Accounting

Q. 2 The information given below for Hasan General Suppliers provides a basis for making all
necessary adjusting entries at December 31, the end of the firm’s fiscal year. You may assume
that all transactions were properly recorded in accordance with the firm’s accounting policies:

i. On June 1, the company borrowed Rs.600,000 at an interest rate of 19% payable on

quarterly basis.

ii. The firm owns a building with an estimate economic life of 25 years. The cost was
Rs.15,00,000. A uniform depreciation is provided every year.

iii. On October 1 the firm paid Rs.27,000 for three years of insurance coverage
commencing on that date. The unexpired insurance account was debited.

iv. A nominal account was credited when Rs.36,000 in rental revenue was received from a
tenant on November 1. This amount represented six months’ rent in advance.

v. Wapda Bonds with a face value of Rs.10,000 and an annual interest rate of 13% were
purchased as an investment on May 1. Interest payment dates are April 1 and October
1.

vi. An annual business license of Rs.4,000 was paid on October 1 and recorded by
debiting a nominal account.

Required:

Prepare the necessary adjusting entries at December 31. Include in the explanation of
each entry any calculations you performed in developing the adjusting entry.

Answer of Q.No.2

Adjusting Entries

Dec 31

I Interest Exp 9500

Interest Payable 9500

(600,000 x 19% x 1/12) = 9500

Dec 31___________________________________________________________

II Depreciation Exp 60000

Acc Deprecation of building 60000

1500000/25 = 60000
Dec 31___________________________________________________________

III Insurance Exp 2250

Prepaid Insurance 2250

(27000/36 x 3) =

Dec 31___________________________________________________________

IV Unearned Rental Revenue 12000

Rental Revenue 12000

(36000/6 x2)

Dec 31___________________________________________________________

V Interest Receivable 325

Interest Revenue 325

(10000x13% x 3/12)

Dec 31___________________________________________________________

VI License fee 4000

Nominal A/c 4000

Paid Business license fee

Q. 3 At the end of first month operation, June 2001, Khalid Plumbing services had the
following accounts balances:

Cash Rs.29,300 Tools Rs.23,800

Debtors Rs.15,400 Creditors Rs.1400

Delivery Truck Rs.69,000

In addition, during June, the following transactions affected owner’s equity:

Investment by Khalid Rs.20,000

Repair revenue Rs.32,800

Drawing Rs.12,000

Salaries Rs.28,300
 Further investment by Khalid Rs.30,000

Rent Rs.7,000

Contract revenue Rs.51,600

Fuel expense Rs.4,200

Required: Prepare balance sheet.

Answer of Q.No.3

Khalid Plumbing Service

Income Statement

For the Period Ended June 2001

-----------------------------------------------------------------------

Rs.

Repair Revenue 32800

Contract Revenue 51600

Total Revenue 84400

Less Expences

Salaries (28300)

Rent (7000)

Fuel Exp (4200) (39500)

Net Income 44900

Khalid Plumbing Service

Balance Sheet

As on June 2001

Assets Liabilities

Rs. Rs.
Cash 29300 Creditor 1400

Debtor 15400 Khalid Capital

Truck 69000 Capital 20000

Tools 23800 +Additional 30000

Total Capital 50000

-Drawing (12000)

38000

+Profit 44900 82900

84300

_____ Assets side over valued 53200

137500 137500

Q. 4 Calculate:

a) Using the below information, complete the balance sheet and sales data for the
Supertech Co.
Supertech Co.

Balance Sheet, December 31 2000

Assets Liabilities & Stockholder’s

Equity

Cash Creditors

Debtors Long term Debt

Stocks 250,000 Common Stock 150,000

Plant and Retained Earnings 260,000

Equipment

Total
 Assets

Sales

Cost of Goods
Sold

All sales are credit sales

Average collection period = 75 days
Credit purchases = 60% of sales
Creditors period = 72 days
Total assets turnover = 2
Quick Ratio = 2:1
Stock turnover (sales/stocks) = 5
Gross profit margin = 0.2

Answer of Q.No.4

Supertech Co.

Balance Sheet

As on Dec 31, 2000

Assets Liabilities & stockholder equity

Rs. Rs.

Cash 39040 Creditor 147945

Debtor 256850 Long Term Debts 67055

Stock 250000 C/stock 150000

Plants & Equipment 79110_ Retained Earning 260000

Total Assets 625000 625000

Sale 1250000

C.G.S 1000000

G.P 250000
Stock Turn Over = Sale = 5

Stock

= __Sale__ = 5

250000

Sale = 1250000

Average Collection Period = 75 days

A/R x 365 = 75

Sale

A/R = 75x 1250000 = 256850

365

Credit Purchase = 60% of sale

= 60% (1250000)

= 750000

A/P x 365 = 72 days

Purchase

A/P = 72 x 750000 = 147945

365

Total Assets Turnover = 2

Sale___ = 2
Total Assets

Total Assets = 1250000 = 625000

Quick Ratio = C.A – Inventory 2:1

C.C

= C.A -250000 = 2/1

147945

= C.A – 250000 = 295890

= C.A = 295890 + 250000

= C.A = 545890