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Hi John
Draft statement of financial position Shuswap LLC as at 3 Dec 20×4.‘$000
Assets
Non current assets
Land and buildings cost 9000 accumulated dep 1000 c value 8000
Plant and equipment cost 21000 accumulated dep 9000 c value 12000
total c value 20000Current assets
Inventories c value 3000
Receivables c value 2600
Cash at bank c value 1900
Total assets c value 27500Equity and liabilities
Equity
Issued share capital (ordinary shares) c value 6000
Retained earnings c value 12400Non current liabilities
Loan notes (redeemable 20Y0) c value 2000Current liabilities
Trade payable c value 2100
Total c value 22500Total 5000
Suspense account 27500Notes
1 It has been decided to revalue the land and buildings to 12,000,000 at 31 Dec 20×4
2 Trade receivables totalling 200,000 are to be written off
3 During the year there was a contract settlement of 106,000 in which an amount due to a supplier was set off against the amount due from the same company for goods sold to it. No entry has yet been made to record the set off.
4 Some inventory items included in the draft statement of financial position at cost 500,000 were sold after the reporting date for 400,000 with selling expenses of 40,000.
5 The suspense account is made up of two items
A The proceeds of issue of 4,000,000 50 c shares at 1.10 per share credited to the suspense account from the cash book
B The balance of the account is the proceeds of sale of some plant on 1 January 20×4 with a carrying value at the date of sale of 700,000 and which had originally cost 1,400,000. No other accounting entries have yet been made for the disposal apart from the cash book entry for the receipt of proceeds. Depreciation on plant has been charged at 25% straight line basis in preparing the draft statement of financial position without allowing for the sale. The depreciation for the year relating to plant sold should be adjusted for in full (I’m not sure what adjusted for in full means)Prepare journal entries to clear the suspense account
Answer
Part 1
Suspense account
Proceeds of issue of 4 m shares at $1.10 = 4400
Proceeds of sale of plant (balance ) = 600
Total 5000
Part 2
Journal entries
Dr suspense a/c = 5000
Cr issued share capital (4m x 60c) = 2000
Share premium (4m x 60 c) = 2400
Disposal a/ c = 600I’ve copied the answer as is. What I can’t seem to figure out is part 1, proceeds of sale of plant ( balance) 600 (or 600 000 if you will). Of which info is this figure derived from? 🙂 I seem to be stuck here Please assist
Either you have mistyped the question, or there is a typing error in your book.
On the Statement of financial position, the suspense account should be 5,000 and the total should be 27,500 (you have typed them the other way round).
Note 5A says that part of the suspense account is the proceeds from the issue of shares, which is 4,000 x 1.10 = 4,400.
Note 5B says that the rest of the suspense account is the proceeds of sale of plant, so this is 5,000 – 4,400 = 600.
The carrying values of the land and buildings is $8M. It is revalued to $12M. Therefore the revaluation surplus is 12 – 8 = $4M
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