National University of Sciences and Technology

SEECS
BS (SE) 6AB
Problem Set 3
Date: 4th November 2018 Due Date:16th November 2018

Q1: Following is the pre-closing trial balance of ADM & Co on December 31st, 2003
Title of Account Debit Credit
Cash 10,000
Accounts Receivables 24,000
Merchandise Inventory (1-1-03) 20,000
Prepaid Insurance 8,000
Office Equipment 100,000
Allowance for Depreciation 20,000
Accounts Payables 16,000
Capital 104,600
Drawings 12,000
Sales 160,000
Sales Discount 8,000
Purchases 80,000
Purchases return and allowance 10,000
Transportation In 11,600
Advertisement Expense 17,000
Salaries Expense 20,000
310,600 310,600

Data for adjustments on December 31st, 2003

i) Insurance Expired Rs. 5000
ii) Allowance for depreciation on equipment Rs 4000
iii) Unpaid salaries Rs. 4000
iv) Advertisement prepaid Rs. 2400
v) Make allowance for doubtful debts at 10% of accounts receivables at the end of the year
vi) Merchandise inventory on December 31, 2003 Rs 30,000
Required
i) Prepare Income statement for the year ended Dec 31, 2003
ii) Prepare Balance sheet as on Dec 31, 2003
Q2. Following is the pre-closing trial balance of ARK & Co on December 31st, 2001
Title of Account Debit Credit
Cash 28,000
Accounts Receivables 43,200
Merchandise Inventory (1-1-03) 36,000
Prepaid Insurance 14,400
Office Equipment 180,000
Allowance for Depreciation 36,000
Accounts Payables 28,800
Capital 188,280
Drawings 21,600
Sales 288,000
Sales Discount 14,400
Purchases 144,000
Purchases return and allowance 18,000
Transportation In 20,880
Advertisement Expense 30,600
Salaries Expense 36,000
Commission Income 10,000
569,080 569,080

Data for adjustments on December 31st, 2003

i) Insurance unexpired Rs. 5400
ii) Allowance for depreciation on equipment Rs 7200
iii) Accrued salaries Rs. 4000
iv) Advertisement expense for the year was Rs. 26280
v) Make allowance for doubtful debts at 10% of accounts receivables at the end of the year
vi) Merchandise inventory on December 31, 2003 Rs 54,000
vii) Commission income for the year was Rs. 7000 and accrued commission income was
Rs 8500
Required
i) Prepare Income statement for the year ended Dec 31, 2001
ii) Prepare Balance sheet as on Dec 31, 2001
Q3. Following is the pre-closing trial balance of BMQ & Company on June 30th , 2007
Title of Account Debit Credit
Cash 108,000
Accounts Receivables 72,000
Merchandise Inventory 36,000
Prepaid Advertisement 14,400
Accounts Payables 36,000
Unearned Commission 18,000
Capital 90,000
Sales 396,000
Drawing 18,000
Cost of goods sold 252,000
Office supplies expense 5,400
Salaries Expense 19,800
Rent Expense 14,400
540,000 540,000

Supplementary data for adjustments

i) Unused office supplies Rs. 1080
ii) Salaries outstanding Rs. 1800 and prepaid salaries Rs. 3000
iii) Unearned Commission Rs. 5400
iv) Commission receivables Rs. 5040
v) Rent expense for the year Rs. 21600
Required
i) Prepare Income statement for the year ended June 30, 2007
ii) Prepare Balance sheet as on June 30, 2007
Q4. Alpine Expeditions operates a mountain climbing school in Colorado. Some clients pay
in advance for services; others are billed after services have been performed. Advance
payments are credited to an account entitled Unearned Client Revenue. Adjusting entries
are performed monthly. An unadjusted trial balance dated December 31, 2011, follows.
(Bear in mind that adjusting entries have already been made for the first 11 months of 2011,
but not for December.)
Following is the unadjusted trial balance of Alpine Expedition on December 31st, 2011
Title of Account Debit Credit
Cash $13,900
Accounts Receivables 78,000
Unexpired Insurance 18,000
Prepaid Advertisement 2,200
Climbing Supplies 4,900
Climbing Equipment 57,600
Allowance for Depreciation $ 38,400
Accounts Payable 1,250
Notes Payable 10,000
Interest Payable 150
Income tax Payable 1,200
Unearned Client revenue 9,600
Capital Stock 17,000
Retained Earnings 62,400
Client Revenue Earned 188,000
Advertising Expense 7,400
Insurance Expenses 33,000
Rent Expenses 16,500
Climbing Supplies Expense 8,400
Salaries Expense 57,200
Interest Expense 150
Repair Expense 4,800
Income taxes expense 12,750
Depreciation Expense 13,200
$ 328,000 328,000

Data for adjustments on December 31st, 2011

i) Accrued but unrecorded fees earned as of December 31 amount to $6,400.
ii) Records show that $6,600 of cash receipts originally recorded as unearned client
revenue had been earned as of December 31.
iii) The company purchased a 12-month insurance policy on June 1, 2011, for $36,000.
iv) On December 1, 2011, the company paid $2,200 for numerous advertisements in
several climbing magazines. Half of these advertisements have appeared in print as of
December 31.
v) Climbing supplies on hand at December 31amount to $2,000.
 vi) All climbing equipment was purchased when the business first formed. The estimated
life of the equipment at that time was four years (or 48 months).
vii) On October 1, 2011 the company borrowed $10,000 by signing an eight-month, 9
percent note payable. The entire note, plus eight months’ accrued interest, is due on
June 1, 2012.
viii) Accrued but unrecorded salaries at March 31 amount to $3,100.
ix) Estimated income taxes expense for the entire year totals $14,000. Taxes are due in
the first quarter of 2012.
Required
i) Prepare Income statement for the year ended March 31, 2009
ii) Prepare Balance sheet as on March 31, 2009

Q5. Following balances were taken from the ledger of Gulistan & Co. on Dec 31st, 2010

Title of Account Debit Credit

Cash 5,000
Accounts Receivables 10,000
Merchandise Inventory (1-1-10) 8,000
Prepaid Rent 5,000
Sales Equipment 30,000
Purchases 24,000
Carriage Inward 500
Advertisement Expenses 2,500
Miscellaneous Expenses 1,500
Office Supplies Expenses 2,000
Delivery Expenses 500
Salaries Expense 18,000
Sales return and allowance 500
Allowance for bad debt 500
Sales Revenue 68,000
Purchases discount 1,000
Commission Income 3,000
Capital 30,000
Accounts Payables 6,000

Data for adjustments on December 31st, 2010

i) Prepaid shop rent Rs. 1000
ii) Office supplies unused Rs. 400
iii) Allowance for bad debt was estimated at Rs 500
iv) Accrued salaries Rs. 5000
v) Allowance for depreciation on sales equipment was estimated at Rs. 2000
vi) Merchandise inventory on December 31, 2010 Rs 10,000
vii) Commission Unearned Rs 1000
Required
i) Prepare Income statement for the year ended Dec 31, 2010
ii) Prepare Balance sheet as on Dec 31, 2010
Q6. Following balances were taken pre-closing trial balance prepared from the ledger of
Patiwala Book Depot on Dec 31st, 2003
Title of Account Debit Credit
Cash 6,000
Accounts Receivables 10,000
Merchandise Inventory (1-1-03) 4,500
Prepaid Rent 2,000
Sales Equipment 8,500
Purchases 20,000
Transportation In 2,000
Sales Salaries Expenses 6,000
Office Salaries Expenses 5,000
Drawings 1,000
Sales return and allowance 800
Allowance for bad debt 1,500
Allowance for depreciation 2,500
Sales Revenue 40,000
Purchases discount 1,600
Purchases return and allowance 1,400
Capital 12,300
Accounts Payables 6,500

Data for adjustments on December 31st, 2003

i) Increase the allowance for bad debt Rs. 500
ii) Prepaid office rent expired Rs. 800
iii) Provide depreciation on sales equipment for the year Rs 1000
iv) Accrued office salaries Rs. 900
v) Sales salaries were prepaid to the extent of Rs. 800
vi) Merchandise inventory on December 31, 2003 Rs 6,200
vii) A purchase of merchandise of Rs 500 wrongly charged to Sales Equipment Account
viii) Salaries to a sales person for the last week of December Rs 400 was paid by the owner
from business cash, which was mistakenly debited to his Drawing account.
Required
i) Prepare Income statement for the year ended Dec 31, 2003
ii) Prepare Balance sheet as on Dec 31, 2003
Q7. Tutors for Rent, Inc., performs adjusting entries every month, but closes its accounts
only at year-end. The company’s year-end adjusted trial balance dated December 31, 2011,
was:
Title of Account Debit Credit
Cash $91,100
Accounts Receivables 4,500
Supplies 300
Equipment 12,000
Allowance for Depreciation $ 5,000
Accounts Payable 1,500
Income tax Payable 3,500
Capital Stock 25,000
Retained Earnings 45,000
Dividends 2,000
Tutoring Revenue Earned 96,000
Advertising Expense 300
Salaries Expenses 52,000
Supply Expenses 1,200
Income taxes expense 11,600
Depreciation Expense 1,000
$ 176,000 176,000

Required

i) Prepare an income statement and statement of retained earnings for the year
ended December 31, 2011. Also prepare the company’s balance sheet dated
December 31, 2011.
ii) Does the company appear to be liquid? Defend your answer.
iii) Has the company been profitable in the past? Explain