Ex.

183
The Astros, a semi-professional baseball team, prepare financial statements on a monthly basis. Their
season begins in April, but in March the team engaged in the following transactions:
(a) Paid $120,000 to Wichita City as advance rent for use of Wichita City Stadium for the six month
period April 1 through September 30.
(b) Collected $250,000 cash from sales of season tickets for the team's 20 home games. This amount
was credited to Unearned Ticket Revenue.

During the month of April, the Astros played four home games and five road games.

Instructions
Prepare the adjusting entries required at April 30 for the transactions above.

Solution 183 (5 min.)

(a) Rent Expense................................................................................ 20,000
Prepaid Rent........................................................................ 20,000
($120,000 ÷ 6 = $20,000)

(b) Unearned Ticket Revenue............................................................. 50,000

Ticket Revenue.................................................................... 50,000
($250,000 ÷ 20 = $12,500; $12,500 × 4 = $50,000)

Ex. 184
On July 1, 2008, Sheeley Company pays $8,000 to its insurance company for a 2-year insurance
policy.

Instructions
Prepare the necessary journal entries for Sheeley on July 1 and December 31.

Solution 184 (5 min.)

July 1 Prepaid Insurance................................................................ 8,000
Cash......................................................................... 8,000

Dec. 31 Insurance Expense.............................................................. 2,000

Prepaid Insurance ($8,000 × 6/24)........................... 2,000

Ex. 185
On July 1, 2008, Anderson Insurance Company received $10,000 from a client for a 2-year insurance
policy.

Instructions
Prepare the necessary journal entries for Anderson on July 1 and December 31.

Solution 185 (5 min.)

July 1 Cash.................................................................................... 10,000
Unearned Insurance Revenue.................................... 10,000

Dec. 31 Unearned Insurance Revenue............................................. 2,500

Insurance Revenue ($10,000 × 6/24).......................... 2,500

1
Ex. 186
Dane Coat Company purchased equipment on June 1 for $81,000, paying $18,000 cash and signing a
12%, 2-month note for the remaining balance. The equipment is expected to depreciate $18,000 each
year. Dane Coat Company prepares monthly financial statements.

Instructions
(a) Prepare the general journal entry to record the acquisition of the equipment on June lst.
(b) Prepare any adjusting journal entries that should be made on June 30th.
(c) Show how the equipment will be reflected on Dane Coat Company's balance sheet on June 30th.

Solution 186 (10 min.)

(a) June 1 Equipment...................................................................... 81,000
Cash...................................................................... 18,000
Notes Payable....................................................... 63,000
(To record acquisition of equipment and signing
of a 2-month, 12% note)

(b) June 30 Depreciation Expense.................................................... 1,500

Accumulated Depreciation—Equipment................ 1,500
(To record monthly depreciation)
$18,000 ÷ 12 = $1,500/month
30 Interest Expense............................................................ 630
Interest Payable.................................................... 630
(To accrue interest on notes payable)
$63,000 × 12% × 1/12 = $630

(c) Assets
Equipment $81,000
Less: Accumulated Depreciation—Equipment 1,500 $79,500

Ex. 187
Welch Company prepares monthly financial statements. Below are listed some selected accounts and
their balances in the September 30 trial balance before any adjustments have been made for the
month of September.
WELCH COMPANY
Trial Balance (Selected Accounts)
September 30, 2008
———————————————————————————————————————————
Debit Credit
Office Supplies...................................................................................... $ 2,700
Prepaid Insurance................................................................................. 4,200
Office Equipment................................................................................... 16,200
Accumulated Depreciation—Office Equipment...................................... $1,000
Unearned Rent Revenue....................................................................... 1,200
(Note: Debit column does not equal credit column because this is a partial listing of selected account
balances)

An analysis of the account balances by the company's accountant provided the following additional
information:
1. A physical count of office supplies revealed $1,000 on hand on September 30.
2. A two-year life insurance policy was purchased on June 1 for $4,800.
3. Office equipment depreciated $6,000 per year.
4. The amount of rent received in advance that remains unearned at September 30 is $500.

Instructions
2
Using the above additional information, prepare the adjusting entries that should be made by Welch
Company on September 30.
Solution 187 (10 min.)
1. Office Supplies Expense................................................................. 1,700
Office Supplies....................................................................... 1,700
(To record the amount of office supplies used)

2. Insurance Expense.......................................................................... 200

Prepaid Insurance................................................................... 200
(To record insurance expired $4,800 ÷ 24)

3. Depreciation Expense..................................................................... 500

Accumulated Depreciation—Office Equipment....................... 500
(To record monthly depreciation $6,000 ÷ 12)

4. Unearned Rent Revenue................................................................. 700

Rent Revenue......................................................................... 700
(To record rent revenue earned)

Ex. 188
Prepare the required end-of-period adjusting entries for each independent case listed below.
Case 1
Starr Company began the year with a $3,000 balance in the Office Supplies account. During the year,
$8,500 worth of additional office supplies were purchased. A physical count of office supplies on hand
at the end of the year revealed that $6,400 worth of office supplies had been used during the year. No
adjusting entry has been made until year end.
Case 2
Eaton Company has a calendar year-end accounting period. On July 1, the company purchased office
equipment for $30,000. It is estimated that the office equipment will depreciate $500 each month. No
adjusting entry has been made until year end.
Case 3
Ward Realty is in the business of renting several apartment buildings and prepares monthly financial
statements. It has been determined that 3 tenants in $700 per month apartments and one tenant in the
$1,000 per month apartment had not paid their August rent as of August 31st.

Solution 188 (10 min.)

Case 1—December 31
Office Supplies Expense.................................................... 6,400
Office Supplies....................................................... 6,400
(To record office supplies used during the year)
Case 2—December 31
Depreciation Expense........................................................ 3,000
Accumulated Depreciation—Office Equipment....... 3,000
(To record depreciation expense for six months)
$500 × 6 months = $3,000 Depreciation
Case 3—August 31
Rent Receivable................................................................. 3,100
Rent Revenue......................................................... 3,100
(To accrue rent earned but not yet received)
Ex. 189
Moran Insurance Agency prepares monthly financial statements. Presented below is an income
statement for the month of June that is correct on the basis of information considered.
MORAN INSURANCE AGENCY
Income Statement
3
 For the Month Ended June 30
———————————————————————————————————————————
Revenues
Premium Commission Revenue................................................... $35,000
Expenses
Salary expense............................................................................. $6,000
Advertising expense..................................................................... 800
Rent expense............................................................................... 4,200
Depreciation expense................................................................... 2,800
Total expenses............................................................................. 13,800
Net income............................................................................................ $21,200
Additional Data: When the income statement was prepared, the company accountant neglected to take
into consideration the following information:
1. A utility bill for $2,000 was received on the last day of the month for electric and gas service for the
month of June.
2. A company insurance salesman sold a life insurance policy to a client for a premium of $35,000.
The agency billed the client for the policy and is entitled to a commission of 20%.
3. Supplies on hand at the beginning of the month were $3,000. The agency purchased additional
supplies during the month for $3,500 in cash and $2,200 of supplies were on hand at June 30.
4. The agency purchased a new car at the beginning of the month for $19,200 cash. The car will
depreciate $4,800 per year.
5. Salaries owed to employees at the end of the month total $5,300. The salaries will be paid on July
5.
Instructions
Prepare a correct income statement.

Solution 189 (15 min.)

MORAN INSURANCE AGENCY
Income Statement
For the Month Ended June 30
———————————————————————————————————————————
Revenues
Premium Commission Revenue ($35,000 + $7,000).................... $42,000
Expenses
Salary expense ($6,000 + $5,300)................................................ $11,300
Supplies expense ($0 + $4,300)................................................... 4,300
Rent expense............................................................................... 4,200
Depreciation expense ($2,800 + $400)......................................... 3,200
Utilities expense ($0 + $2,000)..................................................... 2,000
Advertising expense..................................................................... 800
Total expenses.................................................................... 25,800
Net income............................................................................................ $16,200

Ex. 195
On Friday of each week, Noble Company pays its factory personnel weekly wages amounting to
$40,000 for a five-day work week.

Instructions
(a) Prepare the necessary adjusting entry at year end, assuming December 31 falls on Wednesday.
(b) Prepare the journal entry for payment of the week's wages on the payday which is Friday, January
2 of the next year.

Solution 195 (5 min.)

(a) Dec. 31 Wages Expense............................................................. 24,000
Wages Payable..................................................... 24,000
4
(b) Jan. 2 Wages Payable.............................................................. 24,000
Wages Expense............................................................. 16,000
Cash...................................................................... 40,000
Ex. 173
At March 31, account balances after adjustments for Norton Cinema are as follows:
Account Balances
Accounts (After Adjustment)
Cash $ 6,000
Concession Supplies 4,000
Theatre Equipment 50,000
Accumulated Depreciation—Theatre Equipment 12,000
Accounts Payable 5,000
Norton, Capital 20,000
Norton, Drawing 12,000
Admission Ticket Revenues 60,000
Popcorn Revenues 32,000
Candy Revenues 19,000
Advertising Expense 12,000
Concession Supplies Expense 19,000
Depreciation Expense 4,000
Film Rental Expense 16,000
Rent Expense 12,000
Salaries Expense 18,000
Utilities Expense 5,000

Instructions
Prepare the closing journal entries for Norton Cinema.

Solution 173 (10 min.)

Mar. 31 Admission Ticket Revenues.................................................. 60,000
Popcorn Revenues................................................................ 32,000
Candy Revenues................................................................... 19,000
Income Summary........................................................ 111,000
(To close revenue accounts)

31 Income Summary.................................................................. 86,000

Advertising Expense................................................... 12,000
Concession Supplies Expense.................................... 19,000
Depreciation Expense................................................. 4,000
Film Rental Expense................................................... 16,000
Rent Expense............................................................. 12,000
Salaries Expense........................................................ 18,000
Utilities Expense......................................................... 5,000
(To close expense accounts)

31 Income Summary.................................................................. 25,000

Norton, Capital............................................................ 25,000
(To transfer net income to capital)

31 Norton, Capital...................................................................... 12,000

Norton, Drawing.......................................................... 12,000
(To close drawings to capital)
Ex. 180
Prepare the necessary correcting entry for each of the following.

5
a. A collection on account of $370 from a customer was credited to Accounts Receivable $730 and
debited to Cash $730.
b. The purchase of supplies on account for $250 was recorded as a debit to Equipment $250 and a
credit to Accounts Payable $250.

Solution 180 (5 min.)

a. Accounts Receivable....................................................................... 360
Cash....................................................................................... 360

b. Supplies.......................................................................................... 250
Equipment.............................................................................. 250

Ex. 181
An examination of the accounts of Shaw Company for the month of June revealed the following errors
after the transactions were journalized and posted.
1. A check for $750 from R. Linton, a customer on account, was debited to Cash $750 and credited to
Service Revenue, $750.
2. A payment for Advertising Expense costing $420 was debited to Utilities Expense, $240 and
credited to Cash $240.
3. A bill for $840 for Office Supplies purchased on account was debited to Office Equipment, $480 and
credited to Accounts Payable $480.

Instructions
Prepare correcting entries for each of the above assuming the erroneous entries are not reversed.
Explain how the transaction as originally recorded affected net income for the month of June.

Solution 181 (10 min.)

1. Service Revenue................................................................................... 750
Accounts Receivable.................................................................... 750
(To correct error in recording collection of accounts receivable)
The transaction as originally recorded overstated net income by $750.

2. Advertising Expense............................................................................. 420

Utilities Expense........................................................................... 240
Cash............................................................................................. 180
(To correct errors in recording advertising expense)
The transaction as originally recorded overstated net income by $180.

Solution 181 (cont.)

3. Office Supplies...................................................................................... 840
Office Equipment.......................................................................... 480
Accounts Payable......................................................................... 360
(To correct error in recording office supplies)
The transaction as originally recorded had no effect on net income.

Ex. 182
As Jeff Wills was doing his year-end accounting, he noticed that the bookkeeper had made errors in
recording several transactions. The erroneous transactions are as follows:
(a) A check for $700 was issued for goods previously purchased on account. The bookkeeper
debited Accounts Receivable and credited Cash for $700.
(b) A check for $380 was received as payment on account. The bookkeeper debited Accounts
Payable for $830 and credited Accounts Receivable for $830.

6
(c) When making the entry to record the year's depreciation expense, the bookkeeper debited
Accumulated Depreciation for $1,000 and credited Cash for $1,000.
(d) When accruing interest on a note payable, the bookkeeper debited Interest Receivable for $200
and credited Interest Payable for $200.

Instructions
Prepare the appropriate correcting entries. (Do not reverse the original entries.)

Solution 182 (5 min.)

(a) Accounts Payable......................................................................... 700
Accounts Receivable........................................................... 700
(b) Cash ............................................................................................ 380
Accounts Receivable.................................................................... 450
Accounts Payable................................................................ 830
(c) Cash ............................................................................................ 1,000
Depreciation Expense.................................................................. 1,000
Accumulated Depreciation................................................... 2,000
(d) Interest Expense.......................................................................... 200
Interest Receivable.............................................................. 200

Ex. 186
The financial statement columns of the worksheet for Melton Company as of December 31, 2008 are
as follows:
MELTON COMPANY
Worksheet
For the Year Ended December 31, 2008

Income Statement Balance Sheet

Accounts Debit Credit Debit Credit
Cash 20,000
Accounts Receivable 6,000
Supplies 4,500
Prepaid Insurance 7,000
Equipment 50,000
Accumulated Depreciation 4,800
Patents 7,500
Accounts Payable 23,500
Bonds Payable (due 2012) 18,000
Melton, Capital 46,000
Melton, Drawing 4,200
Service Revenue 25,400
Salaries Expense 5,200
Depreciation Expense 4,800
Insurance Expense 5,000
Interest Expense 3,500
Totals 18,500 25,400 99,200 92,300
Net Income 6,900 6,900
25,400 25,400 99,200 99,200

Instructions
Prepare a classified balance sheet for Melton Company.

MELTON COMPANY
Balance Sheet
December 31, 2008

7
 Assets
Current assets
Cash............................................................................................. $20,000
Accounts receivable..................................................................... 6,000
Supplies........................................................................................ 4,500
Prepaid insurance......................................................................... 7,000
Total current assets............................................................. 37,500
Property, Plant, and Equipment
Equipment.................................................................................... $50,000
Less: Accumulated depreciation—equipment............................... 4,800 45,200
Intangible assets
Patents......................................................................................... 7,500
Total assets......................................................................... $90,200

Liabilities and Owner's Equity

Current liabilities
Accounts payable......................................................................... $23,500
Long-term liabilities
Bonds payable.............................................................................. 18,000
Total liabilities...................................................................... 41,500

Owner's Equity
Melton, Capital............................................................................. 48,700*
Total liabilities and owner's equity........................................ $90,200

* Melton, Capital = $48,700 ($46,000 + $6,900 – $4,200).

Question (1)
At Dec. 31, 2020 the adjusted trial balance contains the following balances! Accumulated
depreciation $ 30000 Depreciation expense $10000 Salaries expense $27000 Service
revenues $ 54000 Withdrawals $ 7000 Rent revenue $ 16000 Unearned revenues $ 8000
Salaries payable $ 2000 Supplies expense $6000 Supplies $ 3000 Equipment $ 80000
A/R $ 50000 A/P $ 36000 Capital $37000
Instructions:
1- Prepare the income statement for the year ended Dec.31. 2020.
2- Prepare the owner's equity statement for the year ended Dec.31, 2020.
3- Prepare the classified balance sheet at Dec 31, 2020
Question (2)
A worksheet for Mousa company at the year ended Dec. 31, 2020 is presented below:

Accounts Trial balance Adjustments Adjusted trial

balance
Dr Cr Dr Cr Dr Cr
Supplies expense 9000
Salaries expense 13000
8
Prepaid insurance 6000
Rent revenue 12000
Unearned service revenue 45000
Equipment 80000
Cash 20000
A/p 30000
Accumulated depreciation 16000
Capital 25000
128000 128000
Other data at Dec.31.2020
1-Equipment depreciates at a rate of 10%
2-Supplies on hand is $ 2000
3-Salaries expense includes prepaid salaries of $3000.
4-Insurance expires at a rate of $ 300 per month.
5-$ 40000 of the unearned service revenue is earned.
6- cash paid to A/P is recorded as $10000 instead of $1000.
7- The owner withdrew $ 2000 for his personal use but the accountant didn't
journalize this transaction.
Instructions:
1-Journalize the adjusting and correcting entries.
2- Complete the worksheet (columns of income statement and balance sheet are not
required)
3- Prepare the owner's equity statement for the year ended Dec. 31, 2018
4- Prepare the classified balance sheet at Dec 31, 2018 .
Question (3)
The accountant reviewed the records and found the following errors:
1- Cash received from the owner as additional investments was recorded as $ 20 000
instead of $ 2000
2- The purchase of equipment costs $ 30 000 on account was recorded as a

9
 debit to supplies and credit to A/P by $ 3000
3- The depreciation expense of the furniture of $ 1000 was debited to accumulated
depreciation and credited to depreciation expense $ 1000
Instruction :
Prepare the correcting entries without reversing the incorrect entries.
Question (4)
Worksheet for the year ended Dec. 31, 2018

Accounts Trial balance Adjustme Adjusted trial

nts balance
Dr Cr DR Cr Dr Cr
Supplies expense 8000
Salaries expense 22000
Prepaid insurance 7500
Rent revenue 11000
Unearned service revenue 35000
Equipment 50000
Cash 14500
A/r 18000
Accumulated depreciation 12000
Capital 62000
120000 120000
Other data at Dec 31, 2018
(1) Depreciation of equipment is $ 4000
(2) Supplies on hand is $ 3000
(3) Salaries of December don't paid.
(4) Insurance expires at the rate of $ 500 per month.
(5) $ 5000 of the unearned service revenue is still unearned.
Instructions:
(1) Journalize the adjusting entries.
10
 (2) Complete the worksheet (columns of income statement and balance sheet are not
required.

Question (5)

Prepare the necessary correcting entry for each of the following without reversing the
incorrect entries :

1- Cash received from accounts receivables was recorded as $9600 instead of $6900.

2- The purchase of equipment on account for $3000 was debited to supplies and credited
to cash for $3000.

3-The depreciation expense of the equipment $1000 was debited to accumulated

depreciation and credited to depreciation expense $1000

4- The owner withdrew $1200 cash was debited to salaries expense and credited to cash
for $120.

Question (6)
A partial worksheet for the year ended Dec 31, 2017 is presented below:

Accounts Trial balance Adjustments Adjusted trial

balance
Dr Cr Dr Cr Dr Cr
Supplies expense 5000
Salaries expense 22000
Prepaid insurance 7000
rent revenue 15000
11
 Unearned service revenue 30000
Furniture 50000
Accumulated depreciation 5000
Other data at Dec 31, 2017
1- Supplies on hand was $1500
2- $3000 rent revenue was accrued but not received
3- Salaries of Dec. do not paid
4- $5000 of the unearned service revenue was still unearned
5- The furniture depreciates at a rate of 10%
6- The insurance expired at $500 per month.
Instructions:
1-Journalize the adjusting entries.
2-Complete the worksheet (columns of income statement and balance sheet are not
required)
Question (7)
At Dec.31,2017 the adjusted trial balance contains the following balances: Accumulated
depreciation – equipment $ 20000
Depreciation expense – equipment $ 10000
Salaries expense $ 18000 Service revenue $ 22000
Unearned revenue $ 8000 Salaries payable $ 2000
Supplies expense $ 4000 Equipment $ 80000
A/R $ 25000 A/P $ 38000
Capital (at Jan.1,2017) $ 50000 Withdrawals (during 2017) $ 3000
Instructions:
1- Prepare the income statement for the year ended Dec.31, 2017.
2- Prepare the owner's equity statement for the year ended Dec 31, 2017.
3- Prepare the classified balance sheet at Dec. 31, 2017
Question (8)
12
Mousa has the following balances at Dec. 1, 2018:
Cash 30 000 Equipment 60 000 A/R 25000
A/P 35 000 Withdrawals 5000 Capital 85 000
Following are the transactions during Dec., 2018:
1- The owner offers equipment of $ 10 000 and $ 25 000 cash as additional
investments.
2- Hired an assistant manager at a salary of $ 1000 per month.
3- Purchased equipment for $ 20 000 paying $ 8000 cash.
4- Purchased supplies on account for $ 6000
5- Provided services for $20 000 and received $ 12000 cash.
6- Withdrew $ 3000 cash for personal use.
7- Received advertising bills of $ 7000 to be paid next month.
8- Paid salaries expenses of $ 13000 (included prepaid salaries of 3000$).
Instructions
1- Journalize the transactions (you may omit explanation).
2- Prepare cash account (use the standard from).
3- Prepare equipment account and A/P account (use T-account form)
4- Prepare the trial balance at Dec. 31, 2018.
Question (9)
At Dec 31, 2018 the adjusted trial balance of Omar organization contains the following
balances:
Depreciation expense $ 8000 Accumulated depreciation $ 24 000
Salaries expense $ 18 000 Service revenue $ 42 000
Rent revenue $ 14 000 Unearned revenue $ 5 000
Prepaid salaries $ 2 000 Supplies expense 4000
Equipment 80000 A/R 25000
А/ Р 30000 Capital 64000
Withdrawals 3 000 Goodwill $ 39 000
rent revenue 14 000 unearned revenue 5 000
prepaid salaries 2 000 supplies expense 4 000
equipment 80 000 A/R 25000
A/P $ 30 000 capital $ 64 000
withdrawals $ 3 000 goodwill $ 39 000
Instructions
1 - Prepare the income statement for the year ended Dec 31, 2018.
2-Prepare the owner's equity statement for the year ended Dec. 31. 2018
3- Prepare the classified balance sheet at Dec. 31, 2018
13
 4- Comment on the liquidity of Omar organization.

Question (1)
Define the following terms:
1 - The conservatism policy.
2-The post-closing trial balance.
3- The classified balance sheet.
4-The temporary accounts.
5- expense payable.
6The closing entries.
Question (2)
Write true or false for the following and correct the false sentences:
1- The single proprietorship is a business owned by two or more persons
2- Net income results when assets exceed liabilities
3- Paid cash to purchase supplies will increase total assets and increase total Liabilities
4- Accrual basis does not need any adjusting entry
5- The statement which prepared after all adjusting entries have been journalized and posted is the
trial balance
6- The drawing account is one of the permanent accounts
7- The expense payable is classified as an asset account
The accumulated depreciation is classified as a liability account
Question (1)
What is the difference between:
1- temporary accounts and permanent accounts.
2- adjusting entries and closing entries.
3- the prepaid expense and the expense payable.
Question (2)
Write true or false for each of the following and correct the false sentences:
1- Cash basis leads to correct financial statements.
2- Accumulated depreciation has a credit balance so it is classified as a liability account.
3- Goodwill is a current asset but inventory is a long-term asset.
4- The purchase of equipment cash will increase total assets and decrease total owners' equity.
5- Withdrawals account is a permanent account because its balance is carried forward to the next
accounting period.

6-economic entity assumption means that long-term assets should be recorded by their cost.
7- at the end of the period revenues and expenses are closed directly in capital account.
8- the statement which prepared after the closing entries have been journalized and posted is the trial
balance.

9- if total liabilities are increased by $30000 and total owners equity are decreased by $30000 then total
assets must increase by $60000.

14
Question (2)
Write true or false for the following and correct the false sentences:
1- The purchase of supplies cash increase total assets and total liabilities.
2- The balance of an account is debit when sum of debit side equal sum of credit side.
3-Accrual basis leads to correct financial statements.
4-All the temporary accounts have debit balances.
4- Accumulated depreciation is an asset account and has a debit balance.
5- Goodwill is a current asset but inventory is a long-term asset.
6- Question (1)
What is the difference between?
(1) Simple entry and compound entry.
(2) Cash basis and accrual basis.
(3) Adjusting entries and correcting entries.
Question (1)
Write true or false for the following and correct the false sentences
1- The purchase of equipment cash will increase total assets and total iabilities
2. If the total liabilities are increased 20 000 and total owners equity are decreased$ 20 000, then the
total assets must increase $ 40 000
3. The financial statement that reports assets, liabilities and owners equity is the income statement
4. under the double entry system. revenues must always equal expenses
5-All the accounts increase when it comes debit and decrease when it comes Credit.
6- The rent payable is considered an asset
7.We can make the correct financial statement from the adjusted trial balance
8. The accounts in the post-closing trial balance don't differ than the accounts on the balance sheet
9. We prepare the income statement from the past closing the balance
10 he adjusted trial balance should prepare before the adjusting entries are made.
11-Goodwill is an intangible asset
12- Assets that have a physical substance are called intangible assets
Question (2)
7- Choose the best answer for each of the following
1-Liabilities of a company would not include
(a) AP
(b) NP
(C) salaries payable
(d) Car
2- The basic accounting equation can be expressed as follows
(A)assets = liabilities + owners equity
(B) assets- liabilities = owner equity
(C) assets- owners equity= liabilities
(d) other answer
3-Assets of a company would not include:
(a) A/R
(b) N/R
(c) prepaid salaries
(d) salaries payable
4-1f total assets increased $ 30 000 and total liabilities increased 30 000 then total owners equity
must:

15
(a) increase $ 30 000
(b) decrease S 30 000
(c) increase 5 60 000
(d) don't change
5-net income results when:
(a) assets > liabilities.
(b) revenues > expenses
(C) revenues <expenses
(d) other answer
6-a compound journal entry involves:
(a) two accounts
(b)three accounts
(c) three or more accounts
(d) four or more accounts
7-On Jan. 1. 2020 a company purchased equipment for S 40 000, the company depreciates the
equipment at the rate of S 800 per month, then the book value of the equipment at Dec 31, 2020 is:

(a) o
(b) 9600
(C) $ 30 400
(d) 5 40 000
8-Closing entries are necessary for:
(a) permanent accounts
(b) temporary accounts
(C) both permanent and temporary accounts
(d) neither permanent nor temporary accounts
Question (3)
Complete the following sentenes:
1-the ...... reports assets, liabilities and owners equity at a specific date
2-Bookkeeping is a part of accounting deals only with the
3-The............. aims to calculate the cost of each unit of production
4-the credit accounts includes
5-the .............. is a list of accounts to identify their location in the ledger
16
 6-in service companies, revenues is recognized when the service is--------
7-............... is a process to allocate the cost of a along-term asset over its useful life.
8-the first step in preparing a worksheet is prepared from the ledger

BE 166
Prepare the necessary journal entries on the books of Tri-State Carpet Company to record
the following transactions, assuming a perpetual inventory system (you may omit
explanations):
(a) Tri-State purchased $40,000 of merchandise on account, terms 2/10, n/30.
(b) Returned $4,000 of damaged merchandise for credit.
(c) Paid for the merchandise purchased within 10 days.
(a) Merchandise Inventory.................................................... 40,000
Accounts Payable.................................................. 40,000
(b) Accounts Payable............................................................. 4,000
Merchandise Inventory.......................................... 4,000
(c) Accounts Payable ($40,000 – $4,000)............................. 36,000
Merchandise Inventory ($36,000 × .02)................ 720
Cash ($36,000 – $720)........................................... 35,280
BE 167
Erving Company sold goods on account to Farley Enterprises with terms of 2/10, n/30.
The goods had a cost of $600 and a selling price of $900. Both Erving and Farley use a
perpetual inventory system. Record the sale on the books of Erving and the purchase on
the books of Farley.
Journal entry on Erving’s books:
Accounts Receivable......................................................... 900
Sales........................................................................... 900
Cost of Goods Sold…........................................................ 600
Merchandise Inventory.............................................. 600
Journal entry on Farley’s books:
Merchandise Inventory...................................................... 900
Accounts Payable...................................................... 900
BE 168
Manning Company sells merchandise on account for $2,000 to Tiger Company with
credit terms of 3/10, n/60. Tiger Company returns $200 of merchandise that was
damaged, along with a check to settle the account within the discount period. What entry
does Manning Company make upon receipt of the check and the damaged merchandise?
Sales Returns and Allowances.......................................... 200
Sales Discounts ($1,800 × .03).................................... 54
Cash ($2,000 – $200 – $54)............................... 1,746
Accounts Receivable ................................................ 2,000
BE 169
Ord Company uses a perpetual inventory system. During May, the following transactions
and events occurred.
May 13 Sold 6 motors at a cost of $44 each to Waller Brothers Supply Company,
terms 1/10, n/30. The motors cost Ord $25 each.
May 16 One defective motor was returned to Ord.
May 23 Received payment in full from Waller Brothers.
Instructions
Journalize the May transactions for Ord Company (seller) assuming that Ord uses a
perpetual inventory system. You may omit explanations.
May 13 Accounts Receivable............................................. 264
Sales............................................................... 264
Cost of Goods Sold................................................ 150
Merchandise Inventory.................................. 150
May 16 Sales Returns and Allowances............................... 44
Accounts Receivable...................................... 44
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 Merchandise Inventory.......................................... 25
Cost of Goods Sold........................................ 25
May 23 Cash....................................................................... 218
Sales Discounts ($220 × .01)................................. 2
Accounts Receivable ($264 – $44)................ 220
BE 172
During October, 2008, Katie’s Catering Company generated revenues of $13,000. Sales
discounts totalled $200 for the month. Expenses were as follows: Cost of goods sold of
$7,000 and operating expenses of $2,000.
Calculate (1) gross profit and (2) income from operations for the month.
Solution 172 (4 min.)
(1) Gross profit: $5,800 ($13,000 - $200 - $7,000)
(2) Income from operations: $3,800 ($5,800 - $2,000)
Ex. 178
On October 1, Taylor Bicycle Store had an inventory of 20 ten speed bicycles at a cost of
$200 each. During the month of October, the following transactions occurred.
Oct. 4 Purchased 30 bicycles at a cost of $200 each from Mann Bicycle Company,
terms 2/10, n/30.
6 Sold 18 bicycles to Team America for $300 each, terms 2/10, n/30.
7 Received credit from Mann Bicycle Company for the return of 2 defective
bicycles.
13 Issued a credit memo to Team America for the return of a defective bicycle.
14 Paid Mann Bicycle Company in full, less discount.
Instructions
Prepare the journal entries to record the transactions assuming the company uses a
perpetual inventory system.
Oct. 4 Merchandise Inventory............................................. 6,000
Accounts Payable............................................. 6,000
6 Accounts Receivable................................................ 5,400
Sales.................................................................. 5,400
Cost of Goods Sold.................................................. 3,600
Merchandise Inventory..................................... 3,600
7 Accounts Payable..................................................... 400
Merchandise Inventory..................................... 400
13 Sales Returns and Allowances................................. 300
Accounts Receivable........................................ 300
Merchandise Inventory............................................. 200
Cost of Goods Sold........................................... 200
14 Accounts Payable ($6,000 – $400).......................... 5,600
Cash ($5,600×.98)...................................... 5,488
Merchandise Inventory ($5,600×.02)......... 112
Ex. 179
On September 1, Snow Supply had an inventory of 15 backpacks at a cost of $25 each.
The company uses a perpetual inventory system. During September, the following
transactions and events occurred.
Sept. 4 Purchased 70 backpacks at $25 each from Jenks, terms 2/10, n/30.
Sept. 6 Received credit of $150 for the return of 6 backpacks purchased on Sept. 4 that
were defective.
Sept. 9 Sold 40 backpacks for $35 each to McGill Books, terms 2/10, n/30.
Sept. 13 Sold 15 backpacks for $35 each to Calvin Office Supply, terms n/30.
Sept. 14 Paid Jenks in full, less discount.
Instructions
Journalize the September transactions for Snow Supply.

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Sept. 4 Merchandise Inventory 1,750
Accounts Payable........................................... 1,750
Sept. 6 Accounts Payable.................................................. 150
Merchandise Inventory.................................. 150
Sept. 9 Accounts Receivable............................................. 1,400
Sales............................................................... 1,400
Cost of Goods Sold................................................ 1,000
Merchandise Inventory.................................. 1,000
Sept. 13 Accounts Receivable............................................. 525
Sales............................................................... 525
Cost of Goods Sold................................................ 375
Merchandise Inventory.................................. 375
Sept. 14 Accounts Payable ($1,750 – $150)........................ 1,600
Cash ($1,600 × .98)........................................ 1,568
Merchandise Inventory ($1,600 × .02).......... 32
Ex. 181
(a) Boden Company purchased merchandise on account from Office Suppliers for
$86,000, with terms of 2/10, n/30. During the discount period, Boden returned some
merchandise and paid $78,400 as payment in full. Boden uses a perpetual inventory
system. Prepare the journal entries that Boden Company made to record:
(1) the purchase of merchandise.
(2) the return of merchandise.
(3) the payment on account.
(b) Boggs Company sold merchandise to Wilsey Company on account for $73,000 with
credit terms of ?/10, n/30. The cost of the merchandise sold was $43,800. During the
discount period, Wilsey Company returned $3,000 of merchandise and paid its
account in full (minus the discount) by remitting $69,300 in cash. Both companies
use a perpetual inventory system. Prepare the journal entries that Boggs Company
made to record:
(1) the sale of merchandise.
(2) the return of merchandise.
(3) the collection on account.
(a) To compute the amount due after returns but before the discount, divide $78,400
by .98 (100% – 2%).
$78,400 ÷ .98 = $80,000.
Subtract $80,000 from $86,000 to determine that $6,000 of merchandise was
returned.
(1) Merchandise Inventory............................................. 86,000
Accounts Payable............................................. 86,000
(2) Accounts Payable..................................................... 6,000
Merchandise Inventory..................................... 6,000
(3) Accounts Payable..................................................... 80,000
Merchandise Inventory..................................... 1,600
Cash.................................................................. 78,400
(b) Wilsey Company returns $3,000 of merchandise and owes $70,000 to Boggs
Company.
$69,300 ÷ $70,000 = .99
100% – 99% = 1%
The missing discount percentage is 1%. $70,000 × 1% = $700 sales discount.
$70,000 – $700 = $69,300 cash received on account.
(1) Accounts Receivable................................................ 73,000
Sales.................................................................. 73,000
Cost of Goods Sold.................................................. 43,800
Merchandise Inventory..................................... 43,800
(2) Sales Returns and Allowances................................. 3,000
Accounts Receivable........................................ 3,000
Merchandise Inventory $3,000 × ($43,800 ÷ $73,000) 1,800
Cost of Goods Sold........................................... 1,800
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 (3) Cash.......................................................................... 69,300
Sales Discounts........................................................ 700
Accounts Receivable........................................ 70,000
Ex. 182
Prepare the necessary journal entries to record the following transactions, assuming
Barone Company uses a perpetual inventory system.
(a) Purchased $30,000 of merchandise on account, terms 2/10, n/30.
(b) Returned $500 of damaged merchandise for credit.
(c) Paid for the merchandise purchased within 10 days.
(a) Merchandise Inventory...................................................... 30,000
Accounts Payable..................................................... 30,000
(b) Accounts Payable.............................................................. 500
Merchandise Inventory............................................. 500
(c) Accounts Payable ($30,000 – $500)................................. 29,500
Merchandise Inventory ($29,500 × .02)................... 590
Cash ($29,500 – $590)............................................. 28,910
Ex. 183
Prepare the necessary journal entries to record the following transactions, assuming
Moran Company uses a perpetual inventory system.
(a) Moran sells $50,000 of merchandise, terms 1/10, n/30. The merchandise cost
$30,000.
(b) The customer in (a) returned $5,000 of merchandise to Moran. The merchandise
returned cost $3,000.
(c) Moran received the balance due within the discount period.
(a) Accounts Receivable........................................................ 50,000
Sales......................................................................... 50,000
Cost of Goods Sold.......................................................... 30,000
Merchandise Inventory..................................... 30,000
(b) Sales Returns and Allowances......................................... 5,000
Accounts Receivable................................................ 5,000
Merchandise Inventory.................................................... 3,000
Cost of Goods Sold.................................................. 3,000
(c) Cash ($45,000 – $450)..................................................... 44,550
Sales Discounts ($45,000 × .01)...................................... 450
Accounts Receivable 45,000
E5-2B Information related to Grey Co. is presented below.
1. On April 5, purchased merchandise from Never Company for $25,000 terms 2/10,
net/30, FOB shipping point.
2. On April 6 paid freight costs of $700 on merchandise purchased from Never.
3. On April 7, purchased equipment on account for $29,000.
4. On April 8, returned damaged merchandise to Never Company and was granted a
$3,000 credit for returned merchandise.
5. On April 15 paid the amount due to Never Company in full.
Instructions
(a) Prepare the journal entries to record these transactions on the books of Grey Co. under
a perpetual inventory system.
(b) Assume that Grey Co. paid the balance due to Never Company on May 4 instead of
April 15. Prepare the journal entry to record this payment.
E5-3B On September 1, Chen Business Supply had an inventory of 40 calculators at a
cost of $18 each. The company uses a perpetual inventory system. During September, the
following transactions occurred.
Sept. 6 Purchased 70 calculators at $20 each from Markowitz Co. for cash.
9 Paid freight of $70 on calculators purchased from Markowitz Co.
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10 Returned 2 calculators to Markowitz Co. for $42 credit (including freight)
because they did not meet specifications.
12 Sold 40 calculators costing $21 (including freight) for $34 each to Karl Book
Store, terms n/30.
14 Granted credit of $34 to Karl Book Store for the return of one calculator that
was not ordered.
20 Sold 20 calculators costing $21 (including freight) for $35 each to Sayed’s Card Shop,
terms n/30.
Instructions
Journalize the September transactions
E5-4B On June 10, Rothlisberger Company purchased $12,000 of merchandise from
Lester Company, FOB shipping point, terms 2/10, n/30. Rothlisberger pays the freight
costs of $500 on June 11. Damaged goods totaling $700 are returned to Lester for credit
on June 12. The fair value of these goods is $300. On June 19, Rothlisberger pays Lester
Company in full, less the purchase discount. Both companies use a perpetual inventory
system.
Instructions
(a) Prepare separate entries for each transaction on the books of Rothlisberger Company.
(b) Prepare separate entries for each transaction for Lester Company. The merchandise
purchased by Rothlisberger on June 10 had cost Powell $7,200.

E5-9B Presented below is information for Oakley Company for the month of March
2017.
Cost of goods sold $212,000 Rent expense $ 32,000
Freight-out 7,000 Sales discounts 8,000
Insurance expense 6,000 Sales returns and 13,000
Salaries and wages 53,000 allowances 360,000
expense Sales revenue
Instructions
(a) Prepare a multiple-step income statement.
(b) Compute the gross profit rate.
E5-10B In its income statement for the year ended December 31, 2017, Krueger Company reported
the following condensed data.
Operating expenses $647,000 Interest revenue 20,000
Cost of goods sold 922,000 Loss on disposal of equipment 7,000
Interest expense 49,000 Net sales 1,650,000

Instructions
(a) Prepare a multiple-step income statement.
(b) Prepare a single-step income statement

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