COMPREHENSIVE EXERCISE

1. P. Simpson began business as an engineering consultant on October 1, 2015. He set up

the following chart of accounts to be used in his business.

101 Bank 301 P. Simpson, Capital

110 A/R—R. Arthur 302 P. Simpson, Drawings
111 A/R—J. Morrison 401 Fees Earned
120 Supplies 505 Car Expense
125 Equipment 510 Office Expense
130 Automobile 515 Rent Expense
210 A/P—Ace Finance Co. 520 Wages Expense
211 A/P—Grand’s Stationers
212 A/P—Star Oil Co.

A. For each of the transactions listed below, work out the changes for the transaction and
record these changes in the T-accounts. After finishing the transactions, calculate and
show the account balances. (28 marks)

Transactions
1. On October 1, 2015, Mr. Simpson started his business with the following assets and
liabilities: Bank $4651; Equipment $2465; Automobile $8460; A/P—Ace Finance
Co. $2850; and A/P—Grand’s Stationers $1000.
2. Performed a service for S. Stewart and received $200 cash in payment.
3. Received a bill from Grand’s Stationers for $400 of supplies purchased on account.
4. Issued a cheque to O. Mack for wages, $500.
5. Received a bill from Star Oil Co. for gasoline and oil used in the business car, $60.
6. Issued a cheque to Ace Finance Company for regular monthly payment, $400.
7. Issued a cheque to J. Mahoney for the rent for the month, $700.
8. Issued a bill to J. Morrison for services performed, $500.
9. Issued a cheque for postage stamps, $30.
10. Issued a cheque for car repairs, $120.
11. Received a cheque from J. Morrison on account, $300.
12. Issued a cheque to R. Gordon for cleaning the office, $100.
13. Issued a cheque to P. Simpson, the owner, for personal use, $800.
14. Issued a bill to R. Arthur for services performed, $1000.
B. Balance the ledger of P. Simpson by means of a trial balance dated October 31, 2015.
(10 marks)
C. Prepare an income statement for P. Simpson as of October 31, 2015. (Thinking 9 Marks)

D. Prepare the equity section of the balance sheet for P. Simpson as of October 31, 2015.
(Thinking 5 Marks)