CLASS EXERCISES-SESSION-5,6

(For course instructor Guidance)

Learning Objective:
Prepare adjusting entries.
Income statement ( SERVICE SECTOR, TRADING ACTIVITIES)
Balance sheet.
Closing entries.

No. Q No. Page No.

1 4A-1 202
2 4A-2 203
3 4A-5 206
4 4A-6 207

Q No.1

1)
T.B: Prepaid insurance Rs. 5000
Adj: Insurance was paid for one year on July 1st( accounting year ends on Dec.31st each
year)

2)
T.B: Prepaid Rent Rs.6000
Adj: Rent was paid on first January for two years

1)
T.B: Office equipment Rs.50,000
Adj: Depreciation of office equipment is estimated 10%

4)
T.B: A/c Receivable Rs.25,000
Adj: Uncollectable account estimated 2.5% of A./c receivable

5)
T.B: Salaries expense Rs. 55,000
Adj: salaries outstanding Rs.12000

6)
T.B: Advertising expense Rs. 12500
Adj: Advertising expense for the last month of the year is Rs.5000. It was not recorded
or paid by the company till the end of the year.

7)
T.B: Office supplies Rs.500
Adj: office supplies used by Rs.400

8)
T.B: Commission revenue Rs 75,000
Adj: accrued commission revenue at the end of the year Rs.12500

9)
T.B: Commission unearned Rs.25000
Adj: commission earned by Rs.17500

10)
T.B: commission unearned Rs. 12500
Adj: commission unearned Rs.2500

Q No 2: Imran and co. presented following data on Sep 30, 2002

Title of account Debit Credit

Cash 51,000
A/c Receivable 25,600
Stationary 1500
Insurance expense 300
Equipment 68,000
Furniture 69300
Traveling expense 5000
A/c payable 14,300
Allowance for depreciation- equipment 5,000
Allowance for depreciation-furniture 18,600
Service revenue 85,300
Salaries expense 24000
Advertising expense 4500
Drawing 17000
Interest expense 1200
Capital 144,200
267400 267400
Additional data:
1. Bad debts estimated 5% of A/c recivable
2. Depreciation on furniture 10%
3. Depreciation on equipment 10%
4. Salaries outstanding Rs.2700
 5. Interest payable Rs. 400
6. Stationary used by company Rs.900
7. Traveling expense is outstanding Rs.1000

Required:
i. prepare adjusting entries
ii. prepare adjusted trial balance
iii. prepare income statement
iv. prepare balance sheet

Q No.3 The adjusted trial balance of Marineland Travel Designers at December 31, 20X6, follows.

MARINELAND TRAVEL DESIGNERS

Adjusted Trial Balance
December 31, 20X6

Cash $ 1,320
Accounts receivable 4,920
Supplies 2,300
Prepaid rent 1,600
Office equipment 20,180
Accumulated depreciation—office equipment $ 4,350
Office furniture 37,710
Accumulated depreciation—office furniture 4,870
Accounts payable 4,740
Interest payable 830
Unearned service revenue 620
Note payable 13,500
Ken Sorley, capital 26,090
Ken Sorley, drawings 29,000
Service revenue 120,910
Depreciation expense—office equipment 6,680
 Depreciation expense—office furniture 2,370
Salary expense 39,900
Rent expense 17,400
Interest expense 3,100
Utilities expense 2,670
Insurance expense 3,810
Supplies expense 2,950
$175,910 $175,910
Total

Required

1. Prepare Marineland's 20X6 income statement and statement of owner's equity and
year-end balance sheet.

2.
a. Which financial statement reports Marineland's results of operations?
Were operations successful during 20X6? Cite specifics from the financial
statements to support your evaluation.

Which statement reports the company's financial position? Does Marineland's financial
position look strong or weak? Give the reason for your evaluation.

Q No.4 The unadjusted trial balance of Christine Salomon, at July 31, 20X2, and the related month-
end adjustment data follow.

CHRISTINE SALOMON, CPA

Trial Balance
July 31, 20X2

Cash $ 5,600
Accounts receivable 11,600
Prepaid rent 4,000
Supplies 800
Furniture 28,800
Accumulated depreciation-Furniture $ 3,500
Accounts payable 3,450
Salary payable
Salomon, capital 39,050
 Salomon, Drawing 4,000
Accounting service revenue 11,750
Salary expense 2,400
Rent expense
Utilities expense 550
Depreciation expense
Supplies expense
$57,750 $57,750
Total

Adjustment data:

a. Accrued accounting service revenue at July 31, $900.

b. Prepaid rent expired during the month. The unadjusted prepaid balance of $4,000
relates to the period July through October.
c. Supplies on hand at July 31, $400.
d. Depreciation on furniture for the month. The estimated useful life of the furniture
is four years.
e. Accrued salary expense at July 31 for one day only. The five-day weekly payroll
is $1,000.

Required

1. Prepare work sheet at July 31, 20X5.

2. Prepare the income statement and the statement of owner's equity for the month
ended July 31, 20X2, and the balance sheet at that date.

Q No.5 The trial balance of Cohen Construction Co. at June 30, 20X3, follows.

COHEN CONSTRUCTION CO.

Trial Balance
June 30, 20X3

Cash $ 21,200
Accounts receivable 37,820
Supplies 17,660
Prepaid insurance 2,300
Equipment 32,690
Accumulated depreciation—equipment $ 26,240
Building 42,890
 Accumulated depreciation—building 10,500
Land 28,300
Accounts payable 22,690
Interest payable
Wage payable
Unearned service revenue 10,560
Note payable, long-term 22,400
Lynn Cohen, capital 79,130
Lynn Cohen, withdrawals 4,200
Service revenue 20,190
Depreciation expense—equipment
Depreciation expense—building
Wage expense 3,200
Insurance expense
Interest expense
Utilities expense 1,110
Advertising expense 340
Supplies expense
$191,710 $191,710
Total

Additional data at June 30, 20X3:

a. Depreciation: equipment, $630; building, $370.

b. Accrued wage expense, $240.
c. Supplies on hand, $14,370
d. Prepaid insurance expired during June, $500.
e. Accrued interest expense, $180.
f. Unearned service revenue earned during June, $4,970.
g. Accrued advertising expense, $100 (credit Accounts Payable).
h. Accrued service revenue, $1,100.

Required

Complete Cohen Construction's work sheet for June.

Q No.6 The adjusted trial balance of Gallo Shipping & Handling at June 30, 20X9, after all
adjustments, follows.

GALLO SHIPPING & HANDLING

Adjusted Trial Balance
June 30, 20X9
 Cash $ 12,350
Accounts receivable 26,470
Supplies 31,290
Prepaid insurance 3,200
Equipment 135,800
Accumulated depreciation—equipment $ 16,480
Building 34,900
Accumulated depreciation—building 16,850
Land 30,000
Accounts payable 38,400
Interest payable 1,490
Wages payable 770
Unearned service revenue 2,300
Note payable, long–term 97,000
Linda Gallo, capital 58,390
Linda Gallo, withdrawals 45,300
Service revenue 139,860
Depreciation expense—equipment 7,300
Depreciation expense—building 3,970
Wage expense 21,470
Insurance expense 3,100
Interest expense 8,510
Utilities expense 4,300
Supplies expense 3,580
$371,540 $371,540
Total

Adjusting data at June 30, 20X9, which have all been incorporated into the adjusted trial
balance figures:

a. Prepaid insurance expired during the year, $2,200.

b. Accrued interest expense, $540.
c. Accrued service revenue, $940.
d. Unearned service revenue earned during the year, $7,790.
e. Accrued wage expense, $770.
f. Depreciation for the year: equipment, $7,300; building, $3,970.
g. Supplies used during the year, $3,580.

Required:Prepare Gallo's income statement and statement of owner's equity for the year
ended June 30, 20X9, and the classified balance sheet on that date.
Q No.7 Afzal company provided information on December 31,2004.
TITLE OF ACCOUNT DEBIT CREDIT
Plant assets Rs.37,50,000
Cash 100,000
Account Receivable 162,500
Merchandise Inventory-beg 62500
Sales return 7000
Purchases 12,45000
Transportation in 20000
Salaries expense 145000
Prepaid advertising 20000
Director’s fee 2,15000
Sales revenue 18,75000
Commission income 20000
Accumulated depreciation 350000
Retained earning 367500
Paid up capital 25,00000
10% debentures payable 500000
Account payable 112500
Purchases return 2000
57,27,000 57,27,000

Additional information:
1. Merchandise Inventory-ending Rs.45,000
2. Depreciation 10% on fixed assets
3. Tax rate is 30%

Required:
a) Income Statement showing EBIT
b) Balance Sheet

Q No.8 Delux company authorized capital is 500,000 shares of Rs.10 each. Following
information provided on December 31,2004.
TITLE OF ACCOUNT DEBIT CREDIT
Cash 120,000
Account receivable 155,000
Account payable 145,000
Merchandise inventory 125,000
Purchases 1500,000
Paid up capital 1800,000
Transportation 20,000
Salaries expense 120,000
Sales 1830,000
Building 1800,000
Auditor’s fee 70,000
Furniture 50,000
Retained earnings 225,000
Fire insurance 10,000
Utility expenses 30,000
4000,000 4000,000

Additional information:
1. Merchandise Inventory ending Rs.140,000
2. Provide depreciation on furniture 20% and building at 2%.
3. Income tax 40%

Required:
a) Income Statement
b) Balance Sheet

Q-9 Prepare Balance Sheet from the given data, but be careful, every item will not be
appeared in Balance Sheet.

Land 25000
Building 125000
A/c payable 30000
Cash 15000
Note payable 25800
Sales 550000
Office supplies 5000
Bank 17000
A/c receivable 15000
Amir-capital ?
Salaries payable 32500
Short-term investment 58000
Office salaries expense 12500
Prepaid advertising 36000
Commission revenue 256900

Q-10 An incorrect Balance sheet of Ahmad Merchant is given here, your are required to
prepare correct and classified Balance Sheet on December 31,2002.

Q A/c payable 14000 Land 68000

A/c receivable 800 Machinery 65000
Building 52000 Note Payable 29000
Cash 9200 Salaries Payable 3000
Salman-capital ? Supplies 400

Q-11 Following Balance Sheet presented by Sajid and sons on March 31, 2002

ASSETS EQUITIES
CURRENT ASSETS LIABILITIES
CASH 125,000A/C PAYABLE 85000
A/C RECEIVABLE 45000LOAN FROM AKRAM 100,000
NOTE RECEIVABLE 25000NOTE PAYABLE 25000
PREPAID ADVERTISING 2500
OWNER'S EQUITY
FIXED ASSETS CAPITAL 502500
EQUIPMENT 65000
BUILDING 450,000
TOTAL ASSETS 712,500 EQUITIES 712500

Following transactions occurred during the month of April

1. Collected from customer Rs. 15000

2. Paid to supplier Rs. 65000
3. Note receivable matured and received Rs.10000
4. Sajid invest additional capital in business in the form of cash Rs.100,000 and
equipment Rs.25000
5. Sajid obtained bank loan from Standard Chartered on five year term Rs. 200,000
6. Note payable paid by firm Rs.5000
7. Sajid withdrew Cash Rs. 20,000 for personal use.
Required:
1. Prepare Journal entries for the above transactions
2. Draw General ledger for the accounts effected
3. Prepare Balance Sheet as at April 30th,2002

Q No. 12 The Trial Balance from the given data of Funfood Enterprises on August
31st,2005.

Prepaid insurance 4500

Cash 15600
Office stationary 5600
Sales revenue 1175000
Commission income 25000
Office salaries 56000
Capital- Haroon 575000
Drawing-Haroon 45000
Equipment 45000
A/c payable 56000
Utility expense 12000
Bank overdraft 75000
Insurance expense 5000
Note payable 32000
Building 750000
Prepaid rent 40000
A/c Receivable 60000
Loan from bank 300000
Marketable securities 50000
Interest expense 12000
Operating expenses 1125,300

Prepare Income Statement and Balance Sheet.

Q No.13 Following Trial balance and adjustment data is presented by Saleem , a sole-
trader at the end of its financial year Dec.31,2002.

TITLE OF ACCOUNT DEBIT CREDIT

CASH 5,000
A/C RECEIVABLE 20,000
EQUIPMENT 32,800
ADVERTISING EXPENSE 3,000
PREPAID RENT 6,000
MISCELLANEOUS EXPENSE 2,000
OFFICE SUPPLIES EXPENSE 1,000
INTEREST EXPENSE 500
MDS. INVENTORY-BEGINNING 7,000
PURCHASES 25,000
CARRIAGE IN 200
SALES RETURN 900
SALARIES EXPENSE 8,000
SALES REVENUE 40,000
PURCHASES RETURN 800
PURCHASES DISCOUNT 300
COMMISSION INCOME 2,500
A/C PAYABLE 5,500
CAPITAL-SALEEM 39,800
NOTE PAYABEL 5,000
BANK OVERDRAFT 7,500
 LONG-TERM LOAN 10,000
TOTAL 111,400 111,400

ADJUSTMENT DATA ON DEC.31,2002:

1. Depreciation charged @ 25% on non-current assets

2. Income tax 34%
3. Merchandise Inventory-ending Rs.1700

Required:
1. Prepare Income Statement
2. Prepare Balance Sheet
3. Prepare closing entries.

Q No.14 Saleem provided following Trial Balance on December 31, 2002 and
adjustment data.

TITLE OF ACCOUNT DEBIT CREDIT

CASH 45,000
A/C RECEIVABLE 75,000
OFFICE EQUIPMENT 325,000
MARKETING EXPENSE 12,500
PREAPID ADVERTISING 8,500
OTHER EXPENSE 6,000
OFFICE SUPPLIES EXPENSE 3,500
INTEREST EXPENSE 16,000
MDS. INVENTORY-BEGINNING 27,800
PURCHASES 275,000
TRANSPORTATION-IN 22,000
SALES RETURN 12,000
SALARIES EXPENSE 65,000
SALES REVENUE 475,000
PURCHASES RETURN 1800
PURCHASES DISCOUNT 4500
INTEREST INCOME 27,000
A/C PAYABLE 35,000
CAPITAL-SALEEM 222,300
SHORT-TERM LOAN 55,000
BILL PAYABLE 22,700
LONG-TERM LOAN 50,000
TOTAL 893,300 893,300

Adjustment data
1. Depreciation on non-current assets @ 20%
2. Income Tax 40%
3. Merchandise Inventory-ending 12500

Required:
1. Prepare Income Statement
2. Prepare Balance sheet
3. Prepare closing entries