FOREWORD

Accounting Principles 1 is the very first subject that has to be learned in the accounting
major. This subject is the basic subject of accounting. In Accounting Principles 1,
students will be introduced to the accounting world. The basic accounting knowledge
and the name of the account will be taught.
The students will learn accounting theory in the Accounting Principles 1 theory class.
But theory without practice will be useless. Some people prefer to do the practice rather
than learn the theory. So, the needs of applying the theory will be the purpose of the
Accounting Principles Lab. This Lab will help students to understand the
implementation of accounting in the real world.
To make the students understand the Accounting Principles 1 easier, this module has
been compiled. It contains the summary and comprehensive exercise of each chapter to
improve the students' understanding.
By taking this course, the compiler team hopes that the students are competent in both
theory and practice of accounting and have the good basics to take the Accounting
Principles 2.
May God bless all of you and grant you wisdom throughout the journey.

Sincerely,
Lab Assistant Team

1
 CONTENTS

FOREWORD ................................................................................................................................................ 1
CONTENTS .................................................................................................................................................. 2
INTRODUCTION ......................................................................................................................................... 3
OUTLINE OF THE INSTRUCTION PROGRAM (SAP) ............................................................................ 7
MODULE 1 – “ACCOUNTING IN ACTION” .......................................................................................... 9
MODULE 2 – THE RECORDING PROCESS ........................................................................................ 14
MODULE 3 – ADJUSTING THE ACCOUNTS ...................................................................................... 18
MODULE 4 – COMPLETING THE ACCOUNTING CYCLE ............................................................... 25
MODULE 5 – ACCOUNTING FOR MERCHANDISING OPERATIONS ............................................ 30
MODULE 6 – INVENTORIES ................................................................................................................ 34
MODULE 7 – FRAUD, INTERNAL CONTROL, AND CASH CONTROL .......................................... 39
MODULE 8 – ACCOUNTING FOR RECEIVABLES ............................................................................. 43

2
 INTRODUCTION

A. Description

Accounting lab is linked and inseparable with each of its main courses (theory).
Accounting lab is intended for students to better comprehend the concepts related to
its main course through exercises and cases.

Every accounting lab is worth 0 credits and has a duration of 100 minutes, scheduled
face-to- face and equaling 2 credits.

B. General Purpose Instruction

After taking this course and finishing all the materials, students are expected to
be able to identify/explain/calculate/analyze the following concepts:

1. Accounting in Action – Accounting for Service Company

2. The Recording Process
3. Adjusting the Accounts
4. Completing the Accounting Cycle
5. Accounting for Merchandising Operations
6. Inventories
7. Fraud, Internal Control, and Cash
8. Accounting for Receivables
C. Lecturing Activities
1. Students are directed to be actively involved during the learning activity in class.
2. To facilitate the teaching and learning activity, students are required to read the
reference book or related materials. Students can also read thesummarized
theory available in every module.
3. The exercises compiled in this module are just a part of what is taught in theory
class.

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4. Students are obligated to individually finish each exercise given in this module,
according to the lab assistant's instructions, do quizzes as well as the mid and
final test according to the schedule given

4
 D. Class Rules
1. Attendance

At least attend 12 sessions from 14 sessions or equal to 85% attendance.

2. Lateness
> 15 Minutes will be regarded as absent for every class meeting

3. Permission Exception
1. Formal permission from university or faculty
2. Hospitalized (maximum 2 weeks)
3. Sudden pass away of a core family member (with supported documents).

E. Grading Composition

The final grade is the sum of the student's theory and lab score with a composition
of 85%

theory class and 15% lab course.

Below are the components of the lab course grading:

Mid - Test: 35% Absence: 10%

Final- Test 35% KAT: 10%

Quiz: 10%

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F. Grading Scale

Score Grade

90 – 100 A
85 – 89.99 A-

80 – 84.99 B+

75 – 79.99 B
70 – 74.99 B-
65 – 69.99 C+
60 – 64.99 C
55 – 59.99 C-
40 – 54.99 D
0 – 39.99 E

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 OUTLINE OF THE INSTRUCTION PROGRAM (SAP)
Week Module Material Type Reference
Accounting in
Action – Onsite
1 Chapter 1
1 Accounting for
Service Company

2 The Recording
2 Process Onsite Chapter 2
The Recording
3 2 Onsite Chapter 2
Process
Adjusting the
4 3 Onsite Chapter 3
Accounts
Adjusting the
5 3 Onsite Chapter 3
Accounts

6 Completing the
Onsite Chapter 4
4 Accounting Cycle
Adjusting the Accounts
& Completing the
7 Accounting Cycle Onsite Chapter 4
4
UTS
Accounting for Onsite
9 Merchandising Chapter 5
5
Operations
Accounting for
10 Merchandising Onsite Chapter 5
5
Operations
11 Inventories Onsite Chapter 6
6
12 6 Inventories Onsite Chapter 6
Fraud, Internal
13 7 Control, and Cash Onsite Chapter 7
Control
Fraud, Internal
Onsite
14 Control, and Cash
7 Chapter 7
Control
Accountingfor
8 Receivables Chapter 8
15 Onsite
UAS
MODULE 1
7
 “ACCOUNTING IN ACTION”

Problem 1-1
Accounting equation
A fresh-graduate student, Maria, decided to open Oink Corp. to get some money.
Below are the following transactions during the third month.
1. Stockholders invested $30.000 cash into the business
2. Sold goods to customer on credit for $8.000
3. Paid creditors, Flare n Co $700
4. Purchase supplies for $1.000 cash
5. Paid rent on office and advertising for the month $1.000
6. Received $8,000 from customers purchases billed in (2)
7. Received cash from customers for the service provided on credit last month $850
8. Withdrew cash from her capital for her personal use $500
9. Paid dividends to shareholders $2.500

Required:
Determine the effects (increase/decrease) of each transaction on assets, liabilities, and equity.

Problem 1-2
Accounting Equation
Listed below are two different companies' financial statement information.

VEGAS Corp. Rotherwood Inc.

(In Million) (In Million)

Beginning of year:

Total Assets $650 (b)

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 Total Liabilities (a) $250

Total Equity $300 $450

End of Year:

Total Assets $750 $800

Total Liabilities $150 (d)

Total Equity (c) $500

Changes during year in equity:

Additional Investments $100 $150

Dividends $150 $100

Total Revenues (e) $100

Total Expenses $200 (f)

Required:
Determine the missing amount.

Problem 1-3
Accounting equation
Dudu Company was formed on July 1 2022. On July 30, 2022 the statement of financial
position showed Cash $200.000, Accounts Receivable $10.000, Supplies $8.000, Equipment
$510.000, Account Payable $200.000, Notes Payable $128.000, Share Capital Ordinary
$400.000. During August, the following transaction occurred.
1. Shareholders invested $20.000 in cash in exchange for ordinary shares of Legal
Service Company
2. Paid $1.600 for July Rent office space
3. Purchased office equipment in cash $6.000
4. Performed legal services for clients for cash $3.000
5. Incurred Utilities expense for the month on account $1.800
6. Borrowed $1.400 from a bank on a note payable

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 7. Performed a legal service for clients on account $4.000
8. Paid monthly expenses: salaries $1.000, advertising $2.200

Required:
Prepare a tabular analysis of the August transactions beginning with July 31 balances. The
column heading should be as follow:
Cash + Account Receivable + Supplies + Equipment = Notes Payable + Account Payable
+ Share Capital + Revenue –Expenses –Dividends.

Problem 1-4
Statement of preparation
Nay started a consulting firm, Nay Ltd on April 1, 2022. Nay invested $300.000 cash in the
business. The following are the assets and liabilities of the company at April 30 and the revenues
and expenses for the month of April.

Cash $300.000

Account Receivable $55.000

Supplies $100.000

Advertising Expense $100.000

Equipment $170.000

Notes Payable $175.000

Account Payable $100.000

Service Revenue $350.000

Gasoline Expense $20.000

Maintenance and Repair Expense $10.000

Utilities Expense $5.000

Rent Expense $15.000

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 Salaries and Wages Expense $120.000

No additional investments were made in that month. There is a dividend of $ 30,000 during
the month

Required:
Prepare income statement and retained earnings statement for the month of Marchand a
statement of financial position at April 30, 2022.

Homework
Accounting equation
Financial Statement information about four different companies is as follows

Required:
Determine the missing amounts!

Jan 1, 2021 Honey Inc. Russell Co. John n Doey Busan Corp.

Assets $1.750.000 $1.450.000 (g) $1.750.000

Liabilities (a) (d) $560.000 $1.000.000

Equity $500.000 $350.000 $340.000 (j)

Dec 31, 2021

Assets $1.500.000 $1.200.000 $1.700.000 (k)

Liabilities $500.000 (e) $800.000 $650.000

Equity (b) $700.000 (h) $1.200.000

Equity changes in
year

Additional (c) $400.000 $600.000 $800.000

Investment

Dividends $150.000 (f) $250.000 $350.000

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Total Revenues $4.500.000 $3.000.000 (i) $3.500.000

Total Expenses $4.200.000 $2.600.000 $250.000 (l)

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 MODULE 2

THE RECORDING PROCESS

Problem 2-1
Journalize transactions
Due to its relevance, a Parent Company called Saint Medical expanded their corporations to
focus more on providing COVID-19 medical tools and equipment. Thus, a subsidiary company
called Health Care was born on 2 November 2021. The following transactions were made during
their first month of operations.

January 1 Invested $40,000 cash in exchange for ordinary shares

1 Hired a secretary at a salary of $450 per week payable monthly. The secretary
got to work the day of the employment.

6 Paid $300 for Advertising

9 Performed health consulting services and billed Customer for $4,500

13 Purchased therapy supplies on account from Darwin Company $5,000

16 Received and paid utility bills for $100

18 Purchased equipment with cash from Paris Company $12,300

19 Incurred advertising expense of $1,000 on account

22 Declared & paid $500 cash dividend

24 Paid office rent for the month $6,000 cash

27 Received $1,500 cash advance from Mrs. Aubrey for a health consultation

29 Received $2,000 cash for services completed to their respective customers.

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 30 Paid the secretary for the month

Required:
Prepare the journal entries for each transaction for the month of January.

Problem 2-2
Trial balance & t-account ledger (Video)
Super M accountant has prepared the following journal transactions for September 2021
thatare presented below:

Date Account Titles & Explanation Debit Credit

September 1 Cash $80,000

Capital $80,000

12 Equipment $20,000
Account Payable $20,000

13 Rent Expense $2,500

Cash $2,500

23 Account Receivable $17,000

Service Revenue $17,000

27 Account Payable $4,000

Cash $4,000

Required:

1. Posting these journal transactions into T-account Ledger

2. Prepare a Trial Balance on September 30, 2021

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Homework
Journalize transactions, t-accounts, & trial Balance
SM Entertainment is a company whose mainly providing services for planning & organizing
events. They have an Ending Trial Balance of the following:

SM Entertainment
Trial Balance
September 30, 2021

Debit Credit

Cash $40,000

Accounts Receivable $12,000

Supplies $15,000

Prepaid Rent $20,000

Equipment $10,000

Account Payable $2,000

$60,00
Share Capital - Ordinary 0
$35,00
Retained Earnings 0
$97,000 $97,000

During October 2021, the following transactions occurred:

October 3 Purchased new equipment from Disney Company costing $100,000 and
paid $20,000 cash now and agreed to pay the remaining on account.

5 Finished orders from decorating Ms. Olivia Sweet 17 Birthday

Celebration Party $50,000 and make up amounted to $90,000 in the
same customer. Make up payment received on cash and for the
decorating service the billed will be sent.

6 Purchased supplies costing $ 20,000 on account.

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 9 Received $50,000 in cash for services rendered to customers.

12 Received payment of the bill sent to Ms. Olivia.

19 Received $200,000 in cash as advanced payment from Marvel

Company for service.

21 Paid the remaining balance on account for Disney Company.

29 Paid $23,000 for salaries and wages.

30 Paid for advertising expense of $17,000.

Required:

1. Journalize the transactions occurred in October 2021

2. Prepare a general ledger using T-accounts. Enter the opening balances in the ledger
accounts as of October 1, 2021
3. Prepare a trial balance on October 31, 2021

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 MODULE 3
ADJUSTING THE ACCOUNTS

Problem 3-1

Adjusting entries (Video)

The ledger of Bridgeton Co. is shown below on December 31, 2021, includes
the selected accounts before adjusting entries are prepared.

Accounts Debit Credit

Account Receivable $ 15,000

Supplies $ 20,000

Equipment $ 16,500

Accumulated Depreciation - $ 1,000

Equipment

Notes Payable $ 21,000

Interest Payable $0

Salaries and Wages Payable $ 1,200

Service Revenue $ 51,200

Insurance Expense $ 13,500

The information below has been gathered on December 31, 2021.

1. Supplies of $8,300 are on hand.

2. Performed services for a client in December 2021, the client will be billed $2,000.
3. Depreciation on the equipment for 2021 is $7,000.
4. Borrowed $15,000 by signing a 8%, one-year note on September 1, 2021.
5. Paid $9,000 for 12 months of insurance coverage on 31 August 2021.
6. On November 1, 2021, they collected $42,000 for services to be performed from
November1, 2021 through May 31, 2022.
7. The company pays 5 employees who are paid every week with a salary payment
schedule every Friday. Three people are paid $550/week and the rest are paid

17
 $300/week. On December 31 2021, is Thursday and employees don't work on
weekends.

Required:
Prepare annual adjusting entries for the seven items described above.

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Problem 3-2
Adjusting entries
The ledger of EXO Company on 30 June of the current year includes the selected accounts,
shown below, before adjusting entries have been prepared.

Accounts Debit Credit

Prepaid Insurance $ 24,000

Supplies $ 12,400

Equipment $ 29,900

Accumulated Depreciation - $ 4,000

Equipment

Notes Payable $ 15,000

Unearned Rent Revenue $ 80,000

Interest Expense $ 13,500

Salaries and Wages Expense $ 51,000

An analysis of the accounts show the following.

1. The equipment depreciates $300 per month.
2. Insurance expires at the rate of $400 per month.
3. Interest of notes payable is accrued (the notes payable was since February 1 on the
same year with 10%).
4. 3/8 of the unearned rent revenue was recognized in the middle of the year
5. Supplies on hand total $5,750.
Required:
Prepare the adjusting at 30 June for EXO Company, assuming that the
adjusting entries are made semiannually.

19
Problem 3-3
Adjusting entries, ledger, & adjusted trial balance
Lee Jong Suk started his own consulting firm, W Company, on January 1, 2019. The
trialbalance before adjustment on 31 December 2021 is as follows.

W Company

Trial Balance

December 31, 2021

Account Number Account Titles & Explanation Debit Credit

101 Cash $50,000

126 Supplies 19,500

130 Prepaid Insurance 23,500

140 Land 64,000

143 Buildings 280,500

157 Equipment 94,000

201 Accounts Payable $25,000

208 Unearned Rent Revenue 27,000

275 Mortgage Payable 76,750

311 Share Capital—Ordinary 340,000

332 Dividends 14,500

429 Rent Revenue 185,000

622 Maintenance and Repairs Expense 12,500

726 Salaries and Wages Expense 70,650

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732 Utilities Expense 24,600

$653,750 $653,750

In addition to those accounts listed on the trial balance, the chart of accountants for W Company
also contains the following accounts and account numbers: No. 112 Accounts Receivable, No.
144 Accumulated Depreciation - Buildings, No. 158 AccumulatedDepreciation – Equipment,
No. 212 Salaries and Wages Payable, No. 230 Interest Payable, No. 631 Supplies Expense, No.
711 Depreciation Expense, No. 718 Interest Expense, and No. 722 Insurance Expense.
Other Data :
1. Annual depreciation is $8,700 on buildings and $4,800 on equipment.
Machine and Buildings acquired on 1 May 2021.
2. The company paid insurance in advance of $23,500 for 2021 with the
following details:

Company Date Policy Amount Time Period

UOB 1 June 2021 $12,000 2 year

Citibank 1 October 2021 $11,500 1 year

3. A count on December 31 shows $11,300 supplies on hand.

4. Unearned rent revenue of $7,500 was recognized for service performed
prior to December 31.
5. The mortgage interest rate is 12% per year (the mortgage was taken out on
November 1).
6. Salaries of $10,200 were unpaid on December 31.
7. Rentals of $12,000 were due from tenants on December 31.

Required:
a). Journalize the adjusting required as of December 31, 2021.
b). Prepare a ledger using the three-column form of account. Enter the trial
balance amounts and post the adjusting entries. (Use J1 as the posting reference).
c). Prepare an adjusted trial balance on December 31, 2021.

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Homework
Journal transactions, adjusting entries, ledger accounts, adjusted trial balance,
statement of preparation
On December 31, 2021, the account balance of Coffee Prince Inc. was as follows.

No Accounts Debit No Accounts Credit

Cash $8,500
101 $ 20,200 158 Accumulated
Depreciation -
Equipment

Accounts Receivable 13,000 201 Accounts Payable 5,000

112

126 Supplies 14,500 209 Unearned Service 7,200

Revenue

157 Equipment 75,500 212 Salaries and 9,500

Wages Payable

311 Share Capital - 57,600

Ordinary

320 Retained 35,400

Earnings

Total $123,200 $123,200

During December, the following summary transactions were completed.

Dec 02 Purchased supplies on account $17,500.

Dec 05 Received $52,500 cash for services performed in December

Dec 07 Paid $10,000 for salaries due employees, of which $4,800 is for October
salaries.

Dec 10 Purchased equipment on account $6,750.

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Dec 12 Received $12,500 cash from customers on account.

Dec 20 Paid creditors on account $1,200.

Dec 24 Paid December rent $4,400.

Dec 25 Received $12,700 from customers for future service.

Dec 29 Paid salaries $5,000.

Dec 29 Performed services on account and billed customers for services provided
$13,800.

Adjustment data consist of:

1. Unearned service revenue $4,000 is recognized for services performed.

2. Accrued salaries payable $6,400.
3. Supplies on hand $6,000.
4. Depreciation for the month is $750.

Required:

a). Journalize the December transactions.

b). Journalize the adjusting entries on December 31, 2021.

c). Post to ledger accounts using the three-column form of account. (Use J1 for posting
references. Use the following additional accounts: No. 400 Service Revenue, No. 631
Supplies Expense, No. 711 Depreciation Expense, No. 726 Salaries and Wages Expense,
and No. 729 Rent Expense.)

d). Prepared an adjusted trial balance.

e). Prepare an Income Statement and a Retained Earnings Statement for December and a
Statement of Financial Position on December 31, 2021.

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 MODULE 4
COMPLETING THE ACCOUNTING CYCLE

Problem 4-1
The Accounting Cycle (Video)
James opened Broadway Barber Inc. On August 1, 2022, During this month,
thefollowing transactions were completed.

Aug 1 Issued 50,000 shares of share capital ordinary for $50,000 cash

Aug 2 Purchase used equipment for $22,000 paying, $7500

cash, and the balance on account.

Aug 5 Purchase barber supplies for $5000 on account

Aug 8 Paid $6000 cash on one-year insurance policy

effective August 1

Aug 10 Billed customer $4500 for barber services

Aug 16 Paid $4200 cash on amount owed on equipment and $2000

on amount owed on barber supplies

Aug 20 Collected $4500 cash from customers billed on

August10

Aug 25 Paid $2500 cash for employee salaries

Aug 28 Billed customers $6900 for barber service

Aug 31 Declared and paid $200 cash dividends.

The chart of accounts for Cleaner Inc. contains the following accounts: No. 101
Cash, No. 112 Accounts Receivable, No. 126 Supplies, No. 130 Prepaid
Insurance, No. 157 Equipment, No. 158 Accumulated Depreciation –

24
Equipment, No. 201 Account Payable, No. 212 Salaries and wages payable, No.
311 Share Capital-Ordinary, No. 320 Retained Earnings, No. 332 Dividend, No.
350 Income Summary, No. 400 Service Revenue, No. 631 Supplies Expense, No.
711 Depreciation Expense, No. 722 Insurance Expense, and No. 726 Salaries and
Wages Expense.

Required:
a. Journalize the August transaction
b. Enter the following adjustments on worksheet and complete the worksheet
1. Unbilled revenue for service performed at August 29 was $2775
2. Depreciation on equipment for the month was $700
3. One-twelfth of the insurance expired
4. An Inventory count shows $475 barber supplies on hand at August 31
5. Accrued but unpaid employee salaries were $1675
c. Prepare the income statement, retained earnings statement and
classified statement of financial position for August 31
d. Prepare the closing entries and post-closing trial balance
*) The worksheet is given on the next page

25
27
Homework
The Accounting Cycle & Worksheet

Kangaroo Service Company

Worksheet

For the Month Ended October 31, 2022

Account Titles Trial Balance

Dr Cr

Cash 7,050

Account Receivable 5,500

Supplies 5,200

Accounts Payable 2,000

Unearned Service Revenue 550

Share Capital—Ordinary 10,970

Service Revenue 5,500

Salaries and Wages Expense 970

Miscellaneous Expense 300

Other data:
1. A physical count reveals $550 of supplies on hand
2. $150 of the unearned revenue is still unearned at the month-end
3. Accrued salaries are $320

The chart of accounts for Kangaroo Company contains the following accounts: No. 101
Cash, No. 112 Accounts Receivable, No. 126 Supplies, No. 201 Account Payable, No. 210
Unearned Service Revenue, No. 212 Salaries and wages payable, No. 311 Share Capital-
Ordinary, No. 320 Retained Earnings, No. 332 Dividend, No. 350 Income Summary, No.
400 Service Revenue, No. 631 Supplies Expense, No. 725 Miscellaneous Expense, No. 726
Salaries and Wages Expense

28
Required:
a. Enter the trial balance on a worksheet and complete the worksheet
b. Prepare the income statement, retained earnings statement for October, and
Statement of financial position at October 31
c. Prepare the closing entries
d. Prepare the post-closing trial balance

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 MODULE 5:
ACCOUNTING FOR MERCHANDISING OPERATIONS

Problem 5-1
Perpetual Inventory System
Newtown Inc. distributes racks to retail stores and extends credit terms of 3/10, n/30 to all
its customers. At the end of September, Newtown's inventory consisted of racks costing
$1,500. During the month of October, the following merchandising transaction occurred.

Oct 1 Purchased racks on account for $2350 from Mandela Manufactures, FOB
Destination, terms 4/10, n/30. The appropriate party also made a cash payment
of $130 for freight on this date
Oct 4 Sold racks on account to Arthur for $7,500. The cost of suitcases sold is $3,750

Oct 8 Paid Mandela Manufactures in full

Oct 10 Received full payment from Arthur

Oct 15 Sold suitcases on account to Victoria Co. for $8,500. The cost of the
suitcases sold was $4,250
Oct 18 Purchased suitcases on account for $6,000 from BCG Manufactures, FOB
shipping point, terms 1/15, n/30. The appropriate party also made a cash
payment of $200 for freight on this date
Oct 20 Received $250 credit for racks returned to BCG Manufactures
Oct 23 Received full payment from Victoria Co.
Oct 25 Sold suitcases on account to Madeline Co. for $6,000. The cost of suitcases
sold was $3,500
Oct 30 Paid BCG Manufacturers in full
Oct 31 Granted Madeline Co. $300 credit for suitcases returned costing $150
Required:
Journalize the transactions for the month of October for Newtown Corp. using a
perpetual inventory system

30
Problem 5-2

Periodic Inventory System

The following transactions were completed during November by World of Sports.

Nov 1 Purchased balls from Stephen Co. $6000, terms 4/12, n/30
Nov 5 Paid freight on Mayer Co. purchase $210 From October transaction
Nov 9 Sold merchandise to Darwin $7,600, terms n/30

Nov 10 Received credit of $300 from Mayer Co. For a ball that was returned
Nov 12 Purchased basketball shoes from Hoops Basketball for cash $1050
Nov 15 Paid Stephen Co. In full

Nov 17 Purchased sofas and shorts from WO Station $970, terms 3/15, n/60
Nov 18 Paid freight on Football Station purchased $80
Nov 22 Sold appliances to Darwin $2,300, terms n/30

Nov 25 Received $970 in cash from Darwin in settlement of their account

Nov 28 Paid WO Station in full

Nov 30 Granted an allowance of $567 to Darwin for basketball clothing that did not fit properly

Required:
Prepare the August Transactions using a periodic inventory system

31
Problem 5-3
Perpetual and Periodic System (Video)

The following transactions were completed during December by QLO Clothing.

Dec 2 Purchased pants from Giant Co. $3,100, FOB shipping point, terms 2/15, n/60

5 Paid freight on Giant Co. purchase $90

7 Sold hats to Nunez, Co $2,400, terms n/30. The merchandise sold had a cost of

$2,100

10 Received credit of $95 from Giant Co. for pants that was returned

12 Purchased jackets from Margot for cash $2,150

13 Paid Giant Co. In full

15 Purchased cardigans from Alpha $2,000, FOB Shipping Point, terms

5/10, n/60

16 Received cash refund of $175 from Margot for damaged jackets that was returned

18 Paid freight on Alpha purchase $95

19 Sold jackets to members $1070, terms n/45. The cost of merchandise sold was
$550
22 Received $830 in cash from Nunez, Co in settlement of their account

25 Paid Alpha in full

28 Granted an allowance of $95 to Nunez, Co for hats that were torn. The cost of
the
hat is $60

Required:

Prepare the December transactions using a perpetual and periodic inventory system

32
Homework
Income Statement
At the end of Nets Ltd.'s fiscal year on December 31, 2022, these accounts appeared in its
adjusted trial balance.

Freight – In $ 9,300
Inventory (1 Jan 2022) $ 55,000

Purchases $ 850,000
Purchases Discount $ 35,000
Purchases Return and Allowances $ 8,500
Sales Revenue $ 865,000

Sales Return and Allowances $ 32,000

Additional facts:

1. Merchandise inventory on December 31, 2022, is $92,000

2. Nets Ltd. uses a periodic system.

Required:

Prepare an income statement through gross profit for the year ended December 31,2022.

33
 MODULE 6

INVENTORIES

Problem 6-1

Periodic and perpetual system using fifo and average method

Miracle Company is a retailer company in South Korea. It uses the perpetual inventory method.
All sales returns from customers result in the goods being returned to inventory, the inventory
is not damaged. Assume that there are no credit transactions, all amounts are settled in cash.
The following information is available for Ace Hardware during May 2022.

Date Description Quantity Price/ Unit

Apr 28 Ending Inventory 55 $55

May 7 Purchase 30 $80

8 Sale 72 $90

12 Sale Return 10 $90

18 Purchase 50 $70

22 Sale 50 $93

28 Purchase Return 14 $70

34
Required:

a. Calculate the COGS, Ending Inventory, and Gross Profit under a periodic inventory system
and perpetual inventory system using FIFO method.

b. Calculated the COGS, Ending Inventory, and Gross Profit under a periodic inventory system
using Weighted-Average method and perpetual inventory system using Moving-average
method.

Problem 6-2

Retail inventory method

The following shows information about Ketrine retail store. Determine the missing amounts
using the retail inventory method.

Description At Cost At Retail

Beginning Inventory $50,000 $90,000

Goods Purchase $155,000 ……………

Goods Available for Sale ………….. $250,000

Net Sales $75,000 $100,000

Ending Inventory ………….. …………..

35
Required:
Complete the table !

Problem 6-3

Periodic and perpetual average cost method (Video)

You have the following information for Shooky Diamonds. Shooky Diamonds uses theperiodic
inventory method for its inventory transactions. Shooky Diamond only carries one brand and
six of diamonds – all are identical. Each batch of diamonds is carefully coded and marked with
its purchase cost.

Dec 1: Beginning Inventory 680 diamonds at a cost of $790 per diamond.

Dec 8: Purchased 520 diamonds at a cost of $800 each.

Dec 15: Sold 300 diamonds for $1,228 each.

Dec 20: Purchased 698 diamonds at a cost of $860 each.

Dec 28: Sold 570 diamonds for $1,490 each.

Required:

Calculate:

(1) Ending Inventory

(2) Cost of Goods Sold

(3) Gross Profit under each of the following method:

a). Periodic Average Cost Method

b). Perpetual Average Cost Method

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(4) Gross Profit Margin

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Homework

Periodic inventory system using fifo and average cost method

Cynthia Company had a beginning inventory on January 1 of 880 units of Product X at a cost
of $50 per unit. During the year, the following purchases were made.

Date Units Units Cost

May 14 150 $35

June 27 480 $42

Sept 18 320 $58

Dec 21 270 $60

On 28 December, 1800 units were sold for $88. Cynthia Company uses a periodic inventory

system.

Required:

1. Determine the cost of goods available for sale using table

2.Determine the Ending inventory and COGS under the two assumed cost flow methods

(FIFO and average-cost)

3. Which cost flow method results in:

A). The higher inventory amount for the statement of financial position

B). The higher COGS for the income statement

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 MODULE 7

FRAUD, INTERNAL CONTROL, AND CASH CONTROL

Problem 7-1

Petty Cash Fund

Chris Bum Ltd. maintains a petty cash fund for small expenditures. These transactions
occurred during the month of June.

June 01 Established the petty cash fund by writing a check payable to petty cash
custodian for $350.

June 10 Replenished the petty cash fund by writing check for $225. On this date, the
fund consisted of $57 in cash and these petty cash receipts: freight out $43,
entertainment expense $72, postage expense $45, and miscellaneous expense
$59.

June 17 Replenished the petty cash fund by writing check for $159. On this date, the
fund consisted of $26 and these petty cash receipts: freight out $28, postage
expense $27, charitable contributions expense $88, and miscellaneous expense
$24.

June 25 Chris Bum Ltd. decides to increase the amount of petty cash funds to
$500.

June 30 Replenished the petty cash fund by writing check for $200. On this date, the
fund consisted of $69 in cash and these petty cash receipts: freight out $42,
entertainment expense $57, postage expense $68, and miscellaneous expense
$33.

Required:

Journalize the petty cash transactions.

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Problem 7-2

Bank Reconciliation & Adjusting Entries (Video)

The following transactions occurred at Bumstead Co. on December 31, 2022:

1. Bank account showed a balance of $20,090.

2. Cash balance per books, December 31 $19,696.
3. Bank collected $5,700 note for Elsa's Company in December, with an interest
of $250. Collection fee was $50. Interest on the note has been accrued.
4. Deposit in transit $4,848 and checks outstanding on December 31 totaled $737.
5. Bank statement showed an NSF charge of $275.
6. Bank statement showed charges of $120 for the service charge of maintaining
the checking account.
7. Bumstead Co. issued check no. 505 for $1,231 to Olaf's Company on account.
This check, which was cleared by the bank in November, was incorrectly
journalized and posted by Bumstead Co. for $231. This check had been issued
to pay for purchases of Machinery.
Required:

1. Prepare the bank reconciliation on December 31, 2022.

2. Journalize the adjusting entries on December 31, 2022.

Problem 7-3

Bank Reconciliation

The Cash account of Halls Corporation showed a balance of $168,969 on October 31, 2022.
The bank statement as of the date showed a balance of $178,328. Upon comparing the
statement with the cash records, the following facts were determined.

1. There were bank service charges for October of $222.

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2. A bank memo stated that Halls Corporation's note for $18,000 and interest of
$888 had been collected on October 15 and the bank had made a charge of
$111 on the collection.
3. Deposit in transit was $12,743 and outstanding checks on October 31 was
$7,034.
4. Check No.404 in the amount of $12,400 had been entered in the cash journal
as $14,200 and Check No.415 in the amount of $1,080 had been entered in
the cash journal as $1,800. Both checks had been issued to pay for purchases
of supplies.
5. The bank had charged the Halls Corporation's account for a customer's
uncollectible check amounting to $666 on October 25.
6. There was a cancelled check of $5,341 issued by Aurora Company that was
incorrectly charged to Halls Corporation by the bank.

Required:

Prepare the bank reconciliation on October 31, 2022.

Homework

Bank Reconciliation & Adjusting Entries

On November 30, 2022, Shaw Corporation had a cash account per its general ledger showing
a balance of $58,430.

The bank statement from Secret Treasure Bank on that date showed the following date
showed the following balance.

Secret Treasure Bank

Checks and Debits Deposits and Credits Daily Balance

11-30 $56.789

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A comparison of the details on the bank statement with the detail in the Cash account
revealed the following facts.

1. Cash sales of $2,190 on November 5 were deposited in the bank. The cash
receipts journal entry and the deposit slip were incorrectly made for $2,910.
The bank credited Shaw Corporation for the correct amount.
2. On November 17, the company issued check no. 753 for $2,930 to Flounder on
account. The check, which cleared the bank in November, was incorrectly
journalized and posted by Shaw Corporation for $2,390. This check had been
issued to pay for purchases of Equipment.
3. The statement included a debit memo of $650 for the printing of additional
company checks.
4. Included with the cancelled checks was a check issued by Aquamarine
Company to Atlantis Corporation for $5,535 that was incorrectly charged to
Shaw Corporation by the bank.
5. On November 25, the bank statement showed an NSF charge of $1,964 for
check issued by Ariel, a customer, to Shaw Corporation on account.
6. Outstanding checks on November 27 totaled $4,341 and deposits in transit were
$7,280.
7. A $10,000 note receivable was collected by the bank for Shaw Corporation on
November 12 plus $812 interest. The bank charged a collection fee of $105.
No interest has been accrued on the note.
Required:

1. Prepare the bank reconciliation on November 30, 2022.

2. Prepare the necessary adjusting entries for Shaw Corporation on account.

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 MODULE 8

ACCOUNTING FOR RECEIVABLES

Problem 8-1

Inadequate Receivables

The ledger of Noel Inc. at the end of current year shows:

Account Receivable $ 400,000; Sales Revenue $ 640,000; and Sales Return and Allowance
$ 240,000.

Required:

1. If Noel Inc. uses direct write-off method, journalize the adjusting entry at
December 31, assuming Noel Inc. determines that Servish's $ 31,000 balance
is uncollectible
2. If Allowance for Doubtful Accounts has a credit balance of $ 29,700 in the trial
balance, journalize the adjusting entry at December 31, assuming bad debt are
expected to be :
A. 4% of net sales
B. 12% of accounts receivable

Problem 8-2

Notes Receivable

Deyzel Co. has the following transaction (related to notes receivable during the last two
months of 2020). The company doesn't make any entries to accrue the interest, except on
December 31.

(1 year = 360 days)

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 Nov. 1 Loaned $ 58,000 to Magnifico Inc. on 12-month, 9% note

Dec. 10 Sold goods to Sakura Inc. receiving a $ 45,000, 90-day, 12% note

16 Received a $ 42,500, 180-day, 10% note in exchange for NaiNai Co.'s

outstanding account receivable

31 Accrued interest revenue on all notes receivable

Required:
1. Journalize the transaction for Deyzel Co.
2. Record the collection of the Magnifico Inc. note at its maturity.

Problem 8-3

Age of Accounts Uncollectible

Information related to Fraser Company for 31 December 2020 is summarized as following:

Account Receivables $ 250,000,000

Allowance for Doubtful Accounts (CR) $ 10,500,000

Sales $ 850,000,000

Sales Return $ 95,000,000

Fraser Company categorizes its account receivables based on their age:

Age of Accounts uncollectible Amount Estimated percentage

1-30 days $ 100,000,000 1%

31-60 days $ 80,000,000 3%

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 61-90 days $ 55,000,000 8%

Over 90 days $ 45,000,000 10%

Required:

If Fraser Company uses allowance method for their uncollectible accounts:

1. Prepare the adjusting entry if its bad debt expense assumes to be 1% of net sales
2. Prepare the adjusting entry if its bad debt expense assumes to be 6% of Account
Receivables
3. Prepare the adjusting entry if its bad debt expense assumption is based on age of
accounts uncollectible

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Homework

Notes & Interest Receivable

Wilson closes its books every 30 September. selected ledger account balances are:

Notes Receivable = $41,000

Interest Receivable = $170

Notes Receivable includes the following:

Date Maker Face Value Term Interest

Aug. 16 Alpha $ 25,000 60 days 12%

Aug. 27 UV $ 7,000 60 days 7%

Sept. 30 Gamma $ 18,000 6 months 10%

*Interest is computed using a 360-day year. During October, the following transactions were
completed.

Oct 9 Made sales of $ 19,000 on credit

Oct 12 Made sales of $ 6,500 on VISA credit card. The credit card's service charge
is 2%

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 Oct 14 Added $680 to customer balance for finance charges on unpaid balance

Oct 15 Received full payment from Alpha on the amount due

Oct 26 Received notice that UV's note has been dishonored (Assume that UV is
expected to pay in the future)

Required:

Journalize the October transactions and the October 31 adjusting entry for accrued interest
receivables.

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