FAC101X – General Assignment

Exercise (01):
ABC Company has the following transactions for its inventory systems. The company
uses the perpetual system.
July 01: Purchased TV sets on account for L.E.1,800 from TERRY company, FOB
destination, terms 2/10, n/30. The party responsible for paying the freight costs paid
L.E.100 on this date.
July 03: Sold TV sets on account to STAR Company for L.E.2,000. The cost of the TV
sold is L.E.1200. Terms 1/10, n/30.
July 09: Paid TERRY company in full.
July 12: Received the full amount from STAR Company.
July 17: Sold TV sets on account to SAMIR company for L.E.1,500. The cost of the TV
sets sold was L.E 900, terms 1/10, n/30.
July 18: Purchased TV sets on account for L.E.1,700 from MASTER, FOB shipping
point, terms 1/10, n/30. The party responsible paid L.E.100 for freight on this date.
July 20: Received L.E. 300 credit (including freight) for TV sets returned to MASTER.
July 22: Sold TV sets on account to FLAG company for L.E.2,250. The cost of TV sets
sold was L.E.1,350.
July 30: Paid MASTER in full.
July 31: Granted FLAG L.E.200 for returned TV sets costing L.E.120.
Answer:

Date Transaction Dr. Cr.

Merchandise Inventory 1,800
July 01
Account Payable 1,800
Accounts Receivables 2,000
Sales 2,000
July 03
Cost of Goods sold 1,200
Merchandise Inventory 1,200
Accounts payable 1,800
July 09 Merchandise Inventory (L.E 1,800 × 0.02) 36
Cash 1,764
Cash 1,980
July 12 Sales discounts (L.E 2,000 × 0.01) 20
Account Receivables 2,000
Accounts Receivables 1,500
Sales 1,500
July 17
Cost of Goods sold 900
Merchandise Inventory 900
Merchandise Inventory 1,700
Account Payable 1,700
July 18
Merchandise Inventory 100
Cash 100
Accounts payable 300
July 20
Merchandise Inventory 300
Cash 1,485
July 21 Sales Discount (L.E 1,500 × 0.01) 15
Accounts Receivables 1,500
Accounts Receivables 2,250
Sales 2,250
July 22
Cost of Goods sold 1,350
Merchandise Inventory 1,350
Accounts Payable (1700 - 300) 1,400
July 30
Cash 1,400
Sales Returns and Allowances 200
Accounts Receivables 200
July 31
Merchandise Inventory 120
Cost of goods sold 120
Exercise (02):
For each of the following separate cases, prepare adjusting entries required of financial
statements for the year ended (date of) December 31, 2024.
1. Purchased supplies costing L.E.6,000 on October 5. An inventory count at the close
of business on December 31 reveals that L.E.2,000 of supplies are still on hand.
2. Prepaid insurance shows a debit balance of L.E.60,000 representing cost of three
years’ insurance policy was purchased on July 1 this year.
3. On August 1, unearned rent revenues was credit for L.E.10,000 representing rent for
ten month beginning August 1 of the current year
4. The company completed performance amounting to L.E.6,000 and it will be collected
next month.
5. At 31/12/2024 salaries accrued but not paid yet are L.E.3,000.
Answer:

Date Explanation Debit (Dr) Credit (Cr)

Supplies expense 4,000
Dec. 31st Supplies 4,000
(6,000 - 2,000 = L.E.4,000)
Insurance Expense 10,000
st
Dec. 31 Prepaid Insurance 10,000
(60,000 / 3 = 20,000 x 6/12 = L.E.10,000)
Unearned Rent Revenue 5,000
st
Dec. 31 Rent Revenue 5,000
(10,0000 / 10 = L.E.1,000 x 5 = L.E.5,000)
Accounts Receivable 6,000
st
Dec. 31 6,000
Services Revenue

Salaries Expense
Dec. 31st 3,000
Salaries Payable
3,000
Exercise (03):
Suppose that company ABC has the following balances before adjustment:
Account Title Dr. Cr.
Prepaid Insurance L.E.3,600
Supplies 2,800
Equipment 25,000
Accumulated Depreciation –Equipment 8,400
Notes Payable 20,000
Unearned Rent Revenue 9,900
Rent Revenue 60,000
Interest Expense 0
Wages Expense 14,000
Other data:
1. One-third of the unearned rent revenue was earned during the quarter
2. Interest of L.E. 500 is accrued on the notes payable
3. Supplies on hand total L.E. 700
4. Insurance expires at the rate of L.E. 200 per month.
Required:
Journalize the adjusting entries at March 31 (Assume adjustments are recorded quarterly:
every 3 months)
Answer:
Date Transaction Dr. Cr.
Depreciation expense (400×3) 1,200
March 31
Accumulated Depreciation –Equipment 1,200
Unearned rent 3,300
March 31 Rent revenue 3,300
(9,900×1/3)
Interest Expense 500
March 31
Interest Payable 500
Supplies Expense 2,100
March 31
Supplies 2,100
Insurance Expense 600
March 31 Prepaid Insurance 600
(200×3)
Exercise (04):
Suppose that company MARKET that is owned by MF has the following Trial balance
before adjustment at May 01, 2024:

Account Title Dr. Cr.

Cash 7,700
Accounts Receivables 4,000
Supplies 1,500
Prepaid Insurance 4,800
Office Furniture 9,600
Accounts Payable 3,500
Unearned service revenue 3,000
Magdy’s Capital 19,100
Service Revenue 6,000
Salaries Expense 3,000
Rent Expense 1,000
Totals 31,600 31,600

Other data:

1. L.E. 500 of supplies have been used during this month.

2. Travel expense incurred but not paid on May 31, 2024 is L.E. 200
3. The insurance policy is for 2 years.
4. L.E. 1000 of the balance of the unearned service revenue remains unearned at the end of
the month.
5. May 31 is a Tuesday and the employees are paid weekly (for 5-day work) every Thursday.
The company has two employees each is paid L.E. 700. Then a 3 days salary are not paid
at the end of the month.
6. Invoices represents L.E. 1000 services that are performed during the month but have not
been received in cash yet.

Required:

Journalize the adjusting entries at May 31 (Assume adjustments are recorded monthly)
Answer:
Date Transaction Dr. Cr.
Supplies expense 500
May 31
Supplies 500

Travel Expense 200

May 31
Travel payable 200

Insurance expense 200

May 31 Prepaid Insurance 200

(4,800÷24)

Unearned Revenue 2,000

May 31 Service Revenue 2,000

(3000-1000)

Salaries Expense 840

May 31 Salaries Payable 840

[(3/5 x 700) x 2]

Accounts Receivables 1,000

May 31
Service Revenue 1,000
Exercise (05):
The adjusted trial balance of MFH Repair Company at December 31, 2024, follows.
MFH Repair Company
Adjusted trial balance
at December 31, 2024
Account Title Debit Credit
Cash 95,600
Notes receivable (current) 50,000
Prepaid insurance 16,000
Prepaid rent 4,000
Equipment 170,000
Accumulated depreciation—Equipment 57,000
Accounts payable 52,000
Long-term notes payable 63,000
Capital 178,500
Withdrawals 30,000
Repair services revenue 180,800
Interest revenue 7,500
Depreciation expense—Equipment 28,500
Wages expense 85,000
Rent expense 48,000
Insurance expense 6,000
Interest expense 5,700
Totals 538,800 538,800

Required:

1. Prepare closing entries for MFH Repair Company.

2. Determine the balance of the Capital account to be reported on the December 31, 2024,

balance sheet.

3. Prepare post-closing trial balance.

Answer:
1- Closing entries:
Date Explanation Dr Cr
Repair Services Revenue 180,800
Interest Revenue 7,500
Dec. 31
Income Summary 188,300
(To close revenue accounts)
Income Summary 173,200
Depreciation Expense—Equipment 28,500
Wages Expense 85,000
Dec. 31 Rent Expense 48,000
Insurance Expense 6,000
Interest Expense 5,700
(To close expense accounts)
Income Summary 15,100
Dec. 31 C. Trout, Capital 15,100
(To close the Income Summary account)
Trout, Capital 30,000
Dec. 31 C. Trout, Withdrawals 30,000
(To close the withdrawals account)

2-Balance of the C. Trout, Capital account

Dr Capital Cr

30,000 178,500

15,100

Balance 163,600
 3- Post closing trial balance
MFH Repair Company
Post-closing trial balance
At December 31, 2024
Account Title Debit Credit
Cash 95,600
Notes receivable (current) 50,000
Prepaid insurance 16,000
Prepaid rent 4,000
Equipment 170,000
Accumulated depreciation—Equipment 57,000
Accounts payable 52,000
Long-term notes payable 63,000
Capital 163,600
Totals 335,600 335,600

Exercise (06):
MFH Company purchased a machine on January 1 of the current year for L.E.750,000.
Calculate the annual depreciation expense for five years of the machine's life (estimated at
5 years and total production 2,500,000 units, with a salvage value of L.E.75,000). During
the machine's 5-year life it produced the following unit produced: 350,000; 400,000;
550,000; 800,000; and 400,000 units.

Required:

Compute the annual depreciation expense for the 5 years under each of the following
methods:
a) Straight line depreciation method.
b) Units of output production.
c) Double declining balance method.
Answer:
a) Straight-line depreciation method.
Annual depreciation expense
= (Original cost – salvage value) / useful life
= (L.E.750,000 - L.E.75,000) / 5
= L.E.675,000 / 5
= L.E.135,000 for each year.
b. Units of production method.
Depreciation cost per unit
= (Original cost – salvage value) / Total units of production
= (L.E.750,000 – L.E.75,000) / 2,500,000
= L.E.675,000 / 2,500,000
= L.E.0.27 per unit
Depreciation expense for Year 1
= L.E.0.27  350,000 units = L.E.94,500
Depreciation expense for Year 2
= L.E.0.27  400,000 units = L.E.108,000
Depreciation expense for Year 3
= L.E.0.27  550,000 units = L.E.148,500
Depreciation expense for Year 4
= L.E.0.27  800,000 units = L.E.216,000
Depreciation expense for Year 5
= L.E.0.27  400,000 units = L.E.108,000
c. Double-declining balance method.
Depreciation rate = [100% / useful life] x 2
= (100% / 5 ) x 2 = 40%
Year Book Value at Beg. Dep. Rate Dep. Exp. A/D Book Value at end

0
1
2
3
4
5
97,200 – 75,000 = 22,200
Exercise Seven:
MFH Company uses the periodic inventory system and had the following purchases and
sales during May.

Purchases Sales
Units Unit Cost Units Selling Price/Unit
01 May Beginning inventory 100 L.E.40
03 May Purchase 60 L.E.50
05 May Sales 70 L.E.80
11 May Purchase 200 L.E.55
15 May Sales 80 L.E.90
19 May Purchase 40 L.E.60
25 May Sales 150 L.E.90

Instructions: If MFH Company uses the periodic inventory system, calculate the value
assigned to cost of goods sold and to the ending inventory at May 31 using the three
different cost method.
a) FIFO
b) LIFO
c) Weighted Average Cost
Answer:

Units Unit Cost Total Cost

01 May Beginning inventory 100 L.E.40 4,000
03 May Purchase 60 L.E.50 3,000
11 May Purchase 200 L.E.55 11,000
19 May Purchase 40 L.E.60 2,400
Totals 400 20,400
Units sold = (70 + 80 + 150) = 300 units
Ending units = 400 – 300 = 100 units
a) FIFO:

100 * 40 = 4,000
60 * 50 = 3,000
140 * 55 = 7,700
Total = 14,700
Cost of goods sold = L.E.14,700
Cost of Ending inventory = 20,400 – 14,700 = L.E.5,700
 b) LIFO:
40 * 60 = 2,400
200 * 55 = 11,000
60 * 50 = 3,000
Total = 16,400
Cost of goods sold = L.E.16,400
Cost of Ending inventory = 20,400 – 16,400 = L.E.4,000

c) WAC:

Weighted Average cost per unit = 20,400 / 400 = L.E.51

Cost of goods sold = 300 * 51 = L.E.15,300

Cost of Ending inventory = 20,400 – 15,300 = L.E.5,100

Exercise (08): Multiple Choice Question

1- Adjusting entries:
A. Affect only income statement accounts.
B. Affect only balance sheet accounts.
C. Affect both income statement and balance sheet accounts.
D. Affect only cash flow statement accounts.
Answer:

2- Prepaid expenses, depreciation, accrued expenses, unearned revenues, and

accrued revenues are all examples of:
A. Items that require contra accounts.
B. Items that require adjusting entries.
C. Asset and equity.
D. Asset accounts.
Answer:

3- An adjusting entry could be made for each of the following except:

A. Prepaid expenses.
B. Depreciation.
C. Owner withdrawals.
D. Unearned revenues.
Answer:
 4- Unearned revenue is reported in the financial statements as:
A. A revenue on the balance sheet.
B. A liability on the balance sheet.
C. An unearned revenue on the income statement.
D. An asset on the balance sheet.
Answer:

5- Which of the following assets is not depreciated?

A. Store fixtures.
B. Computers.
C. Land.
D. Buildings.
Answer:

6- A trial balance prepared after adjustments have been recorded is called a(n)
A. Balance sheet.
B. Adjusted trial balance.
C. Unadjusted trial balance.
D. Classified balance sheet.
Answer:

7- When closing entries are made:

A. All ledger accounts are closed to start the new accounting period.
B. All temporary accounts are closed but not the permanent accounts.
C. All real accounts are closed but not the nominal accounts.
D. All permanent accounts are closed but not the nominal accounts.
Answer:

8- Assets, liabilities, and equity accounts are not closed; these accounts are
called:
A. Nominal accounts.
B. Temporary accounts.
C. Permanent accounts.
D. Contra accounts.
Answer:
 9- The recurring steps performed each reporting period, starting with analyzing
and recording transactions in the journal and continuing through the post-
closing trial balance, is referred to as the:
A. Accounting period.
B. Operating cycle.
C. Accounting cycle.
D. Closing cycle.
Answer:

10- Financial statements are typically prepared in the following order:

A. Balance sheet, statement of owner's equity, income statement.
B. Statement of owner's equity, balance sheet, income statement.
C. Income statement, balance sheet, statement of owner's equity.
D. Income statement, statement of owner's equity, balance sheet.
Answer:

11- The assets section of a classified balance sheet usually includes:

A. Current assets, long-term investments, plant assets, and intangible assets.
B. Current assets, long-term assets, revenues, and intangible assets.
C. Current assets, long-term investments, plant assets, and equity.
D. Current liabilities, long-term investments, plant assets, and intangible assets.
Answer:

12- The Income Summary account is used:

A. To adjust and update asset and liability accounts.
B. To close the revenue and expense accounts.
C. To determine the appropriate withdrawal amount.
D. To replace the income statement under certain circumstances.
Answer:

13- Cost of goods sold:

A. Is another term for merchandise sales.
B. Is the term used for the cost of buying and preparing merchandise for sale.
C. Is another term for revenue.
D. Is also called gross margin.
Answer:
 14- Beginning inventory plus net purchases is:
A. Cost of goods sold.
B. Merchandise available for sale.
C. Ending inventory.
D. Sales.
Answer:

15- Sales less sales discounts less sales returns and allowances equals:
A. Net Sales.
B. Cost of goods sold.
C. Net purchases.
D. Gross profit.
Answer:

16- The amount recorded for merchandise inventory includes all of the following
except:
A. Freight costs paid by the seller.
B. Returns and allowances.
C. Freight costs paid by the buyer.
D. Purchase discounts.
Answer:

17- Expenses that support the overall operations of a business and include the
expenses relating to accounting, human resource management, and financial
management are called:
A. General and administrative expenses.
B. Selling expenses.
C. Purchasing expenses.
D. Cost of goods sold.
Answer:

18- The following statements regarding gross profit are true except:
A. Gross profit is also called gross margin.
B. Gross profit less other operating expenses equals income from operations.
C. Gross profit is not calculated on the multiple-step income statement.
D. Gross profit equals net sales less cost of goods sold.
Answer:
 19- Merchandise inventory:
A. Is a long-term asset.
B. Is a current asset.
C. Includes supplies.
D. Is classified with investments on the balance sheet.
Answer:

20- Sales returns:

A. Refer to merchandise that customers return to the seller after the sale.
B. Refer to reductions in the selling price of merchandise sold to customers.
C. Represent cash discounts.
D. Represent trade discounts.
Answer:

***************

Mohamed Farouk, Ph. D.