2020 SMSS 3N POA EOY P2 Q5

2020 SMSS 3N POA EOY P2 Q5

5 Sparkling Clean Pte Ltd provides laundry services for hotels.  The service fee revenue account for the year ended 31 December 2019 is shown below.

Service fee revenue account

2019

 

Dr ($)

Cr ($)

Bal ($)

Jan 1

Service fee received in advance 

 

1 280

1 280 Cr

Mar 31

Cash at bank

 

25 000

26 280 Cr

Jun 20

Cash at bank

 

33 500

59 780 Cr

Oct 15

Trade receivables

 

12 900

72 680 Cr

Dec 31

Service fee received in advance 

800

 

71 880 Cr

REQUIRED

a. Interpret the entry on 1 January 2019.

[3]

b. Calculate the amount of service fee revenue collected for the year ended 31 December 2019.

[1]

c. State the accounts to be debited and credited for the adjustment on 31 December 2019.

[2]

d. State the total service fee revenue amount that should be transferred to the statement of financial performance for the year ended 31 December 2019.

[1]

e. Explain the transaction on October 15.

[2]

f. Interpret the entry on 31 December 2019.

[3]

g. Prepare an extract of the statement of financial position for the year ended 31 December 2019 to show the service fee received in advance.

[3]

[TOTAL 15]

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It refers to $1 280 of service fee revenue that was collected last year (2018) but the laundry services are only being provided in the current year. Hence the amount of $1 280 service fee revenue received in advance that was adjusted on 31 December 2018 is reversed and added to this year’s service fee revenue on 1 January 2019.

Service fee revenue collected

=$25 000 + $33 500 

=$58 500

Dr Service fee revenue

   Cr Service fee revenue received in advance

Total service fee revenue to be transferred is $71 880.

On 15 October 2020, the business has provided the laundry services worth $12 900 but the customer has not paid yet.

The amount refers to the service fee revenue of $800 collected this year while laundry services will only be provided next year after 31 December 2019. Therefore this amount needs to be removed from the total amount of service fee revenue earned for the year as an adjustment.

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