Reference no: EM133103965

Fundamentals of Accounting

Question #1)

On January 1, 2003, Alemu Haba, an ex-manager of the CBE Finfine Branch, established his own consultancy business. He named his business "AH Consultancy Services". The objective of the business is to render financial consultancy services to clients on a fee basis. The following business activities occurred during the first month of operations of the business (January 3 to January 31, 2003).

1 Alemu deposited $20,000 cash in a bank account in the name of his business - AH Consultancy Services. He has $250,000 cash in his personal bank account with Dashen Bank and $50,000 cash in a safe deposit box at his residence.

2 Alemu transferred furniture worth $30,000 from his home for office purposes by AH Consultancy Services. He also has extra home furniture, residential house and personal car worth $620,000, $800,000 and $360,000, respectively.

3 Alemu purchased office supplies worth $5,000 from various suppliers agreeing to pay the sum in the near future. Two-fifth of the supplies will be used for personal purposes while the remaining is for use by AH. Three-fifth of the liability is arranged to be settled from business cash sources.

4 AH paid $3,000 for rent on a building leased for business purposes
5 AH received $20,000 cash for consultancy services it rendered to a cash client.
6 AH paid $3,000 cash for advertising aired through ETV.
7 AH forecasted that services fees in the next two weeks will amount to $5,000.
8 AH received $10,000 additional cash investment from Alemu - its owner.
9 AH rendered consultancy services worth $15,000 to clients promising to pay in the near future.
10 AH sold one of the furniture invested by its owner for $5,000 cash. The furniture had a recorded value of $5,000.
11 AH collected $5,000 cash from clients who received services in item-9 above.
12 AH paid $2,000 cash to suppliers on credit.
13 AH purchased a used car for business purposes. The business paid $8,000 cash for the car.
14 AH borrowed $4,000 cash from Dashen Bank. The loan is repayable over ten months.
15 AH employed an accountant and a secretary for monthly salary of $1,200 and $700, respectively.
16 AH incurred and paid for the following expenses
• Wages................................................. $6,000
• Rent.................................................... 4,500
• Utilities................................................ 1,200
• Others.................................................. 800
17 AH paid $450 cash to Dashen Bank consisting of $400 principal and $50 one month interest on the loan due in January.
18 AH paid its owner $5,000 cash for personal uses (to pay house utility expenses).

Instruction:
a) Journalize the above transactions in a two-column journal
b) Post the journal entries to "T" accounts
c) Prepare and complete a worksheet based on the following additional information
i. Cost of supplies remained unconsumed on January 31 is $ 1,300
ii. The amount paid on January 3 is for a three-month rent
iii. The amounts of depreciation for Truck and office equipment are estimated to be $560 and $1,900 respectively
iv. The salary of an employee during the month and unpaid is $1,000
v. Interest on bank loan accrued but not paid on January 31 total $100
d) Prepare financial statements for the month
e) Journalize and post adjusting entries
f) Journalize and post-closing entries
g) Prepare post-closing trial balance

Question #2)

The trial balance of Zebera Painters shown below does not balance.
ZEBERA PAINTERS
Trial Balance
June 30, 2012

                                                                                                                       Debit               Credit 

Cash...................................................................................................         $  2,780

Accounts Receivable..........................................................................             7,420

Supplies..............................................................................................                600

Equipment..........................................................................................             8,300

Accounts Payable...............................................................................                                 $  9,777

Owner's Capital................................................................................                                     1,952

Owner's Drawings............................................................................             1,300

Service Revenue.................................................................................                                   15,200

Salaries and Wages Expense...............................................................             3,800

Repair Expense...................................................................................             1,600                        

Totals.........................................................................................         $25,800           $26,929

An examination of the ledger and journal reveals the following errors:

1. Each of the above listed accounts has a normal balance per the general ledger.

2. Cash of $270 received from a customer on account was debited to Cash $720 and credited to Accounts Receivable $720.

3. A withdrawal of $400 by the owner was posted as a credit to Owner?s Drawings, $400 and credit to Cash $400.

4. A debit of $300 was not posted to Salaries and Wages Expense.

5. The purchase of equipment on account for $700 was recorded as a debit to Repair Expense and a credit to Accounts Payable for $700.

6. Services were performed on account for a customer, $510, for which Accounts Receivable was debited $510 and Service Revenue was credited $51.

7. A payment on account for $235 was credited to Cash for $235 and credited to Accounts Payable for $253.

Instructions:
Prepare a correct trial balance.