ACC202 Financial And Managerial Accounting

Don Company experienced the following transactions and events during December 2019. The company uses allowance method to account for uncollectible receivables.
(1) On 1 December, the company paid $4,800 for a 2-year fire insurance coverage which commenced immediately.
(2) On 1 December, the company took a bank loan of $300,000. The interest is 4% per annum payable annually.
(3) On 10 December, the company wrote off $10,000 balance owed by Jerry Chan who is declared bankrupt.
(4) On 10 December, the company reinstated the account of Emily Tan that was written off in October 2019. The company received $20,000 cash in full payment.
(5) On 15 December, the company issued 1,000,000 shares at $0.50 per share for additional working capital.
(6) On 20 December, the company is sued by one of its competitors for infringement of the competitor’s patent. After discussing with the legal advisors, the management concluded that the loss of the lawsuit was probable, and they must pay out $2 million.
(7) On 30 December, a customer paid $3,000 deposit for goods worth $30,000 to be delivered in January 2020.
(8) Overtime wages of $5,000 for December 2019 were omitted.
(9) A bank service charge of $100 for December 2019 was not recorded by the company.Analyse the above and prepare the necessary entries to describe them for the month of December 2019.
Question 2
In each of the independent situations, explain whether you agree or disagree with the accounting treatments using generally accepted accounting principles and concepts.
(a) Tom runs a dance studio offering dance classes at various levels for adults. Each level has twelve weekly lessons and the first lesson always start on the first week of the quarter. The fee policy is students must pay the course fees by the first lesson. Upon payment of the fees, Tom would record as revenue.
(b) Mary is the owner of a pet shop. She recently attended a course on “Stock Investing for Retail Investors” and paid the course fees using a business cheque.
(c) Every year, Connex Company (yearly profit is around $50 million) spends $2 million on publicity and promotion (P&P). The company did not disclose the amount spent on P&P in the annual report.
(d) In October 2019, Delphi Company purchased some goods for $30,000. At 31 December 2019, the market value of these goods is $40,000. The company retains the value at $30,000, explaining that they should be recorded at the actual cost.
(e) Xenon Research usually depreciates scientific equipment over eight years. For a special scientific equipment, the company depreciates it over four years. The company explained that they were advised by an independent assessor that this special equipment would be obsolete at the end of four years.


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