E 3-4 The Capital , Withdrawals and Income Summary accounts for Bilir’s Hair Dressing are
shown in T-account form below. The closing entries have been recorded for the year ended 31
December 2007.
Mr. Bilir, Capital
31.Dec.07 5.625
16.250
11.875
22.500
Income Summary
31.Dec.07 26.875
38.750
31.Dec.07 11.875
Balance
-
Mr. Bilir, Withdrawals
03.Mar.07 1.875
5.625
03.May.07 1.875
04.June.07 1.875
Balance
-
31.Dec.06
31.Dec.07
Balance
31.Dec.07
31.Dec.07
a. Determine the total revenues for the year.
b. Determine the total expenses for the year.
c. Determine the amount of withdrawals.
d. Determine the net income/(loss) for the company.
38.750
26.875
5.625
11.875
E 3-5 Prepare the journal entries for the following adjustments at 30 June.
a. Employee salaries owed for Monday thru Wednesday of a five day work week,
weekly payroll is TL 7.500
b. Unearned service revenue earned, TL 1.300
c. Depreciation expense for the building, TL 750.
d. Expired prepaid insurance, TL 450.
e. Accrued interest income, TL 5.600
a.
Date
30 June
Account
Salary Expense
Salaries Payable
b.
30 June
Unearned Revenues
Revenues
c.
30 June
Depreciation Expense
Accumulated Depreciation
Debit Credit
4.500
4.500
1.300
1.300
750
750
d.
e.
30 June
30 June
Insurance Expense
Prepaid Insurance
450
Interest Receivable
Interest Revenue
5.600
450
5.600
E 3-6 Prepare the adjusting journal entries needed at 31 December for each of the following
independent cases.
a. Unearned rent revenue of TL 4.500 represents one year rent revenue collected in
advance from the tenant on 1 August.
b. The company had notes payable for a bank. The interest expense accrued for the
note payable on 31 December is TL 6.000
c. Revenue earned but not billed to customers is TL 7.750.
d. Monthly salary expense is TL 45.000 and the company pays salaries on the 15th
day of each month.
e. The unadjusted balance of supplies account is TL 950. The count of supplies on 31
December revealed TL 250 of supplies on hand.
f. Building was purchased last year at a cost of TL 150.000. The building’s useful
life is estimated to be 40 years.
g. On 1 May the company paid TL 3.600 for the insurance of company premises for
12 months period.
a.
Date
31 December
Account
Unearned Revenues
Revenues
b.
31 December
Interest Expense
Interest Payable
6.000
Fees Receivable
Revenues
7.750
c.
d.
e.
f.
g.
31 December
31 December
31 December
31 December
31 December
Debit Credit
1.875
1.875
6.000
7.750
Salaries Expense
Salaries Payable
22.500
Supplies Expense
Supplies
700
Depreciation Expense
Accumulated Depreciation
22.500
700
3.750
3.750
Insurance Expense
2.400
Prepaid Insurance
2.400
E3-9 Below is a list of accruals that would affect the net income statement, balance sheet
items, and cash flow of the period. State the effect of each item on the net income of 2006, the
balance sheet items at the end of 2006, and the cash flow of 2006. In all cases, assume that the
fiscal year is the same as the calendar year.
a. YAA Company rents its construction machinery for TL 20.000 per month, plus
insurance. On October 1, 2006, the company paid annual insurance of TL 6.000 in a
single payment. Related to the Insurance:
Prepaid insurance (balance sheet) increase 4.500 TL
Cash (balance sheet) (cash flows) decrease 6.000 TL
Insurance expense (amount corresponding to October till December) increase 1.500
b. UCM Company purchased a computer network service for TL 6.000 on 15 February
2006. The company depreciates similar assets at a rate of 20% of the cost per annum,
beginning the month following the purchase.
Office equipment (balance sheet) increase 6.000
Accumulated depreciation (balance sheet) increase 1.100
Depreciation expense increase (income decrease) 1.100
Cash decrease 6.000
c. CSM Company borrowed TL 100.000 from NHA Bank for six months on 1 November
2006, at an interest rate of 24%. The interest and the principal will be paid together at
the end of the life of the note.
i.
State the effects on CSM Company’s accounts.
Cash increase (balance sheet) 100.000
Bank loans (balance sheet) 100.000
Interest expense (income statement) increase 4.000
Interest payable (balance sheet) increase 4.000
ii.
State the effects on NHA Bank’s accounts.
Cash decrease (balance sheet) 100.000
Receivables (balance sheet) increase 100.000
Interest income (income statement) increase 4.000
Interest receivable (balance sheet) increase 4.000
d. AYN Company paid RAND Company TL 12.000 for the decoration of their new
offices at the end of November 2006. RAND Company started the job in December
2006 and completed almost 25% by the end of 2006.
i.
State the effects on RAND Company’s accounts.
Cash increase 12.000
Liabilities (balance sheet) increase 9.000
Revenues (income statement) 3.000
ii.
State the effects on AYN Company’s accounts.
Cash decrease 12.000
Property plant and equipment (balance sheet) increase 3.000
Advances given (balance sheet-assets) increase 9.000
e. An inexperienced accountant at BHB Company recorded the purchase of a company
car (in August 2006 for TL 35.000) as an automobile rental expense and as a
deduction from cash. The Company expects to use the car for 5 years with no salvage.
Rent expense is overstated by 35.000
Depreciation expense is understated by 2.917
Property plant and equipment is understated by (32.083)
E3-11 The accountant of BAY Company made a number of errors in journalizing and posting
transactions, as described below. Prepare the journal entries to correct the errors. Each error is
independent.
a. Rent of TL 300, paid for the current month, was recorded as a debit to Prepaid
insurance and a credit to Cash.
Rent Expense
300
Prepaid Rent
300
b. Equipment of TL 1.500, purchased on account, was recorded as a debit to Buildings
and a credit to Cash.
c.
Equipment
1.500
Buildings
1.500
d. Payment of TL 400 cash to M. Kuzey, the owner, for personal use was recorded as a
debit to Salary Expense and a credit to Cash.
Withdrawals
Salary Expense
400
400
e. Cash of TL 160, received from a customer on account, was recorded as a TL 610 debit
to Cash and credit to Accounts Receivable.
No error
f. A TL 30 cash payment for utilities expense was recorded as a debit to Supplies and a
credit to Cash.
Utility expenses
Supplies
30
30
P 3-1
a. Prepare the adjusting entries
1 Office Supplies Expense
Office Supplies
2 Rent Expense
Prepaid Rent
3 Depreciation Expense
Accumulated Depreciation
4 Accounts (Fees) Receivable
Fees Revenue
5 Interest Expense
Interest Payable
6 Unearned Fees
Fees Revenue
7 Salaries Expense
Salaries Payable
9.592
9.592
1.760
1.760
2.640
2.640
8.800
8.800
2.200
2.200
7.216
7.216
1.320
b. Post the adjusting entries to T-accounts
Office Supplies
Beg.Bal
10.648
9.592
End.Bal
1.056
1
End.Bal
Beg Bal
2
End.Bal
1.320
1
Office Supplies Expense
9.592
9.592
Rent Expense
17.600
1.760
19.360
Prepaid Rent
Beg.Bal
End.Bal
5.280
3.520
1.760
2
Depreciation Expense
3
2.640
End.Bal
2.640
Accumulated Depreciation
6.160 Beg. Bal
2.640
3
ash
8.800 End.Bal
Accounts Receivable
Beg.Bal
33.000
4
8.800
End.Bal
41.800
Fees Revenue
290.400 Beg. Bal
8.800
4
7.216
6
306.416 End.Bal
Interest Expense
5
2.200
End.Bal
2.200
Interest Payable
5
2.200
2.200 End.Bal
Unearned Fees
6
7216
11.880 Beg. Bal
4.664 End.Bal
Salaries Expense
Beg.Bal
197.600
7
1.320
End.Bal
198.920
Salaries Payable
5
1.320
1.320 End.Bal
c. Prepare the adjusted trial balance, the income statement and the balance sheet
Sound Advice Company
Adjusted Trial Balance
31.Dec.07
(in TL)
66.000
ccounts Receivable
ffice Supplies
repaid Rent
ffice Equipment
ccumulated Depreciation
ccounts Payable
otes Payable
nearned Fees
nterest Payable
alaries Payable
Mr. Advice, Capital
Mr. Advice, Withdrawals
ees Revenues
alaries Expense
ent Expense
ransportation Expense
ffice Supplies Expense
epreciation Expense
nterest Expense
41.800
1.056
3.520
36.960
8.800
23.760
44.000
4.664
2.200
1.320
96.008
88.000
306.416
198.920
19.360
17.120
9.592
2.640
2.200
Total
487.168
Sound Advice Company
Income Statement
For the year 2007
(in TL)
Fees Revenue
Expenses:
Salaries Expense
Rent Expense
Transportation
487.168
306.416
198.920
19.360
Expense
17.120
Office Supplies
Expense
9.592
Depreciation
Expense
Interest Expense
Net Income
Sound Advice Company
Balance Sheet
31.Dec.07
(in TL )
2.640
2.200
249.832
56.584
Assets
Cash
Accounts Receivable
Office Supplies
Prepaid Rent
Office Equipment
Accumulated Depreciation
Total Assets
66.000
41.800
1.056
3.520
36.960
-8.800
Liabilities and Owners' Equity
Accounts Payable
Notes Payable
Unearned Fees
Interest Payable
Salaries Payable
Mr. Advice, Capital
Total Liabilities and Owners' Equity
28.160
140.536
23.760
44.000
4.664
2.200
1.320
64.592
140.536
P3-5
GNN A.S.
Income Statement
Four Months Ended 30 April 2007
Service Revenue
139,932
Expenses
Salaries Expense
Supplies Expense
Advertising Expense
Utilities Expense
Repairs Expense
Miscellaneous Expense
Depreciation Expense-Equipment
Depreciation Expense-Building
Insurance Expense
Total Expenses
55,475
2,930
5,640
5,150
3,637
3,345
3,600
900
340
81,017
Net Income Before Tax
58,915
GNN A.S.
Income Statement
For the Month Ended 30 April 2007
Service Revenue
34,792
Expenses
Salaries Expense
Supplies Expense
Advertising Expense
Utilities Expense
Repairs Expense
Miscellaneous Expense
Depreciation Expense-Equipment
Depreciation Expense-Building
Insurance Expense
Total Expenses
11,835
410
1,410
1,020
772
1,120
900
225
85
17,777
Net Income Before Tax
17,015
GNN A.S.
Balance Sheet
30-Apr-07
Cash
4,620
Supplies
910
Prepaid Insurance
900
Equipment
130,700
Acc.Depr. - Equipment
-27,300
Building
75,950
Acc.Depr.- Building
-10,025
Land
12,000
Total Assets
187,755
Accounts Payable
Salaries Payable
Common Stock
Retained Earnings
2,300
215
100,000
85,240
187,755