FINANCIAL ACCOUNTING – SESSION # 2

Q No.1 Afzal company provided information on December 31,2004.

TITLE OF ACCOUNT DEBIT CREDIT
Plant assets Rs.37,50,000
Cash 100,000
Account Receivable 162,500
Merchandise Inventory-beg 62500
Sales return 7000
Purchases 12,45000
Transportation in 20000
Salaries expense 145000
Prepaid advertising 20000
Director’s fee 2,15000
Sales revenue 18,75000
Commission income 20000
Accumulated depreciation 350000
Retained earning 367500
Paid up capital 25,00000
10% debentures payable 500000
Account payable 112500
Purchases return 2000
57,27,000 57,27,000

Additional information:
1. Merchandise Inventory-ending Rs.45,000
2. Depreciation 10% on fixed assets
3. Tax rate is 30%

Required:
a) Income Statement showing EBIT
b) Balance Sheet

Athar Iqbal
athar@iqra.edu.pk
Q No.2 Delux company authorized capital is 500,000 shares of Rs.10 each. Following
information provided on December 31,2004.

TITLE OF ACCOUNT DEBIT CREDIT

Cash 120,000
Account receivable 155,000
Account payable 145,000
Merchandise inventory 125,000
Purchases 1500,000
Paid up capital 1800,000
Transportation 20,000
Salaries expense 120,000
Sales 1830,000
Building 1800,000
Auditor’s fee 70,000
Furniture 50,000
Retained earnings 225,000
Fire insurance 10,000
Utility expenses 30,000
4000,000 4000,000

Additional information:
1. Merchandise Inventory ending Rs.140,000
2. Provide depreciation on furniture 20% and building at 2%.
3. Income tax 40%

Required:
a) Income Statement
b) Balance Sheet

Q No.3(DEPRECIATION)
ABC Co. purchase office equipment for Rs. 125,000 on credit from Hamid & Co. Co
paid transportation charges Rs.5000. Estimated life of the asset is 10 years and scrap
value Rs.10,000.
Co decided to use straight line method for depreciation assets

Required:
1: Compute total cost of office equipment
2: Compute depreciation for first three years
3: Present Schedule of depreciation showing book value
4: Prepare Allowance for depreciation account

Athar Iqbal
athar@iqra.edu.pk
5: Balance sheet for each of the three years separately.

DEPRECIATION

Q No.4 Company bought machine at $ 40,000 on Jan.1 1998. Estimated life of the
machine is expected to be four years and residual value is 4000.
Prepare Schedule showing cost, depreciation and book value under given method
separately showing four years depreciation and residual value.

1) STRAIGHT LINE METHOD

2) DIMINISHING BALANCE METHOD ( rate 25% )

Q-5 Prepare Balance Sheet from the given data, but be careful, every item will not be
appeared in Balance Sheet.

Land 25000
Building 125000
A/c payable 30000
Cash 15000
Note payable 25800
Sales 550000
Office supplies 5000
Bank 17000
A/c receivable 15000
Amir-capital ?
Salaries payable 32500
Short-term investment 58000
Office salaries expense 12500
Prepaid advertising 36000
Commission revenue 256900

Q-6 An incorrect Balance sheet of Ahmad Merchant is given here, your are required to
prepare correct and classified Balance Sheet on December 31,2002.

Q A/c payable 14000 Land 68000

A/c receivable 800 Machinery 65000
Building 52000 Note Payable 29000
Cash 9200 Salaries Payable 3000
Salman-capital ? Supplies 400

Athar Iqbal
athar@iqra.edu.pk
Q-7 Following Balance Sheet presented by Sajid and sons on March 31, 2002

ASSETS EQUITIES
CURRENT ASSETS LIABILITIES
CASH 125,000 A/C PAYABLE 85000
A/C RECEIVABLE 45000 LOAN FROM AKRAM 100,000
NOTE RECEIVABLE 25000 NOTE PAYABLE 25000
PREPAID ADVERTISING 2500
OWNER'S EQUITY
FIXED ASSETS CAPITAL 502500
EQUIPMENT 65000
BUILDING 450,000
TOTAL ASSETS 712,500 EQUITIES 712500

Following transactions occurred during the month of April

1. Collected from customer Rs. 15000

2. Paid to supplier Rs. 65000
3. Note receivable matured and received Rs.10000
4. Sajid invest additional capital in business in the form of cash Rs.100,000 and
equipment Rs.25000
5. Sajid obtained bank loan from Standard Chartered on five year term Rs. 200,000
6. Note payable paid by firm Rs.5000
7. Sajid withdrew Cash Rs. 20,000 for personal use.

Required:
1. Prepare Journal entries for the above transactions
2. Draw General ledger for the accounts effected
3. Prepare Balance Sheet as at April 30th,2002

Athar Iqbal
athar@iqra.edu.pk
Q No. 8 The Trial Balance from the given data of Funfood Enterprises on August
31st,2005.

Prepaid insurance 4500

Cash 15600
Office stationary 5600
Sales revenue 1175000
Commission income 25000
Office salaries 56000
Capital- Haroon 575000
Drawing-Haroon 45000
Equipment 45000
A/c payable 56000
Utility expense 12000
Bank overdraft 75000
Insurance expense 5000
Note payable 32000
Building 750000
Prepaid rent 40000
A/c Receivable 60000
Loan from bank 300000
Marketable securities 50000
Interest expense 12000
Operating expenses 1125,300

Prepare Income Statement and Balance Sheet.

Athar Iqbal
athar@iqra.edu.pk
Q No.9 Following Trial balance and adjustment data is presented by Saleem , a sole-
trader at the end of its financial year Dec.31,2002.

TITLE OF ACCOUNT DEBIT CREDIT

CASH 5,000
A/C RECEIVABLE 20,000
EQUIPMENT 32,800
ADVERTISING EXPENSE 3,000
PREPAID RENT 6,000
MISCELLANEOUS EXPENSE 2,000
OFFICE SUPPLIES EXPENSE 1,000
INTEREST EXPENSE 500
MDS. INVENTORY-BEGINNING 7,000
PURCHASES 25,000
CARRIAGE IN 200
SALES RETURN 900
SALARIES EXPENSE 8,000
SALES REVENUE 40,000
PURCHASES RETURN 800
PURCHASES DISCOUNT 300
COMMISSION INCOME 2,500
A/C PAYABLE 5,500
CAPITAL-SALEEM 39,800
NOTE PAYABEL 5,000
BANK OVERDRAFT 7,500
LONG-TERM LOAN 10,000
TOTAL 111,400 111,400

ADJUSTMENT DATA ON DEC.31,2002:

1. Depreciation charged @ 25% on non-current assets

2. Income tax 34%
3. Merchandise Inventory-ending Rs.1700

Required:
1. Prepare Income Statement
2. Prepare Balance Sheet
3. Prepare closing entries.

Athar Iqbal
athar@iqra.edu.pk
 Q No.10 Saleem provided following Trial Balance on December 31, 2002 and
adjustment data.

TITLE OF ACCOUNT DEBIT CREDIT

CASH 45,000  
A/C RECEIVABLE 75,000  
OFFICE EQUIPMENT 325,000  
MARKETING EXPENSE 12,500  
PREAPID ADVERTISING 8,500  
OTHER EXPENSE 6,000  
OFFICE SUPPLIES EXPENSE 3,500  
INTEREST EXPENSE 16,000  
MDS. INVENTORY-BEGINNING 27,800  
PURCHASES 275,000  
TRANSPORTATION-IN 22,000  
SALES RETURN 12,000  
SALARIES EXPENSE 65,000  
SALES REVENUE   475,000
PURCHASES RETURN   1800
PURCHASES DISCOUNT   4500
INTEREST INCOME   27,000
A/C PAYABLE   35,000
CAPITAL-SALEEM   222,300
SHORT-TERM LOAN   55,000
BILL PAYABLE   22,700
LONG-TERM LOAN   50,000
  TOTAL  893,300 893,300
     

Adjustment data
1. Depreciation on non-current assets @ 20%
2. Income Tax 40%
3. Merchandise Inventory-ending 12500

Required:
1. Prepare Income Statement
2. Prepare Balance sheet
3. Prepare closing entries

Athar Iqbal
athar@iqra.edu.pk
Athar Iqbal
athar@iqra.edu.pk