CHAPTER 3

A. QUESTION FOR DOUBLE ENTRIES

Q1
Data for this question are presented in Q5 of chapter 3.
Required: Journalize each transaction. Explanations are not required.

Q2
ABC Corporation has got following information:
a. Received cash of $8,000 and issued common stock.
b. Earned video rental revenue on account, $1,800
c. Purchased office furniture on account, $400.
d. Received cash on account, $100
e. Paid cash on account, $100
f. Rented videos and received cash of $100
g. Paid monthly office rent expense of $900.
h. Paid $200 cash to purchase supplies that will be used in the future
Required:
Journalize each transaction. Explanations are not required.

Q3
ABC Delivery Service Company, completed the following transactions during the
first month of operations for January, 2019:
a. Issued common stocks, received cash $6,000 and a truck valued at $11,000.
b. Purchased supplies $300 on account.
c. Prepaid insurance, $700.
d. Performed delivery service for a customer and received $3,200 cash.
e. Paid employee salary, $700
f. Performed delivery service on account $12,000.
g. Collected $600 in advance for delivery service to be performed later.
h. Paid office rent, $600. This rent is not paid in advance.
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 i. Paid $200 on account.
j. Paid cash dividends of $2,100.
Required:
1. Record each transaction in the journal. Key each transaction by it letter.
Explanations are not required.
2. Post the transaction that you recorded in requirement 1 in the T-accounts.
Cash Service revenue
A/R Salary expense
Supplies Rent expense
Prepaid insurance
Delivery truck
Accumulated depreciation
Accounts payable
Unearned service revenue
Common stock
Dividends
3. Enter the trial balance in worksheet for the month ended January 31 2019.
Complete worksheet using the adjustment data given at January 31.
a. Accrued salary expense, $700.
b. Depreciation expense, $60.
c. Prepaid insurance expired, $250.
d. Supplies on hand, $200
e. Unearned service revenue earned during January, $500.
4. Prepare financial statements
5. Journalize closing entries.

Q4
Sara decided to start her own gift basket business. Here is a summary of
transactions she made for the month of May:
May 1: Invested $10,000 to start her new business.
May 2: Paid $900 for gift basket supplies to make gift basket
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 May 3: Paid $800 rent for the month of September for her storefront.
May 4: Bought $400 worth of office equipment (desk, chairs).
May 28: Sold gift baskets and gift basket accessories on credit for $2,200
May 29: Bought straw and birchwood to make gift basket on credit, $1,500.
The payable will be maturity in 90 days.
1/ Apply the basic accounting equation to complete a transaction analysis for
each transaction 
2/ Prepare T-accounts to record the transactions above
3/ Prepare the trial balance

Q5
Make entries for the following transactions:
1. ABC Ltd. purchased a motor vehicle with $5000 cash and $15,000 on bank
loan.
2. The charge for the year for depreciation on Office Equipment owned by ABC
Ltd was calculated to be $4,000
3. ABC Ltd. paid their annual insurance premium of $1,500
4. ABC Ltd. purchased $2,000 of stock on credit/on account from a supplier.
5. The owner invested $30,000 cash in the corporation
6. Purchased $5,500 of equipment with cash
7. Purchased $500 in supplies on account
8. Paid $300 for supplies previously purchased

B. QUESTION FOR THE MEASUREMENT OF INVENTORIES

Q6
Which one of the following lists consists only items which may be included in the
balance sheet value of such inventories?
A. Foreman’s wages, carriage inwards, carriage outwards, raw materials
B. Raw materials, carriage inwards, costs of storage of finished goods, plant
depreciation

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 C. Plant depreciation, carriage inwards, raw materials, and foreman’s wages.
D. Carriage outwards, raw materials, foreman’s wages, plant depreciation

Q7
Which of following costs may be included when arriving at the cost of finished
goods for inclusion in balance sheet of a manufacturing company?
Yes No
Carriage inwards
Non-refundable tax
Refundable tax
Carriage outwards
Depreciation of factory plant
Finished goods storage costs
Factory supervisors’ wages
Production line wages
Depreciation of office buildings
Director’s wages

Q8
From the given transactions, calculate cost of closing inventories and cost of goods
sold Using FIFO method, LIFO method and Average Cost Method

 Date Transactions Units Cost per Selling

unit price
per unit
Jan. 1 Opening Balance 1500 24
2 Sales 150   25
12 Purchases 400 23
21 Sales 700 - 25
28 Purchases 300 24
30 Sales 1200 - 28

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Q9
The following units of a particular item were purchased and sold during the period:
Beginning Inventory 40 units at P20
First purchase 50 units at P21
Second purchase 50 units at P22
First sale 110 units
Third purchase 50 units at P23
Second sale 45 units
What is the cost of the 35 units on hand at the end of the period as determined by:
a/ The LIFO costing method
b/ The FIFO costing method
c/ The moving average cost method

Q10
On 10/1/N, A Company purchased merchandise K on credit: Quantity 1.000 kg,
total amount $2.000. Transportation fee of $60 was paid by cash. On 15/2/N, A
issued 400 kg of material K for production.
Determine:
a/ Cost of K purchased?
b/ Cost of K issued?
c/ Cost of K at the end of accounting period?
(A Company applied historical cost and accrual principle; cost of material issused
was calculated by moving average method, Openning balance of K: Quantity:
500kg, $1.000)

Q11
 Under FIFO, LIFO, Weight Average and Moving average costing method, fill
in the missing data in the following table:

Inventory
Date Transactions Units Sold Unit Cost
Units
May 1 Beginning 700 $10 700

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 Inventory
May 3 Purchase 100 $12 800
May 8 Sale (*1) (500) ?? 300
May 15 Purchase 600 $14 900
May 19 Purchase 200 $15 1,100
May 25 Sale (*2) (400) ?? 700
May 27 Sale (*3) (100) ?? 600
Ending
May 31 ??
Inventory

Q12
On 01/01/N, A Company had information about Merchandise K as follows:
Openning balance: Quantity: 1000kg, unit cost: $15
12/1: Purchased 1500kg
21/1: Sold 700kg
30/1: Sold 900kg
Total cost of sale: $30.000 (weighted-average method is applied)
Determine:
1. Purchased unit cost
2. Total cost of purchased
3. Unit cost of sale
4. Closing balance of K

Q13
On 01/01/N, A Company had information about Merchandise M as follows:
Openning balance: Quantity: 1500kg, unit cost: $10
12/1: Puschased 2000kg
21/1: Sold 500kg

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30/1: Sold 1300kg
Closing balance of M was $25.500. (Weighted-average costing method was applied
when determine cost of sale).
Determine:
1. Unit cost of purchased.
2. Total cost of purchased.
3. Unit cost of sale
4. Total cost of sale

Q14
On 10/12/N, A Company purchased 1.500 kg of material K with total amount of $3.000.
Transportation fee of $60 mil was paid by cash. On 15/12/N, A issued 750 kg of material
K for production.
(Cost of materials issued was calculated by weighted-average method). Openning
balance of material K= 0).
Determine:
1. Cost of purchased.
2. Cost of issued
3. Closing balance of K.

Q15
Transactions in March: (Currency unit: VND)
- On 1/3: Openning Balance of merchandise X: quantity: 100kg, unit cost:
200.000/kg.
- On 6/4: Purchased 350kg merchandise X, purchasing unit price 200.000/kg
- On 14/3: Issued merchandise X for sales, quantity: 80kg, selling unit price:
220.000/kg, Transportation expense for is 2.000.000.
- On 20/3: Purchased 400kg merchandise X, purchasing unit price 220,000/kg

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- On 26/3: Issued merchandise X for sales, quantity: 250kg, selling unit price:
250.000/kg. Transportation expense is 3.500.000.
Salary expense of selling department and administrative department is 18.000.000
and 22.000.000, respectively. The moving average cost method is applied.
Determine:
1, Cost of purchased in March
2, Cost of issued in March

Q16
Transaction in Jan/N: (CU: VND)
Openning balance of Material X: Quantity: 300kg, unit cos: 125.000.
1, Purchased 70kg of material X on credit of 120,000/kg. Other purchase cost was
3,000,000.
2, Issued 350kg of material X for production.
3, Purchased 130kg of material X on credit of 130,000/kg. Other purchase cost was
20,000/kg.
4, Issued 100kg of material X for production.
5, Issued 10kg of material X for packaging.
Determine:
a, Total cost of purchased in Jan
b, Total cost of issued in Jan (Moving average cost method is applied)
c, Closing balance of X

C. QUESTION FOR THE MEASUREMENT OF FIX ASSET

Q17
Foster has built a new factory incurring the following costs:
$'000
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 Land 1,200
Materials 2,400
Labour 3,000
Architect's fees 25
Surveyor's fees 15
Site overheads 300
Apportioned administrative overheads 150
Business insurance for first year 12
Required: Determine cost of buildings.

Q18
On 1 October 20X5 Dearing acquired a machine under the following terms.
Manufacturer's base price 1,050,000
Trade discount (applying to base price only) 20%
Freight charges 30,000
Electrical installation cost 28,000
Staff training in use of machine 40,000
Pre-production testing 22,000
Purchase of a three-year maintenance contract 60,000
The machine has useful life 10 years with residual value $10,000
Required:
1. Determine initial cost of machine.
2. Determine depreciation expense/charge for the year ended 31 Dec 20X5 and
31 Dec 20X6
3. Determine book value (carrying value) of machine as at 31 Dec 20x5 and 31
Dec 20x6.
4. Assume that the machine is disposed at 31 Dec 20x9 for 700,000. Determine
gain or loss from this transaction.

Q19

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On September 1, N, Company M purchased a building at $1,200,000. Buildings are
depreciated using the straight-line depreciation method. Useful life of the building is
40 years. Salvage value of the building at the end of useful life is estimated as
$120,000.
Determine:
1. Depreciation expense for N?
2. Carrying value of the building at December 31, N?
3. Accumulated depreciation account is_________account.

Q20
Company X purchased a car by 3 yearly instalments on 17/9/N. The interest rate
per year was 8.5%. Market value of the car at purchased date of 1.2 billions.
Registration tax rate was 10%. Delivery cost and assemble cost were 35 million.
The car was in use from Oct/N. Its estimated useful life was 5 years and there was
no residual value.
Required:
1, Determine the total cost of the car:
- at the time of initial recognition.
- at the time of last payment.
2, Determine the accumulated depreciation and carrying amount of the car at the
end of year N. (The Car is depreciated on monthly basis and straight line method is
used for depreciation).

D. QUESTION FOR CORRECTION OF ERRORS

Q21
Write the journal entries which would correct these errors:
1. A business receives an invoice for $250 from a supplier which was omitted
from the books entirely.
2. Repairs worth $150 were incorrectly debited to the non-current asset
(machinery) account instead of the repairs account.
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 3. The bookeepers of a business reduces cash sales by $280 because he was not
sure what the $280 represented. In fact, it was drawings.
4. Telephone expenses of $540 are incorrectly debited to the electricity
account.
5. Sales has been added up to $28.425 instead of $28.825
6. A bookkeeper accidentally post an invoice for $50 to the Utility expense
instead of of the the Material account.
7. Goods sold on credit to John, $230, was not recorded in the books.
8.  Goods bought from Jane $500 was credited to Jenny’s account.
9. Repairs to motor vehicles paid by cheque $650 have been debited to motor
vehicles account
10.The purchase of a van by cash in bank $2 000 was wrongly entered in the
books as $2 200 due to an error in the invoice received.
11.Stationery bought in cash $76 was recorded in the books at $67.
12.  Electricity paid by cheque (cash at bank) $200 was credited to account. No
other entries were made in the ledger.
13.Furniture bought on credit from James, $575, was correctly debited to
furniture account but credited to James account at $775.

Q22
At ABC Co, the trial balance contained a suspense account with a credit balance of
$1.040
Investigations revealed the following errors:
a. A sale of goods on credit for $1000 had been omitted from the sales account.
b. Delivery and installation costs of $240 on a new item of plant had been
recorded as revenue expenditure in the distribution cost account.
c. Cash discount of $150 had been taken on paying a supplier, XYX, even
though the payment was made outside the time limit. XYZ is insisting that
$150 is still payable.
d. A raw material purchase of $350 had been recorded in the purchased
account as $850, but the trade payables able account was correctly written
up.

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 e. The purchases day book included a credit note for $230 as an invoice in the
total column. The correct entry was made in the purchases account.
Required:
1. Prepare journal entries to correct each of the above errors.
2. Open a suspense account and show the correction to be made.

Q23
The credit column on A company’s initial trial balance exceeds the debit column
total by $78, so a suspen account is opened. Adjustment are entered in the
adjustments column of the extended trial balance as follows:
Debit $144 and credit $173. None of these adjustments is entered in the suspense
account.
What is the balance on the suspense account the remains to be cleared?

E. QUESTION FOR THE COMMUNICATION AND OTHERS

Q24
Company X applied accrual basis, perpetual inventory system with moving
average method and prepare financial statements quarterly. (CU: million VND)
I/ Openning balance as at 01/1/N as follows:
Cash on hand 200 Short-term loan from Bank P 500
Cash at bank 6,400 Short-term loan from Bank Q 400
Receivable from customer A 150 Owner’s Capital 11,500
Receivable from customer N 50 Supplies 80
Receivable from customer B 50 Buildings 2,500
Payable to supplier X 200 Motor vehicles 700
Payable to supplier Y 400 Other fixed assets 200
Advanced payment to 50 Raw materials 120
employee M
Merchandises K: 1.000kg 2,900 Accumulated depreciation 400
II/ Transactions incurred in Quarter I/N as follows:
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 1. Purchased merchandise K by cash at bank: Quantity: 2000kg, amount 6,000.
2. Paid freight in of merchandise K, settled by employee M; 40
3. Sold 1,500kg of merchandise K for 5,600. Received 3,500 by cash at bank.
4. Delivery expense of 30, not yet paid.
5. Accural Salary to marketing employees: 90, administrative employees:150
6. Depreciation of fixed assets for the period: 60, in which:
- Depreciation for selling component: 20
- Depreciation for administrative component: 40
7. Issued supplies for administrative purposes: 10
8. Issued materials for packaging: 20
Required:
1. Identify the financial position of Company X as at 1/1/N.
2. Journalize entries for transactions above.
3. Post data of transaction above to relevant T-accounts.
4. Prepare the trial balances (Vietnamese style)
5. Prepare Statement of Financial Position as at 31/3/N.
6. Prepare Statement of Profit or Loss for Quarter I/N

Q25
X company applied accrual basis of accounting, prepared financial statements
quarterly. (CU: VND million)
Information extracted from General Ledger of Selling Expenses Account in Q1/N
as follows.
Voucher Amount
No Description Accounts reference Debit
Date Credit
.
10/1/N (1) Cash 30
31/1/N (2) Salaries payables 100
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 313/N (3) Other payables X1
31/3/N (4) Accumulated X2
depreciation
31/3/N (5) Income Summary X3
Required:
a/ Determine X1, X2, X3?
Additional information:
- The cost of fixed asset used in Selling Department was 720, accumulated
depreciation reported as at 01/01/N was 288 and was calculated by using straight-
line method. This fixed asset had no residual value and 5 years of estimated useful
life.
- The total amount of Compensations such as social insurance, health insurance,
trade union fee equals to 20% of employee payables.
b/ Describe each transaction from (1) to (5) on the General Ledger of Selling
Expenses Acc.

Q26
Information extracted from General Ledger of Income Summary Account of year
N of X Company as follows. (CU: million VND)
Voucher Amount
No Description Accounts reference Debit
Date Credit
.
31/12/N (1) Revenue Acc. 24,000
31/12/N (2) COGS Acc.
31/12/N (3) Selling Expenses 2,200
Acc.
31/12/N (4) General
Administration
Expenses Acc.
31/12/N (5) Retained earnings

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 Acc.
a/ Determine COGS, General Administration Expenses and Retained earnings to
complete the table.
Additional information: COGS equaled 60% of revenue, profits generated during
period equaled 20% of COGS.
b/ Describe each transaction from (1) to (5) on the General Ledger of Income
Summary Acc.
REVIEW
1. When a company pays a bill, the account Cash will be Debited or Credited?
2. What will usually cause an asset account to increase? Debit or Credit?
3. Entries to expenses such as Rent Expense are usually Debits or Credits?
4. What type of accounts are Interest Receivable and Fees Receivable?
5. What type of accounts are Deferred Revenues and Unearned Revenues?
6.What type of accounts are Prepaid Insurance, Prepaid Advertising, and Prepaid
Expenses?
7. What type of accounts are Accumulated Depreciation and Allowance for
Doubtful Accounts.
8. A company using the accrual method of accounting performed services on
account in August. The services were for $2,000 and the company gave the
customer credit terms that state the amount is to be paid to the company in
September.
a. Assuming that the company prepares monthly income statements, what
will be the account debited for $2,000 in August?
b. Assuming that the company prepares monthly income statements, what
will be the account credited for $2,000 in August?
c. In September when the company receives the $2,000 from the
customer, which account should the company debit?
d. In September when the company receives the $2,000 from the
customer, which account should the company credit?

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9. Is The business transaction recorded in journal in a chronological order or
random order?
10. In accounting/bookkeeping, the term posting refers to post data from journal to
_______________
11. Is the right hand side of a T-account termed as debit side or credit side?
12. Which statement is helpful in determining the financial position of the business
at a specific date?
13. The nomal balance of capital account is ______________balance
14. Revenue and expense accounts are referred as ______________accounts
15. Is the right hand side of a T-account termed as debit side or credit side?
16. Which statement is helpful in determining income/expense/results of finanical
performance of the business at a specific date?

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