Tanah Lot is a retailing business. It has been using the perpetual inventory system since it started the business. The trial balance of Tanah Lot as at 30 September 2006, which is also its financial year ended, is shown below.

DR $’000 CR$’000
Rent revenue 33
Accounts payable 94
Notes payable, due after 2007 110
Capital 307
Allowance for doubtful debt 12
Discount received 24
Accumulated depreciation, at 1.10.2005:
-Building 100
-Office equipment 30
Notes payable, due on 31.12.2006 10
Sales 999
Land 120
Building 480
Office equipment 50
Cost of goods sold 660
Sales return 9
Advertising expense 6
Inventory(stock-in-trade), at 30.9.2006 85
Utilities expense 37
Cash at bank 27
Interest expense 13
Accounts receivable 120
Sundry operating expense 5
Prepaid insurance 18
Management consultancy expense 6
Transport outwards expense 17
Wages and salaries expense 66
1719 1719
Other data given:
1. Part of the building was rented out to a tenant at a rate of $3,000 per month. Tanah Lot has not collected the Sep.2006 rental. No entry has been made.
2. The allowance for doubtful debts account was considered adequate. No additional allowance was required.
3. The depreciation charges for building $8,000 and for office equipment $10,000 have not yet been provided.
4. The prepaid insurance in the above was valid from 01 Oct.2005 to 30 Sep.2006.
5. There was a sales promotion in Tanah Lot in the month of Sep 2006. An advertisement, costing $2,000, was placed in a local newspaper on 31 Aug. 2006. Tanah Lot has not yet paid. No entry has been made.
REQUIRED:
1. Prepare a detailed income statement for the year ended 30 Sep. 2006.
2. A Balance Sheet at 30 Sep. 2006.

What is expected rate of return

dream111, please see our guidelines for posting homework problems:
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Lot of work for someone here to do when we don't even see your efforts at doing your own homework.

I hv already done the homework, but tha answer is not balance, so I want someone tell me the important points in this homework, such as how to calculate the "required"part which is given.

If you've already done it, post your work. The link I gave you says you can post your work and we'll check - or did you bother to read it? I still can't see your work, and since we're not here to do your work for you, I can't offer anything than what I've already said. There isn't any point more important than any other. You have 5 adjusting entries and statements to do. It's all important.

P&L Statement for the year ended 30.Sep 2006

Sales 999
Less: Sales return (9)
Net Sales 990

Less: Cost of goods sold (660)
Less: ending inventory (85) 575

Gross profit 415
Add: Other Incomes:
Rental Revenue 33+3
Discount Received 24

475

Less: Expenses:
Advertising expense. 6+12
Utilities expense 37
Interest expense 13
Sundry operating expense 5
Insurance expense 18
Bad Debt expense 12
Management consultancy expense 6
Transport-Out 17
Wages & Salary expense 66
Depreciation expense 8+10 200

Net profit 275


Statement of Owner's equity

Capital 307
Add: Net profit 275
Ending Capital 582


Balance Sheet at the year 30.Sep 2006

Current Assets:
Cash at bank 27
Accounts Receivable 120+3
Less: Allowance for doubtful accounts 12
Ending inventory 85 223
Non-Current Assets:
Land 120
Building 480
Less: Accumulated Depreciation for building (100+8)
Office equipment 50
Less: Accumulated Depreciation for Office equipment (30+10) 502

725
Less: Liabilities:
Accounts Payable 94+2
Notes Payable 110-10
196

Net profit 529

Capital & Net profit is not balance.
WHERE IS THE MISTAKE?
Thanks for helping.

You've got a lot of it there and the adjusting entries are mostly good. Following is what I'm finding, starting from the top (meaning some sub-totals and such have to be re-figured as you go):

1) Ending inventory is not on the income statement. You're confusing perpetual with periodic. In the periodic system the inventory numbers are used to calculate COGS. But this is perpetual, meaning that the inventory account is constantly updated with every purchase and every sale. So the ending inventory is just what's on the balance sheet, and COGS is already caught up to date without you having to do anything to it.

2) Other Income and Other expenses go at the bottom of the statement after operating expenses, not right under gross profit. At early levels they will sometimes do a single-step statement and put this stuff right along within the main body of the statement with everything else. However, you are doing a multi-step statement and therefore the "others" should be at the very bottom.

3) Also on the rent revenue and any other accounts like this: don't show the math of your adjusting entries on the statements. You would never see a statement like that. That's internal work that would be done in your ledger accounts and perhaps on a worksheet, but not on the statements themselves. The statements should contain only the final balance. i.e. show the rent revenue as 36, etc.

4) A discount received isn't "income." You didn't even literally "receive" it. That's just an expression. You paid less for your invoices because of the discounts you got. I'm actually a bit confused over a couple of bits of the given information, namely this discount and the transportation. Technically, those would affect the cost of inventory, and consequently, cost of goods sold. (Transportation adding to it and the discount coming of it.) I'm not sure what they are wanting you to do with either of these -- on my statement that I threw together before checking yours, I actually adjusted the COGS with them, but wasn't sure what they expected. You need to look over your chapter and see how these are handled because I don't know what they've taught you. But something going against an expense isn't "income."

5) The advertising expense is incorrect. They may have just been a typo or something. Look at that again.

6) Interest expense belongs under that "other" section down at the bottom.

7) Bad debt expense. There was no adjusting entry necessary for this -- it outright said it didn't need adjusted. The amount in the allowance account DOES NOT equal the amount of expense for the year. When you make the entry, you use the same amount for both the expense and the allowance account, but that's the entry, not the balance. The balance can be anything. Furthermore, the unadjusted balances you're given in the problem were from entries already completed before the adjusting entries. You have no idea where those balances came from - that is, what the entries were that happened in that account to create that ending balance. And you can't journalize balances.

Keep in mind: income statement accounts close at the end of the year and start over at zero for a new year. Balance sheet accounts do not close, their balance carries over, and therefore two accounts used together like that doesn't mean the balances are going to equal each other, when one closes and one does not.

8) Don't know your book's opinion - check if they want you lumping the depreciation into one expense account like that, or separated for each individual asset. That's somewhat a "book thing" and an opinion. Most textbooks I've seen separate them.

9) All of the above of course is throwing off your net income, and consequently throwing off the ending capital balance, consequently throwing off the balance sheet.

As to the balance sheet:

10) For anything that has a "less" something, like the receivables has "less allowance", show the net of that subtraction. Ditto the ones with accumulated depreciation.

11) This is somewhat my opinion, but I think that rent that's due shouldn't be in accounts receivable but rather a rent recievable. Accounts receivables, otherwise known as trade receivables, is for your normal everyday business dealings, your customers. I consider rent to be outside the realm of that. Again, that's my opinion.

12) Missing some sub-totals, like total current assets, total plant assets, etc. Not sure I caught all those, but you need to show those numbers.

13) "Less liabilities"?? Were you taught that? The accounting equation is assets = liabilities + equity, not assets - liabilities = equity. While that mathematically works, the balance sheet is your accounting equation. First section is assets, totaled. Second section is the liabilities, followed by equity, then those totaled, which should equal assets.

14) Notes payable: two things on this one. First, there's two notes. That shorter-term date was not meant to imply that it's the current portion of a long-term debt, and therefore should be subtracted off the long-term one. It's a separate note. So you have two notes, one current and one long-term. The long-term should be separated into its own section, following the total of the current liabilities.

15) That 529 (which is a wrong number) is not "net profit." The last thing on the balance sheet should be your equity, which should be copied directly from the statement of owner's equity, right or not. Then you add it to liabilities and see if it balances with the assets. It doesn't equal because of some of the other errors.

See what you can do with all that...

The net profit in the income statement is 497?
Is it right or wrong?
Thanks.

Wrong. But obviously I don't know where you got that.

P&L Statement for the year ended 30.Sep 2006

Sales 999
Less: Sales return (9)
Net Sales 990

Less: Cost of goods sold (660)
Less: ending inventory (85)
Less: Transport Carriage-Out (17) 558
===================================>Gross profit 432

Add: Other Incomes:
Rental Revenue 33
Discount Received 24
489
------------------------------------
Less: Expenses:
Advertising expense. 6
Utilities expense 37
Interest expense 13
Sundry operating expense 5
Insurance expense 18
Bad Debt expense 12
Management consultancy expense 6
Wages & Salary expense 66
Depreciation expense 100+8+30+10
(311)
------------------------------------
==================================>Net profit 178


Balance Sheet at the year 30.Sep 2006

Statement of Owner's equity

Capital 307
Add: Net profit 178
Ending Capital 485

Current Assets:
Cash at bank 27
Accounts Receivable 120+3
Less: Allowance for doubtful accounts 12
Ending inventory 85
223
------------------------------------------------------485 + 223 ===>708

Fixed Assets:
Land 120
Building 480
Less: Accumulated Depreciation for building (100+8)
Office equipment 50
Less: Accumulated Depreciation for Office equipment (30+10)
502

Current Liabilities:
Accounts Payable 94
Notes Payable 110
Advertisement Payable 2
206

------------------------------------------------------502+206===>708

Balance! ^_^

P&L Statement for the year ended 30.Sep 2006

Sales 999
Less: Sales return (9)
Net Sales 990

Less: Cost of goods sold (660)
Less: ending inventory (85)
Less: Transport Carriage-Out (17) 558
===================================>Gross profit 432

Add: Other Incomes:
Rental Revenue 33
Discount Received 24
489
------------------------------------
Less: Expenses:
Advertising expense. 6
Utilities expense 37
Interest expense 13
Sundry operating expense 5
Insurance expense 18
Bad Debt expense 12
Management consultancy expense 6
Wages & Salary expense 66
Depreciation expense 100+8+30+10
(311)
------------------------------------
==================================>Net profit 178


Balance Sheet at the year 30.Sep 2006

Statement of Owner's equity

Capital 307
Add: Net profit 178
Ending Capital 485

Current Assets:
Cash at bank 27
Accounts Receivable 120+3
Less: Allowance for doubtful accounts 12
Ending inventory 85
223
------------------------------------------------------485 + 223 ===>708

Fixed Assets:
Land 120
Building 480
Less: Accumulated Depreciation for building (100+8)
Office equipment 50
Less: Accumulated Depreciation for Office equipment (30+10)
502

Current Liabilities:
Accounts Payable 94
Notes Payable 110
Advertisement Payable 2
206

------------------------------------------------------502+206===>708

Balance! ^_^

ryokolim, please do not do people's homework for them. It's their work to do and just getting answers from someone else is not only unethical, but generally it's not the way to actually learn. We are here to help people understand the material -- it's their responsibility to do it and then we can correct and comment and guide.

Please follow the guidelines set forth here:
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I feel very sORRY about this.
But sometimes answer do help people to find out why they are wrong, especially when they really don't understand.

Sometimes seeing an answer does help, but it doesn't change that you shouldn't do people's homework for them.

Besides, OP hasn't even been back to this thread and I think already has it all worked out.

You don't need to feel too sorry about it - now you know.

P&L Statement for the year ended 30.Sep 2006

Sales 999
Less: Sales return (9)
Net Sales 990

Less: Cost of goods sold (660)
Less: ending inventory (85)
Less: Transport Carriage-Out (17) 558
===================================>Gross profit 432

Add: Other Incomes:
Rental Revenue 33
Discount Received 24
489
------------------------------------
Less: Expenses:
Advertising expense. 6
Utilities expense 37
Interest expense 13
Sundry operating expense 5
Insurance expense 18
Bad Debt expense 12
Management consultancy expense 6
Wages & Salary expense 66
Depreciation expense 100+8+30+10
(311)
------------------------------------
==================================>Net profit 178


Balance Sheet at the year 30.Sep 2006

Statement of Owner's equity

Capital 307
Add: Net profit 178
Ending Capital 485

Current Assets:
Cash at bank 27
Accounts Receivable 120+3
Less: Allowance for doubtful accounts 12
Ending inventory 85
223
------------------------------------------------------485 + 223 ===>708

Fixed Assets:
Land 120
Building 480
Less: Accumulated Depreciation for building (100+8)
Office equipment 50
Less: Accumulated Depreciation for Office equipment (30+10)
502

Current Liabilities:
Accounts Payable 94
Notes Payable 110
Advertisement Payable 2
206

------------------------------------------------------502+206===>708

Balance! ^_^

Can u follow my answer and tell me where is the wrongly calculation in my answer?Thanks so much .~~

P&L Statement for the year ended 30.Sep 2006

Sales 999
Less: Sales return (9)
Net Sales 990

Less: Cost of goods sold (660)
Less: ending inventory (85) 575

Gross profit 415
Add: Other Incomes:
Rental Revenue 33+3
Discount Received 24

475

Less: Expenses:
Advertising expense. 6+2
Utilities expense 37
Interest expense 13
Sundry operating expense 5
Insurance expense 18
Bad Debt expense 12
Management consultancy expense 6
Transport-Out 17
Wages & Salary expense 66
Depreciation expense 8+10 200

Net profit 275


Statement of Owner’s equity

Capital 307
Add: Net profit 275
Ending Capital 582


Balance Sheet at the year 30.Sep 2006

Current Assets:
Cash at bank 27
Accounts Receivable 120-3
Less: Allowance for doubtful accounts 12
Ending inventory
85 241
Non-Current Assets:
Land 120
Building 480
Less: Accumulated Depreciation for building (100+8)
Office equipment 50
Less: Accumulated Depreciation for Office equipment (30+10) 502

743
Less: Liabilities:
Accounts Payable 94+2
Notes Payable 110+10
216

Net profit 527

Capital582 & Net profit527is not balance.
WHERE IS THE MISTAKE?
Thanks for helping.

can u follow my answer and tell me where is the wrongly calculation in my answer?Thanks so much .~~

What makes you think this was correct?

It looks much like this person simply copied a lot of what you had and then fixed a couple of things. But that doesn't make it correct. The reason I think they just copied off you is because it contains some of the same errors you had. Some things can be opinion, or the way the book is teaching, but some of it is just outright incorrect, plain and simple.

Less: Cost of goods sold (660)
Less: ending inventory (85) 575

Re-read what I wrote about this. Ending inventory does not come off cost of goods sold. The problem specifically states that you are doing a perpetual inventory system. Even if this were periodic, this wouldn't be the correct way to do it and you'd still end up out of balance.



Gross profit 415
Add: Other Incomes:
Rental Revenue 33+3
Discount Received 24

Re-read what I wrote about this. I will make two possible concessions. I stated that you were doing a multi-step income statement, in which case rent revenue would go at the bottom of the statement under "other." Looking at the instructions, it says a "detailed" statement. Your book may want it this way. I highly suggest you look it up to find out for sure.

I also stated that a discount received is not income. You didn't earn anything. You never "received" anything. Technically, the cost of inventory should be reduced by any discount you receive. But again, your book may be doing this differently. Again, I highly suggest you look it up to be sure.

(If you want to tell me what book/author this came from, I can check if I have that book and see what it says.)


Bad Debt expense 12

Re-read what I said about bad debt. If you don't understand it, ask me to explain better. But don't ignore it. This is not opinion or your book. This is just plain wrong because of what it specifically states in the problem.


Net profit 275

If we assume that the discount was on inventory already sold, then this is 73 too high. That is the net of having reduced your COGS by 85, and having put 12 of bad debt in that doesn't belong.


Accounts Receivable 120-3

Re-read what I said about this. This is the only error you've even attempted to correct. I said that I thought the 3 should be separated into Rent Receivable. Your book may disagree or may have not have gone over that concept yet. However, instead of separated it into a different account, you've simply gotten rid of it. The 3 does exist -- put it some place.


Accounts Receivable 120-3
Less: Allowance for doubtful accounts 12

What does "less" mean?


Notes Payable 110+10

Re-read what I said about this. I'm not repeating it.


Net profit 527

Re-read what I said about this. This it NOT net profit. The 275 from the income statement is net profit. (Well, the 275 is an incorrect number, but that's not the point. If that's what your income statement says, then you have to go with it until you find out otherwise.)


Capital582 & Net profit527is not balance.

Two things wrong with this statement. One I already stated: 527 is not net profit. It is assets less liabilities, meaning it's equity. Two, capital already had a balance in it -- if you ADD the net profit to it, then why would it still equal net profit? That's illogical.

You understand that the assets less liabilities should equal the capital number from the statement of owner's equity. But that number is not net profit!

Now, I'm going to say something very bluntly. Go back and count the number of times I had to repeat "re-read what I said about...." That equals the numbers of times you completely ignored what I said the first time around. That equals the number of times I've had to repeat myself, and I feel like I'm wasting my breath, not to mention a lot of my time.

I do not mind taking the time to go through a long problem like this. But not if you're going to pretty much ignore everything I say.

If you do not understand something I said, then ask for a clarification. But do not just ignore it. A lot of people here wouldn't have bothered to even do a second round of this after you pretty much ignored them the first time.

I felt very sorry about this... and thanks so much for your help. I knew that it took you a lot of time to mention that.
But I was still a bit confused .
I thought that the different way to do the P&L and balance sheet. I just follow my lecture's way to do it.
Which book I was taught was "John Hoggett, Lew Edwards, John Medlin, Matthew Tilling, Financial Accounting 7th edition, Australia."
I knew that you know how 2 do that but maybe using different ways.
Can you understand my way and tell me the right answer at last and so that I can check and correct.
Thanks.

Can u tell me the whole things about 5 adjusted data that was given about this question ? How 2 calculate correctly?
Thank u.

You're correct that I'm not going to be familiar with that book because it's Australian.

However, most of the things that may have been differences of book or country, I left them out in the second post.

Pretty much the stuff I left are going to be correct either way.

Just for instance, the issue of whether you should put rent revenue and interest expense under a section called "other revenue/expense" will be dependent partly on the level you're at and the book you're using. Even in the U.S. the first few chapters of a book do not teach this concept of separating this out. For a different country, I don't even honestly know if it should be separated out.

That's just an example. But that is the type of thing I mostly ignored in my second post, because I wasn't sure about your book or if this was for another country. That means if "your way" is different, I can't possibly know what it is. I've said on a couple of items that you need to check your book, and that is all you can do. (We have some people from Australia, but I don't know if they'll take the time to essentially start this from scratch.)

However, most of what I left in the second post is just the way it is. Some of it absolutely, positively is the way it is. Some of it I'm 99% sure of. Meaning, I think you should simply pay attention to those specific items that I reiternated in the second post. (Though you may have to backtrack to the first post for original comments.)

Examples of what I'm referring to:

Bad debt - the problem says the amount in bad debt is fine as is and not to make an adjustment. I don't care about the book or international differences. The problems says don't make any adjustment. So don't.
Net income isn't capital. Capital has a beginning balance. If you add net income to it, it changes the balance. Therefore, net income (profit) isn't the same as capital, it adds to capital. Again, your book will not disagree w/this and it has nothing to do with international rules.
You have 2 notes payables. They should be separated out, one is current and one long-term. The beginning chapters in a book might not bother with long-term debt, but if the problem is giving you dates, it means they want them separated. I don't think there are any international differences on something like that.


That is just examples. But everything I listed in the second post is not related to book differences or international differences (unless I specifically said so), meaning you need to pay attention to them.

can u tell me the whole things about 5 adjusted data that was given about this question ? How 2 calculate correctly?
Thank u.

But most of your issues aren't with the adjusting entries.

The only issue with #1 is that you included it in regular Accounts Receivable. I personally would separate it into a different receivable, simply because it's not part of your "trade." (Accounts receivable is also known as trade receivables.) However, this is one of those things where your book may not have introduced this idea. That is why in the second post I said perhaps it's OK to put it in Accounts Receivable, but that it needs put somewhere. I didn't mean for you to just get rid of it. You have to debit something -- you can't just drop it. And I didn't mean for you to subtract it from Accounts Receivable.

Re-read the original post on that. I was only referring to possibly separating it into a different receivable. That doesn't mean get rid of it altogether.

As for #2 -- I've already said this like 3 times now. Just read that again. Notice the part that basically says don't make an entry. So there's two issues with that. One is that you weren't supposed to make an entry to begin with. Secondly, that you put 12 in bad debt expense and didn't balance it with anything else, thereby putting yourself out of balance.

The rest are correct. Most of the other problems aren't related to the adjusting entries.

[QUOTE=dream111;1941600]
P&L Statement for the year ended 30.Sep 2006（Parts of it)

Add: Other Incomes:
Rental Revenue 33+3


Less: Expenses:
Bad Debt expense 12




Balance Sheet at the year ended 30 Sep. 2006(Parts of it)

Current Assets:
Accounts Receivable 120+3
Less: Allowance for doubtful accounts 12



This is the new one that I hv done again... not the original one...
It that adjusted correctly?
Thanks for helping.

P&L Statement for the year ended 30.Sep 2006（Parts of it)

Add: Other Incomes:
Rental Revenue 33+3

OK, so you got rid of the discount received from this section. But you have to do something with it. That 24 does have to count in the math somewhere.



Less: Expenses:
Bad Debt expense 12

Sigh. You didn't CHANGE anything here. You've only isolated the one expense.

I don't know how to state this any more simply than I already have. #2 says don't make any adjustment for bad debt. That's about as plain as you can get. There is no adjusting entry for bad debt.



Balance Sheet at the year ended 30 Sep. 2006(Parts of it)

Current Assets:
Accounts Receivable 120+3
Less: Allowance for doubtful accounts 12

That's fine.

U mean : no need to add" bad debt expenses 12" in P&L satement ? And also no need to subtract " allowance for doubtful debts12" in the Balance sheet?

u mean : no need to add" bad debt expenses 12" in P&L satement ? and also no need to subtract " allowance for doubtful debts12" in the Balance sheet?

You seem to not be getting the idea of what doing an entry means. An entry has equal debits & credits. The ENTRY has the equal debits & credits. That is not the same thing as an entry having one debit and a balance in another account having a credit in it. But that's what you're trying to do.

Entry:
Dr. Cash 1000
Cr. Acct Receivable 1000

Cash:
5000 balance in the account prior to the entry
1000 ADD the debit from the above entry
6000 balance in the account after posting the entry

Acct Receivable:
9000 balance in the account prior to the entry
(1000) SUBTRACT the credit from the above entry
8000 balance in the account after posting the entry

The entries are purple. Notice the entry has equal debits & credits. The balances are green. Notice everything else is just balances in the accounts. Those number are not relevant to the entry and have nothing to do with it. The entry changes those balances to new balances. Balances and entries are not the same thing. You don't put balances into entries, and they can't change without making an entry. Entries change balances.

Here is what you did:
Dr. Bad Debt Expense 12
NO CREDIT

Bad Debt Expense:
0 balance in the account prior to the entry
12 ADD the debit from the above entry
12 balance in the account after posting the entry

Allowance:
12 balance in the account prior to the entry
No entry cause you didn't do anything to it
12 balance in the account which is the same cause you didn't make an entry to it to change it.

You simply stuck the same 12 that already existed in the allowance account and put it in bad debt expense. But you seem to think that another account already having a prior credit balance of 12 in it is good enough. But note the entry has no credit.

I hope this illustration shows the difference between how balance and entries properly work, and what it is you did.

This is one reason you're out of balance. That entry that put 12 in bad debt expense doesn't have a credit in it. The credit that already exists in allowance is not in the entry. It simply already existed.

Now that said...

Sticking anything at all into bad debt expense should not have happened. In other words, this should never have happened to begin with:
Dr. Bad Debt Expense 12
NO CREDIT

The problem very explicitly says that no entry is needed. Please start reading more carefully. Not only is the problem coming right out and saying no entry is needed, but I've repeated it numerous times. That one-sided 'entry' up there with the bad debt expense should never have existed to begin with, cause the problem said don't do it.