Instructions

(1) Due date and time to submit this assignment is October 7, 2015, 09:35 am for section 5,
11:05 am for section 3 and 12:35 pm for section 4.

(2) Please remember that the submission would end after 5 minutes of the due time and then
thered be no acceptance. Also theres no make-up assignment. (Last year many students
could not submit on time because of long queues at LUMS printers and they all got their
grades lowered because of non-submission).

(3) This assignment is required to be submitted only in the printed form (on MS Excel) and
must be stapled.

(4) Clearly write your name, ID and course name on the main page of the assignment.

(5) It is recommended that each page of the assignment is numbered. It would keep a check on
the pages which may get separated accidently.

(6) Make sure you follow the proper format of the Financial Statements.

(7) Do not copy any other students work. This assignment should contain your own research
and understanding of the subject.

Good luck!
 Selena, Miley and Zayn
Selena started her own business with the name of Gomes & Co., right after graduating from a
community college in Los Angeles. On December 31, 2014 she was contacted by her accountant
Miley that the financial statements of the first year-end were not being finalised. There were lots of
errors in the trial balance which were not corrected by the assistant accountant, Bieber - who spent
most of the time pursuing his career in singing than paying attention to his day job. Selena did not
have any prior experience in accounting so she decided to call her old college friend Zayn to get some
advice.

Zayn, who was teaching at a local university in LA, one day got a call from Selena. He got very happy
when he heard her voice but soon he realised Selena called her because she was having problem in
preparation of her financial statements and that all this mess in her business was created by Bieber.
After listening to all the details on phone Zayn promised Selena that hed come to her office next day
and then give advice to her accounting staff about how to prepare the financial statements.

As promised, Zayn reached Selenas office 9:30 am sharp and both had a cup of tea together. Selena
told him how her business had not been doing very well in the first year of its operation but she
hoped itd improve a lot next year. After having chit chat for about good 30-40 minutes Zayn asked
Selena to show him the accounts department so that he could get some information about the
accounting system. Selena showed him around and introduced to her accounting staff.

Zayn met Miley and Bieber and asked them about what went wrong in the preparation of financial
statements. After listening to both of them for good half an hour, Zayn decided that it was time to do
some ground work. He asked Selena to bring the data and prepare un-adjusted trial balance, in order
to see, if it is balanced or not? The following data was presented by Selena in this regard.

US $ US $
Inventory 1-1-2014 100,000 Sales 720,000
Purchases 400,000 Discount Allowed 4,750
Salaries 80,000 Carriage Inward 3250
Building 120,000 Repairs 2,900
Accumulated Dep Building 25,000 Miscellaneous Expenses 8,700
Cash in hand 10,000 Advertisement 22,000
Cash at bank 135,000 Commission 32,400
Rent, Rates, Taxes 15,000 Furniture & Fittings 50,000
Prepaid Insurance 4,000 Accumulated Dep Furniture 15,000
Account Payable 12,000 Air Conditioners 42,000
Debtors 95,000 Accumulated Dep Air Cond 12,000
Creditors 110,000 Loan 70,000
Interest Expense 3,500 Drawings 18,000
Bank Charges 2,000 Legal Charges 6,000
Motor Vehicle 105,000 Travelling & Conveyance 10,000
Accumulated Dep Motor Veh 25,000 Capital 280,500
Carriage Outward 2,000 Sales Return 5,000
Purchase Return 5,000 Discount Received 2,000
Closing Inventory was valued at $55,000. Zayn had a detailed look at both the General Journal and
the General Ledger and found out the following errors and adjustments in the accounting records;

Adjustments:

(1) A payment of Salaries Expense of $6,000 was debited to Debtors and credited to Cash.
(2) A collection of $1,000 from a client on account was debited to cash and credited to Discount
Received.
(3) A payment on account of $6,300 to a creditor was debited to Accounts Payable $3,600 and
credited to Cash $3,600.
(4) The purchase of Supplies on account for $5,600 was debited to Repairs $560 and credited to
Account Payable $560.
(5) $4,000 cash Drawings was debited to Salaries Expense and credited to cash.
(6) Travelling and Conveyance include Selenas personal travelling for which she is to be charged
with $4,800.
(7) Six months interest is to be accrued on Loan @ 10% p.a.
(8) The sales manager is entitled to a commission of 7.5% of total Sales.
(9) Prepaid Insurance is $1,500 at the end of the year.
(10)Depreciation is chargeable as follows; Building @ 10%, Furniture and Fittings @ 6%, Air
Conditioners @ 10% and Motor Vehicles @ 20%.

He advised Bieber to pass correcting entries for the above items and journal entries for the other
adjustments.

After passing the journal entries and correcting entries he advised both Miley and Bieber to
prepare Adjusted Trial Balance. (Proper format required i.e. Un-adjusted Trial Balance, Adjustments
and Adjusted Trial Balance).

From the Adjusted Trial Balance, he assured them that they can prepare the financial statements
which are; Income Statement, Statement of Retained Earnings and Balance Sheet. (Proper format
required for all three statements)

Requirement

Help Selena in preparing the financial statements of the Gomez & Co by following Zayns suggestions.

Note

Marks have been allocated for the journal and correcting entries in proper format.

Marks have been allocated for preparing Un-adjusted, Adjustmenst and Adjusted Trial Balance.

Marks have been allocated for preparing Income Statements, Statement of Retained Earnings and
Balance Sheet in proper format.