ACCT 126 - Fundamentals of Accounting

Adjusting Entries Practice Question

Below is the trial balance of a retail trader.

You are required to prepare the financial statements for the year ended 31 December 2013.

Sam Sung
Trial Balance as at 31 December 2013
Dr. Cr.
Accounts payables 40,000
Accounts receivables 35,000
Bad debts expense 1,000
Bank 25,500
Cash 5,000
Capital 525,450
Carriage in 1,450
Carriage out 1,850
Discounts allowed 1,700
Discounts received 950
Drawings 9,800
Insurance 5,400
Interest expense 2,200
Land and Buildings 500,000
Motor Vehicles 100,000
Opening stock 10,000
Prov. for dep'n - Land and Buildings 55,500
Prov. for dep'n - Motor Vehicles 25,000
Purchases 90,000
Returns in 550
Returns out 350
Sales 150,000
Telephone 4,500
Water rates 3,300
797,250 797,250 -

The following items should be taken into consideration:

i) Stock at December 31, 2013 was $9,700

ii) Insurance expenses were prepaid $400. This has not yet been accounted for.

iii) A telephone accrual of $250 has not yet been accounted for.

iv) Depreciation for the year should be applied at the following rates:
Land and Buildings 1% Straight Line
Motor Vehicles 25% Straight Line
Sam Sung
Income Statement for the year ended 31 December 2013
$ $ $
Sales 150,000
less Returns In (550)
Net Sales 149,450
less Cost of Goods Sold
Opening Stock 10,000
Purchases 90,000
less Returns Out (350) 89,650
add Carriage In 1,450
less Closing Stock (9,700) (91,400)
Gross Profit 58,050
add Discount Received 950
59,000
less Expenses
Bad debts 1,000
Carriage Out 1,850
Discounts Allowed 1,700
Insurance [W1] 5,000
Interest expense 2,200
Depreciation - Land and buildings [W3] 5,000
Depreciation - Motor vehicles [W3] 25,000
Telephone [W2] 4,750
Water rates 3,300 (49,800)
Net Profit 9,200
Sam Sung
Balance Sheet as at 31 December 2013
$ $
Assets
Non-Current Assets
Office buildings 439,500 [W3]
Motor vehicles 50,000 [W3]
489,500
Current Assets
Inventories 9,700
Accounts receivables 35,000
Prepayments 400
Bank 25,500
Cash 5,000 75,600
Total Assets 565,100

Capital and Liabilities

Capital
Opening Capital 525,450
add Net Profit 9,200
534,650
less Drawings (9,800)
Owner's Equity 524,850

Liabilities
Current Liabilities
Accounts payables 40,000
Accruals 250 40,250

Total Capital and Liabilities 565,100

Sam Sung
Working 1
Insurance
Per TB 5,400 Prepayments 400
Accruals Balance c/d 5,000
5,400 5,400

Prepayments
Per TB - Balance c/d 400
Insurance 400
400 400

Working 2
Telephone
Per TB 4,500 Balance c/d 4,750
Accruals 250
4,750 4,750

Accruals
Balance c/d 250 Per TB -
Interest 250
250 250

Working 3

Opening
Cost Acc'd Dep'n NBV Dep'n 2011 * Closing NBV
Land and buildings 500,000 55,500 444,500 5,000 439,500
Motor vehicles 100,000 25,000 75,000 25,000 50,000
To Income Statement To Balance Sheet
NCA Method
* Land and buildings Straight line ($500,000 x 1%)
Motor vehicles Straight line ($100,000 x 25%)