USE PERPETUAL INVENTORY SYSTEM FOR P6.

a. Cost of goods available for sale:

400x8 + 200x9 + 500x10 + 600x11 + 300x12 = 20200

b.

Date Purchase Sale Balance

400x8 3200
Feb. 20 200x9 1800
May 5 500x10 5000
Aug. 12 600x11 6600
Dec. 8 300x12 3600
FIFO:
Sales totaled 1500 units: 400x8 + 200x9 + 500x10 + 400x11 = 14400
(2) Cost of goods sold: 14400
(1) Ending inventory: 20200 - 14400 = 5800
Average cost:
Sales totaled 1500 units which cost (3200 + 1800 + 5000 + 6600 + 3600) / (400 + 200 + 500 + 600 + 300)
= 10,1 per unit: 1500 x 10,1 = 15150
(2) Cost of goods sold: 15150
(1) Ending inventory: 20200 – 15150 = 5050
Under average cost method, cost of goods sold increase an amount of 750. In contrast, under FIFO
method, cost of goods sold decrease an amount of 750.
 a.

Exercise 1

Mike started a computer programming business (12/2017), Mike’s Programming Service. The
following transactions occurred during December, 2017:

1. 1/12: Mike invested $100,000.

2. 1/12: Paid the rent for the next 12 months $12,000.
3. 2/12: Purchased supplies on credit for $1,000.
4. 3/12: Purchased a computer for $5,500 in cash.
5. 5/12: Received cash for programming services performed, $1,100.
6. 6/12: Received cash for programming services to be performed, $1,300.
7. 10/12: Billed a customer for programming services performed, $600.
8. 10/12: Paid $400 of purchased supplies on credit on 2/12
9. 14/12: Purchased equipment for $12,000, paying $4,000 in cash

Required:
1. Record the transactions in the general journal for 2017.
2. Post the transactions to the ledger (T accounts) and calculate closing balances of the
accounts
3. Prepare a trial balance on 31, December
Answer:
 1. General Journal
Date Explanation Debit Credit
Dec. 1 Cash 100,000
Share Capital-Ordinary 100,000
Dec. 1 Prepaid Rent 12,000
Cash 12,000
Dec. 2 Supplies 1,000
Account payable 1,000
Dec. 3 Computer 5,500
Cash 5,500
Dec. 5 Cash 1,100
Service revenue 1,100
Dec. 5 Cash 1,300
Service revenue 1,300
Dec. 10 Account receivable 600
Service revenue 600
Dec. 10 Account payable 400
Cash 400
Dec. 14 Equipment 12,000
Cash 4,000
Account payable 8,000
2. Post to T-account
 3. Trial balance
Account Debit Credit
Cash 80500
Supplies 1000
Computer 5500
Equipment 12000
Account receivable 600
Prepaid rent 12000
Account payable 8600
Service revenue 3000
Share Capital-Ordinary 100000

Balance 111600 111600

Exercise 2: Greenock Company has the following information available for accruals for the year ended
December 31, 2020. The company adjusts its accounts annually.

Required:

1. Record the transactions in the general journal for 2017.

2. Post the transactions to the ledger (T accounts) and calculate closing balances of the
accounts

Answer:
1. General Journal
Date Explanation Debit Credit
Dec. 31 Utility expense 425
Account payable 425
Dec. 31 Wages and salaries expense 2000
(3500/7) x 4 = 2000
Account payable 2000
Dec. 31 Interest expense 2400
48,000 x 5% = 2400
 Interest payable 2400
Dec. 31 Account receivable 300
Service revenue 300
Dec. 31 Account receivable 6000
Rent revenue 6000
2. T-account

3. Trial Balance
Account Debit Credit
Account receivable 6.300
Account payable 2.425
Interest payable 2.400
Utility expense 425
Wages and salaries expense 2.000
Interest expense 2.400
Service revenue 300
Rent revenue 6.000

Balance 11.125 11.125

4. Statement
Greenock Company
Income Statement
Revenue:
Service revenue 300
Rent revenue 6.000
Total revenue 6.300
Expense:

Exercise 3
Helen started a computer programming business (12/2016), Helen’s Programming Service. The
following transactions occurred during December, 2016:

1. 1/12: Helen invested $120,000.

2. 1/12: Paid the rent for the next 12 months $24,000.
3. 1/12: Purchased equipment for $15,000 on credit
4. 2/12: Purchased supplies on credit for $1,500.
5. 3/12: Purchased a computer for $8,500 in cash.
6. 5/12: Received cash for programming services performed, $3,100.
7. 6/12: Received cash for programming services to be performed, $2,300.
8. 10/12: Billed a customer for programming services performed, $1,600.
9. 10/12: Paid 50% of purchased supplies on credit on 2/12
10. 15/12: Paid 60% of purchased equipment on credit on 1/12
Required:
1. Record the transactions in the general journal for 2017.
2. Post the transactions to the ledger (T accounts) and calculate closing balances of the
accounts
3. Prepare a trial balance on 31, December

Answer:
1. General Journal
Date Title and explanation Debit Credit
Dec. 1 Cash 120,000
Share Capital-Ordinary 120,000
Dec. 1 Prepaid rent 24,000
Cash 24,000
Dec. 1 Equipment 15,000
Account payable 15,000
Dec. 2 Supplies 1,500
Account payable 1,500
Dec. 3 Computer 8,500
Cash 8,500
Dec. 5 Cash 3,100
Service revenue 3,100
Dec. 6 Cash 2,300
Service revenue 2,300
Dec. 10 Account receivable 1,600
Service revenue 1,600
Dec. 10 Account payable 750
Cash 750
Dec. 15 Account payable 9000
Cash 9000
Exercise 4
At the end of its fiscal year (31/12/2017), Pando, a cleaning company, has a trial balance as
follows:

Pando
Trial Balance
December 31, 2017

The following information is also available:

1. An inventory of cleaning supplies shows $1,344 on hand.
2. Estimated depreciation on the building for the year is $13,000
3. Mortgage payable is at the interest rate of 8% per year.
4. On September 1, the company signed a contract, effective immediately, with Hope County
Hospital to dry clean, for a fixed monthly charge of $ 400, the uniforms used by doctors in
surgery. The hospital paid for four months’ service in advance.
5. A study of the company’s insurance policies shows that $780 is unexpired at the end of the year.
6. There are eight salaried employees and salaries are paid every Friday. Five employees receive a
salary of $700 each per week, and three employees earn $500 each per week. Assume December
31 is a Tuesday. Employees do not work weekends. All employees worked the last 2 days of
December.
7. Services performed during December have not billed to the customers $5,000
Required
 1. Record adjusting entries in the general journal for 2017.
2. Post the entry to the ledger (T accounts) and calculate closing balances of the accounts after
adjustments
3. Prepare the adjusted trial balance on 31, December
4. Prepare Income statement, statement of Retained Earning, And Statement of Financial
Position.

Answer:
1. General Journal
Date Explanation Debit Credit
Dec. 31 Cleaning supplies expense 6030
(7374 – 1344 = 6030)
Cleaning supplies 6030
Dec. 31 Depreciation expense 13000
Accumulated Depreciation-Building 13000
Dec. 31 Interest expense 8800
(110,000 x 8% = 8800)
Interest payable 8800
Dec. 31 Unearned cleaning revenue 1600
(400 x 4 = 1600)
Cleaning revenue 1600
Dec. 31 Insurance expense 2620
(3400 – 780 = 2620)
Prepaid insurance 2620
Dec. 31 Wages expense 2000
[(700/5) x 5 + (500/5) x 3] x 2 = 2000
Wages payable 2000
Dec. 31 Account receivable 5000
Service revenue 5000
2. Post to T-account
 3. Trial balance
Account Debit Credit
Cash 11.788
Account receivable 31.494
Prepaid insurance 780
Cleaning supplies 1.344
Land 18.000
Building 185.000
Accumulated Depreciation-Building 58.600
Account payable 20.400
Interest payable 8.800
Wages payable 2.000
Mortgage payable 110.000
Cleaning revenue 159.234
Wages expense 103.330
Cleaning equipment rental expense 6.000
Delivery truck expense 4.374
Interest expense 19.800
Other expense 28.684
Service revenue 5.000
Capital 56.560
Withdrawals 10.000

Balance 420.594 420.594

4. Statements

Pando
Income statement
December 31, 2017
Revenue:
Cleaning revenue 159.234
Service revenue 5.000
Total revenue: 164.234
Expense:
Wages expense 103.330
Cleaning equipment rental expense 6.000
Delivery truck expense 4.374
Interest expense 19.800
Other expense 28.684
Total expense: 162.188
Net income: 2.046

Pando
Retained earnings statement
December 31, 2017
Retained earnings, December 1 10.000
Add: Net income 2.046
Retained earnings, December 31 7.954
Pando
Statement of Financial Position
 December 31, 2017
Asset
Cash 11.788
Prepaid insurance 780
Cleaning supplies 1.344
Land 18.000
Building 185.000
Less: Accumulated Depreciation-Building 58.600
Account receivable 31.494
Total asset 189.806
Liabilities and equity
Equity
Capital 56.560
Retained earnings 7.954
Total equity 64.514
Liabilities
Account payable 20.400
Interest payable 8.800
Wages payable 2.000
Mortgage payable 110.000
Total liabilities 141.200
Total liabilities and equity