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LECTURE 1
SOLUTIONS
Problem 2.5
A. B. C.
Required: Prepare an income statement for Dawson Industries for the year ended 31 December 2011 (5 marks) Prepare a balance sheet as at 31 December 2011 (5 marks) Prepare a statement of changes in equity for 2011. (5 marks)
A.
DAWSON INDUSTRIES Income Statement for the year ended 31 December 2011 INCOME Service income EXPENSES Advertising expense Insurance expense Rent expense Supplies expense Telephone expense Electricity expense Wages expense PROFIT
1 mark 2 marks = 5 marks
$147 500 $12 500 2 500 13 500 5 250 4 900 7 200 44 000 89 850 $57 650
B.
DAWSON INDUSTRIES Balance Sheet as at 31 December 2011 ASSETS Cash at bank Accounts receivable Supplies Equipment TOTAL ASSETS LIABILITIES Accounts payable TOTAL LIABILITIES NET ASSETS EQUITY Lila Dawson, Capital TOTAL EQUITY $10 250 25 600 11 000 48 000 $94 850 9 500 $9 500 $85 350 85 350 $85 350
1 mark
2 marks
= 5 marks
C.
DAWSON INDUSTRIES Statement of Changes in Equity for the year ended 31 December 2011 Lila Dawson, Capital 1 January 2008 $51 100 Add: Capital contribution 0 Profit for the year 57 650 108 750 Less: Drawings during the year 23 400 Lila Dawson, Capital 31 December 2008 $85 350
1 mark
= 5 marks
Remember : to get the 1 mark you need the number AND the account name (and date when necessary) in the right place
Exercise 6.10
Required:
Use the following information from the records of Moree Retail Ltd to prepare an income statement under the periodic inventory system for the year ended 30 June 2010.(5 marks)
MOREE RETAIL LTD Income Statement for the year ended 30 June 2010 INCOME Sales Revenue: Less: Sales returns and allowances Net sales revenue Cost of sales: Beginning inventory Purchases Freight inwards Less: Purchases returns and allowances Cost of net purchases Cost of goods available for sale Less: Ending inventory Cost of sales GROSS PROFIT EXPENSES: Selling and Distribution expenses Administrative expenses Finance and other expenses PROFIT
1 mark 2 marks
$ 171 840 4 440 167 400 $9 780 $117 120 2 270 119 390 3 156 116 234 126 014 13 130 112 884 54 516 32 452 11 760 1 440 45 652 $8 864
= 5 marks
Exercise 6.11
MOREE RETAIL LTD Income Statement for the year ended 30 June 2010 INCOME Sales Revenue: Less: Sales returns and allowances Net sales revenue Cost of sales ($110 614 + $2 270): GROSS PROFIT EXPENSES: Selling and distribution expenses Administrative expenses Finance expenses PROFIT $171 840 4 440 167 400 112 884 54 516 32 452 11 760 1 440 45 652 $8 864
1 mark
2 marks
= 5 marks
Remember : to get the 1 mark you need the number AND the account name (and date when necessary) in the right place.
Problem 4.1
June
Office Furniture GST Outlays Cash at Bank Purchased office furniture Prepaid Insurance GST Outlays Cash at Bank Purchased 12 month insurance policy Cash at Bank Loan Payable Borrowed $6 000 from the bank at 12% due in 3 months
6 000 6 000
11 Supplies GST Outlays Cash at Bank Purchased supplies 15 Rent Expense GST Outlays Cash at Bank Paid rent for one month
180 18 198
450 45 495
18 Cash at Bank GST Collections Unearned Services Revenue Received payment from customer in advance 30 Telephone Expense GST Outlays Telephone Account Payable Amount due for telephone charges
770 70 700
300 30 330
Adjusting entries (2 marks each) 30 Depreciation Expense Accumulated Depreciation - Office Furniture Calculation of depreciation expense [$6 300/9 x 1/12] 30 Insurance Expense Prepaid Insurance Insurance expired for one month on policy ($2 240 x 1/12) 30 Interest Expense Interest Payable Interest payable on loan from bank 30 Supplies Expense Supplies Supplies used during the month 30 Prepaid Rent Rent Expense Rent not yet expired for the month 30 Unearned Services Revenue Services Revenue Revenue recorded on completed work 30 No adjusting entry required as telephone expense is now recorded. 58 58
187 187
60 60
80 80
225 225
70 70