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Week 1 Questions

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Muzzamil Younus
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38 views12 pages

Week 1 Questions

Uploaded by

Muzzamil Younus
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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250. Bank Loan 30000 30000 300 Share Capital 35000 35000 310 Retained Earnings 311 Dividends 1000 1.000 400 Sales Rev 25900 28400 410 Commission Revenue 15000 17200 500 Salaries Expense 18 100 510 Rent Expense 5000 520 Depreciation Expense 530 Supplies expense 540 Electricity Expense 550 Interest Expense $116300 $136300 $124600 $124600 Required ‘a) Journalise the adjusting entries that were made b) Prepare an income statement and a calculation of ret 30 September and prepare a st ined earnings for the nent of financial position as 3, months endin at 30 September (©) Identify which accounts should be closed on 30 September. (@) Ifthe interest rate on the loan is 8%, when did the entity take out the loan? (©) Ifthe business uses straight line depreciation and it was estimated the residual value of the equipment was zero, calculate the estimated useful life of the equipment PSA3.6 Characters Led adjusted and unadjusted trial balances as of 30 June 2014 are follows: CHARACTERS LTD Trial Balances as at 30 June 2014 Unadjusted Adjusted No. Account name Dr cr Dr ce 100 Cash § 24520 § 24520 110 Accounts Receivable 2400 24080 130 Supplies 9400 5600 140 Prepaid Insurance 3750 2800 150 Printing Equipment 67200 67.200 151 Accumulated Depreciation 5 31360 $ 39200 200 Accounts Payable 5.600 5600 220 Interest Payable 120 230 Revenue Received in Advance 7840 6270 240 Salaries Payable 1400 250 Bank Loan (long term) 18000 18000 300. Share Capital 22.400 22400 310 Retained Earnings 6160 6160 311 Dividends 13440 13440 400 Revenue 65630 68880 500 Salaries Expense 11200 12600 Insurance Expense 950 Interest Expense 600 720 Depreciation Expense 7840 530 Supplies Expense 3800 540 Rent Expense 4 480 4.480 $156990 $156990 (continued dent Required Fe Aermalise the annual adjusting entries that Were made Ty calculation of retained earings for the of nancial position as at 30 June 2014 year ended {by Prepare an income statement and 30 june 2014 and prepare a statement < Te which accounts should be closed on 30 June: se taken out 6 months ago, what is the annua Mord, what was the balance in Salaries (© enti (@) Ifthe bank loan ws (© If the entity paid $13.400 in salaries in Payable on 30 June 2013? (p What is the effect on profit as a result of these adjusting entries? ecees~ (3) The income statement presents the performer ‘of the business over the past year hat other information concerning the proftablty fof the business would be useful for the financial statement users? als Lud opened for business on 1 April 201 ne 2014 presented on a worksheet: | interest rate on the loar? Prepare adjusting entries ‘jsted trial balance, and financial statements 4, Here is its trial PSA3.7__ Showroom Re balance before adjustment on 30 Ju (sts ‘SHOWROOM RENTALS LTD Worksheet as at 30 June 2014 | | | statement of Adjusted | Income financial tril btance_ suf step | poston — No.| Accous Te (es [oe or [oe Pe ees roo | cash + 5000 12 | Preald tnsurance 3000 20 | Land 30000 | 122 | Bullding 1000 tao | Furiture 33.60 do | accounts Payable 400 300 | Rent Revenue Received in vance 7200 nao | Mongage Payable 70000 Joo | Share capital 20000 400 | Rent Revenue 18400 i $05 | ndertsing Expense 1000 | 30 | pleccny Expense 2000 3s | salaries Expense 6000 ‘Totals 5225000 | $225.000 | | tn addition to those accounts listed on the tral balance the chart of accounts for ‘tid also contains the following accounts: 123 ‘Accumulated ocamulated Depreciation—Fumniture, 506 Depreciation rest Expense, and 530 Supplies Expense Showroom Rental Depreciation—Building, 131 Expense, 512 Insurance Expense, 515 Inte Other data 1. Insurance expires at the commencing 1 April 2014. 2, Sertnventory of supplies shows $2400 of unused supplies on 30 June. 2 jul depreciation is $7200 on the building and ‘$6000 on furniture 4 ‘of $300 per month and is an annual premium ale pr mongage interest rate is 12%. (The morgage WS taken out on 1 April.) Tas00 ofthe Rent Revenue Received in Advance pertains June. The remainder pertains to July 6, balaries of $600 are unpaid at 30 June. Required Re aising information provided complete the above worksheet. (A blank worksheet ormation Proyarse management sysiem that accompanies the t= ) available ecounting: Building business sits th eton 200 (b) Journalise the adjusting entries on 30 June. (©) Prepare a ledger using T accounts, Enter the trial bakince amounts as opening. balances and post the adjusting entries, ) Prepare an adjusted trial balance on 30 June ) Prepare the income statement and a calculation of retained earnings for the quarter ended 30 June 2014, and prepare the statement of financial position as at 30 June 2014, (Identify which accounts should be closed on 30 June, PSA3.8 O'Brien Cl following transactions were completed. July 1 Issued 20000 shares at $1 each. 1 Purchased used truck for $16000, paying $5000 cash and the balance on account. 3 Purchased cleaning supplies for $1200 on account. Paid $4800 cash on 1-year insurance policy effective 1 July -aning Lid began operations on 1 July 2013. During July the Complete all eps in accounting cyte (lors) 12 Invoiced customers $5240 for cleaning services 18 Paid $3000 cash of amount owed on truck and $800 of amount owed on cleaning supplies. 20 Paid $3200 cash for employee salaries. Collected $4000 cash from customers invoiced on 12 July Invoiced customers $3600 for cleaning services. 31 Paid petrol and oil for month on truck $400. 31 Paid $750 cash dividend. The chart of accounts for O’Brien Cleaning Ltd contains the following accounts and account ‘numbers: 100 Cash, 110 Accounts Receivable, 120 Cleaning Supplies, 130 Prepaid Insurance 170 Truck, 171 Accumulated Depreciation—Truck, 200 Accounts Payable, 210 Salaries Payable, 300 Share Capital, 310 Retained Earnings, 315 Dividends, 320 Income Summary 400 Service Revenue, 500 Petrol and Oil Expense, 510 Cleaning Supplies Expense, 520 Depreciation Expense, 530 Insurance Expense, and 540 Required (@) Journalise the July transactions. (b) Post to the ledger accounts (use T accounts). (© Prepare a trial balance as at 31 July (@) Journalise the following adjustments. 1, Services provided but not invoiced and uncollected at 31 July were $2000. 2. Depreciation on truck for the month was $250. 3. One-twelfih of the insurance expired, {, An inventory count shows $400 of cleaning supplies on hand at 31 July 5. Unpaid employee salaries were $300. ‘ ©) Post adjusting entries to the T accounts prepared in part (b). Prepare an adjusted trial balance, (g) Prepare the income statement and a calculation of retained earnings for July, and prepare a classified statement of financial position as at 31 July (h) Journalise and post closing entries and complete the closing process as if it were the end of the financial year. (@ Prepare a post-closing trial balance at 31 July (@ The business purchases cleaning supplies which are ‘environmentally friendly — but cost twice the price of understand why a business would not just try to reduce costs. Prepare a short response to Joe explaining why a business would choose to operate this way aries Expense. 1 alternative brand. Joe a potential investor doesn't cash = sao Gondieees Supplies Store Equipment Chapter 3: Accrual accounting concepts 201 depreciated 6, The office equipment has a 5-year life with no resale value and is being at $750 per month for 60 months. 7. Invoices representing $3000 of services performed during the month have not been recorded as of 30 June. Required (a) Prepare the adjusting entries for the month of June. (b) Using T accounts, enter the totals from the trial balance as beginning account balances and then post the adjusting entries to the ledger accounts. (©) Prepare an adjusted trial balance as at 30 June 2013. ‘) If the business wanted to report a higher profit which of the adjusting entries — above would be avoided? Which stakeholders would be affected by the misreported profit? PSB3.3. Matrix Ltd began operations on 1 July 2013. Quarterly financial statements Prepare adjusting entries, and are prepared. The trial balance and adjusted trial balance on 30 September are shown financial statements, identi Baa acs be cla MATRIX LTD Trial Balances as at 30 September 2013, Unadjusted Adjusted No. Account name Dr c Dr ce 100 Cash $8710 $ 8710 110 Commissions Receivable 520 1300 120 Prepaid Rent 1950 1170 130 Supplies 1560 1300) 150 Equipment 19500 19500 151 Accumulated Depreciation— Equipment $455 200 Accounts Payable $1963 1963 210 Salaries Payable 520 220 Interest Payable 65 230 Rent Rev. Recd in Advance 1170 780 250 Bank Loan 6500 6500 300 re Capital 18200 18200 310 Retained Earnings Es 311 Dividends 780 400 Commission Revenue 18200 18980 410 Rent Revenue 20 10 500 Salaries Expense 11700 12220 510 Rent Expense 1170 1950 520 Depreciation Expense 530 Supplies expense 260 540 Electricity Expense 663 663 550 Interest Expense 6 3 $46553 © $48373 Required @ Journalise the adjusting entries that were made. () Prepare an income statement and a calculation of retained earnings for the 3 months ending 30 September and prepare a statement of financial position as, at 30 September. (© Identify which accounts should be closed on 30 September (IF the ingerest ate on the loan is 12%, when did Matrix Ltd take out the loan? (Ohaper 3: Accu accounting concepts 205 Prepare adjusting entries from PSB34 The trial balances shown below are before and after adjustment for Digital analysts of tral balances: Ld at the end of its reporting period Drepare fonetal statements from adjusted til balan 045.6) DIGITAL LTD Trial Balancs ‘as at 30 June 2014 Unadjusted Adjusted ‘Account same Dr c Dr cr Cash $10400, $10400, Accounts Receivable 8800 9400 Office Supplies 2300 700 Prepaid Insurance 4.000 2500 Office Equipment 14000 14000 Acc. Depn—Office Equipment $ 3600 $ 4800 Accounts Payable 5.800 53800 Salaries Payable — 1100 Rent Rev. Recd in Advance 1500 700 Share Capital 10.000 10.000 Retained Earnings 5.600 5600 Service Revenue 34000 34.600 Rent Revenue 11.000 11800 Salaries Expense 17000 18100 Office Supplies Expense 1600 Rent Expense 15000 Insurance Expense 1500 Depreciation Expense 1200 374400 Required () Prepare the adjusting entries that were made (b) Prepare the income statement and the calculation of retained earnings for the year ended 30 June 2014 and prepare the statement of financial position as at 30 June 2014 (© Prepare the closing entries for the temporary accounts at 30 June, Prepare adjusting entries and PSB3.5 McPherson Led began operations on 1 January 2012. Quarterly financial statements ‘densify are prepared, The trial balance and adjusted trial balance on 31 March are shown below. MCPHERSON LTD Trial Balance as at 31 March 2012 Unadjusted Adjusted No. Account name Dr & 100 Cash $15750 110 Accounts Receivable 1300 120 Prepaid Rent 2000 130. Supplies 1500 150 Equipment 32000 32000 151 Accumulated Depreciation —Equipment $17 200 Accounts Payable $ 1840 210 Salaries Payable 1800 220 Interest Payable 250 230 Rent Rev. Reed in Advance 500 250 Bank Loan 15000 206 Accounting: uling business sis 4th eon Journalive transactions ‘prepare a tal balance Financial savoments Joxernalise transactions, post prepa 140 fatal balance and ‘Accounting: Bing business sis ~ 4 etion poH2.5 Roger Miller incorporated Skeptical Accountants, an accom practice, on Faia 2012. During the fist month of operations of his business, hess events and transactions occurred: Shareholders invested $52000 cash in exchange for shares in the company 1 2 Hired a receptionist at a salary of $1000 per month. 3 May Fase $1200 of supplies on account from Read Supply a Paid office rent of $900 for the month. 11 Completed a tax return and invoiced the client $1100 for service’ Prt fided. 1 ewetved $4500 advance on a management consulting engsgement 12 Received cash of $1200 for services completed for H. Armold ud. 31 Paid receptionist $1000 salary for the month 31 Paid 40%6 of balance owing to Read Supply 1d. the following chart of accounts is used: (100) Cash, (110) Accounts Receivable, Tris) Supplies, (200) Accounts Payable, (210) Revenue Received Advance, (300) Share Capital, (400) Service Revenue, (500) Salaries Expense and (510) Rent Expense, Required G) Journalise the transactions, including, narrations (b) Post to the ledger T accounts. (@ Prepare a trial balance on 31 May 2012. GQ) Prepare an income statement for the month of May anc financial position as at 31 May 2012. 4 a classified statement of psp2.6. The trial balance of Alice Springs Dry Cleaners on 30 June is BCD here: ALICE SPRINGS DRY CLEANERS ial Balance as at 30 June 2012 No, Account name Debit. —_—_Credit 100 $12 532 110 Accounts Receivable 10536 120 Supplies 4844 130. Equipment 25950 200 Accounts Payable $15878 210 Revenue Received in Advance 1730, 300. Share Capital 36254 ‘The July transactions were as follows: july 8 Collected $4936 in cash on 30 June accounts receivable 9 Paid employee salaries, $2100. 11 Received $4925 in cash for services provided. 14 Paid 30 June creditors $10750 on account 17 Purchased supplies on account, $554 2 Invoiced customers for services provided, $4700 22 Bald employee salaries $3114, elecciy $1584, and repatrs $492 31 Paid $500 cash dividend. Required Ee Prepare a general ledger using T accounts. Enter the opening balances in th Fadger accounts as of 1 July. Provision should be made fos ihe following additional eee ae G10) Dividends, (400) Dry Cleaning Revenue, (500) Repair Expenss G10) Salaries Expense, and (520) Electricity Expense. (b) Journalise the transactions. (Post to the ledger accounts, which you prepared in part (a) (@) Prepare a trial balance on 31 July 2012. QUESTIONS 1. G@) How does the accounting period concept affect an accountants analysis of accounting transactions? (b) Explain the term financial year accepted accounting, the accounts, Identify and state ewo generally principles that relate 10 adjustin | a solicitor, engagement in March, performs the work in Apri, and is paid in May. If Gale's law firm prepares monthly financial statements, when should it agement? Why? recognise revenue from this en 4, DE In completing the engagement in question 3, Gale incurs $4000 of expenses in March, $2000 in April, and $1000 in May expense should be deducted from revenues in the month the revenue is recognised? Why? How much Why might the financial information in a trial balance not be up to date and complete? 6, Distinguish between the two categories of adjusting entries, and identify the types of adjustments applicable to each category Explain the differences between depreciation expense and accumulated depreciation, 8. An entity has recognised revenue for which the services have not been performed but the cash BRIEF EXERCISES has been received. Which of the following accounts are involved in the adjusting entry a) asset, (b) liability, (©) revenue or (d) expense? Por the accounts selected, indicate whether they would be debited or credited in the entry 9, An entity recognised some expenditure as an expense but the future benefits have not expired, Indicate which of the following accounts is debited and which is credited in the adjusting entry (@) asset, (b) liability, (©) revenue or (A) expense. 10. For each of the following items before adjustment, indicate the type of adjusting entry — prepaid expense, revenue received in advance, accrued revenue, and accrued expense — that is needed to correct the misstatement. If the misstatement could result from more than one type of entry ach or all of the or unrecorded item, indicate adv (a) Assets a ments required. understated (b) Liabilities are overstated. (©) Liabilities are understated (a) Expenses are understated. (e) Assets are overstated. (B Revenue is understated, 11, What is the basic form and purpose of a worksheet? BE3.1 Transactions that affect profits do not necessarily affect cash, deny the impact of Frcarca rach nd Identify the effect, if any, that each ofthe following transactions would have upon [iin eorming cash and retained earnings. The fist transaction has been completed as an example Retained ; Cash earnings (a) Purchased $120 supplies for cash, = () Recorded an adjusting entry to record use of $60 of the above supplies (©) Made sales of $1200, all on account (@) Received $960 from customers in payment of their accounts. (©) Purchased a photocopier for cash, $3000 (, Recorded depreciation of building for period used, $1200. (@) Purchased inventory, $2000 on account. BE3.2 Riko Lid accumulates the following adjustment data at 31 December. Indicate Ident te major apes of () the type of adjustment (prepaid expense, accrued revenues, and so on) and (2) the adh entries Satus of the accounts before adjustment (overstated or understated) @) Supplies of $600 are on hand. Supplies account shows $1900 balance (b) Service provided to customers but not invoiced total $900, (©) Interest of $200 is due on a bank loan. (@) The period for which rent had been collected in advance, totalling $800, has expired. (Chapter 8: Accrual accounting concepts 189 £3.13 A review of the ledger of Woks Ltd at 30 June 2013 produces these data Prepan pertaining to the preparation of annual adjusting entries (Lo3.4 1. Prepaid Insurance $24 840: the entity has separate insurance policies on its buildings and its motor vehicles. Policy B4564 on the building was purchased on 1 January 2012 for $22200. The policy has a term of 3 years. Policy A2958 on the vehicles was purchased on 1 July 2012 for $6340, This policy has a term of 2 years 2. Subscription Revenue Received in Advance $117 300: the entity began selling magazine subscriptions on 1 April 2013 on an annual basis. The selling price of a subscription is $85, A review of subscription contracts reveals the following: Subscription start date _Number of subscriptions 1 Apsil 300 1 May 1 June The annual subscription is for 12 monthly issues. The June magazine for all of the subscriptions had been delivered to the subscribers at 30 June 2013. 3, Bank Loan $8500: the loan was taken out on 1 March at an annual interest rate of 94 4, Salaties Payable: There are eight salaried employees. Salaries are paid every Friday for the current week. Five employees receive a salary of $840 each per week, and three employees earn $1050 each per week. 30 June is a Wednesday. Employees do not work on weekends, All employees worked the last 3 days of June Required (a) Prepare the adjusting journal entries at 30 June 2013. (b) Explain why the business would not recognise the full subscription revenue when the customers sign up for the magazines and pay for the subscription, eee PROBLEM SET A Prepare ating ens post to ledger accounts, and PSA3.1_Hans Lid began operations on 1 May 2012. The trial balance at 30 June is as ate atte rab follows: HANS LTD Trial Balance as at 30 June 2012 No. Account name Debit Credit iF 100 Cash $ 17280 104 Accounts Receivable 13020 . 112 Prepaid Insurance 4800 113 supplies 6800 | 130.——Office Equipment 43200 200 Accounts Payable $9900 F213 Service Revenue Received in Advance 2.400 300 Share Capital 50000 400 Service Revenue 38300 500 Salaries Expense 11900 510 Rent Expense 600 3100600 $100600 In addition to those accounts listed on the trial balance, the chart of accounts for Hans Lid also contains the following accounts: 131 Accumulated Depreciation—Office Equipment, 218 Electricity Payable, 215 Salaries Payable, $20 Depreciation Expense, 515 Insurance Expense, 530 Electricity Expense, and 505 Supplies Expense. Other data: Supplies on hand at 30 June total $3600. ars aty bill for 8600 has not been recorded and will not be paid until next month 3. The insur Sev iges were performed during the period in relation to $1500 of Revenue Received in Advance aries of $3200 are owed at 30 June. A eatiice equipment has a 5-year life with no resale value and is being depreciated at §720 per month for 60 months. ce policy is for a year, commencing 1 May 2012. 1 erees sepresenting $4000 of services performed during the month have: not been recorded as of 30 June Required (a) Prepare the adjusting entries for the month of June Tiane'T accounts enter the tuals from the tral balance as beginning account bilnsces and then post the adjusting entries to the ledger accounts. (© Prepare an adjusted trial balance as at 30 June 2012. (@) Calculate the profit for the month. aa i impact on proft for the current period and year and future years the equipment was depreciated over 2 years not the 5 years and Yet the business uses the equipment for the 5 years Prepare adjusting entries 943.2. The unadjusted trial balance at 30 June 2014 for Combined Services Ld is as pout leigeraccounts and follows: prepare adjusted tial balance (1034s) COMBINED SERVICES LTD ‘Trial Balance as at 30 June 2014 No. Account name _Gredit_ 100 Cash 104 Accounts Receivable 112 Prepaid Insurance 113 Supplies 130 Office Equipment 15000 131 Accumulated Depreciation $1000 200 Accounts Payable 3700 213 Service Revenue Received in Advance 2.000 300 Share Capital 30000 310 Retained Earnings 3750 400 Service Revenue 23.400 500 Salaries Expense 17000 510 Rent Expense 1000 515 Insurance Expense 540 Electricity Expense 72850 $72850 rhe chan of accounts for Combined Services Lid contains the following accounts rn dite to those listed on the wial balance: 218 Electricity Payable, 215 Salaries Payable, 520 Depreciation Expense, and 505 Supplies Expense. Other data: 1. Supplies on hand at 30 june total $500. 1 er ity bill for $150 for June has not been recorded and will not be paid tun next month. 4, The balance of the prepaid insurance account is the annual premium for insurance commencing 1 January 2014 4. Sonis were performed during the current period in relation to $1500 of Revenue Received in Advance. 196 Accounting: Builing business sis ~Atn ton 5, Salaries of $2300 are owed at 30 June 6. Depreciation expense for the year is $2000. + Invoices representing $2200 of services performed during the month have not been recorded as of 30 June 2014. Required (@) Prepare the adjusting entries for the month of June (b) Using T accounts, enter the totals from the trial balance as beginning account balances and then post the adjusting entries to the ledger accounts. (o) Prepare an adjusted trial balance as at 30 June 2014, (@) Calculate profit or loss for the year ended 30 June 2014 (©) If the business wanted to report a higher profit which of the adjusting entries above would be avoided? Which stakeholders would be affected by the misreported profit? psA3.3 Perth Business Park Ltd began operations on 1 July 2013. Quarterly financial Prepare adjusting entre and eercraents are prepared, The tial balance and adjusted trial balance on 30 September nancle eemensy inn are shown below cco cls PERTH BUSINESS PARK Trial Balances as at 30 September 2013 Unadjusted Adjusted No. Account name Dr. & Dr, & 100 Cash $2475 $2475 110 Accounts Receivable 600 9900 120 Prepaid Rent 2250 130 Supplies 675 450 150 Equipment 22500 22500 151 Accumulated Depreciation— Equipment $1125 200 Accounts Payable $ 2265 2265 210 Salaries Payable 2100 220 Interest Payable 150 230 —_-Rent Rev. Recd in Advance 2100 900 250 Bank Loan 7500 7500 300 Share Capital 21000 21000 310 Retained Earnings = 311 Dividends 900 900 400 Commission Revenue 1800 11100 410 Rent Revenu 15000 16200 500. Salaries Expense 12000 510 Rent Expense 7500 520 Depreciation Expense 530 Supplies expense 540 Electricity Expense 765 550 Interest Expense $49,665 a @) Journalise the adjusting entries that were made. §®) Prepare an income statement and a calculation of retained earnings for the 3 months ending 30 September and prepare a statement of financial position as at iy 20 September, f©) Identify which accounts should be closed on 30 September. 4@) If the interest rate on the loan is 12%, when did the entity take out the loan? Cchaper 3: Accrual accounting concepts 197 pare PSA34 The trial FROG LTD. ‘Trial Balances as at 30 June 2012 No, Account name

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