Financial Accounting

Assignment 4

Case 4-1 to Case 4-4

Submitted by
Pradeep Meena 1501090

P Siva Rohit 1501091

Prem Prakash 1501092

Priyanshu Nishad 1501093

Rajat Kedia 1501094

Ritesh Verma 1501095

 Case 4-1 PC Depot
Case 4-1: PC Depot

Question 1:

Entry No-1: Ms. Barbara Thompson started PC depot business with initial capital amount of $
165,000. Out of which $ 65,000 is her own money and $ 100,000 she borrowed from a bank at
15% interest.
Entry No-2: She rented out an office space for her store for a rent of $ 1,485, paid it with cash.
Entry No-3: She bought merchandises worth of $ 137,500 on credit.
Entry No-4: She bought office furnitures and fixtures for $ 15,500 and paid the supplier in cash.
The expected life of these furnitures is 10 years.
Entry No-5: She advertised her store on local newspaper and paid $ 1320 in cash for the same.
Entry No-6: She hired a store assistant and paid her $ 935 towards wages in cash.
Entry No-7: She bought office supplies for $ 1,100 and paid the supplier in cash
Entry No-8: Other utilities worth of $ 275 was bought by her and paid in cash.

Question-2:

Ledger (T-account form) for entries 1 to 8

Cr. Cash Dr. Cr. Proprietor's Capital Dr.
(1) 165,000 (2) 1,485 (1) 65,000
(4) 15,500
(5) 1,320
(6) 935 Cr. Loans payable Dr.
(7) 1,100 (1) 100,000
(8) 275

Cr. Rent Expenses Dr.

Cr. Accounts Payable Dr. (2) 1,485
(3) 137,500

Cr. Merchandise Inventory Dr.

Cr. Wage Expenses Dr. (3) 137,500
(6) 935

Cr. Furnitures & Fixtures Dr.

Cr. Office Supplies Exp. Dr. (4) 15,500
(7) 1,100

Cr. Advertisment Expense Dr.

Cr. Utilities Expense Dr. (5) 1,320
(8) 275

Question No-3

Amount
Entry Account Dr. Cr.
(9) Cash 38000
Sales 38000
(10) Accounts receivable 14850
Sales 14850
(11) Cash 3614
Accounts receivable 3614
(12) Accounts payable 96195
Cash 96195
(13) Merchandise Inventory 49940
Accounts payable 49940
(14) Cost of Sales 38140
Merchandise Inventory 38140
(15) Wages Expense 688
Cash 688
(16) Wages Expense 440
 Accrued wages 440
(17) Prepaid rent 1485
Cash 1485
(18) Prepaid Insurance 2310
Cash 2310
(19) Utilities Expenses 226
Cash 226
(20) Sign 1760
Cash 660
Accounts payable 1100

Question 4:

Depreciation calculation:

(15500/10)/12 = $ 129

Interest Calculation:

(100000*15/100)/12 = $ 1250

Insurance calculation:

2310/12 = $ 193

Ledgers for adjusting entries:

Cr. Depreciation Expense Dr. Cr. Interest Expenses Dr.

(21) 129 (22) 1,250

Cr. Accumulated Depreciation Dr. Cr. Interest Payable Dr.

(21) 129 (22) 1,250

Cr. Insurance Expenses Dr.

(23) 193

Amount
Entry Account Dr. Cr.
(21) Depreciation Expense 129
Accumulated Depreciation 129
(22) Interest Expense 1250
Interest payable 1250
(23) Insurance Expense 193
 Prepaid Insurance 193

Why?

Adjusting entries are journal entries made at the end of the accounting period to allocate revenue and
expenses to the period in which they actually are applicable. Here, the depreciation, Interest, Insurance
are allotted to this particular accounting period by adjusting entries.

Question-5: Closing entries

Cr. Sales revenues Dr. Cr. Income summary Dr.

(A) 52,850 (9) 38,000 (6) 935 (A) 52,850
(10) 14,850 (15) 688
52850 (16) 440
(5) 1320
Cr. Cost of sales Dr. (7) 1100
(14) 38,140 (B) 38,140 (8) 275
(19) 226
38140 (2) 1485
(21) 129
(22) 1250
Cr. Retained earnings Dr. (23) 193
(25) 6,669 (B) 38140
(25) 6669

Amount
Entry Account Dr. Cr.
(24) Sales 52850
Income summary 52850
(25) Income summary 6669
Retained earnings 6669

Question-6:

Balance Sheet:
Assets
Current Assets
Cash 84,661
Accounts receivable 11,236
Merchandise Inventory 149,300
Prepaid expenses (Insurance & Rent) 3,602
Total current assets 248,799
Fixed (Long-Term) Assets
Furnitures & Fixtures 15,500
(Less accumulated depreciation) (129)
Sign 1,760
Total fixed assets 17,131

Total Assets 265,930

Liabilities and Owner's Equity

Current Liabilities
Accounts payable 92,571
Interest payable 1,250
Accrued wages 440
Total current liabilities 94,261
Long-Term Liabilities
Bank loans payable 100,000
Total long-term liabilities 100,000
Owner's Equity
Owner's investment 65,000
Retained earnings 6,669
Total owner's equity 71,669

Total Liabilities and Owner's Equity 265,930

Income statement:
Revenue
Gross sales 52,850

52,850

Cost of Goods Sold

Beginning inventory
Goods purchased or manufactured 38,140
Total Goods Available 38,140
(Less ending inventory)
Cost of Goods Sold 38,140

Gross Profit (Loss) 14,710

Expenses
Advertising 1,320
Depreciation 129
Insurance 193
Interest 1,250
Office supplies 1,100
Rent 1,485
Salaries and wages 2,063
Utilities 501

Total Operating Expenses 8,041

Operating Income (Loss) 6,669

Calculations

In the attached file

4- 1Ass3.xlsx

Case 4-2 Save Mart

Question-1

T Account
Cash
Increases Decreases
Beginning Balance 88,860

Accounts Receivables
Increases Decreases
Beginning Balance 1,27,430

Prepaid Insurance
Increases Decreases
Beginning Balance 12,430

Furniture and Equipment

Increases Decreases
Beginning Balance 1,98,400

Inventory
Increases Decreases
Beginning Balance $9,20,610

6,04,783

Notes Payable
Decreases Increases
Balance 88,500

Accounts Payable
Decreases Increases
Balance 88,970

Retained Earnings
Decreases Increases
Balance 33,500

Common Stock
Decreases Increases
Balance 1,00,000

Depreciation
Increases Decreases
Beginning Balance 11,420.00

Selling Expense
Increases Decreases
Balance 10,880

Sales
Increases Decreases
Balance 9,88,700

Selling Expense
Increases Decreases
Beginning Balance 10,880

Salaries
Increases Decreases
Beginning Balance 47,140

Miscellaneous General Expense

 Increases Decreases
Beginning Balance 18,930

Interest Expense
Increases Decreases
Beginning Balance 7,100

Social Security Tax Expense

Increases Decreases
Beginning Balance 3,400

Question-3

Journal Entries

Journal Balance Adjustment Final Balance

Entr Particulars Dr. Cr. Dr. Cr. Dr. Cr.

y no.
1 COGS $6,04,783
Merchandise $6,04,783
Inventory $9,03,130 $2,98,3
47
2 Depreciation $10,139
Accumulated $11,420.00 $10,139 $21,559
Depreciation
3 Supplies used up $13,603
Supplies Inventory $17,480 $13,603 $3,877
4 Expired Insurance $7,125
Prepaid Insurance $12,430 $7,125 $5,305
5 Interest Expense $7,100
Interest Payable $7,965 $7,100 $865
6 Salary $47,140 $2,340
$49,480
Salary accrued $2,340
7 Bank Service $750 $750
Charges
 Cash $88,860 $750
$88,110

Question 4

Balance Sheet

Save Mart
Balance Sheet as of February 28

Assets
Current Assets:
1 Cash 88110
2 Account Receivable 127430
3 Merchandise Inventory 298347
4 Supplies Inventory 3877
5 Prepaid Insurance 5305
Total Current Asset 523069
Plant & Equipment:
1 Store Equipment 70970
2 Accumulated Depreciation -21559 49411
Total Asset 572480

Liabilities
Liabilities:
1 Accounts Payable 88970
2 Notes and Wages Payable 90840
3 Interest Payable 865
Total Liability 180675
Owner's Equity
1 Common Stock 100000
2 Retained Earnings 291805
Total Owner's Equity 391805
Total 572480
Income Statement

Save Mart
Income Statement for February

Gross Sales $9,88,700

Discount $-3,340
Net Sales $9,85,360
Cost of Goods Sold $-6,04,783
Gross Margin $3,80,577

Expenses:
Selling Expense $10,880
Sales Salaries $49,480
Miscellaneous General Expenses $18,930
Interest Expense $7,965
Social Security tax expense $3,400
Depreciation expense $10,139
Supplies Used $13,603
Insurance Expense $7,125
Bank Services Charges $750
Total Expense $1,22,272
Net Income $2,58,305

Case 4-3 Copies Express

Question-1: Balance Sheet

Liabilities Amount
Current Liabilities
Accounts Payable $9,875.00
Taxes Payable $11,593.00
Long Term Liability
Bank Loan $12,000.00
Owner's Equity
Capital Stock $3,04,000.00
 Retained Earnings $33,352.00

Total Liabilties $3,70,820.00

Assets
Cash $36,195.00
Accounts Receivable $11,000.00
Supplies inventory $26,625.00

Total Current Assets $73,820.00

Land $12,000.00
Building and Equipment $3,00,000.00
less:depriciation $(15,000.00)

Total Fixed Asset $2,97,000.00

Total Assets $3,70,820.00

Income Statement

Profit and Loss Account

Cash Sales 176450
Credit Sales 75750
Total Sales 252200
COGS 60250
Gross Income 191950
Other Expenses

Wages 85750
Utilities 15000

Operating Expenses(Selling & Administration) 28375

Total SGA Expenses 129125

EBITDA 62825
 Depreciation 15000
Interest 2880
EBT 44945
Income Tax 11593
EAT 33352

Question-2

Income Summary
Particulars Dr. Particulars Cr.
Interest Expense 2880 Cash Sales 176450
Tax Expense 11593 Credit Sales 75750
Wages 85750
Depreciation 15000
COGS 60250
Utilities Expense 15000
Selling and Administration 28375
balance 33352

Journal Entries
Entry No. Account Amount
Dr Cr
Cash 1,76,450
1 Revenue from Sales 1,76,450

Cash 64,750
2
Account Receivables 64,750

Wages 85,750
3
Cash 85,750

Utilities 15,000
4
Cash 15,000

Inventory 52,600
5
Cash 52,600
 SGA 28,375
6
Cash 28,375

Interest 2,880
7
Cash 2,880

Bank Loan 12,000

8
Cash 12,000

Accounts Payable 10,400

9
Cash 10,400

Accumulated Depreciation 15,000

10
Building and Equipment 15,000

Tax Expenses 11,593

11
Tax Payable 11,593

COGS 60250
12
Inventory 60,250

Account Receivables 75,750

13
Sales Revenue 75,750

Inventory 9,875
14
Accounts Payable 9,875

Cash 3,04,000
15
Capital Stock Credit 3,04,000

Cash 24,000
16
Bank Loan 24,000

Building and Equipment 3,00,000

17
Cash 3,00,000

Land 12,000
18
Cash 12,000

Inventory 24,400
19
Accounts Payable 24,400
 Accounts Payable 14,000
20
Cash 14,000

Cash
No. Particulars Dr. No. Particulars Credit
15 Capital Stock 304000
16 Bank Loan 24000
1 Revenue from Sales 176450 17 Building and Equipment 300000
2 Account Receivables 64750 18 Land 12000
20 Accounts Payable 14,000
3 Wages 85750
4 Utilities 15000
5 Inventory 52600
6 SGA 28375
7 Interest 2880
8 Bank Loan 12,000
balance 36195 9 Accounts Payable 10,400

Accounts Payable
No. Particulars Dr. No. Particulars Credit
19 Inventory 24400
20 Cash 14000
9 Cash 10400
14 Inventory 9875
balance 9875
Sales
No. Particulars Dr. No. Particulars Credit
1 Cash 176450
13 Account Receivables 75750
balance 252200

Accounts Receivable
No. Particulars Dr. No. Particulars Credit
2 Cash 64750
13 Sales Revenue 75750
balance 11000
Interest Expense
No. Particulars Dr. No. Particulars Credit
 7 Cash 2880
balance 2880

Bank Loan Payable

No. Particulars Dr. No. Particulars Credit
16 Cash 24000
8 Cash 12000 balance 12000

Tax Expenses
No. Particulars Dr. No. Particulars Credit
11 Tax Payable 11593
balance 11593

Merchandise Inventory
No. Particulars Dr. No. Particulars Credit
19 Accounts Payable 24400
5 Cash 52600
14 Account Payable 9875 12 COGS 60250
balance 26625
Wages Expenses
No. Particulars Dr. No. Particulars Credit
3 Cash 85750

balance 85750

Utilities Expenses
No. Particulars Dr. No. Particulars Credit
4 Cash 15000
balance 15000

Cost of Goods Sold

No. Particulars Dr. No. Particulars Credit
12 Inventory 60250
balance 60250

Land
No. Particulars Dr. No. Particulars Credit
 18 Cash 12000
balance 12000.0

Case 4-4 Walthan Oil and Lube Centre

Question-1:

Entry
No Particulars Dr Cr
1 Cash 40000
Capital 40000
2 Deposit National 40000
Cash 40000
3 Furniture 6000
Cash 6000
4 Cash 10000
Capital 10000
5 Prepaid Insurance 1200
Cash 1200
Oil and grease inventory 6320
Operating supplies and uniforms 4130
6 Equipment 25000
Deposit 35450
7 Lease expense 1500
Cash 1500
8 Equipment 49800
Equipment Payable 49800
9 Cash 108600
Parking Revenue 3300
Services Revenue 105300
10 Oil and grease as Inventory 8230
Cash 8230
11 Payroll Expense 34560
Cash 34560
12 Utilities Expenses 1700
Cash 1700
13 Misc Expenses 6600
Cash 6600
14 Lease Expenses 26400
Cash 26400
15 Equipment Payable Payment 2490
Cash 2490
16 Withdrawals by Knight 4500
 Cash 4500
17 Accounts recievable for parking 340
Parking revenues 340
18 Accounts rececivable for local merchant 730
Revenues 730
19 Payroll Expense 2100
Payroll Accrued 2100
20 Utilities Expenses 350
Accrued Utilities 350
21 Cost of sales 9260
Inventory 9260
22 Furniture Depreciation expense 150
Depreciation accumulated 150
23 Equipment Depreciation expense 3750
Depreciation accumulated 3750
24 Cash 400
Deferred parking revenue 400
25 Insurance Expense 300
Prepaid Insurance 300

Question-2:

A. Capital The total capital balance for the Waltham Oil and Lube Center, Inc. is
(40000+10000) = 50000.
B. Accumulated Depreciation The total accumulated depreciation balance is (150+3750) = 3900.

C. Prepaid Asset The total prepaid assets balance is (1200-300) = 900.

The total cash balance is (40000+10000+108600+400)-
D. Cash Balance (40000+6000+1200+1500+8230+34560+1700+6600+26400+2490+4500)
= 25820
E. Accounts Receivable The total account receivable balance is (340+730) = 1070.

F. Liabilities The total liability balance is (2100+350+47310) = 49760

Question-3:

A. Withdrawals The withdrawal amount is 4500.

B. Cost of sales The cost of goods sold amount is (6320+8230-5290) = 9260.

C. Parking revenues The parking revenues amount is (3300+340) = 3640.

 D. Lease expense The lease expense amount is (1500+3000+23400) = 27900
E. Total revenues The total revenue amount is (3640+105300+730) = 109670

Question 4:

Since the cheques were received before the end of the accounting period, $400 worth of parking charge
for the month of August should be treated as deferred Revenue and it will be liability. Because parking
space renters have already paid for the service they will avail during the month of August.

The two account receivables are - 1) overnight renters ($370), 2) local merchant ($730). If there is a case
for non-payment it will be mainly from the overnight renters. Local merchant needs to service their
vehicle frequently so defaulters would be less. And looking at the amount of account receivables, it is of
relatively small amount. So no need for provision at this moment. But, if the amount of account
receivable increases in the future, provisions will be needed to be made.

Knight and his family used Waltham Center's services a several times. The value of all those services
combined was $450. This cost has occurred due to the personal use of the owner and his family so
Knight's capital will be reducing by $450. So the closing balance for capital will be $45,050.

Calculations for all questions

Case 4- 4.xlsx