Quest 1.

The balance sheet items for alfredos pizza parlor at June 1, 2006, were as
follows:
Account payable
$8000
Bank loan payable
4,000
Paid in capital
100,000
Cash
10,000
Pizza ovens
12,000
Inventory of food items
15,000
Loan receivables
8,000
Note payable to insurance company
9,000
Restaurant furniture
80,000
Retained earnings
?
During June, the following transactions occurred:
1. The company paid its suppliers $2,400 on account.
2. Additional food inventory of $3,500 was purchased on account.
3. the loan receivable was from a friend of the stores owner; a payment of one-half of the
balance was received by the company.
4. Additional equipment costing $2,500 was purchased for cash.
5. a soft drink supplier wanted the pizza parlor to stock its brand of drink, so it agreed to
sell the parlor ten cartons of the soft drinks for a total of $200.The regular purchase price
of this quantity is $250.the purchase was made on account.
Required:
1. Prepare a balance sheet as of June 1, 2006.be sure to determine the retained earnings
amount.
2. prepare a balance4 sheet as of June 30,2006.
3. Have the balances in the stockholders equity accounts changed? If so, by how much?
Can you explain the change or lack of change in these accounts?

Quest 2. The balance sheet items for McKay Computer Corporation at October 1, 2006, were as
follows:
Accounts and notes payable
Account receivables
Paid in capital
Cash
Furniture and equipment
Inventory
Mortgage payable
Retained earnings

$124,000
148,000
250,000
?
96,000
160,000
120,000
80,000

During October, the following transactions occurred:

1. The company received $40.000 on its accounts receivable.
2. The company purchased additional furniture and equipment for $50,000.twenty
thousand was paid in cash, and the firm took out a bank loan for the remainder.
3. A payment of $28,000 was made on accounts and note payable.
4. In exchange for additional shares of stock, the owner of the firm gave the firm his
personal 4 X 4 truck to be used for deliveries. The truck originally cost $24,000
and had a current fair market value of $16,000 (the exchange was valued at the
fair market value of the truck).

Required:
1. Prepare a balance sheet as of October 1, 2006. Be sure to determine the cash amount.
2. prepare a balance sheet as of October 31,2006.
3. Have the balances in the stockholders equity accounts changed? If so, by how much?
Can you explain the changes or lack of changes in these accounts?

Quest 3. The following items were taken from the records of Anasonic Corporation for the
month ended October 31, 2006:
Sales revenue
$620,000
Salaries expenses
80,000
Capital stock issued
140,000
Cost of goods sold
335,000
Service revenues
55,000
Rental expenses
45,000
Repairs and maintenance expense
54,000
Retained earnings, October 1, 2006 230,000
Accounts payable
40,000
Tax expense
30,000
Dividends declared and paid
13,000
Required:
1. Prepare an income statement for the month ended October 31, 2006.
2. Compute retained earnings as of October 31, 2006.
3. During the month, the company made sales of $100.000 on credits, which
have not yet been collected in cash. Why are these sales included in the
October 2006 income statement?
Is it accurate to say that when a firm earns net income during the period, its resources increase?
Explain

Q.4. Mr. Gupta runs a general store. His Trial Balance as on 31 st March 2004 was as follows:
Particulars
Capital
Drawings
Purchases
Sales
Opening Stock
Returns Outward
Freights Inward
Discount Received
Salaries
Commission
Discount Allowed
Dividend Received
Bad Debts
Provision for Doubtful Debts
Sundry Debtors
Purchase Subsidies
Returns Inward
Investment
Furniture
Sundry Creditors
Salesmens Commission
Office Expenses
Sales Tax
Cash in Hand and at Bank

Dr.
Rs.

Cr.
Rs.
12,50,000

1,25,000
19,62,000
25,90,000
2,20,000
22,000
55,000
25,000
2,95,000
57,500
25,000
32,000
19,500
15,000
2,65,000
64,500
26,000
2,05,000
2,20,000
2,00,000
15,000
72,500
1,22,000
6,29,000
42,56,000

42,56,000

Additional Information
(a) Mr. Gupta purchased a running business of Mr. Gour for Rs. 5,90,000 on 31 st March,
2004. He took over stock of Rs. 3,25,000, Debtors Rs. 2,65,000, Furniture Rs. 75,000 and
Creditors Rs. 75,000. No entry was passed for this transaction.
(b) Closing stock on 31st march 2004 was not valued. Mr. Gupta earned a uniform rate of
gross profit of 25% on net sales.
(c) Provision for doubtful debts is to be maintained at 7.5% on debtors.
(d) Purchases include purchases of furniture on 1st January, 2004 worth rs. 45,000.
(e) Sales include sale of old furniture for rs. 16,000 on 1 st October, 2003 (WDV of such
furniture on 1st April 2003 was Rs. 26,000)
(f) Furniture was to be depreciated by 10% p.a.

You are required to prepare the Profit and Loss Account of Mr. Gupta for the year ended 31 st
March, 2004 and also a Balance sheet as on the same date.

Q.5. The trial balance for Terrific Lawn on April 30, 2009 is given below.

Cash
Accounts receivable
Notes receivable
Prepaid expenses
Land
Equipment
Accumulated depreciation
Accounts payable
Wages payable
Utilities payable
Notes payable
Interest payable
Income tax payable
Unearned revenues
Contributed capital
Retained earnings
Mowing revenue
Interest revenue
Wages expense
Fuel expense
Insurance expense
Utilities expense
Depreciation expense
Interest expense
Income tax expense
Total

Debit
5,032
1,700
0
300
3,750
4,600

Credit

0
220
0
0
3,700
0
0
1,600
9,000
0
5,200
12
3,900
410
0
0
0
40
0
$19,732 $19,732

Additional Information follows:

One-fourth of the $1,600 cash received from the city at the beginning of April for future
mowing service has been earned in April. The $1,600 in Unearned Revenues represents
four months of service (April through July).
Insurance costing $300 providing coverage for six months (April through September)
paid by Terrific Lawn at the beginning of April has been partially used in April.
Mowers, edgers, rakes, and hand tools (equipment) has been used in April to generate
revenues. The company estimates $ 300 in depreciation each year.
Wages have been paid through April 28. employees worked the last two days of April
and will be paid in May. Wages accrue at $200 per day.

An extra telephone line was installed in April at an estimated cost of $52, including hook
up and usages charges. The bill will be received and paid in May.
Interest accrues on the outstanding notes payable at an annual rate of 12 percent. The
$3,700 in principal has been outstanding all month.
The estimated income tax rate for Terrific Lawn is 35 percent.

Required:
Work on the adjustment entries and prepare
Income Statement
Balance Sheet
Q.6. From the following trial balance as on 31.3.2010 of a sole proprietor, a dealer in furniture,
prepare final accounts:
Dr

Trial Balance

Cash at bank
Furniture (for office use)
Purchases
Salary
Debtors
Depreciation on furniture for
office use

Amount (Rs)
4000
6000
155000
18000
80000
1000

Cr

Sales
Creditors
Owners equity
Provision for doubtful debts
Accumulated depreciation
Outstanding salary

264000

Amount (Rs )
175000
21000
60000
2000
2000
4000

264000

Adjustments:
1. Closing stock Rs 25,000
2. Maintain provision at 5% for bad and doubtful debts.
3. Purchases relate to chairs purchased @Rs 200 per chair. Out of the chairs purchased for
resale, 10 chairs were taken by the proprietor for domestic use, 25 chairs were donated
to the Old Age Home and 5 chairs were used for office use. No entry was passed in the
books to record these transactions.
4. A sofa-set purchased for office use at the end of the year at a cost of Rs 18000 was
recorded as purchases by mistake.
5. On 1st March, goods of the value of Rs 2000 were destroyed by fire and an insurance
claim of Rs 1200 was admitted by the Insurance Company. This has not been recorded.

Q.3 (b) Information from Pukinhead Banks financial statements is given below (amounts are in
millions)

Bad Debt Expense

2006 2005 2004

$ 950 $ 885 N/A

Allowance for Bad debts 3,500 3,523 3,554

Determine the amount of actual bad debts written off by the bank during 2005 and 2006.
Q.7. Mackbay

Company provides local mail delivery service in the financial district of Mumbai. The trial
balance of the company is as follows:
Account
Office Equipment
Accumulated Depreciation, Office Equipment
Office Supplies
Debtors
Cash
Prepaid Rent
Creditors
Unearned Revenue
Share Capital
Retained Earnings
Dividends
Revenue From Services
Salaries Expense
Telephone Expense
Total

Debit
7,000

Credit
1,000

3,800
1,990
770
2,400
1,100
400
10,000
2,100
1,400
7,200
3,800
730
21,800 21,800

Additional Information:
i)
Prepaid rent represents rent from February to April.
ii)
The inventory of office supplies at the end of February was Rs 3,200.
iii)
Revenue earned for services performed but not yet billed at the end of February was Rs
1,600.
iv)
Revenue earned for services performed, paid for in advance, was Rs 210.
v)
Depreciation on office equipment for February was Rs 250.
vi)
Accrued salaries at the end of February were Rs 540.
REQUIRED

Prepare adjusting entries and post them directly to T accounts.

Prepare the profit and loss account and balance sheet.