North Campus

Midterm Exam Summer - 2021

Subject: Financial Accounting Principles Submission Day/Date: Wednesday, Aug 04,2021

Instructor: Danish Ahmed, PhD Submission Duration: 2 Hours
Program: BBA (H) Max. Marks: 25 marks

Department of Business Administration

Please follow the instructions carefully:

1. Write your answers in a Word file and upload the file before the due time on BlackBoard.

2. Write your name and registration ID on the first page of your Word file.

3. Answer scripts can be uploaded on BlackBoard within or before its deadline.

Therefore, do not wait for the last hour to avoid any unforeseen problems.

4. Submission of answer copy(ies) will be considered acceptable through BlackBoard

only. Therefore, do not submit your document through email or any other medium.

5. Use 12 pt. font size and Times New Roman font style along with 1-inch page margins.

6. Follow the requirements of the word limit and the marking criteria while writing your
answers.

7. Provide relevant, original and conceptual answers, as this exam aims to test your ability to
examine, explain, modify or develop concepts discussed in class.

8. Do not copy answers from the internet or other sources. The plagiarism of your answers
may be checked through Turnitin.

9. Recheck your answers before the submission on BlackBoard to correct any content or
language related errors.

10. Double check your word file before uploading it on BlackBoard to ensure that you have
uploaded the correct file with your answers.
Q1. What is Accounting cycle? Explain in detail. [Marks 5]

Q2 In January 2021, Jawed Chaudhry opened a corporation to provide investment advisory

services. The company is called CJ Associates. It began operations immediately. Transactions
during the month of January were as follows:
[Marks 15]

Jan. 1 The corporation issued 70,000 shares of capital stock to Jawed Chaudhry in exchange for
Rs. 140,000 cash.
Jan. 2 Purchased a building from Bahria Town for Rs. 220,000. Made a Rs. 40,000 cash down
payment and issued a note payable for the remaining balance.
Jan 4 Paid Careem Networks Rs. 250,000 to rent a car for the month.
Jan. 15 Billed customers Rs. 832,000 for investment advisory services provided during the first
half of January.
Jan. 15 Paid Rs.588,000 in salaries earned by employees during the first half of January.
Jan. 18 Paid Kamkaj.com R. 18,900 for maintenance and repair services of vehicle.
Jan. 25 Collected Rs. 491,000 of the amounts billed to customers on January 15.
Jan. 30 Billed customers Rs. 164,500 for advisory services provided during the second half of the
month.
Jan. 30 Paid Rs. 600,000 in salaries earned by employees during the second half of the month.
Jan. 30 Received a Rs. 25,100 bill from PSO for fuel purchased in June. The entire amount is due
February 10.
Jan. 30 Declared a Rs.200,000 dividend payable on February 15.

Requirement
a. Analyze the effects that each of these transactions will have on the following six
components of the company’s financial statements for the month of January. Organize your
answer in tabular form, using the column headings shown. Use I for increase, D for
decrease, and NE for no effect.
b. Prepare journal entries (including explanations) for each transaction.
c. Post each transaction to the appropriate ledger accounts
d. Prepare a trial balance dated June 30, 2011.
e. Using figures from the trial balance prepared in part d, compute total assets, total liabilities,
and owners’ equity. Are these the figures that the company will report in its January 30
balance sheet? Explain your answer briefly.
Q3. Clint Stillmore operates a private investigating agency called Stillmore Investigations. Some clients
pay in advance for services; others are billed after services have been performed. Advance payments are
credited to an account entitled Unearned Retainer Fees. Adjusting entries are performed on a monthly basis.
An unadjusted trial balance dated December 31, 2019, follows. (Bear in mind that adjusting entries have
already been made for the first 11 months of 2019, but not for December.) [Marks
5]

Other Data

1. Accrued but unrecorded client fees earned at December 31 amount to $1,500.

2. Records show that $2,500 of cash receipts originally recorded as Unearned Retainer Fees had been
earned as of December 31.
3. Office supplies on hand at December 31 amount to $110.
4. The company purchased all of its office equipment when it first began business. At that time, the
equipment’s estimated useful life was six years (or 72 months).
5. On October 1, 2011, the company renewed its rental agreement paying $1,800 cash for six months’ rent
in advance.
6. On March 1 of the current year, the company paid $1,080 cash to renew its 12-month insurance policy.
7. Accrued but unrecorded salaries at December 31 amount to $1,900.
8. On June 1, 2011, the company borrowed money from the bank by signing a $9,000, 8 percent, 12-month
note payable. The entire note, plus 12 months’ accrued interest, is due on May 31, 2020.
9. The company’s CPA estimates that income taxes expense for the entire year is $7,500.

Requirement:
Prepare the necessary adjusting entry in general journal for Clint Stillmore.