Assignment
Please read each question carefully and answer what isasked For the full marks show all thecalculation
Start answering each of five questions from a newpage
1. Evaluate the accounting principles used in Canada (name,description,examples of theuse)
2. Answer the questions in self-tests (do not re-type the questions; listthecodes (S3.1, S.3.2, etc.) with your choice of theanswer)
S3.1 Which one of the following equations is not correct?
a. Income - Expenses =Profit
b. Asset - Liabilities = Equity
c. Income + Assets =Equity
d. Assets = Equity +Liabilities
S3.2 A transaction to record the sale of merchandise for profit on credit would havethefollowingeffect:
a. Increase sales and decreaseinventory
b. Increase profit and increasesales
c. Increase accounts receivable and increasesales
d. All of theabove
S3.3 A transaction to record the purchase of merchandise for cash would have the following effect:
a. Increase in expenses andassets
b. Increase in expenses andliabilities
c. Increase in expenses and decrease inassets
d. Total assets will notchange
S3.4 A transaction to record the purchase of an asset on credit wouldinvolve
a. Increasing assets and increasingexpenses
b. Increasing assets and decreasingprofit
c. Increasing assets and increasing accountspayable
d. Decreasing assets and increasing accountspayable
S3.5 A retail business had cash of $15,000 and inventory of $70,000 on hand on January1.On January 7, it sold half of the inventory on credit for $50,000 and collected half ofthisamount on January 26. The financial statements of the business wouldshow
a. Profit of $15,000 and cash of$40,000
b. Profit of $15,000 and cash of$65,000
c. Profit of $50,000 and cash of$65,000
d. Loss of $20,000 and cash of$40,000
S3.6 A business person starts a retail company by contributing $100,000 cash.Thecompany then buys inventory for $90,000, has sales of $150,000, cost of goods soldof $80,000, salaries of $30,000, rental of $12,000, advertising expenses of $8,000,andequipment purchases of $40,000. All of the transactions, except the purchase ofequipment,are for cash. The financial statements of the company wouldshow
a. Profit of $20,000, cash of $30,000, and equity of$100,000
b. Profit of $20,000, cash of $110,000, and equity of$120,000
c. Profit of $10,000, cash of $110,000, and equity of$120,000
d. Loss of $70,000, cash of $110,000, and equity of$30,000
S3.7 For the year a company earned revenue of $200,000 and incurred expenses of $175,000. At the year end, it has assets of $600,000 and liabilities of $500,000. Equityatthe end of the yearis
a.$25,000b.$75,000c.$100,000d.$125,000
S3.8 An accounting system comprises accounts that can be groupedinto
a. Income, expenses, andprofit
b. Statement of financial position, profit, and cashflow
c. Assets, liabilities, income, andexpenses
d. Profit, capital, assets, and cashflow
S3.9 A transaction to record the sale of goods on credit would involve a double entry forthesales value to the followingaccounts:
a. Increase sales and reduceinventory
b. Increase sales and increaseinventory
c. Increase accounts payable and increasesales
d. Increase accounts receivable and increasesales
S3.10 A new retail business has sales of $100,000, cost of goods sold of $35,000,salariesof $15,000, rental of $4,000, and advertising of $8,000. All expenses were paid out oftheowner's initial capital of $25,000; for the inventory paid $30,000 (remains unsold)andpurchased equipment on credit for $20,000. The financial statementsshow:
a. Profit of $38,000, cash of $13,000, and shareholders' equity of$25,000
b. Profit of $38,000, cash of $33,000, and shareholders' equity of$63,000
c. Profit of $65,000, cash of $3,000, and shareholders' equity of$38,000
d. Profit of $63,000, cash of $33,000, and shareholders' equity of$38,000
S3.11 A statement of financial position shows liabilities of $125,000 and assets of$240,000.The statement of comprehensive income shows income of $80,000 and expenses of $35,000. Capitalis
a.$45,000b.$115,000c.$160,000d.$365,000
S3.12 A transaction to record the purchase of assets on credit wouldinvolve
a. Increasing assets and reducing accountspayable
b. Reducing assets and reducing accountspayable
c. Increasing accounts payable and increasingassets
d. Increasing accounts payable and reducingassets
3. The general ledger of Colourful Corporation, a paint store, had thefollowingbalances in its general ledger on May 31,2015:
|
Cash
|
$8,500
|
|
AccountsReceivable
|
1,400
|
|
Inventory
|
22,050
|
|
Equipment
|
2,500
|
|
Accountspayable
|
9,600
|
|
Commonshares
|
10,000
|
|
Retainedearnings
|
14,850
|
The following transactions occurred during June2015:
1. Collected all, but $800 of the accounts receivable outstanding on May31.
2. Sold paint that costs $20,500 to customers for $34,000. Of these sales, 80%wasfor cash and 20% was oncredit.
3. Paid the accounts payable outstanding on May31.
4. Bought paint from a supplier for $18,300, half on credit and half forcash.
5. Paid rent for June of$2,200.
6. Sent out a statement reminding a customer that he still owed $800 fromMay.
7. Purchased additional equipment for $3,000 with money borrowed from thebank.
8. Took out an advertisement in the local paper for $150. The company will pay foritin July.
9. Paid salaries and wages of$5,500.
10. Paid utilities for June of$550.
11. Paid dividends of $1,000 cash to the owner of thecompany.
Required:
Prepare
a) Statement of comprehensive income for June 2015and
b) Statement of financial position at June 30,2015.
The balances below are shown in alphabetical order in a professional servicefirm'sledger at the end of a financialyear.
Required: Calculate
a. The profit for theyear
b. The shareholders' equity at the end of the year
|
Advertisingexpense
|
$15,000
|
|
Bank
|
5,000
|
|
Shareholder's equity at the beginning of the year
|
71,000
|
|
Accountspayable
|
11,000
|
|
Accountsreceivable
|
12,000
|
|
Fixedassets
|
100,000
|
|
Income
|
135,000
|
|
Rentexpense
|
10,000
|
|
Salaryexpense
|
75,000
|
5. For each of the following transactions, identify the effect on each component of the statement of earnings (income statement) and the statement off inancial position (balance sheet) for the current month. The first one has been done as anexampleforyou.
1) $14,000 of services were provided to clients on credittoday
|
Incomestatement
|
Balancesheet
|
|
Revenues
|
Expenses
|
Assets
|
Liabilities
|
Equity
|
|
1)
|
↑ $14,000
|
|
↑ $14,000
|
|
↑ $14,000
|
2) $5,000 cash was collected for service performed on credit lastmonth
3) $25,000 cash was borrowed from thebank
4) $500 of advertising was done in the local newspaper on accounttoday
5) $500 was paid regarding the advertising above (4)
6) The owners contributed an additional $10,000 cash into thebusiness
7) The owners withdrew $5,000 of cash from thebusiness
8) The owners took $200 worth of office supplies home for personaluse
9) A new computer was purchased for $2,000cash
10) A one-year insurance policy costing $12,000 was purchasedtoday
11) Purchased $45 of fuel for the van; paidcash
12) Collected $900 from a client for work performedtoday.