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To answer a question effectively, address the question directly, bring important related
issues into the discussion, refer to sources, and indicate how principles from the course
materials apply. The student must also be able to identify important problems and
implications arising from the answer.
For citing references, writing bibliographies, and formatting the assignment, APA format
should be followed.
Q. 2 Island Hopper is an airline providing passenger and freight service among some
Pacific islands. The accounts are adjusted and closed each month. On June 30, the
trial balance shown below was prepared from the ledgers.
HEMPSTEAD REALTY
Trial Balance
March 31, 19--
Cash Rs. 59,500
Accounts receivable 15,000
Office supplies 1,700
Land 60,000
Building 180,000
Accumulated depreciation: Building Rs. 1,000
Office Equipment 42,000
Accumulated depreciation: Office 1,400
Equipment
Accounts payable 29,500
M. Valentino, capital 253,300
M. Valentino, drawing 9,000
Commissions earned 100,000
2
Advertising expense 1,800
Automobile rental expense 1,000
Salaries expense 14,000
Telephone expense 1,200
Rs.385,200 Rs.385,200
Instructions:
From the trial balance and supplementary data given, prepare the following as of
March 31, 19__.
a. Adjusting entries for depreciation during March of building and of office equipment.
b. Adjusting entry to recognize as expense the cost of office supplies used in March. At the
end of March, the supplies on hand are estimated to have a cost of Rs.1, 000.
c. Adjusted trial balance.
d. Income statement for the month of March.
e. A balance sheet at March 31 in report form. Assume no additional investments by owner
during March.
f. Closing entries. (20)
Q. 3 (a) Critically evaluate the difference between Perpetual and Periodic inventory
system. (05)
(b) River Imports sold merchandise to Marine Systems for Rs.8, 000, offering
terms of 2/10, n/30. Marine Systems paid for the merchandise within the
discount period. Both companies use perpetual inventory systems.
i. Prepare journal entries in the accounting records of River Imports to
account for this sale and the subsequent collection. Assume the original
cost of the merchandise to River Imports had been Rs.4,800.
ii. Prepare journal entries in the accounting records of Marine Systems to
account for the purchase and subsequent payment. Marine Systems
records purchases of merchandise at net cost.
iii. Assume that because of a change in personnel, Marine Systems failed to
pay for this merchandise within the discount period. Prepare the journal
entry in the accounting records of Marine Systems to record payment
after the discount period. (15)
Q. 4 The cash transactions and cash balances of Puma Farm for July were as follows:
3
6. Comparison of the paid checks returned by the bank with the entries in the
accounting records revealed that check no.821 for Rs.1,670.04, issued on
July 15, in payment for office equipment, had been erroneously entered in
Puma’s records as Rs.1,706.04.
7. Examination of the paid checks also revealed that three checks, all issued in
July, had not yet been paid by the bank: bearing No.811 for Rs.1,722.24; no.
814 for Rs.1,281.6; No. 823 for Rs.602.1.
8. Included with the July bank statement was a Rs.360 check drawn by Ahmed
Bilal, a customer of Puma Farm. This check was marked “NSF”. It had been
included in the deposit of July 27, but had been charged against the
company’s account on July 31.
Instructions:
a) Prepare bank reconciliation for Puma Farm on July 31.
b) Prepare journal entries (in general journal form) to adjust the accounts on
July 31. Assume that the accounts have not been closed.
c) State the amount of cash which should be included in the balance sheet on
July 31. (20)