ADDIS ABABA UNIVERSITY

SCHOOL OF COMMERCE
ACCOUNTING & FINANCE PROGRAM UNIT
Group Assignment (Fundamentals of Accounting I - ACFN 2011)
Submission date: May 27, 2021
Group size: 4-6 students
Exercise 1
At the beginning of the year, Chalew Company had total assets of Br870,000 and total
liabilities of Br500,000. Answer the following questions.

(a) If total assets increased Br150,000 during the year and total liabilities decreased
Br80,000, what is the amount of equity at the end of the year?
(b) During the year, total liabilities increased Br100,000 and equity decreased Br70,000.
What is the amount of total assets at the end of the year?
(c) If total assets decreased Br80,000 and equity increased Br120,000 during the year,
what is the amount of total liabilities at the end of the year?

Exercise 2
Chala Computers entered into the following transactions during May 2021.
1. Purchased computer terminals for Br20,000 from Digital Equipment on account.
2. Paid Br3,000 cash for May rent on storage space.
3. Received Br15,000 cash from customers for contracts billed in April.
4. Provided computer services to Sharew Construction Company for Br2,400 cash.
5. Paid EEU Br11,000 cash for energy usage in May.
6. Shareholders invested an additional Br32,000 in the business.
7. Paid Digital Equipment for the terminals purchased in (1) above.
8. Incurred advertising expense for May of Br900 on account.
Instructions
Indicate with the appropriate letter whether each of the transactions above results in:
(a) An increase in assets and a decrease in assets.
(b) An increase in assets and an increase in equity.
(c) An increase in assets and an increase in liabilities.
(d) A decrease in assets and a decrease in equity.
(e) A decrease in assets and a decrease in liabilities.
(f) An increase in liabilities and a decrease in equity.
(g) An increase in equity and a decrease in liabilities.

Exercise 3
Two items are omitted from each of the following summaries of statement of financial
position and income statement data for two companies for the year 2020, Olango Company
and Buta Enterprises.

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 Olango Buta
Company Enterprises
Beginning of year:
Total assets Br97,000 Br129,000
Total liabilities 85,000 (c)
Total Equity (a) 75,000
End of year:
Total assets 160,000 180,000
Total liabilities 120,000 50,000
Total Equity 40,000 130,000
Changes during year in equity:
Additional Investment (b) 25,000
Dividends 24,000 (d)
Revenues 215,000 100,000
Expenses 175,000 55,000

Instructions
Determine the missing amounts.

Exercise 4
The Classic Theater opened on April 1. All facilities were completed on March 31. At this
time, the ledger showed No. 101 Cash Br6,000, No. 140 Land Br10,000, No. 145 Buildings
(concession stand, projection room, ticket booth, and screen) Br8,000, No. 157 Equipment
Br6,000, No. 201 Accounts Payable Br2,000, No. 275 Mortgage Payable Br8,000, and No.
311 Share Capital—Ordinary Br20,000. During April, the following events and transactions
occurred.
Apr. 2 Paid film rental of Br800 on first movie.
3 Ordered two additional films at Br1,000 each.
9 Received Br1,800 cash from admissions.
10 Made Br2,000 payment on mortgage and Br1,000 for accounts payable due.
11 Classic Theater contracted with D. Zarle Company to operate the concession stand.
Zarle is to pay 18% of gross concession receipts (payable monthly) for the rental of
the concession stand.
12 Paid advertising expenses Br300.
20 Received one of the films ordered on April 3 and was billed Br1,000. The film will be
shown in April.
25 Received Br5,200 cash from admissions.
29 Paid salaries Br1,600.
30 Received statement from D. Zarle showing gross concession receipts of Br1,000 and
the balance due to The Classic Theater of Br180 (Br1,000 x 18%) for April. Zarle paid
one-half of the balance due and will remit the remainder on May 5.
30 Prepaid Br900 rental on special film to be run in May.

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In addition to the accounts identified above, the chart of accounts shows No. 112 Accounts
Receivable, No. 136 Prepaid Rent, No. 400 Service Revenue, No. 429 Rent Revenue, No.
610 Advertising Expense, No. 726 Salaries and Wages Expense, and No. 729 Rent Expense.
Instructions
(a) Enter the beginning balances in the ledger as of April 1. Insert a check mark (✓) in
the reference column of the ledger for the beginning balance.
(b) Journalize the April transactions.
(c) Post the April journal entries to the ledger. Assume that all entries are posted from
page 1 of the journal.
(d) Prepare a trial balance on April 30, 2014.

Exercise 5
The trial balance of the Garland Company shown below does not balance.
Tana Company
Trial Balance
March 31, 2021
Debit Credit
Cash Br 3,850
Accounts Receivable Br 2,750
Prepaid Insurance 700
Equipment 12,000
Accounts Payable 4,500
Unearned Service Revenue 560
Share Capital—Ordinary 11,700
Service Revenue 8,690
Salaries and Wages Expense 4,200
Advertising Expense 1,100
Utilities Expense 800

Br30,800 Br20,050

Your review of the ledger reveals that each account has a normal balance. You also discover
the following errors.
1. The totals of the debit sides of Prepaid Insurance, Accounts Payable, and Utilities
Expense were each understated Br100.
2. Transposition errors were made in Accounts Receivable and Service Revenue. Based
on postings made, the correct balances were Br2,570 and Br8,960, respectively.

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 3. A debit posting to Salaries and Wages Expense of Br200 was omitted.
4. A Br1,000 cash dividend was debited to Share Capital—Ordinary for Br1,000 and
credited to Cash for Br1,000.
5. A Br520 purchase of supplies on account was debited to Equipment for £520 and
credited to Cash for Br520.
6. A cash payment of Br450 for advertising was debited to Advertising Expense for Br45
and credited to Cash for Br45.
7. A collection from a customer for Br420 was debited to Cash for Br420 and credited to
Accounts Payable for Br420.

Instructions
Prepare a correct trial balance. Note that the chart of accounts includes the following:
Dividends and Supplies.

Exercise 6
Tirhas Advertising Agency was founded by Tirhas Aniley in January of 2019. Presented
below are both the adjusted and unadjusted trial balances as of December 31, 2020.
Tirhas Advertising Agency
Trial Balance
December 31, 2014
Unadjusted Adjusted
Debit Credit Debit Credit
Cash Br 11,000 Br 11,000
Accounts Receivable 20,000 23,500
Supplies 8,600 5,000
Prepaid Insurance 3,350 2,500
Equipment 60,000 60,000
Accumulated Depreciation— Br 28,000 Br 33,000
Equipment
Accounts Payable 5,000 5,000
Interest Payable –0– 150
Notes Payable 5,000 5,000
Unearned Service Revenue 7,200 5,600
Salaries and Wages Payable –0– 1,300
Tirhas Aniley, Capital 25,500 25,500
Tirhas Aniley, Drawing 12,000 12,000
Revenue 58,600 63,700
Salaries and Wages Expense 10,000 11,300
Insurance Expense 850
Interest Expense 350 500
Depreciation Expense 5,000
Supplies Expense 3,600
Rent Expense 4,000 4,000
Br129,300 Br129,300 Br139,250 Br139,250

Instructions
(a) Journalize the annual adjusting entries that were made.

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 (b) Prepare an income statement and a statement of changes in Equity for the year ending
December 31, 2020, and a statement of financial position at December 31.
(c) Answer the following questions.
(1) If the note has been outstanding 6 months, what is the annual interest rate on that
note?
(2) If the company paid Br14,500 in salaries in 2020, what was the balance in Salaries
and Wages Payable on December 31, 2019?

Exercise 7
Atnaf Distributing Company completed the following merchandising transactions in the
month of April. At the beginning of April, the ledger of Atnaf showed Cash of Br8,000 and
Share Capital—Ordinary of Br8,000.
Apr. 2 Purchased merchandise on account from Bacha Supply Co. Br6,200, terms 1/10, n/30.
4 Sold merchandise on account Br5,500, FOB destination, terms 1/10, n/30. The cost of
the merchandise sold was Br3,400.
5 Paid Br240 freight on April 4 sale.
6 Received credit from Bacha Supply Co. for merchandise returned Br500.
11 Paid Bacha Supply Co. in full, less discount.
13 Received collections in full, less discounts, from customers billed on April 4.
14 Purchased merchandise for cash Br3,800.
16 Received refund from supplier for returned goods on cash purchase of April 14, Br500
18 Purchased merchandise from Temo Distributors Br4,500, FOB shipping point,
terms 2/10, n/30. 20 Paid freight on April 18 purchase Br160.
23 Sold merchandise for cash Br7,400. The merchandise sold had a cost of Br4,120.
26 Purchased merchandise for cash Br2,300.
27 Paid Temo Distributors in full, less discount.
29 Made refunds to cash customers for defective merchandise Br90. The returned
merchandise had a fair value of Br30.
30 Sold merchandise on account Br3,400, terms n/30. The cost of the merchandise sold
was Br1,900.
Instructions
(a) Journalize the transactions using a perpetual inventory system.
(b) Journalize the transactions using a periodic inventory system.
(c) Prepare a multiple step income statement for the month of April 2021.

Exercise 8
On December 1, 2014, Jember Distributing Company had the following account balances.
Debit Credit
Cash Br 7,200
Accounts Receivable 4,600
Inventory 12,000
Supplies 1,200

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Equipment 22,000
Accumulated Depreciation— Equipment 2,200
Accounts Payable 4,500
Salaries and Wages Payable 1,000
Share Capital—Ordinary 30,000
Retained Earnings 9,300
Br47,000 Br47,000

During December, the company completed the following summary transactions.

Dec. 6 Paid Br1,600 for salaries and wages due employees, of which Br600 is for December
and Br1,000 is for November salaries and wages payable.
8 Received Br2,100 cash from customers in payment of account (no discount allowed).
10 Sold merchandise for cash Br6,600. The cost of the merchandise sold was Br4,100.
13 Purchased merchandise on account from Gena Co. Br9,000, terms 2/10, n/30.
15 Purchased supplies for cash Br2,000.
18 Sold merchandise on account Br12,000, terms 3/10, n/30. The cost of the merchandise
sold was Br8,400.
20 Paid salaries and wages Br1,800.
23 Paid Gena Co. in full, less discount.
27 Received collections in full, less discounts, from customers billed on December 18.
Adjustment data:
1. Accrued salaries and wages payable Br800.
2. Depreciation Br200 per month.
3. Supplies on hand Br1,700.

Instructions
(a) Journalize the December transactions using a perpetual inventory system.
(b) Enter the December 1 balances in the ledger T-accounts and post the December
transactions. Use Cost of Goods Sold, Depreciation Expense, Salaries and Wages
Expense, Sales Revenue, Sales Discounts, and Supplies Expense.
(c) Journalize and post adjusting entries.
(d) Prepare an adjusted trial balance.
(e) Prepare a single step income statement and a retained earnings statement for
December and a classified statement of financial position at December 31.