lOMoARcPSD|20574723

lOMoARcPSD|20574723

CHAPTER 3
A. QUESTION FOR DOUBLE ENTRIES
Q1
Data for this question are presented in Q5 of chapter 3.
Required: Journalize each transaction. Explanations are not required.
Q2
ABC Corporation has got following information:
a. Received cash of $8,000 and issued common stock.
Dr common stock: 8,000
Cr cash: 8,000
b. Earned video rental revenue on account, $1,800

c. Purchased office furniture on account, $400.

Dr office furniture: 400
Cr A/P: 400
d. Received cash on account, $100
Dr cash on account: 100
Cr A/R:100
e. Paid cash on account, $100
Dr cash on account: 100
Cr A/P: 100
f. Rented videos and received cash of $100.
Dr rented video: 100
Cr cash: 100
g. Paid monthly office rent expense of $900.
Dr office rent expense: 900
Cr A/P: 900
h. Paid $200 cash to purchase supplies that will be used in the future
Dr supplies: 200
Cr cash: 200
Required:
Journalize each transaction. Explanations are not required.
Q3
ABC Delivery Service Company, completed the following transactions during the
first month of operations for January, 2019:
a. Issued common stocks, received cash $6,000 and a truck valued at $11,000.
b. Purchased supplies $300 on account.
c. Prepaid insurance, $700.
d. Performed delivery service for a customer and received $3,200 cash.
e. Paid employee salary, $700
f. Performed delivery service on account $12,000.
g. Collected $600 in advance for delivery service to be performed later.
h. Paid office rent, $600. This rent is not paid in advance.
i. Paid $200 on account.
j. Paid cash dividends of $2,100.
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Required:
1. Record each transaction in the journal. Key each transaction by it letter.
Explanations are not required.

2. Post the transaction that you recorded in requirement 1 in the Taccounts.

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Cash Service revenue

A/R Salary expense
Supplies Rent expense
Prepaid insurance
Delivery truck
Accumulated
depreciation
Accounts payable
Unearned service
revenue
Common stock
Dividends

Cash A/R Supplies

3200 700
600 600
200 2100

11000 700 12000

300 10900 12000 300
Prepaid insurance Delivery truck A/P
700 6000 300
200

700 6000 500

Common stock Dividends Unearned service revenue

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17000 2100 12000

17000 2100 12000

Salary expense Rent expense Service revenue

700 600 600
3200

700 600 3800

3. Enter the trial balance in worksheet for the month ended January 31 2019.
Complete worksheet using the adjustment data given at January 31.
a. Accrued salary expense, $700.
b. Depreciation expense, $60.
c. Prepaid insurance expired, $250.
d. Supplies on hand, $200
e. Unearned service revenue earned during January, $500.
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Financial statement
Asset
Truck 6000
Supplies 300
Prepaid expense 700
A/R 12000
Collected in advanced 600
Cash 9200
Total 28800
Liability
A/P 500
Rent expense 600
Salary expense 700
Total 1800 Equity
Dividends 2100
5. Journalize closing entries.
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Q4
Sara decided to start her own gift basket business. Here is a summary of
transactions she made for the month of May:
May 1: Invested $10,000 to start her new business.
May 2: Paid $900 for gift basket supplies to make gift basket
May 3: Paid $800 rent for the month of September for her storefront.
May 4: Bought $400 worth of office equipment (desk, chairs).
May 28: Sold gift baskets and gift basket accessories on credit for $2,200
May 29: Bought straw and birchwood to make gift basket on credit, $1,500.
The payable will be maturity in 90 days.
1/ Apply the basic accounting equation to complete a transaction analysis for
each transaction
May 1: Sara asset (money on hand) decrease 10,000$
Equity ( new bussiness) increase 10,000$
May 2: Sara asset ( money on hand) decrease 900$
Asset ( supplies) increase 900$
May 3: Asset (money on hand) decrease 800$
Expense ( rent of September) increase 800$
May 4: Asset (money) decrease 400$
Asset equipment increase 400$
May 28: Asset (goods) decrease 2,200$
Asset (A/R) increase 2,200$
May 29: Asset (materials) increase 1,500$
Liability (A/P) increase 1,500$
2/ Prepare T-accounts to record the transactions above
Journal
Date Account Debit Credit
May 1 Invested money 10,000
May 1 Bussiness asset 10,000
May 2 Basket supplies 900
May 2 Money on hand 900
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May 3 Rent expense 800

May 3 Money on hand 800
May 4 Equipment 400
May 4 Cash 400
May 28 Goods accessories 2200
May 28 A/R 2200
May 29 Materials 1500
May 29 A/P 1500
Total 15800 15800

3/ Prepare the trial balance

Q5
Make entries for the following transactions:
1. ABC Ltd. purchased a motor vehicle with $5000 cash and $15,000 on bankloan.
Dr motor vehical: 20,000
Cr cash: 5,000
Cr bank loan: 15,000
2. The charge for the year for depreciation on Office Equipment owned by ABC
Ltd was calculated to be $4,000
Dr depreciation on Office Equipment: 4,000
Cr A/P:4,000
3. ABC Ltd. paid their annual insurance premium of $1,500.
Dr insurance expense: 1500
Cr cash: 1500
4. ABC Ltd. purchased $2,000 of stock on credit/on account from a supplier.
Dr common stock: 2000
Cr cash on credit: 2000
5. The owner invested $30,000 cash in the corporation
Dr cash: 30000
Cr Owner’s capital:30000
6. Purchased $5,500 of equipment with cash
Dr equipment: 5,500
Cr Cash: 5,500
7. Purchased $500 in supplies on account
Dr supplies: 500
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Cr A/R: 500
8. Paid $300 for supplies previously purchased
Dr Cash :300
Cr A/P: 300
B. QUESTION FOR THE MEASUREMENT OF INVENTORIES
Q6
Which one of the following lists consists only items which may be included in the
balance sheet value of such inventories?
A. Foreman’s wages, carriage inwards, carriage outwards, raw materials B.
Raw materials, carriage inwards, costs of storage of finished goods, plant
depreciation
C. Plant depreciation, carriage inwards, raw materials, and foreman’s wages.
D. Carriage outwards, raw materials, foreman’s wages, plant depreciation
Q7
Which of following costs may be included when arriving at the cost of finished
goods for inclusion in balance sheet of a manufacturing company?
Yes No
Carriage inwards x
Non-refundable tax x
Refundable tax x
Carriage outwards x
Depreciation of factory x
plant
Finished goods storage x
costs
Factory supervisors’ x
wages
Production line wages x
Depreciation of office x
buildings
Director’s wages x

Q8
From the given transactions, calculate cost of closing inventories and cost of goods
sold Using FIFO method, LIFO method and Average Cost Method

Date Transaction Unit Cost per unit Selling

price per
unit
Jan 1 Opening 1500 23
Balance
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2 Sales 150 25
12 Purchases 400 24
21 Sales 700 - 25
28 Purchases 300 24,5
30 Sales 1200 - 28

FIFO method:

Jan 1 to 2: 150.23
Jan 12 to 24 : 700.23
Jan 28 to 30: 650.23 + 400.24 + 150.24,5
Closing inventiries: 1500 + 400 + 300 – 150 -700 -1200= 150
cost of closing inventories: 150.24,5=3675
cost of goods sold: 150.23+ 700.23 + 650.23 + 400.24+ 150.24,5 = 41560
LIFO method
Jan 1 to 2: 150.23
Jan 12 to 24 : 400.24 + 300.23
Jan 28 to 30: 300.24,5 + 900.23
Closing inventiries: 1500 + 400 + 300 – 150 -700 -1200= 150
cost of closing inventories: 150.23=3450
cost of goods sold: 150.23+ 400.24 + 300.23 + 300.24,5 + 900.23= 48000
Average Cost Method
Jan 1 to 2: 150.23
Jan 12 to 24 : ((1350.23 + 400.24): 1750)= 23,23
23,23.700
Jan 28 to 30: (1050.23,23 + 300.24,5): 1350= 23,4
23,4.1200
Closing inventiries: 1500 + 400 + 300 – 150 -700 -1200= 150
cost of closing inventories: 150.23,4=26731
cost of goods sold: 150.23 + 23,23.700 + 23,4.1200= 47791

Q9
The following units of a particular item were purchased and sold during the period:
Beginning Inventory 40 units at P20 First
purchase 50 units at P21
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Second purchase 50 units at P22

First sale 110 units
Third purchase 50 units at P23
Second sale 45 units
What is the cost of the 35 units on hand at the end of the period as determined
by:
a/ The LIFO costing method 5.P23 + 30.P20= P715
b/ The FIFO costing method 35.P23= P805 c/ The
moving average cost method 21,5.35= 752,5
Q10
On 10/1/N, A Company purchased merchandise K on credit: Quantity 1.000 kg,
total amount $2.000. Transportation fee of $60 was paid by cash. On 15/2/N, A
issued 400 kg of material K for production.
Determine:
a/ Cost of K purchased? b/ Cost of K issued?
c/ Cost of K at the end of accounting period?
(A Company applied historical cost and accrual principle; cost of material
issused was calculated by moving average method, Openning balance of K:
Quantity: 500kg, $1.000)

A, Cost of K purchased = total amount + tranportation fee= 2000 + 60=2060

B, Cost of K issued: (average method)
= (Cost of purchased + Beginning balance)/(Total quantity).Issused
quantity
= (1000 + 2060)/(500+1000) .400=816
C, Cost of K at the end of accounting period
= Beginning balance + Cost of purchased – cost of issued
=1000 + 2060 - 816 = 2244
Q11
Under FIFO, LIFO, Weight Average and Moving average costing method, fill
in the missing data in the following table:
FIFO
LIFO
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Q12
On 01/01/N, A Company had information about Merchandise K as follows:
Openning balance: Quantity: 1000kg, unit cost: $15
12/1: Purchased 1500kg
21/1: Sold 700kg
30/1: Sold 900kg
Total cost of sale: $30.000 (weighted-average method is applied)
Determine:
1. Purchased unit cost
2. Total cost of purchased
3. Unit cost of sale
4. Closing balance of K

1, Unit cost of sale: 30000/(700+900)=18,75

Purchase unit cost = x

=>(15.1000+1500.x)/2500=18,75
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>X=21,25
2, Total cost of purchased: 21,25.1500=31875
3, 30000/(700 + 900)= 18,75
4, : Quantity remain: 2500 – 1600= 900 kg
=>Unit cost remain: 900.18,75= 16875

Q13
On 01/01/N, A Company had information about Merchandise M as follows:
Openning balance: Quantity: 1500kg, unit cost: $10
12/1: Puschased 2000kg
21/1: Sold 500kg
30/1: Sold 1300kg
Closing balance of M was $25.500. (Weighted-average costing method was
applied when determine cost of sale).
Determine:
1. Unit cost of purchased.
2. Total cost of purchased.
3. Unit cost of sale
4. Total cost of sale
1, Unit cost of sale = 25500/(1500 + 2000 – 500 – 1300)=15
Unit cost of purchased: x
(1500.10 + 2000.x)/3500= 15
=> x=18,75
Total cost of purchased: 18,75. 2000=37500
Total cost of sale: 15.(500+1300)=27000

Q14
On 10/12/N, A Company purchased 1.500 kg of material K with total amount of
$3.000. Transportation fee of $60 mil was paid by cash. On 15/12/N, A issued
750 kg of material K for production.
(Cost of materials issued was calculated by weighted-average method).
(Openning balance of material K= 0).
Determine:
1. Cost of purchased.
2. Cost of issued
3. Closing balance of K.
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1, Cost of purchased: 3000 + 60 = 3060

2, Cost of issued: 3060/1500.750= 1530
3, Closing balance of K = 3060-1530=1530
Q15
Transactions in March: (Currency unit: VND)
- On 1/3: Openning Balance of merchandise X: quantity: 100kg, unit cost:
200.000/kg.
- On 6/4: Purchased 350kg merchandise X, purchasing unit price 200.000/kg-
On 14/3: Issued merchandise X for sales, quantity: 80kg, selling unit price:
220.000/kg, Transportation expense for is 2.000.000.
- On 20/3: Purchased 400kg merchandise X, purchasing unit price
220,000/kg- On 26/3: Issued merchandise X for sales, quantity: 250kg,
selling unit price:
250.000/kg. Transportation expense is 3.500.000.
Salary expense of selling department and administrative department is 18.000.000
and 22.000.000, respectively. The moving average cost method is applied.
Determine:
1, Cost of purchased in March
2, Cost of issued in March
Transaction Purchase Selling Balance
Units Units $ Units Units $ Units Units $ cost cost cost
Opening balance 100 200 20,000
Purchases 350 200 70,000450 200 90,000 Sales 80 209,4 16,753370 198
73,274
Purchases 400 220 88,000 770 209,4 161,247
Sales 250 209,4 52,353520 209,4 108,894 158,000
69,1063,450

Q16
Transaction in Jan/N: (CU: VND)
Openning balance of Material X: Quantity: 300kg, unit cos: 125.000.
1, Purchased 70kg of material X on credit of 120,000/kg. Other purchase cost
was 3,000,000.
2, Issued 350kg of material X for production.
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3, Purchased 130kg of material X on credit of 130,000/kg. Other purchase cost

was 20,000,000
4, Issued 100kg of material X for production.
5, Issued 10kg of material X for packaging.
Determine:
a, Total cost of purchased in Jan b, Total cost of issued in Jan
(Moving average cost method is applied) c, Closing balance of X

C. QUESTION FOR THE MEASUREMENT OF FIX ASSET

Q17
Foster has built a new factory incurring the following costs:
$'000
Land 1,200 .
Materials 2,400 .
Labour 3,000 .
Architect's fees 25 .
Surveyor's fees 15 .
Site overheads 300 .
Apportioned
administrative 150
overheads
Business insurance for
12
first year
Required: Determine cost of buildings.
Cost of building:

1200 + 2400 + 3000 + 25 + 15 + 300=6940

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Q18
On 1 October 2015 Dearing acquired a machine under the following terms.
Manufacturer's base
1,050,000
price Trade discount
(applying to base price 20%
only)
Freight charges 30,000
Electrical installation
28,000
cost
Staff training in use of
40,000
machine
Pre-production testing 22,000
Purchase of a three-year
60,000
maintenance contract
The machine has useful life 10 years with residual value $10,000
Required:
1. Determine initial cost of machine.
2. Determine depreciation expense/charge for the year ended 31 Dec 2015 and
31 Dec 2016
3. Determine book value (carrying value) of machine as at 31 Dec 2015 and31
Dec 2016.
4. Assume that the machine is disposed at 31 Dec 2019 for 700,000.
Determine gain or loss from this transaction.
1, 1050000.80% + 30000 + 28000 + 22000 = 920000
2, Determine depreciation expense/charge for the year ended 31 Dec 2015
and 31 Dec 2016
Annual dep expense: (920000 – 10000)/10= 91000
depreciation expense/charge for the year ended 31 Dec 2015: 91000/12 .3= 22750
depreciation expense/charge for the year ended 31 Dec 2016: 91000 3,
Determine book value (carrying value) of machine as at 31 Dec 2015 and 31 Dec
2016:
Carrying amount as at Dec 2015: 920000 – 22750= 897250
Carrying amount as at Dec 2016: 920000 – 22750 - 91000= 806250
4, Assume that the machine is disposed at 31 Dec 2019 for 700,000.
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Determine gain or loss from this transaction.

Carrying amount as at 31 Dec 2019 = 920000 - 22750 -91000.4= 533250

Gain: 700000 – 533250= 166750

Dr other expense: 533250

Dr acc dep : 386750
Cr machine: 900000
Dr machine sold: 700000
Cr gain: 700000

Q19
On September 1, N, Company M purchased a building at $1,200,000. Buildings
are depreciated using the straight-line depreciation method. Useful life of the
building is 40 years. Salvage value of the building at the end of useful life is
estimated as $120,000.
Determine:
1. Depreciation expense for N?
2. Carrying value of the building at December 31, N?
3. Accumulated depreciation account is_________account.
1, Depreciation expense for N = (1,200,000 – 120,000)/40= 27,000 per year
2, Carrying value of the building at December 31, N
Deprecation per month = 27,000/12 = 2250
Carrying value of the building at December 31, N:
= 1,200,000 – (2250 .4)= 1,191,000
3, Accumulated depreciation account is a contra asset account.

Q20
Company X purchased a car by 3 yearly instalments on 17/9/N. The interest rate
per year was 8.5%. Market value of the car at purchased date of 1.2 billions.
Registration tax rate was 10%. Delivery cost and assemble cost were 35 million.
The car was in use from Oct/N. Its estimated useful life was 5 years and there
was no residual value.
Required:
1, Determine the total cost of the car:
- at the time of initial recognition.
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- at the time of last payment.

2, Determine the accumulated depreciation and carrying amount of the car at the
end of year N. (The Car is depreciated on monthly basis and straight line method
is used for depreciation)
1,The total cost of the car at the time of initial recognition: =
1,200,000,000 + 1,200,000,000.10% + 35,000,000= 1,355,000,000
Interest have to paid each year for the car:
= 1,200,000,000.8,5%= 102,000,000
The total cost of the car at the time of last payment:
= 1,355,000,000 + 102,000,000.3=1,611,000,000
2, Depreciation of the car each month: 1,200,000,000/(5.12)=20,000,000
The accumulated depreciation of the car at the end of year N:
=20,000,000.3=60,000,000
The carrying amount of the car at the end of year N:
=1,200,000,000 – 60,000,000 = 1,140,000,000

D. QUESTION FOR CORRECTION OF ERRORS

Q21
Write the journal entries which would correct these errors:
1. A business receives an invoice for $250 from a supplier which was
omittedfrom the books entirely.- error of omission
Dr merchandise/ material purchased: 250$
Cr A/P: 250$
2. Repairs worth $150 were incorrectly debited to the non-current
asset(machinery) account instead of the repairs account.
Error: Dr non – curent asset
Correct: Dr repair account: 150$
Cr non-curent asset: 150$
3. The bookeepers of a business reduces cash sales by $280 because he was
notsure what the $280 represented. In fact, it was drawings.
Error: Dr sale
Correct: Dr drawing: 280$
Cr sales: 280$
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4. Telephone expenses of $540 are incorrectly debited to the electricity account.

Error of ommision.
5. Sales has been added up to $28.425 instead of $28.825
Error of transposition
6. A bookkeeper accidentally post an invoice for $50 to the Utility
expenseinstead of of the the Material account.
7. Goods sold on credit to John, $230, was not recorded in the books.
Error of omission
8. Goods bought from Jane $500 was credited to Jenny’s account.
Error of transposition
9. Repairs to motor vehicles paid by cheque $650 have been debited to
motorvehicles account.
Error of transposition
[Link] purchase of a van by cash in bank $2 000 was wrongly entered in the
books as $2 200 due to an error in the invoice received.
Error of transposition
[Link] bought in cash $76 was recorded in the books at $67.
Error of transposition
12. Electricity paid by cheque (cash at bank) $200 was credited to account. No
other entries were made in the ledger.
Error of omission
[Link] bought on credit from James, $575, was correctly debited to
furniture account but credited to James account at $775.
Error of transposition
Q22
At ABC Co, the trial balance contained a suspense account with a credit balance
of $1.040
Investigations revealed the following errors:
a. A sale of goods on credit for $1000 had been omitted from the sales account.
Dr goods: 1000
Cr Cash: 1000
b. Delivery and installation costs of $240 on a new item of plant had
beenrecorded as revenue expenditure in the distribution cost account.
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Dr delivery and installation expense: 240

Cr Cash: 240
c. Cash discount of $150 had been taken on paying a supplier, XYX, eventhough
the payment was made outside the time limit. XYZ is insisting that $150 is
still payable.
Dr cash discount: 150
Cr A/P: 150
d. A raw material purchase of $350 had been recorded in the purchasedaccount
as $850, but the trade payables able account was correctly written up.
Dr materials cost: 350
Cr A/P: 350
e. The purchases day book included a credit note for $230 as an invoice in
thetotal column. The correct entry was made in the purchases account.
Required:
1. Prepare journal entries to correct each of the above errors.
2. Open a suspense account and show the correction to be made.
Q23
The credit column on A company’s initial trial balance exceeds the debit column
total by $78, so a suspen account is opened. Adjustment are entered in the
adjustments column of the extended trial balance as follows:
Debit $144 and credit $173. None of these adjustments is entered in the
suspense account.
What is the balance on the suspense account the remains to be cleared?
E. QUESTION FOR THE COMMUNICATION AND OTHERS
Q24
Company X applied accrual basis, perpetual inventory system with moving
average method and prepare financial statements quarterly. (CU: million VND)
I/ Openning balance as at 01/1/N as follows:
Short-term loan from
Cash on hand 200 500
Bank P
Short-term loan from
Cash at bank 6,400 400
Bank Q
Receivable from
150 Owner’s Capital 11,500
customer A
Receivable from
50 Supplies 80
customer N
Receivable from
50 Buildings 2,500
customer B
Payable to supplier X 200 Motor vehicles 700
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Payable to supplier Y 400 Other fixed assets 200

Advanced payment to
50 Raw materials 120
employee M
Merchandises K: Accumulated
2,900 400
1.000kg depreciation
II/ Transactions incurred in Quarter I/N as follows:
1. Purchased merchandise K by cash at bank: Quantity: 2000kg, amount 6,000.
2. Paid freight in of merchandise K, settled by employee M; 40
3. Sold 1,500kg of merchandise K for 5,600. Received 3,500 by cash at bank.
4. Delivery expense of 30, not yet paid.
5. Accural Salary to marketing employees: 90, administrative employees:150
6. Depreciation of fixed assets for the period: 60, in which:
- Depreciation for selling component: 20
- Depreciation for administrative component: 40
7. Issued supplies for administrative purposes: 10
8. Issued materials for packaging: 20 Required:
1. Identify the financial position of Company X as at 1/1/N.
2. Journalize entries for transactions above.
3. Post data of transaction above to relevant T-accounts.
4. Prepare the trial balances (Vietnamese style)
5. Prepare Statement of Financial Position as at 31/3/N.
14
6. Prepare Statement of Profit or Loss for Quarter I/N
Q25
REVIEW
1. When a company pays a bill, the account Cash will be Debited or
Credited?
Credited
2. What will usually cause an asset account to increase? Debit or Credit?
Debit
3. Entries to expenses such as Rent Expense are usually Debits or Credits?
Debits
4. What type of accounts are Interest Receivable and Fees Receivable?
Credits
5. What type of accounts are Deferred Revenues and Unearned Revenues?
Current liability account
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[Link] type of accounts are Prepaid Insurance, Prepaid Advertising, and Prepaid
Expenses?
Debits
7. What type of accounts are Accumulated Depreciation and Allowance
forDoubtful Accounts.
Contra asset
8. A company using the accrual method of accounting performed services
onaccount in August. The services were for $2,000 and the company gave the
customer credit terms that state the amount is to be paid to the company in
September.
a. Assuming that the company prepares monthly income statements, whatwill
be the account debited for $2,000 in August? A/R
b. Assuming that the company prepares monthly income statements, whatwill
be the account credited for $2,000 in August?Revenue
c. In September when the company receives the $2,000 from the
customer,which account should the company debit? Cash
d. In September when the company receives the $2,000 from the
customer,which account should the company credit? A/R
9. Is The business transaction recorded in journal in a chronological order
orrandom order? chronological order
10. In accounting/bookkeeping, the term posting refers to post data from journal
to________the ledger_______
11. Is the right hand side of a T-account termed as debit side or credit side?
Crebit
12. Which statement is helpful in determining the financial position of the
business at a specific date? The balance sheet
13. The nomal balance of capital account is ________Credit______balance
14. Revenue and expense accounts are referred as
________Debit______accounts
15. Is the right hand side of a T-account termed as debit side or credit side?
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Credit
16. Which statement is helpful in determining income/expense/results of
finanical performance of the business at a specific date?
Financial statement