Answers Practical Problems week 48

Problem 1: Fulton Security Service (taken from mid-term test November !" !!8#
Fulton Security Service provides users and security personnel for athletic events and other functions. Here is
Fultons trial balance at the end of October:
Fulton Security Services Trial Balance October 31, 2008
Cash 26,600
ccounts receivable !","00
Supplies !,!20
#$uip%ent !&,600
ccounts payable !0,600
Share capital 20,000
'etained earnin(s 2!,!20
)ividends *,000
Security service revenue &6,000
+a(es e,pense -2,000
#lectricity e,pense -,200
'ent e,pense 6,*00
!0.,.20 !0.,.20
$urin( /ove%ber 200", Fulton en(a(ed in the follo0in( transactions:
! 'eceived cash fro% a custo%er billed last %onth, ",*00.
- 1ade a pay%ent on accounts payable, 6,200.
. 2urchased supplies on credit, "60.
" 3illed a client for security services perfor%ed, *,*00.
!0 1ade a rent pay%ent for /ove%ber, !,600.
!! 'eceived fro% custo%ers for security services perfor%ed, -,200.
!2 2aid 0a(es to the security staff for the first half of /ove%ber, 2,"00.
!* Ordered e$uip%ent, !,600.
!& 2aid the current %onths electricity bill, "00.
!. 'eceived and paid for the e$uip%ent ordered on /ove%ber !*, !,600.
!4 'eturned for full credit da%a(ed supplies purchased on /ove%ber ., 2*0.
2! 2aid for the supplies purchased on /ove%ber . less the return on /ove%ber !4, 620.
2- 3illed a custo%er for security services perfor%ed, -,600.
-0 2aid 0a(es to the security staff for the second half of /ove%ber, 2,!00.
-0 2aid a dividend of 2,000.
%uestion A
'ecord the transactions in 5ournal entries. 6se only the accounts in the trial balance. 2lease s7ip a line
bet0een the entries.
%uestion &
#nter the October -! trial balance in the 89accounts.
%uestion '
2ost the 5ournal entries to the 89accounts.
%uestion $
Close the 89accounts and prepare the trial balance as of /ove%ber -0, 200".
1
%uestion A
)ate ccount )ebit Credit
! Cash ",*00
ccounts receivable ",*00
- ccounts payable 6,200
Cash 6,200
. Supplies "60
ccounts payable "60
" ccounts receivable *,*00
Security services revenue *,*00
!0 'ent e,pense !,600
Cash !,600
!! Cash -,200
Security services revenue -,200
!2 +a(es e,pense 2,"00
Cash 2,"00
!* /o entry
!& #lectricity e,pense "00
Cash "00
!. #$uip%ent !,600
Cash !,600
!4 ccounts payable 2*0
Supplies 2*0
2! ccounts payable 620
Cash 620
2- ccounts receivable -,600
Security services revenue -,600
-0 +a(es e,pense 2,!00
Cash 2,!00
-0 )ividends 2,000
Cash 2,000
2
%uestion &('
Cash ccounts receivable Supplies
3 26,600
! ",*00
!! -,200
# 20,*"0
- 6,200
!0 !,600
!2 2,"00
!& "00
!. !,600
2! 620
-0 2,!00
-0 2.000
3 !","00
" *,*00
2- -,600
# !",*00
! ",*00 3 !,!20
. "60
# !,.*0
!4 2*0
#$uip%ent ccounts payable Share capital
3 !&,600
!. !,600
# !.,200
- 6,200
!4 2*0
2! 620
3 !0,600
. "60
# *,*00
3 20,000
# 20,000
'etained earnin(s )ividends Security services revenue
3 2!,!20
# 2!,!20
3 *,000
-0 2,000
# 6,000
3 &6,000
" *,*00
!! -,200
2- -,600
# 6.,200
+a(es e,pense #lectricity e,pense 'ent e,pense
3 -2,000
!2 2,"00
-0 2,!00
# -6,400
3 -,200
!& "00
# *,000
3 6,*00
!0 !,600
# ",000
3
%uestion $
Fulton Security Services Trial Balance November 30, 2008
Cash 20,*"0
ccounts receivable !",*00
Supplies !,.*0
#$uip%ent !.,200
ccounts payable *,*00
Share capital 20,000
'etained earnin(s 2!,!20
)ividends 6,000
Security service revenue 6.,200
+a(es e,pense -6,400
#lectricity e,pense *,000
'ent e,pense ",000
!!2,.20 !!2,.20
4
Problem Sun" ' and Sand 'om)any
Sun, C and Sand Company started its activities on ! Septe%ber 200.. :t trades in life style consu%er (oods.
8he co%pany uses the )er)etual inventory system. 8he chart of accounts is added as a separate appendi,
at the end of the e,a%. 6se only these accounts in your ans0ers. 8he co%panys classified balance sheet at
-0 Septe%ber 200. ; the end of its first %onth of operations ; is (iven belo0.
Sun" ' and Sand 'om)any
'lassified &alance S*eet at +! Se)tember !!,
Current ssets Current !iabilities
Cash -&,&&0 3an7 <oan !2,000
ccounts 'eceivable *,000 ccounts 2ayable 6,000
:nventory !0,000 +a(es 2ayable !00
2repaid 'ent &,000 8otal !",!00
8otal &*,&&0
S"are"olders# $%uity
Fi&ed ssets Share Capital 24,000
Shop #$uip%ent 4,000 /et profit in Septe%ber !6,200
!ess' ccu%ulated )epreciation 92&0 8otal *&,200
/et 3oo7 =alue ",.&0
8otal ssets 6-,-00 8otal <iabilities and
Shareholders #$uity
6-,-00
/otes:
#$uip%ent: 2urchased early Septe%ber> has e,pected useful life of three years and is
depreciated usin( the strai(ht9line %ethod. /o residual value.
2repaid 'ent: Si, %onths rent of ? 6,000 paid at start of Septe%ber.
)urin( October 200. the follo0in( transactions too7 place:
!@ 2urchased and received !00 silver bracelets on credit, ter%s 2A!0, nA-0, FO3 shippin( point, invoice
dated October -, ? -,000. 8his a%ount e,cludes transportation e,pense ? &0.
2@ Sold and delivered !&0 silver bracelets on credit, ter%s 2A!0, nA-0, FO3 destination, invoice dated
October !6, ? .,&00. BCost ? *,&00@ 8his a%ount e,cludes transportation e,pense ? -&.
-@ 2aid on October !. for purchase dated October - and the related transportation e,pense.
*@ 'eceived pay%ent on October 2- for a%ount due for sale of October !6.
&@ 2ay%ents in October to the part9ti%e e%ployee 0ere ? !,200 includin( ? !00 of unpaid Septe%ber
0a(es.
6@ 8he a%ount o0in( to suppliers at -0 Septe%ber 0as paid in October. So too 0as Octobers interest
on the ban7 loan, 0hich has a yearly interest rate of !0C.
.@ d5ust%ents 0ere %ade in the accounts for the prepaid rent and the shop e$uip%ent in the %onth
October Bad5ustin( entries@.
5
%uestion A
Dive the 5ournal entries for the follo0in( transactions of Sun, C and Sand Company in October 200.. 2lease
s7ip a line bet0een the different 5ournal entries.
-ournal Sun" ' and Sand 'om)any
No. Account $ebit 'redit
! :nventory -,000
ccounts 2ayable -,000
E
Frei(ht :n &0
Frei(ht :n 2ayable &0
2 ccounts receivable .,&00
Sales .,&00
E
Cost of Doods Sold *,&00
:nventory *,&00
E
Frei(ht Out #,pense -&
Frei(ht Out 2ayable -&
- ccounts 2ayable -,000
Frei(ht :n 2ayable &0
Cash -,0&0
* Cash .,-&0
Sales )iscount F@ !&0
ccounts 'eceivable .,&00
& +a(es #,pense !,!00
+a(es 2ayable !00
6
Cash !,200
6 ccounts 2ayable 6,000
Cash 6,000
E
:nterest #,pense !00
Cash !00
. 'ent #,pense !,000
2repaid 'ent !,000
E
)epreciation #,pense, Shop #$uip%ent 2&0
ccu%ulated )epreciation, Shop #$uip%ent 2&0
7
%uestion &
2repare a 1ultistep :nco%e State%ent for Sun, C and Sand Company for October 200..
:n addition to the infor%ation in $uestion , the follo0in( details are available:
- :nco%e ta, rate *0C
nyho0, you %ust include in the inco%e state%ent the follo0in( ite%s:
- net profit
- (ross profit
- net sales
- profit fro% operations
'om)any Sun" ' and Sand
/ultiste) 0ncome Statement for 1ctober !!,
Net Sales:
Dross Sales .,&00
!ess Sales )iscounts 9!&0
/et Sales .,-&0
'ost of 2oods Sold:
Cost of Doods Sold before Frei(ht :n *,&00
Frei(ht :n &0
Cost of Doods Sold 9*,&&0
Dross 2rofit 2,"00
1)eratin3 45)enses:
Frei(ht Out #,pense -&
'ent #,pense !,000
+a(es #,pense !,!00
)epreciation #,pense 2&0
8otal Operatin( #,penses 92,-"&
Profit from 1)erations *!&
1t*er 6evenue and 45)enses
:nterest #,pense !00
9!00
Profit before 0ncome 7a5es -!&
0ncome 7a5es (4!8# 9!26
Net Profit !"4
8