class exam Nov 13 solution

Sheet3 Sheet2 Sheet1 CIS Fall 2009 Financial Accounting 10% of final grade The following information is also available at the month end Required: Journals, ledgers, trial balance, adjustments, close the accounts, financial reports For the Month of September, 2009, the following transactions take place in Accounting Solutions, a new business. 1) Owner invests $12,000 into business 2) Buy equipment $7500 on account 3) Buy supplies for cash $1600 4) Sell on account $2200 5) Receive payment for consulting service in advance $4200 6) Pay 11 months insurance in advance $2200 7) Pay salaries $400 8) Pay for utilities $350 9) Owner withdraws $900 for personal use 10) Pay $2500 relating to transaction 2 11) Receive $1400 relating to transaction 4 a) Equipment depreciation is $75 per month b) At the month end, $350 of salaries were unrecorded c) Inventory of supplies is $ 1450 d) Relating to transaction 5, $2800 service have been provided e) There is accrued revenue of $600 Answer All Questions Question 1 70% Journals Ledgers Trial Balance Adjustments Close Accounts Financial Reports Show calculations and the adjusting journals for the following transactions. Supplies pu¡rchased $5600 Accounting year end 31 December 2008 a) Opening Balance 1 Jan 2008 in Supplies prepaid $1000 Supplies Inventory at year end 31 December 2008 $6200 b) The following information relates to the business Insurance policies Policy A Policy B Purchased Months Coverage Cost Question 2 20% c) Borrowing is $60000, interest is 10% d) 1 January 2008, equipment of $30000 was purchased Life 6 years Residual value $6000 e) On 1 August, a customer paid for consulting 1 year in advance of $4800 f) We rent out part of our office for $600 per month. In December, the tenant didn't pay, but has agreed to pay in January Interest is paid on the 6th of every month 1 month in arrears 3 marks 5 marks 8 marks 7 marks 15 marks 20 marks Question 3 10% What are the main types of accounting adjustments and describe them. Why do accountants close accounts. Describe the procedure for closing accounts Ref Description DR CR Cash Capital Equipment Accounts Payable Supplies PP Accounts Receivable Revenue Unearned Revenue Membership PP Salary Expense Utilities Exp Withdrawals A1 Depreciation Expense Accumulated Depreciation A2 Salary Payable A3 Supplies Expense A4 A5 A6 C1 Income Summary C2 C3 Utilities Expense C4 C5 C6 C7 C8 Ledger Assets Bals dr cr Memebership Expense Liabilities Equity Dr Post Closing Trial Balance Income Statement ABC Solutions Less Expenses Total Expenses Net Income Statement Owners Equity Opening Balance Capital Introduced Balance Sheet Total Assets Liabilities and Equity Total Liabilities Total Liabilities and Equity QUESTION 1 Insurance Expense PP Insurance Insurance PP QUESTION 2 Calculations a) Supplies Purchased in year (DR supplies pp, Cr cash) Closing Inventory 31 dec Therefore Supplies consumed in year b) Insurance Prepaid Opening Bals Monthly Insurance Closing Bals Consumption Consumed c) d) Depreciation Building Life Residual Value Annual Depreciation : (Cost-Residual Value)/Life Annual Depreciation: e) Accrued Revenue Unearned revenue Aqdjustment Journals 2008 Months Opening Bals Policy A is 30 months (36 months minus 6 months consumed) Interest Payable 1 month interest unrecorded Cost per month Interest Accrued Interest Expense (30000-6000)/6 5 months Earned Accrued Revenue 1 month Per Month Question 3 See Notes/book 7/1/2007 00.00 $0.00 10/1/2008 00.00 0000.00 0.00 00000.00 00000.00 0.00 0000.00 0000.00 0.00 0000.00 0000.00 0.00 0000.00 0000.00 0.00 0000.00 0000.00 0.00 0000.00 0000.00 0.00 000.00 000.00 0.00 000.00 000.00 0.00 000.00 000.00 00.00 0000.00 0000.00 00.00 0000.00 0000.00 00.00 00.00 000.00 000.00 000.00 000.00 0000.00 0000.00 000.00 000.00 000.00 000.00 0000.00 0000.00 000.00 000.00 000.00 000.00 00.00 00.00 000.00 000.00 000.00 000.00 0000.00 0000.00 000.00 000.00 0.00 00000.00 00000.00 0.00 0000.00 00000.00 0.00 0000.00 00000.00 0.00 0000.00 00000.00 0.00 000.00 00000.00 0.00 000.00 00000.00 0.00 000.00 00000.00 00.00 0000.00 0000.00 00.00 0000.00 0000.00 0.00 0000.00 0000.00 00.00 00.00 0.00 0000.00 0000.00 000.00 0000.00 0.00 0000.00 0000.00 00.00 0000.00 000.00 000.00 0000.00 0.00 0000.00 0000.00 000.00 0000.00 0.00 0000.00 0000.00 00.00 0000.00 0000.00 000.00 000.00 0.00 0000.00 0000.00 0000.00 0000.00 0.00 00000.00 00000.00 0000.00 00000.00 000.00 00000.00 0.00 000.00 000.00 000.00 0000.00 0000.00 000.00 0000.00 000.00 0000.00 00.00 0000.00 000.00 0000.00 000.00 0000.00 0000.00 0.00 0000.00 0000.00 0000.00 0000.00 000.00 0000.00 0000.00 0.00 000.00 000.00 000.00 000.00 000.00 0.00 000.00 000.00 000.00 00.00 00.00 00.00 000.00 000.00 000.00 000.00 000.00 000.00 0000.00 0000.00 00.00 0000.00 0000.00 0000.00 0000.00 000.00 0000.00 00000.00 000.00 0000.00 000.00 000.00 00.00 000.00 000.00 00000.00 00000.00 0000.00 0000.00 00.00 0000.00 0000.00 0000.00 0000.00 000.00 0000.00 00000.00 00000.00 00000.00 10/1/2009 0000.00 000.00 000.00 00.00 000.00 000.00 0000.00 0000.00 10/1/2009 0.00 00000.00 0000.00 00000.00 000.00 00000.00 10/31/2009 0000.00 0000.00 00.00 0000.00 0000.00 0000.00 0000.00 00000.00 0000.00 000.00 0000.00 0000.00 00000.00 00000.00 0000.00 0000.00 0000.00 0000.00 000.00 1/1/2008 12/31/2008 0000.00 00.00 000.00 0000.00 00.00 00.00 0000.00 0000.00 00.00 0.00 00.00 0000.00 00.00 0.00 000.00 0000.00 0000.00 00.00 0000.00 000.00 00000.00 0.00 00.00 000.00 00000.00 0.00 0000.00 0000.00 00000.00 0000.00 0.00 8/1/2008 12/31/2009 12/31/2009 0000.00 0000.00 00.00 0.00 0000.00 000.00 000.00 000.00 000.00 0000.00 0000.00 000.00 000.00 0000.00 0000.00 0000.00 0000.00 000.00 000.00