Assignment No

1
 ACCT-I-2003

Section A & B

Instructor: Sahibzada Ahmad

Muneeb Bugvi

To be Held on 27th March FRIDAY

8:00 A.M to 12:00 P.M
And
2:00 P.M to 4:00 P.M

Closing Date: 28 March till 12:00 P.M

Instructions: All Questions are compulsory

 TOPIC

Compulsory Library Six Hour

Sitting and research of
practical questions exposure
of Ch No 1 , 2 , 3

COMLETE ACCIOUNTING CYCLE

Guide Line
Manual answer sheet for questions.
 Caution
There will be attendance sheet provided to the
Librarian (Mr. NOOR and Mr. Rashid) every
student is required to enter his or her TIME IN
the library and TIME OUT of the Library on the
attendance sheet. The time should not be less
than the SIX (6) HOURS.
Research
Question
s
Page 12:

1.1 You are to complete the gaps in the following table:

Assets Liabilities Capital

Serial # £ £ £
a 12500 1800 ?
b 28000 4900 ?
c 16800 ? 12500
d 19600 ? 16450
e ? 6300 192000
f ? 11650 39750

1.2 A You are to complete the gaps in the following table:

Assets Liabilities Capital

Serial # £ £ £
a 55000 16900 ?
b ? 17200 34400
c 36100 ? 28500
d 119500 15400 ?
e 88000 ? 62000
f ? 49000 110000

1.3 Distinguished from the following list the items that are liabilities
from those that are assets:
a) Office machinery
b) Loan for C Shirley
c) Fixtures and fittings
d) Motor vehicles
e) We owe for goods
f) Bank balance

1.4A Classify the following items into liabilities and assets:

a) Motor vehicles
b) Premises
c) Creditors for goods
d) Stock of goods
e) Debtors
f) Owing to bank
g) Cash in hand
h) Loan from D Jones
 i) Machinery.

1.5 State which of the following are shown under the wrong
classification for J White’s business:

Assets Liabilities

Loan from C Smith Stock of goods

Cash in hand Debtors
Machinery Money owing to bank
Creditors
Premises
Motor Vehicles

Page 13:

1.6A Which of the following are shown under wrong headings:

Assets Liabilities

Cash at hand Loan from J graham

Fixtures Machinery
Creditors Motor vehicles
Building
Stock of goods
Debtors
Capital

1.7 A Smart sets up a new business. Before he actually sells anything,

he has bought motor vehicle £ 2,000, premises £ 5,000, stock of goods
£ 1,000. He did not pay in full for his stock of goods and still owes £400
in respect of them. He had borrowed £3,000 from D Bevan. After the
events just described, and before trading starts, he has £100 cash in
hand and £700 cash at bank. You are required to calculate the amount
of his capital.

1.8 A T Charles sets up a new business. Before he actually sells

anything, he has bought fixtures £ 2,000, motor vehicles £ 5,000, stock
of goods £ 3,500. He has paid in full for his fixtures and motor vehicles,
he still owes £1,400 for some of the goods. J Preston had lent him
£3,000. Charles, after the above,, has £ 2,800 in the business bank
account and £100 cash in hand. You are required to calculate the
amount of his capital.
1.9 Draw up a Foster’s balance sheet from the following as at 31
December a9X8:
£
Capital 23,750
Debtors 4,950
Motor vehicles 5,700
Creditors 2,450
Fixtures 5,500
Stock of goods 8,800
Cash at hand 1,250

1.10 A Draw up M Kelly’s balance sheet as at 30 June 19X6 from

the following:
£
Capital 15,000
Office machinery 9,000
Creditors 900
Debtors 275
Cash at hand 5,075

1.11 Complete the columns to show the effects of the following

transactions:
Effect upon
Assets Liabilities
Capital
a) We pay a creditor £70 in cash
b) Bought fixtures £200 paying by cheque
c) Bought goods on credit £275
d) The proprietor introduces another £500 cash into the firm.
e) J Walker lends the firm £200 in cash
f) A debtor pay us £50 by cheque.
g) We return goods costing £60 to a supplier whose bill we had not
paid.
h) Bought additional shop premises paying £5,000 by cheque.

Page 14:

1.12A Complete the columns to show the effects of the following

transactions:
Effect upon
Assets Liabilities
Capital
Bought a motor van on credit Complete the columns to show the
effects of the following transactions:
Effect upon
 Assets Liabilities
Capital
a) 500.
b) Repaid by cash a loan owed to P Smith £ 1,000.
c) Bought goods for £ 150 paying by cheque.
d) The owner puts a further £5,000 cash into the business.
e) A debtor returns to us £80 goods. We agree to make an
allowance for them.
f) Bought goods on credit £ 220
g) The owner takes out £100 cash for his personal use.
h) We pay a creditor £190 by cheque.

1.13 C Sangster has the following items in his balance sheet as on 30

April 19X8.
Capital £ 20,900; Creditors £ 1,600; Fixtures £ 3,500; motor vehicles £
4,200; stock of goods £4,950; Debtors £ 3,280; Cash at bank £ 6,450;
Cash in hand £120

During the first week of May 19X8:

a) He bought extra stock of goods £700 on credit.
b) One of the debtors paid him £ 280 in cash
c) He bought extra fixtures by cheque £ 1,000.
You are to draw up a balance sheet as on 7 May 19XB after the above
transactions have been completed.

1.14A F Dale has the following assets and liabilities as on 30 Nov

19X9:
Creditors £ 3,950; Equipment £ 11,500; Motor vehicles £ 6,290; stock
of goods £6,150; Debtors £ 5,770; Cash at bank £ 7,280; Cash in hand
£40

The capital at that date is to be deduced by you.

During the first week of December 19X9, Dale:

a) Bought extra equipment on credit for £1,380
b) Bought extra stock by cheque £ 570
c) Paid creditors by cheque £ 790
d) Debtors paid us £840 by cheque and £60 by cash
e) F Dale put in an extra £250 cash as capital.
You are to draw up a balance sheet as on 7 December 19X9 after the
above transactions have been completed.
Page 22:

2.1 Prepare JOURNAL and Write Entries:

a) Bought office machinery on credit from D Isaacs Ltd.

b) The proprietor paid on credit, C Jones, from his private monies
outside the firm.
c) A debtor, N Fox, paid us in cash.
d) Repaid part of loan from P Exeter by cheque
e) Returned some of office machinery to D Isaacs Ltd.
f) A debtor, N Lyn, pays us by cheque.
g) Bought motor van by cash,

Page 23
2.2 A Prepare JOURNAL and Write Entries:

a) Bought motor lorry for cash.

b) Paid creditor, T Lake, by cheque.
c) Repaid P Logan’s loan by cash.
d) Sold motor lorry for cash.
e) Bought office machinery on credit from Ultra Ltd.
f) A debtor, a Hill, pays us by cash.
g) A debtor, J Cross, pays us by cheque.
h) Proprietor puts a further amount into the business by cheque.
i) A loan of £ 200 in cash is received from L Lowe.
j) Paid a creditor, D Lord, by cash.

2.3 Prepare JOURNAL and Write Entries:

19X7
July 1 Started business with £2,500 in the bank
July 2 Bought office furniture by cheque £150
July 3 Bought machinery £750 on credit from Planners Ltd.
July 5 Bought a motor van paying by cheque £600
July 8 Sold some of the office furniture – not sustainable for the firm –
for £60 on credit to J Walker & Sons.
July 15 Paid the amount owing to Planners Ltd £750 by cheque.
July 23 Received the amount due from J Walkers and Sons £60 in cash
July 31 Bought more machinery by cheque £280

2.4 Prepare JOURNAL and Write Entries:

June 1 Started business with £2000 in cash

June 2 Paid £1800 of the opening cash into bank account for the
business.
June 5 Bought office furniture on credit from Betta Built Ltd for £120
June 8 Bought a motor van paying by cheque £950
June 12 Bought works machinery from Evans and Sons on credit £560
June 18 Returned faulty office furniture costing £62 to Betta Built Ltd
June 25 Sold some of the works machinery for £75 cash.
June 26 Paid amount owing to Betta Built Ltd £58 by cheque
June 28 Took £100 of the bank and put it in the cash till.
June 30 J Smith lent us £ 500 – giving us the money by cheque.

Page 24

2.5A Prepare JOURNAL and Write Entries:

19X9
June 1 Started business with £5000 in the bank.
June 2 Bought motor van paying by cheque £1200
June 5 Bought office fixtures £400 on credit from Young Ltd
June 12 Took £100 out of the bank and put it into the cash till.
June 15 Bought office fixtures paying by cash £60
June 19 Paid Super Motors a cheque for £800
June 21 A loan of £ 1000 cash is received from J Jarvis.
June 25 Paid £800 of the cash in hand into the bank account.
June 30 Bought more office fixtures paying by cheque £300

2.6 A Prepare JOURNAL and Write Entries:.

March 1 started with £1000 cash.

March 2 Received a loan of £5000 from M Chow by cheque, a bank
account being opened and the cheque paid into it.
March 3 Bought a machinery for cash £60
March 5 Bought display equipment on credit form Betterview Machines
£550
March 8 Took £300 out of the bank and put it into the cash till.
March 15 Repaid part of Chow’s loan by cheque £800
March 17 Paid amount owing to Betterview Machines £550 by cheque.
March 24 Repaid amount owing to Betterview Machines £550 by
cheque.
March 31 Bought additional machinery, this time on credit from D
Smith for £500.
Page 32

3.1 Complete the following table showing which accounts are to be

credited and which are to be debited.

Accou Accou
nt to nt to
be be
Seria debit credit
l# ed ed
a Goods bought on credit from J Reid
b Goods Sold on credit to B Perkins
c Motor vans bought on credit from H Thomas
d Goods sold, a cheque being received immediately
e Goods sold for cash
f Goods we returned to H Hardy
g Machinery sold for cash
h Goods returned to us by J Nelson
i Goods bought on credit from D Simpson
j Goods we returned to H Forbes

3.2A Complete the following table

Accou Accou
nt to nt to
be be
Seria debit credit
l# ed ed
a Goods bought on credit from T Morgan
b Goods returned to us by J Thomas
c Machinery returned to L Jones Ltd
d Goods bought for cash
e Motor van bought on credit from D Davies Ltd
f Goods returned to us by I Prince
g D Picton paid us his account by cheque
h Goods bought by cheque
i We paid creditor, B Henry, by cheque
j Goods sold on credit to J Mullings.

3.3 Prepare JOURNAL and Write Entries:

19X8
July 1 Started business with £500 cash,
July 3 Bought goods for cash £85
July 7 Bought goods on credit £116 from E Morgan
July 10 Sold goods for cash £42
July 14 Returned goods to E Morgan £28
July 18 Bought goods in credit £98 from A Moses
July 21 Returned goods to A Moses £19
July 24 Sold goods to a Knight £55 on credit
July 25 Paid E Morgan’s account by cash £88
July 31 A Knight paid us his account in cash £55

Page 33

3.4A Prepare JOURNAL and Write Entries:

19X6
Aug 1 Started business with £1000 cash
Aug 2 Paid £900 of the opening cash into the bank
Aug 4 Bought goods on credit £78 from S Holmes
Aug 5 Bought a motor van by a cheque £500
Aug 7 Bought goods for cash £55
Aug 10 Sold goods on credit £98 to D Moore.
Aug 12 Returned goods to S Holmes £18
Aug 19 Sod goods for cash £28
Aug 22 Bought fixtures on credit from Kingston Equipment Co £150
Aug 24 D Watson lent us £100 paying us the money by cheque
Aug 29 We paid S Holmes his account by cheque £60
Aug 31 We paid Kingston Equipment Co by cheque £150

3.5 Prepare JOURNAL and Write Entries:.

19X7
July 1 Started business with £10000 in the bank
July 2 T Cooper lent us £400 in cash
July 3 Bought goods on credit from F Jones £840 and S Charles £3600
July 4 Sold goods for cash £200
July 6 Took £250 of the cash and paid it into the bank.
July 8 Sold goods on credit to C Moody £180
July 10 Sold goods on credit to J Newman £220
July 11 Bought goods on credit from F Jones £370
July 12 C Moody returned goods to us £40
July 14 Sold goods on credit to H Morgan £190 and J Peat £320
July 15 We returned goods to F Jones £140
July 17 Bought motor ban on credit from Manchester Motors £2600
July 18 Bought office furniture on credit from Faster Supplies Ltd £600
July 19 We returned goods to S Charles £110
July 20 Bought goods for cash £220
July 24 Goods sold for cash £70
July 25 Paid money owing to F Jones by cheque £1070
July 26 Goods returned to us by H Morgan £30
July 27 Returned some of the office furniture costing £160 to Faster
Supplies Ltd.
July 28 E Sangster put a further £500 into the business in the form of
cash.
July 29 Paid Manchester Motors £2600 by cheque
July 31 Bought office furniture for cash £100.

Page 34

3.6A Prepare JOURNAL and Write Entries:

May 1 Started up the business with £2000 in the bank

May 2 Bought goods on credit from C Shaw £900
May 3 Bought goods on credit from F Hughes £250
May 5 Sold goods for cash £180
May 6 We returned goods to C Shaw £40
May 8 Bought goods on credit from F Hughes £190
May 10 Sold goods for cash £210
May 18 Took £300 of the cash and paid it to the bank
May21 Bought machinery b cheque £550
May 22 Sold goods on credit to L Moore £220
May 23 G Wood returned goods to us £140
May 25 L Moore returned goods to us £10
May 28 We returned goods to F Hughes £30
May 29 We paid Shaw by cheque £860
May 31 Bought machinery on credit from D Lee £270
Page 40:
4.1 Prepare JOURNAL and Write Entries:

19X7
May 1 Started business with £2000 in the bank.
May 2 Purchased goods £175 on credit from M Mills.
May 3 Bought fixtures and fittings £150 paying by cheqe.
May 5 Sold goods for cash £275
May 6 Bought goods on credit £114 from S Waites.
May 10 Paid rent by cash £ 15
May 12 Bought stationary £27, paying in cash
May 18 Goods returned to M Mills £23
May 21 Let off part of the premises receiving rent by cheque £5
May 23 Sold goods on credit to U Henry for £77
May 24 Bought a motor van paying by cheque £300
May 30 Paid the month’s wages by cash £117
May 31 The proprietor took cash for himself £44.

Page 41
4.2 Prepare JOURNAL and Write Entries:

19X8
March 1 Started business with the cash £1500
March 2 Bought goods on credit from A Hanson £296
March 3 Paid rent by cash £28
March 4 Paid £1000 of the cash of the firm into a bank account.
March 5 Sold goods on credit to E Linton £54
March 7 Bought stationary £15 paying by cheque
March 11 Cash sales £49
March 14 Goods returned by us to a Hanson £17
March 17 Sold goods on credit to S Morgan £29
March 20 Paid for repairs to the building by cash £18
March 22 E Linton returned goods to us £14
March 27 Paid Hanson by cheque £279
March 28 Cash purchases £125
March 29 Bought a motor van paying by cheque £395
March 30 Paid motor expenses in cash £15
March 31 Bought fixtures £120 on credit from A Webster.

4.3A Prepare JOURNAL and Write Entries:

July 1 Started business with £8000 in the bank
July 2 Bought stationary by cheque £30
July 3 Bought goods on credit from I Walsh £900
July 4 Sold goods for cash £180
July 5 Paid insurance by cash £40
July 7 Bought machinery on credit from H Morgan £500
July 8 Paid for machinery expenses by cheque £50
July 10 Sold goods on credit to D Small £320
July 11 Returned goods to I Walsh £70
July 14 Paid wages by cash £70
July 17 Paid rent by cheque £100
July 20 Received cheque £200 from D Small.
July 21 Paid H Morgan by cheque £500
July 23 Bought stationary on credit from Express Ltd £80
July 25 Sold goods in credit to N Thomas £230
July 31 Paid Express Ltd by cheque £80

4.4A Prepare JOURNAL and Write Entries:

Feb 1 started business with £3000 in the bank and £500 cash.
Feb 2 Bought goods on credit: T Small £250; C Todd £190; V Ryan
£180
Feb 3 Bought goods for cash £230
Feb 4 paid rent in cash £10
Feb 5 Bought stationary paying by cheque £49
Feb 6 Sold goods on credit: C Crooks £140; R Rogers £100; B Grant
£240
Feb 7 Paid wages in cash £80
Feb 10 We returned goods to C Todd £60
Feb 11 Paid rent in cash £10
Feb 13 R Rogers returns goods to us £20
Feb 15 Sold goods on credit to: J Burns £90; J Smart £130; N Thorn
£170
Feb 16 Paid rates by cheque £130
Feb 18 Paid insurance in cash £40
Feb 19 Paid rent by cheque £10
Feb 20 Bought motor van on credit from C White £600
Feb 21 Paid motor expenses in cash £6
Feb 23 Paid wages in cash £90
Feb 24 Received part of amount owing from B Grant by cheque £200
Feb 28 Received refund of rates 10 by cheque.
Feb 28 Paid by cheque: T Small £250; C Todd £130; C White £600.
1. MM-1B-2(52)
Recording the Effects of Transactions
The items making up the balance sheet of Travel Connection at
December 31 are listed below in tabular form similar to the illustration
of the accounting equation on page 25.

Owner
's
Assets = Liabilities Equity
Account
s Office Notes Accoun D.Hall
Receiva Automob Equipmen Paya ts Capita
Cash ble iles t ble Payable l
Balan $9,50 $20,0 $35,50
ces 0 $58,400 $9,000 $3,800 00 $25,200 0

During a short period after December 31. Travel Connection had the
following transactions:
1. Bought office equipment at a cost of $5,700. Paid Cost.
2. Collected $ 4,000 of accounts receivable.
3. Paid $7,200 of accounts receivable
4. Borrowed $10,000 from a bank. Signed a note payable for that
amount.
5. Purchased an automobile for $15,500. Paid $3,000 cash and
signed a note payable for the balance of $12,500

Instructions:
a. Solve the question through ACCOUNTING EQUATION.

2. MM 1B-2 (52)
Recording the Effects of Transactions
Water Wise Landscaping was organized on September 1 of the currant
year and had the following account balance at December 31, listed in
tabular form:

Owner
's
Assets = Liabilities Equity
J.Gree
Office Notes Accoun n
Buildin Equipmen Paya ts Capita
Cash land g t ble Payable l
Balan $14,8 32,00
ces 00 50,000 45,000 22,500 0 25,300 75,000
Early in January, the company carried out the following transactions:

1. The owner J. Green deposited $ 20,000 in personal funds into the

bank account of the business.
2. Purchased land and a small office building for a total price of $
80,000, of which $30,000 was the value of the land and $
50,000 was the value of the building. Paid $20,000 in cash and
signed a note payable for the remaining $ 60,000.
3. Bought a Xerox copying machine on credit for $ 9500.
4. Obtained a loan from Gulf Coast Bank in the amount of $ 18,000.
Signed a note payable.
5. Paid the $ 9500 account payable originating in transaction 3.

Instructions:

Solve the question through ACCOUNTING EQUATION.

3. MM 2-2 (89)
Double Entry and the Accounting Equation
A number of transactions are described below in terms of the balance
sheet accounts debited and credited:
1. Debit Cash, credit Account Receivable.
2. Debit Accounts Payable, credit Cash.
3. Debit Cash, credit Tom Hill, Capital.
4. Debit Equipment, credit Account Payable.
5. Debit land, credit Cash and Notes Payable.
6. Debit Accounts Payable, credit Equipment.
Instructions:

a. Indicate the effects of each transactions upon the elements of the

accounting equation, using the code letters I for increase, D for the
decrease, and NE for the no effect. Organize your answer in tabular
form using the column heading shown below. The answer for
transaction 1 is provided as an example

Transactio
n Assets = Liabilities + Owner's Equity
1 NE NE NE

b. Write a one sentenced description of each transaction.

4. MM 2A-1 (93)

Elizabeth Carver, a certified public accountant, resigned from her

position with a large CPA firm in order to begin he own public
accounting practice. The business transactions during the September
while new venture was being organized are listed below:

• Sept 1. Carver opened a bank checking account in the name of

her firm, Elizabeth Carver, Certified Accounting, by depository #
32,000 which she had saved over a period of years.
• Sept 10. Purchased a small office building located on a large lot
for a total price of $ 91,200 of which $ 48,000 was applicable to
the land and $43,200 to the building. A cash payment of $
18,240 ease made and a note payable was issued for the balance
of the purchase price.
• Sept 15. Purchased a microcomputer system from Computer
Stores, Inc. ,for $ 4,680 cash.
• Sept 19. Purchased office furniture, filing cabinets, and a
typewriter from Davidson Office Supply Company at a cost of $
3,960. A cash down payment of $72 0 was made, the balance to
be paid in three equal installments due September 28, October
28 and November 28. The purchase wan on open account and
did not require signing of promissory note.
• Sept 26. A $ 140 monitor in the microcomputer system
purchased in September 15 stopped working. The monitor was
returned to Computer Stores, Inc. which promised to refund the
$140 within 5 days.
• Sept 28. Paid Davidson Office Supply Company $ 1080 cash as
the first instalment due on the account payable for office
equipment.
• Sept 30. Received $14 0cash from Computer Stores Inc. in full
settlement of the account receivable created on Sept 26

Instructions:

Write Journal Entries.

5 MM 2A-5 (95)
Preparing a journal Entries, posting and preparing a Trail
Balance.
Ann Ryan, a licensed real state broker, on October 1 began the
organization of her own business, to be known as Ryan Land Company.
The following events occurred during the October:
. Ann Ryan opened a bank account
• Oct 2 Ann Rayn opened a bank account in the name of business
by depository # personal savings of $35,000
• Oct 6. Purchased land and a small office building at total price of
$ 98,500 of which $ 64,000 was applicable to the land and
$34,500 to the building. The terms of the purchased required s
cash payment of $29,500 and the issuance of note payable for
$69,000.
• Oct 15. Sold one quarter of land at its cost of $16,000 to a
neighboring business. Village Medical Clinic, which wanted to
expand its parking lot. No down payment was required. Village
Medical Clinic issued a note promising payment required of the
$16,000 in a series if five monthly installments of $3,200 each,
beginning October 30. As the land was sold at the same price per
square foot as Ryan Land Company had paid to acquire it, no
gain or loss results on this transaction.
• Oct 20 Purchased office equipment on credit from Buffington
Company in the amount of $ 6,280
• Oct 30. Paid $3,440 as partial settlement of the liability to
Buffington Company.
• Oct 31. Received the first $ 3,200 monthly installment on the
note receivable from Village Medical Clinic.

The account titles and the account numbers to be used are:

Cash______________________ 1 Office equipment _____________ 26

Notes receivable_____________ 5 Notes payable________________ 30
Land______________________ 21 Accounts payable_____________ 32
Building____________________ 23 Ann Ryan, capital______________ 50

Instructions:

a. Prepare journal entries for the month of October.

b. Post to ledger accounts
c. Prepare a trial balance at October 31,19__.

6. MM 2A-6 (96)
Preparing Journal Entries, posting, and preparing a trial
balance.
After playing several seasons of professional football, George, Harris
has saved enough money to start a business, to be called Number One
Auto Rental. The transactions during March while the new business was
being organized are listed below:
Mar. 1 George invested $140,000 cash in the business by
making a deposit in a bank account in the name of the new
company.
Mar. 3 The new company purchased land and building at a cost
of $ 120,000 pf which $72,000 was regarded as applicable to the
land and $48,000 to the building. The transaction involved a cash
payment of $41,500 and the issuance of a note payable for $
78,500.
Mar. 5 Purchased 20 new automobiles at $8,600 each from Fleet
Sales Company. Period $40,000 cash and agreed to pay $32,000
by March 31 and the remaining balance by April 15. The liability
is viewed as an account payable.
Mar 7 Sold an automobile at cost to Harris’s father in law.
Howard Facey, who paid $2,400 in cash and agreed to pay the
balance within 30 days.
Mar 8 One of the automobiles was found to be defective and
was returned to Fleet Sales company. The amount payable tot
his creditor was thereby reduced by $8,600.
Mar 20 Purchased office equipment at a cost of $4,000 cash.
Mar 31. Issued a check for $32,000 in partial payment of the
liability to Fleet Sales Company.
The accounts titles and the account numbers used by the company are
as follows:

Cash___________ ______10 Automobiles_______________

22
Accounts Receivable_____ 11 Notes payable______________
31
Land_________________ 16 Accounts payable____________
32
Buildings______________ 17 George Harris,
Capital________ 50
Office equipment_________ 20

Instructions:
a. Journalize the March transactions.
b. Post a ledger accounts.
c. Prepare trial balance at March 31, 19__.
7. MM 2B-1 (97)
Recording transaction in a Journal.

In May, James Colby, a physician, decided to open his medical practice,

During May, the new business engaged in the following transactions.
May 4. Colby opened a bank account in the name of his medical
practice, James Coldy, M.D., by depositing $36,000 cash.
May 16. . Purchased small medical office. The purchased price was
$95,400, which included land valued at $50,000 and a building
valued $45,400 A cash down payment was made for $21,000 and a
note payable was issued for the balance of the purchase price.
May 19. Purchased office furniture on account from Modern Office
Company, $2,340.
May 22. Purchased medical supplies for cash from Denton Labs,
$1,630.
May 23. Returned to Denton Labs $225 of the medical supplies
purchased yesterday as these items were not exactly what Colby
had ordered. Denton Lab agreed to refund the $225 within 10 days.
May 30. Made an $1,170 partial payment on the account payable to
Modern Office Company.
May 31. Received the $225 refund from Denton Labs for the
supplies on May 23.

Instructions:
Prepare journal entries to record the above transactions. Select the
appropriate account titles from the following chart of accounts.

Cash Land Notes Payable

Accounts receivable Building Accounts payable
Medical supplies Office furniture James Colby, capital

8. MM 2B-5 (99)
Journal Entries

Beach Property Management was started on November 1 by Rosa

Garcia to provide management services for the owners of apartment
buildings. The organizational period extended throughout November
and included the transactions listed below:
Nov 1. Garcia opened a bank account in the name of the business
with a deposit of $25,000 cash.
Nov.4 Purchased land and an office building for a price of
$140,000 of which $75,000 was considered applicable to the
land and $65.000 attributable to the building. A cash down payment
of $20,000 was made and a note payable for $120,000 was issued
for the balance of the purchase price.
 Nov 7 Purchased office equipment on credit from Harvard office
equipment, $5850.
Nov 9 A typewriter (cost $490), which was part of the November 7
purchase of office equipment, proved defective and was returned
for credit to Harvard Office Equipment.
Nov 17. Sold one third of the land acquired on Nov 4 to Ace Parking
Lots ata price of $25,000. This price is equal to Beach Property’s
cost for this portion of the land, so there is no gain or loss on this
transaction. Beach received a $5,000 each, beginning on November
30 (ignore interest)
Nov 28 Paid $1,600 in partial settlement if the liability to Harvard
Office Equipment.
Nov 30. Received cash of $5,000 as partial collection of the note
receivable from Ace Parking Lots.

The account titles and accounts numbers to be used are:

Cash _______________ 1
Notes receivable_______ 5
payable________________ 31
Land _______________ 21
Building _____________ 23
51
Office equipment _____________ 25
Notes
Accounts payable______________ 32
Rosa Garcia, capital_____________

Instructions:
a. Prepare Journal entries for the month of November

9. MM 2B-6 (99)
The accounting Cycle, a comprehensive problem

Community TV was organized in February 1994 to operate as a local

television station. The account titles and numbers used by the business
are listed below:

Cash_________________ 11 Telecasting
equipment_______________ 24
Account receivable______ 15 Film library________________________
25
Supplies______________ 19 Notes
payable______________________ 31
Land ________________ 21 Accounts
Payable___________________ 32
Building _____________ 22 James Ward,
capital__________________ 51
Transmitter___________ 23
The transactions for February are as follows:
Feb 1 James Ward deposited $400,000 cash in a bank checking
account in the name of the business, Commercial TV.
Feb 3. Community TV purchased the land, buildings, and
telecasting equipment previously used by a local television
station which had gone bankrupt. The total purchase price was
$300,000 of which $100,000 was attributable to the land,
$90,000 to the building, and the remainder to the television
equipment. The terms of purchased required a cash payment of
$200,000 and the issuance of a note payable for the balance.
Feb 5. Purchased a transmitter at a cost of $225,000 from AC
Manufacturing Company, making a cash down payment of
$75,000. The balance, in the form of a note payable, was to paid
in monthly installments of $12,500, beginning February 15
(interest expense is to be ignored).
Feb 9. Purchased a film library are a cost of $40,000 from
Modern Film Productions, making a down payment of $15,000
cash, with the balance on account payable in 30 days.
Feb 12 Bought supplies costing $3500, paying cash.
Feb 15 Paid $12,500 to AC manufacturing as the first monthly
payment on the note payable created on Feb 5 (Interest expense
to be ignored)
Feb 25. Sold part of the film library to City College; cost was
$9,000 and the selling price also was $9,000. City College agreed
to pay the full amount in 30 days.

Instructions:
a. Prepare journal entries for the month of February.
b. Post to ledger accounts
c. Prepare a trial balance at February 28,1994
d. Prepare a balance sheet at February 28,1994.

10. MM 3A-1 (145)

Preparing journal entries

Bay Plumbers performs repair work on both a cash and credit basis.
Credit customers are required to pay within 30 days from date of
billing. The ledger accounts used by the company include:

Cash David Cohen, drawing

Accounts Receivable Repair service revenue
Tools Advertising expense
Notes payable Rent expense
Accounts payable Salaries expense
Among the September transactions were the following:

Sept. 1 Performed repair work for the Arden Hardware, a credit

customer. Sent bill for $1,322.
Sept 2 Paid rent for September, $750
Sept. 3 Purchased tools with the estimated life of 10 years for
$1,275 cash.
Sept 10 Performed repairs for Harris drugs and collected in full the
charge of $565.
Sept. 15. Newspaper advertising to appear in Sept 18 was
arranged at a cost of $275. Received bill from Tribune requiring
payment within 30 days.
Sept. 18 Received payment in full of the $1,322 account receivable
from Arden Hardware for our services on Sept. 1
Sept 20 David Cohen, owner of Bay Plumbers, withdrew $1,100
cash from the business for personal use.
Sept 30 Paid salaries of $3,425 to employees for services rendered
during September.

Instructions:
Prepare a journal entry (including explanation) for each of the above
transaction.

11. MM 3A-3 (147)

Preparing journal entries, posting and preparing trail balance.

In June 1994, Chris Scott organized a crop dusting business. The

company, a sole proprietorship, called Scott Crop Dusting, began
operations immediately. Transactions during the month of June were as
follows:

June 1 Scott deposited $60,000 cash in a bank account in the name of

the business.
June 2 Purchased a crop dusting aircraft from Utility Aircraft for
$225,000. Made a $45,000 cash down payment and issued a note
payable for $180,000
June 4 Paid Woodrow Airport $2,500 to rent office and hanger space
for a month.
June 15 Billed customers $8,320 for crop dusting services rendered
during the first half of June
June 15 Paid $5,880 salaries to employees for services rendered
during the first half of June.
June 18 Paid Hannigan’s Hanger $1890 for maintenance and repair
services.
June 25 Collected $4.910 of the amounts billed to customers on June
15.
June 30 Billed customers $16,450 for crop dusting services rendered
during the second half of June.
June 30 Received a fuel bill from Henry’s feed and Fuel for $2,510 of
aircraft fuel purchased during June. This amount is due by July 10.
June 30 Scott withdrew $2,000 cash from the business for personal
use.

The account titles and numbers used by the Scott Crop Dusting were:

Cash_______________________1 Chris Scott, drawing_____________

43
Accounts Receivable__________ 5 Crop-dusting
revenue____________ 51
Aircraft_____________________ 15 Maintain ace
expense_____________ 61
Notes payable________________ 31 Fuel
expense____________________ 62
Accounts payable_____________ 32 Salaries expense_________________
63
Chris Scott, capital____________ 41 Rent expenses___________________
64

Instructions:

a. Prepare journal entries.

b. Post to ledger accounts
c. Prepare a trial balance at June 30,1994.

12. MM 3A-7 (149)

Complete Accounting Cycle:

April Stein, M.D., after completing her medical education, established

her own practice on May 1. The following transactions occurred during
the first month.

May 1 Stein opened a bank account in the name of practice, April

Stein, M.D., by making a deposit of $ 12,000
May 1 Paid office rent for May $1,700
May 2 Purchased office equipment for cash $7,200
May 3 Purchased medical instruments from Niles Instruments, Inc. , at
a cost of $9,000. A cash down payment of $1,000 was made and a
note payable was issues for the remaining $8,000.
May 4 Retained by Brandon Construction to be on call for emergency
service at a monthly fee of $400. The fee for May was collected in
cash.
May 15 Excluding the retainer of May 4, fees earned during the first 15
days if the month amounted to $1,600, of which $600 was in cash and
$1,000 was in accounts receivable.
May 15 Paid Mary Hester, R.N., has salary for the first half of May
$1.000.
May 16 Dr. Stein withdrew $975 for the personnel use.
May 27 Treated Michael Tracy for minor injuries received in an
accident during employment at Brandon Construction. No charge was
made as these services were covered by Brandon’s payment on May 4
May 31 Excluding the treatment of Cynthia Knight on May 27, fees
earned during the last half of month
May 31 Received a bill from McGraw Medical Supplies in the amount of
$640 representing the amount of medical supplies used during May.
May 31 Paid utilities for the month, $300.

Other Information:
Dr Stein estimated the useful life of medical instruments at three years
and of office equipment at five years. The account titles to be used and
the account numbers are as follows:
Cash______________________10 April Stein, drawing__________41
Accounts Receivable__________ 13 Income summary____________
45
Medical Instruments__________ 20 Fees earned_________________
49
Accumulated depreciation: Medical supplies
expenses______ 50
Medical instruments________ 21 Rent expenses_______________
52
Office equipment____________ 22 Salaries
expense______________ 53
Accumulated depreciation: Utilities
expense______________ 53
Office equipment___________ 23 Depreciation expenses:
Notes payable_______________ 30 medical
instruments________ 54
Accounts payable_____________ 31 Depreciation expense:
April Stein, Capital____________ 40 Office
equipment__________ 55

Instructions:
 a. Journalize the above instructions.
b. Post to ledger accounts
c. Prepare a trial balance at May 31,19__.
d. Prepare an income statement and a balance sheet

13. MM 3B-1 (151)

Preparing Journal Entries

Air Wolfe provides transportation by helicopter for skiers, backpackers,

and others to remote mountains areas. Among the ledger accounts
used by the company are the following:

Cash Advertising expense:

Accounts payable Fuel expense
Amy Wolfe, capital Rent expense
Amy Wolfe, drawing Repair & maintenance expense
Passenger fare revenue Salaries expense

Some of the January transactions of Air Wolfe are listed below:

Jan. 3 Paid $1,600 rent for the building for January.
Jan 4. Placed advertising in local newspapers for publication
during January. The agreed price of $520 was payable within 10
days after the end of the month.
Jan 15. Cash receipts from passengers for the first half of
January amounted to $9,470
Jan 16. Amy Wolfe, the owner, withdrew $ 3,000 cash for
personal use.
Jan 16 Paid salaries to employees for services for the first half of
January, $ 5,265.
Jan 29 Received a bill for fuel used from Western Oil Company,
amounting to $ 1,930 and payable be February 10
Jan 31 Paid $1,642 to Stevens Aircraft for repair and
maintenance work during January.
Instructions:
Prepare a journal entry (including an explanation) for each of the above
transaction.

14. MM 3B-2 (151)

Analyzing Transactions and Preparing Journal Entries.

Garwood Marine is a boat repair yard. During August its transactions

included the following:
1. On August 1, paid rent for the month of August $4,000.
 2. On August 3, at request of Kiwi Insurance, Inc., made
repairs on boat of Michael Fay. Sent bill for $4,680 for
services rendered to Kiwi insurance, Inc. (Credit Repair
Service Revenue)
3. On August 9, made repairs to boat of Dennis Conner and
collected in full the charge of $1,575.
4. On August 14, placed advertisement in Yachting World to
be published in issue of August at cost of $95, payment to
be made within 30 days.
5. On August 25, received a check for $4,680 from Kiwi
Insurance, Inc., representing collection of the receivable of
August 3.
6. On August 30, sent check to Yachting World in payment of
the liability incurred on August 14.
7. In August 31, Barbara Garwood, owner of Garwood Marine,
withdrew $3,500 form the business for personal use.

Instructions:
a. Write an analysis of each transaction. An example of the type of
analysis desired is as follows for transaction 1 above.
1 (a) Rent is an operating expense. Expenses are recorded by
debits. Debit Rent Expense, $4,000.
1. (b) The asset Cash was decreased. Decrease in assets are
recorded by credits. Credit Cash, $4,000.
b. Prepare a journal entry (including explanation) for each of the
above transactions.

15. MM 3B-3 (152)

Preparing Journal Entries, posting and preparing a Trial
Balance

Metro Park was originated on March 1 for the purpose of operating an

automobile parking lot. Included in the company’s ledger are the
following ledger accounts and their identification numbers.
Cash____________________ 11 Tony Poletti,
drawing____________ 42
Land____________________ 21 Parking fees earned______________
51
Notes payable_____________ 31 Advertising
expense______________ 61
Accounts payable___________ 32 Utilities
expense_________________ 63
Tony Poletti, capital_________41 Salaries
expense_________________ 65
The business was organized and operations were began during the
month of March. Transactions during March were as follows:
Mar 1. Tony poletti deposited $ 50,000 cash in a bank account in the
name of the business.
Mar 5 Purchased land for $160,000, of which $40,000 was paid in a
cash. A short term note payable was issued for the balance of
$120,000.
Mar 6 An arrangement was made with the Century Club agreed to pay
$1,200 monthly, payable in advance. Cash was collected for the month
of March.
Mar 7 Arranged with Times Printing Company for a regular
advertisement in the Times at a monthly cost of $390. Paid for
advertising during March by check $390
Mar 15 Parking receipts for the first half of the month were $1,836,
exclusive of the monthly fee from Century Club.
Mar 31 Received bill for light and power from Pacific Power Company
in the amount of &78, to be paid by April 10.
Mar 31 Paid $2,720 to employees for services rendered during the
month (Payroll taxes are to be ignored)
Mar 31 Parking receipts for the second half of the month amounted to
$5,338.
Mar 31 Poletti withdrew $2,000 for personal use,
Mar 31 Paid $5,000 cash on the note payable incurred with the
purchase of land. (You are to ignore any interest on the note)

Instructions:
a. Journalize the March transactions.
b. Post to ledger accounts.
c. Prepare a trial journal at March 31.

16. MM 3B-7 (155)

The accounting cycle; a comprehensive analysis

On November 1,19__, Ken Ryan organized Continental Moving

Company. The transactions occurring during the first month of
operations were as follows:

Nov 1. Ryan deposited $400,000 cash in a bank account in the name

of the business,
Nov 2. Purchased land for $170,000 and building for $360,000, paying
#130,000 cash and signing a $400,000 note payable to Secure
Mortgage Company bearing interest at 9%.
Nov 3. Purchased six trucks form Willis motors at a total cost of
$432,000. A cash down payment of $200,000 was made, and a note
payable was issued for the balance of the purchase price. (This note is
due in 60 days and does not call for the payments of interest)
Nov 6. Purchased office equipment for cash , $ 24,000
Nov 6. Moved furniture for Mr. and Mrs. Don Fitch from New York to
Los Angeles for $8,650. Collected $4,850 in cash, balance to be paid
within 30 days (credit Moving Service Revenue).
Nov.9 Moved furniture for various clients for $32,350. Collected
$18,350 in cash, balance to be paid within 30 days.
Nov. 15 Paid salaries to employees for the first half month, $17,400
Nov 25 Moved furniture for various clients for a total of $27000. Cash
collected in full.
Nov 30 Salaries paid for the second half of November amounted to
$13,250.
Nov 30 Received a gasoline bill for the month of November from
L:ucier Oil Company in the amount of $17,500 to be paid by December
10.
Nov. 30 Received blill of $1,250 for repair work on trucks during
November by Newport Repair Company. Payment is due within 30
days.
Nov. 30 Paid $5,000 to secure Mortgage Company. This $5,000
payment included $3,000 interest expense for November and a $2,000
reduction in the balance of the note pasyable issued on November 2
Nov. 30 Ryan withdrew $4000 cash from the business for his personal
use.
Estimated useful life of the building is 20 years, trucks 4 years, and
office equipment 10 years. The account titles to be used and the
account numbers are as follows:

Cash ______________________ 1 Ken Ryan, capital______________

40
Accounts Receivable__________ 3 Ken Ryan,
drawing_____________ 41
Land______________________ 11 Income
summary_______________ 50
Building____________________12 Moving service
revenue__________ 60
Accumulated depreciation: Salaries
expense________________ 70
Building__________________ 13 Gasoline
expense_______________ 71
Trucks ____________________ 15 Repairs & maintenance
expense____ 72
Accumulated depreciation: trucks_ 16 Interest
expense_________________73
Office equipment____________ 18 Depreciation expense:
building______ 74
Accumulated depreciation: office Depreciation expense:
trucks________75
 Equipment________________19 Depreciation expense:
office
Notes payable_______________ 30
equipment___________________76
Accounts payable_____________ 31

Instructions:
a. Prepare journal entries
b. Post to ledger accounts
c. Prepare a trial balance at November 30, 19__.
d. Prepare an income statement and a balance sheet