ACCT 202 Tutorial Questions for Week 12 commencing 16 May 2016 Century Limited entered into a non-cancellable,

Tutorial Questions for Week 12 commencing 16 May 2016Tutorial Q17Century Limited entered into a non-cancellable, five-year lease agreement with LodgeLimited on 1st April 2009. The lease was for an item of machinery that is expected to have aneconomic life of seven years, after which time it will have no salvage value. There is abargain option, which Century Limited will be able to exercise at the end of the fifth year, for$40,000. Lodge Limited manufactured the machinery at a cost of $250,000. There are to befive annual instalments of $70,000. Included in the annual lease payment is an amount of$5,000 representing payment to the lessor for the insurance and maintenance of themachinery. The leased machinery is to be amortised using straight-line method. The rate ofinterest implicit in the lease is 10 per cent. The present value of $1 at a discount rate of 10%at the end of 5 years is $0.6209. The present value of an annuity of $1 per period at a discountrate of 10% for 5 years is 3.7908. The present value of minimum lease payment is indicativeof the fair value of the machinery at the inception of the lease.Required(a) Calculate the present value of the minimum lease payments.(b) Prepare journal entries in the books of Lodge Limited to record:(i)Lease transaction as at 1st April 2009.(ii)Lease payments received for years ended 31st March 2010 and 31st March2011.(c) Prepare journal entries in the books of Century Limited to record:(i)Lease transaction as at 1st April 2009(ii)Lease payments made for years ended 31st March 2010 and 31st March 2011.(iii)Depreciation of leased asset for year ending 31st March 2010.(Note: Calculate figures to the nearest dollar)Tutorial Q 18Sunway Limited is registered under the companies Act 1993 with an authorised share capitalof $8,000,000 ordinary shares. Contributed equity of the company as at 31st October 2006comprises of 3,000,000 ordinary shares. Set out below is a list of balances extracted from theaccounts of the company as at financial year end date 31st October 2006:BankProperty, Plant & EquipmentAccumulated Depreciation – Property Plant & EquipmentContributed EquityPurchasesDirectors’ FeesProvision for Doubtful DebtsAudit FeesDonationAccounts PayableAccounts ReceivableDebit$26,0006,678,000Credit$430,0003,000,0001,500,00040,0005,00013,00015,000270,000180,000Bad DebtsDividend IncomeDividendsInterest ExpenseInterest IncomeInventory as at 1 November 2005Long Term LoanOther ExpensesRetained Earnings—1 November 2005Investment in Shares at costSalesSalaries and Wages10,00022,00065,00030,00020,00040,000600,000678,0001,048,000650,000_765,000_10,690,0005,295,000_________10,690,000The following information is relevant for the preparing financial statements for the yearended 31 October 2006:Provision for doubtful debts is to be made at a rate of 5% on the balance of accountsreceivable outstanding as at 31st October 2006.No depreciation has been provided for the year ending 31 October 2006. Depreciationon property, plant, and equipment for the year ended 31st October 2006 is $120,000Interest expenses of $20,000 due for payment on 20 th October 2006 have not beenpaid or accrued.An amount of $140 000 representing the principal component of long term loan is duefor repayment on 10th March 2007.Investment in shares comprises of shares available-for-sale $250,000 and shares heldfor trading $400,000. As at 31st October 2006 the market value of shares available-forsale is $400,000 and market value of the shares held for trading $500,000. Thesemarket values are considered to be the fair value of the shares.Inventory as at 31st October 2006 consists of the following:Raw Materials15,000Work In Progress10,000Finished Goods25,000A professional valuation consultant re-valued land on 15 th September 2006 at$6,000,000 using fair value. The carrying value of the land before the revaluation was5,300,000. No journal adjustment has been made for this revaluation. There are nochanges in the value of all other items of property, plant and equipment.Directors fees comprises of $10,000 paid to the managing director R. Jason, $12,000to the financial director D. Anthony and $18,000 to human resource director K. SamyIncluded in salaries and wages is an amount of $105,000 paid to R. Jason and 119,000paid to D. Anthony and 127,000 paid to K. Samy. No other employees earned over$100,000 per annum.An examination of the ledger account, shows that other expenses comprises of thefollowing:Accounting fee$30,000Bank service charges$15,000Distribution expensesInsurance (20% administration and 80% marketing and distributionMotor vehicle expenses – administrationMotor vehicle expenses – sales representativesAdvertising and sales promotion$450,000$40,000$30,000$64, 000$49,000$678,000Expenses are classified by function in the Income Statement.The following basis used in previous years has been recommended by the accountant:o Salaries and wages are allocated 40% for administration and 60% formarketing and distribution.o Depreciation on property, plant and equipment is to be allocated 20% foradministration and the balance for marketing and distribution.The tax rate is 30 per cent. Assume that all expenses are deductible for purposes ofcomputing tax payable. Ignore deferred taxation.RequiredPrepare balance day journal adjustments in general journal form for the year ended 31 stOctober 2006.