[gika21]

I mean we must deduct it as expense. But in answer they didn’t take into consideration accruals in trial balance.

[gika21]

I have one more question:
Merlot Co is engaged in a number of research and development projects:
Project A A project to investigate the properties of a chemical compound.
Project B A project to develop a new process which will save time in the
production of widgets. This project was started on 1 January 20X5 and
met the capitalisation criteria on 31 August 20X5.
Project C A development project which was completed on 30 June 20X5. Related
costs in the statement of financial position at the start of the year were
$290,000. Production and sales of the new product commenced on
1 September and are expected to last 36 months.
Costs for the year ended 31 December 20X5 were as follows:
$
Project A 34,000
Project B costs to 31 August 78,870
Project B costs from 31 August 27,800
Project C costs to 30 June 19,800
What amount is expensed to the statement of profit or loss and other comprehensive
income of Merlot Co in respect of these projects in the year ended 31 December 20X5?

ANSWER:$147,292
$
Project A 34,000
Project B 78,870
Project C ($290,000 + $19,800) × 4/36 34,422
–––––––
147,292
–––––––
Why do we calculate 19800 for 4 months,but project B’s costs(78870) completely for the year?

[gika21]

Receivables equal to 120000 at the year end.It means that they’ve substracted irrecoverable debt from it.(Before receivables were 125000)

[gika21]

I’m using 2016-2017 version. now they can ask for example to calculate only retained earnings.yes? But i didn’t understand only this part of this question in calculation of retained earnings: Why did they add depreciation to retained earnings? It is clear why they substracted from retained earnings irrecoverable debts or loss on disposal of inventory( because they are expenses,so that they decrease profit).But depreciation charge is expense too.But in answer they add it to retained earnings

[gika21]

Now it is clear) But only 1 moment that I didn’t understand is why we add depreciation expense(350000) to retained earnings.As I know we deduct it from profit,that means that we also have to deduct it from retained earnings.Am I right?
P.S.This question from BPP revision kit.
Great thanks to you for those videos.I’m watching them.

[gika21]

Thank you very much!

[gika21]

But in (c) there is late invoice for $12000 (covering year ended 30 June 2009),which is not included in the trial balance.
The year is ended in 30 September 2008 ,therefore there is prepayment 12000/12×9=9000.

Is it correct?

[gika21]

The Umbrella Shop has the following trial balance as at 30 September 20X8.
$ $
Sales 156,000
Purchases 65,000
Land and buildings – carrying value at 30.9.X8 125,000
Plant and machinery – carrying value at 30.9.X8 75,000
Inventory at 1.10.X7 10,000
Cash at bank 12,000
Trade accounts receivable 54,000
Trade accounts payable 40,000
Selling expenses 10,000
Cash in hand 2,000
Administration expenses 15,000
Finance expenses 5,000
Carriage inwards 1,000
Carriage outwards 2,000
Capital account at 1.10.X7 180,000
376,000 376,000
The following information is available.
(a) Closing inventory at 30.9.X8 is $13,000, after writing off damaged goods of $2,000.
(b) Included in administration expenses is machinery rental of $6,000 covering the year to
31 December 20X8.
(c) A late invoice for $12,000 covering rent for the year ended 30 June 20X9 has not been included
in the trial balance.
Prepare a statement of profit or loss and statement of financial position for the year ended 30 September
20X8.
ANSWER
THE UMBRELLA SHOP
STATEMENT OF PROFIT OR LOSS FOR THE YEAR ENDED 30 SEPTEMBER 20X8
$ $
Revenue 156,000
Opening inventory 10,000
Purchases 65,000
Carriage inwards 1,000
76,000
Closing inventory (W1) 13,000
Cost of goods sold 63,000
Gross profit 93,000
Selling expenses 10,000
Carriage outwards 2,000
Administration expenses (W2) 16,500
Finance expenses 5,000
33,500
Profit for the year 59,500

WORKINGS
1 Closing inventory
As the figure of $13,000 is after writing off damaged goods, no further adjustments are
necessary. Remember that you are effectively crediting closing inventory to the statement of profit
or loss and the corresponding debit is to the statement of financial position.
2 Administration expenses
$
Per trial balance 15,000
Add accrual (W3) 3,000
18,000
Less prepayment (W4) (1,500)
16,500
3 Accrual
$
Rent for year to 30 June 20X9 12,000
Accrual for period to 30 September 20X8 (3
/12 ? $12,000) 3,000
4 Prepayment
$
Machinery rental for the year to 31 December 20X8 6,000
Prepayment for period 1 October to 31 December 20X8 (3
/12 ? $6,000) 1,500

I cannot understand this part of answer:

3 Accrual
$
Rent for year to 30 June 20X9 12,000
Accrual for period to 30 September 20X8 (3
/12 ? $12,000) 3,000

Why we do not calculate only accrual?why we dont calculate prepayment?

Thank you in advance

[gika21]

Whether there can be questionsin exam of type “find administrative expenses” or “distribution expenses” at preparation of the statement of profits and losses?
Thank you in advance

[gika21]

Hello.Congratulate to you.It is great result.Can you give any advice to how prepare for exam?And what type questions was in the exam?Are they confused or like bpp and kaplan’s kit questions?

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