Hercules Ho, a qualified fitness trainer started a firm, Happy Fit Management about 3 years ago. The firm offers fitness programmers for individuals and companies. Business was good.

Recently, its accountant was seriously injured in an accident and you were approached to help draw up the adjusted Trial Balance.

Following is the 31 December 2018 unadjusted trial balance:

Account title	Debit (S)	Credit (S)
Share capital		125,000
Retained earnings, 31 Dec 2017		24,688
Training equipment at cost	125,000
Furniture and fittings at cost	50,000
Accumulated depreciation, 31 Dec 2017
- Training equipment		15,000
- Furniture and fittings		10,000
Prepaid insurance	9,000
Rental expense	162,500
Insurance expense	6,750
Membership fee received		302,113
General expenses	5,090
Bad debt expense
Wages and salaries	49,850
Equipment maintenance expense	13,580
Interest and bank charges	110
Allowance for doubtful debts	195
Accounts receivable	7,643
Accounts payable		3,125
Bank	50,208
	479,926	479,926

You are given the following additional information all of which is considered material and (unless stated otherwise) none of which has been taken into consideration in arriving at the figures shown in the unadjusted trial balance above.

(i) On 1 October, Hercules Ho sold a treadmill that costs $5,000, with accumulated depreciation of $2,000 as at 31 Dec 2017 for cash of $3,000. Hercules Ho deposited the cash into his personal bank account. Hercules Ho forgot to inform his accountant of this transaction. According to him, the cash taken by him was to be treated as a loan to him.

Both the cost of the treadmill and the accumulated depreciation were included in the amount shown for training equipment at cost and the accumulated depreciation for training equipment in the unadjusted trial balance above. The residual value of the treadmill was originally estimated to be $500.

Required:

(a) Analyse the above and prepare all necessary adjusting entries to describe them. Show narrations and all workings. (19 marks)

(b) Prepare an adjusted trial balance as at 31 December, 2018. (15 marks)

(c) Identify the following from the adjusted trial balance:

(i) The net profit for the year ending 31 December, 2018.

(ii)The total assets as at 31 December, 2018.

(iii)The total liabilities as at 31 December, 2018.

(iv)The total equity as at 31 December, 2018.

You do not need to produce your answers in the format of the income statement or the statement of financial position. However, you need to show all workings. (16 marks)

Answer rating: 100% (QA)

Part... View the full answer