Answer All the Questions

Question 1:

Super Decorators Co had the following transactions with a customer during the year ended on 31 December 2019;

November 1: Sold decoration material on account OMR 7,500, terms 1.5/10, n/30.

November 4: Customer retuned some faulty materials of OMR 1,000

November 8: Customer paid OMR 2,500.

December 1: Accepted a 90 days, 12% note from the customer for the balance amount.

Required:

a. Determine the date of maturity of the note. (1.5 Marks)

b. Determine the interest payable on maturity of the note. (1 Marks)

c. Journalize all the above transactions in the books of Super Decorators when the note is i) honoured on maturity and ii) dishonoured on maturity. (7.5 Marks)

Answer:

Question 2:

The conceptual framework for financial reporting identifies and defines the main elements of financial statement. An element can be recognized in the financial statements as asset, liabilities, equity, income or expense.

Required:

a) Explain the circumstances in which an element should be recognized as an asset in the financial statements with the help of five examples. (5 Marks, Word Limit 150-300)

b) Explain the circumstances in which an element should be recognized as a liability in the financial statements with the help of five examples. (5 Marks, Word Limit 150-300)

Answer:

Question 3:

Al Ahalia Constructions established a petty cash fund and assigned Mr. Greed as petty cash custodian. The disbursements made from the fund were frequent and were involved small amount of money, so mostly the transactions were overlooked by the top management. Recently the management observed an unusual change in the disbursement pattern and amount. An investigation revealed that Mr. Greed; the custodian of petty cash had been stealing and covering the theft with fake reimbursement forms.

Required:

a) Illustrate the operation of a petty cash taking the example of Al Ahalia, a construction company, with at least 7 different expenses with appropriate amounts.(7 Marks)

b) Suggest Al Ahalia, the measures that could be taken to avoid such incidents in the future.

(3 Marks, Word Limit 100-200)

Answer:

Question 4:

At 30 April 2020, the balance in the cash book of Boon Traders was OMR 4,015. The bank statement on 30 April 2020 showed a balance of 3,410. An examination of Boons records and bank statement disclosed the following information:

a) Company mailed a deposit on April 30 OMR xx is not appeared on the bank statement.

b) A cheque was issued for the settlement of the accounts of a supplier OMR 30. This cheque is returned along with the bank statement, but was recorded by the company as OMR 300 at the time of issue

c) It is found that a cheque written by Moon Traders for OMR xx is incorrectly drawn against Boon Traders.

d) A check issued by the company for OMR 1500 is incorrectly recorded as OMR 150. The cheque was cleared by the bank on due date.

e) Bank charges for April OMR xx were not recorded by the company until the receipt of bank statement

f) OMR xx receivable from a customer is collected by the bank, not recorded in the books.

Required

Prepare a bank reconciliation statement for Boon Traders for the month of April 2020. (10 Marks)

Note: Before you begin, fill the highlighted fields with imaginary amounts. Make sure that the adjusted cash balance and bank balances are same after reconciliation.

Answer:

Question 5:

Al Hajar Co. provides you the following account balances for the year ended on 31 December 2019.

Sales RevenueOMR 100,000 Cr.

Accounts Receivable OMR 25,000 Dr.

Allowance for Doubtful accounts OMR 1000 Cr.

Scenario 1

Bad debts are estimated based on the aging schedule given below

Aging class

Receivable Balance (OMR)

Estimate % of uncollectible

030 days

15,000

10

3160 days

5,000

15

6190 days

3,500

20

Over 90 days

1,500

25

Actual bad debt - OMR 1,100 and amount recovered - OMR 800.

Scenario 2

Estimated amount of bad debts - 12% of receivables, Actual bad debt - OMR 1,500 and amount recovered later on - OMR 900.

Scenario 3

Estimated amount of bad debts - 3.5% of Sales, Actual bad debt - OMR 1,300 and amount recovered - OMR 1000.

Required:

For each scenario given above;

a) Estimate the uncollectible amounts. (2.5 Marks)

b) Pass adjusting entry to record the estimated uncollectible. (1.5 Marks)

c) Pass all the journal entries for actual write off and recovery of written off accounts. (4.5 Marks)

References