2010 financial accounting 7 oct class exam solution

42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 0 1 2 3 4 6 8 9 16 7 13 5 15 10 11 1 40000 40000 2 8000 8000 3 -3000 10000 7000 4 3900 3900 5 -300 -300 12 6 4200 4200 7 -4500 -4500 8 2800 -2800 9 6000 6000 10 -1000 -1000 14 11 -1000 -1000 12 2300 2300 13 4000 4000 14 5000 5000 15 -1500 -1500 14 16 -700 -700 17 17 -200 1000 800 18 -3500 -3500 19 -1000 -1000 20 -500 -500 21 -1000 -1000 38800 9000 10000 6100 2300 9100 5500 0 44000 -2000 13100 -3500 18 66200 19 66200 26 27 28 28 10 13100 29 0 30 44000 21 25 9600 22 300 15 2000 23 2500 17 700 31 51600 24 3500 25 9600 32 20 1 19 4 38800 34 33 6100 7 9100 16 2300 35 5500 6 9000 36 14600 8 10000 3 51600 18 66200 37 66200 79 80 John smith Assets Liabilities Equity Cash capital Equipment Accounts Payable Furniture Acc. Rece Revenue Expenses utilities Note Payable salaries Withdrawals Supplies telephone Total Assets Liabilities and Equity 30 September 2010 Less expenses Utilities Salaries Total Expenses Net Income Income statement John Smith Statement Owners Equity John Smith September 2010 Opening Balance Capital Closing Balance Balance Sheet John Smith Acc. Receivable Liabilities Notes Payable Total Liabilities Total Liabilities and Equity CIS class exam 7 October 2010. 10 % of final grade 1 hour 30 minutes. Answer all questions Theory questions must be answered in essay format Question 1: For the list of transactions below, prepare a Tabular Analysis, Income Statement, Statement of Owners’ Equity and Balance Sheet. In September 2010 John smith opened a business called “Best Training” specialised in providing finance classes to university students. The following transactions took place in September 1) John Smith invested $40,000 in the business in exchange for common stock 2) Purchased equipment on account $8,000 3) Purchased furniture $10,000. Paid $3,000 cash, the remainder on account. 4) Sold a service on account to a university $3,900 5) Paid utilities $300 6) Sold a service for cash $4,200 7) Paid $4,500 relating to transaction 2 8) Received $2,800 relating to transaction 4 9) Got a note payable from the bank $6,000 10) Paid salaries in cash $1,000 11) Owner withdraws $1000 from the business 12) Purchased supplies $2,300 on account. 13) Owner invested $4,000 more into the business 14) Sales on account $5,000 15) Paid salaries $1,500 16) Paid telephone bill, $700 17) Purchase a computer $1,000. Paid $200, the rest on is account 18) Paid the balance owing relating to transaction 2 19) Paid $1,000 relating to transaction 3 20) Paid $500 on the note payable 21) Owner withdraws $1000 from the business 70 Marks Question 2: a) Who are the users of accounting information. Why do they use them? 10 Marks b) Explain the fundamental accounting principles and assumptions. 10 Marks c) Why do revenues increase owners equity and why do expenses decrease owners equity? 5 Marks d) For the following transactions, say what items are affected, categorise them as assets, liabilities, or equity and say whether they increase or decrease. Example: Buy equipment on account: equipment, asset, increase . accounts payable liability, increase. (1) Provide service to a client for cash (2) Owner invests money into the business (3) Borrow money from the bank (4) Purchase furniture on account (5) Owner takes money out of the business 5 marks (1 each) QUESTION 1 QUESTION 2 see book/notes