RAYA UNIVERSITY

COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF ECONOMICS

PRINCIPLE OF ACCOUNTING I ASSIGNMENT ONE FOR 2nd YEAR

The following information taken from Hagos Meles during 2006.The ledger accounts used in this part for
the net service company are as follows:

1 ASSET 4 REVENUE
41 fees earned
11 cash 42 service revenue
12 account receivable 43 rent income
13 supplies 5 EXPENSE
14 prepaid insurance 51 wages expense
15 equipment 52 supplies expense
16 land 53 utilities
17 accumulated depreciation-equipment 54 rent expense
18 trucks 55 insurance expense
19 accumulated depreciation –trucks 56 truck expense
2 LIABILITY 58 miscellaneous expense
21 accounts payable
22 wages payable
23 unearned rent
3 CAPITAL
31 Hagos, capital
32 Hagos, drawing

The company started operation on November 1, 2006. During the two months period November and
December, Hagos Meles completed the following transactions connected with his business practice.

Nov .1 when business started, Hagos, invested $15,000.

Nov. 5 bought land for a future building cite for $ 10,000, paying cash.

Nov. 10 purchased supplies on account for $1,350.

Nov. 18 received service fees of $7,500from customers.

Nov .30 paid wages $2,125; rent $ 800: utilities, $450; miscellaneous $275.

Nov. 30 paid creditor on account $950.

Nov .30 withdrew cash for personal use $2000.

Dec 1 paid a premium of $2400 for a comprehensive insurance policy covering theft and fire. The policy
covers two year period.

Dec 1 paid rent of store space for December $800. The company from which net service is renting its
store space now requires the payment of rent on the first day of each month, rather than at the end of
the month.

Dec 1 received $360 cash as an offer from a local retailer to rent the land purchased on November 5.
The retailer plans to use the land as a parking lot for its employees and customers. Net service agreed to
rent the land for three months’ rent beginning December 1.

Dec 4 purchased office equipment on account from OMEDAD for$1,800.

Dec 6 paid $180 for a newspaper advertisement.

Dec 11 paid creditors $400.

Dec 13 paid receptionist and part time assistant $950.

Dec 16 received $3100 from fees earned for the first half of December; the company gives a service with
amount of $1750 on credit.

Dec 20 paid $900 to OMEDAD on the $1800 debit owed from the December 4 transaction.

Dec 21 received $650 from customers in payment of their accounts.

Dec 23 paid $1450 for supplies

Dec 27 paid receptionist and part time assistant $1200 for two weeks wages.

Dec 31 paid $310 telephone bill for the month.

Dec 31 paid $225 electricity bill for the month.

Dec 31 received $2870 from fees earned for the second half of December.

Dec 31 fees earned on account totaled $1120 for the second half of December.

Dec 31 Hagos withdrew $2000 cash for personal use.

Instruction; carefully a analyze the above transactions in terms of their effect on accounts and journalize
the transactions for the two months period on net services two column journal.
The unadjusted trial balance of Hagos Meles Company at February 2006, the end of the current year, is
shown below.

Hagos Meles Company

Unadjusted trial balance

February 28, 2006

Debit balance Credit balance

Cash ……………………………………………………………………………………………3,950

Supplies ………………………………………………………………………………………15,295

Prepaid insurance……………………………………………….............................2,735

Equipment…………………………………………………………………………………..100,650

Accumulated depreciation –Equipment …………………………………................................................21,209

Trucks…………………………………………………………………………………………..36,300

Accumulated depreciation –trucks………………………………………………………………………………….7, 400

Accounts payable……………………………………………………………………………………………………………4,015

Hagos Meles capital ………………………………………………………………………………………………………72, 426

Hagos Meles drawing…………………………………………………………………. 5,000

Service revenue ……………………………………………………………………………………………………….........119,950

Wages expense ……………………………………………………………………………39,925

Rent expense ……………………………………………………………………………….10, 600

Truck expense ………………………………………………………………………………7,350

Miscellaneous expense ………………………………………………………………..3,195 __

225,000 225,000
The data needed to determine year-end adjustments are as follows:

A Supplies on hand at February 28 are $4000.

B insurance premiums expired during year are $2000.

C depreciation of equipment during year is $6000.

D depreciation of trucks during year is $3500.

E wages accrued but not paid at February 28 are $450.

Instruction: 1. enter the trail balance at a ten column work sheet and complete the work sheet

2. Prepare income statement, statement of owner equity, balance sheet for the year ended February28

3. Journalizing and posting the adjusting entries and closing entries

4. Preparing post-closing trial balance