Question 4 11 marks

PART A [6 marks]

Shania Twain Ltd pays its annual insurance premium in cash on 1 September each year. The latest payment of $9,000 was on 1 September 2020 which was $600 more than the previous year. All transactions are recorded in the general journal. Shania Twain Ltd has a December 31st year end.

Required:

1. Assuming Shania Twain Ltd uses the expense approach to record the payment, prepare general journal entries (narrations are NOT required) required at (3 marks):

1. 1 September 2020
2. 31 December 2020 (both adjusting and closing entries)

Date	Particulars	Debit	Credit

2. Assuming Shania Twain Ltd uses the asset approach to record the payment, prepare general journal entries (narrations are NOT required) required at [3 marks]:

1. 1 September 2020
2. 31 December 2020 (adjusting entry only; i.e. closing entry not required)

Date	Particulars	Debit	Credit

PART B [3 marks]

Shania Twain Ltd had Accounts Receivable of $215,000 and an Allowance for Doubtful Debts of $520 (Credit) at 31 December 2020. A review of outstanding accounts indicated the need to immediately write off $700 of bad debts and to make a provision for Doubtful Debts for next year based on 3% of Adjusted Accounts Receivable.

Prepare the necessary general journal entries for the above information (narrations are NOT required).

Date	Particulars	Debit	Credit

PART C [2 marks]

Shania Twain Ltd had purchased equipment on 1 January 2020 at a cost of $200,000. The equipment had a useful life of 6 years and an estimated residual of $35,000. The company decided to use the reducing balance method of depreciation at 30% per annum.

Calculate the depreciation and prepare the necessary journal entry for the year ended 31 December 2021.