FALL2015

INTRODUCTION TO FINANCIAL ACCOUNTING (USAC 21)

WRITTEN ASSIGNMENT 1 (15%)
Question1
Keep Cool Corporation was established in January 2014. The following business transactions are
related to its business during the first three months of its operations.
January 4

Owners issued 50,000 shares to public at $3 per share. The par value of each
share is $1.

January 5

Acquired inventory worth, $20,000 with the cash payment of $8,000 (10/20,
n/30).

January 5

Paid freight cost on the inventory purchase transaction worth $100.

January 6

Paid rent expense in advance for January, February and March 2014, $3,000.

January 6

Paid insurance policy to cover the business for 6 months, $12,000.

January 9

Acquired supplies to be used in the current period for cash worth $5,000.

January 24

The company paid its debt on Accounts Payable.

February 2

Sold goods on open account, $50,000 with the cost of goods sold of $10,000
(15/25, n/60).

February 2

Paid freight cost on the sales transaction worth $110

February 4

Returned inventory purchased for cash to suppliers worth, $150.

February 10

Took a long term loan from a financial institution, $100,000 with the interest rate
of 12% per annum. The interest expense is payable every 6 months.

February 12

Customers returned back inventory sold to them worth $1,000. The cost of
inventory returned was $200.

February 16

Bought inventory on credit, $35,000 (10/20, n/45).

February 25

Credit customers pay their debts to the company.

February 28

Acquired office equipment worth $40,000 and received a note to evidence the
debt worth $25,000.

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February 28
March 5

Made a return of inventory to supplier worth, $900 (Refer transaction on

February 16).
Loaned $80,000 cash to workers with the repayment period of 5 years. Interest
rate of 6% is payable by the workers on every December 31. The company
issued a promissory note to the workers.

March 7

The company paid its debt for the credit purchases made on February 16.

March 8

Made sales of $90,000 with comprise of cash sales worth $18,000. The
inventories sold were purchased at a cost of $31,000.

March 10

The company gave cash refund of $100 to the customers for the inventory
returned from cash sales ((Refer transaction on March 8). The cost of inventory
returned was $40.

March 11

Paid advertising expense of $19,000.

March 16

Paid selling expense of $12,300.

March 17

The company made collection from credit sales of March 8.

March 20

The company sold inventory on open account, $5,000 with the cost of goods sold
of $1,000.

March 23

Received cash in advance worth $5,000 for goods to be delivered on March 31,
2014 to customers.

March 31

The amount of supplies used by the business during the current period was
$1,200.

March 31

Depreciation expense of office equipment worth $2,000.

March 31

Incurred but unpaid wages and salaries expense worth $8,000.

March 31

Incurred but unpaid utilities expense worth $2,000.

March 31

Declared but unpaid cash dividends of the first three months worth $6,000.

March 31

The accounts receivable from March 20s transaction was declared as bad debts
due to the death of credit customer.

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March 31

The goods from March 23s transaction was delivered successfully to customers.
The cost of goods sold was $1500.

Required:
1) Record all transactions, including adjusting entries in general journal
2) Post journal entries to ledgers
3) Prepare a trial balance
4) Prepare financial statements of the company as at March 31, 2014
Question 2
MMP Corporation was incorporated on January 1, 2013. The company closes its accounts on
December 31 each year. As at December 31, 2014 the company reported its accounts receivable
at $180,000. It is the policy of the company to estimate 6% of its accounts receivable as
uncollectible. When the company started its operation in 2015, the company has identified one of
its customers was declared as bankrupt. Therefore, the accounts receivable of the customer
worth $2,500 was written-off on March 3, 2015. Unexpectedly, on August 10, 2015 the
customers financial position was recovered slowly and he is able to pay part of his debt worth
$1,000 to the business.
Requirement:
Record the transactions happened on the following dates in general journal:
1) December 31, 2014
2) March 3, 2015
3) August 10, 2015

Question 3
Given is the trial balance of Fly High Company as at March 31, 2014. The company uses
calendar year as its accounting period.

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Supplies
Prepaid Insurance
Accrued Rent Revenue
Equipment
Cash
Notes Receivable
Inventory
Accounts Payable
Income Tax Payable
Notes Payable
Unearned Revenue
Accumulated Depreciation- Equipment
Paid In Capital
Retained Earnings

DEBIT ($)
1,600
9,600
3,200
45,000
100,000
18,000
5,000

CREDIT ($)

8,000
5,000
60,000
10,000
3,000
90,000
6,400

Adjustments at March 31, 2014:

1) Unused supplies is $6,000
2) Unearned revenue that remains unearned is $7,000
3) Prepaid insurance is a one-year policy, paid on January 4, 2014
4) The loan was taken out on March 5 with the annual interest rate of 12%. Interest expense
is payable annually
5) Accrued rent revenue is paid by the tenants
6) Unrecorded depreciation expense of $1,000
7) The notes receivable carries 10% interest which is accrued for 2 months
8) Salaries expense worth $8,000 is paid every Friday for the works done on Monday to
Friday. During the current year, March 31, 2014 in on Thursday
9) Utilities expense is accrued for $1,800
10) Advertising expense was incurred but still unpaid as at the closing date, $500
11) Accrued revenue of $11,000 with the cost of goods sold worth $4,000
12) Received cash of $20,000 for goods to be delivered during June 2014
Required:
1) Record all adjustments in general journal
2) Post adjusting entries to ledgers
3) Prepare an adjusted trial balance of Fly High Company