DFA 5058 Financial Accounting
Trimester 3 2009/2010
TUTORIAL QUESTION: CHAPTER 2 to CHAPTER 9
Warning:
Tutorial class is only for those students who bring tutorial questions
TUTORIAL 2
Question 1
Classify each of the following items as owner’s drawing (D), revenue (R), expense (E), asset (A), liability
(L) or owner’s equity (OE).
1.Advertising expense
8.Account payable
2.Commission revenue
9.Cash
3.Cleaning equipment
10.Insurance expense
4.Account receivable
11.David, drawing
5.Salaries expense
12.Notes payable
6.Rent revenue
13.Salaries payable
7.Maria, capital
14.Utilities expense
Question 2
Selected transactions for Cuci-Cuci service Company are listed below.
1. Made cash investment to start business.
2. Paid monthly rent.
3. Purchased equipment on account.
4. Billed customers for services performed.
5. Withdrew cash for owner’s personal use.
6. Received cash from customers billed in (4).
7. Incurred advertising expense on account.
8. Purchase additional equipment for cash.
9. Received cash from customers when service was performed.
Instructions
List the numbers of the above transaction and describe the effect of each transaction on assets, liabilities,
and owner’s equity. For example, the first answer is : (1) Increase in assets and increase in owner’s equity.
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DFA 5058 Financial Accounting
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Question 3
On June 1, Linda established Anchorage Travel Agency. The following transactions were completed during
the month.
(1)
(2)
(3)
(4)
(5)
(6)
Linda invested RM30,000 cash in the business.
Paid RM20,000 cash for land.
Bought RM500 of office supplies on credit.
Received RM5,500 cash from clients for the service revenue earned.
Performed travel service for clients on credit, RM3,000.
Paid cash expenses : computer lease RM600, office rent RM1,100, employee salary
RM1,200, electricity RM400.
(7)
Paid RM300 on the account payable created in transaction 3.
(8)
Renovation of Linda’s house RM5,000. This is not a transaction of the business.
(9)
Collected RM1,000 on the account receivable created in transaction 5.
(10) Sold land for cash at its cost at RM50,000.
(11) Withdrew RM2,000 cash for personal expenses.
Instructions :
a) Prepare a tabular analysis of the transactions using the following column headings: Cash, Account
receivable, Office Supplies, Land, Account payable, Linda capital and Retained earnings.
b) From an analysis of the column Linda, capital, compute the net income or net loss for June.
Question 4
Suraya opened a law office, Suraya, Attorney at Law, on April 1, 2007. On July 31, the balance sheet
showed Cash RM 4,000; Account receivable RM 1,500; Supplies RM 500; Office Equipment RM 5,000;
Account payable RM 4,200 and Suraya, capital RM 6,800. During August the following transactions
occurred.
1. Collected RM 1,400 of account receivable.
2. Paid RM 2,700 cash on account payable.
3. Earned revenue of RM 7,500 of which RM 3,000 is collected in cash and the balance is due in
September.
4. Purchased additional office equipment for RM 1,000, paying RM 400 in cash and the balance on
account.
5. Paid salaries RM 3,000, rent for August RM 900 and advertising expenses RM 350.
6. Withdrew RM 550 in cash for personal use.
7. Received RM 2,000 from Standard Federal Bank-money borrowed on a note payable.
8. Incurred utility expenses for month on account RM 250.
Instructions :
a) Prepare a tabular analysis of the August transactions beginning with July 31 balances. The column
headings should be as follows: Cash + Account receivable + Supplies + Office Equipment = Account
payable + Notes payable + Suraya, capital+ Retained earnings.
b) Prepare an income statement for August 31.
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Question 5
On June 1, Jennifer Garner started Divine Cosmetics Co, a company that provides individual skin care
treatment, by investing RM 26,200 cash in the business. Following are the assets and liabilities of the
company at June 30 and the revenues and expenses for the month of June.
Cash
RM 10,000
Notes payable
RM 13,000
Account receivable
4,000
Account payable
1,200
Service revenue
5,500
Supplies expense
1,600
Cosmetics supplies
2,000
Gas and oil expense
800
Advertising expense
500
Utilities expense
300
Equipment
25,000
Jennifer made no additional investment in June, but withdrew RM 1,700 in cash for personal use during the
month.
Instructions
Prepare an income statement and a balance sheet at June 30, 2007.
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Question 6
Laura Stiner started her own consulting firm, Stiner Consulting Sdn. Bhd., on May 1, 2009. The following
transactions occurred during the month of May.
May
1
2
3
5
9
12
15
17
20
23
26
29
30
Stiner invested RM 8,000 cash in the business.
Paid RM 800 for office rent for the month.
Purchased RM 500 of supplies on account.
Paid RM 50 to advertise in the County News.
Received RM 3,000 cash for services provided.
Withdrew RM 700 cash for personal use.
Performed RM 3,300 of services on account.
Paid RM 3,000 for employee salaries.
Paid for the supplies purchased on account on May 3.
Received a cash payment of RM 2,000 for services provided on account on May 15.
Borrowed RM 5,000 from the bank on a note payable.
Purchased office equipment for RM 2,400 on account.
Paid RM 150 for utilities.
Instructions
a) Show the effects of the previous transactions on the accounting equation using the following format.
ASSETS
LIABILITIES
STOCKHOLDERS’
EQUITY
=
DATE
Cash +
Account
Receivable
+ Supplies Office
= Notes
+
Equipment Payable
Account
Payable
Common
Stock
Retained
Earnings
b) Prepare an income statement for 31st May 2009.
c) Prepare a balance sheet at May 31, 2009.
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Question 7
Analyzing transaction with the (1) accounting equation and (2) preparing the
Income Statement and Statement of Retained Earnings.
The following amounts summarize the financial position of Ready Resources, Inc., on
May 31, 20X8:
Cash
Account Receivable
Supplies
Land
Account Payable
Common Stock
Retained Earnings
: 1,200
: 1,500
:0
: 12,000
: 8,000
: 4,000
: 2,700
During June, 20X8, Ready Resources completed these transactions:
a. The business received cash of $5,000 and issued common stcok.
b. Performed services for a customer and received cash of $6,700.
c. Paid $5,000 on accounts payable.
d. Purchased supplies on account, $1,000.
e. Collected cash from a customer on account, $500.
Consulted on the design of a computer system and billed the customer for services rendered,
f. $2,400.
Recorded the following business expenses for the month: (1) paid office rent - $900; (2) paid
g. advertising -$300.
h. Declared and paid a cash dividend of $1,800.
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Question 8
Financial balances for the business of Abu Enterprise on 30th June 2009 are provided as below:
Assets
= Liabilities
+ Equity
Accounts
Office
Accounts
Note
Abu,
Cash
+ Receivable + Supplies + Equipment = Payable
+ Payable + Capital
Bal. 11,000 + 15,000
+ 1,500
+ 24,000
= 3,500
+ 12,000 + 36,000
During July, the business of Abu entered into the following transactions:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
Collected RM8,000 of the accounts receivable.
Paid RM1,800 on accounts payable.
Purchased equipment for RM8,100. Paid RM3,000 in cash and signed a Maybank
business loan agreement for RM5,100 to pay for the remainder of the equipment.
Billed customers for the services performed, RM6,300.
Purchased supplies on credit, RM375.
Paid expenses in cash, RM2,925 (salary, RM1,650; filling fee RM825; assessment,
RM450)
The owner withdrew RM2,000 for personal use.
Used RM900 of supplies.
Abu invested another RM14,000 cash in the business.
Paid RM 50 to advertise in the County News.
Performed RM 3,300 of services on account.
Received a cash payment of RM 4,300 for services provided on account on transaction
4.
Paid for the supplies purchased on account on transaction 5.
Paid RM 150 for utilities.
Instructions:
(a) Analyze the effects of the above business transactions on the accounting equation.
(b) Prepare an Income Statement for the month of July 2009.
(c) Prepare a Balance Sheet as at July 31, 2009.
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DFA 5058 Financial Accounting
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TUTORIAL 3: RECORDING TRANSACTIONS
Question 1
On 1 July 2007, Johnny opens Johnny’s Research Service. He will be the owner of the proprietorship.
During the entity’s month of operations, the business completes these transactions :
a. To begin operations, Johnny deposited RM45,000 of personal funds in a bank account entitled
“Johnny’s Research Service”. The business receives the cash and gives Johnny capital (owner’s
equity).
b. He pays RM30,000 cash for a small building to be used as an office for the business.
c. He purchases office supplies for RM500 on account.
d. He pays cash of RM6,000 for office furniture.
e. He pays RM200 on the account payable he created in transaction (c).
f. He withdraws RM1,000 cash for personal use.
Instructions:
1. Journalize these transactions and post to the accounts. Key the journal entries by letter.
2. Show all the accounts(column type) after posting.
3. Prepare the trial balance as at July 31,2007.
Question 2
Journalize the following business transactions in general journal form. Identify each transaction by number.
You may omit explanations of the transactions.
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
TM
Stockholders invest RM20,000 in cash in starting a real estate office operating as a corporation.
Purchased RM400 of office supplies on credit.
Purchased office equipment for RM7,500, paying RM2,500 in cash and signed a RM5,000 note
payable with Maybank Berhad.
Real estate commissions billed to clients amount to RM5,000.
Paid RM700 in cash for the current month's rent.
Paid RM200 cash on account for office supplies purchased in transaction 2.
Received a bill for RM500 for advertising for the current month.
Paid RM2,200 cash for office salaries.
Paid RM1,200 cash dividends to stockholders.
Received a check for RM4,000 from a client in payment on account for commissions billed in
transaction 4.
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Question 3
Transactions for Pate Company for the month of October are presented below. Journalize each transaction
and identify each transaction by number. You may omit journal explanations.
1.
2.
3.
4.
5.
6.
7.
8.
9.
Stockholders invested additional RM45,000 cash in the business.
Purchased land costing RM28,000 for cash.
Purchased equipment costing RM8,000 for RM4,000 cash and the remainder on credit.
Purchased supplies on account for RM800.
Paid RM1,000 for a one-year insurance policy.
Received RM2,000 cash for services performed.
Received RM4,000 for services previously performed on account.
Paid wages to employees for RM2,500.
Paid dividends to stockholders of RM1,000.
Question 4
Louise Lane incorporated as a licensed architect. During the first month of the operation of her business, the
following events and transactions occurred.
April 1
1
2
3
10
11
20
30
30
Invested RM 25,000 cash in exchange for common stock.
Hired a secretary-receptionist at a salary of RM 500 per week payable monthly.
Paid office rent for the month RM 1,200.
Purchased architectural supplies on account from S.M.U Company RM 2,000.
Completed blueprints on a carport and billed client RM 900 for services.
Received RM 800 cash advance from Jesse Izzo for the design of a new home.
Received RM 1,750 cash for services completed and delivered to Clark Kent.
Paid secretary- receptionist for the month RM 2,000.
Paid RM 900 to S.M.U. Company on account.
Instructions :
Journalize the transactions, post to the ledger accounts and prepare a trial balance on April 30,2006.
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Question 5
1. October 1, C.R. Byrd invests RM10,000 cash in an advertising venture to be known as the Pioneer
Advertising Agency.
2. October 1, office equipment costing RM5,000 is purchased by signing a RM5,000 note payable with
Hong Leong Bank Berhad.
3. October 2, a RM1,200 cash advance is received from R. Knox, a client, for advertising services that
are expected to be completed by December 31.
4. October 3, office rent for October is paid in cash, RM900.
5. October 4, RM600 is paid for a one-year insurance policy that will expire next year on September
30.
6. October 5, an estimated 3-month supply of advertising materials is purchased on account from Aero
Supply for RM2,500.
7. October 9, hire four employees to begin work on October 15. Each employee is to receive a weekly
salary of RM500 for a 5-day work week, payable every 2 weeks - first payment made on October 26
8. October 20, C. R. Byrd withdraws RM500 cash for personal use.
9. October 31, received RM10,000 in cash from Copa Company for advertising services rendered in
October.
Instructions :
Journalize the transactions, post to the ledger accounts and prepare a trial balance on October 31,2007.
Question 6
Selected transactions for Lily, an interior decorator, in her first month of business, are as follows.
Jan
2
Invested RM 25,000 cash in business.
3
Purchased used car for RM 6,000 cash for use in business.
9
Purchased supplies on account for RM 1,000.
12
Billed customer RM 2,000 for service performed.
16
Paid RM 250 cash for advertising expenses.
18
Received RM 1,000 cash from customers billed on January 12.
24
Paid creditor RM 500 cash on balance owed.
28
Withdrew RM 1,500 cash for personal use of owner.
29
Paid salary RM 1,000 cash.
31
Paid RM 200 cash for utilities.
Instructions:
1) Journalize the above transactions.
2) Post to ledger.
3) Prepare Income Statement and Balance Sheet for the month.
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Question 7
The accounts of Custom Pool Service, Inc., follow with their normal balances at June 30,
20X6. The accounts are listed in no particular order.
Instructions:
1. Prepare the company’s trial balance as at June 30, 20X6.
2. Prepare the Income Statement for the month ended June 30, 20X6.
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Question 8
The accounting records hold the following errors:
a. Recorded a $1,000 cash revenue transaction by debiting Accounts Receivable.
The credit entry was correct.
b. Posted a $1,000 credit to Accounts Payable as $100.
c. Did not record utilities expense or the related account payable in the amount of $200.
d. Understated Common Stock by $1,100.
e. Omitted Insurance Expense of $1,000 from the trial balance.
Instructions:
Prepare the correct trial balance at September 30, 20X3, complete with a heading.
Journal entries are not required.
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Question 9
The trial balance of Honeybee Hams, Inc., follows:
Instructions:
Prepare Honeybee Hams, Inc.'s income statement and statement of retained
earnings for the year ended December 31, 20X6, and its balance sheet on that
date.
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Question 10:
Ah Tong opened a boat hire business; Ah Tong Sdn. Bhd. in August 2009. The following transactions
occurred during the first month of the business.
August.
1
3
4
5
15
18
19
24
29
30
Ah Tong invested RM15,000 in cash in the business.
Paid RM590 for August rent of premises.
Purchased equipment costing RM7,000 with a cash for RM3,000 and a RM4,000
commercial loan from Hong Leong Bank.
Purchased supplies costing RM250 on credit.
Recorded revenue for the first half of the month of RM1,530 in cash and
RM70 on credit.
Paid for supplies purchased on 5th August 2009, RM250.
Paid insurance expense for August of RM190.
Received payment from customer on account of RM40.
Recorded revenue for the second half of the month of RM1,330 in cash and
RM60 on credit.
Paid telephone expense of RM60 in cash.
Instructions:
(a) Prepare general journal entries to record the transactions.
(b) Prepare a Trial Balance as at 31 August 2009.
(d) Prepare an Income Statement for the month of August 2009.
(e) Prepare a Balance Sheet as at August 31, 2009.
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Question 11:
Instructions:
1.
2.
Prepare the income statement of Maxwell Banking Company, for the year ended
December 31, 2008.
What amount of dividends did Maxwell declare during the year ended December
31, 2008? Hint: Prepare a statement of retained earnings.
Question 12:
Instructions:
Prepare the income statement and the statement of retained earnings of Ricoh Copy
Center, Inc., ended July 31, 20X9.
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Question 13:
Instructions
1.
2.
3.
4.
TM
Prepare the income statement of Post Oak, Inc., for the year ended December 31, 2007.
Prepare the company's statement of retained earnings for the year.
Prepare the company's balance sheet at December 31, 2007.
Analyze Post Oak by answering these questions:
a. Was Post Oak profitable during 20X7? By how much?
b. Did retained earnings increase or decrease? By how much?
c. Which is greater, total liabilities or total equity? Who owns more of Post Oal's assets,
creditors or Post Oak stockholders?
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Question 14:
Instructions:
1. Prepare the income statement of HD Radio Corporation for the year ended December 31,
20X8.
2. Prepare HD Radio’s statement of retained earnings for the year.
3. Prepare HD Radio’s balance sheet at December 31, 20X8.
4. Analyze HD Radio Corporation by answering these questions: (Challenge)
a. Was HD Radio profitable during 20X8? By how much?
b. Did retained earnings increase or decrease? By how much?
c. Which is greater, total liabilities or total equity? Who owns more of HD Radio’s assets,
creditors of the company or the HD Radio stockholders?
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Question 15:
The adjusted trial balance of Snead Corporation, at December 31, 20X6, follows below:
Instructions:
1. Prepare Snead Corporation’s 20X6 income statement, statement of retained earnings, and
balance sheet.
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TUTORIAL 4: ADJUSTING ENTRIES
Question 1
Before month-end adjustments are made, the February 28 trial balance of Al’s Enterprise contains revenue
of RM9,000 and expenses of RM4,800. Adjustments are necessary for the following items:
1.
2.
3.
4.
5.
Depreciation for February is RM1,300.
Service revenue earned but not yet billed is RM2,800.
Accrued interest expense is RM900.
Revenue collected in advance that is now earned is RM3,500.
Portion of prepaid insurance expired during February is RM400.
Instructions:
1) Prepare the adjusting entries for the month of February.
2) Compute the correct net income for Al’s Enterprise for February.
Question 2
Ellis Company accumulates the following adjustment data at December 31.
1. Revenue of RM800 collected in advance has been earned.
2. Salaries of RM400 are unpaid.
3. Prepaid rent totaling RM450 has expired.
4. Supplies of RM350 have been used.
5. Revenue earned but unbilled totals RM750.
6. Utility expenses of RM300 are unpaid.
7. Interest of RM250 has accrued on a note payable.
Instructions:
(a) For each of the above items indicate:
1.
2.
3.
4.
The type of adjustment (prepaid expense, unearned revenue, accrued revenue, or accrued expense).
The account relationship (asset/liability, liability/revenue, etc.).
The status of account balances before adjustment (understatement or overstatement).
The adjusting entry.
Example Answer for number 1:
Unearned revenue. Liability (overstated) and Revenue (understated).
Dr Unearned revenue
800
Cr Revenue
800
(b) Assume net income before the adjustments listed above was RM15,500. What is the adjusted net
income?
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Question 3
Terry Thomas opens the Green Thumb Lawn Care Company on April 1. At April 30, the trial balance shows
the following balances for the selected accounts.
Prepaid Insurance
Equipment
Notes Payable
Unearned Revenue
Service Revenue
RM 3,600
28,000
20,000
4,200
1,800
Analysis reveals the following additional data.
1. Prepaid insurance is the cost of a 2-year insurance policy, effective April 1.
2. Depreciation on the equipment is RM 500 per month.
3. The notes payable is dated April 1, 12% per annum.
4. Six customers paid the company’s 7-months’ lawn service package of RM 4,200 beginning in
April. These customers were serviced in April.
5. Lawn services provided other customers but not billed at April 30 total RM 1,500.
Instructions:
Prepare the adjusting entries for the month of April. Show computation.
Question 4
Prepare year-end adjusting entries for each of the following:
a. Office supplies had a balance of RM84 on January 1. Purchased debited to office supplies during
the year amount to RM415. A year-end inventory reveals supplies of RM285 on hand.
b. Depreciation of office equipment is estimated to be RM2,130 for the year.
c. Property taxes for six months, estimated to total RM875, have accrued but are unrecorded.
d. Unrecorded interest receivable on government bond RM850
e. Unearned revenue has a balance of RM900. The services for RM300 received in advance have
now been performed.
f. Services totaling RM200 have been performed for which the customer has not yet been billed.
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Question 5
The schedule below presents the trial balance for the Sigma Consultants Corporation on December 31,2002
Sigma Consultants Corporation
Trial Balance
December 31, 2002
Cash
RM 12,786
Account receivable
24,840
Office supplies
991
Prepaid rent
1,400
Office equipment
6,700
Accumulated depreciation-office equipment
Account payable
Notes payable
`
Unearned fees
Common stock
Retained earnings
Dividends
15,000
Fees revenue
Salaries expenses
33,000
Utility expenses
1,750
Rent expenses
7,700
RM104,167
RM 1,600
1,820
10,000
2,860
10,000
19,387
58,500
RM 104,167
The following information is also available:
a. Ending inventory of office supplies, RM86
b. Prepaid rent expired, RM700
c. Depreciation of office equipment for period, RM600
d. Interest accrued on note payable, RM600
e. Salaries accrued at end of period, RM200
f. Fees still unearned at end of period, RM 1,410
g. Fees earned but not billed, RM600
h. Estimated federal income taxes for the year, RM3,000
Instructions:
1. Determine adjusting entries.
2. Prepare Column account for each of items listed in trial balance and consider the
adjusting entries as made in Part 1.
3. Prepare adjusted trial balance.
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Question 6
The schedule presents the trial balance for New Wave Dance Studio, Inc at the end of the current fiscal year.
The following information is available to assist in the preparation of adjusting entries:
New Wave Dance Studio, Inc
Trial Balance
October 31, 2002
Cash
RM 1,028
Account receivable
517
Supplies
170
Prepaid rent
400
Prepaid Insurance
360
Equipment
9,100
Accumulated depreciation- equipment
Account payable
Unearned dance fees
Common stock
Retained earnings
Dividends
12,000
Dance fees
Wage expenses
3,200
Rent expenses
2,200
Utility expenses
1,200
RM 30,175
RM 400
380
900
1,500
1,000
25,995
RM 30,175
The following information is available to assist in the preparation of adjusting entries:
a. An inventory of supplies reveals RM92 still on hand.
b. The prepaid rent reflects the rent for October plus the rent for the last month of lease.
c. Prepaid insurance consists of a two-year policy purchased on May1, 2002.
d. Depreciation on equipment is estimated to be RM 800.
e. Accrued wages are RM65 on October 31.
f. Two-third of the unearned dance fees have been earned by October 31.
g. Management estimates federal income taxes for the year to be RM 3,000.
Instructions:
1.
2.
3.
4.
TM
Open the Column account in the trial balance.
Determine adjusting entries and post them directly to the Column account.
Prepare adjusted trial balance.
Prepare Income Statements, statement of Retained Earnings, and Balance Sheet.
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Question 7
Journalize transactions
April
1
2
4
6
9
17
23
30
Received 25,000 and issued common stock.
Purchased $800 of office supplies on account.
Paid $20,000 cash for land to use as a building site.
Performed service for customers and received cash of $2,000.
Paid $100 on accounts payable.
Performed service for FedEx on account totaling $1,200.
Collected $900 from FedEx on account.
Paid the following expenses: salary, $1,000; rent, $500.
Instructions:
Record the transactions in the journal of Double Tree.
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Question 8:
Journalize transactions
Dec. 1
5
9
10
19
22
31
31
31
Barnett received $10,000 cash and issued common stock to stockholders.
Paid monthly rent, $1,000.
Paid $5,000 cash and signed a $25,000 note payable to purchase
for an office site.
Purchased supplies on account, $1,200.
Paid $600 on account.
Borrowed $15,000 from the bank for business use. Signed a note
payable to the bank in the name of the business.
Service rearnues earned during the month included $6,000 cash
and $5,000 on account.
Paid employees' salaries ($2,000), advertising expense ($1,500),
and utilities expense ($1,100).
Declared and paid a cash dividend of $4,000.
Barnett's Auction Company uses the following accounts:
Cash, Accounts Receivable, Supplies, Land, Accounts Payable, Notes Payable, Common Stock,
Dividends, Service Revenue, Salary Expense, Rent Expense, Advertising Expense,
and Utilities Expense.
Instructions:
1
2
Journalize each transaction of Barnett Auction Company. Explanations are not required.
After these transactions, how much cash does the business have?
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Question 9
Journalize adjusting entries and analyze effects
a
b
c
d
e
f
Prepaid insurance, beginning, $700. Payments for insurance during the
period, $2,100. Prepaid insurance, ending $800.
Interest revenue accrued, $900.
Unearned service revenue, beginning, $800. Unearned service revenue,
ending, $300.
Depreciation, $6,200.
Employees' salaires owed for 3 days of a 5-day work week, weekly payroll, $9,000.
Income before income tax, $20,000. Income tax rate is 40%.
Question 10
Notes receivable and accrued interest revenue
Assume that Kraft Foods famous for cheese, Jell-O and Planters nuts completed the following selected
transactions:
Instructions
Record the transactions in Kraft’s journal. Round interest amounts to the nearest dollar.
Explanations are not required.
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Question 11
The schedule presents the balance for Wei Seng Dance Studio Sdn. Bhd., at the end of the current fiscal
year.
Wei Seng Dance Studio Sdn. Bhd.
For the Month ended April 30, 2009
Balance
RM
11,610
200
400
1,800
9,600
390
Capital, Wei Seng
Supplies
Prepaid rent
Prepaid insurance
Equipment
Unearned dance fees
The following information is available to assist in the preparation of adjusting entries:
a.
b.
c.
d.
e.
f.
g.
An inventory of supplies reveals RM92 still on hand.
The prepaid rent reflects the rent for April 2009.
Prepaid insurance consists of a one-year policy purchased on April 1, 2009.
Depreciation on equipment is estimated to be RM 800.
Accrued wages are RM75 on April 30.
Two-third of the unearned dance fees have been earned by April 30.
Management estimates federal income taxes for the year to be RM 3,000.
Instructions:
a) Prepare the adjusting entries for the month of April 30, 2009.
b) Prepare an Adjusted Trial Balance as at April 30, 2009.
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DFA 5058 Financial Accounting
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TUTORIAL 5
Question 1
Mr Farid open a company, named Besraya Enterprise. The Trial Balance of BESRAYA ENTERPRISE as at
August 31, 2007, is as follows.
BESRAYA Enterprise
Trial Balance
August 31, 2007
Debit
RM
Cash
Account receivable
Prepaid rent
Supplies
Office equipment
Rent expense
Salaries expense
Depreciation expense
Farid, drawing
Accumulated depreciation-Equipment
Account payable
Farid, capital
Rent revenue
Credit
RM
280
120
80
100
500
40
200
60
20
RM1,400
100
200
300
800
RM1,400
Other data:
(a) Prepaid rent expired during August, RM 40.
(b) Depreciation expense on office equipment for the month of August, RM 60.
(c) Supplies on hand on August 31 amounted to RM 70.
(d) Salaries expense incurred at August 31 but not yet paid amounted to RM 140.
Instructions:
Enter the trial balance on a work sheet and complete the work sheet.
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DFA 5058 Financial Accounting
Trimester 3 2009/2010
Question 2
The trial balance of Tumira Service is shown below :
Tumira Service
Trial Balance
as at 30 September 2006
Cash
RM3,500
Account receivable
3,400
Prepaid rent
1,200
Supplies
3,300
Equipment
32,600
Accumulated depreciation-equipment
1,800
Account payable
3,600
Mira, capital
36,000
Mira, drawing
2,000
Service revenue
7,100
Salary expense
1,800
Utility expense
700
Total
RM48,500
RM48,500
Additional information at 30 September 2006 :
a.
Accrued service revenue, RM600.
b. Depreciation, RM150.
c. Accrued salary expense, RM500.
d. Prepaid rent expired, RM800.
e. Supplies used, RM1,600.
Instructions:
Enter the trial balance on a work sheet and complete the work sheet.
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DFA 5058 Financial Accounting
Trimester 3 2009/2010
Question 3
The trial balance columns of the work sheet for Undercover Roofing at March 31, 2005.
UNDERCOVER ROOFING
Work sheet
For the month ended March 31, 2005
Trial balance
Debit
Credit
RM
RM
Cash
2,500
Account receivable
1,800
Roofing supplies
1,100
Equipment
6,000
Accumulated depreciation- Equipment
1,200
Account payable
1,400
Unearned revenue
300
I.Spy, capital
7,000
I.Spy, drawing
600
Service revenue
3,000
Salaries expense
700
Miscellaneous expense
200
12,900
12,900
Other data :
1. A physical count reveals only RM 140 of roofing supplies on hand.
2. Depreciation for March is RM 200.
3. Unearned revenue amounted to RM 130 after adjustment on March 31.
4. Accrued salaries are RM 350.
Instructions
a) Enter the trial balance on a work sheet and complete the work sheet.
b) Journalize the adjusting entries from the adjustments columns of the work sheet.
c) Journalize the closing entries from the financial statement columns of the work sheet.
d) Prepare an income statement and owner’s equity statement for the month of March.
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DFA 5058 Financial Accounting
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Question 4
The adjusted trial balance of Lanza Company at the end of its fiscal year is :
LANZA COMPANY
Adjusted Trial Balance
July 31, 2005
Debit
Credit
RM
RM
Cash
14,840
Account receivable
8,780
Equipment
15,900
Accumulated depreciation
5,400
Account payable
4,220
Unearned rent revenue
1,800
C.J.Lanza, capital
45,200
C.J.Lanza, drawing
16,000
Commission revenue
67,000
Rent revenue
6,500
Depreciation expense
4,000
Salaries expense
55,700
Utilities expense
14,900
__________
RM 130,120 RM 130,120
Instructions
a) Prepare the closing entries.
b) Prepare a post closing trial balance as at July 31 2005.
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DFA 5058 Financial Accounting
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Question 5
At March 31, account balances after adjustments for Marley Cinema are as follows:
Account Balances
Accounts
(After Adjustment)
Cash (Asset)
RM 6,000
Concession Supplies (Asset)
4,000
Theatre Equipment (Asset)
50,000
Accumulated Depreciation—
Theatre Equipment(Asset)
12,000
Accounts Payable (Liability)
5,000
Marley, Capital (O.Equity)
20,000
Marley, Drawing(O.Equity)
12,000
Admission Ticket Revenues (I/S)
60,000
Popcorn Revenues (I/S)
37,000
Candy Revenues (I/S)
19,000
Advertising Expense (I/S)
12,000
Concession Supplies Expense (I/S)
19,000
Depreciation Expense(I/S)
4,000
Film Rental Expense(I/S)
16,000
Rent Expense(I/S)
12,000
Salaries Expense(I/S)
13,000
Utilities Expense(I/S)
5,000
Instructions
Prepare the closing journal entries for Marley Cinema.
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DFA 5058 Financial Accounting
Trimester 3 2009/2010
Question 6
Mike Young opened Young’s Carpet Cleaners on March 1. During March, the following transactions were
completed.
Mar
1
Invested RM 10,000 cash in the business.
1
Purchased used truck for RM 6,000 paying RM 3,000 cash and the balance on account.
3
Purchased cleaning supplies for RM 1,200 on account.
5
Paid RM 1,800 cash on one year insurance policy effective March 1.
14
Billed customers RM 2,800 for cleaning services.
18
Paid RM 1,500 cash on amount owed on truck and RM 500 on amount owed on cleaning
supplies.
20
Paid RM 1,800 cash for employee salaries.
21
Collected RM 1,400 cash from customers billed on March 14.
28
Billed customers RM 2,500 for cleaning services.
31
Paid gas and oil for month on truck RM 200.
31
Withdrew RM 700 cash for personal use.
Instructions
a) Journalize and post March transactions to column account.
b) Enter the following adjustments on the work sheet and complete the work sheet.
1. Earned but unbilled revenue at March 31 was RM 700.
2. Depreciation on equipment for the month was RM 250.
3. One twelfth of the insurance expired.
4. An inventory count shows RM 600 of cleaning supplies on hand at March 31.
5. Accrued but unpaid employee salaries were RM 500.
c) Journalize above adjusting entries.
d) Prepare closing entries and consider the closing in column account.
e) Prepare post closing trial balance at March 31.
Question 7
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DFA 5058 Financial Accounting
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The unadjusted trial balance of Princess, Inc. at January 31, 20X2, and the related month-end adjustment
data follow:
Adjustment data:
a. Accrued service revenue at January 31, $2,000.
b. Prepaid rent expired during the month. The unadjusted prepaid balance of $3,000 relates to the period,
January through March.
c. Supplies used during January, $2,000.
d. Depreciation on furniture for the month. The estimated useful life of the furniture is 3 years.
e. Accrued salary expense at January 31, Monday, Tuesday, and Wednesday. The 5-day weekly payroll of
$5,000 will be paid on Friday February 2.
Required.
1. Enter the trial balance on a work sheet and complete the work sheet.
2. Prepare the monthly income statement, the statement of retained earnings, and the classified balance sheet.
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DFA 5058 Financial Accounting
Trimester 3 2009/2010
Question 8:
The balance of ABC Sdn. Bhd. as at March 31, 2009, is as follow:
ABC Sdn. Bhd.
For the Month ended March 31, 2009
Cash
Account receivable
Supplies
Equipment
Accumulated depreciation- Equipment
Account payable
Unearned revenue
Tan, capital
Tan, drawing
Prepaid rent
Service revenue
Salaries expense
Miscellaneous expense
Balance
RM
5,900
2,500
1,300
8,000
1,800
2,900
390
9,000
500
3,200
8,210
800
100
Other data:
1. A physical count reveals only RM 180 of supplies on hand.
2. Depreciation for March is RM 300.
3. Unearned revenue amounted to RM 250 after adjustment on March 31.
4. Accrued salaries are RM 450.
5. Prepaid rent expired, RM 800.
6.
Instructions:
a) Enter the trial balance on a work sheet and complete the work sheet.
b) Journalize the adjusting entries from the adjustments columns of the work sheet.
c) Journalize the closing entries from the financial statement columns of the work sheet.
d) Prepare an Income Statement for the month ended 31 March 2009.
e) Prepare a Balance Sheet as at March 31, 2009.
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Multimedia University (Melaka Campus)
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DFA 5058 Financial Accounting
Trimester 3 2009/2010
TUTORIAL 6: MERCHANDISING OPERATIONS
Question 1
On May 1, Bintang Supply had an inventory of 20 travel bags at a cost of RM25 each. The company uses a
perpetual inventory system. During May, the following transactions and events occurred.
May
4 Purchased 40 travel bags at RM25 each from Cloud Company, terms 2/10, n/30.
May
6 Received credit of RM125 for the return of five travel bags purchased on May 4 that were
defective.
May
9 Sold 20 travel bags for RM35 each to Twinkle Store, terms 2/10, n/30.
May 11 Sold 15 travel bags for RM35 each to Bulan Travel Agency, terms n/30.
May 12 Bulan Travel Agency returned two defective travel bags that were purchased on May 11.
May 13 Paid Cloud Company in full, less discount.
Instructions
Journalize the May transactions for Bintang Supply.
Question 2
Suppose NEC Sales Co. engaged in the following transactions during June of the current year :
June 3
Purchased inventory RM1,600 on credit terms of 2/10, net 30.
6
Returned 40% of the inventory purchased on June 3. It was defective.
9
Sold goods for cash, RM1,000 (cost RM550)
11
Paid the amount owed on account from the purchase of June 3, less the June 6 return.
15
Purchased goods for RM5,000. Credit terms were 3/15, net 30.
16
Paid a RM200 freight bill on goods purchased.
18
Sold inventory for RM2,000 on credit terms of 2/10, n/30 (cost, RM950)
20
Received returned goods from the customer of June 18 sale RM800 (cost RM480)
25
Received cash in full settlement of the account from the customer who purchased
inventory on June 18, less the return and discount.
28
Sold goods for cash, RM3,200 (cost RM1,800)
Instructions
Prepare the journal entries to record the transactions assuming the company uses a perpetual inventory
system.
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DFA 5058 Financial Accounting
Trimester 3 2009/2010
Question 3
MRH Book Store entered into the transactions listed below. In the journal provided, prepare MRH’s
necessary entries, assuming use of the perpetual inventory system.
July
6
Purchased RM2,900 of merchandise on credit, terms n/30.
8
Returned RM200 of the items purchased on July 6.
9
Paid freight charges of RM90 on the items purchased July 6.
19
Sold merchandise on credit for RM3,000, terms 1/10, n/30. The merchandise sold had a cost of
RM1,700.
22
Of the merchandise sold on July 19, RM200 of it was returned. The items had cost the store
RM100.
28
Received payment in full from the customer of July 19.
31
Paid for the merchandise purchased on July 6.
Question 4
The adjusted trial balance of Pratt Company contained the following information:
Income Statement
Debit
Sales
Sales Returns and Allowances
Sales Discounts
Cost of Goods Sold
Freight-out
RM550,000
RM 20,000
7,000
366,000
2,000
Advertising Expense
15,000
Interest Expense
18,000
Store Salaries Expense
50,000
Utilities Expense
18,000
Depreciation Expense
Credit
7,000
Interest Revenue
25,000
Instructions:
Use the above information to prepare a multiple-step income statement for the year ended December 31,
2007.
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DFA 5058 Financial Accounting
Trimester 3 2009/2010
Question 5
Gordon Company gathered the following condensed data for the year ended December 31, 2006:
Cost of goods sold
Net sales
Administrative expenses
Interest expense
Dividend revenue
Loss from employee strike
Selling expenses
RM 742,000
1,350,000
239,000
58,000
38,000
223,000
45,000
Instructions:
Prepare a multiple-step income statement for the year ended December 31, 2006.
Question 6
The Sunrise Distributing Company completed the following merchandising transaction in the month of July:
July 2
4
Purchased merchandise on account from Brighton Supply Co. for RM5,100 CIF, terms n/30.
Sold merchandise on account for RM6,000 CIF, terms n/30. This merchandise had cost Sunrise
Distributing RM4,500.
5
Paid RM220 freight on July 4 sale.
6
Received credit from Brighton Supply Co. for merchandise returned, RM350.
14
Purchased merchandise for cash, RM4,300.
15
Received refund from supplier on cash purchase of July 14, RM300.
18
Purchased merchandise from Cameo Distributors for RM4,300, FOB Cameo's warehouse,
terms n/30.
19
Paid freight on July 18 purchase, RM120.
23
Sold merchandise for cash, RM5,900. The cost of this merchandise was RM4,425.
26
Purchased merchandise for cash, RM2,400.
27
Paid Brighton Supply Co. the amount due.
28
Received collections in full from customers billed on July 4.
29
Made refunds to cash customers for defective merchandise, RM100, the cost is RM80.
30
Sold merchandise on account for RM3,900 FOB Sunrise's warehouse, terms n/30. Sunrise's cost
for this merchandise was RM2,925.
Instructions:
Journalize the transactions, using the perpetual inventory system.
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DFA 5058 Financial Accounting
Trimester 3 2009/2010
Question 7:
(a) Darby sells RM50,000 of merchandise, terms 1/10, n/30. The merchandise cost RM30,000.
(b) The customer in (a) returned RM5,000 of merchandise to Darby. The merchandise returned cost
RM3,000.
(c) Darby received the balance due within the discount period.
Instruction:
Based on the above transactions, prepare the necessary journal entries to record the following transactions,
assuming Darby Company uses a perpetual inventory system.
Question 8:
The adjusted trial balance of Red Ribbons Company contained the following information:
Debit
Credit
Sales
RM 560,000
Sales Returns and Allowances
RM 20,000
Sales Discounts
7,000
Cost of Goods Sold
386,000
Freight-out
2,000
Advertising Expense
15,000
Interest Expense
18,000
Store Salaries Expense
55,000
Utilities Expense
28,000
Depreciation Expense
7,000
Interest Revenue
30,000
Instruction:
Use the above information to prepare a multiple-step income statement for the year ended
December 31, 2010.
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DFA 5058 Financial Accounting
Trimester 3 2009/2010
TUTORIAL 7: CONCEPTUAL FRAMEWORK OF ACCOUNTING
Short Answer Questions.
1.
What are the three primary objectives of financial reporting?
2.
Define each of the following qualitative characteristics:
Relevance
Predictive value
Feedback value
Timeliness
Reliability
Verifiability
Representational faithfulness
Neutrality
3.
Define “comparability” and “consistency” and explain the difference between these two concepts.
4.
Define “Revenues” & “Gains” and Why do accountants distinguish between “revenues” and “gains”?
5.
Define “Expenses” & “Losses” and Why do accounts distinguish between “expenses” and “losses”?
Multiple Choice Questions.
1. Determining periodic earnings and financial position depends on measuring economic resources and
obligations and changes in them as these changes occur. This explanation pertains to
A. Disclosure.
B. Accrual accounting.
C. Materiality.
D. The matching concept.
2. Revenue is generally recognized when the earning process is virtually complete and an exchange has
taken place. What principle is described herein?
A. Consistency.
B. Matching.
C. Realization.
D. Conservatism.
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3. According to the FASB conceptual framework, which of the following is an essential characteristic
of an asset?
A. The claims to an asset’s benefits are legally enforceable.
B. An asset is tangible.
C. An asset is obtained at a cost.
D. An asset provides future benefits.
4. In analyzing a company's financial statements, which financial statement would a potential investor
primarily use to assess the company's liquidity and financial flexibility?
A. Balance sheet.
B. Income statement.
C. Statement of retained earnings.
D. Statement of cash flows.
5. What is the purpose of information presented in notes to the financial statements?
A. To provide disclosures required by generally accepted accounting principles.
B. To correct improper presentation in the financial statements.
C. To provide recognition of amounts not included in the totals of the financial
statements.
D. To present management's responses to auditor comments.
6. According to the FASB conceptual framework, the objectives of financial reporting for business
enterprises are based on
A. Generally accepted accounting principles.
B. Reporting on management's stewardship.
C. The need for conservatism.
D. The needs of the users of the information.
7. According to the FASB conceptual framework, the usefulness of providing information in financial
statements is subject to the constraint of
A. Consistency.
B. Cost-benefit.
C. Reliability.
D. Representational faithfulness.
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DFA 5058 Financial Accounting
Trimester 3 2009/2010
TUTORIAL 8: INTERNAL CONTROL AND CASH
Question 1
Helen Company has the following internal control procedures over cash disbursements.
1. Company cheques are prenumbered.
2. The bank statement is reconciled monthly by an internal auditor.
3. Blank cheques are stored in a safe in the treasurer’s office.
4. Only the treasurer or assistant treasurer may sign the cheques.
5. Cheque signers are not allowed to record cash disbursement transactions.
Instruction:
Identify the internal control principle that is applicable to each procedure.
Question 2
Listed below are five procedures followed by the Hilton Company.
1. Several individuals operate the cash register using the same register drawer.
2. Monthly bank reconciliation is prepared by someone who has no other cash responsibilities.
3. Benny writes checks and also records cash payment journal entries.
4. One individual orders inventory, while a different individual authorized payments.
5. Unnumbered sales invoices from credit sales department are forwarded to the accounting department
every four weeks for recording.
Instructions :
Indicate whether each procedure is an example of good internal control or of weak internal control. For
every example, indicate which internal control principle is violated.
Use the table below.
Procedure
IC Good or weak?
Related internal control principle
1.
2.
3.
4.
5.
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DFA 5058 Financial Accounting
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Question3
Match the internal control principle below with the appropriate cash disbursements procedure described.
A. Establishment of responsibility
B. Segregation of duties
C. Documentation procedures
D. Physical, mechanical, and electronic controls
E. Independent internal verification
F. Other controls
_____ 1.
Compare checks to invoices.
_____ 2.
Different individuals approve and make payments.
_____ 3.
Print check amounts by machine with indelible ink.
_____ 4.
Only designated personnel are authorized to sign checks.
_____ 5.
Each check must have approved invoice.
_____ 6.
Stamp invoices PAID.
Question 4
The following is a summary of the petty cash transactions for a week:
Income
RM
Expenditure
Opening balance
500
Traveling expenses
Sale of stamps
10
Subsistence expenses
Sale of paper
50
RM
150
250
Instructions :
What sum should be reclaimed by the cashier at the end of the week?
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DFA 5058 Financial Accounting
Trimester 3 2009/2010
Question 5
Suppose on June 1, Sun Medicare, a manufacturing company, creates a petty cash fund with an imprest
balance of RM300. During June, Lisa, fund custodian, signs the following petty cash tickets :
Petty cash Ticket Item
Number
1
Postage for package received
2
Decorations and refreshments for office party
3
Two boxes of stationery
4
Printer cartridges
5
Dinner money for sales manager entertaining a
customer
Amount
RM 18
13
20
27
50
On June 30, prior to replenishment, the fund contains these tickets plus cash RM170. The accounts affected
by petty cash payments are office supplies expense, entertainment expense and postage expense.
Instructions :
1. Make journal entries to (a) create the fund and (b) replenish it.
2. Make the entry on July 1 to increase the fund balance to RM400. Include the explanation.
Question 6
The petty cash fund of RM200 for Walsh Company appeared as follows on December 31, 2005:
Cash
Petty cash vouchers
Freight in
Postage
Balloons for a special occasion
Meals
RM95.60
RM19.40
40.00
18.00
25.00
Instructions:
1. Briefly describe when the petty cash fund should be replenished. Because there is cash on hand, is there
a need to replenish the fund at year end on December 31? Explain.
2. Prepare in general journal form the entry to replenish the fund.
3. On December 31, the office manager gives instructions to increase the petty cash fund by RM100. Make
the appropriate journal entry.
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DFA 5058 Financial Accounting
Trimester 3 2009/2010
Question 7
The following information pertains to I-10 Shoes Store.
1. Cash balance per bank, April 30, RM7,263.
2. April bank service charge not recorded by the depositor RM28.
3. Cash balance per books, April 30, RM7,284.
4. Deposits in transit, April 30, RM1,500.
5. Bank collected RM900 note for I-10 Shoes Store , plus interest RM36, less fee RM20. The
collection has not been recorded by I-10 Shoes Store, and no interest has been accrued.
6. Outstanding checks, April 30, RM591.
Instructions :
(a) Prepare a bank reconciliation at April 30.
(b) Journalize the adjusting entries at April 30 on the books of I-10 Shoes Store.
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DFA 5058 Financial Accounting
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Question 8
Instruction:
Prepare Bryant's bank reconciliation at November 30, 20X6.
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DFA 5058 Financial Accounting
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Question 9
The cash data of Alta Vista Toyota for June 20X4 follow:
(Continue…….)
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Multimedia University (Melaka Campus)
45
DFA 5058 Financial Accounting
Trimester 3 2009/2010
Alta Vista received the following bank statement on June 30, 20X4:
Additional data for the bank reconciliation include the following:
a. The EFT deposit was a receipt of monthly rent. The EFT debit was a monthly insurance
payment.
b. The unauthorized signature check was received from a customer
c. The correct amount of check number 3115, a payment on account, is $1,390. (Alta
Vista’s accountant mistakenly recorded the check for $1,930.)
Instructions:
1. Prepare the Alta Vista Toyota bank reconciliation at June 30, 20X4.
2. Describe how a bank account and the bank reconciliation help the general manager control
Alta Vista’s cash.
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DFA 5058 Financial Accounting
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Question 10
Instructions:
1
2
TM
Prepare the bank reconciliation for Varian Engineering Associates.
Journalize the May 31 transactions needed to update Varian’s Cash account.
explanation for each entry.
Multimedia University (Melaka Campus)
Include an
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DFA 5058 Financial Accounting
Trimester 3 2009/2010
Question 11
The cash data of Navajo Products for September 20X5 follow:
(Continue………….)
TM
Multimedia University (Melaka Campus)
48
DFA 5058 Financial Accounting
Trimester 3 2009/2010
On September 30, 20X5, Navajo received this bank statement:
Additional data for the bank reconciliation:
The EFT deposit was for monthly rent revenue. The EFT deduction was for monthly
a.
insurance expense.
The NSF check was received from a customer.
b.
The correct amount of check number 1419, a payment on account, is $4,216. (The Navajo
accountant mistakenly recorded the check for $4,126.)
1.
2.
TM
Instruction:
Prepare the bank reconciliation of Navajo Products at September 30, 20X5.
Describe how a bank account and the bank reconciliation help managers control a firm’s
cash.
Multimedia University (Melaka Campus)
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DFA 5058 Financial Accounting
Trimester 3 2009/2010
Question 12
Instructions
1.
2.
TM
Prepare the bank reconciliation for Bed & Bath Accessories at January 31.
Journalize the transactions needed to update the Cash account. Include an explanation
for each entry.
Multimedia University (Melaka Campus)
50
DFA 5058 Financial Accounting
Trimester 3 2009/2010
Question 13
On October 1, 2010, Kyle XYZ Company establishes an imprest petty cash fund by issuing a check for
RM200 to Winnie, the custodian of the petty cash fund. On October 31, 2010, Winnie submitted the
following paid petty cash receipts for replenishment of the petty cash fund when there is RM55 cash in the
fund:
Freight-in
RM27
Office Supplies Expense
35
Entertainment of Clients
60
Postage Expense
20
Instructions
Prepare the journal entries required to establish the petty cash fund on October 1 and the replenishment of
the fund on October 31, 2010.
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DFA 5058 Financial Accounting
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TUTORIAL 9: FINANCIAL STATEMENT ANALYSIS
Question 1:
Necco Company
Balance Sheet
As at December 31
Assets
Current assets
Equipment
Total assets
Liabilities
Current liabilities
Long-term liabilities
Total liabilities
Stockholders’ equity
Common stock $ 1 par
Retained earnings
Total liabilities and stockholders’ equity
2007
2006
$ 130,000
300,000
$ 430,000
$ 105,000
250,000
$ 355,000
80,000
150,000
230,000
59,000
105,000
164,000
100,000
100,000
200,000
80,000
111,000
191,000
$ 430,000
$ 355,000
Instructions.
(a) Prepare a schedule showing a horizontal analysis for 2007 using 2006 as the base year.
(b) Prepare a schedule showing a vertical analysis for both years.
TM
Multimedia University (Melaka Campus)
52
DFA 5058 Financial Accounting
Trimester 3 2009/2010
Question 2:
Data for Simba Corporation for the year ended December 31, is presented below.
Simba Corporation
Condensed Income Statement
For the year ended December 31
2006
2005
Amount
Amount
$ 750,000
$ 600,000
Cost of goods sold
450,000
390,000
Gross profit
300,000
210,000
Selling expenses
125,000
75,000
Administration expenses
76,000
54,000
Total operating expenses
201,000
129,000
Income before income taxes
99,000
81,000
Income tax expenses
30,000
20,000
Net income
69,000
61,000
Sales
Instructions:
(a) Prepare a schedule showing a horizontal analysis for 2006 using 2005 as the base year.
(b) Prepare a schedule showing a vertical analysis for both years.
TM
Multimedia University (Melaka Campus)
53
DFA 5058 Financial Accounting
Trimester 3 2009/2010
Question 3:
The comparative income statements for Gardenia Corporation are shown below.
Gardenia Corporation
Comparative Income Statement
For the year Ended December 31
2007
Net sales
$ 500,000
Cost of goods sold
350,000
Gross profit
150,000
Operating expenses
68,300
Net income
81,700
2006
$ 400,000
320,000
80,000
35,000
45,000
Instructions:
a) Prepare a horizontal analysis of the income statement data for Gardenia Corporation using 2006 as a base.
Show the amounts of increase or decrease.
b) Prepare a vertical analysis of the income statement data for Gardenia Corporation in columnar form for
both years.
TM
Multimedia University (Melaka Campus)
54
DFA 5058 Financial Accounting
Trimester 3 2009/2010
Question 4:
The comparative balance sheet of TravelMate Company appears below:
TRAVELMATE COMPANY
Comparative Balance Sheet
December 31,
————————————————————————————————————
Assets
2011
Current assets .......................................................................................... RM 360
Plant assets ..............................................................................................
2010
RM300
640
500
Total assets .............................................................................................. RM1,000
RM800
Liabilities and stockholders' equity
Current liabilities .................................................................................... RM 150
RM120
Long-term debt ........................................................................................
240
160
Common stock ........................................................................................
350
280
Retained earnings ....................................................................................
260
240
Total liabilities and stockholders' equity .......................................... RM1,000
RM800
Instructions:
(a)
Using horizontal analysis, show the percentage change for each balance sheet item using
2010 as base year.
(b)
TM
Using vertical analysis, prepare a common size comparative balance sheet.
Multimedia University (Melaka Campus)
55
DFA 5058 Financial Accounting
Trimester 3 2009/2010
Question 5:
The comparative condensed balance sheets of CACTUS Corporation are presented below.
Cactus Corporation
Comparative Condensed Balance Sheets
December 31
2011
2010
Assets
Current assets
RM 72,000
RM 80,000
Property, plant and equipment (net)
94,500
90,000
Intangibles
33,500
40,000
RM200,000
RM210,000
RM 40,800
RM 48,000
Long-term liabilities
141,000
150,000
Stockholders' equity
18,200
12,000
RM200,000
RM210,000
Total assets
Liabilities and stockholders' equity
Current liabilities
Total liabilities and stockholders' equity
Instructions
(a) Prepare a horizontal analysis of the balance sheet data for CACTUS Corporation using 2010 as a base.
(b) Prepare a vertical analysis of the balance sheet data for CACTUS Corporation in columnar form for
2011.
TM
Multimedia University (Melaka Campus)
56