Reference no: EM132998793

Question: January 3, 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).

Point 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.

Point 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.

Point 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.

Point 4. AH received $20,000 cash for consultancy services it rendered to a cash client.

Point 5. AH paid $3,000 cash for advertising aired through ETV.

Point 6. AH forecasted that services fees in the next two weeks will amount to $5,000.

Point 7. AH received $10,000 additional cash investment from Alemu - its owner.

Point 8. AH rendered consultancy services worth $15,000 to clients promising to pay in the near future.

Point 9. AH sold one of the furniture invested by its owner for $5,000 cash. The furniture had a recorded value of $5,000.

Point 10. AH collected $5,000 cash from clients who received services in item-7 above.

Point 11. AH paid $2,000 cash to suppliers on credit.

Point 12. AH purchased a used car for business purposes. The business paid $8,000 cash for the car. Brokers estimated that the car currently worth only $5,000 and the Inland Revenue assessed the car at $12,000 for property tax purposes.

Point 13. AH borrowed $4,000 cash from Dashen Bank. The loan is repayable over ten months.

Point 14. AH employed an accountant and a secretary for monthly salary of $1,200 and $700, respectively.

Point 15. AH incurred and paid for the following expenses

Point 16. Wages................................................. $6,000

Point 17. Rent.................................................... 4,500

Point 18. Utilities................................................ 1,200

Point 19. Others.................................................. 800

Point 20. AH determined that cost of supplies remained on hand at the end of the current month total $1,300.

Point 21. AH paid $450 cash to Dashen Bank consisting of $400 principal and $50 one month interest on the loan due in January.

Point 22. AH paid its owner $5,000 cash for personal uses (to pay house utility expenses).

Required:

Question a) Analyze the above transactions and record them in the accounting records of AH Consultancy Services and

Question b) Prepare financial statements for the business for the month of January 2003.

Assignment

On March 1, 2002, Tahir Muktar, a famous businessman in Addis, opened a business named "Universal Garage" which is organized as a sole proprietorship. The business is established to render car repair, maintenance and related services for fees. Below are chart of accounts for and selected transactions completed by Universal Garage in March 2002.
a) Chart of accounts

Universal Garage                         Chart of Accounts

100 ASSETS

110 CURRENT ASSETS

111 Cash

112 Accounts Receivable

114 Supplies

116 Prepaid Rent

117 Prepaid Insurance

120 PLANT ASSETS

121 Land

123 Machinery

123.1 Accumulated Depreciation-Machinery

125 Office Equipment

125.1 Accumulated Depreciation-Office Equipment

200 LIABILITIES

210 CURRENT LIABILITIES

211 Account Payable

213 Salaries Payable

216 Interest Payable

220 NON-CURRENT LIABILITIES

221 Long-term Bank Loan

300 OWNER'S EQUITY

301 Tahir, Capital

302 Tahir, Drawings

303 Incomes Summary

400REVENUES

401 Fees Earned

410 Other Income

500 EXPENSES

501 Salary Expenses

502 Supplies Expenses

503 Rent Expenses

504 Insurance Expenses

505 Depreciation Expenses

506 Interest Expenses

510 Miscellaneous Expenses

Point b) Transactions

Mar 1 Received the following assets from its owner, Tahir:

Cash....................................... Br, 8,300

Supplies ................................. 2,000

Office Equipment................... 10,000

2 Borrowed Br 5,000 from Dashen Bank

3 Paid Br 1,800 for rent on a building leased for business purposes

3 Purchased welding and other repair machinery for Br 3,600 cash

4 Paid Br 200 for a radio advertisement

8 Sold for Br 200 cash an old office equipment with a recorded cost of Br 200

13 Paid weekly salary Br 1,200

16 Received Br 4,400 from services rendered on cash

20 Paid weekly salary Br 1,200 include transactions for other income

20 Delivered service on credit, Br 6,000

21 Purchased additional repair machinery on account for Br 2,000 from Sámi-Engineers

23 Received Br 5,000 additional cash investment from its owner

24 Repaid Br 1,000 bank loan and paid Br 100 interest on bank loan

26 Purchased supplies for Br 800 cash

27 Paid Br 100 for customer entertainment and other items

27 Paid weekly salary Br 1,200

31 Paid Br 500 for electricity and other utilities consumed during the month

31 Received Br 4,200 cash from credit customers

31 Paid Tahir Br 1,800 for personal uses

Required:

Question a) Journalize the above transactions in a two-column journal

Question b) Post the journal entries to "T" accounts

Question c) Prepare and complete a worksheet based on the following additional information

i. Cost of supplies remained unconsumed on Mar 31 is Br 900

ii. The amount paid on Mar 3 is for a three-month rent

iii. The amounts of depreciation for machinery and office equipment are estimated to be Br 560 and Br 1,900 respectively

iv. Universal Garage usually pays Br 1,200 for employee's salary every saturday for a six-day work week ended on that day

v. Interest on bank loan accrued but not paid on March 31 total Br 100

Question d) Prepare financial statements for the month

Question e) Journalize and post adjusting entries

Question f) Journalize and post closing entries

Question g) Prepare post-closing trial balance