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Lecture 5 - Ss Q1 Q2 Q3

1. The document provides information and questions regarding adjusting journal entries, preparing financial statements, and accounting for subscriptions, insurance, rent, and other expenses for various businesses. 2. Question 1 asks to record adjusting journal entries for prepaid insurance, supplies, shop shelving depreciation, and unearned rental fees. Question 2 asks to record subscription, insurance, and rent transactions in T-accounts and the adjusting entry. 3. Question 3 provides a trial balance and additional information to record adjustments, prepare financial statements for the year, and present the Interest on Mortgage Expense account.

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Esther Fan
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120 views4 pages

Lecture 5 - Ss Q1 Q2 Q3

1. The document provides information and questions regarding adjusting journal entries, preparing financial statements, and accounting for subscriptions, insurance, rent, and other expenses for various businesses. 2. Question 1 asks to record adjusting journal entries for prepaid insurance, supplies, shop shelving depreciation, and unearned rental fees. Question 2 asks to record subscription, insurance, and rent transactions in T-accounts and the adjusting entry. 3. Question 3 provides a trial balance and additional information to record adjustments, prepare financial statements for the year, and present the Interest on Mortgage Expense account.

Uploaded by

Esther Fan
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 4

SCHOOL OF BUSINESS

Subject : Principles of Financial Accounting


Code : ACC1014
Lecture 5 : Adjusting the Accounts & Preparing Financial Statements

Question 1 (Exercise 4.12, Hoggett 10ed.; Chapter 4)

Selected accounts of Amanda’s Art Supplies are shown below at 30 June of the
current year before any adjusting entries have been made.

Debit Credit
Prepaid Insurance $ 4 500
Supplies 720
Shop Shelving 24 000
Unearned Rental $ 4 800
Fees 32 600
Salaries Expense 13 200
Rental Fees
Reve
nue

Additional information
i. Prepaid insurance represents premiums for 1 year paid on 1 April.
ii. Supplies of $430 were on hand at 30 June.
iii. Shop shelving, which had been purchased on 1 January, is expected to last 10
years and have a residual value of $2000.
iv. Amanda collected 4 months’ rent in advance on 1 June from a number of
tenants.
v. Accrued salaries not recorded as at 30 June are $2400.

Required
Record in the general journal the necessary adjusting entries on 30 June.

Question 2 (Problem 4.3, Hoggett 9ed.; Chapter 4)

Monthly Foodies’ Magazine’s ledger includes the following accounts: Subscription


Revenue, Unearned Subscriptions Revenue, Prepaid Insurance, Insurance Expense,
Prepaid Rent and Rent Expense.

The following transactions relating to subscriptions, insurance and rent occurred on


the dates indicated.

Subscriptions
1 July 2016. The Unearned Subscriptions Revenue account contained a credit
balance of $77 500. Of this balance, $21 900 is for subscriptions expiring at the end

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SCHOOL OF BUSINESS

of October and $55 600 is for subscriptions expiring at the end of February.

1 November 2016. Monthly Foodies’ Magazine received $14 800 for subscriptions
lasting 6 months. 1 March 2017. Monthly Foodies’ Magazine received $34 200 for
subscriptions lasting 12 months.

1 May 2017. Monthly Foodies’ Magazine received $16 500 for subscriptions lasting 6
months.

Insurance
1 July 2016. The Prepaid Insurance account contained a debit balance of $11 970
for a policy that ends on 31 March.

15 September 2016. Monthly Foodies’ Magazine paid $27 120 for a 12-month policy
beginning coverage on 15 September.

Rent
1 July 2016. The Prepaid Rent account contained a debit balance of $12 995 for the
period July to November inclusive.

1 December 2016. Monthly Foodies’ Magazine paid $24 030 for 9 months’ rent.

Required:
For each of the situations listed, using T-accounts, enter the beginning balance in
the proper ledger account and post the transactions directly to the accounts listed.
Then record the necessary adjusting entry at 30 June 2017, the end of the financial
year.

Question 3 (Problem 4.12, Hoggett 9ed.; Chapter 4)

The unadjusted trial balance of the general ledger of Antonio’s Small Appliance
Repair Service on 30 June 20X6 is presented below:

ANTONIO’S SMALL APPLIANCE REPAIR SERVICE


Trial Balance
as at 30 June 20X6
Account Debit Credit
Cash at bank $ 56 630
Investment in marketable securities 76 260
Accounts receivable 198 850
GST receivable 18 860
Prepaid insurance 10 200
Electrical repair equipment 360 000

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SCHOOL OF BUSINESS

Accumulated depreciation – electrical equipment $ 122 500


Accounts payable 184 500
Mortgage payable (due 31 December 2021) 61 500
GST payable 27 100
A. Calabrese, Capital 199 870
A. Calabrese, Drawings 31 540
Small appliance repairs revenue 434 600
Advertising expense 20 100
Other selling expenses 30 750
Electricity expense 20 100
Sundry expenses 39 200
Rent expense 19 680
Wages expense 155 800
Interest on mortgage expense 3 060
Rent revenue               19 200
$ 1 022 170 $ 1 022 170

Additional data for adjustment purposes:

(a) Supplies on 30 June 20X6 were:


(i) advertising supplies (originally debited to Advertising Expense), $6900.
(ii) store supplies (originally debited to Sundry Expenses), $3600.
(b) On 1 January 20X6, the business rented half of its shop space to Joshua’s Cafe
for 12 months and received a cheque for $19 200 plus GST, representing the
entire year’s rental fee.
(c) Purchases of electrical repair equipment were as follows, net of GST:
Purchase date Cost Useful life
1 January 20X2 $280 000 8 years
1 April 20X6 $80 000 10 years
(d) The Prepaid Insurance account consists of the following, net of GST:
Policy number Date of policy Life of policy Total premiums
FGK 3457 1 July 2015 2 years $6200
BKL 5702 1 January 2016 1 year $4000
(e) Wages earned by employees but unpaid as at 30 June 20X6 totalled $5040.
(f) Interest on the mortgage payable is $3672 per year, paid in half-yearly
instalments on 1 May and 1 November.

Required:
A. Journalise adjustments in the general journal of the entity.
B. Prepare an income statement and a statement of changes in equity for the year
ended 30 June 20X6.
C. Prepare a statement of financial position (properly classified in narrative form) as
at 30 June 20X6.

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SCHOOL OF BUSINESS

D. Present the Interest on Mortgage Expense account showing detailed entries for
the year ended 30 June 20X6 as it would appear after all adjustments have been
made.

Page | 4

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