ACC201 PRINCIPLES OF ACCOUNTING

INCLASS TEST 01 – SET A

PART B - 45 Minutes
Question 1 (0.5 mark)
N&H Time2Clean started 2020 with total assets of $18,000 and total liabilities of $12,000. At
the end of 2020, N&H’s total assets stood at $12,000 and total liabilities were $9,000.
Requirements
a. Did the owner’s equity of N&H Time2Clean increase or decrease during 2020? By how
much?
b. Identify the four possible reasons that owner’s equity can change.

Question 2 (0.5 mark)

On September 1, PSO Consulting received an advance payment of $6,000 from a customer for a
service to be performed in the future. During the period, the company completed two-third of
the agreed-on services for the customer. Assume there was no beginning balance in the
Unearned Revenue account for the period. Based on the information provided.
a. Make the December 31 adjusting journal entry to bring the balances to correct.
b. Show the impact that these transactions had.

Question 3 (0.5 mark)

Harvey Norman pays salaries for its employees every Monday with full time of five-working
days $13,000. Assume Harvey Norman’s end of accounting period on Tuesday, June 30, and the
next salaries payment is on Monday, July 6th. The balance for Salaries Expense before
adjustment is $640,000.
a. Prepare adjusting entries to record accrued salaries on June 30.
b. Prepare the journal entries to record the payment made on July 6 for Salaries Expense.
Question 4 (0.5 mark)
After journalizing and posting the transactions, SES Clothing examined the accounts again at the
end of May, it recognized some errors:

a. A customer’s payment on account $950, was debited to Cash $590 and credited to
Service Revenue, $590.

b. A payment for Salaries Expense costing $720 was debited to Utilities Expense, $720 and
credited to Cash $720.

c. A payment on account for $860 for Equipment was debited to Supplies, $680 and
credited to Accounts Payable $680.

Question 5 (0.5 mark)

On November 28, an attorney received $3,000 as an advance payment for legal work to be
performed. On November 28, the $3,000 was recorded with a debit to Cash and a credit to
Unearned Service Revenue.
On November 30, the attorney did not provide any legal services for the client. During
December the attorney provided services costs $1,900. At December 31, no entry had been
made to the revenue earned.
a. Will an adjusting entry be needed at November 30? Why?
b. If there is an adjusting entry to be made at December 31, what will it be?

Question 6 (0.5 mark)

After adjusting the accounts, Bed&Bath Co’s accounts balance are as follows.
Prepare the adjusted trial balance for Bed&Bath Co. at December 31, 2021.

Cash $ ? Salaries Payable $ 310

Equipment 30,000 Accumulated Depreciation-Equipment 2,500
Accounts Payable 2,400 Insurance Expense 580
Service Revenue 25,400 Unearned Revenue 300
Bed&Bath, Capital 15,300 Salaries Expenses 7,310
Supplies Expense 1,700 Office Supplies 300
Prepaid Insurance 20 Depreciation Expense-Equipment 500
Bed&Bath, Withdrawals 5,000
Question 7 (0.5 mark)
When recording adjusting entries, JB Hi-fi did not record the adjusting entries for the following
situations:

a. Unearned revenue still unearned at December 31, $3,600.

b. Prepaid rent still in forcae at December 31, $2,000.
c. Depreciation expense, $400.
d. Acrued Salaries Expense at December 31, $180.
e. Office Supplies used, $600
Determine the effects on the income statement and balance sheet by identifying whether
assets, liabilities, equity, revenue and expenses are either overstated or understated. Use the
following table.

Adjustment Balance Sheet Income Statement

Not recorded Assets Liabilities Equity Revenue Expenses
(Example) Overstated Overstated Understated

Question 8 (0.5 mark)

Prepare an adjusted trial balance from the following account information, considering the
adjustment data provided (assume accounts have normal balances).

Account payable $ 11,700

Accounts receivable 17,100
Administrative expense 54,800
Cash 44,800
Owner’s capital 30,000
Prepaid insurance 16,000
Service revenue 91,000

Adjustments needed:

• Salaries due to administrative employees, but unpaid at period end, $2,000

• Insurance still unexpired at end of the period, $12,000
Question 9 (0.5 mark)
From the following SEEDS FASHION adjusted trial balance, prepare financial statements, as
follows:

a. Income Statement
b. Owner’s Equity Statement
c. Classified Balance Sheet

SEEDS FASHION
Adjusted Trial Balance
December 31,2020
Debit Credit
Cash $ 1,300
Accounts Receivable 1,500
Office Supplies 1,800
Equipment 20,900
Accumulated Depreciation – Equipment $ 2,200
Account Payble 400
Interest Payable 500
Note Payable (due in 11 months) 3,100
Seeds, Capital 16,150
Seeds, Withdrawals 1,400
Service revenue 13,800
Rent Expense 3,900
Supplies Expense 850
Depreciation Expense – Equipment 2,200
Interest Expense 2,300 .
Total $36,150 $36,150

Question 10 (0.5 marks)

Using the information from question 9, prepare the closing entries and prepare the post-closing
trial balance for SEEDS Clothing.