CLASS EXERCISES-SESSION-3,4

(For course instructor Guidance)

Learning Objective:
1. How to prepare Income Statement and Balance sheet from selected data?
2. How to change balance sheet after new transactions?
3. What are the purposes and formats of an Income statement for service
industry?
No.
1
2
3
4
5

Q No.
1-12
1A-1
1A-4
2B-3
3A-4

Page No.
47
49
50
98
147

Q No.1
Salim & Co bought machine at a cost of Rs.500,000 on January 1,1997 on credit from
Sheeraz brothers. Estimated life of the machine is 5 years and scrap value is Rs.50,000.
Required:
Present schedule of depreciation under following methods for 5 years. Last year
depreciation should be adjusted to arrive at scrap value:
Straight line method
Diminishing Balance method(Rate 20%)
Q No.2
Merchant & Co bought machine at a cost of Rs.200,000 on September 1,1999 on credit
from Hamid brothers. Estimated life of the machine is 5 years and scrap value is
Rs.20,000.
Required:
Present schedule of depreciation under following methods for 5 years. Last year
depreciation should be adjusted to arrive at scrap value:
Straight line method
Diminishing Balance method(Rate 20%)
Q No.3
Khalid Brothers purchased two machines at a cost of Rs.25000 each on March 5,1998.
Another machine bought on July 5,1998 at Rs.75,000. Three machine purchased on
September 5 at Rs.40,000 each.

Required:
Present Machine Account on December 31,1998.
Compute depreciation under straight line method( Rate 10% ) using fraction of the year
of 1998.
Present book value at December 31,1998.
Q-4 Prepare Balance Sheet from the given data, but be careful, every item will not be
appeared in Balance Sheet.
Land
Building
A/c payable
Cash
Note payable
Sales
Office supplies
Bank
A/c receivable
Amir-capital
Salaries payable
Short-term investment
Office salaries expense
Prepaid advertising
Commission revenue

25000
125000
30000
15000
25800
550000
5000
17000
15000
?
32500
58000
12500
36000
256900

Q-5 n incorrect Balance sheet of Ahmad Merchant is given here, your are required to
prepare correct and classified Balance Sheet on December 31,2002.
Q A/c payable
A/c receivable
Building
Cash
Salman-capital

14000
800
52000
9200
?

Land
Machinery
Note Payable
Salaries Payable
Supplies

Q-6 Following Balance Sheet presented by Sajid and sons on March 31, 2002
ASSETS
CURRENT ASSETS

EQUITIES
LIABILITIES

68000
65000
29000
3000
400

CASH
A/C RECEIVABLE
NOTE RECEIVABLE
PREPAID ADVERTISING
FIXED ASSETS
EQUIPMENT
BUILDING
TOTAL ASSETS

125,000A/C PAYABLE
45000LOAN FROM AKRAM
25000NOTE PAYABLE
2500
OWNER'S EQUITY
CAPITAL
65000
450,000
712,500
EQUITIES

85000
100,000
25000

502500

712500

Following transactions occurred during the month of April

1.
2.
3.
4.

Collected from customer Rs. 15000

Paid to supplier Rs. 65000
Note receivable matured and received Rs.10000
Sajid invest additional capital in business in the form of cash Rs.100,000 and
equipment Rs.25000
5. Sajid obtained bank loan from Standard Chartered on five year term Rs. 200,000
6. Note payable paid by firm Rs.5000
7. Sajid withdrew Cash Rs. 20,000 for personal use.
Required:
1. Prepare Journal entries for the above transactions
2. Draw General ledger for the accounts effected
3. Prepare Balance Sheet as at April 30th,2002
Q No. 7 The Trial Balance from the given data of Funfood Enterprises on August
31st,2005.
Prepaid insurance
Cash
Office stationary
Sales revenue
Commission income
Office salaries
Capital- Haroon
Drawing-Haroon
Equipment
A/c payable
Utility expense
Bank overdraft
Insurance expense
Note payable
Building
Prepaid rent
A/c Receivable

4500
15600
5600
1175000
25000
56000
575000
45000
45000
56000
12000
75000
5000
32000
750000
40000
60000

Loan from bank

Marketable securities
Interest expense
Operating expenses

300000
50000
12000
1125,300

Prepare:
1. Trial Balance( if not equal, use suspense account)
2. Income Statement
3. Balance Sheet

Q No.8
The balance sheet contains numerous errors. In particular, the bookkeeper knew that the
balance sheet should balance, so he plugged in the owner's equity amount needed to achieve this
balance. The owner's equity amount, however, is not correct. All other amounts are accurate, but some
are out of place.
TRSORO PUBLISHING CO.
Balance Sheet
Month Ended July 31, 20X3
Assets
Cash
Office Supplies
Land

Liabilities
$12,000
1,000
44,000

Salary expense

2,500

Office furniture

8,000

Note payable

16,000

Rent expense

4,000

Total assets

$87,500

Accounts Receivable
Service revenue

$ 3,000
68,000

Property tax expense

800

Accounts payable

9,000

Owner's Equity
Owner's Equity
Total liabilities

6,700
$87,500

Required
1. Prepare the correct balance sheet. Compute total assets, total liabilities, and owner's
equity.Marks-07