Question

Hui Yu, lawyer, had the following transactions related to the business during June 2019. 1 Purchased office furniture for $36 000. The furniture will be depreciated over a useful life of 10 years at which time it is expected to have a residual value of $4800. Purchased a 12-month fire insurance policy for $3000. June 1 Borrowed $42 000 from the Eastern Bank on a short-term loan. The principal, plus 8% annual interest, will be repaid in 3 months. Purchased supplies for $450. On 30 June, supplies worth $230 remained on hand. 15 2 11 Paid $1200 for 1 month's rent for the period 15 June to 15 July. Received an electronic bank transfer from a client for $840 as an advance payment for services to be performed. Only 20% of the work was completed by 30 June. Received an invoice for $410 for telephone and internet charges for the month. 18 28

Answer 1

a.

Balance Sheet

Assets
Furniture	36000-(3120*1/12)	35740
Prepaid Insurance	3000*11/12	2750
Supplies	Given	230
Prepaid Rent	1200*15/30	600
Cash/Bank	See Note	2190
	TOTAL	41510
Liabilities and Capital
Short term Loan	Given	42000
Interest O/s thereon	42000*8%*1/12	280
Unearned Service Revenue	840*(100-20)%	672
Telephone and internet Charges payable		410
Capital
Net Income/(Loss)		-1852
	TOTAL	41510

b.

Income Statement

Service Revenue	840*20/100	168
Less:
Insurance	3000*1/12	250
Supplies	450-230	220
Telephone and Internet		410
Rent	1200*15/30	600
Depreciation	3120*1/12	260
Interest		280
Net Income/(Loss)		-1852

Note:

Cash/Bank a/c

Loan	42000	Furniture	36000
bank trfr	840	Supplies	450
		rent	1200
		Insurance	3000
		Balance c/d	2190
	42840		42840

depreciation : (36000- 4800)/10 = 3120 pa.