Accounting Principles - Assignment Example

Question 1 Requirement a) Depositing the inherited cash of $40,000 will increase the cash at bank by $40,000. The owner’s equity will also increase by a similar amount. This will leave the accounting equation of Future Designs balanced. The receipt of cash of $1,400 from the services performed for a client will increase the cash at bank hence the left hand side of the equation will increase by $1,400 while the right hand of the accounting equation will not change (Fess and Warren, 2004). This will leave the accounting equation of Future Designs unbalanced. Paying of the beginning balance of accounts payable will decrease the accounts payable to zero while the cash at bank will reduce by $16,000. This will leave the accounting equation of Future Designs balanced. Purchasing supplies worth $2,000 on credit will increase supplies by $2,000 and the accounts payable by $2,000. The right hand side of the accounting equation will increase by $2,000 whereas the left hand side of the equation will increase by a similar amount. This will leave the accounting equation of Future Designs balanced. The cash of $2,000 collected from a customer on account will reduce the accounts receivable by $2,000 and increase cash at bank by similar amount. Therefore, the left hand side of the equation will remain the same as is the right hand side of the accounting equation. This will leave the accounting equation of Future Designs balanced. The $2,000 personal cash that has been invested in the business cash at bank by $2,000 and owner’s equity by a similar amount. This will leave the accounting equation of Future Designs balanced. Billing $4,800 for services rendered will increase the accounts receivable by $4,800. This will increase the left hand side of the equation by $4,800; however, the left hand side of the equation will not change. This will leave the accounting equation of Future Designs unbalanced. The recording of business expenses totaling $2,000 with regard to paying office rent and advertising will cause a decrease in cash at bank by $2,000 and a corresponding decrease in accounts payable. This will leave the accounting equation of Future Designs balanced (Horngren & Harrison, 2009). Selling supplies for $300 for cash will reduce supplies by $300 but increase cash by $300. Therefore, the right hand side of the equation will not change. This will leave the accounting equation of Future Designs balanced. Withdrawing $4,000 in cash for personal use will reduce cash at bank by $4,000 and decrease owner’s equity by a similar amount. This will leave the accounting equation of Future Designs balanced. Requirement b) Future Designs Income Statement Month Ended 30 September 2013 Revenue income Services to a client $1,400 Consultation fee $4,800 Total Revenue $6,200 Expenses Supplies $2,000 Office rent $1,800 Advertising $200 Total expenses $4,000 Net profit $2,200 Requirement c) Future Designs Statement of Changes in Equity Month Ended 30 September 2013 Opening owner’s equity $15,500 Add: profit for the month $2,200 Additional investments $42,000 $59,700 Less: Drawings $4,000 Ending owner’s equity $55,700 Requirement d) Future Designs Balance Sheet As at 30 September 2013 Assets Non-current Assets Land $24,000 Total Non-current Assets $24,000 Current Assets Cash at bank $26,200 Accounts receivable $5,800 supplies $1,700 Total Current Assets $35,700 Total Assets $57,700 Liabilities and Owners’ Equity Liabilities Current Liabilities Accounts payable $2,000 Total current liabilities $2,000 Total liabilities $2,000 Owners’ Equity $55,700 Total Liabilities and Owners’ Equity $57,700 Question 2 Requirement a) General Journal Page 3 DATE ACCOUNTS AND EXPLANATIONS POST. REF. DEBIT CREDIT April 15 Cash GL $7,000 Accounts receivable GL $7,000 (to record cash collected from a client on account) April 16 Accounts receivable GL $1,400 Service revenue GL $1,400 (being record of tax services for a client on credit) April 20 Accounts payable GL $2,000 Cash GL $2,000 (being record of paid on account) April 21 Supplies GL $200 Accounts payable GL $200 (to record purchases of supplies on credit) Roberts, Drawings GL $2,400 Cash GL $2,400 (to record cash drawings) April 22 Cash GL $11,000 Service revenue GL $11,000 (to record cash received for consulting work) April 30 Rent expense GL $1,600 Cash GL $1,600 (to record rent payment) Salary expense GL $3,600 Cash GL $3,600 (to record employees’ salaries payment) Requirement b) ACCOUNT: Cash at Bank ACCOUNT NO. 11 JRNL. BALANCE DATE ITEM REF. DEBIT CREDIT DEBIT CREDIT April 14 $4,000 √ $4,000 April 15 Accounts receivable GJ $7,000 $11,000 April 20 Accounts payable GJ $2,000 $9,000 April 21 Drawings GJ $2,400 $6,600 April 22 Service revenue GJ $11,000 $17,600 April 30 Rent expense GJ $1,600 $16,000 30 Salary expense GJ $3,600 $12,400 ACCOUNT: Accounts receivable ACCOUNT NO. 12 JRNL. BALANCE DATE ITEM REF. DEBIT CREDIT DEBIT CREDIT April 14 $19,000 √ $19,000 April 15 Cash GJ $7,000 $12,000 April 16 Service revenue GJ $1,400 $13,400 ACCOUNT: Supplies ACCOUNT NO. 13 JRNL. BALANCE DATE ITEM REF. DEBIT CREDIT DEBIT CREDIT April 14 $1,600 √ $1,600 April 21 Accounts payable GJ $200 $1,800 ACCOUNT: Land ACCOUNT NO. 14 JRNL. BALANCE DATE ITEM REF. DEBIT CREDIT DEBIT CREDIT April 14 $37,200 √ $37,200 ACCOUNT: Accounts payable ACCOUNT NO. 21 JRNL. BALANCE DATE ITEM REF. DEBIT CREDIT DEBIT CREDIT April 14 $6,000 √ $6,000 April 20 Cash GJ $2,000 $4,000 April 21 Supplies GJ $200 $4,200 ACCOUNT: Roberts, Capital ACCOUNT NO. 31 JRNL. BALANCE DATE ITEM REF. DEBIT CREDIT DEBIT CREDIT April 14 $53,000 √ $53,000 ACCOUNT: Roberts, Drawings ACCOUNT NO. 32 JRNL. BALANCE DATE ITEM REF. DEBIT CREDIT DEBIT CREDIT April 14 $2,400 √ $2,400 April 21 Cash GJ $2,400 $4,800 ACCOUNT: Service revenue ACCOUNT NO. 41 JRNL. BALANCE DATE ITEM REF. DEBIT CREDIT DEBIT CREDIT April 14 $14,400 √ $14,400 April 16 Accounts receivable GJ $1,400 $15,800 April 22 Cash GJ $11,000 $26,800 ACCOUNT: Salary expense ACCOUNT NO. 51 JRNL. BALANCE DATE ITEM REF. DEBIT CREDIT DEBIT CREDIT April 14 $7,200 √ $7,200 April 30 Cash GJ $3,600 $10,800 ACCOUNT: Rent expense ACCOUNT NO. 52 JRNL. BALANCE DATE ITEM REF. DEBIT CREDIT DEBIT CREDIT April 14 $2,000 √ $2,000 April 30 Cash GJ $1,600 $3,600 Requirement c) Julia Roberts, CA Trial Balance As at 30 April 2013 ACCOUNT DEBIT CREDIT Cash at Bank $12,400 Accounts receivable $13,400 Supplies $1,800 Land $37,200 Accounts payable $4,200 Roberts, Capital $53,000 Roberts, Drawings $4,800 Service revenue $26,800 Salary expense $10,800 Rent expense $3,600 Total $84,000 84,000 Question 3 Requirement a) Omar IT Consultant Work Sheet Month Ended 30 June 2013 ACCOUNT TITLE TRIAL BALANCE ($) ADJUSTMENTS ($) ADJUSTED TRIAL BALANCE ($) INCOME STATEMENT ($) BALANCE SHEET ($) Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Cash at bank 3,800 3,800 3,800 Accounts receivable 15,560 15,560 15,560 Prepaid rent 1,290 1,050 2,340 1,050 Supplies 20,900 5,340 15,560 15,560 Equipment 15,350 15,350 15,350 Accumulated depreciation – equipment 12,800 370 13,170 13,170 Building 89,900 89,900 89,900 Accumulated depreciation – building 28,600 130 28,730 28,730 Accounts payable 4,240 4,240 4,240 Salary payable 460 460 460 Unearned service revenue 8,900 2,400 6,500 6,500 Omar, capital 71,920 71,920 71,920 Omar, Drawings 4,800 4,800 4,800 Service revenue 27,300 2,400 29,700 29,700 Salary expense 2,160 460 2,620 2,620 Rent expense 240 240 240 Depreciation expense - equipment 370 370 370 Depreciation expense - building 130 130 130 Supplies expense 5,430 5,430 5,430 Total 153,760 153,760 155,600 155,600 Net profit/loss 21,500 Total 146,020 146,020 Requirement b) General Journal Page 7 DATE ACCOUNTS AND EXPLANATIONS POST. REF. DEBIT CREDIT June 30 Unearned service revenue GL 2,400 Service revenue GL 2,400 Rent expense GL 240 Prepaid rent GL 240 Supplies expense GL 5,340 Supplies GL 5,340 Depreciation on equipment GL 370 Accumulated Depreciation on equipment GL 370 Depreciation on building GL 130 Accumulated Depreciation on building GL 130 Salary expense GL 460 Salary payable GL 460 Requirement c) General Journal Page 7 DATE ACCOUNTS AND EXPLANATIONS POST. REF. DEBIT CREDIT June 30 Cash at bank GL 3,800 Bal c/d 3,800 Accounts receivable GL 15,560 Bal c/d 15,560 Prepaid rent GL 1,050 Profit & loss GL 1,050 Supplies GL 15,560 Balance c/d 15,560 Equipment GL 15,350 Accumulated depreciation – equipment GL 13,170 Balance c/d 2,180 Building GL 89,900 Accumulated depreciation – Building GL 28,730 Balance c/d 61,170 Accounts payable GL 4,240 Balance c/d 4,240 Salary expense GL 460 Salary payable GL 460 Profit and loss GL 6,500 Unearned service revenue GL 6,500 Omar, capital GL 71,920 Balance c/d 71,920 Omar, Drawings GL 4,800 Balance c/d 4,800 Profit and loss GL 29,700 Service revenue GL 29,700 Salary expense GL 2,620 Profit and loss GL 2,620 Rent expense GL 240 Profit and loss GL 240 Depreciation expense - equipment GL 370 Profit and loss GL 370 Depreciation expense - building GL 130 Profit and loss GL 130 Supplies expense GL 5,430 Profit and loss GL 5,430 Requirement d) Julia Roberts, CA Trial Balance As at 30 April 2013 ACCOUNT DEBIT CREDIT Omar IT Consultant Trial Balance As at 30 June 2013 ACCOUNT DEBIT CREDIT Cash at bank 3,800 Accounts receivable 15,560 Prepaid rent 2,340 Supplies 15,560 Equipment 15,350 Accumulated depreciation – equipment 13,170 Building 89,900 Accumulated depreciation – building 28,730 Accounts payable 4,240 Salary payable 460 Unearned service revenue 6,500 Omar, capital 71,920 Omar, Drawings 4,800 Service revenue 29,700 Salary expense 2,620 Rent expense 240 Depreciation expense - equipment Depreciation expense - building Supplies expense 5,430 Total 155,600 155,600 References Fess, E. and Warren, C., 2004. Accounting principles. Canada: Southwestern Company. Horngren, C. T., & Harrison, W. T., 2009. Accounting (7th ed.). Upper Saddle River, NJ: Pearson Prentice Hall. Read More