Assets = Liabilities + Equity

Retained earnings
Cash Equipment Accounts payable + Revenue Expenses Dividend Capital shares
1 25000 25000
2 7000 7000
3 8000 8000
4 -850 -850
5 -1000 -1000
38150 = 7000 + 31150
38150 = 38150
a Assets
Cash Equipment Accounts receivable
8000 10000 9000 = 27000

b Net income = Revenue - Expenses

Revenue - Expenses
Rent Utilities S&W
36000 - 11000 4000 7000 = 14000

c Assets - Liabilities = Equity

Assets - Liabilities
Accounts payable Notes payable
27000 - 2000 16500 = 8500
Date Transaction Ref Dr Cr
Cash 20000
Share Capital - Ordinary 20000

Equipment 4800
Accounts payable 4800
 Debit Credit
Cash 7000
Equipment 88000
Accounts Receivable 4000
Prepaid Insurance 6000

Accounts Payable 22000

S&W Payable 2000
Notes Payable 19000

Service Revenue 95000

S&W Expense 42000

Utilities Expense 3000

Dividends 8000

Share Capital - Ordinary 20000

158000 158000
a Date Account Titles and Explanation Ref Credit Debit
Sept 1 Cash 20000
Capital share - Ordinary 20000
Sept 2 Rent Expense 1000
Cash 1000
Sept 3 Equipment 25000
Cash 10000
Note payable 15000
Sept 4 Prepaid insurance 1200
Cash 1200
Sept 10 Advertising Expense 200
Accounts payable 200
Sept 20 Dividends 700
Cash 700
Sept 30 Cash 6200
Service Revenue 6200
54300 54300
Date Account Titles and Explanation Ref Credit Debit
Cash 6500
Capital share - Ordinary 6500
Supplies 1200
Cash 400
Accounts payable 800

Date Explanation Ref Debit Credit Balance

April 1 1600 1600
April 3 3400 5000
April 16 700 4300
April 20 250 4050
 Debit Credit
Cash 6000
Supplies 7000
Equipment 80000
Accounts Receivable 8000

Notes Payable 20000

S&W Payable 3000
Accounts Payable 11000

Share Capital - Ordinary 28000

Service Revenue 90000

S&W Expense 38000

Rent Expense 4000

Dividends 9000
152000 152000
Date Account Titles and Explanations Ref Dr Cr
31-Aug S&W Expense 800
S&W Payable 800
Interest Expense 250
Interest Payable 250
Accounts receivable 1100
Service revenue 1100
a Revenue
Service Revenue 14200
Rent Revenue 800 15000

Expenses
S&W Expense 9400
Rent Expense 1500
Depreciation Expense 850
Supplies Expense 200
Utilities Expense 510
Interest Expense 50
Total Expenses 12510

Net income 2490

b Assets
Cash 6700
Accounts Receivable 600
Prepaid Rent 900
Supplies 1000
Equipment 15000
Less: Accumulated
Depreciation - Equipment 850 14150
23350
Liabilities
Notes Payable 5000
Accounts Payable 1510
S&W Payable 400
Interest Payable 50
Unearned Rent Revenue 500
7460

c Retained Earnings, April 1 0

Add: Net income 2490

Less: Devidends 600

Retained Earnings, June 30 1890
Date Account Titles and Explanations Dr Cr
31-Jan Service Revenue 2400
Accounts Receivable 2400
Utilities Expense 400
Utilities Payable 400
Depreciation Expense 500
Accumulated Depreciation -
Equipment 500
Interest Expense 600
Interest Payable 600
Insurance Expense 1000
Prepaid Insurance 1000
Supplies Expense 1700
Supplies 1700

Revenue
Service Revenue (8700+650) 9350

Expenses
S&W Expense (2500+400) 2900
Supplies Expense (1700-250) 1450
Utilities Expense 500
Depreciation Expense 300
Insurance Expense 700 5850

Net income 3500

Date Account Titles and Explanations Dr Cr

Adjusting entries
30-Apr Insurance Expense 150
Prepaid Insurance 150
Depreciation Expense 500
Accumulated Depreciation -
Equipment 500
Interest Expense 200
Interest Payable 200
Unearned Service Revenue 700
Service Revenue 700
Accounts Receivable 1500
 Service Revenue 1500

Date Account Titles and Explanations Dr Cr

Adjusting entries
31-Mar Insurance Expense 400
Prepaid Insurance 400
Supplies Expense 900
Supplies 900
Depreciation Expense 480
Accumulated Depreciation -
Equipment 480
Accounts Receivable 3600
Service Revenue 3600

12/31/2020 Interest expense 300

Internet payable 300
12/31/2020 Supplies expense 1550
Supplies 1550
12/31/2020 Depreciation expenses 1000
Accumulated Depreciation 1000
12/31/2020 Insurance Expense 1225
Prepaid insurance 1225
12/31/2020 Unearned service revenue 8000
Service revenue 8000
12/31/2020 Accounts receivable 4200
Service revenue 4200
12/31/2020 S&W expense 5400
S&W payable 5400
Date Account Titles and Explanations Dr Cr
31-Mar Depreciation Expense 400
Accumulated Depreciation 400
Uneanred Rent Revenue 3400
Rent Revenue 3400
Interest Expense 500
Interest Payable 500
Supplies Expense 2050
Supplies 2050
Insurance Expense 300
Prepaid Insurance 300
Date Account Titles and Explanations Dr Cr

Service Revenue 98000

Income Summary 98000

Income Summary 80000

Rent Expense 22000
S&W Expense 51000
Supplies Expense 7000

Income Summary 18000

Retained Earnings 18000

Retained Earnings 15000

Dividends 15000
1. False -> From selling merchandise
2. True
3. True
4. False -> Beginning inventory

5-Sep Inventory 15,000

Accounts Payable 15,000
Accounts Payable 2,000
Inventory 2,000

5-Sep Accounts receivable 15,000

Sales revenue 15,000
Cost of goods sold 8,000
Inventory 8,000
Sales Returns and Allowance 2,000
Accounts receivable 2,000
Inventory 300
Cost of goods sold 300

Sales Revenue 162,400

Rent Revenue 6,000
Income Summary 168,400

Income Summary 151,000

Sales Returns and Allowances 4,800
Sales Discounts 3,600
Cost of Goods Sold 110,000
Freight Out 1,800
Rent Expense 8,800
S&W Expense 22,000
 2-Mar Inventory 800,000
Accounts Payable 800,000
6-Mar Accounts Payable 100,000
Inventory 100,000
12-Mar Accounts Payable 700,000
Cash 686,000
Inventory 14,000 (Inventory is measured by the cost → Valu

Salues Revenue 300,000

Income Summary 300,000

Income Summary 184,000

Sales Returns and Allowances 10,000
Cost of Goods Sold 174,000

a Net sales = Sales Revenue - Sales discounts

390000
b Gross profit = Net sales - Cost of goods sold
156000
c Income from operations = Gross profit - Operating expenses
96000
d Gross profit rate = Gross profit/Net sales
0.4

10-Jun Inventory 8,000

Accounts Payable 8,000
11-Jun Inventory 400
Cash 400
12-Jun Accounts Payable 300
Inventory 300
19-Jun Accounts Payable 7,700
Inventory 231
Cash 7,469

10-Jun Accounts Receivable 8,000

Sales Revenue 8,000
Cost of goods sold 4,800
Inventory 4,800
12-Jun Sales Returns and Allowances 300
Accounts Receivable 300
Inventory 70
Cost of goods sold 70
19-Jun Cash 7,469
Sales Discounts 231
Accounts Receivable 77,000

Sales
Net sales 2,200,000
Cost of goods sold 1,300,000
Gross profit 900,000
Expenses
Operating Expenses 725,000
Total operating expenses 725,000
Income from operations 175,000
Other income and expenses
Interest revenue 25,000
Loss on disposal of plant assets (17,000) 8,000
Interest Expense 70,000
Net income 113,000

Sales
Sales Revenue 536,800
Less: Sales Returns and Allowances 6,700
Less: Sales Discounts 5,000 11,700
Net Sales 525,100
Cost of goods sold 363,400
Gross profit 161,700

Expenses
Freight-Out 7,600
 Advertising Expense 12,000
S&W Expense 56,000
Utilities Expense 18,000
Rent Expense 24,000
Depreciation Expense 9,000
Insurance Expense 4,500
Total operating Expenses 131,100
Income from operations 30,600

Other income and expenses

Interest revenue 2,500
Interest Expense 3,600
Net income 29,500

Date Account Titles Dr Cr

5-Apr Inventory 25,000
Accounts Payable 25,000
6-Apr Inventory 900
Cash 900
7-Apr Inventory 26,000
Accounts Payable 26,000
8-Apr Accounts Payable 2,600
Inventory 2,600
15-Apr Accounts Payable 22,400
Cash 21,952
Inventory 448

15-Apr Accounts Payable 22,400

Cash 22,400
-
y is measured by the cost → Value reduces due to discount so inventory is credited)
a.
Adjusting Entries
Date Account Titles and Explanations Dr Cr
Cost of Goods Sold 7,000
Inventory 7,000
Depreciation Expense 38,000
Accumulated Depreciation - Equipment 38,000
S&W Expense 20,000
S&W Payable 20,000

Closing Entries
Date Account Titles and Explanations Dr Cr
Sales Revenue 524,000
Income Summary 524,000

Income Summary 492,300

Sales Returns and Allowances 8,000
Cost of Goods Sold 310,300
S&W Expense 125,000
Utilities Expense 11,000
Depreciation Expense 38,000

Income Summary 31,700

Retained Earnings 31,700

Retained Earnings 24,000

Dividends 24,000

b. Income Statement
Sales
Sales Revenue 524,000
Less: Sales Returns and Allowances 8,000
Net Sales 516,000
Cost of Goods Sold 310,300
Gross Profit 205,700

Expenses
S&W Expenses 125,000
Utilities Expenses 11,000
Depreciation Expenses 38,000
Total operation expenses 174,000
Income from operations 31,700

Other income and expense -

Interest expense -
Net income 31,700

c. Retained Earnings Statement

 Retained Earnings at Jan 31 2023 64,600
Add: Net income 31,700
Less: Dividends 24,000
Retained Earnings at Dec 31 2023 72,300

d. Statement of Financial Position

Assets
PPE
Equipment 190,000
Less: Accumulated Depreciation -
Equipment (80,100)
Inventory 168,000 277,900
Current assets
Cash 23,800
Prepaid Rent 9,600
Accounts Receivable 50,300 83,700
Total assets 361,600

Liabilities
Current Liabilities
Accounts Payable 76,300
Notes Payable 80,000
S&W Payable 20,000
Total Liabilities 176,300

Equity
Share Capital Ordinary 113,000
Retained Earnings 72,300
Total Equity 185,300

A = L+E
361600 361,600
 Accounts Debit ($) Credit ($) a. Adjusting and Closing entries
Cash 18,400 Date
Accounts Receivable 61,000 31/12/24
Inventory 129,000
Prepaid Insurance 4,800

Equipment 210,000

Accumulated Depreciation - Equipment 63,000

Accounts Payable 57,400
Notes Payable 90,000
Share Capital Ordinary 125,000
Dividends 16,000
Retained Earnings 48,200 31/12/24
Sales Revenue 470,000
Sales Returns and Allowances 6,500
Cost of Goods Sold 285,000
Salaries and Wages Expense 96,000
Insurance Expense
Utilities Expense 10,500
Total 826,200 826,200
Additional Information:
1. Ending inventory is $123,000.
2. Equipment is depreciated at 10% per annum on cost.
3. One month of prepaid insurance has expired ($400).
4. Salaries earned but unpaid at year-end total $12,000.
Requirements:
a. (1 mark) Prepare necessary adjusting and closing entries.
b. (1 mark) Prepare the income statement for the year ended Dec 31, 2024.
c. (1 mark) Prepare the retained earnings statement.
d. (2 marks) Prepare the statement of financial position as at Dec 31, 2024.
a. Adjusting and Closing entries b. Income statement
Accounts Titles Dr Cr Sales
Cost of Goods Sold 6,000 Sales Revenue
Inventory 6,000 Less: Sales Returns and Alowances
Depreciation Expense 21,000 Net sales
Accumulated Depreciation -
Equipment 21,000 Cost of Goods Sold
Insurance Expense 400 Gross profit
Prepaid Insurance 400
S&W Expense 12,000 Expenses
S&W Payable 12,000 S&W Expense
Insurance Expense
Sales Revenue 470,000 Utilities Expense
Income Summary 470,000 Depreciation Expense
Total operating expenses
Income Summary 437,400 Income from operations
Sales Returns and Allowances 6,500
Cost of Goods Sold 291,000 Other income and expenses
S&W Expense 108,000 Interest expense
Insurance Expense 400 Net income
Utilities Expense 10,500
Depreciation Expense 21,000 c. Retained Earnings Statement
Retained Earnings on Jan 31 2024
Income Summary 32,600 Add: Net income
Retained Earnings 32,600 Less: Dividends
Retained Earnings on Dec 31 2024
Retained Earnings 16,000
Dividends 16,000
 d. Statement of Financial Position
Assets
470,000 PPE
6,500 Inventory 123,000
463,500 Equipment 210,000
Less: Accumulated Depreciation -
291,000 Equipment (84,000) 126,000
172,500 Current assets
Cash 18,400
Accounts Receivable 61,000
108,000 Prepaid Insurance 4,400
400 Total Assets 332,800
10,500
21,000 Liabilities
139,900 Current Liabilities
32,600 Accounts Payable 57,400
Notes Payable 90,000
- S&W Payable 12,000
- Total Liabilities 159,400
32,600
Equity
Share Capital Ordinary 125,000
48,200 Retained Earnings 64,800
32,600 Total Equity 189,800
16,000
64,800 L+E
349,200
1. Consigned goods → -15000
2. Purchased goods (shipping point) → +10000
3. Correct

a. FIFO
Cost of goods available to sell
36000
Sales
84000
Ending inventory = 3000 units
12000
Cost of goods sold
24000

b. AVC
Cost of goods available to sell
36000
Average cost
3.6
Ending inventory = 3000 units
Cost of goods sold
25200

200 units 7
300 units 8
150 units 9

220 units on hand

a. FIFO
1910
b. AVC
AVC
7.923077
220*7.92 1742.4
Net income 73,000
Depreciation expense 7,000
Gain on disposal of plant assets (2,500)
Increase in Accounts receivable (4,000)
Decrease in Accounts payable (3,800) (3,300)
Net cash 69,700

Statement of Cash Flow

Cash flow from operating activities
Net income 125,000
Adjustments for
Depreciation Expense 33,000
Loss on disposal of plant assets 2,000
Increase in Accounts receivable (42,000)
Increase in Inventory (54,000)
Decrease in Prepaid expenses 2,000
Decrease in Accounts payable (17,000)
Increase in accrued expenses payable 10,000 (66,000)
Net cash provided by operating activities 59,000

Cash flow from investing activities

Disposal of plant assets 34,000
Sale of land 25,000
Purchase of equipment (166,000)
Net cash provided by investing activities (107,000)

Cash flow from financing activities

Redemption of bonds (10,000)
Sale of ordinary shares 130,000
Dividends paid (55,000)
Net cash provided by financing activities
Net increase in cash
Cash at beginning of period
Cash at end of period

Note 1
Issued ordinary shares in exchange for land 30,000