Question $4$

Clicks Pte Ltd is an e$-$commerce company that offers online shopping in Singapore.

Following is the extract of the unadjusted trial balance of Clicks Pte Ltd as at $31$ December

$2021.$

principal repayment on $1$ January $2022.$ The bank charged an interest of $5\%$ per annum.

Interest for the loan is payable on $1$ January and $1$ July. Interest for the six months had been

paid on $1$ July $2021.$ This has also been recorded in the accounts.

$($iv$)$ Wages and salaries due but still remained unpaid at $31$ December $2021,$ $$7,550$

$($v$)$ The company estimated that as at $31$ December $2021,5\%$ of accounts receivable will

be uncollectible.

$($vi$)$ No depreciation has been charged for the year ended $31$ December $2021.$ The company

depreciates motor vehicle over a useful life of five years using the double declining balance

method.

Required:

$($a$)$ Compute the necessary $31$ December $2021$ adjusting journal entries. No narrations

required.

$(18$ marks$)$

$($b$)$ Explain what book value per share is$.$ Discuss why it is not always a good estimate of

its market value.

$(7$ marks$)$

Additional information:

$($i$)$ The company bought a delivery van on $1$ January $2021$ that cost $$80,000.$ The delivery

van is expected to have a residual value of $$8,000$ at the end of its useful life. This purchase

has been recorded in the accounts.

$($ii$)$ As the company does not occupy the entire freehold property, it rented space to two

tenants at $$5,000$ per month each starting on $1$ July $2021.$ The first tenant paid $$15,000$ for

three months' rent on $1$ July $2021.$ However, no further payment has been made by this

tenant. At the same time, on $1$ July $2021,$ second tenant paid $$45,000$ for nine months'

rental. All payments received have been recorded as rental income.

$($iii$)$ On $1$ January $2021,$ to finance the purchase of the delivery van, the company took

a loan of $$64,000$ from the bank. The company only needs to start making the first Clicks Pte Ltd is an e$-$commerce company that offers online shopping in Singapore. Following is the extract of the unadjusted trial balance of Clicks Pte Ltd as at $31$ December $2021.$ Account title Debit $($$$)$ Credit $($$$)$ Share capital $(100,000$ shares at $$1\mathrm{.}00$ each$)500,000$ Retained earnings, $31$ Dec $2020110,000$ Freehold property at cost $1,000,000$ Motor Vehicle at cost $80,000$ Cost of goods sold $2,254,800$ Sales $3,129,200$ Wages and salaries $480,000$ Allowance for doubtful debts $6,000$ Accounts receivable $96,800$ Accounts payable $233,200$ Bank $40,000$ Bank Loan $($for delivery van$)64,000$ Inventory $88,400$ Rental income $60,000$ Interest expense $1,600$ Additional information: $($i$)$ The company bought a delivery van on $1$ January $2021$ that cost $$80,000.$ The delivery van is expected to have a residual value of $$8,000$ at the end of its useful life. This purchase has been recorded in the accounts. $($ii$)$ As the company does not occupy the entire freehold property, it rented space to two tenants at $$5,000$ per month each starting on $1$ July $2021.$ The first tenant paid $$15,000$ for three months$$ rent on $1$ July $2021.$ However, no further payment has been made by this tenant. At the same time, on $1$ July $2021,$ second tenant paid $$45,000$ for nine months$$ rental. All payments received have been recorded as rental income. $($iii$)$ On $1$ January $2021,$ to finance the purchase of the delivery van, the company took a loan of $$64,000$ from the bank. The company only needs to start making the first principal repayment on $1$ January $2022.$ The bank charged an interest of $5\%$ per annum. Interest for the loan is payable on $1$ January and $1$ July. Interest for the six months had been paid on $1$ July $2021.$ This has also been recorded in the accounts. $($iv$)$ Wages and salaries due but still remained unpaid at $31$ December $2021,$ $$7,550($v$)$ The company estimated that as at $31$ December $2021,5\%$ of accounts receivable will be uncollectible. $($vi$)$ No depreciation has been charged for the year ended $31$ December $2021.$ The company depreciates motor vehicle over a useful life of five years using the double declining balance method. Required: $($a$)$ Compute the necessary $31$ December $2021$ adjusting journal entries. No narrations required.