Discussion Problems
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Transcript of Discussion Problems
FAA 2015.1 Discussion problems_ week 4
FAA 2015.1 Discussion problems_ week 4
Exercise 3.10Recording transactions in general journal and general ledger
Dec.2Michael Macchiato invested $2 650 000 into the business of Macchiatos Coffee Roasters by purchasing a fully equipped coffee roasting business. The business acquired consisted of the following assets and liabilities:
Land$1 200000Building1 000000Coffee roasting equipment420000Office equipment60 000Accounts payable30000
56121418
23
30Purchased some new roasting equipment on credit for $160000.Collected cash from customers for the month, $220000.Paid the accounts payable owing on 2 December when Michael purchased the business.Purchased an insurance policy for the year for $6000 cash.Purchased television advertising for the Christmas New Year period for $8000 to be paid for in 30 days.Collected fees in cash from customers for the Christmas New Year period, amounting to $46000.Michael withdrew $8000 cash in order to pay for private Christmas presents and parties.
RequiredA. Prepare general journal entries for each of the above transactions and events.B. Post the entries to ledger T accounts and balance the accounts as at 31 December 2016.
A.MACCHIATOS COFFEE ROASTERS (ignore GST)
Dec.2Land1200000
Building1000000
Coffee Roasting Equipment420000
Office Equipment60000
Accounts Payable30000
Michael Macchiato, Capital2650000
Assets and liabilities contributed by the owner
5Coffee Roasting Equipment160000
Accounts Payable160000
Purchase of roasting equipment on credit
6Cash at Bank220000
Coffee Sales220000
Cash received for coffee sales for December.
12Accounts Payable30000
Cash at Bank30000
Cash paid for creditor for roasting equipment.
14Prepaid Insurance6000
Cash at Bank6000
Cash paid in advance for insurance policy.
18Advertising Expense*8000
Accounts Payable8000
Advertising costs over the holiday period
23Cash at Bank46000
Coffee Sales 46000
Coffee sales received for the holiday period.
30Michael Macchiato, Drawings8000
Cash at Bank8000
Cash withdrawn by owner
* Alternatively, debit Prepaid Advertising (asset), as not all of the expense applies to the month of December.
B.Cash at Bank
Dec6Coffee Sales220000Dec12Accounts Payable30000
23Coffee Sales4600014Prepaid Insurance6000
30Michael Macchiato, Drawings8000
31Balance c/d222000
266000266000
31Balance c/d222000
Land
Dec2Macchiato, Capital1200000
Building
Dec2Macchiato, Capital1000000
Coffee Roasting Equipment
Dec2Macchiato, Capital420000
5Accounts Payable160000Dec31Balance c/d580000
580000580000
31Balance b/d580000
Office Equipment
Dec1Michael Macchiato, Capital60000
Prepaid Insurance
Dec14Cash at Bank6000
Accounts Payable
Dec12Cash at Bank30000Dec2Macchiato, Capital30000
31Balance c/d1680005Coffee Roasting Equipment160000
18Advertising Expense8000
198000198000
Dec31Balance b/d168000
Michael Macchiato, Capital
Dec2Various Assets and Accs payable 2650000
Michael Macchiato, Drawings
Dec30Cash at Bank8000
Coffee Sales
Dec6Cash at Bank220000
Dec31Balance c/d26600023 Cash at Bank46000
266000266000
31Balance b/d266000
Advertising Expense
Dec18Cash at Bank8000
Exercise 3.12Identifying and explaining errors
When processing the accounts for Ellises Electrical Contractors, the following errors were made:
(a)Electrical equipment purchased for $7800 cash was debited to Equipment and credited to Accounts Payable for an incorrect amount of $8700.(b) Collection of an account receivable for $4500 was recorded by a debit to Cash at Bank and a debit to the equity account of the owner.(c)A cheque for $6000 issued to pay for an account payable was recorded as a debit to Accounts Payable and a credit to Accounts Receivable for $6000.(d)A $2100 payment for assorted electrical tools was recorded as a debit to Equipment and a credit to Cash at Bank for $210.(e)Cash of $2000 withdrawn by the owner from the business was debited to Salaries Expense and credited to Cash at Bank.
RequiredA. Identify which of the above errors would cause unequal totals in a trial balance prepared at the end of the period.B. Write a brief explanation for each error to indicate how it could be fixed in the accounting records.
A.(a)The trial balance will still balance in spite of this error as there is an equal debit and credit for $8700, even though the credit to the Accounts Payable account was incorrect. The correct entry should have been to debit Office Equipment and credit Cash at Bank for the amount of $8700.(b)There should have been a credit to Accounts Receivable instead of a debit to the Capital account. This will cause an unequal total in the trial balance because two debit entries were recorded in error, and no credit.(c)The trial balance will still balance in spite of this error as there is an equal debit and credit for $6000, even though the wrong account was credited.(d)The trial balance will still balance in spite of this error, as the debit and credit were both equal to $210.(e)The trial balance will still balance in spite of this error as there is an equal debit and credit for $2000, even though the wrong account was debited.
B.(a)To fix this error, the following journal entry is needed:
Accounts Payable8700
Electrical Equipment900
Cash at Bank7800
Correcting errors made in certain asset and liability accounts
This entry will bring the balance in the Office Equipment account to its correct amount of $7800, as $900 is deducted from the amount already recorded. $8700 is reversed out of the Accounts Payable account and the correct amount of $7800 is then credited to Cash at Bank.
(b)In order to fix this error, the error in the Capital account will need to be eliminated by crossing out the amount of $4500 from the account; and the debit in the Accounts Receivable account for $4500 will need to be crossed out and then the amount will need to be credited to the account.(c)To fix this error, the entity needs to record another journal entry to debit Accounts Receivable and to credit Cash at Bank for $6000.(d)To fix this error, there will need to be an additional journal entry to debit the Equipment account and credit the Cash at Bank account for $1890.(e)To fix this error, the entity needs to record another journal entry to debit the Drawings account and to credit Salaries Expense for $2000.
Problem 3.2Journal entries, posting to ledger and trial balance
On 1 July 2015 Nicole Andreou opened a beauty parlour. The following transactions occurred during the first month of operations (ignore GST):
July2
23
4616
2023Andreou invested $120000 in the business by depositing cash into a business cheque account with the Eastpac Bank.Paid $1800 for the first months rent.Purchased equipment by an online bank transfer for $32 000 and signing a commercial loan agreement for $38 000.Purchased supplies for $8400.Paid advertising expense of $890.Recorded beauty services revenue for the first half of the month of $3250 in cash and $620 on credit.Paid insurance expense for July of $480 using an online bank transfer.Received a $140 payment from customers who paid on credit in the first half of the month.
283131Andreou withdrew $560 cash for personal living expenses.Recorded revenue for the second half of the month of $3680 in cash and $580 on credit.Paid telephone account of $330 by electronic transfer.
Use the following account titles and numbers: Cash at Bank, 100; Accounts Receivable, 101; Supplies, 102; Equipment, 103; Loan Payable, 200; Nicole Andreou, Capital, 300; Nicole Andreou, Drawings, 301; Revenue, 400; Rent Expense, 500; Advertising Expense, 501; Insurance Expense, 502; Telephone Expense, 503.
RequiredA.Prepare the general journal entries to record the transactions.B.Post the entries from the general journal to the general ledger accounts (running balance format) and enter the posting references in the general journal.C.Prepare a trial balance as at 31 July 2015.
A.General Journal
July2Cash at Bank100120000
Nicole Andreou, Capital300120000
Cash invested by owner.
2Rent Expense5001800
Cash at Bank1001800
Rent paid.
3Equipment10370000
Cash at Bank10032000
Loan Payable20038000
Equipment purchased for cash and loan payable.
4Supplies1028400
Cash at Bank1008400
Supplies purchased.
6Advertising Expense501890
Cash at Bank100890
Cash paid for advertising.
16Cash at Bank1003250
Accounts Receivable101620
Revenue4003870
Revenue for first half of month
20Insurance Expense502480
Cash at Bank100480
Cash paid for insurance
23Cash at Bank100140
Accounts Receivable101140
Receipt of payment from customers
28Nicole Andreou, Drawings301560
Cash at Bank100560
Drawings by owner
31Cash at Bank1003680
Accounts Receivable101580
Revenue4004260
Revenue for second part of month
31Telephone Expense503330
Cash at Bank100330
Telephone expenses paid
B.ACCOUNT: Cash at BankAccount No. 100
DateExplanationPost RefDebitCreditBalance
2015
27Nicole Andreou, Capital120000120000
27Rent Expense1800118200
37Equipment3200086200
47Supplies840077800
67Advertising Expense89076910
167Revenue325080160
207Insurance Expense48079680
237Accounts Receivable14079820
287Nicole Andreou, Drawings56079260
317Revenue368082940
317Telephone Expense33082610
ACCOUNT: Accounts ReceivableAccount No. 101
DateExplanationPost RefDebitCreditBalance
2015
167Revenue620620
237Cash at Bank140480
317Revenue5801060
ACCOUNT: SuppliesAccount No. 102
DateExplanationPost RefDebitCreditBalance
2015
47Cash at Bank84008400
ACCOUNT: EquipmentAccount No. 103
DateExplanationPost RefDebitCreditBalance
2015
37Cash and Loan Payable7000070000
ACCOUNT: Loan PayableAccount No. 200
DateExplanationPost RefDebitCreditBalance
2015
37Equipment3800038000
ACCOUNT: Nicole Andreou, CapitalAccount No. 300
DateExplanationPost RefDebitCreditBalance
2015
27Cash at Bank120000120000
ACCOUNT: Nicole Andreou, DrawingsAccount No. 301
DateExplanationPost RefDebitCreditBalance
2015
287Cash at Bank560560
ACCOUNT: RevenueAccount No. 400
DateExplanationPost RefDebitCreditBalance
2015
167Cash and Accounts Receivable38703870
317Cash and Accounts Receivable42608130
ACCOUNT: Rent ExpenseAccount No. 500
DateExplanationPost RefDebitCreditBalance
2015
27Cash at Bank1 8001 800
ACCOUNT: Advertising ExpenseAccount No. 501
DateExplanationPost RefDebitCreditBalance
2015
67Cash at Bank890890
ACCOUNT: Insurance ExpenseAccount No. 502
DateExplanationPost RefDebitCreditBalance
2015
207Cash at Bank480480
ACCOUNT: Telephone ExpenseAccount No. 503
DateExplanationPost RefDebitCreditBalance
2015
317Cash at Bank330330
Problem 3.5Journal entries, entering beginning account balances,
posting to T accounts, and trial balance
The 31 May 2017 trial balance of Amy Wait, Physiotherapist, is shown below. Ignore GST.
AMY WAIT, PHYSIOTHERAPISTTrial Balanceas at 31 May 2017
AccountDebitCredit
Cash at bankAccounts receivableSuppliesPrepaid insuranceFurniture and equipmentAccounts payableElectricity account payableUnearned revenueA. Wait, CapitalA. Wait, DrawingsServices revenueSalary expenseElectricity expenseRent expense$105 00048 00012 3008 200260 600
161 200
170 3009 460 24 000
$
9 7009 5002 900314 960
462000
$799 060$799 060
The following transactions were completed during June:June136101420232426272930Purchased supplies on credit for $5800.Received $24 400 from patients as payment on account.Paid the electricity expense of $9500, previously recorded.Performed services for $2000 that was recorded previously as unearned revenue.Recorded revenue of $178 600 in cash and $13 650 on credit.Paid salaries of $65 880.Purchased furniture for $15 400 and paid by electronic transfer.Withdrew $60000 from the business for personal use.Paid creditors $7000.Purchased insurance policy for $24 000 to cover business assets.Received $12000 from patients as payment on account.Recorded revenue of $124600 in cash and $25000 on credit.Paid rent of $24000.
RequiredA.Prepare journal entries to record each transaction.B.1.Open T accounts for the accounts shown in the trial balance.2.Enter the 31 May balance in each account.3.Post the journal entries to the T accounts.C.Prepare a trial balance as at 30 June 2017.
A.General Journal(GST ignored)
June1Supplies5800
Accounts Payable5800
Purchase of supplies on credit.
3Cash at Bank24400
Accounts Receivable24400
Cash received from patients.
6Electricity Account Payable9500
Cash at Bank9500
Payment of electricity account.
10Unearned Revenue2000
Services Revenue2000
Revenue previously received.
14Cash at Bank178600
Accounts Receivable13650
Services Revenue192250
Revenue received and receivable.
20Salary Expense65880
Cash at Bank65880
Salaries paid.
23Furniture and Equipment15400
Cash at Bank15400
Furniture purchased for cash.
24A. Wait, Drawings60000
Cash at Bank60000
Drawings by owner.
26Accounts Payable7000
Cash at Bank7000
Payment to creditors.
27Prepaid Insurance24000
Cash at Bank24000
Purchase of insurance policy.
29Cash at Bank12000
Accounts Receivable12000
Payment received from debtors.
30Cash at Bank124600
Accounts Receivable25000
Services Revenue149600
Revenue received and on account.
30Rent Expense24 000
Cash at Bank24 000
Payment of rent.
B.Cash at Bank
31/5Balance b/d1050006/6Electricity Account Payable9500
3/6Accounts Receivable2440020/6Salary Expense65880
14/6Services Revenue17860023/6Furniture & Equipment15400
29/6Accounts Receivable1200024/6A. Wait, Drawings 60000
30/6Services Revenue12460026/6Accounts Payable 7000
27/6Prepaid Insurance24000
30/6Rent Expense24 000
30/6Balance c/d238820
$444600$444600
30/6Balance b/d238820
Accounts Receivable
31/5Balance b/d$480003/6Cash at Bank24400
14/6Services Revenue1365029/6Cash at Bank12000
30/6Services Revenue2500030/6Balance c/d50250
$86650$86650
30/6Balance b/d50250
Supplies
31/5Balance b/d12300
1/6Accounts Payable5800Balance c/d18100
1810018100
30/6Balance b/d18100
Prepaid Insurance
31/5Balance b/d$8200
26/6Cash at Bank2400030/6Balance c/d32200
3220032200
30/6Balance b/d32200
Furniture and Equipment
31/5Balance b/d$260600
23/6Cash at Bank1540030/6Balance c/d276000
276000276000
30/6Balance b/d276000
Accounts Payable
31/5Balance b/d9700
26/6Cash at Bank70001/6Supplies5800
30/6Balance c/d8500
1550015500
30/6Balance b/d8500
Electricity Account Payable
6/6Cash at Bank950031/5Balance b/d9500
Unearned Revenue
10/6Services Revenue200031/5Balance b/d2900
30/6Balance c/d900
29002900
30/6Balance b/d900
A. Wait, Capital
31/5Balance b/d314960
A. Wait, Drawings
31/5Balance b/d161200
24/6Cash at Bank6000030/6Balance c/d221200
221200221200
30/6Balance b/d221200
Services Revenue
31/5Balance b/d462000
10/6Unearned Revenue2000
14/6Cash at Bank/AR192250
30/6Balance c/d80585030/6Cash at Bank/AR149600
805850805850
30/6Balance b/d805850
Salary Expense
31/5Balance b/d170300
20/6Cash at Bank6588030/6Balance c/d236180
236180236180
30/6Balance b/d236180
Electricity Expense
31/5Balance b/d9460
Rent Expense
31/5Balance b/d24000
30/6Cash at Bank2400030/6Balance c/d48000
4800048000
30/6Balance b/d48000
C.AMY WAIT, PHYSIOTHERAPISTTrial Balanceas at 30 June 2017
DebitCredit
Cash at Bank$238820
Accounts Receivable50250
Supplies18100
Prepaid Insurance32200
Furniture and Equipment276000
Accounts Payable$8500
Unearned Revenue900
A. Wait, Capital314960
A. Wait, Drawings221200
Services Revenue805850
Salary Expense236180
Electricity Expense9460
Rent Expense48000
$1130210$1130210
Problem 3.7Preparation of running balance ledger accounts and trial
balance
On 1 March 2014, James Taylor decided to open Taylors Tailormade that makes suits, trousers and jackets and repairs and alters clothes. He contributed for this purpose sewing equipment $46000 and a commercial van $48 000, and deposited $10000 cash in a business bank account. Transactions during March were as follows (ignore GST):
March44
6
7
8
11121314151617182123242528
31Took a 3-year lease on a shop and paid first months rent $1200.Purchased haberdashery supplies for $4200, and paid with an electronic transfer of $1200 and paid for the rest with credit.Cash received for minor clothing repairs, $120.Revenue earned for tailor making a two piece suit for Andrea Fraser on credit, $840.Purchased a sewing machine, $3800, paying $800 cash and taking out a loan for the balance.Cash revenue earned, $1260.Engaged a sewer at an agreed wage of $1100 per week.Paid petrol $120, postage $20, and electricity bill $760.Cash of $200 received for over-the-counter repairs.Revenue of $1500 earned from a customer on credit.Paid for haberdashery supplies purchased on credit on 4 March.Withdrew $600 for own use.Cash revenue received, $380.Haberdashery supplies purchased for $500 on credit.Paid wages to employee.Revenue earned for making clothes: cash $240; on account $1200.Andrea Fraser paid the bill for services rendered on 6 March.Petrol expenses paid $80.Paid weekly wages to employee.Revenue earned for clothes $2420, receiving $200 in cash and the remainder on credit.Haberdashery supplies used, $620.
RequiredA. Prepare three-column running balance ledger accounts. Give each account a suitable account number.B. Prepare a trial balance as at 31 March 2016.
A.ACCOUNT: Cash at BankAccount No. 100
DateExplanationPost RefDebitCreditBalance
2016
13James Taylor, Capital1000010000
43Rent Expense12008800
43Haberdashery Supplies12007600
63Tailoring Revenue1207720
73Sewing Equipment8006920
83Tailoring Revenue12608180
123Petrol, postage & electricity9007280
133Tailoring Revenue2007480
143Accounts Payable30004480
153James Taylor, Drawings6003880
163Tailoring Revenue3804260
18 3Wages Expense11003160
213Tailoring Revenue2403400
233Accounts Receivable8404240
243Fuel Expense804160
253Wages Expense11003060
283Tailoring Revenue2003260
ACCOUNT: Haberdashery SuppliesAccount No. 101
DateExplanationPost RefDebitCreditBalance
2016
43Cash & Accounts Payable42004200
173Accounts Payable5004700
31 3Haberdashery Supplies Expense6204080
ACCOUNT: Accounts ReceivableAccount No. 110
Date
ExplanationPost RefDebitCreditBalance
2016
63Tailoring Revenue840840
133Tailoring Revenue15002340
21 3Tailoring Revenue12003540
233Cash at Bank8402700
283Tailoring Revenue22204920
ACCOUNT: Sewing EquipmentAccount No. 112
Date
ExplanationPost RefDebitCreditBalance
2016
13James Taylor, Capital4600046000
73Cash & Loan Payable380049800
ACCOUNT: Commercial VehiclesAccount No. 113
Date
ExplanationPost RefDebitCreditBalance
2016
13James Taylor, Capital4800048000
ACCOUNT: Accounts PayableAccount No. 201
Date
ExplanationPost RefDebitCreditBalance
2016
43Haberdashery Supplies30003000
143Cash at Bank30000
173Haberdashery Supplies500500
ACCOUNT: Loan PayableAccount No. 202
Date
ExplanationPost RefDebitCreditBalance
2016
73Sewing Equipment30003000
ACCOUNT: James Taylor, CapitalAccount No. 300
Date
ExplanationPost RefDebitCreditBalance
2016
13Cash, Van and Equipment104000104000
ACCOUNT: James Taylor, DrawingsAccount No. 301
Date
ExplanationPost RefDebitCreditBalance
2016
153Cash at Bank600600
ACCOUNT: Tailoring RevenueAccount No. 340
Date
ExplanationPost RefDebitCreditBalance
2016
63Cash at Bank120120
63Accounts Receivable840960
81233Cash at BankCash at Bank1260 20022202420
133Cash & Accounts Rec.1500 3920
163Cash at Bank3804300
213Cash & Accounts Rec.14405740
283Cash & Bills Rec.24208160
ACCOUNT: Rent ExpenseAccount No. 351
Date
ExplanationPost RefDebitCreditBalance
2016
43Cash at Bank12001200
ACCOUNT: Fuel ExpenseAccount No. 352
Date
ExplanationPost RefDebitCreditBalance
2016
123Cash at Bank120120
243Cash at Bank80200
ACCOUNT: Electricity ExpenseAccount No. 353
Date
ExplanationPost RefDebitCreditBalance
2016
123Cash at Bank760760
ACCOUNT: Postage ExpenseAccount No. 354
Date
ExplanationPost RefDebitCreditBalance
2016
123Cash at Bank2020
ACCOUNT: Wages ExpenseAccount No. 355
Date
ExplanationPost RefDebitCreditBalance
2016
18 3Cash at Bank11001100
253Cash at Bank11002200
ACCOUNT: Haberdashery Supplies ExpenseAccount No. 356
Date
ExplanationPost RefDebitCreditBalance
2016
313Haberdashery Supplies620620
B.
TAYLORS TAILORMADETrial Balanceas at 31 March 2016
Account Account No.DebitCredit
Cash at bank100$3260
Haberdashery supplies1014080
Accounts receivable1104920
Sewing equipment11249800
Commercial vehicles11348000
Accounts payable201500
Loan payable2023000
James Taylor, Capital300104000
James Taylor, Drawings301600
Tailoring revenue3408160
Rent expense3511200
Fuel expense352200
Electricity expense353760
Postage expense35420
Wages expense3552200
Haberdashery supplies expense356620
$115660$115660