,000 of inventory. The companyadopts the perpetual inventory system.

• (7) On 29 December 20X3, a customer paid for 20% of an item to be delivered in January 20X4. Theitem was selling at $3,000.

• (8) The investment in XYZ Ltd was treated as fair value through profit and loss under FRS 109 FinancialInstruments. The company has no intention to hold the investment for more than 12 months. On 31 December 20X3, the fair value of the investment was $180,000.

• (a) Analysing the above information, apply and illustrate accrual accounting concepts and prepare all necessaryand adjusting journal entries (journal narratives required) based on the additional data provided in points (1) to (8) above to aid in the preparation of the financial statements for the financial year ending 31 December20X3.

• (b) After making all the necessary adjusting entries, present:

• (i) The statement of comprehensive income, in a one-statement format, for ARC Pte Ltd for thefinancial year ending 31 December 20X3.

• (ii) The statement of changes in equity for ARC Pte Ltd for the financial year ending 31 December 20X3.

• (iii) The statement of financial position for ARC Pte Ltd as at 31 December 20X3.

Answer rating: 100% (QA)

a Accrual accounting requires that revenues and expenses be recognized in the period in which they are earned or incurred rather than in the period in which cash is received or paid With that in mind ... View the full answer