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ACCT5001 S1 2010

Self-Study Solutions

Week 4

ACCT5001 S1 2010 EXERCISE 3.5

Self-Study Solutions

Week 4

1.

(a)

Under the accounting period concept, an accountant is required to determine the impact of each accounting transaction or event in specific accounting periods. An accounting time period of one year in length is referred to as a financial year.

(b)

Dirty Laundry Ltd General Journal

5.

The financial information in a trial balance may not be up-to-date because: (1) (2) (3) Some events are not journalised daily because it is unnecessary and inexpedient to do so. The expiration of some costs occurs with the reduction in an asset with the passage of time. Some items may be unrecorded because the transaction data are not known. 1. Date Account Titles and Explanation Post Ref. 420 121 210 300 400 220 440 110 430 100 1170 1170 1,695 1,695 650 650 4,030 4,030 $ Debit 975 975 $ Credit

June 30 Depreciation Expense ($325 x 3) Accumulated Depreciation Equipment (Depreciation for the year)

10.

(a) (b) (c) (d) (e) (f)

Prepaid expenses (initially recorded as an expense) or Accrued revenue Revenues received in advance. Accrued expenses or revenue received in advance (initially recognised as revenue). Accrued expenses or prepaid expenses. Prepaid expenses. Accrued revenues or revenues received in advance.

2.

30 Revenue Received in Advance Rent Revenue ($12,090 x 1/3) (Rent Revenue April-Jun now revenue)

3.

30 Interest Expense Interest Payable (Accrued interest)

4.

30 Supplies Expense Supplies ($2,800 - $1105) (supplies used)

5.

30 Insurance Expense ($390 x 3) Prepaid Insurance (Interest expense for the 3 months to June)

NB. Adjusting entries are made quarterly (i.e. every 3 months).

ACCT5001 S1 2010 Week 4 Self-Study Solutions.doc

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ACCT5001 S1 2010 Week 4 Self-Study Solutions.doc

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ACCT5001 S1 2010 EXERCISE 3.12

Self-Study Solutions

Week 4

ACCT5001 S1 2010 (b)

Self-Study Solutions

Week 4

Digital Ltd General Journal (a) Date Account Titles and Explanation Service Revenue Ref # 110 400 Debit 600 600 Credit Revenues: Service revenue Rent revenue 30 Office Supplies Expense Office Supplies 510 120 1,600 1,600 Expenses: 30 Insurance Expense Prepaid Insurance 530 130 1,500 1,500 Salaries expense Office supplies expense Rent expense 30 Depreciation Expense Accumulated Depreciation Office Equipment 540 141 1,200 1,200 Profit 30 Salaries Expense Salaries Payable 500 210 1,100 1,100 Insurance expense Depreciation expense Total expenses Total revenue

Digital Ltd Income Statement for the year ended June 30 2010 $ $

June 30 Accounts Receivable

34,600 11,800 46,400

18,100 1,600 15,000 1,500 1,200 37,400 $9,000

30 Rent Revenue Received in Advance Rent Revenue

220 410

800 800

Digital Ltd Statement of Changes in Equity for the year ended 30 June 2010 $ Retained earnings, 1 July 2010 Add: Profit Retained earnings, 30 June 2010 5,600 9,000 $14,600

ACCT5001 S1 2010 Week 4 Self-Study Solutions.doc

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ACCT5001 S1 2010 Week 4 Self-Study Solutions.doc

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ACCT5001 S1 2010

Self-Study Solutions

Week 4

ACCT5001 S1 2010 (c)

Self-Study Solutions Digital Ltd General Journal

Week 4

Digital Ltd Statement of Financial Position as at 30 June 2010 $ Current Assets: Cash Accounts receivable Office supplies Prepaid insurance Total current assets Non-Current Assets Office equipment Less: Total assets Accumulated depreciation office equipment 14,000 (4,800) 9,200 $32,200 10,400 9,400 700 2,500 23,000 $ June 30 Service Revenue Rent Revenue Date

Account Titles and Explanation

Ref #

Debit

Credit

34,600 11,800 46,400 37,400 18,100 1,600 15,000 1,500 1,200 9,000 9,000

Income Summary 30 Income Summary Salaries Expense Office Supplies Expense Rent Expense Insurance Expense Depreciation Expense 30 Income Summary Retained Earnings

Liabilities and Equity: Current Liabilities: Accounts payable Salaries payable Rent received in advance Total liabilities Equity: Share capital Retained earnings Total Equity Total liabilities and Equity 10,000 14,600 24,600 $32,200 $5,800 1,100 700 7,600

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ACCT5001 S1 2010 EXERCISE 3.13

Self-Study Solutions

Week 4

ACCT5001 S1 2010

Self-Study Solutions Trial Balance Adjustments

Week 4 Adj Trial Bal. Income Stm Statement of Financial Position 5 600 34 600 11 800 18 100 1 600 15 000 1 500 1 200

Digital Ltd Worksheet as at 30 June 2010 Retained Earnings Service Revenue Trial Balance Adjustments Adj Trial Bal. Income Stm Statement of Financial Position Cr $ Dr $ 10 400 9 400 700 2 500 14 000 4 800 5 800 1 100 1 500 10 000 800 1 100 700 10 000 4 800 5 800 1 100 700 10 000 Profit $71,500 $71,500 $6 800 $6 800 $74 400 $74 400 9 000 $46 400 $46 400 Cr $ Rent Revenue Salaries Expense Office Supplies Expense Rent Expense Insurance Expense Depreciation Expense 15 000 1 500 1 200 17 000 5 600 34 000 11 000 1 100 1 600 600 800 18 100 1 600 15 000 1 500 1 200 5 600 34 600 11 800

Account titles Cash Accounts Receivable Office Supplies Prepaid Insurance Office Equipment Acc Depn Office Equipment Accounts Payable Salaries Payable Rent Revenue Received in Advance Share Capital

Dr $ 10 400 8 800 2 300 4 000 14 000

Cr $

Dr $

Cr $

Dr $ 10 400

Cr $

Dr $

600 1 600 1 500

9 400 700 2 500 14 000

9 000 $37 000 $7,000

3 600 5 800

1 200

ACCT5001 S1 2010 Week 4 Self-Study Solutions.doc

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ACCT5001 S1 2010

Self-Study Solutions

Week 4

ACCT5001 S1 2010

Self-Study Solutions Cash

Week 4

PROBLEM SET A 3.3 The Palpatine Hotel Ltd General Journal

31/5

Balance

3,500

Prepaid Insurance 31/5 Balance 2,520 31/5 31/5 Insurance Expense Closing Balance 210 2,310 2,520

(a) Date 1. Account Titles and Explanation Prepaid Insurance (To record expired insurance) 31/5 2. 31 Supplies Expense Supplies (To record supplies consumed $2,660 - $1,680) 3. 31 Depreciation Expense Building ($5,040 x 1/12) Accumulated Depreciation Building 31 Depreciation Expense Furniture ($4,200 x 1/12) Accumulated Depreciation Furniture (To record monthly depreciation expense) 31/5 4. 31 Interest Expense Interest Payable [($49,000 x 12%) x 1/12] (To record interest accrued) 5. 31 Rent Revenue Received in Advance Rent Revenue (To record services provided for revenue) 6. 31 Salaries Expense Salaries Payable (To record accrued salaries) 420 420 2,100 2,100 31/5 Balance 490 490 Balance 350 350 420 420 31/5 Balance 980 980 1/6 Opening Balance Balance Debit 210 210 Credit 1/6 Opening Balance May 31 Insurance Expense

2,520 2,310

Supplies 2,660 31/5 31/5 2,660 1,680 Supplies Expense Closing Balance 980 1,680 2,660

Land 21,000

Building 98,000

Accumulated Depreciation Building 31/5 Depreciation Expense 420

Furniture 23,520

Accumulated Depreciation Furniture 31/5 Depreciation Expense 350

(b)

Accounts Payable 31/5 Balance 6,580

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ACCT5001 S1 2010

Self-Study Solutions Rent Revenue Received in Advance

Week 4

ACCT5001 S1 2010

Self-Study Solutions

Week 4

31/5 31/5

Rent Revenue Closing Balance

2,100 31/5 2,940 5,040 1/6

Balance

5,040 31/5 5,040 Interest Payable

Interest Expense 490

Opening Balance

2,940 31/5 Prepaid Insurance

Insurance Expense 210

Salaries Payable 31/5 Salaries Expense 420 31/5 Interest Payable 31/5 Interest Expense 490 31/5 Mortgage Payable 31/5 Balance 49,000 31/5 Share Capital 31/5 Balance 84,000 Depreciation Expense - Furniture Accumulated Depreciation 350 Depreciation Expense - Building Accumulated Depreciation 420 Supplies Supplies Expense 980

Rent Revenue 31/5 31/5 Balance Rent Revenue in Advance 12,880 2,100 14,980

Salaries Expense 31/5 31/5 Balance Salaries Payable 4,200 420 4,620

Electricity Expense 31/5 Balance 1,400

Advertising Expense 31/5 Balance 700

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ACCT5001 S1 2010 (c)

Self-Study Solutions

Week 4

ACCT5001 S1 2010 (d)

Self-Study Solutions

Week 4

The Palpatine Hotel Ltd Adjusted Trial Balance as at 31 May 2010

The Palpatine Hotel Ltd Income Statement for the month ended 31 May 2010

Account Title Cash Prepaid Insurance Supplies Land Building Accumulated Depreciation Building Furniture Accumulated Depreciation Furniture Accounts Payable Rent Revenue Received in Advance Salaries Payable Interest Payable Mortgage Payable Share Capital Rent Revenue Salaries Expense Electricity Expense Advertising Expense Interest Expense Insurance Expense Supplies Expense Depreciation Expense Building Depreciation Expense Furniture

Debit $ 3,500 2,310 1,680 21,000 98,000

Credit $ Revenues: Rent revenue Expenses: Salaries expense Electricity expense Supplies expense 420 Advertising expense Interest expense 350 6,580 2,940 420 490 49,000 84,000 14,980 Profit Insurance expense Depreciation expense building Depreciation expense furniture Total expenses $4,620 1,400 980 700 490 210 420 350 9,170 $5,810 $14,980

23,520

4,620 1,400 700 490 210 980 420 350 $159,180 $159,180 Retained earnings, 1 May 2010 Add: Profit Retained earnings, 31 May 2010 $ 0 5,810 $5,810 The Palpatine Hotel Ltd Statement of Changes in Equity for the month ended 31 May 2010

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ACCT5001 S1 2010

Self-Study Solutions

Week 4

ACCT5001 S1 2010 (e)

Self-Study Solutions

Week 4

The following accounts would be closed:

The Palpatine Hotel Ltd Statement of Financial Position as at 31 May 2010 Rent Revenue, Salaries Expense, Electricity Expense, Advertising Expense, Interest Expense, Insurance Expense, Supplies Expense, Depreciation Expense Building, Depreciation Expense Furniture.

$ Current assets Cash Prepaid insurance Supplies Total current assets Non-current assets Land Buildings Less: Less: Total Assets Liabilities and Equity Current Liabilities: Accounts payable Rent revenue received in advance Salaries payable Interest payable Total current liabilities Non-current liabilities Mortgage payable Total liabilities Equity: Share capital Retained earnings Total Equity Total Liabilities and Equity 84,000 5,810 49,000 6,580 2,940 420 490 Accumulated depreciation building Accumulated depreciation furniture Furniture Total non-current 98,000 (420) 23,520 (350)

$ 3,500 2,310 1,680 7,490 21,000 97,580 23,170 141,750 $149,240

10,430 49,000 59,430

89,810 $149,240

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ACCT5001 S1 2010 PROBLEM SET B 3.3

Self-Study Solutions

Week 4

ACCT5001 S1 2010 (b)

Self-Study Solutions

Week 4

Cash Showroom Rentals Ltd General Journal Prepaid Insurance 30/6 (a) Date 1. Account Titles and Explanation Prepaid Insurance (To record expired insurance $150 x 3)) Supplies 2. 30 Supplies Expense Supplies (To record supplies consumed) 1,900 3. 30 Depreciation Expense Building ($3 600 x 3/12) Accumulated Depreciation Building 30 Depreciation Expense Furniture ($3,000 x 3/12) Accumulated Depreciation Furniture (To record monthly depreciation expense) 4. 30 Interest Expense Interest Payable [($35,000 x 12%) x 3/12] (To record interest accrued) Accumulated Depreciation Building 5. 30 Rent Revenue Received in Advance Rent Revenue (To record services provided for revenue) Furniture 6. 30 Salaries Expense Salaries Payable (To record accrued salaries) Accumulated Depreciation Furniture 30/6 Depreciation Expense 750 300 300 30/6 Balance 16,800 1,500 1,500 30/6 Depreciation Expense 900 1,050 1,050 30/6 Balance Building 70,000 750 750 30/6 Balance 900 900 1/7 Opening Balance 1,200 700 700 30/6 Balance 1,900 30/6 30/6 Supplies Expense Closing Balance 700 1,200 1,900 Debit 450 450 Credit 1/7 Opening Balance June 30 Insurance Expense 1,800 1,350 Balance 1,800 30/6 30/6 Insurance Expense Closing Balance 450 1,360 1,800 30/6 Balance 2,500

Land 15,000

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ACCT5001 S1 2010

Self-Study Solutions Accounts Payable 30/6 Balance

Week 4

ACCT5001 S1 2010

Self-Study Solutions Electricity Expense

Week 4

4,700

30/6

Balance

1,000

Rent Revenue Received in Advance 30/6 30/6 Rent Revenue Closing Balance 1,500 30/6 2,100 3,600 1/7 Opening Balance 3,600 2,100 30/6 Interest Payable Balance 3,600 30/6 Balance

Advertising Expense 500

Interest Expense 1,050

Salaries Payable 30/6 Salaries Expense 300 30/6 Prepaid Insurance

Insurance Expense 450

Interest Payable 30/6 Interest Expense 1,050 30/6 Supplies

Supplies Expense 700

Mortgage Payable 30/6 Balance 35,000 30/6

Depreciation Expense - Building Accumulated Depreciation 900

Share Capital 30/6 Balance 60,000 30/6

Depreciation Expense - Furniture Accumulated Depreciation 750

Rent Revenue 30/6 30/6 Balance Rent Revenue in Advance 9,200 1,500 10,700

Salaries Expense 30/6 30/6 Balance Salaries Payable 3,000 300 3,300

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ACCT5001 S1 2010

Self-Study Solutions

Week 4

ACCT5001 S1 2010 (d)

Self-Study Solutions Showroom Rentals Ltd Income Statement

Week 4

(c)

Showroom Rentals Ltd Adjusted Trial Balance as at 30 June 2011

Account Title Cash Prepaid Insurance Supplies Land Building Accumulated Depreciation Building Furniture Accumulated Depreciation Furniture Accounts Payable Rent Revenue Received in Advance Salaries Payable Interest Payable Mortgage Payable Share Capital Rent Revenue Salaries Expense Electricity Expense Advertising Expense Interest Expense Insurance Expense Supplies Expense Depreciation Expense Building Depreciation Expense Furniture

Debit $2,500 1,350 1,200 15,000 70,000

Credit

for the three months ended 30 June 2011 $ Revenues: Rent revenue Expenses: Salaries expense 3,300 1,000 700 500 1,050 450 900 750 8,650 $2,050 Electricity expense Supplies expense 750 Advertising expense Interest expense Insurance expense Depreciation expense building Depreciation expense furniture Total expenses Profit 10,700 $

$900 16,800 4,700 2,100 300 1,050 35,000 60,000 10,700 3,300 1,000 500 1,050 450 700 900 750 $115,500 $115,500

Showroom Rentals Ltd Statement of changes in equity For the three months ended 30 June 2011 $ Retained earnings, 1 April 2011 Add: Profit Retained earnings, 30 June 2011 2,050 $2,050

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ACCT5001 S1 2010

Self-Study Solutions

Week 4

ACCT5001 S1 2010

Self-Study Solutions

Week 4
PROBLEM SET B 3.4 Showroom Rentals Ltd Worksheet

Showroom Rentals Ltd Statement of Financial Position

Prepare adjusting entries and adjusted trial balance using a worksheet. (LO4,5,6,8) Trial Balance Adjustments Adj. Trial Bal. Income Stm Statement financial position Cr Dr $2,500 1,350 1,200 15,000 70,000 16,800 $4,700 1,500 (5) 2,100 35,000 60,000 1,500 (5) 300 (6) 3,300 10,700 3,300 $10,700 $4,700 2,100 35,000 60,000 Cr of

Account titles

Dr $2,500 1,800 1,900 15,000 70,000 16,800

Cr

Dr

Cr

Dr $2,500

Cr

Dr

as at 30 June 2011
Cash

$ Current Assets Cash Prepaid insurance Supplies Total current assets Non-current assets Land Buildings Less: Less: Total assets Liabilities and Equity Current liabilities: Accounts payable Rent revenue received in advance Salaries payable Interest payable Total current liabilities Non-current liabilities Mortgage payable Total liabilities Equity: Share capital Retained earnings Total equity Total liabilities and equity 60,000 2,050 35,000 4,700 2,100 300 1,050 Accumulated depreciation building Accumulated depreciation furniture Furniture Total non-current assets 70,000 (900) 16,800 (750) 2,500 1,350 1,200

Prepaid Insurance Supplies Land Building

$450 (1) $700(2)

1,350 1,200 15,000 70,000 16,800

5,050 15,000 69,100 16,050 100,150 $105,200

Furniture Accounts Payable Rent Revenue Recd in Advance Mortgage Payable Share Capital Rent Revenue Salaries Expense

4,700 3,600 35,000 60,000 9,200 3,000

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8,150

35,000 43,150

62,050 $105,200

(e)

The following accounts would be closed: Rent Revenue, Salaries Expense, Electricity Expense, Advertising Expense, Interest Expense, Insurance Expense, Supplies Expense, Depreciation Expense Building, Depreciation Expense Furniture. 16/02/2010 23

ACCT5001 S1 2010 Week 4 Self-Study Solutions.doc

ACCT5001 S1 2010

Self-Study Solutions Trial Balance Adjustments

Week 4

ACCT5001 S1 2010
Adj. Trial Bal. Income Stm Statement financial position of

Self-Study Solutions

Week 4

BUILDING BUSINESS SKILLS 3.3 INTERPRETING FINANCIAL STATEMENTS

Electricity Expense Advertising Expense

1,000 500 $112,500 ______ $112,500 450 (1) 700 (2) 900 (3) 900 (3) 750 (3) 750 (3) 1,050 (4) 1,050 (4) 300 (6)

1,000 500

1,000 500

Chip Ltd
450 700 900 900 750 750 1,050 1,050 300 2,050 $5,650 $5,650 $115,500 $115,500 $10,700 $10,700 $106,850 1,050 1,050 300 2,050 $106,850 750 750 450 700 900 900

Insurance Expense Supplies Expense Depreciation Expense Building Accumulated Depn - Building Depreciation Expense Furniture Accumulated Depn - Furniture Interest Expense Interest Payable Salaries Payable Profit

General Journal (a) (Amounts in millions)

Account Titles and Explanation 1. Depreciation Expense Accumulated Depreciation 2. Office Supplies Expense Office Supplies 3. Administrative Salaries Expense R&D salaries Expense Salaries Payable

Debit $M 30

Credit $M 30 1 1 7.5 7.5 15 2.5 2.5

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4.

Insurance Expense Prepaid Insurance (balance of Prepaid Insurance expensed in 2008)

5.

Rent Expense Prepaid Rent

7 7 10 10

6.

Interest Expense Interest Payable

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ACCT5001 S1 2010

Self-Study Solutions

Week 4

ACCT5001 S1 2010

Self-Study Solutions

Week 4

salaries, +2.5, insurance expense, + 7, rent expense, = $795 million. (b) The accounts are considered in the order of the journal entries: (2) (3) (4) Original figure $224 million + $7.5, salaries, = $231.5 million Original figure $240 million + $10 million not recorded = $250 million. Original figure $240 million - $2 million recorded in error = $238 million.

General Ledger Account Depreciation Expense Accumulated Depreciation Office Supplies Expense Office Supplies Administrative Salaries Expense R&D Salaries Expense Salaries Payable Insurance Expense Prepaid Insurance Rent Expense Prepaid Rent Interest Expense Interest Payable

Income Statement Item Selling, general and administrative N/A (Statement of Financial Position) Selling, general and administrative N/A (Statement of Financial Position) Selling, general and administrative Research and development N/A (Statement of Financial Position) Selling, general and administrative N/A (Statement of Financial Position) Selling, general and administrative N/A (Statement of Financial Position) Interest expense decreased N/A (Statement of Financial Position)

(c)

Chip Ltd Income statement (partial) For the year ended 30 June 2008

Revenues: Net sales Interest revenue and other $5,738.0 279.0 6,017.0 Expenses: Cost of goods sold Selling, general and administrative Research and development Interest expense 4,700.0 795.0 (1) 231.5 (2) 250.0 (3) 5,976.5 Profit before income tax (1) $40.5

Original figure $747 million + 30, depreciation, + 1, office supplies, + 7.5,

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