UNIVERSITY OF GUYANA

SCHOOL OF ENTREPRENEURSHIP AND BUSINESS INNOVATION

DEPARTMENT OF ACCOUNTING & FINANCE
WORKSHEET III - ACT2100 – FINANCIAL ACCOUNTING 1

1. What the reasons for adjusting entries.

i)To ensure that expenses are recognized in the period in which they incur.
ii)To ensure that revenues are recorded in the period they were performed.
iii)to ensure that the balance sheet and income statement accounts have the correct balance at the end
of the accounting period.

2. What are the major types of adjusting entries

i) Accruals: Accrued revenue, Accrued expenses
ii) Deferrals: Prepaid expenses, Unearned revenues

3. The matching principle matches?

Related revenues and expenses in the same period

4. The following is selected information from Alpha-Beta-Gamma Corporation for the fiscal year
ending October 31, 2022.
Cash received from customers 300,000
Revenue earned 350,000
Cash paid for expenses 170,000
Cash paid for computers on November 1, 2009 that will be used
for 3 years (annual depreciation is $16,000) 48,000
Expenses incurred, not including any depreciation 200,000
Proceeds from a bank loan, part of which was used to pay for
the computers 100,000

Based on the accrual basis of accounting, what is Alpha-Beta-Gamma Corporation’s net

income for the year ending October 31, 2022?
Revenue-expenses; 350,000 – 200,000 = 150,000.

5. Lamb Company had the following transactions during 2022.

 Sales of $4,500 on account
 Collected $2,000 for services to be performed in 2023
 Paid $625 cash in salaries
 Purchased airline tickets for $250 in December for a trip to take place in 2023

a.What is Lamb’s 2022 net income using accrual accounting?

b. What is Lamb’s 2022 net income using cash basis accounting?

6. A law firm received $2,000 cash for legal services to be rendered in the future. The full
amount was credited to the liability account Unearned Legal Fees. If the legal services have been
rendered at the end of the accounting period and no adjusting entry is made, This would cause what
effect?
Over stated liabilities and understated revenue
.
7. Bee-In-The-Bonnet Company purchased office supplies costing $6,000 and debited Office
Supplies for the full amount. At the end of the accounting period, a physical count of office
supplies revealed $2,400 still on hand. The appropriate adjusting journal entry to be made at
the end of the period would be?
Asset(Suppiies) will be decreased by $3,600

8. Action Real Estate received a check for $18,000 on July 1 which represents a 6 month
advance payment of rent on a building it rents to a client. Unearned Rent was credited for the full
$18,000. Financial statements will be prepared on July 31. Action Real Estate should make the following
adjusting entry on July 31:

9. At December 31, 2022, before any year-end adjustments, Cable Car Company's
Insurance Expense account had a balance of $1,450 and its Prepaid Insurance account
had a balance of $3,800. It was determined that $3,000 of the Prepaid Insurance had
expired. The adjusted balance for Insurance Expense for the year would be

10. Sherman Air Charter signed a four-month note payable in the amount of $8,000 on
September 1. The note requires interest at an annual rate of 9%. The amount of interest
to be accrued at the end of September is? What is the journal entry?
 11. Cindi’s Candies paid employee wages on and through Friday, January 26, and the next payroll
will be paid in February. There are three more working days in January (29–31). Employees
work 5 days a week and the company pays $900 a day in wages. What will be the adjusting entry
to accrue wages expense at the end of January?

12. Identify the impact on the balance sheet if the following information is not used to adjust the
accounts.
1. Supplies consumed totaled $3,000.
2. Interest accrues on notes payable at the rate of $200 per month.
3. Insurance of $450 expired during the month.
4. Plant and equipment are depreciated at the rate of $1,200 per month.

13. The adjusted trial balance of Rocky Acre Spread Inc. on December 31, 2010 includes the following
accounts: Accumulated Depreciation, $6,000; Depreciation Expense, $2,000; Note Payable $7,500;
Interest Expense $150; Utilities Expense, $300; Rent Expense, $500; Service Revenue, $19,600;
Salaries Expense, $4,000; Supplies, $200; Supplies Expense, $1,200; Wages Payable, $600. Prepare
an income statement for the month of December.

14. What is the process of closing the books?

15. What are the required steps in the accounting cycle?

16. Identify the sections of a classified balance sheet.

17. A classified balance sheet categorizes assets as current assets; long-term investments; property, plant,
and equipment; and intangibles. Liabilities are classified as either current or long-term. There is also
an owner's (owners’) equity section, which varies with the form of business organization.

These financial statement items are for Knight Company at year-end, July 31, 2022.
Salaries payable $ 4,580 Note payable (long-term) $ 3,300
Salaries expense 45,700 Cash 22,200
Utilities expense 19,100 Accounts Receivable 9,780
Equipment 22,000 Accumulated depreciation 6,000
Accounts payable 4,100 Knight, Drawing 4,000
Commission revenue 56,100 Depreciation expense 4,000
Rent revenue 6,500 Knight, Capital (beginning of the year) 46,200

Instructions
(a) Prepare an income statement and an owner's equity statement for the year. The owner did
not make any new investments during the year..
(b) Prepare a classified balance sheet at July 31.

18. Prepare the necessary closing entries based on the following selected accounts.

Accumulated Depreciation $10,000

Depreciation Expense 5,000
McCoy, Capital 20,000
McCoy, Drawing 12,000
Salaries Expense 18,000
Service Revenue 30,000

19. The trial balances of Orton Company follow with the accounts arranged in alphabetic order. Analyze
the data and prepare (a) the adjusting entries and (b) the closing entries made by Orton Company.
 UNIVERSITY OF GUYANA
SCHOOL OF ENTREPRENEURSHIP AND BUSINESS INNOVATION
DEPARTMENT OF ACCOUNTING & FINANCE
WORKSHEET III - ACT2100 – FINANCIAL ACCOUNTING 1

20. Indicate the proper sequence of the steps in the accounting cycle by placing numbers 1-8 in the blank
spaces.
____ a. Analyze business transactions.
____ b. Journalize and post adjusting entries.
____ c. Journalize and post closing entries.
____ d. Journalize the transactions.
____ e. Prepare a post-closing trial balance.
____ f. Prepare a worksheet.
____ g. Prepare financial statements.
____ h. Post to ledger accounts.

21. What is the computation and importance of gross profit?

22. Explain the recording of purchases and sales of inventory under a periodic inventory
system.

23. Geran Company purchased merchandise inventory with an invoice price of $5,000 and
credit terms of 2/10, n/30. What is the net cost of the goods if Geran Company pays within
the discount period?

24. In a perpetual inventory system, the amount of the discount allowed for paying for
merchandise purchased within the discount period is credited to

25. Tony’s Market recorded the following events involving a recent purchase of merchandise:

Received goods for $50,000, terms 2/10, n/30.

Returned $1,000 of the shipment for credit.
Paid $250 freight on the shipment.
Paid the invoice within the discount period.

As a result of these events, the company’s merchandise inventory?

26. Rasner Co. returned defective goods costing $3,000 to Markum Company on March 19, for
credit. The goods were purchased April 10, on credit, terms 3/10, n/30. The entry by Rasner Co.
on April 19, in receiving full credit is:

27. Mather Company made a purchase of merchandise on credit from Underwood Company on
August 8, for $9,000, terms 3/10, n/30. On August 17, Mather makes the appropriate payment to
Underwood. The entry on August 17 for Mather Company is:

28. Ball Company sells merchandise on account for $1,500 to Edds Company with credit terms of
2/10, n/30. Edds Company returns $300 of merchandise that was damaged, along with a check to
settle the account within the discount period. What is the amount of the check?

29. Moses Company sells merchandise on account for $2,000 to Lane Company with credit terms of
2/10, n/30. Lane Company returns $300 of merchandise that was damaged,along with a check to
 settle the account within the discount period. What entry does Moses Company make upon
receipt of the check?

30. Maxwell Company's financial information is presented below.

Sales $ ???? Cost of Goods Sold 270,000
Sales Returns and Allowances 30,000 Gross Profit ????
Net Sales 450,000
The missing amounts above are:

31. During 2010, Yoder Enterprises generated revenues of $60,000. The company’s expenses were
as follows: cost of goods sold of $30,000, operating expenses of $12,000 and a loss on the sale of
equipment of $2,000.Yoder’s gross profit is? Yoder’s Income from Operations is? Yoder’s net
profit is?

32. The following information is available for Potts Company. Using this information, prepare the
closing entries for Potts Company.

33. The adjusted trial balance of Dailey Music Company appears below. Dailey Music Company prepares
monthly financial statements and uses the perpetual inventory method.
Instructions
Complete the worksheet below.