Jagannath UniversityFaculty of Business Studies

Department of Accounting and Information SystemBBA Program (First year First Semester)

BBA – 1101: Principles of AccountingAcademic session: 2011-2012

Theory

1. Define accounting. Identify and describe the steps in the accounting process.2. Who are the users of Accounting information?3. What do you mean by GAAP? Mention the features of GAAP.4. “Accounting is an aid to management”-Discuss the statement.5. Why is accounting called the language of business?6. “ Bookkeeping and accounting are the same”-Do you agree? Explain.7. What are the differences between the Bookkeeping and accounting?8. What are the qualitative characteristics of accounting information.9. What are basic assumptions of accounting?10. What is the basic accounting equation? Define assets, liabilities and owners equity.11. Explain the elements of accounting equation.12. Explain with examples the effects of transactions on the accounting equation. 13. Define account. Describe the classification of account.14. What is double entry system? Discuss the advantages of double entry system.15. What is accounting cycle? Describe the steps in the accounting cycle.16. Show the differences between Journal and ledger.17. What is trial balance and what are its purposes?18. What do you mean by merchandising operations? Describe the operating cycle of a

merchandising company.19. Distinguish between perpetual and periodic inventory system.20. What do you mean by special journals? What are the advantages of special journals?21. What are subsidiary ledgers? What are the advantages of using subsidiary ledgers?22. Explain how transactions recorded in the sales journal and the cash receipts journal are

posted.23. Give some examples of general journal transactions for an organization using special

journals.24. What do you mean by adjusting entries? Why are adjusting entries are necessary?25. What are the different classes of adjusting entries? Discuss with example.26. Distinguish between accrual basis accounting and cash basis accounting.27. Why do accrual basis financial statements provide more useful information than cash

basis statements?28. What do you mean by closing entries? Why are closing entries are necessary?29. State the entries required to close accounts.30. What do you mean by reversing entries? Why are reversing entries are necessary?31. What do you mean by post closing trial balance?32. What is a work sheet? Explain the purpose of the work sheet.33. What are the five steps in preparing a work sheet?34. What is income statement? Show the specimen of a single-step and multi-step income

statement with imaginary figures.35. What is owners equity statement? Show the specimen of owners equity statement with

imaginary figures.36. What is a classified balance sheet? Show the specimen of classified balance sheet with

imaginary figures. 37. Distinguish between Capital Expenditure & Revenue Expenditure.38. Distinguish between Cash basis Accounting & Accrual basis Accounting.39. Distinguish between current and non-current liabilities.

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40. Explain the concept of business entity and going concern.41. Depreciation is a process of allocating cost for wear and tear, not a process of

valuation – Explain. 42. What is Stock Dividend? What is Stock Split? What results involved in stock split?43. Distinguish between Depreciation, Amortization and Depletion.44. What are Matching Principles and Revenue Recognition?45. Discuss the Qualitative Characteristics of Accounting Information.46. Discuss about Revenue Recognition Principle.47. What do you mean by the Conceptual Framework of Accounting?48. Explain the concept of Business Entity and Going Concern.49. Differentiate between Preferred Stock and Common Stock.50. Explain Contingent Liabilities.

Mathematical problems

Q. No. 1.

Mr. Suzan started his own delivery service, Mr. Suzan deliveries, on June 1, 2010. The following transactions occurred during the month of June.June 1: Mr. Suzan invested $10,000 cash in the business.June 2: Purchased an old van for deliveries for $10,000 for the purpose of deliveries. Mr. Suzan paid $2,000 cash and signed a notes payable for the remaining balance.June 3: Paid $500 for office rent for the month.June 5: Performed $2,400 of service on account.June 9: Withdrew cash $200 from the business for personal use.June 12: Purchased supplies for $150 on account.June 15: Received cash payment of $750 for service provided on June 5June 17: Purchased gasoline for $100 on account.June 20: Received a cash payment of $1,500 for service provided.June 23: Made a cash payment of $500 on the notes payable.June 26: Paid $250 for utilities.June 27: Hired delivery manager at a salary of $4,000 per month effective on July 1.June 29: Paid for the gasoline purchased on account on June 17. June 30: Paid salary of staff for the month $1,000.

Required: (a) Show the effects of the transactions on the accounting equation using the following

format:

Assets ==Liabilities + Owner’s Equity

Date Cash + Accounts Receivable + supplies+ D. Van = Accounts payable+ Notes payable + Capital

Include explanation for any exchanges in Mr. Suzan, capital account in your analysis(b) Determine how much owners equity increase or decrease for the month;(c) Prepare an Income Statement for the month ended June (d) Prepare a owner’s equity statement for June and (e) Prepare a Balance Sheet as at June 30, 2010.

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Q. No. 2.

The following selected transactions relate to ABC Company:March-1: Sold on credit Tk.20,000 to Aziz Brothers Terms 2/0, n/30.March-11:

Received payment in full from Aziz Brothers for balance due.

March-12:

Accepted Juno Company’s Tk.20,000; 6 months 12% note for balance due.

March-13:

Made ABC Company Credit Card sales for Tk.13,200.

March-15:

Made American Express Credit Card sales totaling Tk.6,700. A 5% service fee is charged.

March-30:

American express company made full payment.

April-11: Sold Accounts Receivable of Tk.8,000 to XYZ factor. They take a service charge of 2% of the account of receivables sold.

April-13: Received collections of Tk.8,200 on ABC Company credit card sales and added finance charges of 1.5% on the remaining balances.

May-10: Wrote off as uncollectible Tk.16,000 of Accounts Receivable. ABC uses the percentage of sales as basis to estimate bad debts.

June-30: Credit sales for the first six months total Tk.20,00,000. The bad debts percentage is 1% of credit sales. At June 30, the balance in the allowance account is Tk.3,500.

July-16: One of the accounts receivable written off in May was from Mr. Salim who pays the amount due Tk.4,000 in full.

Required: Prepare the journal entries for the above transactions.

Q. No. 3.

Medico started his own delivery service, Medico deliveries, on January 1, 2008. The following transactions occurred during the month of January.

January 1: Medico invested $90,000 cash in the business.January 2: Purchased an old van for deliveries for $15,000 for the purpose of deliveries. Medico paid $2,000 cash and signed a notes payable for $13,000.January 3: Paid cash $2,000 for office rent for the month of January 2008.January 7: Purchased office supplies for cash $3,000.January 10: Paid electric bill $1,000.January 12: Paid salary of staff for the month $4,000.January 13: Borrowed $27,000 from the bank.January 17: Purchase a delivery van for $10,000 on account.January 21: Earned revenues of $51,000 of which $13,000 is collected in cash and the balances are due.January 24: Withdrew cash $5,000 from the business for personal use.January 27: Paid $3,000 bills for advertisement.January 31: Cash received $2,000 for service of January 21

Required: (f) Show the effects of the transactions on the accounting equation using the following

format:

Assets ==Liabilities + Owner’s Equity

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Date Cash + Accounts Receivable + supplies+ D. Van = Accounts payable+ Notes payable + Capital

(g) Determine how much owners equity increase or decrease for the month;(h) Prepare an Income Statement for the month ended June (i) Prepare a owner’s equity statement for June and (j) Prepare a Balance Sheet as at 31st June 2008.

Q. No. 4.

Mr. Raman opens a transportation consulting business called The High Flyers and completes the following transactions in April:

April 1 Mr. Raman invested Tk.65,000 cash along with Tk.12,000 of office equipment.

2Prepaid Tk.8,000 cash for two months’ rent for an office. (Hint: Debit Prepaid Rent for Tk.8,000)

3Made credit purchases of office equipment for Tk.28,000 and office supplies for Tk.12,000.

6 Completed a Tk.25,000 project for a client, who will pay within 20 days.9 Completed services for a client and immediately received Tk.17,000 cash.

12 Paid cash to settle the account payable created on April 3.17 Paid Tk.12,000 cash for the premium on a 6-month insurance policy.22 Received payment for the work completed on April 6.25 Completed work for another client for Tk.7,500 on credit.27 Mr. Raman withdrew Tk.1,000 cash from the business for personal use.28 Purchased Tk.7,000 of additional office supplies on credit.30 Paid Tk.4,000 cash for this month’s utility bill.

Required

(a) Prepare general journal entries to record these transactions (use the account titles listed in part 2).

(b) Open the following accounts (use the balance column format): Cash (101); Accounts Receivable (104); Office Supplies (125); Prepaid Insurance (126); Prepaid Rent (130); Office Equipment (160); Accounts Payable (200); Mr. Raman, Capital (302); Mr. Raman, Withdrawals (303); Services Revenue (404); and Utilities Expense (790). Post journal entries to the accounts and enter the balance after each posting.

(c) Prepare a trial balance as of the end of this month’s operations.

Q. No.5.

Mr. Ruthann operates a fashion-consulting business that he began in March 2010. On March 31, 2010, the balance sheet for his business appeared as follows:

Mr. RuthannBalance SheetMarch 31, 2010

AssetsCurrent assets: Cash $10,000 Accounts receivable 800 Office supplies 200 Total assets $11,000

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Liabilities and Owner’s EquityCurrent Liabilities: Accounts payable $500Owner’s Equity Mr. Ruthann, Capital 10,500 Total Liabilities and Owner’s Equity

$11,000

During April 2010, his business engaged the following transactions:

April 5 Purchased office supplies in the amount of $300 on account.

7 Paid $700 in office rent for the month of April

10 Hired a receptionist to begin work on April 15. 17 Paid the amount owed on open account on March 31. 19 Performed consulting services for cash in the amount of $900. 21 Collected $600 of amount owed on account. 27 Purchased land for a future store at a cost of $8,000 and signed a notes. 29 Billed customers for service rendered during the month $1,800. 30 Paid receptionist $500 in wages for the last half of April. 30 Mr. Ruthann withdrew Tk.1,000 cash from the business for personal use.

Required

(d) Prepare general journal entries to record these transactions (use the account titles listed in part b).

(e) Open the following accounts (use the balance column format): Cash (101); Accounts Receivable (111); Office Supplies (135); Land (151); Accounts Payable (201); Notes Payable (252); Mr. Ruthann, Capital (301); Mr. Ruthann, Withdrawals (311); Services Revenue (423); Salaries expenses (705) and Rent Expense (715). Post journal entries to the accounts and enter the balance after each posting.

(f) Prepare a trial balance as of the end of this month’s operations.

Q. No. 4.

The ledger balances of Agora Company on September 30, 2005 were as follows: Assets: Cash-Tk. 80,000, Equipment- Tk. 40,000 and Accounts Receivable-Tk.48, 000. Liabilities: Accounts Payable- Tk. 32,000, Note Payable Tk. 40,000; Owner’s Equity: Capital-Tk. 96,000. Transactions during the month:Oct- 01: Paid 80% of accounts payable amountsOct- 04: Purchased another furniture of Tk. 35,000 paying 80% amount is cash and issuing a note for the rest balanceOct-20: Cash collected from accounts receivable Tk. 27,000Oct-22: The owner withdrew Tk. 4,000 from business for his personal useOct-27: Service provided but unbilled of Tk. 8,000Oct-31: Salary unpaid Tk. 5,000Oct-31: Utility bill received for Tk. 2,0 00Required: Prepare a summary of transaction showing effects in accounting equation. Use column heading and balances as given above. Use “Accounts Payable” for any expense due as liability. Determine the balances after transaction.

Q. No. 5.

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The ledger balances of Agora Company on September 30, 2005 were as follows: Assets: Cash-Tk. 40,000, Furniture- Tk. 20,000 and Accounts Receivable-Tk.24, 000. Liabilities: Accounts Payable- Tk. 16,000, Note Payable Tk. 20,000; Owner’s Equity: Capital-Tk. 48,000. Transactions during the month:Oct- 01: Paid 70% of accounts payable amountsOct- 04: Purchased another furniture of Tk. 25,000 paying 80% amount is cash and issuing a note for the rest balanceOct-20: Cash collected from accounts receivable Tk. 17,000Oct-22: The owner withdrew Tk. 5,000 from business for his personal useOct-27: Service provided but unbilled of Tk. 8,000Oct-31: Salary unpaid Tk. 5,000Oct-31: Utility bill received for Tk. 2,500 Required Prepare a summary of transaction showing effects in accounting equation. Use column heading and balances as given above.. Determine the balances after transaction.

Q. No. 6.

Mr. Anderson opens a transportation consulting business called The High Flyers and completes the following transactions in April:

April 1 Mr. Anderson invested Tk.75,000 cash along with Tk.20,000 of Machinery.

2 Prepaid Tk.5,000 cash for two months’ rent for an office. (Hint: Debit Prepaid Rent for Tk.5,000)3 Made credit purchases of store equipment for Tk.18,000 and store supplies for

Tk.15,000.6 Completed a Tk. 25,000 project for a client, who will pay within

15 days.9 Completed services for a client and immediately received Tk.27,000 cash.

10 Paid cash to settle the account payable created on April 3.19 Paid Tk.8,000 cash for the premium on a 6-month insurance policy.22 Received payment for the work completed on April 6.25 Completed work for another client for Tk.33,000 on credit.30 Mr.Anderson withdrew Tk.12,000 cash from the business for

personal use.30 Purchased Tk.14,000 of additional store supplies on credit.30 Paid Tk.12,000 cash for this month’s utility bill.

Required

(g) Prepare general journal entries to record these transactions (use the account titles listed in part 2).

(h) Open the following T accounts : Cash (103); Accounts Receivable (105); Store Supplies (125); Prepaid Insurance (126); Prepaid Rent (130); Machinery (160); Accounts Payable (200); Mr. Anderson, Capital (301); Mr. Anderson, Withdrawals (303); Services Revenue (400); and Utilities Expense (750). Post journal entries to the accounts and enter the balance after each posting.

(i)  Prepare a trial balance as of the end of this month’s operations.

Q. No. 7.

A Tabular analysis of the transactions made by Mr. Jags for the month of June 2008 shows below:

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Serial No

Cash (Tk.)

Machinery(Tk.)

Prepaid Salary (Tk.)

Accounts Receivable (Tk.)

Office Supplies (Tk.) =

Accounts Payable (Tk.)

Notes Payable (Tk.)

Capital (Tk.)

Remarks

1 +3,00,000

+3,00,000

Investment

2 -50,000 +50,000

3 -20,000 +20,000

4 -18,000 +72,000

+54,000

5 -13,000 +13,000

6 -10,000 +30,000

+20,000

7 +42,000

+38,000

80,000 Service Revenue

8 -16,000 -16,0009 -12,000 -12,000 Drawings10

-20,000 -20,000 Salary

11

+28,000

-28,00

012

+18,000

-18,000 Rent Expenses

Required:a. Describe each transaction that occurred for the month of June;b. Determine how much owners equity increase or decrease for the month;c. Prepare an Income Statement for the month ended June d. Prepare a owner’s equity statement for June and e. Prepare a Balance Sheet as at 31st June 2008.

Q. No. 8.

Mr. Moby started his own delivery service, Moby deliveries, on January 1, 2006. The following transactions occurred during the month of January.

January 1: Moby invested $4, 00,000 cash in the business.January 1: Purchased an old van for deliveries for $55,000 for the purpose of deliveries. Moby paid $22,000 cash and signed a notes payable for $33,000.January 3 : Paid cash $20,000 for office rent for the month of January 2006.January 7: Purchased office supplies for cash $25,000.January 10 : Paid electric bill $10,000.January 12: Paid salary of staff for the month $8,000.January 13 : Borrowed $70,000 from the bank.January 17 : Purchase a delivery van for $40,000 on account.January 21: Earned revenues of $80,000 of which $25,000 is collected in cash and the balances are due.January 24: Withdrew cash $15,000 from the business for personal use.

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January-25: At a monthly payment of Tk. 60,000, a manager was employed who will join in the next month.

January 27: Paid $5,000 bills for advertisement. January 31: Cash received $35,000 for service of January 21Required:

(i) Show the effects of the transactions on the accounting equation using the following format:

Assets ==Liabilities + Owner’s Equity

Date Cash + Accounts Receivable + supplies+ D. Van = Accounts payable+ Notes payable + Capital

(ii) Determine how much owner’s equity increase or decrease for the month.(iii) Prepare an Income Statement for the month ended January(iv) Prepare a owner’s equity statement for January and (v) Prepare a Balance Sheet as at 31st January 2006.

Q. No. 9.Pretext opened a law office on July 31, 2006. On July 31, the balance sheet showed Cash $1,90,000; Accounts Receivable $50,000; Land & Building $25,000; Office Equipment $27,000; Accounts Payable$24,000, Notes Payable $40,000.During the August the following transactions occurred:August 1: Purchase computer terminals for $80,000 from digital equipment on account.August 5: Paid $15,000 cash for rent on storage space.August 10: Collected $40,000 of accounts receivable.August 12: Paid $4,000 cash on notes payable.August 15: Earned fees $90,000, of which 20,000 is collected in cash and the balance in due September.August 17: Purchase additional office equipment for $70,000, paying $24,000 in cash and the balance on account.August 21: Paid salary $2,000, rent for August $4,000 and advertising expense $3,000.August 24: Withdraw $2,000 in cash for personal use.August 26: Borrowed $90,000 cash from Standard Chartered – Grind lays Bank.August 31: Incurred salary expenses for month on account $4,000 Requirements:

i) Record these transactions in the journal book of Pretext.ii) Determine the ledger balance of all related accounts.iii) Prepare trail balance on August 31, 2005 for Pretext.

Q. No. 10.

A Tabular analysis of the transactions made by Michel for the month of January 2006 shows below:

S.L. No

Cash (Tk.)

Building

(Tk.)

Prepaid

salary

(Tk.)

Accounts

Receivable (Tk.)

Office Supplies (Tk.)

=

Accounts

Payable (Tk.)

Notes Payable (Tk.)

Capital (Tk.)

Remarks

1 +9,00,000

+9,00,000

Investment

2 -80,000 +80,000

3 -20,000 20,000

4 -6,000 +24,00 +18,00

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0 05 -22,000 +22,00

06 -2,000 +6,000 +4,0007 +52,00

0+48,00

01,00,00

0Revenues

8 -10,000 -10,0009 -22,000 -22,000 Drawing

s10 -20,000 -20,000 Salary11 +46,00

0-46,000

12 +9,000 -9,000 Rent Exp.

Required:f. Describe each transaction that occurred for the month of January.

(10)g. Determine how much owners equity increase or decrease for the month:

(2)Q. No. 11.

Pretext opened a law office on July 31, 2006. On July 31, the balance sheet showed Cash $1, 90,000; Accounts Receivable $50,000; Land & Building $25,000; Office Equipment $27,000; Accounts Payable$24,000, Notes Payable $40,000.During the August the following transactions occurred:August 1: Purchase computer terminals for $70,000 from digital equipment on account.August 5: Paid $5,000 cash for rent on storage space.August 10: Collected $30,000 of accounts receivable.August 12: Paid $2,000 cash on notes payable.August 15: Earned fees $80,000, of which 20,000 is collected in cash and the balance in due September.August 17: Purchase additional office equipment for $80,000, paying $24,000 in cash and the balance on account.August 21: Paid salary $2,500, rent for August $4,000 and advertising expense $3,000.August 24: Withdraw $2,000 in cash for personal use.August 26: Borrow $90,000 cash from Standard Chartered – Grind lays Bank.August 31: Incurred salary expenses for month on account $4,000 Required:

iv) Record these transactions in the journal book of Pretext.v) Determine the ledger balance of all related accounts.vi) Prepare trial balance as on August 31, 2006 for Pretext.

Q. No. 12.

Rungs Electric Contracting Company has the following trail balance as of August 31, 2006

Rungs Electric Contracting Company

Trial BalanceAugust 31, 2006

SL# Accounts Name Ref Debit Tk. Credit Tk.

1 Cash 5,0002 Accounts Receivable 3,2003 Prepaid Insurance 2,400

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4 Supplies 1,3005 Machinery 60,0006 Accounts Payable 2,4007 Capital 30,0008 Drawings 10009 Service Revenue 14,900

10 Note Payable 30,00011 Advertising Expense 60012 Salaries Expense 3,00013 Utilities Expense 400

Total 77,300 77,300

Additional data:1. Insurance expires at the rate of Tk. 200 per month.2. Supplies of Tk.300 were used during the period.3. Interest expense of Tk.1, 000 on the notes payable has accrued during the

august.4. Depreciation expense on machinery Tk.500.Required:i) Prepare formal Income Statement for the month ended August 31, 2006.ii) Prepare a Statement of owners equity for the month ended August 31,

2006.iii) Prepare a Balance Sheet for the company as on August 31, 2006.

Q. No. 13.

The balance of Priyo contained the following accounts at December 31, the end of company’s fiscal year.

Priyo Trial Balance

December 31, 2008Name of the accounts Unadjusted trial

balanceAdjusted trial balance

Cash Tk. 66,700 Tk. 66,700

Notes Receivable 40,700 45,700Merchandise Inventory 45,000 46,000Office Supplies 5,500 3,500Delivery Equipment 70,000 70,000Plant and machinery 10,000 10,000Accumulated Dep’n-Delivery Equip’t Tk.18,00

027,000

Furniture 40,000 50,000Notes payable 59,000 69,000Mortgage payable 58,500 58,500Bonds payable 20,000 20,000Capital 108,000 108,000Drawing 12,000 12,000Sales revenue 759,200 764,200Sales salaries expenses 4,200 4,200Cost of goods sold 497,400 496,400Interest expense 2,300 2,300Utilities expense 140,000 140,000Advertisement expense 24,100 24,100Wages 9,000 10,000

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Repair expense 12,100 12,100Office supply expense 16,700 18,700Rent expense 24,000 24,000Sales commission 5,000 5,000Wages expense payable 2,000 3,000Depreciation expense-Delivery equip’t 9,000Total 10,24,700 10,24,70

010,49,70

010,49,70

0Required:

(i) Pass the adjusting journal entries.(ii) Complete the column work sheet by extending the balances to the

financial statement columns. (iii) Prepare formal Income Statement for the month ended December 31,

2008.(iv) Prepare a Statement of owners equity for the month ended December 31,

2008.(v) Prepare a Balance Sheet for the company as on December 31, 2008.

Q. No. 14.

Identify how each of the following separate transactions affects financial statements. For the balance sheet, identify how each transaction affects total assets, total liabilities, and equity. For the income statement, identify how each transaction affects net income. For increases, place a “+” in the column or columns. For decreases, place a “-“ in the column or columns. If both an increase and a decrease occur, place a “+/-“ in the column or columns.

Income Balance Sheet Statement Statement

Total Assets= Total Liabilities + Oweners Equity Net IncomeTransactions

1. Owner invests cash2. Buys supplies for cash3. Buys supplies on credit4. Pays rent with cash5. Performed service on credit6. Pays cash on payable from (3)7. Owner withdraw cash8. Perform service for cash9.Collects cash on receivable from (5)10. Ordered supplies

Q. No. 15.

Stock car enthusiast Cam Wheel left his day job to pursue racing full-time. He completed the following transactions in the month of May.

a. Cam Wheel invested $20,000 cash along with an automobile valued at $15,000 in a new sole proprietorship named The Racing Wheel.

b. Paid $500 office rent for the month

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c. Purchased a new $17,000 engine for his race car. He paid $3,000 with the remainder due in 30 days.

d. Purchased $4,000 of office supplies on account.

e.Service provided for Cash $9,200.

f. Service provided for Cash $4,500 and on credit $3,500.

g.Advertising expenses on credit $500

h.Paid $400 utilities expenses to pit crew.

i. Received full payment on the receivable created in transaction f.

j. Withdrew $1,000 to celebrate the victory.

k.The payment of accounts payable for cash $800Required: Prepare a summary of transaction showing effects in accounting

equation. Use column heading and balances as given above. Use “Accounts Payable” for any expense due as liability. Determine the balances after transaction.

Q. No. 16.

George Jung opens a transportation consulting business called The High Flyers and completes the following transactions in April:April 1 Jung invested $74,000 cash along with $6,000 of office equipment.

2 Prepaid $3,000 cash for two months’ rent for an office. (Hint: Debit Prepaid Rent for $3,000)

2 Made credit purchases of office equipment for $8,000 and office supplies for $2,900.

7 Completed a $15,500 project for a client, who will pay within 20 days.

9 Completed services for a client and immediately received $17,000 cash.

10 Paid cash to settle the account payable created on April 2.19 Paid $12,000 cash for the premium on a 6-month insurance policy.22 Received payment for the work completed on April 6.25 Completed work for another client for $7,590 on credit.30 Jung withdrew $100 cash from the business for personal use.30 Purchased $6,100 of additional office supplies on credit.30 Paid $700 cash for this month’s utility bill.

Required

(a) Prepare general journal entries to record these transactions (use the account titles listed in part 2).

(b) Open the following accounts (use the balance column format): Cash (101); Accounts Receivable (106); Office Supplies (124); Prepaid Insurance (128); Prepaid Rent (131); Office Equipment (163); Accounts Payable (201); George Jung, Capital (301); George Jung, Withdrawals (302); Services Revenue (403); and Utilities Expense (690). Post journal entries to the accounts and enter the balance after each posting.

(c) Prepare a trial balance as of the end of this month’s operations.

(d) Prepare an Income Statement;(e) Prepare a Statement of owner’s equity;(f) Prepare a Classified Balance Sheet in an account form.

Q. No. 17.

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Dolly Parton opened a law office, Dolly Parton , attorney at Law, on June 1, 2002. On June 30, the balance sheet showed Cash $40,000; Bills Receivable $10,000; Office Supplies $20,000; Office Equipment $25,000; Machinery $15,000; Bills Payable 6,000, and Dolly Parton Capital $1,04,000. During the July the following transactions occurred:

a. Purchase additional office equipment for$6,000; paying $1,000 in cash and the balances are on account.

b. Paid the office rent for three months in advance on the law office $2,700;c. Purchase additional office supplies on credit $4,000;d. Traded the old machinery and $3,000 in cash for purchases a new machinery.e. Performed $4,000 of service on account;f. Earned revenues of $20,000 of which $9,000 in cash and the balance is due in

September.g. Paid $1,000 of the amount owed for the office supplies purchased on credit in

transaction (c).h. Received $15,000 cash for service provided;i. Collected $5,000 of Bills receivable.j. Paid Utility bills $3,000.k. Withdrew$1,000 from the business to pay personal expenses.l. Paid wages $2,500; office salaries for July $1,000 and Stationery expenses

$1,500Required:

a. Record Dolly Parton transactions in an expanded accounting equation .Use the description column to provide a brief explanation of each transaction.

b. Journalize the transactions;c. Post to the necessary Ledger Accounts;d. Prepare a Trial Balance for July 31,2002;e. Prepare an Income Statement for July31, 2002;f. Prepare a Statement of owner’s equity for July 31,2002;g. Prepare a Classified Balance Sheet in an account form at July31, 2002.

Q. No. 18.

Michelle Pfeiller opened a law office, Michelle Pfeiller, attorney at Law, on July 1, 2003. On July 31, the balance sheet showed Cash $80,000; Accounts Receivable $20,000; Office Supplies $40,000; Office Equipment $50,000; Machinery $30,000; Accounts Payable 12,000, and Michelle Pfeiller Capital $2,08,000. During the August the following transactions occurred:

a. Paid salaries, $5,000; office expenses $4,000 and advertisement expenses $3,000

b. Paid the rent for two months in advance on the law office $5,000;c. Purchase additional office equipment for$15,000; paying $12,000 in cash and

the balances are on account.d. Purchase additional office supplies on credit $16,000;e. Traded the old machinery and $14,000 in cash for purchases a new

machinery.f. Received $20,000 cash for service provided;g. Performed $5,000 of service on account;h. Earned revenues of $20,000 of which $8,000 in cash and the balance is due in

September.i. Paid $4,000 of the amount owed for the office supplies purchased on credit in

transaction (d).j. Collected $2,000 of accounts receivable.k. Paid Utility bills $6,000.

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l. Withdrew$5,000 from the business to pay personal expenses.Required:

a. Record Michelle Pfeiller transactions in an expanded accounting equation .Use the description column to provide a brief explanation of each transaction.

b. Journalize the transactions;c. Post to the necessary “T” Accounts;d. Prepare a Trial Balance;e. Prepare an Income Statement;f. Prepare a Statement of owner’s equity;g. Prepare a Classified Balance Sheet in an account form.

Q. No. 19. A-1 Answering Service

Trial Balance As At December 31, 2010Balance Sheet Accounts: Debit ($) Credit ($)Cash 1,18,592Accounts Receivable 6,500Framing Supplies 1,800Unexpired Insurance 4,500Land 52,000Building 36,000Accumulated Depreciation: Building 1,500Lodge 12,000Accumulated Depreciation: Lodge 2,000Notes Payable 4,000Accounts Payable 2,690Income Tax Payable 1,560Unearned Rent Revenue 9,000Capital Stock 80,000Mortgage payable 1,00,000Retained Earnings 0Dividends 14,000Income Statement Accounts:Answering Service Revenue 171,250Advertising Expense 3,900Wages Expense 56,800Supplies Expense 6,900Depreciation Expense: Building 1,500Depreciation Expense: Tools and Equipment

2,000

Utilities Expense 19,400Insurance Expense 13,500Income Tax Expense 22,608Total 3,72,000 3,72,000

Additional information:(a) Framing Supplies used in December $600.(b) Portion of Insurance Cost Expired in December $1,500.(c) Depreciation on Building for December $150.(d) Depreciation of Lodge for December $200.(e) Earned one-third of Rent Revenue collected in advance from Harbor Cab.$

3,000.(f) Unpaid Wages owed to Employees at December 31, $1,950.(g) Interest Payable accrued during December $30.(h) Repair Service Revenue earned in December but not yet billed $750.

Page 14 of 35

(i) Income Tax Expense for December $4,020 not accounted for.(j) Mortgage interest rate is 10%. Assume that $10,000 of the mortgage payable

will be paid in 2011.

Required:(a) Prepare Ten column worksheet as at December 31, 2010. (b) Pass the necessary closing journal entries on December 31, 2010(c) Prepare the necessary reversing entries on December 31, 2010.

[10+3+2=15]

Q. No. 20.As on December 31, 2010 the end of annual accounting period, the trial balance of the ledger of Mahal Store are as follows:

MAHAL STORETRIAL BALANCE

DECEMBER 31, 2010Sl. No.

Name of Accounting Debit Tk. Credit Tk.

1 Cash and cash equivalents 1,90,0002 Accounts Receivable 166,0003 Merchandise inventory 300,0004 Purchase 3,310,0005 Prepaid Insurance 38,0006 Store Equipment 800,0007 Accumulated D/P – Store Equipment 170,0008 Accounts Payable 190,0009 Mahal – Capital 10,00,00010 Mahal – drawings 220,00011 Sales 4,830,00012 Sales Return & allowances 150,00013 Sales Discount 72,00014 Purchase Return & allowances 100,00015 Purchase Discount 64,00016 Freight in 122,00017 Freight out 75,00018 Advertising expenses 155,00019 Rent expenses 200,00020 Salaries expenses 395,00021 General expenses 165,00022 Vat current account 4,000

Total 7,258,000 7,258,000Additional information:(a) Merchandise inventory on hand at December 31, 2010 is Tk. 395,000.(b) Merchandise in transit at December 31, 2010 costing Tk. 5,000, which was

shipped by a supplier under the terms F.O.B Shipping point and recorded as purchase but not included in ending Merchandise inventory.

(c) Insurance expired during the period is Tk. 20,000.(d) Salaries accrued but not paid Tk. 10,000.(e) Depreciation expenses are changed during the period was Tk. 80,000.(f) General expenses include Tk. 15,000 for utilities, which is to be treated as

selling expenses.

Required:

(i) Multiple Income Statement.

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(ii) Owner’s Equity Statement.(iii) Balance Sheet.

Q. No. 21. A-1 Answering Service

Trial Balance As At December 31, 2010Balance Sheet Accounts: Debit ($) Credit ($)Cash 1,18,592Accounts Receivable 6,500Framing Supplies 1,800Unexpired Insurance 4,500Land 52,000Building 36,000Accumulated Depreciation: Building 1,500Lodge 12,000Accumulated Depreciation: Lodge 2,000Notes Payable 4,000Accounts Payable 2,690Income Tax Payable 1,560Unearned Rent Revenue 9,000Capital Stock 80,000Mortgage payable 1,00,000Retained Earnings 0Dividends 14,000Income Statement Accounts:Answering Service Revenue 171,250Advertising Expense 3,900Wages Expense 56,800Supplies Expense 6,900Depreciation Expense: Building 1,500Depreciation Expense: Tools and Equipment

2,000

Utilities Expense 19,400Insurance Expense 13,500Income Tax Expense 22,608Total 3,72,000 3,72,000

Additional information:(k) Framing Supplies used in December $600.(l) Portion of Insurance Cost Expired in December $1,500.(m) Depreciation on Building for December $150.(n) Depreciation of Lodge for December $200.(o) Earned one-third of Rent Revenue collected in advance from Harbor Cab.$

3,000.(p) Unpaid Wages owed to Employees at December 31, $1,950.(q) Interest Payable accrued during December $30.(r) Repair Service Revenue earned in December but not yet billed $750.(s) Income Tax Expense for December $4,020 not accounted for.(t) Mortgage interest rate is 10%. Assume that $10,000 of the mortgage payable

will be paid in 2011.

Required:(d) Prepare Ten column worksheet as at December 31, 2010. (e) Pass the necessary closing journal entries on December 31, 2010

Page 16 of 35

(f) Prepare the necessary reversing entries on December 31, 2010

Q. No. 22.OVERNIGHT AUTO SERVICE

Trial Balance As At December 31, 2009Balance Sheet Accounts: Debit ($) Credit ($)Cash 18,592Accounts Receivable 6,500Shop Supplies 1,800Unexpired Insurance 4,500Land 52,000Building 36,000Accumulated Depreciation: Building 1,500Tools and Equipment 12,000Accumulated Depreciation: Tools and Equipment

2,000

Notes Payable 4,000Accounts Payable 2,690Income Tax Payable 1,560Unearned Rent Revenue 9,000Capital Stock 80,000Retained Earnings 0Dividends 14,000Income Statement Accounts:Repair Service Revenue 171,250Advertising Expense 3,900Wages Expense 56,800Supplies Expense 6,900Depreciation Expense: Building 1,500Depreciation Expense: Tools and Equipment

2,000

Utilities Expense 19,400Insurance Expense 13,500Income Tax Expense 22,608Total 272,000 272,000

Additional information:(u) Shop Supplies used in December Tk. 600.(v) Portion of Insurance Cost Expired in December Tk. 1,500.(w) Depreciation on Building for December Tk. 150.(x) Depreciation of Tools and Equipment for December Tk. 200.(y) Earned one-third of Rent Revenue collected in advance from Harbor Cab. Tk.

3,000.(z) Unpaid Wages owed to Employees at December 31, Tk. 1,950.(aa) Interest Payable accrued during December Tk. 30.(bb) Repair Service Revenue earned in December but not yet billed Tk. 750.(cc) Income Tax Expense for December Tk. 4,020 not accounted for.

Required:(g) Prepare Ten column worksheet as at December 31, 2009. (h) Pass the necessary closing journal entries on December 31, 2009(i) Prepare a post closing Trial Balance on December 31, 2009(j) Prepare the necessary reversing entries on December 31, 2009.

Q. No.23.

Page 17 of 35

As on December 31, 2001 the end of annual accounting period, the trial balance of the ledger of Mahmud Store are as follows:

MAHMUD STORETRIAL BALANCE

DECEMBER 31, 2001Sl. No.

Name of Accounting Debit Tk. Credit Tk.

1 Cash 90,0002 Accounts Receivable 166,0003 Merchandise inventory 300,0004 Purchase 3,310,0005 Prepaid Insurance 38,0006 Store Equipment 800,0007 Accumulated D/P – Store Equipment 170,0008 Accounts Payable 190,0009 Mahmud – Capital 900,00010 Mahmud – drawings 220,00011 Sales 4,830,00012 Sales Return & allowances 150,00013 Sales Discount 72,00014 Purchase Return & allowances 100,00015 Purchase Discount 64,00016 Freight in 122,00017 Freight out 75,00018 Advertising expenses 155,00019 Rent expenses 200,00020 Salaries expenses 395,00021 General expenses 165,00022 Vat current account 4,000

Total 6,258,000 6,258,000Additional information:(a) Merchandise inventory on hand at December 31, 2001 is Tk. 395,000.(b) Merchandise in transit at December 31, 2001 costing Tk. 5,000, which was

shipped by a supplier under the terms F.O.B Shipping point and recorded as purchase but not included in ending Merchandise inventory.

(c) Insurance expired during the period is Tk. 20,000.(d) Salaries accrued but not paid Tk. 10,000.(e) Depreciation expenses are changed during the period was Tk. 80,000.(f) General expenses include Tk. 15,000 for utilities, which is to be treated as

selling expenses.Required:(i) Multiple Income Statement.(ii) Owner’s Equity Statement.(iii) Balance Sheet.Q. No. 24.

Here are some accounts balances of Pretext Company on December 31, 2008:Name of Accounts Debit (Tk.) Credit

(Tk.)Prepaid insurance expense 18,000Supplies on hand 6,000Unearned service revenue 9,000Note payable 3,000Salaries 13,200

Page 18 of 35

Rent expenses 6,000Owners Equity 31,200Service revenue 21,000Accounts payable 9,000Accounts Receivable 12,000Plant & machinery 18,000Total 73,200 73,200

On December 31, 2008 following matters were revealed:i) Actual balance of supplies on hand became Tk. 2,000.ii) Depreciation on plant& machinery@ 10% p.a.iii) Salaries were unpaid for the month of December Tk. 1,000.iv) Insurance is expired Tk.2,000.v) Tk.400 is treated to be doubtful debts and it is also decided to create 5%

allowance for doubtful debts.vi) Two-third of unearned revenue is earned during the period.vii) Service provided to a customer but unbilled Tk.2,000.viii) Rent is accrued but not paid Tk.3,000.ix) A utility bill of Tk.300 is not received during the period.x) The interest rate on the notes payable is 10% p.a. Notes payable was

issued as on 1st July 2008.Required:

(a) Pass the necessary adjusting journals in the book of Pretext Company. (b) Prepare the adjusted Trial Balance

Q. No. 25.

The balance of Pearson contained the following accounts at December 31, the end of company’s fiscal year.

PearsonTrial Balance

December 31, 2008Name of the accounts Unadjusted trial

balanceAdjusted trial balance

Cash Tk. 50,700 Tk. 50,700

Accounts Receivable 46,700 51,700Merchandise Inventory 45,000 46,000Store Supplies 5,500 3,500Store Equipment 80,000 80,000Accumulated Dep’n-Store Equip’t Tk.18,00

027,000

Furniture 40,000 50,000Notes payable 49,000 59,000Accounts payable 58,500 58,500Bank Loan 20,000 20,000Capital 108,000 108,000Drawing 12,000 12,000Sales 759,200 764,200Sales return and allowance 4,200 4,200Cost of goods sold 497,400 496,400Interest expense 2,300 2,300Salary expense 140,000 140,000Advertisement expense 24,100 24,100Utilities expense 9,000 10,000Repair expense 12,100 12,100

Page 19 of 35

Store supply expense 16,700 18,700Rent expense 24,000 24,000Sales commission 5,000 5,000Utilities expense payable 2,000 3,000Depreciation expense-store equip’t 9,000Total 1,014,700 1,014,70

01,039,70

01,039,70

0Required: Complete the column work sheet by extending the balances to the financial statement columns. Q. No. 26.

Here are some accounts balances of Western Company on December 31, 2004:Name of Accounts Debit (Tk.) Credit

(Tk.)Prepaid insurance expense 12,000Supplies on hand 4,000Unearned service revenue 6,000Note payable 2,000Salaries 8,800Rent expenses 4,000Owners Equity 20,800Service revenue 14,000Accounts payable 6,000Accounts Receivable 8,000Plant Assets 12,000Total 48,800 48,800

On December 31, 2004 following matters were revealed:xi) Actual balance of supplies on hand became Tk. 2,300.xii) Depreciation on plant assets is 20% p.a.xiii) Salaries was unpaid for the month of December Tk.600.xiv) Insurance is expired Tk.1, 500.xv) Tk.300 is treated to be doubtful debts and it is also decided to create 5%

allowance for doubtful debts.xvi) One-third of unearned revenue is earned during the period.xvii) Service provided to a customer but unbilled Tk.2,000.xviii) Rent is accrued but not paid Tk.3,000.xix) A utility bill of Tk.400 is not received during the period.xx) The interest rate on the notes payable is 10% p.a. Notes payable was

issued as on 1st July 2004.Required: Pass the necessary adjusting journals in the book of Western Company.

Q. No. 27.

XYZ Electric Contracting Company has the following trail balance as of August 31, 2007

XYZ Electric Contracting CompanyTrial Balance

August 31, 2007SL# Accounts Name Ref Debit Tk. Credit

Tk.1 Cash 5,000

Page 20 of 35

2 Accounts Receivable 3,2003 Prepaid Insurance 2,4004 Supplies 1,3005 Equipment 60,0006 Accounts Payable 2,4007 Capital 20,0008 Drawings 10009 Service Revenue 14,900

10 Note Payable 40,00011 Advertising Expense 80012 Salaries Expense 1,20013 Utilities Expense 40014 Rent expenses 2,000

Total 77,300 77,300

Additional data:(a) Insurance expires at the rate of Tk. 200 per month.(b) Supplies of Tk 800 were used during the period.(c) Interest expense of Tk. 700 on the notes payable has accrued during the

august.(d) Depreciation expense on equipment Tk. 1,000.(e) Salaries accrued but not paid Tk. 500.

Required: Complete the 10 column work sheet.

Q. No. 28.

Here are some accounts balances of Pretext Company on December 31, 2008:Name of Accounts Debit (Tk.) Credit

(Tk.)Prepaid insurance expense 18,000Supplies on hand 6,000Unearned service revenue 9,000Note payable 3,000Salaries 13,200Rent expenses 6,000Owners Equity 31,200Service revenue 21,000Accounts payable 9,000Accounts Receivable 12,000Plant & machinery 18,000Total 73,200 73,200

On December 31, 2008 following matters were revealed:xxi) Actual balance of supplies on hand became Tk. 2,000.xxii) Depreciation on plant& machinery@ 10% p.a.xxiii) Salaries were unpaid for the month of December Tk. 1,000.xxiv) Insurance is expired Tk.2,000.xxv) Tk.400 is treated to be doubtful debts and it is also decided to create

5% allowance for doubtful debts.xxvi) Two-third of unearned revenue is earned during the period.xxvii) Service provided to a customer but unbilled Tk.2,000.xxviii) Rent is accrued but not paid Tk.3,000.xxix) A utility bill of Tk.300 is not received during the period.

Page 21 of 35

xxx) The interest rate on the notes payable is 10% p.a. Notes payable was issued as on 1st July 2008.

Required: (c) Pass the necessary adjusting journals in the book of Pretext Company. (d) Prepare the adjusted Trial Balance

Q. No. 29.

As on December 31, 2001 the end of annual accounting period, the trial balance of the ledger of Mahmud Store are as follows:

MAHMUD STORETRIAL BALANCE

DECEMBER 31, 2001Sl. No.

Name of Accounting Debit Tk. Credit Tk.

1 Cash 90,0002 Accounts Receivable 166,0003 Merchandise inventory 300,0004 Purchase 3,310,0005 Prepaid Insurance 38,0006 Store Equipment 800,0007 Accumulated D/P – Store Equipment 170,0008 Accounts Payable 190,0009 Mahmud – Capital 900,00010 Mahmud – drawings 220,00011 Sales 4,830,00012 Sales Return & allowances 150,00013 Sales Discount 72,00014 Purchase Return & allowances 100,00015 Purchase Discount 64,00016 Freight in 122,00017 Freight out 75,00018 Advertising expenses 155,00019 Rent expenses 200,00020 Salaries expenses 395,00021 General expenses 165,00022 Vat current account 4,000

Total 6,258,000 6,258,000Additional information:(a) Merchandise inventory on hand at December 31, 2001 is Tk. 395,000.(b) Insurance expired during the period is Tk. 20,000.(d) Salaries accrued but not paid Tk. 10,000.(e) Depreciation expenses are changed during the period was Tk. 80,000.(f) General expenses include Tk. 15,000 for utilities, which is to be treated as

selling expenses.Required:(i) Multiple Income Statement.(ii) Owner’s Equity Statement.(iii) Balance Sheet.

Q. No. 30.The balance of Vision Corporation contained the following accounts at June 30, the end of company’s fiscal year.

Vision Corporation Trial Balance

Page 22 of 35

June 30, 2010Name of the accounts Unadjusted trial

balanceAdjusted trial balance

Cash and cash equivalents $ 1,10,000 $ 1,10,000

Interest receivable 4,500 4,500Trade Receivable 20,000 20,000Accounts receivable 3,600 3,600Prepaid insurance 3,100 1,400Delivery Equipment 40,000 40,000Goodwill 10,000 10,000Roofing supplies 4,000 4,000Copy right 2,000 2,000Building 49,000 49,000 Store Equipment 60,000 60,000Franchise 10,000 10,000Plant and machinery 1,36,000 1,36,000Accounts payable 10,400 10,400Unearned revenue 5,000 2,800Mortgage payable 2,80,000 2,80,000Bonds payable due in 4 years 20,000 20,000Capital 1,20,000 1,20,000Drawing 20,000 20,000Service revenues 75,600 75,600Rent revenue 22,000 24,200Interest revenue 2,000 2,000Warranty expenses 4,000 4,000Salary expense 15,000 15,000Advertisement expense 10,000 10,000Salesman commission 5,000 5,000Doubtful expenses 10,000 10,000Patent amortization 2,000 2,000Miscellaneous expenses 1,000 1,000Travel expenses 800 800Utilities expense 15,000 15,000 Total 5,35,000 5,35,000

Insurance expense 1,700Depreciation expenses-Building 2,500Accumulated depreciation on building 2,500Depreciation expenses-Equipment 3,900Accumulated depreciation on Equipment

3,900

Interest expense 8,000Interest payable 8,000Property tax expenses 1,000Property tax payable 1,000Total 5,50,400 5,50,400Required:

(i) Complete the Informal Statements by extending the balances to the financial statement columns.

(ii) Prepare a formal Statement of Financial Performance for the month ended June 30, 2010.

(iii) Prepare an owner’s equity statement for the month ended June 30, 2010.(iv) Determine how much owner’s equity increase or decrease.

Page 23 of 35

(v) Prepare a Statement of Classified Financial Position as at the month ended June 30, 2010. ($80,000 of mortgage payable is due for payment next year.)

Q. No. 31.

The balance of Bishop Fashion Center contained the following accounts at December 31, the end of company’s fiscal year.

Bishop Fashion CenterTrail Balance

December 31, 2005Name of the accounts Debit (Tk.) Credit (Tk.)Cash 25,700Accounts Receivable 34,700Merchandise Inventory 45,000Store Supplies 5,500Store Equipment 85,000Accumulated Dep’n-Store Equip’t 18,000Delivery Equipment 48,000Accumulated Depreciation - Delivery Equipment

6,000

Notes payable 51,000Accounts payable 48,500Common stock 90,000Retained earnings 8,000Sales 7,57,200Sales return and allowance 4,200Cost of goods sold 4,97,400Salaries expense 1,40,000Advertisement expense 26,400Utilities expense 14,000Repair expense 12,100Delivery expense 16,700Rent expense 24,000 Total 9,78,700 9,78,700

Adjustment data:a) Store supplies on hand totaled Tk.3,500b) Depreciation is Tk.9,000 on the store equipment and Tk.7,000 on

the delivery equipment.c) Interest of Tk.11,000 is accrued on notes payable

Other data:a) Salary expense is 70% selling and the rest for administrative.b) Rent and utilities expense are 80% selling and 20% administrative.c) Tk.30,000 of notes payable are due for the payment next year.d) Repair expense is 100% administrative

Required: i) Enter the trial balance on a work sheet and complete the work

sheet.ii) Journalizing the closing entries.iii) Prepare a post closing trial balance.

Q. No. 32.

Page 24 of 35

The accountant of Whitney Company has compiled the following information for the company’s records as a basis for an income statement for the year ended December 31, 2005.

Rental Revenues Tk.29,000Interest on notes payable 18,000Market appreciation on land above cost 31,000Wages and salaries –sales 1,14,800Materials and supplies-sales 17,600Income tax 37,400Wages and salaries –administrative 1,35,900Other administrative expenses 51,700Cost of goods sold 4,96,000Net sales 9,80,000Depreciation on plant assets (70% selling, 30% administrative)

65,000

Dividend declared 16,000There were 20,000 shares of common stock outstanding during the year.Required:

(a) Prepare a Multi-step income statement.(b) Prepare a single- step income statement.(c) Which format do you prefer? Discuss.

Q. No. 33.

Presented below is selected information pertaining to the Huston Company during 2005:

Cash balance, January 1, 2005 Tk.13,000Accounts Receivable, January 1, 2005 19,000Collections from customers in 2005 2,10,000Capital Account balance, January 1, 2005 38,000Total assets, January 1, 2005 75,000Cash investment added July 1, 2005 5,000Total assets, December 31, 2005 1,01,000Cash balance, December 31, 2005 20,000Accounts Receivable, December 31, 2005 36,000Merchandise taken for personal use 11,000Total liabilities, December 31, 2005 41,000

Required: Compute the net income for 2005. Q. No. 34.

Presented below is information related to American Horse Company for 2005Account Titles Amount ($)Retained Earning balance, January 1, 2005 9,80,000Sales for the year 2,50,00,000Cost of goods sold 1,70,00,000Interest revenue 70,000Selling & Administrative expenses 47,00,000Write off goodwill (not tax deductible) 5,20,00Income tax for 2005 9,05,000Assessment for additional 2002 income tax 3,00,000Gain on sale of investment 1,10,000Loss due to flood damage-extraordinary item 3,90,000Loss on the disposition of the whole sale division 4,40,000Loss on the operation of the whole sale division 90,000

Page 25 of 35

Dividend declared on common stock 2,50,000Dividend declared on preferred stock 70,000

RequiredPrepare a multi-step income statement and a retained earning statement. American Horse Company decided to discontinue its wholesale operations and to retain its manufacturing operations. On September 15, American Horse Company sold the whole sale operations to Rogers Company. During 2005, there were 30,000 shares of common stock outstanding all year.

Q. No. 35.Assume that Denis Savored Company has the following accounts at the end of the current year.

(1) Allowance for doubtful Accounts- Accounts receivable- Should be deducted from accounts receivable

(2) Merchandise held on consignment- Should not appear on the consignee balance sheet except possibly as a note to the financial statement.

(3) Advances received on sales contract- are normally a current liability and should be shown as such in the balance sheet.

(4) Merchandise out on consignment- Should be shown among current assets under the heading of inventories.

(5) Pension fund on deposit with a trustee: should be shown among non-current assets under the separate heading or grouped with similar fund and deposits in investment section.

(6) Franchises: should be itemized in a section for intangible assets.(7) Materials in transit- purchased f.o.b. destination: Should not be

shown on the balance sheet of the buyer, if the purchased f.o.b. destination.

(8) Held to maturity securities: Long term investment(9) Land held for investment: Long term investment(10) Land held for future plant sit: Long term investment(11) Bond sinking fund: Long term investment(12) Investment in bonds: Current assets(13) Investment in stocks: Current assets(14) Advances to Employees: Current assets(15) Cash and cash equivalents- Current assets(16) Advances to suppliers- Current assets(17) Accrued revenues- Current assets(18) Restricted securities-Fiberboard (Current portion)- Current assets(19) Trade receivables- Current assets(20) Accounts receivables- Current assets(21) Notes receivables- Current assets(22) Affiliated companies Installment notes and contracts- Current

assets(23) Trade receivables-net- Current assets(24) Inventories (Merchandise)- Current assets(25) Inventories (Finished goods, work in process, raw materials)-

Current assets(26) Short-term investment: Current assets(27) Investment securities available for sale- Current assets(28) Investment securities held to maturity (at fair value)- Current

assets(29) Mortgage-related securities held to maturity (at fair value)- Current

assets(30) Mortgage-related securities available for sale- Current assets(31) Trading securities- Current assets(32) Marketable securities- Current assets

Page 26 of 35

(33) Prepaid or unexpired insurance and rent- Current assets(34) Prepaid pension benefits- Current assets(35) Marketable securities- Current assets(36) Trading asset- Current assets(37) Product and other insurance receivables- Current assets(38) Accrued interest on notes receivable- Current assets(39) Machinery retired from use and held for sale- Current assets(40) Refundable federal and state income taxes- Current assets(41) Notes receivable- Short term- Current assets(42) Interest receivable- Current assets(43) Franchise: Intangible assets(44) Patent: Intangible assets(45) Copy right: Intangible assets(46) Organization cost: Intangible assets(47) Goodwill: Intangible assets(48) Lease hold: Intangible assets(49) Preliminary Expenses: Intangible assets(50) Technology know-how: Intangible assets(51) Design and Membership: Intangible assets(52) Non compete covenants- Intangible assets(53) Leasehold improvements: Intangible assets(54) Licenses: Intangible assets(55) Bond Sinking fund: Long term investment(56) Trading securities at fair value: Current assets(57) Inventories at lower of cost: Current assets(58) Accounts receivable is pledged as collateral on bank loan: Current

assets(59) Interest receivable: Current assets(60) Refundable income tax: Current assets(61) Petty cash: Current assets(62) Unrealized holding gain (loss)- Stockholder equity(63) Paid- in on capital stock- Preferred stock- Stockholders’ equity(64) Paid- in on capital stock- Common stock- Stockholders’ equity(65) Profit reserve: Stockholders’ equity(66) Reserve fund: Stockholders’ equity(67) Revolution reserve: Stockholders’ equity(68) Estimated vacation pay liabilities: Current liabilities(69) Additional paid- in capital- Stockholders’ equity(70) Premium on common stock- Stockholders’ equity(71) Earnings retained in the business- Stockholders’ equity(72) Subscription receivable on common stock: Current assets(73) Subscription receivable on preferred stock: Current assets(74) Short term investment fair value adjustment: Current assets(75) Cash restricted for plant expansion: Long term investment(76) Premium on common stock- Stockholder equity.(77) Cash surrender value of life insurance: Long term investment(78) Assets allocated to trustee for expansion: Long term investment(79) Long term investment fair value adjustment: Long term

investments(80) Stock owned in affiliated companies: Long term investments(81) Long term receivable: Long term investment(82) Capital Lease: Property, plant and Equipment(83) Cost of uncompleted plant facilities: Property, plant and Equipment(84) Display cases and equipment: Property, plant and Equipment(85) Boats: Property, plant and Equipment(86) Professional library: Property, plant and Equipment

Page 27 of 35

(87) Land improvements: Property, plant and Equipment(88) Mineral deposits: natural resources(89) Warehouse in process of Construction: Property, plant and

Equipment(90) Tools, dies and molds: Property, plant and Equipment(91) Fully depreciated machine still in use: Property, plant and

Equipment(92) Advance from customers: Current liabilities(93) Bank overdraft: Current liabilities(94) Unearned subscription: Current liabilities(95) Bank loans payable secured by investment: Current liabilities(96) Installment loan unpaid balance: Current liabilities(97) Trade accounts payable (within 1 year)- Current liabilities(98) Notes payable (within 1 year)- Current liabilities(99) Sales taxes payable- Current liabilities(100) Deferred credits: current liabilities(101) Minority interest: current liabilities(102) Customer advances- Current liabilities(103) Revenue received in advance- Current liabilities(104) Accrued special charges- Current liabilities(105) Unclaimed payroll taxes- Current liabilities(106) Unearned admission revenues- Current liabilities(107) Advances received on sales contract- Current liabilities(108) Accrued or outstanding expenses (wages, salary)- Current liabilities(109) Accrued vacation pay- Current liabilities(110) Short-term borrowings- Current liabilities(111) Cash dividends payable- Current liabilities(112) Accrued interest on notes payable- Current liabilities(113) Insurance payable- Current liabilities(114) Returnable cash deposits- Current liabilities(115) Income tax payable- Current liabilities(116) Accrued pension liabilities- Current liabilities(117) Estimated warranty liability- Current liabilities(118) Current portion or maturities of long-term debt -Current liabilities(119) Unearned subscription revenue or dues revenue- Current liabilities(120) Bond interest payable- Current liabilities(121) Property tax payable- Current liabilities(122) Accrued employee compensation and benefits: Current liabilities(123) FICA taxes payable- Current liabilities(124) Employees’ Federal income tax payable- Current liabilities(125) Employees’ Medical insurance payable- Current liabilities(126) Employees’ Union dues payable- Current liabilities(127) Employees’ Retirement program payable- Current liabilities(128) Employees’ Bonuses- Current liabilities(129) Salaries that company budget shows will be paid to employees

within the next year: Long term liabilities.(130) Legal fees payable: Current liabilities(131) Unearned consultant fees: Current liabilities(132) Unearned legal fees: Current liabilities(133) Current maturities of long-term debt- Current liabilities(134) Current obligations under capital leases- Current liabilities(135) Payroll taxes payable- Current liabilities(136) Other accrued liabilities- Current liabilities(137) Unearned janitorial revenues: Current liabilities(138) Mortgage notes payable to the bank- Long term liabilities- Current

liabilities

Page 28 of 35

(139) Bonds payable- Long term liabilities- Current liabilities(140) Lease liabilities 20 years, 12% Debenture, due January1, 2008-

Long term liabilities- Current liabilities(141) Deferred income taxes- Long term liabilities(142) Premium on bonds payable: Long term liabilities(143) Post retirement and post employment benefits other than pensions:

Long term liabilities(144) Put warrants- Long term liabilities(145) Pension obligations: Long term liabilities(146) Unsecured notes payable: Long term liabilities(147) Long term rental obligations: Long term liabilities(148) Obligations under capital lease: Long term investment(149) Receivable –officers-Current Assets(150) Preferred stock investments: Long term investment

Q. No. 36.

Assume that Denis Savard Company has the following accounts at the end of the current year.

(1) Common stock;(2) Discount on bonds payable;(3) Treasury stock (at cost)(4) Common stock subscribed(5) Raw materials(6) Preferred stock Investment –Long term(7) Unearned rent(8) Work in Process(9) Copyrights(10) Building(11) Notes Receivable(12) Cash(13) Accrued salaries payable(14) Accumulated depreciation-Building(15) Cash restricted for Plant Expansion(16) Land held for plant site(17) Allowance for doubtful Accounts- Accounts receivable;(18) Retained Earnings –Un-appropriated;(19) Premium on common stock(20) Unearned subscriptions(21) Receivable- officers (due in one year)(22) Finished goods(23) Accounts Receivable(24) Bonds Payable (due in 4 years)(25) Stock subscriptions Receivable

Required: Prepare a classified balance sheet in good form (no monetary amounts are necessary)

Q. No. 37.

Presented below is the Trial Balance of William Melvin Kelly Corporation at December 31, 2006.

Name of the Accounts Debit Amount

Credit amount

Cash Tk.1,97,000Sales Tk.81,00,000

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Trading Securities (at cost Tk.1,45,000) 1,53,000Cost of goods sold 48,00,000Long- term investments in bonds 2,99,000Long- term investments in stocks 2,77,000Short term Notes Payable 90,000Accounts Payable 4,55,000Selling expenses 20,00,000Investment revenues 63,000Land 2,60,000Building 10,40,000Dividend Payable 1,36,000Accrued liabilities 96,000Accounts receivable 4,35,000Accumulated Depreciation –Building 1,52,000Allowance for doubtful accounts 25,000Administrative expenses 9,00,000Interest expenses 2,11,000Inventories 5,97,000Extraordinary gain 80,000Prior period adjustment- Depreciation Error 1,40,000Long term notes payable 9,00,000Equipment 6,00,000Bonds payable 10,00,000Accumulated depreciation –building 60,000Franchise (net of Tk.80,000 amount) 1,60,000Common stock (Tk.5 par) 10,00,000Treasury stock 1,91,000Patent(net of Tk.30,000 amount) 1,95,000Retained earnings 2,18,000Additional paid in capital 80,000Total 1,24,55,000 1,24,55,000

Required: Prepare a Balance sheet at December 31, 2006 William Melvin Kelly Corporation. Ignore income taxes.

Q. No. 38.

The balance of Pearl Fashion Center contained the following accounts at December 31, the end of company’s fiscal year.

Pearl Fashion CenterTrial Balance

December 31, 2008Name of the accounts Debit (Tk.) Credit (Tk.)Cash 12,000Prepaid rent 4,000Notes Receivable 10,700Accounts Receivable 33,000Merchandise Inventory 45,700Office Supplies 5,500Store Equipment 85,000Accumulated Dep’n-Store Equip’t 18,000Delivery Equipment 48,000

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Accumulated Depreciation - Delivery Equipment

6,000

Notes payable 50,000Interest payable 1,000Accounts payable 48,500Common stock 97,000Retained earnings (01.01.2008) 8,000Sales 7,50,200Sales return and allowance 4,200Cost of goods sold 4,97,400Salaries expense 1,40,000Advertisement expense 24,000Dividend paid 2,000Utilities expense 14,000Repair expense 12,500Delivery expense 16,000Rent expense 24,700 Total 9,78,700 9,78,700

Adjustment data:d) Office supplies on hand totaled Tk.2,500e) Depreciation is Tk.8,000 on the store equipment and Tk.5,000 on the

delivery equipment.f) Interest of Tk.5,000 is accrued on notes payableg) Salaries accrued but not paid Tk.2,000

Required: iv) Enter the trial balance on a work sheet and complete the work

sheet.v) Journalizing the closing entries.vi) Prepare a post closing trial balance.

Q. No. 39.

(a) Deposits received from customers(b) Paid in capital(c) Additional paid in capital(d) Trading assets(e) Short term debt(f) Long-term debt(g) Merchandise held on consignment: (h) Advances received on sales contract(i) Merchandise out on consignment (j) Pension fund on deposit with a trustee(k) Franchises(l) Materials in transit- purchased f.o.b. destination: (m)Common share(n) Discount on bonds payable(o) Treasury stock (at cost) (p) Common stock subscribed(q) Preferred stock Investment (r) Unearned rent revenue(s) Copyrights(t) Discount on Notes Receivable (u) Accrued salaries payable(v) Accumulated depreciation-Building(w) Cash restricted for Plant Expansion

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(x) Land held for plant site: (y) Allowance for bad debts Accounts(z) Premium on common stock(aa) Unearned subscriptions Revenue: (bb) Receivable- officers (due in one year) : (cc) Bonds Payable (due in 4 years)(dd) Petty cash: (ee) Warehouse in process of construction(ff) Accrued interest on notes payable(gg) Deficit(hh) Income tax payable: (ii) Accrued Vocation pay (jj) Non-current liabilities(kk) Premium on bonds payable(ll) Allowance for doubtful accounts receivable: (mm) Cash surrender value of life insurance(nn) Bond sinking fund-(oo) Merchandise inventory ending(pp) Taxes payable(qq) Advances to suppliers(rr) Sales tax payable:(ss) Accrued interest on notes receivable: (tt) Machinery retired from use and held for sale(uu) Fully depreciated machine still in use(vv) Organization costs(ww) Salaries that company budget shows will be paid to

employees within the next year,(xx) Discount on bond payable(yy) Paid in capital in excess of par.(zz) Stock subscriptions Receivable (aaa) Accrued revenues(bbb) Accrued expenses(ccc) Property tax expenses(ddd) Sales salaries expenses(eee) Interest receivable(fff) Property tax payable(ggg) Telephone and internet expenses(hhh) Art supplies (iii) Loss on inventory write down;(jjj) Common stock(kkk) Interest payable(lll) Accounts payable(mmm) Bonds payable(nnn) Retained earnings beginnings(ooo)Loss on inventory write down;(ppp)Loss from strike(qqq)Beginning inventory(rrr) Transportation in(sss) Packing expenses(ttt) Loss on sale of investment(uuu)Loss from earthquake(vvv) Cash dividend(www) Stock dividend(xxx) Interest revenue(yyy) Amortization of intangible assets(zzz) Depletion of natural resources

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(aaaa) Trade accounts payable(bbbb) Current portion of long term debt(cccc) Pension obligation(dddd) Inventories at lower of average cost or market(eeee) Notes payable to banks(ffff) Deposits received from customers(gggg) Current maturities to long term debt(hhhh) Other current liabilities(iiii) Accrued employee compensation and benefits

Required: Prepare a classified balance sheet in good form (no monetary amounts are necessary)

Q. No. 40.

The balance of Quality Goods Center contained the following accounts at December 31, the end of company’s fiscal year.

Quality Goods Center

Trail Balance

December 31, 2005Name of the accounts Unadjusted trial balance Adjusted trial balanceCash Tk. 51,700 Tk. 51,700Accounts Receivable 40,700 45,700Merchandise Inventory 45,000 46,000Store Supplies 5,500 3,500Store Equipment 85,000 85,000Accumulated Dep’n-Store Equip’t Tk.18,000 27,000Furniture 40,000 50,000Notes payable 49,000 59,000Accounts payable 58,500 58,500Bank Loan 20,000 20,000Capital 108,000 108,000Drawing 12,000 12,000Sales 759,200 764,200Sales return and allowance 4,200 4,200Cost of goods sold 497,400 496,400Interest expense 2,300 2,300Salary expense 140,000 140,000Advertisement expense 24,100 24,100Utilities expense 9,000 10,000Repair expense 12,100 12,100Store supply expense 16,700 18,700Rent expense 24,000 24,000Sales commission 5,000 5,000Utilities expense payable 2,000 3,000Depreciation expense-store equip’t 9,000Total 1,014,700 1,014,700 1,039,700 1,039,700Additional Information:

1. Bank loan is due in the year of 20072. Only 20,000 of note payable is due in next fiscal year3. Salary expense is 80% selling and the rest for administration4. Rent and utilities expense are 70% selling and 30% administrative

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5. Full repair expense has been incurred for the furniture which is solely used in head office

Required: (a) Prepare multi-step income statement for the year ended on December 31,

2005.(b) Prepare a statement of owner’s equity statement for the year ended

December 31, 2005.(c) Prepare classified balance sheet on December 31, 2005.

Q. No. 41.

Eva Tsai opened Ivan’s Window Washing on July 1, 2008. During July the following

transactions were completed:

Date Transactions

July 1 Tsai invested $1, 50,000 cash and $2, 00,000 machinery in the business.

2 Purchased used machinery for $35,000; paying $5,000 in cash and the balances are on

account.

3 Purchased cleaning supplies for $5,000 on account.

5 Paid $9,000 cash on one year insurance policy effective on July 1.

12 Billed customers $20,000 for cleaning supplies.

18 Paid $8,000 cash on amount owed on machinery and $3,000 on amount owed on cleaning

supplies.

20 Paid $6,000 cash for employee’s salaries.

21 Collected $ 14,000 cash from customers billed on July 12.

25 Billed customers $28,000 for cleaning supplies.

29 Paid Gas and Oil for the month on truck $10,000.

31 Withdrew $6,000 cash for personal use.

Required:

i) Prepare a summary of transaction showing effects in accounting equation.

ii) Record these transactions in the journal book of Eva Tsai.

iii) Determine the ledger balance of all related accounts.

iv) Prepare trial balance at July 31, on a work sheet.

v) Enter the following adjustments on the work sheet and complete the work sheet.

(i) Service provided but unbilled and uncollected at July were $7,000.

(ii) Depreciation on machinery for the month $1500.

(iii) One-twelfth of the insurance expired.

(iv)An inventory count shows $2,000 of cleaning supplies on hand at July 31.

(v) Accrued but unpaid employees salaries were $3,000.

vi) Prepare a formal Statement of Financial performance for the month ended July 31,

2008.

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vii) Prepare an owner’s equity statement for the month ended July 31, 2008.

viii) Determine how much owner’s equity increase or decrease.

ix) Prepare a statement of Financial Position as at the month ended July 31, 2008.

x) Prepare the necessary adjustment journals on July 31, 2008.

xi) Prepare the necessary closing journal on July 31, 2008.

xii) Prepare the Post closing Trial Balance on July 31, 2008.

xiii) Prepare the reversing journal entries on July 31, 2008.

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