FINANCIAL ACCOUNTING Assignment - 2010E.

C
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1. Problem 2-3A

Ann Kane, M.D., completed the following transactions in the practice of her profession during May of
the current year:
May 1. Paid office rent for May, $1,900.
2. purchased equipment on account, $9,000.
5. Purchased X-ray film and other supplies on account, $850.
6. received cash on account from patients, $9,125.
7. Paid cash to creditors on account, $6,120.
10. Paid cash for renewal of property insurance policy, $545.
15. Paid cash for laboratory analyses,$345.
20. Discovered that the balance of the cash account was understated and the accounts receivable
account was overstated as of May 1 by $100.
A cash receipt of that amount on account from a patient on April had not been recorded.
journalized the $100 receipt as of May 20.
24. One of the items of equipment purchased on May 2 was defective. It was returned with the
permission of the supplier,Who agreed to reduce the account for the amount charged for the item
, $250.
26. Paid cash from business bank account for personal and family expenses, $2,200.
28. Paid miscellaneous expenses, $420.
30. Paid gas and electricity expense, $510.
30. Paid water expense, $130.
30. Paid telephone expense, $225.
31. Recorded fees charged to patients on account for services performed in May, $8,200.
31. Recorded the cash received in payment of services (on cash basis) to patients during May,
$9,910.
31. Paid salaries of receptionist and nurses, $4,750.
Kane’s account titles, numbers, and balances as of May 1(all normal balances) are listed as follows:
Cash, 11, $6,125; Accounts Receivable, 12, $14,960; Supplies, 13, $1,240; Prepaid insurance, 14,
$3,500; Equipment, 18, $55,600;Account payable , 22, $9,850; Ann Kane, Capital, 31, $71,575; Ann
Kane, Drawing, 32; Professional Fees, 41; Salary Expense, 51; Rent Expense, 53; Utility Expense, 55;
Laboratory Expense, 56; Miscellaneous Expense, 59.

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 FINANCIAL ACCOUNTING Assignment - 2010E.C
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Instruction

(1). Open a ledger of four-column accounts for Dr. Kane as of May 1 of the current year. Enter the
balance in the appropriate balance column and place a check mark (✓) in the posting reference column.
(It is advisable to verify the equality of the debit and credit balance in the ledger before proceeding the
next instruction.)

Account Cash Account No. 11

Date Item Post Ref. Debit Credit Balance

Debit Credit
May 1 √ 6,125 6,125

Account Accounts Receivable Account No. 12

Date Item Post Ref. Debit Credit Balance

Debit Credit
May 1 √ 14,960 14,960

Account Supplies Account No. 13

Date Item Post Ref. Debit Credit Balance

Debit Credit
May 1 √ 1,240 1,240

Account Prepaid Insurance Account No. 14

Date Item Post Ref. Debit Credit Balance

Debit Credi
t
May 1 √ 3,500 3,500

Account Equipment Account No. 18

Date Item Post Ref. Debit Credit Balance

Debit Credi
t
May 1 √ 55,600 55,600

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Account Account Payable Account No. 22

Date Item Post Ref. Debit Credit Balance

Debit Credit
May 1 √ 9,850 9,850

Account Ann Kane, Capital Account No. 31

Date Item Post Ref. Debit Credit Balance

Debit Credit
May 1 √ 71,575 71,57
5

Debit Credit

Cash 6,125

Accounts Receivable 14,960

Supplies 1,240

Prepaid insurance 3,500

Equipment 55,600

Account payable 9,850

Ann Kane, Capital 71,575

Total 81,425 81,425

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 Since debit and credit of the ledger is equal we can proceed to the next instruction

(2) Record each transaction in the two-column journal.

Journal

Date Description Post ref Debit Credit

May 1 Rent Expense 53 1,900
Cash 11 1,900
Paid April office
rent.

2 Equipment 18 9,000
A/Payable 22 9,000
Purchased
equipment on
account.

5 Supplies 13 850
A/Payable 22 850
Purchased
supplies.
6 Cash 11 9,125
A/Receivable 12 9,125
Received cash
on account.
7 A/Payable 22 6,120
Cash 11 6,120
Paid creditors on
account.
10 Prepaid 14 545
Insurance 11 545
Cash
Renewed
property policy
15 Laboratory 55 345
Expense 11 345
Cash
  Paid for

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laboratory
analysis.
20 A/Payable 22 100
Cash 11 100
 Recorded April
payment to
creditor.
24 A/payable 22 250
Equipment 18 250
Returned
defective
equipment.

26 Ann Kane, Md 32 2,200

Drawing 11 2,200
Cash
withdrew cash
for personal   
use.
28 Miscellaneous 59 420
Expense 11 420
Cash
Paid expenses.
30 Utilities Expense 55 510
Cash 11 510
Paid for gas and
electricity
30 Utilities Expense 55 130
Cash 11 130
Paid for water
Expense
30 Utilities Expense 55 225
Cash 11 225
Paid telephone
Expense
31 A/Receivable 12 8,200
41 8,200
Professional fees
Fees earned on
account.
31 Cash 11 9,910
Professional 41 9,910
fees
Received fees

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from patients.
31 Salary Expense 51 4,750
Cash 11 4,750

(3) Post the journal to the ledger, extending the month-end balance to the appropriate balance column
after all posting is completed.
ACCOUNTCashACCOUNT No.11

Balance
Date Item Post Ref. Debit Credit
Debit Credit
2018 1 Balance ✓ 6,125
May
1 4 1,900 4,225
6 4 9,125 13,350
7 4 6,120 7,230
10 4 545 6,685
15 4 345 6,340
20 4 100 6,240
26 5 2,200 4,040
28 5 420 3,620
30 5 510 3,110
30 5 130 2,980
30 5 225 2,755
31 5 9,910 12,665
31 5 4,750 7,915

ACCOUNT: Account Receivable ACCOUNT No 12

Balance
Date Item Post Ref. Debit Credit
Debit Credit
2018
Balance ✓ 14,960
May 1
6 4 9,125 5,835
3 5 8,200 14,035
1

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ACCOUNT: Supplies ACCOUNT No 13

Balance
Date Item Post Ref. Debit Credit
Debit Credit
2018 1
Balance ✓ 1,240
May
5 4 850 2,090

ACCOUNT: Prepaid insurance ACCOUNT No 14

Balance
Date Item Post Ref. Debit Credit
Debit Credit
2018 1
Balance ✓ 3,500
May
10 4 545 4,045

ACCOUNT: Equipment ACCOUNT No 18

Balance
Date Item Post Ref. Debit Credit
Debit Credit
2018 1
Balance ✓ 55,600
May
2 4 9,000 64,600
24 4 250 64,350

ACCOUNT: Accounts Payable ACCOUNT No 22

Balance
Date Item Post Ref. Debit Credit
Debit Credit
2018 1
Balance ✓ 9,850
May
2 4 9,000 18,850
5 4 850 19,700
7 4 6,120 13,580
20 4 100 13,480
24 4 250 13,230

ACCOUNT: Ann Kane, Capital ACCOUNT No 31

Date Item Post Ref. Debit Credit Balance

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Debit Credit
2018 1
Balance ✓ 71,575
May

ACCOUNT: Ann Kane, Drawing ACCOUNT No 32

Balance
Date Item Post Ref. Debit Credit
Debit Credit
2018 26
5 2,200 2,200
May

ACCOUNT: Professional Fees ACCOUNT No 41

Balance
Date Item Post Ref. Debit Credit
Debit Credit
2018 31
5 8,200 8,200
May
31 5 9,910 18,110

ACCOUNT: Salary Expense ACCOUNT No 51

Balance
Date Item Post Ref. Debit Credit
Debit Credit
2018
31 5 4,750 4,750
May

ACCOUNT: Rent Expense ACCOUNT No 53

Balance
Date Item Post Ref. Debit Credit
Debit Credit
2018
1 4 1,900 1,900
May

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ACCOUNT: Utility Expense ACCOUNT No 55

Balance
Date Item Post Ref. Debit Credit
Debit Credit
2018
5 510 510
May 30
30 5 130 640
30 5 225 865
ACCOUNT: Laboratory Expense ACCOUNT No 56

Balance
Date Item Post Ref. Debit Credit
Debit Credit
2018
4 345 345
May 15

ACCOUNT: Miscellaneous Expense ACCOUNT No 59

Balance
Date Item Post Ref. Debit Credit
Debit Credit
2018 28
5 420 420
May

(4) Prepare a trial balance as of May 31.

Ann Kane, M.D,
Trial Balance
May 31, 2018

Accounts Debit Credit

Cash 7,915
Accounts Receivable 14,035
Supplies 2,090
Prepaid Insurance 4,045
Equipment 64,350
Accounts Payable 13,230
Ann Kane, M.D., Capital 71,575
Ann Kane, M.D., Drawing 2,200
Professional Fees 18,110
Salary Expense 4,750
Rent Expense 1,900

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Utilities Expense 865
Laboratory Expense 345
Miscellaneous Expense 420
Total 102,915 102,915

(5) Assuming that the expenses which have not been recorded (such as supplies expense and insurance
expense) amount to a total of $1,950for the month, determine the following amounts:
(a) Net income for the month of May
.

Ann Kane, M.D

Income statement
For the Month Ended May 31, 2018
Revenue
Professional Fees…………………………………………..9,950
Expense
Salary Expense……………………4,750
Rent Expense…………………...…1,900
Utilities Expense…………………..865
Laboratory Expense………………..345
Miscellaneous Expense……………..420
Other expense………………………1,950
Total Expense…………………………………..…………..….. 10,230
Net loss…………………………………………………….………280

Total Expense is greater than the revenue, therefore we got net loss 280

(b) Increase or decrease in owner’s equity during May.

(c) Owner’s equity as of May 31.
Ann Kane, M.D
Owner’s Equity statement
For the Month Ended May 31, 2018

Ann Kane, M.D., Capital may 1……………………………………………71,575

Less: Drawings…………………………….… 2,200
Net loss …………………………………280
Decrease in owner’s equity …………………………………………………2,480

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Ann Kane, M.D., Capital may 31……………………………………………69,095

b, the owner’s equity/ capital is decreased by 2,480

c, Owner’s equity as of May 31 is 69,095

2. Problem 2-4A
The following business transactions were completed by Kim Theatre Corporation during May of the
current year:

May 1. Received and deposited in a bank account $50,000 cash for capital stock.

2. Purchased the Coastland Drive-in Theatre for $150,000, divided as of follows: land, $60,000;
buildings, $60,000; equipment, $30,000. Paid $45,000 in cash and gave a note payable for the
remainder.

4. Entered into a contract for the operation of the refreshment stand concession at a rental of 20%the
concessionaire’s sales, with a guaranteed minimum of $750 a month, payable in advance, Received a
cash of $750 as of the advance payment for the month of May.

6. Purchased supplies, $450, and equipment, $4,800, on account.

7. Paid premiums for property and casualty insurance policies, $2,250.

8. Paid for May billboard and newspaper advertising, $750.

10. Cash received from admissions for the week, $3,100.

12. Paid miscellaneous expense, $265.

17. Paid semimonthly wages, $1,450.

17. Cash received from admissions for the week, $2,980.

19. Paid miscellaneous expenses, $310.

20. Returned a portion of the supplies purchased on May 6 to the supplier, receiving full credit for the
cost, $75.

23. Paid cash to creditors on account, $2,250.

24. Cash received from admissions for the week, $3,420.

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26. Purchased supplies for cash, $210.

26. Paid for advertising leaflets for special promotion during last week in May, $375.

28. Recorded invoice of $5,400 for rental of film for May. Payment is due on June 7.

29. Paid electricity and water bills, $890.

31. Paid semimonthly wages,$1,610.

31. Cash received from admission for remainder of the month, $3,600.

31. Recorded additional amount owed by the concessionaire for the month of May; sales for the month
totaled $4,500. Rental charges in excess of the advance payment of $750 are not due and payable until
June 10.

Instructions:

1) Open a ledger of four-column accounts for Kim Theater Corporation, using the following
accounts titles and numbers: Cash, 11; account Receivable, 12; Prepaid Insurance, 13; Supplies,
14; Land, 17; buildings, 18; Equipment, 19; Account Payable, 21; Note Payable, 24; Capital
Stock, 31; Admission income, 41; Concession income, 42; Wages Expense, 51; Film Rental
Expense, 52; Advertising Expense, 53; Electricity and Water Expense, 54; Miscellaneous
expense, 59.
2) Record the transaction in the two-column journal.
Journal

Date Description Pos Debit Credit

t ref
May 1 Cash 11 50,000
Capital Stock 31 50,000
Received and deposited
in a bank
2 Land 17 60,000
Buildings 18 60,000
Equipment 19 30,000
Cash 11 45,000
Note Payable 24 105,000
Purchase of asset in cash
and note payable

4 Cash 11 750
Concession income 42 750
Received cash for

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refreshment
6 Supplies 14 450
Equipment 19 4,800
A/Payable 12 5,250
Purchase supplies and
equipment on account
7 Prepaid Insurance 13 2,250
Cash 11 2,250
Paid for property policy
8 Advertising Expense 53 750
Cash 11 750
Paid for Advertising
Expense

10 Cash 11 3,100
Admission income 41 3,100
  Receive cash for
admission of week
12 Miscellaneous expense 59 265
Cash 11 265
Paid for Miscellaneous
expense
17 Wages Expense 51 1,450
Cash 11 1,450
Paid forWages Expense
17 Cash 11 2,980
Admission 41 2,980
income
Receive cash for
admission of week.
19 Miscellaneous expense 59 310
Cash 11 310
Paid for Miscellaneous
expense
20 Account payable 21 75
Supplies 14 75
Returned defective
Supplies.
23 Account Payable 21 2,250
Cash 11 2,250
Paid cash for creditors
24 Cash 11 3,420
Admission 41 3,420
income

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Receive cash for
admission of week.
26 Supplies 14 210
Cash 11 210
Purchase supplies on
cash
26 Advertising Expense 53 375
Cash 11 375
Paid for Advertising
Expense
28 Film Rental Expense 52 5,400
Note 24 5,400
Payable
Paid forFilm Rental
Expense
29 Electricity and Water 54 890
Expense 11 890
Cash
Paid forElectricity and
Water Expense
31 Wages Expense 51 1,610
Cash 11 1,610
Paid forWages Expense
31 Cash 11 3,600
Admission 41 3,600
income
Receive cash for
admission of month
31 Account Receivable 12 750
Concession 42 750
Income
Advance payment of
rental charge

3) Post the journal to the ledger, extending the month-end balance to the appropriate balance
column after all posting is completed.

Ledger

Account Cash Account No. 11

DATE Item Post Debit Credit Balance

Ref Debit Credit

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Ma 1 12 50,000 50,000
y
2 12 45,000 5,000
4 12 750 5,750
7 12 2,250 3,500
8 12 750 2,750
10 12 3,100 5,850
12 13 265 5,585
17 13 1,450 4,135
17 13 2,980 7,115
19 13 310 6,805
23 13 2,250 4,555
24 13 3,420 7,975
26 13 210 7,765
26 13 375 7,390
29 13 890 6,500
31 13 1,610 4,890
31 13 3,600 8,490

Account Account Receivable Account No. 12

Date Item Post Ref Debit Credit Balance

Debit Credit
Ma 31 14 750 750
y

Account Prepaid Insurance Account No. 13

Date Item Post Ref Debit Credit Balance

Debit Credit
Ma 7 12 2,250 2,250
y

Account Supplies Account No. 13

Date Item Post Ref Debit Credit Balance

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Debit Credit
Ma 6 12 450 450
y
20 13 75 375
26 13 210 585

Account Land Account No. 17

Date Item Post Ref Debit Credit Balance

Debit Credit

Ma 2 12 60,000 60,00
y 0

Account Building Account No. 18

Date Item Post Ref. Debit Credit Balance

Debit Credit
Ma 2 12 60,000 60,000
y

Account Equipment Account No. 19

Date Item Post Ref Debit Credit Balance

Debit Credit
Ma 2 12 30,000 30,00
y 0
6 12 4,800 34,80
0

AccountAccount Payable Account No.21

Date Item Post Ref Debit Credit Balance

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Debit Credit
Ma 6 12 5,250 5,250
y
20 13 75 5,175
23 13 2,250 2,925

Account Note Payable Account No.24

Date Item Post Ref Debit Credit Balance

Debit Credit
Ma 2 12 105,000 105,00
y 0
28 13 5,400 110,40
0

Account Capital Stock Account No.31

Date Item Post Ref Debit Credit Balance

Debit Credit
Ma 1 12 50,000 50,00
y 0

Account Admission Income Account No.41

Date Item Post Ref Debit Credit Balance

Debit Credit
`Ma 10 12 3,100 3,100
y
17 13 2,980 6,080
24 13 3,420 9,500
31 13 3,600 13,100

Account Concession Income Account No.42

Date Item Post Ref Debit Credit Balance

Debit Credit
Ma 4 12 750 750
y
31 14 750 1,500

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Account Wage Expense Account No. 51

Date Item Post Ref Debit Credit Balance

Debit Credit
Ma 17 12 1,450 1,450
y
31 13 1,610 3,060

Account Film Rental Expense Account No. 56

Date Item Post Ref Debit Credit Balance

Debit Credit
Ma 28 13 5,400 5,400
y

Account Advertising Expense Account No. 53

Date Item Post Ref Debit Credit Balance

Debit Credit
Ma 8 12 750 750
y
26 13 375 1,125

Account Electricity and Water Expense Account No. 54

Date Item Post Ref Debit Credit Balance

Debit Credit
Ma 29 13 890 890
y

Account Miscellaneous Expense Account No. 59

Date Item Post Ref Debit Credit Balance

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Debit Credit
Ma 12 12 265 265
y
19 13 310 575

4) Prepare a trial balance as of May 31.

Ann Kane, M.D,

Trial Balance
May 31, 2018

Accounts Debit Credit

Cash 8,490
Accounts Receivable 750
Supplies 2,090
Prepaid Insurance 585
Land 60,000
Building 60,000
Equipment 34,800
Accounts Payable 2,925
Note Payable 110,400
Capital Stock 50,000
Admission Income 13,100
Concession Income 1,340
Wage Expense 3,060
Film Rental Expense 5,400
Advertising Expense 1,125
Electricity and Water Expense 890

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Miscellaneous Expense 575
Total 177,765 177,765

5) Determine the following:

a) Amount of total revenue recorded in the ledger.
Revenue
Admission Income………………….13,100
Concession Income………………….1,340
Total revenue ………………………14,440

b) Amount of total expenses recorded in the ledger.

Expense
Wage Expense……………………………………3,060
Film Rental Expense………………………………5,400
Advertising Expense……………………………….1,125
Electricity and Water Expense…………………….. 890
Miscellaneous Expense…………………………….. 575
Total Expense……………………………………..11,050
c) Amount of net income for May, assuming that additional unrecorded expenses
(including supplies used, insurance expired, etc.) totaled $950.

Kim Theatre Corporation

Income statement
For the Month Ended May 31, 2018
Revenue
Admission Income………………….13,100
Concession Income………………….1,340
Total revenue …………………………………14,440

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Expense
Wage Expense……………………………………3,060
Film Rental Expense………………………………5,400
Advertising Expense………………………………. 1,125
Electricity and Water Expense…………………….. 890
Miscellaneous Expense…………………………….. 575
Supply and insurance Expense……………………….950
Total Expense……………………………………..12,000
Net income……………………………………………………. 2,400

d) The understatement or overstatement of net income for May that would have resulted
from failure to record the invoice for film rental until it was paid in June. (See
transaction of May 28.)

Kim Theatre Corporation

Income statement
For the Month Ended May 31, 2018
Revenue
Admission Income………………….13,100
Concession Income………………….1,340
Total revenue …………………………………14,440

Expense
Wage Expense……………………………………3,060
Advertising Expense……………………….……. 1,125
Electricity and Water Expense…………………….. 890
Miscellaneous Expense…………………………….. 575
Supply and insurance Expense……………………….950
Total Expense……………………………………..6,600
Net income……………………………………………………. 7,800
 It cause the net income to be overestimated
e) The understatement or overstatement of liabilities as of May 31 that would have resulted
from failure to record the invoice for film rental in May. (See transaction of May 28.)

Total liability of may 31

Account payable……………………..2,925
Note payable…………………………110,400

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Total liability…………………………113,325

Liabilities as of May 31 that would have resulted from failure to record the invoice for
film rental in May is
Account payable……………………..2,925
Note payable…………………………105,000
Total liability…………………………107,925

 It cause the liability understatement

3. Problem 2-7B

Gursoy photography, a sole proprietorship, prepared the following trial balance as of July 31 of the
current year:

Cash…………………………………………..………. 5,935
Accounts Receivable………………………..………….. 9,800
Supplies…………………………………….………..…1,450
Prepaid insurance…………………….……………….…220
Equipment……………………………………………...11,750
Notes payable ……………………………………………………………………..10,000
Account Payable……………………………………………………………………4,750
Alice Gursoy, Capital …………………………….…………………………….....12,390
Alice Gursoy, Drawing …………………………………9,000
Sales ………………………………………………………………………….….86,950
Wage Expense………………………………….………52,400
Rent Expense…………………………………………..750
Advertising Expense…………………………………...5,250
Gas, Electricity, and water Expense ……………………. 4,950
Total ………………………………………………....101,505114,090

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

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a) The balance of cash was overstated by $1,000.
b) A cash payment of $750was posted as a credit to cash of $570.
c) A debit of $175 to Account Receivable was not posted.
d) A return of $725 of defective supplies was erroneously posted as a $275 credit to supplies.
e) An insurance policy acquired at a cost of $400 was posted as a credit to prepaid insurance.
f) The balance of Notes Payable was overstated by $2,500.
g) A debit of $150 in Accounts Payable was overlooked when the balance of the account was
determined.
h) A debit of $1,500 for a withdrawal by the owner was posted as a credit to Alice Gursoy,
Capital.
i) The balance of $7,500 in Rent Expense was entered as $750 in the trial balance.
j) Miscellaneous Expense, with a balance of $840, was omitted from the trial balance.

Instruction:

Prepare a correct trial balance as July 31 of the current year.

Solution

Adjustment (by using T-account)

A/R
Cash 9,800
5,935 1,000(a) 175(c)
180(b) 9,975
4,755

supplies Prepaid insurance Notes Payable

1,450 450(d) 220 2,500(f) 10,000

1,000 400*2(e)
1,020 7,500

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Accounts Payable A.G. Capital A.G, Drawing
150(g) 4,750 1,500 (h) 12,390 9,000
4,600 10,890 1,500(h)
10,500

Rent Expense Miscellaneous Exp

750 8,450(j)
6,750(i) 8,450
7,500

All the above adjustment summarized as follow:

ALICE GURSOY, PHOTOGRAPHY, A SOLE PROPRIETORSHIP

Adjusted Trial Balance
July 31, 2018

Unadjusted Trial
Accounts Adjustment Adjusted Trial Balance
Balance

Cash 1,000
5.935 4,755
b80
Accounts Receivable 9,800 175 9,975
Supplies 1,450 450 1,000
Prepaid Insurance 220 400*2 1,020
Equipment 11,750 11,750
Notes Payable 10,000 f2,500 7,500
Accounts Payable 4,750 150 4,600

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Beru, Capital 12,390 1,500 10,890
Beru, Drawing 9000 1,500 10,500
Sales 86,950 86,950
Wages Expense 52,400 52,400
Rent Expense 750 6,750 7,500
Advertising Expense 5,250 5,250
Utilities Expense 4,950 4,950
Miscellaneous
840 840
Expense
Total 101,505 114,090 109,940 109,940

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