CLASS EXERCISES-SESSION-5,6

(For course instructor Guidance)

Learning Objective:
Prepare adjusting entries.
Income statement.
Balance sheet.
Closing entries.

No. Q No. Page No.

1 4A-1 202
2 4A-2 203
3 4A-5 206
4 4A-6 207

Q No.1

1)
T.B: Prepaid insurance Rs. 5000
Adj: Insurance was paid for one year on July 1st( accounting year ends on Dec.31st each
year)

2)
T.B: Prepaid Rent Rs.6000
Adj: Rent was paid on first January for two years

1)
T.B: Office equipment Rs.50,000
Adj: Depreciation of office equipment is estimated 10%

4)
T.B: A/c Receivable Rs.25,000
Adj: Uncollectable account estimated 2.5% of A./c receivable

5)
T.B: Salaries expense Rs. 55,000
Adj: salaries outstanding Rs.12000

6)
T.B: Advertising expense Rs. 12500
Adj: Advertising expense for the last month of the year is Rs.5000. It was not recorded
or paid by the company till the end of the year.

7)
T.B: Office supplies Rs.500
Adj: office supplies used by Rs.400

8)
T.B: Commission revenue Rs 75,000
Adj: accrued commission revenue at the end of the year Rs.12500

9)
T.B: Commission unearned Rs.25000
Adj: commission earned by Rs.17500

10)
T.B: commission unearned Rs. 12500
Adj: commission unearned Rs.2500

Q No 2: Imran and co. presented following data on Sep 30, 2002

Title of account Debit Credit

Cash 51,000
A/c Receivable 25,600
Stationary 1500
Insurance expense 300
Equipment 68,000
Furniture 69300
Traveling expense 5000
A/c payable 14,300
Allowance for depreciation- equipment 5,000
Allowance for depreciation-furniture 18,600
Service revenue 85,300
Salaries expense 24000
Advertising expense 4500
Drawing 17000
Interest expense 1200
Capital 144,200
267400 267400
Additional data:
1. Bad debts estimated 5% of A/c recivable
2. Depreciation on furniture 10%
3. Depreciation on equipment 10%
4. Salaries outstanding Rs.2700
 5. Interest payable Rs. 400
6. Stationary used by company Rs.900
7. Traveling expense is outstanding Rs.1000

Required:
i. prepare adjusting entries
ii. prepare adjusted trial balance
iii. prepare income statement
iv. prepare balance sheet

Q No.3 The adjusted trial balance of Marineland Travel Designers at December 31, 20X6, follows.

MARINELAND TRAVEL DESIGNERS

Adjusted Trial Balance
December 31, 20X6

Cash $  1,320  
Accounts receivable 4,920  
Supplies 2,300  
Prepaid rent 1,600
Office equipment 20,180
Accumulated depreciation—office equipment $    4,350
Office furniture 37,710
Accumulated depreciation—office furniture 4,870
Accounts payable   4,740
Interest payable 830
Unearned service revenue 620
Note payable   13,500
Ken Sorley, capital   26,090
Ken Sorley, drawings 29,000  
Service revenue   120,910
Depreciation expense—office equipment 6,680
 Depreciation expense—office furniture 2,370
Salary expense 39,900
Rent expense 17,400
Interest expense 3,100  
Utilities expense 2,670  
Insurance expense 3,810
Supplies expense      2,950             
$175,910 $175,910
Total

Required

1. Prepare Marineland's 20X6 income statement and statement of owner's equity and
year-end balance sheet.

2.
a. Which financial statement reports Marineland's results of operations?
Were operations successful during 20X6? Cite specifics from the financial
statements to support your evaluation.

Which statement reports the company's financial position? Does Marineland's financial
position look strong or weak? Give the reason for your evaluation.

Q No.4 The unadjusted trial balance of Christine Salomon, at July 31, 20X2, and the related month-
end adjustment data follow.

CHRISTINE SALOMON, CPA

Trial Balance
July 31, 20X2

Cash $  5,600  
Accounts receivable 11,600  
Prepaid rent 4,000  
Supplies 800
Furniture 28,800
Accumulated depreciation-Furniture $  3,500
Accounts payable 3,450
Salary payable
Salomon, capital   39,050
 Salomon, Drawing 4,000
Accounting service revenue 11,750
Salary expense 2,400
Rent expense
Utilities expense 550  
Depreciation expense
Supplies expense                        
$57,750 $57,750
Total

Adjustment data:

a. Accrued accounting service revenue at July 31, $900.

b. Prepaid rent expired during the month. The unadjusted prepaid balance of $4,000
relates to the period July through October.
c. Supplies on hand at July 31, $400.
d. Depreciation on furniture for the month. The estimated useful life of the furniture
is four years.
e. Accrued salary expense at July 31 for one day only. The five-day weekly payroll
is $1,000.

Required

1. Prepare work sheet at July 31, 20X5.

2. Prepare the income statement and the statement of owner's equity for the month
ended July 31, 20X2, and the balance sheet at that date.

Q No.5 The trial balance of Cohen Construction Co. at June 30, 20X3, follows.

COHEN CONSTRUCTION CO.

Trial Balance
June 30, 20X3

Cash $  21,200
Accounts receivable 37,820
Supplies 17,660
Prepaid insurance 2,300
Equipment 32,690
Accumulated depreciation—equipment $  26,240
Building 42,890
 Accumulated depreciation—building 10,500
Land 28,300
Accounts payable 22,690
Interest payable
Wage payable
Unearned service revenue 10,560
Note payable, long-term 22,400
Lynn Cohen, capital 79,130
Lynn Cohen, withdrawals 4,200
Service revenue 20,190
Depreciation expense—equipment
Depreciation expense—building
Wage expense 3,200
Insurance expense
Interest expense
Utilities expense 1,110
Advertising expense 340
Supplies expense                            
$191,710 $191,710
Total

Additional data at June 30, 20X3:

a. Depreciation: equipment, $630; building, $370.

b. Accrued wage expense, $240.
c. Supplies on hand, $14,370
d. Prepaid insurance expired during June, $500.
e. Accrued interest expense, $180.
f. Unearned service revenue earned during June, $4,970.
g. Accrued advertising expense, $100 (credit Accounts Payable).
h. Accrued service revenue, $1,100.

Required

Complete Cohen Construction's work sheet for June.

Q No.6 The adjusted trial balance of Gallo Shipping & Handling at June 30, 20X9, after all
adjustments, follows.

GALLO SHIPPING & HANDLING

Adjusted Trial Balance
June 30, 20X9
 Cash $  12,350
Accounts receivable 26,470
Supplies 31,290
Prepaid insurance 3,200
Equipment 135,800
Accumulated depreciation—equipment $  16,480
Building 34,900
Accumulated depreciation—building 16,850
Land 30,000
Accounts payable 38,400
Interest payable 1,490
Wages payable 770
Unearned service revenue 2,300
Note payable, long–term 97,000
Linda Gallo, capital 58,390
Linda Gallo, withdrawals 45,300
Service revenue 139,860
Depreciation expense—equipment 7,300
Depreciation expense—building 3,970
Wage expense 21,470
Insurance expense 3,100
Interest expense 8,510
Utilities expense 4,300
Supplies expense      3,580              
$371,540 $371,540
Total

Adjusting data at June 30, 20X9, which have all been incorporated into the adjusted trial
balance figures:

a. Prepaid insurance expired during the year, $2,200.

b. Accrued interest expense, $540.
c. Accrued service revenue, $940.
d. Unearned service revenue earned during the year, $7,790.
e. Accrued wage expense, $770.
f. Depreciation for the year: equipment, $7,300; building, $3,970.
g. Supplies used during the year, $3,580.

Required:Prepare Gallo's income statement and statement of owner's equity for the year
ended June 30, 20X9, and the classified balance sheet on that date.