Problem 1

Briarcliff Riding Stable, owned by Joanna Willis, had the following balance sheet on June 30,
1994.

BRIARCLIFF RIDING STABLE

Balance Sheet
June 30, 1994

Assets Liabilities
Cash………………………….$ 7,000 Accounts Payable…………………..$ 800
Accounts Receivable……….... 5,400 Loan Payable……………..………….40,000
Land…………………………. 40,000 Total Liabilities……………………...40,800

Owner’s Equity
Joanna Willis, Capital………….……11,600

Total Assets…………………...52,400 Total Liabilities & Owner’s Equity…52,400

Transactions for July 1994 were as follows:

July 1 The owner invested additional cash of $25,000.

1 Paid for a prefabricated building constructed on the land at a cost of $24,000.
8 Paid an account payable of $800.
10 Collected an account receivable of $5,400
12 Horse feed to be used in July was purchased on credit for $1,100.
24 A miscellaneous expense of $800 for July was paid.
28 The owner withdrew $700 cash.
31 Riding and lesson fees for July were billed to a riding club in the amount of
$3,600. Payment is due on August 10.
31 Boarding fees for July were billed to the riding club in the amount of $4,500. The
amount is due August 10.

Required:
a. Prepare the journal entries to record the transactions for July, 1994.

b. Post the journal entries to the ledger accounts after entering the beginning balances in
those accounts. Insert cross-indexing references in the general journal and the ledger. Use
the following chart of accounts:
 Account Number Account Title
100 Cash
103 Accounts Receivable
130 Land
140 Building
200 Accounts Payable
203 Loan Payable
300 Joanna Willis, Capital
304 Joanna Willis, Drawing
402 Horse Boarding Fees, Revenue
404 Riding and Lesson Fee Revenue
507 Salaries Expense
513 Feed Expense
568 Miscellaneous Expense

c. Prepare a trial balance.

Problem 2

The trial balance of Jason Company at the end of first eleven months of the fiscal year is given
below:

JASON COMPANY
Trial Balance
May 31, 1996

Acct # Account Title Debits ($) Credits ($)

100 Cash 64,944
103 Accounts Receivable 65,400
130 Land 24,000
200 Accounts Payable 15,000
201 Notes Payable 12,000
300 Debra Jason, Capital 85,440
304 Debra Jason, Drawing 13,200
405 Tennis Lesson Revenue 162,000
505 Advertising Expense 16,800
507 Salaries Expense 52,800
511 Utilities Expense 1,680
515 Rent Expense 31,680
518 Supplies Expense 1,800
530 Repairs Expense 1,200
531 Entertainment Expense 696
568 Miscellaneous Expense 240
$274,440 $274,440

Transactions for June 1996 were as follows:

June 1 Paid building rent for June, $2,400.

2 Paid an account payable, $4,580.
5 Purchased a small tract of land for cash, $1,800.
7 Gave tennis lessons to members of a large tennis organization on account, $2,600.
10 Paid the note payable of $12,000.
13 Received cash from a customer on account, $2,800.
19 Received bill for equipment repairs, $180.
24 Paid the June telephone bill, $66 and the June electricity bill $78.
28 Received a bill for June advertising, $1,320.
30 Gave tennis lessons to members of a tennis club for cash, $3,600.
30 Paid June salaries, $4,800
30 Gave tennis lessons to members of a tennis club on account, $4,400.
30 Costs paid in entertaining persons who subsequently became members, $204.
30 Paid equipment rent expense for June, $480.
30 The owner withdrew $1,200 cash.
Required:
a. Open three-coloumn ledger accounts for each of the accounts in the trial balance. Place
the word Balance in the explanation space, enter the date June 1, 1996 on the same line
and enter the proper beginning balance in each account.

b. Prepare general journal entries for the transactions.

c. Post the journal entries in three-coloumn ledger accounts.

d. Prepare a trial balance as of June 30, 1996.

Problem 3

Philip Martin lost his job as a carpenter with a contractor when a recession hit the construction
industry. Philip had been making $50,000 per year. He decided to form his own company, The
Fix-It Company, and do home repairs.

The following is a summary of transactions of the business during the first three months of
operations in 2004:

Jan, 15 Philip invested $20,000 in the business.

Feb, 10 Owner withdrew $2,000 for living expenses.
Feb, 25 received a payment of $4,400 for remodeling a basement into a recreation
room. The work was performed in February. The home owner purchased
all the building materials.
Mar, 5 Paid cash for an advertisement that appeared in the local newspaper on this date, $110.
Mar, 18 Owner withdrew $1,800 for personal living expenses.
Apr, 10 Received $6,400 for converting a room over a garage into an office for a
college professor. The professor purchased all of the material required for
the job.
Jan, 15 – Apr, 15 Paid gas and oil expenses for automobile, $700.
Jan, 15 – Apr, 15 Miscellaneous business expenses were paid, $450.
Jan, 15 – Apr, 15 The owner withdrew an additional $8,540 to pay various personal
expenses.

Required:
a. Prepare journal entries for the above transactions.

b. Prepare a chart of accounts for the ledger.

c. Post the journal entries to T- accounts. Use the account numbers shown in the chart of
accounts.

d. How profitable is this new venture? Should Philip stay in this business or find another job
similar to the one he had lost.
Problem 4

Briefly define the following in your own words:

i. The Accounting Equation

ii. The Business Entity Concept
iii. The Historical Cost Concept
iv. The Money Measurement Concept
v. The Dual Aspect Concept
vi. The Time Interval Concept
vii. The Going Concern Concept
viii. The Consistency Concept
ix. The Prudence Concept
x. The Accruals Concept
xi. The Materiality Concept
xii. The Revenue Recognition Principle
xiii. The Matching Principle

Problem 5

The following information relates to a Trader’s business

Assets and Liabilities at January 1, 2009 ($) December 31, 2009 ($)
Furniture & Fixtures 18,000 16,200
Debtors 4,800 5,800
Stock 24,000 28,000
Creditors 8,000 11,000
Cash 760 240
Balance at Bank 15,600 4,600
Loan from B. Burton 6,000 2,000
Motor Vehicle - 16,000

During the year Trader sold private investments for $4,000 which he paid into the business bank
account, and he had drawn out $200 weekly for private use.

Required:
a. Prepare an Income Statement for the year ending December 31, 2009.
b. Prepare a Balance Sheet as on December 31, 2009.