PRINCIPLE OF ACCOUNTING I

WORK SHEET #1
CHAPTER THREE – ACCOUNTING FOR MERCHANDISING ENTERPRISE
1. A retailer is considering the purchase of 5 units of a specific commodity from either of two suppliers.
Their offers are as follows;
a) 100 a unit, total of 500, 1/10, n/30, no charge for transportation
b) 90 a unit, total of 450, 2/10, n/30, plus transportation cost of 65.00

2. Merchandise is sold on account to a customer for 5,000.00, terms FOB shipping point, 1/10, n/30, the
seller paying the transportation costs of 100.00. determine the following
a) Amount of the sale.
b) Amount debited to accounts receivable.
c) Amounts of the discount for early payment.
d) Amounts of the remittance due within the discount period.
3. In the following question, identify the items designated by X and Z
a) Sales – (X+Y) =Net Sales
b) Purchase – (X+Y) = Net Purchase
c) Merchandise inventory (beg.) + X = Merchandise available for sale
d) Merchandise available for sale – X = Cost of merchandise sold
e) Net sales – Cost of merchandise sold = X
f) Gross profit – X = Operating income
4. For the fiscal year, net sales were 975,000.00 and net purchase were 650,000.00. Merchandise
inventory at the beginning of the year was 75,000.00 and at the end of the year it was 80,000.00.
determine the following amounts:
a) Merchandise available for sale
b) Cost of merchandise sold
c) Gross profit
d) Merchandise inventory listed on the balance sheet as of the end of the year
e) Pass the necessary adjusting entry
5. The following expenses were incurred by a merchandising enterprise during the year. In which
expense section of the income statement should each be reported.
A) Selling B) general C) other
a. Depreciation expense on store equipment e. Heating and lighting expense
b. Interest expense on notes payable f. Salary of general manager
c. Salary of sales person g. Advertising expense
d. Insurance expense on office equipment h. Office supplies used
B) Two or more terms are omitted in each of the following tabulation of income statement data.
Determine the amounts of the missing items, identify them by letter
A)
Case 1 Case 2 Case 3
Gross sales $ 640,000 $? $?
Sales discounts ? 25,600 19,200
Sales returns and allowances 19,200 44,800 32,000
Net sales 608,000 1,209,600 ?
Merchandise inventory, January 1 256,000 384,000 ?
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Purchases 384,000 768,000 ?
Purchase discounts 7,680 13,440 12,800
Purchase returns and allowances 24,320 31,360 32,000
Net purchases 352,000 672,000 ?
Transportation-in 25,600 38,400 32,000
Net cost of purchases 377,600 761,600 ?
Cost of goods available for sale ? 1,081,600 1,088,000
Merchandise inventory, December 31 ? 384,000 448,000
Cost of goods sold 320,000 ? 640,000
Gross margin 512,000 320,000 ?
B)Sales Sales Net Beg. Net Ending Cost of Gross
Ret. Sales Inv. Purchase Inventory MDS Sold Profit
98,000 5,000 (a) 45,000 80,000 (b) 70,000 (c)
72,000 (d) 70,000 19,000 45,000 20,000 (e) (f)
89000 (g) 89,000 (h) 65,000 37,000 (i) 28,000
65000 2,000 63,000 22,000 43,000 (j) (k) 20,000
C) Present entries for the following related transactions of Barker and Son.
a) Purchase 2,000.00 merchandise from Carl co. on account terms 2/10, n/30.
b) Paid the amount owed on the invoice within the discount period.
c) Discovered that some of the merchandise was defective and returned items with an invoice price
of 500.00, receiving credit.
d) Purchased an additional 300.00 of merchandise from Carl co. on account, terms 2/10, n/30.
e) Received a check for the balance owed from the return in transaction (c) after deducting for the
purchase in (d).
CHAPTER FOUR – DEFFERALS AND ACCRUALS
1. Classify the following items as
a) Prepaid expense c) accrued expense b) Unearned
revenue d) accrued revenue
i. Receipts from sales of meal tickets by a restaurant
ii. Property taxes paid in advance
iii. A two-year premium paid on a fire insurance policy
iv. Life insurance premiums received by an insurance company
v. Utilities owed but not yet paid
vi. Fees earned but not yet received
vii. Supplies on hand
viii. Tuition collected in advance by a university
ix. Storage fees earned but not yet received
x. Taxes owed but payable in the following period
xi. Salary owed but not yet paid
xii. Fees received but not yet earned
2. The debit portion of a particular adjustment is to an asset account
a) If the adjustment is for a deferral, which of the following types of accounts will be credited? Asset,
liability, revenue, or expense?
b) If the adjustment is for an accrual, which of the following types of accounts will be credited? Asset,
liability, revenue, or expense?

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3. Which of the following debits and credits represents one half on adjusting entries? Name the title of
the account that would be used for the remaining half of the entry
a) Fees earned is debited e) Property tax payable is credited
b) Office supplies expense is debited f) Prepaid insurance is credited
c) Unearned subscriptions is credited g) Unearned rent is debited
d) Salary expense is debited
4. There are balance in each of the following accounts after adjustment have been made at the end of
fiscal year. Identify each as asset, liability, revenue, or expense.
a) Fees receivable h) Salary expense
b) Supplies expense i) Rent income
c) Prepaid insurance j) Prepaid advertising
d) Insurance expense k) Prepaid advertising
e) Unearned subscription l) Rent receivable
f) Fees earned m) Taxes payable
g) Supplies
5. Salary expense has a balance of 722,150.00 as of June 26.
a) Pass entries for the following
Jun 30 record accrued salaries 6,050.00 30
closed the salaries expense account
July 1. Record a reversal entry for accrued salaries
3. Record salaries paid 15,700.00
b) Answer the following questions
i. What is the balance of the salary expense account on July?
ii. Is the balance of the salary expense account on July 1 an asset a liability, a revenue, or an
asset?
iii. What is the balance of the salary expense account on July 3?
iv. Of the 15,000.00 salary payment on July 3 how much is expense in July?
v. If there had been no reversing entry on july1, how should the debit for the salary
payment of July 3 have been recorded?
6. Selected accounts from the ledger of Margaret Co. at the end of the fiscal year are as follows.
The account balances are shown before and after adjustment.
Unadjusted balance Adjusted Balance
Fees Receivable - 3,250.00
Supplies 2,125.00 675.00
Prepaid Insurance 5,600.00 2,450.00
Wages payable - 2,970.00
Utilities payable - 475.00
Unearned Rent - 600.00
Fees earned 91,000.00 94,250.00
Wages expense 60,050.00 63,020.00
Insurance expense - 3,150.00
Supplies expense - 1,450.00
Rent income 7,800.00 7,200.00
Utilities expense 4,950.00 5,425.00
Instruction: show adjusting entries based on provided data.

CHAPTER FIVE – CASH

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 Identify each of the following reconciling items as;
A) An addition to the balance per bank statement
B) A deduction from the balance per bank statement
C) An addition to the balance per depositor’s record
D) A deduction from the balance per depositor’s record
i. Deposit in transit 670.20
ii. Note collected by bank 1,010.00
iii. Outstanding checks 879.50
iv. Check for 20.00 charged by bank as 200.00
v. Bank service charge 17.20
vi. Check of a customer returned by bank to depositor because of nonsufficient funds 47.00
2. ATD Company establishes a cash change fund by drawing a check amounting to Br. 500.00. Pass the
necessary journal entry.
3. The balance of cash on hand to maintain a fund of currency and coins in order to make change for the
month is Br. 350.00 and actual cash counted and deposited to bank Br 9,725.38. While the cash
register tally shows a balance of Br. 9,750.00. Pass the necessary journal entries for the amount
deposited in bank.
4. Jan 1 A petty cash is established by Br. 500.00
31 The petty cash receipt indicate expenditure for transportation expense 85.00,
office supplies 115.00, store supplies 120.00, and miscellaneous administration
expense 87.00.
Feb 1 The petty cash fund is restored to its original amount.
Instruction: Pass the necessary journal entries.
5. The bank statement for Laird Company shows a balance of 15,907.45 on April 30, 2010. On this date
the balance of cash per books is 11,589.45. The accountant investigation shows the following
reconciling items;
- April 30 deposit (received by bank on May 1) 2,201.40
- Check No. 453, 3,000.00; no. 457, 1,401.30; no. 460, 1,502.70. a total of Br. 5,904.00 not shown in
the bank statement.
- Laird wrote check no. 443 for 1,226.00 and the bank correctly paid that amount. However, Laird
recorded the check as 1,262.00.
- NSF Ck from J. R. Baron for payment of his account Br. 425.60 returned by the bank.
- The bank charge for printing company checks 30.00.
- The bank collect note receivable Br. 1,000 plus interest earned 50. In addition to that, the bank
deducts 15.00 for the service given.
a) Prepare a bank reconciliation
b) Pass the necessary journal entries
6. The cash in bank account for martin co. at July 31 of the current year indicated a balance of 12,192.50
after both the cash receipt journal and the check register for July had been posted. The bank
statement indicates a balance of 19,955.65 on July 31. Comparison of the bank statement and the
accompanying canceled checks and memorandums with the records revealed the following
reconciling items:
a) A deposit of4,015.20, representing receipts of july31, had been made too late to appear on the
bank statement
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 b) Checks outstanding totaled 9,090.75
c) The bank had collected for martin co. 3,045.00 on a note left for collection. The face of the note
was 3,000.00
d) A check drawn for 470.00 had been erroneously charged by the bank as 740.00
e) A check for 72.50 returned with the statement had been recorded in the check register as 7.25.
The check was for the payment of an obligation to shawl equipment co. for the purchase of office
equipment on account.
f) Bank service charge for July amounted to 22.15
Instruction
i. Prepare a bank reconciliation
ii.Journalize the necessary journal entries.
7. Lincolnville Company uses a petty cash system. The fund was established on March 1 with a balance of 100.00 using a voucher
system and on March 2 a check was written. During March the following petty cash receipts were found in the petty cash box.
Date Receipt No. For Amount
5 1 Office Supplies 39.00
7 2 Freight-out 21.00
9 3 Miscellaneous Expense 6.00
11 4 Travel Expense 24.00
14 5 Miscellaneous Expense 5.00
The fund was replenished on March 15 when the fund contained 3.00 in cash. On March 20, the
amount in the fund was increased to 150.00.
Instructions
a) Journalize the entries in March that pertain to the operation of the petty cash fund.
8. The cash records of Givens Company show the following four situations.
1. The June 30 bank reconciliation indicated that deposits in transit total 720.00 During July the
general ledger account Cash shows deposits of 15,750.00, but the bank statement indicates that
only 15,600.00 in deposits were received during the month.
2. The June 30 bank reconciliation also reported outstanding checks of 680.00. During the month of
July, Givens Company books show that 17,200.00 of checks was issued. The bank statement
showed that 16,400.00 of checks cleared the bank in July.
3. In September, deposits per the bank statement totaled 26,700.00, deposits per books were
25,400.00, and deposits in transit at September 30 were 2,100.00.
4. In September, cash disbursements per books were 23,700.00, checks clearing the bank were
25,000.00, and outstanding checks at September 30 were 2,100.00.
There were no bank debit or credit memoranda. No errors were made by either the bank or Givens
Company.
Instructions
Answer the following questions.
(a) In situation (1), what were the deposits in transit at July 31?
(b) In situation (2), what were the outstanding checks at July 31?
(c) In situation (3), what were the deposits in transit at August 31?
(d) In situation (4), what were the outstanding checks at August 31?

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9. Winning ham Company maintains a petty cash fund for small expenditures. The following
transactions occurred over a 2-month period.
July 1 Established petty cash fund by writing a check on Cubs Bank for 200.00.
15 Replenished the petty cash fund by writing a check for 196.00. On this date the fund consisted of 4.00
in cash and the following petty cash receipts: freight-out 94.00, postage expense 42.40, entertainment
expense 46.60, and miscellaneous expense 11.20.
31 Replenished the petty cash fund by writing a check for 192.00. At this date, the
fund consisted of 8.00 in cash and the following petty cash receipts: freight-out
82.10, charitable contributions expense 45.00, postage expense 25.50, and
miscellaneous expense 39.40.
Aug 15 Replenished the petty cash fund by writing a check for 187.00. On this date, the
fund consisted of 13.00 in cash and the following petty cash receipts: freight-out
75.60, entertainment exp. 43.00, postage exp. 33.00, and miscellaneous exp.
37.00.
16 Increased the amount of the petty cash fund to 300.00 by writing a check for 100. 31 Replenished
petty cash fund by writing a check for 284.00. On this date, the fund consisted of 16.00 in cash and the
following petty cash receipts: postage expense
140.00, travel expense 95.60, and freight-out 47.10.
Instructions
(a) Journalize the petty cash transactions.
(b) Post to the Petty Cash account.
(c) What internal control features exist in a petty cash fund?
10.On May 31, 2010, James Logan Company had a cash balance per books of 6,781.50. The bank
statement from Farmers State Bank on that date showed a balance of 6,404.60. A comparison of the
statement with the cash account revealed the following facts.
1. The statement included a debit memo of 40.00 for the printing of additional company checks.
2. Cash sales of 836.15 on May 12 were deposited in the bank. The cash receipts journal entry and the
deposit slip were incorrectly made for 886.15. The bank credited Logan Company for the correct
amount.
3. Outstanding checks at May 31 totaled 576.25. Deposits in transit were 1,916.15.
4. On May 18, the company issued check No. 1181 for 685.00 to Barry Trest, on account. The check,
which cleared the bank in May, was incorrectly journalized and posted by Logan Company for 658.
5. A 2,500.00 note receivable was collected by the bank for Logan Company on May 31 plus 80.00
interests. The bank charged a collection fee of 20.00. No interest has been accrued on the note.
6. Included with the cancelled checks was a check issued by Bridgetown Company to Tom Lujak for
800.00 that was incorrectly charged to Logan Company by the bank.
7. On May 31, the bank statement showed an NSF charge of 680.00 for a check issued by Sandy

(a) Prepare the bank reconciliation at May 31, 2010.

(b) Prepare the necessary adjusting entries for Logan Company at May 31, 2010.