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
