INDIVIDUALE ASSIGNMENT (20%)

QUESTION 1

On April 1, 2010, Jose Guadalupe established an interior decorating business, Lodge Designs. During
the month, Jose completed the following transactions related to the business:

Apr. 1. Jose transferred cash from a personal bank account to an account to be used for the business,
$15,000.

2. Paid rent for period of April 2 to end of month, $2,350.

6. Purchased office equipment on account, $10,000.

8. Purchased a used truck for $21,000, paying $2,000 cash and giving a note payable for the
remainder.

10. Purchased supplies for cash, $1,200.

12. Received cash for job completed, $8,500.

15. Paid annual premiums on property and casualty insurance, $1,800.

23. Recorded jobs completed on account and sent invoices to customers, $6,000.

24. Received an invoice for truck expenses, to be paid in April, $1,000.

29. Paid utilities expense, $1,100.

29. Paid miscellaneous expenses, $500.

30. Received cash from customers on account, $3,500.

30. Paid wages of employees, $3,000.

30. Paid creditor a portion of the amount owed for equipment purchased on April 6, $2,500.

30. Withdrew cash for personal use, $1,750.

Instructions 1. Journalize each transaction in a two-column journal, referring to the following chart of
accounts in selecting the accounts to be debited and credited. (Do not insert the account numbers in the
journal at this time.) Explanations may be omitted

2. Post the journal to a ledger and extend the balances to the appropriate balance columns after each
transaction is posted.

3. Prepare an unadjusted trial balance for Lodge Designs as of April 30, 2010
QUESTION 2

Damascus Carpet has the following unadjusted trial balance as of August 31, 2010.

Damascus Carpet Unadjusted Trial Balance August 31, 2010

Debit Balances Credit

Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,650

Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,760

Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,195

Prepaid Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,550

Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98,000

Notes Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,675

Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,825

Isaiah Betts, Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67,200

Isaiah Betts, Drawing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,375

Fees Earned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 214,725

Wages Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122,500

Rent Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,050

Advertising Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,260

Miscellaneous Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,540

The debit and credit totals are not equal as a result of the following errors:

a. The balance of cash was understated by $5,250.

b. A cash receipt of $3,600 was posted as a debit to Cash of $6,300.

c. A debit of $2,250 to Accounts Receivable was not posted

d. A return of $350 of defective supplies was erroneously posted as a $530 credit to Supplies.
e. An insurance policy acquired at a cost of $300 was posted as a credit to Prepaid Insurance.

f. The balance of Notes Payable was understated by $13,125.

g. A credit of $1,575 in Accounts Payable was overlooked when determining the balance of the account.
h. A debit of $6,125 for a withdrawal by the owner was posted as a credit to Isaiah Betts, Capital.

i. The balance of $12,600 in Advertising Expense was entered as $1,260 in the trial balance.

j. Gas, Electricity ,and Water Expense ,with a balance of $12,075 was omitted from the trial balance.

Instructions 1. Prepare a corrected unadjusted trial balance as of August 31, 2010.

QUSTION 3

Cecil Jameson, Attorney-at-Law, is a proprietorship owned and operated by Cecil Jameson. On July 1,
2009, Cecil Jameson, Attorney-at-Law, has the following assets and liabilities: cash, $1,000; accounts
receivable, $3,200; supplies, $850; land, $10,000; accounts payable, $1,530. Office space and office
equipment are currently being rented, pending the construction of an office complex on land purchased
last year. Business transactions during July are summarized as follows:

a. Received cash from clients for services, $3,928.

b. Paid creditors on account, $1,055.

c. Received cash from Cecil Jameson as an additional investment, $3,700.

d. Paid office rent for the month, $1,200.

e. Charged clients for legal services on account, $2,025.

f. Purchased supplies on account, $245.

g. Received cash from clients on account, $3,000.

h. Received invoice for paralegal services from Legal Aid Inc. For July (to be paid on August 10),
$1,635.

i. Paid the following: wages expense, $850; answering service expense, $250; utilities expense, $325;
and miscellaneous expense, $75.

j. Determined that the cost of supplies on hand was $980; therefore, the cost of supplies used during the
month was $115.

k. Jameson withdrew $1,000 in cash from the business for personal use.

Instructions 1. Determine the amount of owner’s equity (Cecil Jameson’s capital) as of July 1,2009.

2. State the assets, liabilities, and owner’s equity as of July 1 in equation form similar to that shown in
this chapter. In tabular form below the equation, indicate the increases and decreases resulting from each
transaction and the new balances after each transaction.
 3. Prepare an income statement for July, a statement of owner’s equity for July, and a balance sheet as of
July 31, 2009.

QUESTION 4.

Jean Howard established an insurance agency on July 1 of the current year and completed the following
transactions during July:

a. Opened a business bank account with a deposit of $50,000 from personal funds.

b. Purchased supplies on account, $1,600.

c. Paid creditors on account, $500.

d. Received cash from fees earned on insurance commissions, $9,250.

e. Paid rent on office and equipment for the month, $2,500.

f. Paid automobile expenses for month, $900, and miscellaneous expenses, $300.

g. Paid office salaries, $1,900.

h. Determined that the cost of supplies on hand was $550; therefore, the cost of supplies used was
$1,050.

i. Billed insurance companies for sales commissions earned, $11,150.

j. Withdrew cash for personal use, $2,700.

Instructions 1. Indicate the effect of each transaction and the balances after each transaction, using the
tabular headings:

QUESTION 5. The amounts of the assets and liabilities of Heavenly Travel Service at April 30, 2010, the
end of the current year, and its revenue and expenses for the year are listed below. The capital of Jennifer
Burch, owner, was $45,540 at May 1, 2009, the beginning of the current year, and the owner withdrew
$25,000 during the current year.

Accounts payable $ 14,600

Supplies $ 6,800

Accounts receivable 78,000

Supplies expense 13,200

Cash 159,200

Taxes expense 10,250

Fees earned 600,000

Miscellaneous expense 5,000

Wage’s expense 232,640

Rent expense 80,900

Instructions 1. Prepare an income statement for the current year ended April 30, 2010. 2. Prepare a
statement of owner’s equity for the current year ended April 30, 2010. 3. Prepare a balance sheet as of
April 30, 2010

QUESTION 6. The following selected transactions were completed during August between Salem
Company and Boulder Co.:

Aug. 1. Salem Company sold merchandise on account to Boulder Co., $28,600, terms FOB destination,
2/15, n/eom. The cost of the merchandise sold was $17,000.

2. Salem Company paid freight of $500 for delivery of merchandise sold to Boulder Co. on August 1.

5. Salem Company sold merchandise on account to Boulder Co., $18,000, terms FOB shipping point,
n/eom. The cost of the merchandise sold was $10,800.

6. Boulder Co. Returned $1,600of merchandise purchased on account on August 1 from Salem Company.
The cost of the merchandise returned was $960.

9. Boulder Co. paid freight of $350 on August 5 purchase from Salem Company.

15. Salem Company sold merchandise on account to Boulder Co., $36,200, terms FOB shipping point,
1/10, n/30. Salem Company paid freight of $900, which was added to the invoice. The cost of the
merchandise sold was $19,600.

16. Boulder Co. paid Salem Company for purchase of August 1, less discount and less return of August 6.
25. Boulder Co. paid Salem Company on account for purchase of August 15, less discount.

31. Boulder Co. paid Salem Company on account for purchase of August 5.

Instructions

Journalize the August transactions for (1) Salem Company and (2) Boulder Co.

QUESTION 7.

The cash account for Discount Medical Co. at April 30, 2010, indicated a balance of $4,604. The bank
statement indicated a balance of $9,158 on April 30, 2010. Comparing the bank statement and the
accompanying canceled checks and memos with the records revealed the following reconciling items:

a. Checks outstanding totaled $5,225.

c. The bank had collected $4,120on a note left for collection. The face of the note was $4,000.

d. A check for $2,490 returned with the statement had been incorrectly recorded by Discount Medical
Co. as $2,409. The check was for the payment of an obligation to Goldstein Co. for the purchase of office
equipment on account.

e. A check drawn for $170 had been erroneously charged by the bank as $1,700.

f. Bank service charges for April amounted to $30.

Instructions

1. Prepare bank reconciliation.

2. Journalize the necessary entries.