Q1
QUESTION (1) Purchase of Fixed Assets by Hire Purchase / Finance Lease
A Company purchased a fixed asset ( Motor Vehicle) Using Credit on 01 Jan 2020.
S$
Cash Price of the Motor Vehicle 100,000
The Company is required to pay the Creditor 5 equal annual installment of S$20,000 per annual
over a 5 years period ( on the last day of each year, assuming the company have a 31 December year end).
Depreciation Rate for Motor Vehicle are 5 years straight line method ( 20% per annum).
1) Please create the Journal Entries to record the above transaction in Year 1 ( Year ended 31 Dec 2020) .
a) To record the cost of the Motor Vehicle in the Company's Fixed Assets Register ( Cost of Fixed assets to be recognised) Using T-Account ( 1 Mark)
b) To record the Hire Purchase Liabilities created ( Amount owed to Creditor) Using T-Account ( 1 Mark) .
c) To record the depreciation charge to be debited or credited to Profit & Loss Account and Accumulated Depreciation Account Using T-Account (1 Mark) .
d) To record the acounting entries related to payment of cash to Creditor Using T-Account (1 mark )
e) To Close Off the T-Account at Year End ( To Show Balance C/F at 31 Dec 2020 & Balance B/F to 01 Jan 2021 Via T-Account) and Prepare Trial Balance at 31 Dec 2020 ( 1 Mark)
h) To Prepare P&L A/C for Year Ended 31 Dec 2020 and Balance Sheet as at 31 December 2020 (1 Marks )
h) To Prepare P&L A/C for Year Ended 31 Dec 2020 and Balance Sheet as at 31 December 2020 (1 Marks )
2) Prepare the Accounting Entries mentioned above using " Jourmal Entries " Method ( 2 marks)
10 Marks
Answer for Q1
1) Answer to Part I
Fixed Assets Cost A/C : Motor Vehicle Fixed Assets Accumulated Depr A/C : Motor Vehicle
Date Description Dr Date Description Cr Date Description Dr Date Description Cr
$ $ $ $
31-Dec-20
31-Dec-20 Balance C/F 0 31-Dec-20 Balance C/F 0
Total 0 Total 0 Total 0 Total 0
1-Jan-21 Balance B/F 0 1-Jan-21 Balance B/F 0
Creditor A/C Suspence A/C
Date Description Dr Date Description Cr Date Description Dr Date Description Cr
$ $ $ $
c)
31-Dec-20 Balance C/F 0
Total 0 Total 0 Total 0 Total 0
1-Jan-21 Balance B/F 0 1-Jan-21 Balance B/F 0
Bank A/C - Overdraft Profit & Loss A/C
Date Description Dr Date Description Cr Date Description Dr Date Description Cr
$ $ $ $
To P&L A/C - Accumulated
31-Dec-20 Loss 0
31-Dec-20 Balance C/F 0
Total 0 Total 0 Total 0 Total 0
1-Jan-21 Balance B/F 0 1-Jan-21 Accumulated Losses B/F 0
1) Answer to Part I (Continue)
Trial Balance as at 31 Dec 2020
Dr Cr
S$ S$
Fixed Assets Cost A/C : Motor Vehicle
Fixed Assets Accumulated Depr A/C : Motor Vehicle
Creditor A/C
Suspence A/C
Bank A/C
Depreciation Expense
Total 0 0
Profit & Loss Account for Year ended 31 Dec 2020
Ye 31 12 2020
S$
Depreciation Expense
0
Loss for the year 0
Balance Sheet as at 31 Dec 2020
Ye 31 12 2020
S$
Non -Current Assets
Fixed Assets Cost A/C : Motor Vehicle
Less : Fixed Assets Accumulated Depr A/C : Motor Vehicle
Net Book Value of Fixed Assets 0
Current Assets
Suspence A/C 0
Total Assets 0
Current Liabilities
Creditor A/C
Bank A/C - Overdraft
Net Liabilities 0
Reserves
Accumulated Losses
Total Reserves 0
1) Answer to Part 2 (Continue)
Journal Entries to record the above transaction
P&L A/C P&L A/C B/S B/S
Dr Cr Dr Cr
S$ S$ S$ S$
1-Jan-20 Motor Vehicle account
Hire PurchasE Creditor account
< Motor vehicle purchased by way of Credit on 1 Jan 2020. >
31-Dec-20 MV Depreciation account
Motor Vehicle account
< Annual depreciation against motor vehicle to motor vehicle depreciation and accumulated to
Accumulated depreciation account.>
31-Dec-20 Profit or loss account 20,000
MV Depreciation account
< Annual depreciation of motor vehicle charged against profit or loss account >
31-Dec-20 Creditor account
Bank overdraft account
< Annual installment of payment to Creditor that are paid from bank overdraft account>
10 Marks
Q1
QUESTION (1) Purchase of Fixed Assets by Hire Purchase / Finance Lease
A Company purchased a fixed asset ( Motor Vehicle) Using Credit on 01 Jan 2020.
S$
Cash Price of the Motor Vehicle 100,000
The Company is required to pay the Creditor 5 equal annual installment of S$20,000 per annual
over a 5 years period ( on the last day of each year, assuming the company have a 31 December year end).
Depreciation Rate for Motor Vehicle are 5 years straight line method ( 20% per annum).
1) Please create the Journal Entries to record the above transaction in Year 1 ( Year ended 31 Dec 2020) .
a) To record the cost of the Motor Vehicle in the Company's Fixed Assets Register ( Cost of Fixed assets to be recognised) Using T-Account ( 1 Mark)
b) To record the Hire Purchase Liabilities created ( Amount owed to Creditor) Using T-Account ( 1 Mark) .
c) To record the depreciation charge to be debited or credited to Profit & Loss Account and Accumulated Depreciation Account Using T-Account (1 Mark) .
d) To record the acounting entries related to payment of cash to Creditor Using T-Account (1 mark )
e) To Close Off the T-Account at Year End ( To Show Balance C/F at 31 Dec 2020 & Balance B/F to 01 Jan 2021 Via T-Account) and Prepare Trial Balance at 31 Dec 2020 ( 1 Mark)
h) To Prepare P&L A/C for Year Ended 31 Dec 2020 and Balance Sheet as at 31 December 2020 (1 Marks )
h) To Prepare P&L A/C for Year Ended 31 Dec 2020 and Balance Sheet as at 31 December 2020 (1 Marks )
2) Prepare the Accounting Entries mentioned above using " Jourmal Entries " Method ( 2 marks)
10 Marks
Answer for Q1
1) Answer to Part I
Fixed Assets Cost A/C : Motor Vehicle Fixed Assets Accumulated Depr A/C : Motor Vehicle
Date Description Dr Date Description Cr Date Description Dr Date Description Cr
$ $ $ $
1-Jan-20 Hire Purchase Creditor 100,000 31-Dec-20 MV Depreciation 20,000 31-Dec-20 MV Depreciation 20,000
31-Dec-20 Balance C/F 80,000 31-Dec-20 Balance C/F 20,000
Total 100,000 Total 100,000 Total 20,000 Total 20,000
1-Jan-21 Balance B/F 80,000 1-Jan-21 Balance B/F 20,000
Creditor A/C Suspence A/C
Date Description Dr Date Description Cr Date Description Dr Date Description Cr
$ $ $ $
1-Jan-20 Motor Vehicle 100,000 c)
31-Dec-20 Bank 20,000
31-Dec-20 Balance C/F 80,000
Total 100,000 Total 100,000 Total 0 Total 0
1-Jan-21 Balance B/F 80,000 1-Jan-21 Balance B/F 0
Bank A/C - Overdraft Profit & Loss A/C
Date Description Dr Date Description Cr Date Description Dr Date Description Cr
$ $ $ $
31-Dec-20 Creditor Account 20,000 31-Dec-20 MV Depreciation 20,000
To P&L A/C - Accumulated
31-Dec-20 Loss 20,000
31-Dec-20 Balance C/F 20,000
Total 20,000 Total 20,000 Total 20,000 Total 20,000
1-Jan-21 Balance B/F 20,000 1-Jan-21 Accumulated Losses B/F 20,000
1) Answer to Part I (Continue)
Trial Balance as at 31 Dec 2020
Dr Cr
S$ S$
Fixed Assets Cost A/C : Motor Vehicle 100,000
Fixed Assets Accumulated Depr A/C : Motor Vehicle 20,000
Creditor A/C 80,000
Suspence A/C 0
Bank A/C 20,000
Depreciation Expense 20,000
Total 120,000 120,000
Profit & Loss Account for Year ended 31 Dec 2020
Ye 31 12 2020
S$
Depreciation Expense 20,000
0
Loss for the year 20,000
Balance Sheet as at 31 Dec 2020
Ye 31 12 2020
S$
Non -Current Assets
Fixed Assets Cost A/C : Motor Vehicle 100,000
Less : Fixed Assets Accumulated Depr A/C : Motor Vehicle -20,000
Net Book Value of Fixed Assets 80,000
Current Assets
Suspence A/C 0
Total Assets 80,000
Current Liabilities
Creditor A/C 80,000
Bank A/C - Overdraft 20,000
Net Liabilities 100,000
Reserves
Accumulated Losses -20,000
Total Reserves -20,000
1) Answer to Part 2 (Continue)
Journal Entries to record the above transaction
P&L A/C P&L A/C B/S B/S
Dr Cr Dr Cr
S$ S$ S$ S$
1-Jan-20 Motor Vehicle account 100,000
Hire PurchasE Creditor account 100,000
< Motor vehicle purchased by way of Credit on 1 Jan 2020. >
31-Dec-20 MV Depreciation account 20,000
Motor Vehicle account 20,000
< Annual depreciation against motor vehicle to motor vehicle depreciation and accumulated to
Accumulated depreciation account.>
31-Dec-20 Profit or loss account 20,000
MV Depreciation account 20,000
< Annual depreciation of motor vehicle charged against profit or loss account >
31-Dec-20 Creditor account 20,000
Bank overdraft account 20,000
< Annual installment of payment to Creditor that are paid from bank overdraft account>
10 Marks
