Section A

Exercise 1
Mr. Sam decided to open a new consulting company. During the month of May, the following transactions
occurred:

May 2: Mr. Sam started with $80,000 in the bank account.

6: Purchased equipment worth $25,000 on credit.
10: Performed services on credit totaling $10,000.
14: Take long term loan for a land $70,000.
19: Received a cheque of $5,000 from a client in payment on credit.
24: Paid $11,000 due to suppliers.
30: Paid $4,000 rent for the current month.

Required:
Prepare a schedule of transactions showing the effect of each of the above transactions on the mentioned
accounts and then totaling each account.

Exercise 2
Adam opened a new company. During the month of July, the following transactions occurred:

July 1: Ahmad started with $500,000 in the bank account.

5: Purchased Building worth $200,000 Cash.
10: Purchased Equipment for $50,000 on account
15: Performed services for $30,000 on account.
18: Received a payment of $5,000 from a client.
25: Paid $20,000 from the amount due in purchasing of Equipment.
30: Paid $4,000 Salaries for the current month.

Required:
Prepare a schedule of transactions showing the effect of each of the above transactions on accounts

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 Section B – Recording Process

Exercise 1
McKay Disc Golf Course was opened on March 1 by Evan McKay. The following selected events and
transactions occurred during March.

Mar. 1 Invested $20,000 cash in the business in exchange of common stock.

3 Purchased Sable’s Golf Land for $15,000 cash. The price consists of land $12,000, shed $2,000,
and equipment $1,000. (Make one compound entry.)
5 Paid advertising expenses of $700.
6 Paid cash $600 for a one-year insurance policy.
10 Purchased golf discs and other equipment for $1,050 from Taylor Company payable in 30 days.
18 Received $1,100 in cash for golf fees (McKay records golf fees as service revenue).
19 Received $5,000 cash from customers for services expected to be completed by the end of the
current quarter
25 Paid cash dividends of $3,000 to stockholders.
30 Paid salaries of $250.
30 Paid Taylor Company in full.
31 Received $2,100 cash for golf fees.
Required:
Journalize the March transactions.

Exercise 2
Use the general journal prepared in exercise 1 to post the “Cash” and the “Accounts Payable” to the ledger
using the T-account and the three-column form.

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Exercise 3
The accounts in the ledger of Leaf Co. as of December 31, 2014, are listed in alphabetical order as
follows. All accounts have normal balances.
Accounts Payable $23,500 Notes Payable $50,000
Accounts Receivable 38,100 Prepaid Insurance 6,400
Capital Stock 8,000 Rent Expense 36,000
Cash 13,500 Retained Earnings 42,000
Dividends 16,000 Supplies 3,200
Fees Revenue 538,000 Supplies Expense 9,000
Insurance Expense 6,000 Unearned Rent 13,500
Land 40,000 Utilities Expense 18,000
Miscellaneous Expense 12,000 Wages Expense 476,800

Required
Prepare a trial balance, listing the accounts in their normal order.

Exercise 4
Lynn Cantwell, an architect, organized Cantwell Architects on July 1, 2014. During the month, Cantwell
Architects completed the following transactions:
a. Issued capital stock to Lynn Cantwell in exchange for $25,000.
b. Paid July rent for office and workroom, $2,750.
c. Purchased automobile for $30,000, paying $4,000 cash and giving a note payable for the remainder.
d. Purchased office and computer equipment on account, $9,000.
e. Paid cash for supplies, $1,600.
f. Paid cash for annual insurance policies, $2,400.
g. Received cash from client for services performed, $11,150.
h. Paid cash for miscellaneous expenses, $300.
i. Paid cash to creditors on account, $3,500.
j. Paid note payable, $550.
k. Received invoice for advertising service, due in August, $1,500.

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l. Perform service for credit customers, $17,300.
m. Paid salary of assistant, $2,200.
n. Paid the utility bill of July, $815.
Required
a- Journalize the July transactions.
b- Post the accounts used in the general journal using the three-column form of the general ledger.
c- Prepare a trial balance at July 31, 2014.

Exercise 5
Lenovo Enterprise was started on January 1 by Mr. Dan. During January, the following events and
transactions occurred:
Jan 1 Mr. Dan invested $80,000 cash in exchange of common stock.
10 Purchased Building costing $100,000 on account from Tala Real Estate.
15 Paid Salaries of $3,000.
18 performed services on account totaling $5,000.
19 Received $2,500 in advance from Slam Company for services expected to be completed by the
end of the year.
23 Purchased Equipment for $5,000 cash.
25 Paid advertising bill, $2,000.
26 Paid half of balance due to Tala Real Estate.
28 Received $2,000 cash from customer billed in Jan 18.
30 Paid $4,000 for a 2-year insurance policy.

Required
1- Journalize the given transactions.
2- Post the accounts used in the general journal using the T-account form of the general ledger.

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 Section C – Financial Statements Preparation
Exercise 1
The trial balance of PS Music as of July 31, 2014 is presented below:

PS Music
Trial Balance
July 31,2014
Accounts Debit Credit

Cash $9,945
Accounts Receivable 4,150
Supplies 275
Prepaid Insurance 2,475

Office Equipment 7,450

Accounts Payable $8,350
Wages Payable 140
Unearned Revenue 3,600
Capital Stock 9,000
Dividends 1,750
Fees Earned 21,200
Music Expense 3,610
Wages Expense 2,940
Office Rent Expense 2,550
Advertising Expense 1,500
Equipment Rent Expense 1,375
Utilities Expense 1,215
Supplies Expense 925
Insurance Expense 225
Depreciation Expense 50
Miscellaneous Expense 1,855
Total $42,290 $42,290
Required
From the above trial balance, prepare an income statement, a retained earnings statement, and a balance
sheet for PS Music.

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Exercise 2
Labrador Weight Loss Co. offers personal weight reduction consulting services to individuals. After all the
accounts have been closed on June 30, 2014, the end of the current fiscal year, the balances of selected
accounts from the ledger of Labrador Weight Loss Co. are as follows:
Accounts Payable $ 18,500 Prepaid Insurance $ 19,200
Accounts Receivable 78,250 Prepaid Rent 18,000
Retained Earnings 509,000 Land 290,000
Capital Stock 100,000 Salaries Payable 8,500
Cash ? Supplies 5,350
Equipment 196,700 Unearned Fees 9,000

Required
Prepare a classified balance sheet that includes the correct balance for Cash.

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Exercise 3
The trial balance of Harbor Reality as of July 31, 2014 is presented below:

Harbor Reality
Trial Balance
July 31,2014

Account Title Dr. Cr.

Cash $3,425
Accounts Receivable 8,000
Supplies 380
Prepaid Insurance 305
Office Equipment 37,000
Accounts Payable $925
Unearned Fees 750
Wages Payable 440
Capital Stock 5,000
Retained Earnings 24,000
Dividends 5,200
Fees Earned 60,625
Wages Expense 22,855
Depreciation Expense 4,950
Rent Expense 4,200
Utilities Expense 2,715
Supplies Expense 890
2Insurance Expense 315
Miscellaneous Expense 1,505
Total $91,740 $91,740

Required
From the above trial balance, prepare an income statement, a retained earnings statement, and a balance
sheet for Harbor Reality.