Hercules Ho, a qualified fitness trainer started a firm, Happy Fit Management about 3 years ago....

  

  

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Hercules Ho, a qualified fitness trainer started a firm, Happy Fit Management about 3 years ago. The firm offers fitness programmes 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 ($) Credit ($) Share capital Retained earnings, 31 Dec 2017 Training equipment at cost Furniture and fittings at cost Accumulated depreciation, 31 Dec 2017 - Training equipment - Furniture and fittings 125,000 24,688 125,000 50,000 15,000 10,000 Prepaid insurance Rental expense 9,000 162,500 Insurance expense 6,750 Membership fee received General expenses Bad debt expense 302,113 5,090 Wages and salaries Equipment maintenance expense Interest and bank charges 49,850 13,580 110 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. 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 (i) 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. (ii) As at 31 Dec 2018, the salaries payable to employees were S$2,488. (iii) No depreciation has been charged for the year ended 31 Dec 2018. During the year, no additional non-current assets was purchased. The company depreciates non-current assets held at 31 Dec 2018 as follows: Training equipment at cost - straight line over five years. The residual value of the training equipment at cost was estimated to be $15,000. Furniture and fittings - assuming a four-year life and double-declining- balance depreciation. (iv) On 31 December, the amount of membership fee paid in advance by private members and corporate members were $$5,125. However, these have been included in membership fee received in the unadjusted Trial Balance. (v) It was estimated that 5% of outstanding accounts receivable on 31 December were uncollectible. (vi) The bank statement received from its banker, the Solid Rock Bank Corporation, revealed that the bank service charge for December of $100 were also not recorded by the company. 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) Hercules Ho, a qualified fitness trainer started a firm, Happy Fit Management about 3 years ago. The firm offers fitness programmes 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 ($) Credit ($) Share capital Retained earnings, 31 Dec 2017 Training equipment at cost Furniture and fittings at cost Accumulated depreciation, 31 Dec 2017 - Training equipment - Furniture and fittings 125,000 24,688 125,000 50,000 15,000 10,000 Prepaid insurance Rental expense 9,000 162,500 Insurance expense 6,750 Membership fee received General expenses Bad debt expense 302,113 5,090 Wages and salaries Equipment maintenance expense Interest and bank charges 49,850 13,580 110 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. 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 (i) 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. (ii) As at 31 Dec 2018, the salaries payable to employees were S$2,488. (iii) No depreciation has been charged for the year ended 31 Dec 2018. During the year, no additional non-current assets was purchased. The company depreciates non-current assets held at 31 Dec 2018 as follows: Training equipment at cost - straight line over five years. The residual value of the training equipment at cost was estimated to be $15,000. Furniture and fittings - assuming a four-year life and double-declining- balance depreciation. (iv) On 31 December, the amount of membership fee paid in advance by private members and corporate members were $$5,125. However, these have been included in membership fee received in the unadjusted Trial Balance. (v) It was estimated that 5% of outstanding accounts receivable on 31 December were uncollectible. (vi) The bank statement received from its banker, the Solid Rock Bank Corporation, revealed that the bank service charge for December of $100 were also not recorded by the company. 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)

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