Accounting assignment 2

Principles of Financial Accounting - HOMEWORK RAFAL KUSY Ph. D.

25th JUNE 2020

TEST NO: 2

NAME & SURMANE: …………………………………………

INDEX NUMBER: ……37716……………………………………

Instructions: Be sure to give supporting recommendation and answers where necessary.

Answer as completely as it possible

The Accounting Cycle – Problem Set ABC Company Ltd.

Assets Equities

Land 1 000 Paid-in Capital 4 000

Machinery equipment 2 500 Retained Earnings 1 500

Office Store equipment 3 000 Tax payable 1 300

Raw materials Inventory 1 800 Loan Payable 3 000

Office Supplies Inventory 2 500 Salary payables 1 100

Accounts Receivable 2 000 Accounts payable 3 500

Cash, Bank 3 800 Unearned rent revenue 3 000

Prepaid expenses 2 000 Allowance for uncollectible

accounts 1 200

Total assets 18 600 Total equities 18 600

Balance Sheet on Nov. 30, 2014

Summary of transactions during December:

1. Salaries to employees of € 1250were calculated for December and will paid in January. 2. Purchase of € 2550 of Office Supplies Inventory with 1% cash discount for cash

transaction.

3. Purchase of raw materials Inventory of € 2450 was done with three month trade credit. 4. Due to the low quality of the purchased office supplies inventory the company returned

back € 500 of inventory that diminished the accounts payable by that amount.

5. Paid outstanding salary payables. 6. Paid outstanding tax payables. 7. Paid outstanding trade creditors in the amount of € 1550. 8. The freight in for both supplies and raw material inventory was paid in the amount of €

500.

9. Performed services for Customer XYZ, for which we will receive € 3125 on 2 month credit sale.

10. At the end of month the Customer XYZ made a claim on the services and we agreed to sales allowance in the amount of 10%.

11. Performed consulting services, in the amount of € 3 000 with 5% for cash discount on sales (cash immediately received).

12. Performed services, in the amount of € 2500(cash immediately received). 13. In November 2014 we performed additional consulting work, € 3 000 on credit (5/30, n 60)

and in December 2014 the customer used the discount for prompt payment.

14. We sold office supplies inventory on the market for € 2 000 through credit card transaction (a straight 1% of credit card services were taken).

15. The cost of raw materials inventory used during December is € 1 200. 16. In the beginning of October 2014 a subscription rights for local newspaper magazine of € 4

000 was paid for four month term in advance;

17. In the beginning of September 2014 company receives rent for 6 months in advance, €6,000

18. At the end of the month Company repaid to the Bank credit tranche € 1 000 and paid interest charges (interest rate as of 6% p.a.)

19. Depreciation of machinery equipment for December amounts to € 500. 20. ABC company acknowledged the € 1 200 worth of bad debts in December 2014.

Required:

a) Prepare the opening journal entry on Dec. 1, 2014. b) Prepare the journal entries for the transactions (1– 21) for the month of December and

post them to the T-accounts, opening additional T-accounts for accounts as needed. Cross-

reference the entries using the numbers of the transactions above.

c) Prepare a trial balance. d) Prepare the adjusting journal entries and record them at the end of December in the T-

accounts as well as in the trial balance.

e) Prepare the closing entries for the temporary accounts and the Income Statement. f) Prepare the closing entries for the permanent accounts and the Balance Sheet as of Dec.

31, 2014.