Review Questions Tabular Summary
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Exercise: .1 Fill in theblanksor the ottowingaccountingquations
A. Ah SengCo. has$100,000n assets ndnoliabilities'
ASSETE = LIABILITIES + OWNER'S EQUITY
B . RahmanPaintCo. has$60,000 n equipmentandowes he bank
$30,000n loans.
ASSETS = UABII.JTIES + OWNER'S EQUITY
C. JurongEnterpriseshas and andabuilding worth $120'000and
$60,000n owners'equitY'ASSETS = LIABILITIES + OWNER'S EQUITY
D. P.C. Co. has$300'000n assets nd$250'000n liabilities'_
NSiNTS = LIABITITIES + OWNER'S EQUITY
has $?5O000 n equipmentandno debt'
LIABILITIES + OWNER'S EQUITY
14,000
l-
=-
I"
=-
a-
tt
f.-
SpeedyCo.ASSETS =
+
r-
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=
t
Exercise-.,JThefollowing balancesareextractedrom thebooksof Sallyasat 3l Dec'
I-andandBuilding $60'000 Loan from Bank
Crediton 14,000 StocksDebtors 10,000 PrePaidexPenses
Motor vehicles 20,000 UnPaid bills
CaPital
5,000
5,0002,000
,
a) CalculateTotal assets
b) Calculatehetotal liabilities -c) CalculatehecaPital. -'
Exercise 1-9: ABC companyhadthefollowing transactionsn July:
%-Gght morefumiture cnsting$t0,000-oncash erns'
ibt Coltteo $8,000of outstanding ebts rom customers'
(c) Paid$5,200tocreditors'
idi Bonowed another$15,000 rom thgbg{<-
i;iShareholdersnjected urthercapitalof $5'ff)0 in cash'
BCSCjrTd:. ecord heeffectsof above ransactionson theaccountingequationbelow
r
b
Cash + Fumitu;T-Debtors = Overdraft
l July: 29,500 12'000 58,fl)0 - 20'fi)0
(a)
Assets$) Liabilities f$). + Equitv6)+ Creditors + CaPital
25,M 55,000f-
l-
(b)
l-
b
b
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c).
d)
(
(
Total . . . . = . .
Exercise1.4: XYZ C-ompany ad hefollowing transactionsor monthof June:
.. TINIT I:ACCOUNTING EOUATION AND RULES OFDO{JBLE ENTRY
Purchases ffice ftrniture for $400paid in cashReceived ash$2,0{X) rorndebtors.Paidcreditors$1,2fi) in cashRepaid oansof $3,fi)0
Boughta van for $10,fi)0, paid n cash$4,0m and hebalanceobepaid
n July-The ownerbrought n cashof $5,000asadditional capitalSoldold office fumiture (atcost) for $5fi) cash.Theowner withdrew $3&) forpereonal use
Req |i$d: Record *re effectsof above ransactionson theaccountingequationbelow
Assqh $) = Liabilities $) Equity($)Cash+Debtors + Fumiture +Van = Loan + Creditors + Capital
I Juns 12,000 8,m 10,000 25,000= 15,000 5,000 35,000
Exercise ll.
Amer startsa companycalledAmer
Reesarchers.During the lst mongh.
July the companyhadthe following transactions:-
l. Amerstartsa Companyandputs n $25,000cash(capital) nto the Co. -
2. Co.purchasesn credit, stationery osting$350.
3. Amer Researchersala cash$2O000 o prnchases pieceof lanil
4. Amer Researches oes esearchor a customer& receivescash$1,900.
(a)
(b)
(c)
(d)
(e)
(0(e)(h)
(a'l
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5. Amer Researches ays$100on the accountpayablet createdn
transaction2.
6. Amer takes $2,000fromhis own personalsavings o buy aTV for his house'
7_AmerResearchers ayscashexPensesor office rent ($400)andutilities ($lu))
8. TheCo. sellsat costa smallpieceof the and for $5,000
9. TheCo.paysAmer acashdividendof $1200'
Required:
Listthe3lJulybalancesofassets'liabilitiesandequityasshownabove.
Recordeffectsof eachof the9 transactionson theaccountingequation-
How muchdid the Co.made? =
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Cash Stationery Land
I
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3
4)
6
I
9
Bal.
25r45O
= @rUlic+t Sh:ddders-Equt9
Account$PaYable Capital Retained
Profits
251450
J
-J
:
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Exercisg 1.7ffffiopens a medicalclinic. During thefint monthof operationsn Januaryherclinic entitledAtrn Gm
Clinichad hefollowingevents.
Dr. Ganstarrsamedical clinic by investing $20,000 capital) n the clinic.
The business aid cash or landcosting 15,fiD. Ganplans o buildan
office building on the and-
The business urchasedmedicalsupplies rom UniqueSuppliers
for $2,000on account(credil).GanClinic officially opened or business.
During therestof themonth,Gan reatedpatientsandeamedservice
r"n"n*(Sules) of $8,0fi), receivingcash or half the salesmade'
Thebusiness aid cashexpenses; mployee alaries,$1,400;oflice rent,
$1,Ofi);utilities,$300.
The business oldat cost$500of medicalsupplies o anotherdoctor.The business orrowed $t0'000 from abank.
Thebusinessaid$1,500 o Uniquesuppliers.
Repuired:]l-lllnalyre theeffecrsof theseeventson theaccountingequationbelow
Z. Aftei completing lretable,answer hesequestionsabout hebusiness.
a. Hbw muchdoes hebusiness lryect o collect from patients?
b. How muchdoes hebusiness we n total'
c. How muchnetprofit or net ossdid the businessexperience uring its first monthof operatim?
d. How muchas otal asseB?
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28303l
= Ljabilities
Accounts
= Pavable
Aqsets
Date Accounts Medical
Jan. Cash Rec'able Supplies Land
6 Jan9
12
l5r5-31
15-31
6
I
12
15
15-31
15-31
28
30
31
35,800 35,800
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UNTTI:ACCOUNTING EOUATION AND RLJLESOFDOIIF .LEENTRY
Exef,cise 1.8Reliable ;td is asmall accounting rm. The following transactionsook
placeduringthemonth of January.
(l) Reeeived apital njection of $l$,000 in eash rom own€ffi(2) Paid$50,000cash or land(3) Bought$20,fi)0 office furniture on credit(4) Received$5,0ffi cash rom a customeror accountingservices endered
(5) Performedaccountingservices or customers n account credit)$10'000(6) Paid casbexpanses:ent$2,0(X), alaries$1,500,utilities $5fi)(7) Paid$4,000 n the accountpayablecreatedn Transaction3
(8) Received$1,(XX) n the account cceivablecreatedn Transaction5
(9) Sold and for cashat its costof $22,0fi)(10) Companypaid a cashdividendof $2,fi)0 to owners
Bequircd:
(a) Show he effects of the above ransactions n the accountingequationbelow:
Assets = Uabili$es + Share'holders'Eouitv
Cash + Accounts + Office + [-and =
Receivable FumitureAccounts +Payable
Capital + RetainedProfit$
(1 \
(8) ., .. .--rg\(10) __ - ..
/n \tL l
_(3)
r5\
Total .
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t
a. Increa$en assets
ExercisesnrulesPfDoubleEntrY
Exe,rcisc .9
Onwhich ideof the T' - accountseach f the ollowing ecorded? uta({ on hecorrect ide'
Rules f Asspts
Debit& Debi t J l lCredi t
+ Owner',sEauitv
Debit I lt Credit
Put in the 4gbit side
of the tTt account
,1
b. Decreasen assets
(e.9.
e, ncreasen owner'sequitY
Exercise1. 0
statewhetherhe ollowing ransacdonsesultn increasesrdecreasesn thecashAcgount f A' shena retailer-Tlck
({ therelevantcolunn.
l
f
f
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t
f-
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tr
b.
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a.
b.
d.
e.
f.
c.h.
P,ut n the qrqdlt side
o-f he 3T'account
CashDecrepse
c. lncreasen liabilities(e.g - -
d. Decreasen liabilities
Decreasen owner's equitY(e.g.
Ca$h
Increase
Paidcash o Alice l-ee for amountowed
A Shenbrings in cashas additional nvestment
in thebusiness.Boughtgoods or cash-
Soldgoods or cash
Gavecash oan to anemPloYee'
Receivedcash rom Li for amountdue
A Shenwithdrew cash o payhis householdexpenses.-
Jackgave A Shena cash oan
Exercise 1.11
Statewh€ther he following transacdonsesult in increase r decrease r haveno effect on ttre u!i[$ of Huang's
busines. lick ({) therelevantcolumn'
a- Purchased typewrite'r rom Win Ltd on credit terms'
b. Hurrg receivedgoodsmeant or resale rom
his regularsuPPlier,Lao.
c. Huan! paidcash ot a-oon owing to Tung Ltd'
d. Soldgood on credit to Jin.
e. Huan! Urings n cashas additiural capital
f. Received ash rom Lin for amountdue'
e. Purchasedorry forcash
t. ronnadebtor,pays$1,0S o Huang'sbusiness
LisbilitiesLiabilitis Liabilities
Increase Dgff€aEC Noeffect
lr
:
-
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TINIT I:ACCOTJNTINGEOUATIONAND RTJLES FDOUBLE ENTRY
Exercisq. 1.12 The following are ransactionsof Mr. Dollah, in theanalysischartbelow.
(Rernember:ollowing tlr accountiagentity principle all business ransactions rerecorded rom the
business/company'soint of view')
Rulesof Assets =-L!gD!!lEs-
+ OwnerlsEquitvDebit& Debit llCreoit Debit[ ltCredit Debltllt C"eait
Credit
1 Aus : Dottah starteda companyby depsiting ffi0,6)0 cash capitaQ nto thecorftpany.
Analysis: (a) tbeCo.'s cash ur asset) ncrtssed T- Debit CashA/c by $80'0@-(b) the Co.'s capital(owner'sequity; increased . Crcdit Cepital AlCby $80'000
2 Auq: Tlw companyboughta computerfor $4,0M cash
Analysis:(a) Co.'s computer asset)ncreased f . Lebit ComputE $,/cby $4'S0.(b) Co.'s cash asset)decreased . Credit CashA/c by $4'00O'
3 Ar Companyobtaineda bank oanof $2A(XN um Richbank"
Analysis:(a) Co.'s cash asset)ncreased1. Debit .C.$hA/c by $20'000-(b) Co.'s bonowings, he bank oan Qiability) ncreasedf. Credit
Bank l,oans A/SbY$20,ffi0'
4. AUe: Dollah witMrew $1,@0cashftom campary or wtn use'
Analysis: a) Co.'s capital(Owner'sequity) decrease. Debit Csnitqt A/q by $l'000
O) Co.'s caslr asset)decreasedby $1,000. Credit CashA/c by $l'000.
Nots if the Drawings' accounts used honthe Drawingsaccountwill be ncreased y $ ,000
andyou ilebit DrawingsA/c.
Date Accouuts
Involved
Typeof Effect Amount
Acrcormts Increasd DebiU
Aug-
-;ah
Assei Insease t Debit $80.(D0
.. Canital Owner'sEouitv Increase - C-rcdit . . , $80,0.S
W Z Combuter Asset . Increase ? Debit 54.000
Cash Asset -Fecrease -Credit $4.000
Aug 3
Aug 4
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Exercise l.!3 Thefollowing are ransactio:ts f Mr' Ali'
(Remember:ollowing theaccountingentity principleall business ransactionsarerecorded rom the
business/company'solntof view')
fi:ffi--ff ;i,;,ffi ;;il;vlIg"p"':f19^Y'g:.*!:tp1l'"'"necompanv";;;;tu;*" *
"i"oi1fiomModern umitureor $800'
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-l-r
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-.-r_l--l
:lE-r
Jr_.J
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17242728
Souiht om"""quipment
by cash or $500'
p"iA'fufoa"* Fumiture ttre'amountowing to them, $800 n cash
Mr. Ali withdrew$1,000cash or personaluse
Rules f Aryts
Debit& Debit lJCreAitCredit
+ Owner'EEouitvDebit l1 Creait
. -DralvinesDebit I lCreOit
Required:T":ffi; the analysis hart(sampleshownbelow)' analyse heabove ransactions'
Accounts Type of Amount
April 17
April24
Effect ,tncrease/ DebiU
April23
b. Journalise the abovetransactions(This part reserved or Lesmn 2)_lr.-J
_-l r
_[-,.1
DetqApr.15
Acgg-qntitle 4 Exole$ation
Cash asset)
Debit($) gredit$)
4,0004,000
Captal (Owner's F,Coiq)
April lT Furniture assetl 800ModernRuniure (ltabilitYl
Aplil27
Apri l28. . . . . . .
b-
l-
l-MDIS-PCBM
t-14 ffi;ttesoi A-ountiug & Finance
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{JNIT I:ACCOLINTING EOUATION AND RULES OF-IPOUBLEENTRY
E:rercise 1.14: The following arc transactionsof Mr. JohnLim's a soleuader or July.July I Johnstartsa cmpatry by depositing $2500 (capital) nto the co.'s bank accountJuly2 Boughtoffice fumitureby cheque$150July 3 Boughtmachinery$750on credit from Planners td.July 5 Bought a motor vanpayingby cheque$6fi)Iuly 8 Soldunsuitableoffice furniture for $60oncredit o Walker & SonsJuly 15 Paidthe amountowrng o Planners rd $750by cheque.July 23 Received heamountdue frcm Walker & Sons$6On cash.July3l Boughtmue machineryby heque$280.
Rulesof AsseB = Uabilities + Owner's EouitvDebit D-bir TJGdit D"bit lTffit D"bittlTF.'fritCredil
Requircd:a. Using heanalysis hart samplehown elow),analyseheaboveransactions.
Dalo Accounts Ilpe oJ Effect AtnawtlInseasol Dehitl
Decraa:co ?rp.ditInwlved Accoants
July I Bank AssetCaoital Owner'sEouitv
Irrcrease Debit $2J00Increase Credit $2-500
July .
July 3
DateJuly t
ftrhr (
July23
b. Journallse the above hnsactiom (Ihis part rcserved or L*sson 2)
Ap,count ifle & Elplamtion Debit($) Cr€dit6)
July2
July3
July5
July8
July 15
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Solution to Exercisespn Accounting BqqgEon
Soiution to Exercise 1.2
Total assets $60.000+ 10,000+ 20,000+ 5,0fr) * 5,000= $1oo'ooo
TotalLiabilities= $14,000+14,000+ 2,0ffi = $30"000
Capital= $70,000 ($l00,0fiXassets) = 30,0ffi(liabilities) + 70'000(capital))
Solution to Exercise13 (ABC Company)
Aqsets $) = Liabilities {$l + Equitv($)
Cash+fumirure +Debtors = Overdraft + &editors +Capital
I July: 29,500 12,000 58,900 = 20,U)0 2[4ffi 55'000
(a) -10.000 +10.000
(b) +S.000 ,, -8.000 =
(d)_ +15.0fi) - +15.fi)0
(e) -- +5.000 = -+5'000
Toral42300-+22.000+50.900= 35-0(n + 20-200.+ 60-000
lr
Solution to Exercise L4 ()(YZ Company)
A$sets$'lCash + Debtors + Furniture + Van =
1June: 12,000 8,000 10,000 25'(X[ =
= LiabiHtiesJg.)loan + Creditors + Capital
15,000 5,000 35,000
Equirv{$)
l'-
b
L-
F|:|-
1-
ts
t-
[-
ts
(a)
(a) - : .OQO- .- . = - : . -
(e) 4.000 ., +10.000 +6.0fi)
IO-+S.OOO-
= .- ' - -
G)
(h)_ -?nn = -300
Toral10.60o 6.ffi0 + 9.900 +,35.fi)0= 12000 + 9.800 + 39J00
T
ts
L-
F
(U) IZ.OOO -Z.ft00 = .
t-
t-
F
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Solution to Sxercise 1.5 (Amer Researchers)
Office
Soludon to Exercise1.6 (Gary & Monlca Low)
Cash + Acc-ounts +Stationery+ Land
= Liabilities S_narehorcequity
Accounts Retained
25,000
350
1.900
-100
-480-100
-1,200
25{t 25000 200
Shareboldens'
Ugbifties + EqultY
Aeormts PaidgP Retain9d
1 25,000
2 350
3 -20.000 20,000
4 1.900
5 -100
6Nota businesstramsaction
7 400
-100
I 5.000 -5,000
I -1294
Bal. 10.100 350 15,0m
+50000
40,000
+5J00
-1,100
-1,200
4SO
-400
{40,000 =
+ +50,0fi)
+
+
+
++
+
+
+
+
+
+5Jfi)+3,0(X)
-l,l0o
-12m
-400
Not a lansaction of the business
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-t,000
-22,000 =
f
+
+ -2,1m
33,300 2,000 500 18,000 = 100 + 50,000 3.700
53,800
Solutiono Exercise.? @r. AnneGanClinic)
53,800
+1,ffiO
+22,000
:2,100
Date
Jan.
t-
l-
l-
L
L
L
L
Assets
Accounls Medical
Cash Rec'able SuPPlies
= Liabilities
A,/cs
= Payable Bank
Efi.*Y
Reffi
Capital ffiand
F
L
Solution to Exercise 1.8 (ReliableLtd)L
L
L
L
Assets$hareholders'
Uabilitieq + EouitY
Amunlg + g@jlal Retained
1
Cash+Accounts+Off ice
Receivable Fumiture
1l;;';;lr I-so,oooI3l I | 2o,ooo
Land
| 50,000I
r_ I
6 +20-0
I -15.0 +15.0
12 +2.0
15 Nota Business transaction
t5-31 +4.0 +4.0
't5-31 -1.4
-1.0
-0.3
28 +0.5
30 *10.0
31 -1.5
+15.3 +4.0 +1.5 +15.0
35.8 35.8
L
-
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7
I
I
10
IJNIT I:ACCOUNTING EOJATION AND RLiLES OFDOUBL,EENTRY
H
H1".'lH__!gg_
t l
H
I -rr,ooo
_28,Agg_
t l
t=
H_20,000-_
t lI ro,ooo
Hl-"ffi]
=
----goqo--
I u,o*
E -2,000
l--r-*tl- -*rll----;ll-'*1tr;;tf-r-ooo__99{0q._
4
5
6
Aug. l
Solufion to Exercise1.9
Increaseo thedebit side of 'T' account- r, d, f.lnsrease o the credit side of'T' account:- b, c, e.
Solution to Bxercise 1.10
IncreaseintheCashAeount:- d, f,hDecreasea the CashAccounfi- a. c, e, g,
Solution to Exercise 1.11
Insreasen liability:- a" bDecreasen liability:- cNoeffecti d,e, ,g,h
Solution o 1.O
Date AcountsInvolved
Typeof EffectAccounb Incrcosrl DebiU
Decrease Crcdit
Amount
CashCanital
Asset Increase DebitOwns's Eouitv Increase t Gedit
$80,{m$80-m0
Aug 2 ComputerCssh
Asset lncreaseI DebilAsset hcrease I Gedit
$4,000s4-m0
Aug 3 C.ash AssBank oan LiabilitY
Inoease IIncrease
$20,000$20.0m
DebitCr€dit
Aug 4 CapitatCash
Owner's EguityAs€t
DecFease DebitDecrease I Credit
$1,000$1,000
r99{ss._-l9gg_
Solution to 1.13
a Using he analFis chart(s@ple shownbelow),analysehe abovebansactioru.
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AmountDate Typeof
Accounts
;ffits" T-D"ui $4'oooApril 15 Cash
Capital Oy'ner's &gity lncrease I -Crpdit$4'000
April l7 Office Furn. ^Arssetln"t"ut" I Debit $800
ModernFum- Liabitity lncrease1 Credit $800
April 24 Office EquiPCash
AssetAsset
IncreaseIDecrease
$500$500
DebitCredit
Aptit T, ModernFurn LiabilitY-
Cash Asset
Decrease
DecreaseJ
DebilCredit
$800$800
April 28 DrawingsCash
Owner's EquitY Increase I
Asset Decrcase $1,000
I-,1
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d
IJ
July 3l Machinery Asset rncrcats w"
Solution to 1.14
Date AccountsInvolved
Julv 5 Motor Van
, Effect. , Amount
Increasd Debit/
e Debit $750
'"" ' _ pr*n"r*Ji riuuitr,y Sifff ;9#' n$ffiAsset Increase Debit $600 Bank
Increase Debil $60
iliei o"crease cPoit $600---;;-:. Incrcase Debitt" Debit $60
r.snttur"e ry$ *fff:f ffilt f#t" Debit $750Juty t5 PlannerLtd
sa"k A*$"t *trryry"ftdit S7':'
JDebit $2'500
. Capital --Ownpr'sEquitv 'Inqrease
Ctedit $2'5(X)
nrc:- r:rr*iirrra Asse.t tncie*" Debit $150
Jilotrt"tFumitureAsset
MDIS-gCBMr-zo ffi?--ptesoraccounting& Finarce