Below is the trial balance for Teebo Ltd, a privately traded healthcare company: Trade payables Trade...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Below is the trial balance for Teebo Ltd, a privately traded healthcare company: Trade payables Trade receivables Provision for bad debts Ordinary share capital @ $0.50 each 5% Redeemable preference share capital @ $1.50 each 8% Loan Loan interest Retained earnings Administrative expenses Operating expenses Cost of sales Bank Land Teebo Ltd Trial balance as at March 31, 2021 Building Fixtures Equipment Accumulated depreciation: Building Accumulated depreciation: Fixtures Accumulated depreciation: Equipment Inventory Underprovision of tax Deferred tax liability Revenues Revaluation reserves Research and development costs $ 6,600,000 600,000 43,900,000 26,200,000 173,100,000 2,600,000 44,000,000 153,000,000 21,000,000 37,000,000 13,900,000 600,000 $ 3,700,000 800,000 26,000,000 9,200,000 8,400,000 6,100,000 27,000,000 4,000,000 12,000,000 13,100,000 487,000,000 6,200,000 $1,000,000 603.500.000 603.500.000 The following details are deemed relevant to the preparation of the draft financial statements: Property, plant and equipment The building is depreciated on a straight line basis over a period of fifty years to a nil residual value, with depreciation charges allocated equally between administrative expenses and operating expenses. Fixtures are depreciated over ten years on a straight line basis to a residual value of $3 million, while equipment is depreciated at a rate of 12% on the reducing balance. Depreciation of fixtures is to be charged to operating expenses, while depreciation of equipment is to be charged equally between administrative expenses and cost of sales. Included in cost of sales is the purchase of a motor vehicle for $18 million on October 1, 2020. All motor vehicles are depreciated over six years using the straight line basis to a nil residual value, with the charges being allocated between operating expenses and administrative expenses in a 75:25 ratio. Management is yet to book non-current assets in the current year. depreciation on any of the Additionally, at the end of the financial year, land and building were revalued to $72 million and $186 million respectively. No revaluation adjustment has been booked to date. The deferred tax implications are to be ignored. Intangible assets Included in cost of sales is the cost incurred to acquire a patent on January 1, 2021. The patent cost $23.2 million and it is expected to have a useful life of 20 years. Any amortisation of the patent is to be computed on a straight line basis to a nil residual value and charged to cost of sales. Of the total R&D cost on record, 60% relates to research cost, while the balance relates to development. Half of the amount recognised as development cost was incurred between September 1, 2020 to December 31, 2020. The product achieved commercial feasibility as at January 1, 2021. Any capitalised development cost is to be amortised over twenty years and charged to operating expenses, with time apportionment where necessary. Any non-capitalised research and development cost should be charged to cost of sales Receivables Management adjusted its doubtful debts to 8% of the current trade receivables balance. Any movement in the provision for bad debts is to be charged to administrative expenses. Discontinued operations Included in administrative expenses is the net result of a discontinued operation. An entire division with assets costing $341 million and accumulated depreciation of $202 million was sold for $139 million. The entity also incurred redundancy costs of $21 million as a result of the sale. The now discontinued operation made profits of $49 million before accounting for the cost of redundancies and the sale of its assets as outlined above. The appropriate taxes on the profits for this segment have already been accounted for. Financing On the first day of the financial year, the entity decided to make a regular Issue of three new shares for every ten existing shares held, at a price of $0.85 per share. The shore Issue has not yet been recorded. Dividends on both the redeemable preference shares and the ordinary shares were declared on March 31, 2021, but both remain unrecorded. In the case of the ordinary shares. dividends were declared at a rate of four cents per share in issue at that date. Payments are expected to be made two months after the date of declaration. The loan interest paid during the period was incorrectly debited in a separate account under that name, in addition to the fact that the unpaid balance remains unaccounted for. Taxation The entity has provided for current taxes to the tune of $5.9 million. Accumulated taxable temporary differences at the year end amounted to $37 million. The current income tax rate is 25%. The adjustments relating to tax are yet to be made. Other An impending lawsuit has given rise to the need to create a probable liability to the tune of $23 million, to be recognised in operating expenses. REQUIRED: Prepare all journal entries that would be generated from the transactions and adjustments detailed above. Supporting workings should be shown where applicable to justify the figures used in the journal entries Below is the trial balance for Teebo Ltd, a privately traded healthcare company: Trade payables Trade receivables Provision for bad debts Ordinary share capital @ $0.50 each 5% Redeemable preference share capital @ $1.50 each 8% Loan Loan interest Retained earnings Administrative expenses Operating expenses Cost of sales Bank Land Teebo Ltd Trial balance as at March 31, 2021 Building Fixtures Equipment Accumulated depreciation: Building Accumulated depreciation: Fixtures Accumulated depreciation: Equipment Inventory Underprovision of tax Deferred tax liability Revenues Revaluation reserves Research and development costs $ 6,600,000 600,000 43,900,000 26,200,000 173,100,000 2,600,000 44,000,000 153,000,000 21,000,000 37,000,000 13,900,000 600,000 $ 3,700,000 800,000 26,000,000 9,200,000 8,400,000 6,100,000 27,000,000 4,000,000 12,000,000 13,100,000 487,000,000 6,200,000 $1,000,000 603.500.000 603.500.000 The following details are deemed relevant to the preparation of the draft financial statements: Property, plant and equipment The building is depreciated on a straight line basis over a period of fifty years to a nil residual value, with depreciation charges allocated equally between administrative expenses and operating expenses. Fixtures are depreciated over ten years on a straight line basis to a residual value of $3 million, while equipment is depreciated at a rate of 12% on the reducing balance. Depreciation of fixtures is to be charged to operating expenses, while depreciation of equipment is to be charged equally between administrative expenses and cost of sales. Included in cost of sales is the purchase of a motor vehicle for $18 million on October 1, 2020. All motor vehicles are depreciated over six years using the straight line basis to a nil residual value, with the charges being allocated between operating expenses and administrative expenses in a 75:25 ratio. Management is yet to book non-current assets in the current year. depreciation on any of the Additionally, at the end of the financial year, land and building were revalued to $72 million and $186 million respectively. No revaluation adjustment has been booked to date. The deferred tax implications are to be ignored. Intangible assets Included in cost of sales is the cost incurred to acquire a patent on January 1, 2021. The patent cost $23.2 million and it is expected to have a useful life of 20 years. Any amortisation of the patent is to be computed on a straight line basis to a nil residual value and charged to cost of sales. Of the total R&D cost on record, 60% relates to research cost, while the balance relates to development. Half of the amount recognised as development cost was incurred between September 1, 2020 to December 31, 2020. The product achieved commercial feasibility as at January 1, 2021. Any capitalised development cost is to be amortised over twenty years and charged to operating expenses, with time apportionment where necessary. Any non-capitalised research and development cost should be charged to cost of sales Receivables Management adjusted its doubtful debts to 8% of the current trade receivables balance. Any movement in the provision for bad debts is to be charged to administrative expenses. Discontinued operations Included in administrative expenses is the net result of a discontinued operation. An entire division with assets costing $341 million and accumulated depreciation of $202 million was sold for $139 million. The entity also incurred redundancy costs of $21 million as a result of the sale. The now discontinued operation made profits of $49 million before accounting for the cost of redundancies and the sale of its assets as outlined above. The appropriate taxes on the profits for this segment have already been accounted for. Financing On the first day of the financial year, the entity decided to make a regular Issue of three new shares for every ten existing shares held, at a price of $0.85 per share. The shore Issue has not yet been recorded. Dividends on both the redeemable preference shares and the ordinary shares were declared on March 31, 2021, but both remain unrecorded. In the case of the ordinary shares. dividends were declared at a rate of four cents per share in issue at that date. Payments are expected to be made two months after the date of declaration. The loan interest paid during the period was incorrectly debited in a separate account under that name, in addition to the fact that the unpaid balance remains unaccounted for. Taxation The entity has provided for current taxes to the tune of $5.9 million. Accumulated taxable temporary differences at the year end amounted to $37 million. The current income tax rate is 25%. The adjustments relating to tax are yet to be made. Other An impending lawsuit has given rise to the need to create a probable liability to the tune of $23 million, to be recognised in operating expenses. REQUIRED: Prepare all journal entries that would be generated from the transactions and adjustments detailed above. Supporting workings should be shown where applicable to justify the figures used in the journal entries
Expert Answer:
Answer rating: 100% (QA)
Property plant and Equipment Building Land Fixtures Depreciation Admin D... View the full answer
Related Book For
Posted Date:
Students also viewed these accounting questions
-
Below is the trial balance for Halifax Ltd, an electronics manufacturing company: Trade receivables Trade payables Provision for bad debt 6% Redeemable preference share capital 9% Irredeemable...
-
The following is the trial balance of Sealy Limited, a company with a 31 OCTOBER year end. Sealy LTD TRIAL BALANCE AT 31 OCTOBER 2021 Credit losses expense Fuel and car maintenance costs on CEO...
-
Jen and Berry's sells ice-creams from its factory-shop in Petone. There is a managing director (Maynard Dibble), a marketing manager (Mary Salman) and a production manager (Peter Pritchard). Maynard...
-
If the Federal Government increases taxes:What will be the effect on money demand, money supply, and interest rates? Money demand decreases, money supply is unchanged, and interest rates decrease...
-
Crypton Electronics has a capital structure consisting of 40 percent common stock and 60 percent debt. A debt issue of $1,000 par value, 6 percent bonds that mature in 15 years and pay annual...
-
A radial flow reactor is often used for highly exothermic reactions. The high radial velocities at the reactor inlet compensate for any hot spots that might form in the reactor there. Consider the...
-
Comparative figures from the statement of financial position for Warder Ltd are shown below. Required (a) Prepare common size statements for the company for both years, and comment on what this...
-
Sweeten Company had no jobs in progress at the beginning of March and no beginning inventories. The company has two manufacturing departmentsMolding and Fabrication. It started, completed, and sold...
-
ABC; product profitability Outerwear Inc. is concerned about the profitability of its regular gloves. Company managers are considering producing only the top-quality, fleece lined, gloves. The...
-
1. East Coast Yachts uses a small percentage of preferred stock as a source of financing. In calculating the ratios for the company, should preferred stock be included as part of the companys total...
-
Top of Form As a team, discuss the relationship with other organization processes and methods, such as business continuity planning and disaster recovery planning (BCP/DR). Consider how these...
-
Briefly explain the following fee-for-service payment methods: Cost-based reimbursement Charge-based reimbursement and discounted charges Per-procedure reimbursement Per-diagnosis reimbursement ...
-
How does Medicare reimburse hospitals for inpatient stays?
-
Kim Corporation is considering an investment of 750 million won with expected aftertax cash inflows of 175 million won per year for seven years. The required rate of return is 10%. Expressed in...
-
McConachies incremental annual after-tax operating cash flow is closest to: A. \($116\),000. B. \($124\),000. C. \($140\),000. McConachie Company is considering the purchase of a new 400-ton stamping...
-
What is overhead allocation tied to in the RVU method?
-
Should drug manufacturers be able to advertise prescription drugs directly to consumers? What ethical issues could arise if not allowed to? Should there be any regulatory requirements as with the...
-
What is a content filter? Where is it placed in the network to gain the best result for the organization?
-
Financial accounting should restrict itself to reporting on matters that can be objectively measured in money. Outline the arguments for and against this statement.
-
From the following information in respect of Orchard Ltd., prepare the statement of cash flows for the year ended 31.03.20X3 STATEMENT OF FINANCIAL POSITION AT Income statement for the years ended...
-
The following trial balance was extracted from the books of Marric Ltd. as at 31.05.03 The following information has not been accounted for: 1. Closing inventory as at 31.05.03 is £497,000 2....
-
Describe the nature and significance of the biology plus approach to establishing parental rights for unwed fathers.
-
Identify and describe the three primary ways of establishing legal parentage.
-
Identify the three parties with the strongest interests in parentage determinations and describe the nature of those interests.
Study smarter with the SolutionInn App