Course 103: Principles of Accounting [Including Course Outline, Question Bank & Notes]

Course 103: Principles of Accounting

Course Outline
Course Teachers:
Mohammad Salahuddin Chowdhury, FCA Muhammad Kamrul Hasan
Associate Professor Assistant Professor
Department of Finance Department of Finance
University of Dhaka University of Dhaka
Email address: [email protected] Email address: [email protected]

1. Learning Objective: To provide students with basic accounting knowledge for understanding the
techniques of identifying and recording of transactions, adjusting financial records and how to prepare and
interpret financial statements of business organizations.
2. Learning Outcome: Upon completion of this course students will be able to
• Use double entry accouriting techniques and the maintenance of accounting records
• Learn basic operational accounting guidelines under IFRS.
• Acquaint them selves with the accounting cycle-from transaction identification and recording in the
journal, the ledger, and the trial balance to communication through financial statements.
Accounting an information system; The Accounting Cycle Journalisation, Posting in Ledger. Preparation of
Trial Balance: Accounting Equation; Concepts and Principles: Operational Guide Lines IFRS; Basic
Assumptions: Basic Principles and Constraints; Adjustments, Closing Entries, Post-Closing Trial Balance,
Reversing Entries; Preparation of Financial Statements- Income Statement (A statement of financial
performance), Balance Sheet (A statement of financial position); Specific guidelines as per IFRS for
accounting of revenue, fixed assets. Inventory, receivables and investments.
3. Teaching Method: Real life cases and textbook materials will be presented simultaneously before
students to understand the lecture with heart content. Students viill have to relate the accounting process and
issues which companies/entities encounter with the lessons they get in classes in this regard, students are
highly recommended to be updated on regular basis with concurrent accounting issues and new accounting
concept/conventions/standards. Instructions fanguage in class will be English and students are encouraged to
interact in English.
4. Course Content & Description
Chapter Topics to be covered
01. Accounting in Action • Accounting Activities and Users
• The Building Blocks of Accounting Accounting Standards
• Measurement Principles Assumptions
• The Accounting Equation
• Analyzing Business Transactions
02. The Recording Process • Accounts
• Debits and Credits
• The Journal
• The Ledger and Posting

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 Course 103: Principles of Accounting [Including Course Outline, Question Bank & Notes]

• The Trial Balance

03. Adjusting the Accounts • Accrual Basis Accounting and Adjusting Entries- Fiscal and
Calendar Years
• Accruals vs Cash Basis Accounting
• Recognizing Revenues and Expenses
• The Need for Adjusting Entries
• Types of Adjusting Entries Adjusting Entries for Deferrals
• Adjusting Entries for Accruals
• Adjusted Trial Balance and Financial Statements
04. Completing the Accounting • Closing the books
Cycle • The Accounting Cycle and Correcting Entries
• Classifies Statements of Financial Position
05. Accounting Merchandise • Merchandise Cperations and Inventory Systems
Operations • Recording Purchases under a Perpetual System; Recording
Sale under a Perpetual System
• The Accounting Cycle for a Merchandising Company
• Financial Statement for a Merchandiser; Periodic Inventory
System
06. Inventories • Classifying and Determining Inventory
• Inventory Methods and Financial Effects
• Effects of Inventory Errors
• Inventory Statement Presentation and Analysis
07. Revenue Recognition • Overview of Revenue Recognition
• The Five-Step Process
• Other Revenue Recognition Issues
08. Accounting for Receivables • Recognition of Accounts Receivables
• Valuation and Disposition of Accountings Receivable
• Notes Receivables
• Presentation and Analysis
09. Plant Assets, Natural Resources • Plant Asset Expenditures
and intangible Assets • Depreciation Methods
• Plant Asset Disposals
• Natural Resources and Intangible Assets
• Statement Presentation Analysis
10. Investments • Accounting for Debt Investments
• Accounting for Share Investments
• Valuing and Reporting Investments

5. Text Book: Accounting Principles (IFRS Version) by Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso (13th
Edition)

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 Course 103: Principles of Accounting [Including Course Outline, Question Bank & Notes]

Question Bank
1st Midterm Examination 2023
B.B.A. 29th Batch 1st Year 1st Semester

QI. Define accounting. Explain the expanded version of scorunting equation and normal balance of these
accounts as per debit-credit rule. 03
Q2. In which situations does a firm use contra sales account? What are the reasons for using contra sales
account instead of debiting sales account? 03
Q3. The trial balance of Ramy's Fashion Center contained the following accounts at November 30, the end of
the company's fiscal year. Purchase of inventory during the period was $485,000 and beginning inventory was
$55,000.

Ramy's Fashion Center

Trial Balance
November 30, 2020
Debit Credit
Cash $27,800
Accounts Receivable 30,700
Inventory 44,700
Supplies 6,200
Equipment 133,000
Accumulated Depreciation- Equipment $28,000
Notes Payable 60,000
Accounts Payable 48,500
Owner's Capital 93,000
Owner's Drawings 12,000
Sales Revenue 760,200
Sales Returns and Allowances 8,800
Cost of Goods Sold ?
Salaries and Wigs Expense 140,000
Advertising Expense 24,400
Utilities Expense 14,000
Maintenance and repairs expense 12,100
Freight-Out 16,700
Rent Expose 24,000
Totals ? ?

Requirements:
a. Complete the missing values in the unadjusted trial balance.
b. Enter the following adjustments on t on the worksheet and complete the worksheet.

1. Supplies on hand Totaled $2,600.

2. Depreciation is $11,500 on the equipment.
3. A $60,000 3-month 10% notes payables was issued on September 30.
4. Physical count shows that inventory on hand is $41,300.

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 Course 103: Principles of Accounting [Including Course Outline, Question Bank & Notes]

5. Salaries payable $1,000.

6. Advertising expenses of $3,600 accrued but not recorded.

c. Journalize the adjusting entries.

d. Journalize the closing entries and complete the closing process.
2nd Midterm Examination 2023
B.B.A. 29th Batch 1st Year 1st Semester
Marks: 15 Time: 60 Minutes

Q.1) Why is the allowance method considered to be the superior method, compared to the direct write-off
method, when valuing Accounts Receivables? (02)
Q.2) On October 1, Calculator Bangladesh had an inventory of 30 calculators at a cost of BDT1800 each. The
company uses a perpetual inventory system. During October, the following transactions occurred.

October 06. Purchased 80 calculators at BDT2000 each from Casino Co. for cash.
09. Paid freight of BDT800 on calculators purchased from Casino Co.
10. Returned 2 calculators to Casino Co. for BDT4200 credit (including freight) because
they did not meet specifications.
12. Sold 26 calculators costing BDT2100 (including freight) for BDT3100 each to Bol
Bichitra, terms n/30.
14. Granted credit of BDT3100 to Boi Bichitra for the return of one calculator that was not
ordered.
20. Sold 30 calculators costing BDT2100 for BDT3100 each to Modern Stationary, terms
п/30.
Requirement: Journalize the transactions above. (05)
Q.3) Yunus Company reports the following for the month of June
Date Details Units Unit Cost
Jun-01 Inventory 20z BDT 5
Jun-12 Purchase 300 BDT 6
Jun-23 Purchase 500 BDT 7
Jun-30 Inventory 120

i. Using a perpetual inventory system, determine the cost of the ending inventory and the cost of
goods sold under FIFO. Assume a sale of 400 units occurred on June 15 for a selling price of BDT
8 and a sale of 480 units on June 27 for BDT 9. (06)

ii. if instead the company had used a cost flow method of Average Costing, what would have been
the effect on the value of ending inventory and cost of goods sold? (02)

Department of Finance, University of Dhaka

BBA 29th Batch 1st Year 1st Semester Final Examination 2023

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 Course 103: Principles of Accounting [Including Course Outline, Question Bank & Notes]

F-103: Principles of Accounting

Time: 3 Hours Total Marks: 60

Instructions: Answer any four of the following questions. You must answer all sub-questions sequentially.
01. a. Celina Harris believes revenues from credit sales may be recorded before they are collected in çash.
Do you agree? Explain.
b. The ledger of Villa Rental Agency on March 31 of the current year includes the selected accounts,
shown below, before adjusting entries have been prepared.

Account Name Debit Credit

Prepaid Insurance 3,600
Supplies 2,800
Equipment 25,000
Accumulated Depreciation-Equipment 8,400
Notes Payable 20,000
Unearned Rent Revenue 9,900
Rent Revenue 60,000
Interest Expense -0-
Salaries and Wages Expense 14,000
An analysis of the accounts shows the following.
i. The equipment depreciates $300 per month.
ii. One-third of the unearned rent revenue was recognized during the quarter.
iii. Interest of $500 is accrued on the notes payable.
iv. Supplies on hand total $650.
v. Insurance expires at the rate of $200 per month.
Requirement: Prepare the quarter end adjusting entries at March 31.
c. On September 1 Roshek Office Supply had an inventory of 30 calculators at a cost of €22 each. The
company uses a perpetual inventory system. During September, the following transactions occurred.
Sept. 6 Purchased 90 calculators at €20 each from Harlow Co., terms 2/10, n/30.
9 Paid freights of €180 on calculators purchased from Harlow Co.
10 Returned 3 calculators to Harlow Co. for €66 credit (including freight) because they did not
meet specifications.
12 Sold 26 calculators costing €22 (including freight) for €33 each to Village Book Store, terms
n/30.
14 Granted credit of €33 to Village Book Store for the return of one calculator that was not
ordered.
Requirement: Journalize the September transactions. [5+5+5]
02. a. Explain. is ingrained in our society and it is vital to our economic system." Do you agree?
b. What are the purposes of making closing entries? The adjusted trial balance for Watson Company
are as follows

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 Course 103: Principles of Accounting [Including Course Outline, Question Bank & Notes]

Watson Company
Adjusted Trial Balance
December 31, 2014
Account Titles Dr. Cr.
Cash 17,800
Accounts Receivables 14,400
Supplies 2,300
Prepaid Insurance 4,400
Equipment 46,000
Accumulated Depreciation-Equipment 18,000
Notes Payable 20,000
Accounts Payables 8,000
Salaries and Wages Payable 2,600
Interest Payable 1,000
Share Capital-Ordinary 15,000
Retained Earnings 9,800
Dividends 12,000
Service Revenue 86,200
Advertising Expense 10,000
Supplies Expense 3,700
Depreciation Expense 6,000
Insurance Expense 4,000
Salaries and Wages Expense 39,000
Interest Expense 1,000
Totals 1,60,600 1,60,600
Requirement: Prepare the closing entries and post-closing trial balance.

c. DuPage Company purchases a factory machine at a cost of $18,000 on January 1, 2020. DuPage
expects the machine to have a salvage value of $2,000 at the end of its 4-year useful life. During its
useful life, the machine is expected to be pected to be used 160,000 hours. Actual annual hourly use
was 2020, 40,000; 2021, 60,000; 2022, 35,000; and 2023, 25,000.
Requirements: Prepare depreciation schedules for the following methods: (a) straight-line, (b) units-
of-activity, and (c) declining-balance using double the straight-line rate. [3+6+6]

03. a. Goods costing 32,000 are purchased on account on July 15 with credit terms of 2/10, n/30. On July
18 a $200 credit memo is received from the supplier for damaged goods. Interpret the credit terms.
Give the joumal entry on July 24 to record payment of the balance due within the discount period using
a perpetual inventory system.

b. In a period of rising prices, the inventory reported in Plato Company's balance sheet is close to the
current cost of the inventory. Identify the inventory cost flow method being used by Plato company
What would have happened to the value of the inventory and Cost of Goods Sold, if it was going
through a period of failing prices?

c. Soul Patrol Distribution markets CDs of the performing artist Taylor Hicks, At the beginning of
October, Soul Patrol had in beginning inventory 2,000 of Hicks's CDs with a unit cost of $7. During
October Soul Patrol made the following purchases of Hicks's CDs

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 Course 103: Principles of Accounting [Including Course Outline, Question Bank & Notes]

Oct 3 3000@$8 Oct 19 3000@$10

Oct 9 3500@$9 Oct 25 3500@11

During October, 11,400 units were sold. Soul Patrol uses a periodic inventory system. Determine the
cost of goods available for sale. Determine (1) the ending inventory and (2) the cost of goods sold
under each of the assumed cost flow methods (FIFO and average-cost). [5+5+5]

04. a. The trial balance of Ramy's Fashion Center contained the following accounts on November 30, the
end of the company's fiscal year. year Purchase of inventory during the period was $485,000 and
beginning inventory was $55.000
Ramy's Fashion Center
Trial Balance
November 30, 2020
Debit Credit
Cash $25,600
Accounts Receivable 30,700
Inventory 44,700
Supplies 6,200
Equipment 1,33,000
Accumulated Depreciation Equipment 25,800
Notes Payable 60,000
Accounts Payable 48,500
Owner's Capital 93,000
Owner's Drawings 12,000
Sales Revenue 7,60,200
Sales Returns and Allowances 8,800
Cost of Goods Sold ?
Salaries and Wages Expense 1,40,000
Advertising Expense 24,400
Utilities Expense 14,000
Maintenance and Repairs Expense 12,100
Freight-Out 16,700
Rent Expense 24,000
Totals ? ?
Requirements:
a. Complete the missing values in the unadjusted trial balance.
b. Enter the following adjustments on the worksheet and complete the worksheet.
i. Supplies on hand totalled $2.000
ii. Depreciation is $9,500 O on the equipment.
iii. A $80,000 4-month 10% notes payables was issued on August 30.
iv. Physical count shows that inventory on hand is $42,500
v. Salaries payable $1,250.
vi. Advertising experises of 30,600 accrued but not recorded.
c. Journalize the adjusting entries.
d. Journalize the closing entries and complete the closing process. [15]

05. a. Following is the unadjusted trial balance of Watson Brothers Ltd.

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 Course 103: Principles of Accounting [Including Course Outline, Question Bank & Notes]

Debit Credit
Cash 5400
Accounts Receivables 2400
Supplies 2800
Prepaid Insurance 1300
Equipment 60000
Notes Payable 40000
Accounts Payable 2400
Watson, Capital 1000
Watson, Drawings 4900
Service Revenue 3200
Salaries Expenses 800
Utilities Expenses 400
Advertising Expenses 77300 77300

Other data:
1. Insurance expires at the rate of $200 per month,
2. $1,000 of supplies are on hand at August 31,
3. Monthly depreciation on the equipment is $900.
4. Interest of $500 on the notes payable has accrued during August.
Requirement: Prepare a 10-column worksheet. [15]

06. a. How does the time period assumption affect an accountant's analysis of business transactions? What
effect would be observed on the value of the items on the balance sheet if assumption was not made?
b. such an Maria Momtaz, a first year accounting student, believes debit balances are favorable and
credit balances are unfavorable. Is Maria correct? Discuss. (Provide examples to better explain your
answer)
c. The ledger of Hixson Company at the end of the current year shows Accounts Receivable $120,000,
Sales $840,000, and Sales Returns and Allowances $30,000

i. If Hixson uses the direct write-off method to account for uncollectible accounts, journalize the
adjusting entry at December 31, assuming Hixson determines that Fell's $1,400 balance is
uncollectible.
ii. If Allowance for Doubtful Accounts has a credit balance of $2,100 in the trial balance, joumalize
the adjusting entry at December 31, assuming bad debts are expected to be (1) 1% of net sales, and
(2) 10% of accounts receivable.
iii. If Allowance for Doubtful Accounts has a debit balance of $200 in the trial balance, journalize the
adjusting entry at December 31, assuming bad debts are expected to be (1) 0.75% of net sales and
(2) 6% of accounts receivable. [5+5+5]

Department of Finance, University of Dhaka

BBA 28th Batch, 1st Year, 1st Semester, 1st Mid-term Examination-2022
F-103: Principles of Accounting
Time: 60 Minutes Marks: 15

Q1) Distinguish between the "historical cost principle" and the "fair value principle". (3)

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 Course 103: Principles of Accounting [Including Course Outline, Question Bank & Notes]

Q2) Zudi Dench is a licensed dentist. During the first month of the operation of her business, the following
events and transactions took place.

April 1 Shareholders invested £40,000 cash in exchange for ordinary shares.

1 Hired a secretary-receptionist at a salary of £600 per week payable monthly.
2 Paid office rent for the month £1,400.
3 Purchased dental supplies on accour ccount from Halo Company £5,200.
10 Performed dental services and billed led insurance companies £6,600.
11 Received £1,000 cash advance from Rich Welk for an implant.
20 Received £2,100 cash for services performed for Phil Stueben.
30 Paid secretary- -receptionist for the month £2,400.
30 Paid £1,900 to Halo Company for accounts payable due.

Judi uses the following chart of accounts: No. 10 101 Cash, No. 112 Accounts Receivable, No. 126 Supplies,
No. 201 Accounts-Payable, No. 2 209 Unearned Service Revenue, No. 311 Share Capital Ordinary, No. 400
Service Revenue, No. 726 Salaries and Wages Expense, and No. 729 Rent Expense.

(a) Journalize the transactions

(b) Post to the ledger accounts
(c) Prepare a trial balance on 30 April. (7)

Q3) The unadjusted trial balance of Badger Motel is given below.

BADGER MOTEL, LTD.

Trial Balance
May 31, 2017
Debit Credit
Cash £ 2,500
Supplies
Prepaid Insurance
Land
Buildings
Equipment
Accounts Payable
Unearned Rent Revenue
Mortgage Payable
Share Capital Ordinary
Rent Revenue
Advertising Expense
Salaries and Wages Expense
Utilities Expense
Total £98,400 £98,400
Other data:
1. Prepaid insurance is a 1-year policy starting May 1, 2014
2. A count of supplies shows £350 of unused supplies on May 31.
3. Annual depreciation is 12,640 on the buildings and £1,500 on equipment.
4. The mortgage interest rate is 12%. (The mortgage was taken out on May 1.)
5. Two-thirds of the unearned rent revenue should be recognized as rent revenue prior to May 31.
6. Salaries of £750 are accrued and unpaid at May 31.

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 Course 103: Principles of Accounting [Including Course Outline, Question Bank & Notes]

(a) Prepare the adjusting entries

(b) Prepare an adjusted trial balance (5)

Department of Finance, University of Dhaka

BBA 28 Batch 1" Year 1" Semester Final Examination 2022
Course Code: F-103; Course Title: Principles of Accounting
Time: 3 Hours Total Marks: 60 (15×4)

Answer any 4 (Four) from the following Questions:

01. a. Identify the various users of financial statements and explain how they use financial statements.
b. Distinguish between "book value" and "fair value" of a plant asset with a numerical example.
Suppose, a company has invested in highly liquid bonds in the capital market. Should the bonds be
recorded at cost or at net realizable value? Support your answer by referring to appropriate accounting
principles.
c. Show the effect of the following transactions on the accounting equation through a tabular format.
• Collected $1,200 of accounts receivable.
• Paid $2,800 cash on accounts payable.
• Earned revenue of $8,000 of which $3,000 is collected in cash and the balance is due in September.
• Purchased additional office equipment for $2,000, paying $400 in cash and the balance on account.
• Paid salaries are $2,500, rent for August $900, and advertising expenses $400.
• Withdrew $700 in cash for personal use.
• Received $1,500 from Standard Federal Bank-money borrowed on a note payable.
• Incurred utility expenses for a month on account of $220 (5+5+5)

02. a. Thomas Magnum began operations as a private investigator on January 1, 2010. The trial balance
columns of the worksheet for Thomas Magnum, P.1. at March 31 are as follows.
THOMAS MAGNUM, PI
Worksheet
For the Quarter Ended March 31, 2010
Trial Balance
Account Tiles Dr. Cr.
Cash 11400
Accounts Receivable 5620
Supplies 1050
Prepaid Insurance 2400
Equipment 30000
Notes Payable 10000
Accounts Payable 12350
T. Magnum. Capital 20000
T. Magnum. Drawing 600
Service Revenue 13620
Salaries Expense 2200
Travel Expense 1300
Rent Expense 1200
Miscellaneous Expense 200
Total 55970 55970
Other data:

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 Course 103: Principles of Accounting [Including Course Outline, Question Bank & Notes]

01. Supplies on hand total $380.

02. Depreciation is $1,000 per quarter.
03. Interest accrued on 6-month note payable, issued January 1, $300
04. Insurance expires at the rate of $200 per month () 5. Services provided but unbilled at March 31 total
$530.
Requirement
a. Enter the trial balance on a worksheet and complete the worksheet.
b. Puckett Co. has office furniture that cost $75,000 and that has been depreciated $50,000.
c. Record the disposal under the following assumptions. (i) It was scrapped as having no value. (ii) It
was sold for $31,000. (10+5)

03. a. Explain the recording process. What role does source documents play in the recording process?
b. Why may a trial balance not contain complete and up-to-date information?
c. The trial balance of Syed Moiz Co. is not balancing as shown below.

SYED MOIZ CO.

Trial Balance
June 30, 2010
Debit Credit
Cash $ 3340
Accounts Receivable $ 2731
Supplies 1200
Equipment 2600
Accounts Payable 3666
Unearned Revenue 1100
5. Moiz, Capital 8000
5. Meiz. Drawing 800
Service Revenue 2480
Salaries Expense 3200
Office Expense 810
Total $12441 $17486

Each of the listed accounts has a normal balance per the general ledger. An examination of the ledger and
journal reveals the following errors.
01. Cash received from a customer in payment of its account was debited for $480, and Accounts
Receivable was credited for the same amount. The actual collection was for $840.
02. The purchase of a computer on account for $620 was recorded as a debit to Supplies for $620 and a
credit to Accounts Payable for $620.
03. Services were performed on account for a client for $890. Accounts Receivable was debited for $890,
and Service Revenue was credited for $89.
04. A debit posting to Salaries Expense of $700 was omitted.
05. A payment of a balance due for $306 was credited to Cash for $306 and credited to Accounts Payable
for $360.
06. The withdrawal of 5600 cash for moiz's personal use was debited to Salaries Expense for $600 and
credited to Cash for $600
Requirement:
Make journal entries to correct the above identified errors and prepare a corrected trial balance. (4+3+8)

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 Course 103: Principles of Accounting [Including Course Outline, Question Bank & Notes]

04. a. While recording depreciation on a particular asset why do companies credit the "accumulated
depreciation" account instead of directly crediting the relevant asset account?

b. Rick Marsh, a lawyer, accepts a legal engagement in March, performs the work in April and is paid
in May. While performing the services, Marsh incurred some costs. Marsh pays no costs in March,
$2,000 in April and $2,500 in May incurred in April) If Marsh's law firm prepares monthly financial
statements, when should it recognize revenue from this engagement? Why? How much expense should
the firm deduct from revenues in the month when it recognizes the revenue? Why?

c. The Mound View Motel opened for business on May 1, 2010. Its trial balance before adjustment on
May 31 is as follows.

MOUND VIEW MOTEL

Trial Balance
May 31, 2010
Account Number Debit Credit
101 Cash $ 3500
126 Supplies 2200
130 Prepaid insurance 2280
140 Land 12000
141 Lodge 60000
149 Furniture 15000
201 Accounts Payable $ 4800
209 Unearned Rent Revenue 3300
275 Mortgage Payable 35000
301 Kevin Henry, Capital 46380
429 Rent Revenue 10300
610 Advertising Expense 600
726 Salaries Expense 3300
732 Utilities Expense 900
Total $99780 $99780

Other data:
• Prepaid insurance is a 1-year policy starting May 1, 2010.
• A count of supplies shows $750 of unused supplies on May 31.
• Annual depreciation is $3,000 on the lodge and $2,700 on furniture.
• The mortgage interest rate is 12%. (The mortgage was taken out on May 1.)
• Two-thirds of the unearned rent revenue has been earned.
• Salaries of $750 are accrued and unpaid at May 31

Requirement
Journalize the adjusting entries on May 31. (4+4+7)

05. a. Distinguish between FOB shipping point and FOB destination with examples. Identify the freight
terms that will result in purchaser accounting for the freight expense and the seller accounting for the
freight expense. Furthermore, explain if there is a difference between the treatment of freight expense
by the purchaser and the seller.

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 Course 103: Principles of Accounting [Including Course Outline, Question Bank & Notes]

b. Glanville Distribution markets CDs of the performing artist Harrilyn Clooney. At the beginning of
March, Glanville had in beginning inventory 1,500 Clooney CDs with a unit cost of $7. During March
Glanville made the following purchases of Clooney CDs.
5-Mar 3000@$8
13-Mar 5500 @$9
21-Mar 4000@$10
26-Mar 2000@$11
During March 12,500 units were sold. Glanville uses a periodic inventory system.

Requirements:
i. Determine the cost of goods available for sale.
ii. Determine (1) the ending inventory and (2) the cost of goods sold under each of the assumed cost
flow methods (FIFO and average-cost).
iii. Which cost flow method results in (1) the highest inventory amount for the balance sheet and (2)
the highest cost of goods sold for the income statement and why? (5+10)

06. a. In a recent newspaper release, the president of Keene Company asserted that something has to be
done about depreciation. The president said, "Depreciation does not come close to accumulating the
cash needed to replace the asset at the end of its useful life." What is your response to the president?

b. What are the different methods of depreciation? Explain with examples.

c. In recent years, Juresic Transportation purchased three used buses. Because of frequent turnover in
the accounting department, a different accountant selected the depreciation method for each bus, and
various methods were selected. Information concerning the buses is Salvage summarized below.

Bus Acquired Cost Salvage Value Useful Life in Years Depreciation Method
01 1/1/08 $ 96,000 $ 6,000 5 Straight-line
02 1/1/08 1,20,000 10,000 4 Declining-balance
03 1/1/09 80,000 8,000 5 Units-of-activity

For the units-of activity method, total miles are expected to be 120,000. Actual miles of use in the first 3 years
were: Year 2009: 24,000; Year 2010: 34,000; and Year 2011: 30,000.

Requirements:
i. Compute the amount of accumulated depreciation on each bus at December 31, 2010
ii. If bus no. 2 was purchased on April instead of for this bus in 2008 and 20097 January 1, what is
the depreciation expense for this bus in 2008 and 2009?
F-103: Principles of Accounting
BBA 27th Batch 1st Year 1st Semester; Mid-term 1
Time: 1 hour Marks: 50
Part A: Multiple-choice questions
01. Which of the following is the expanded version of the accounting equation?
A. Assets Liabilities + Revenues Expenses
B. Assets Liabilities + Owner's Equity
C. Assets Liabilities Owner's Capital Owner's Withdrawal + Revenues-Expenses
D. Assets Liabilities Owner's Capital Expenses Drawings

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 Course 103: Principles of Accounting [Including Course Outline, Question Bank & Notes]

02. As of December 31, 2021, Tui Company has assets of $7,500 and liabilities of $5,000. What is the
owner's equity for Tui Company as of December 31, 2021?
A. $2,500 B. $12.50 C. $1,500 D. Cannot be determined

03. Revenue has a normal balance of

A. Debit B. Credit C. Contra debit D. Contra credit

04. ____ is a list of accounts with their balances at a given time?

A. Journal B. Ledger C. T-account D. Trial balance.

05. Under a periodic inventory system, when goods are purchased for resale by a company
A. purchases on account are debited to Inventory.
B. purchases on account are debited to Purchases.
C. purchase returns are debited to Prelease Returns and Allowances.
D. freight costs are debited to Freight-Out.

Part B: Statement verification

Indicate whether each of the statements presented below is true or false. If false provide the correct statement.

01. FOB destination freight terms indicate that the seller places the goods free on board to the buyer's
place of business, and the seller pays the freight
02. Under perpetual inventory system there is no record of cost of goods sold.
03. Owner's Drawings is increased by credits and decreased by debits
04. Increases and decreases in revenues have to be recorded opposite from increases and decreases in
expenses.
05. The historical cost principle dictates that companies record assets at their cost. In later periods,
however, the fair value of the asset must be used if fair value is higher than its cost.

Part C: Descriptive writing

Explain debit/credit procedures for owner's equity.

"Part D: Problem solving”

Jon Snow started his own consulting firm Snow consulting, on June 1, 2021. The following transactions
occurred during the month of June.

June 1 Snow invested £5,500 cash in the business.

2 Paid £720 for office rent for the month.
3 Purchased £640 of supplies on account.
5 Paid £100 to advertise in the National News.
9 Received £3,200 cash for services performed.
12 Withdrew £800 cash for personal use.
15 Performed £5,100 of services on account.
17 Paid £2,000 for employee salaries.
20 Made a partial payment of £480 for the supplies purchased on account on June 3.
23 Received a cash payment of £3,200 for services performed on account on June 15.
26 Borrowed £4,000 from the bank on a note payable.
29 Purchased equipment for £3,300 on account.
30 Paid £250 for utilities.

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Requirements
a) Show the effects of the previous transactions on the accounting equation.
b) Prepare an income statement for the month of June.
c) Prepare a balance sheet at June 30, 2021.

F-103: Principles of Accounting

Department of Finance, University of Dhaka
BBA 27th Batch, 1st Year 1st Semester, 2nd Mid-term Examination
Full Marks: 15 Time: 55 minutes

01. Micro Computer Services began operations on August 1, 2020. At the end of August 2020, management
prepares monthly financial statements. The following information relates to August.
i. At August 31, the company owed its employees $800 in salaries and wages that will be paid on
September 1.
ii. On August 1, the company borrowed $30,000 from a local bank on a 15-year mortgage. The annual
interest rate is 10%.
iii. Revenue for services performed but unrecorded for August totalled $1,100. Prepare the adjusting
entries needed on August 31, 2020. (06)

02. In its first month of operations, Weatherall Company made three purchases of (6) merchandise in the
following sequence: (1) 300 units at $6, (2) 400 units at $7, and (3) 200 units at $8. Assuming there are 350
units on hand, compute the cost of the ending inventory under the (a) FIFO method and (b) LIFO method.
Weatherall uses a periodic inventory system. (06)

03. Explain the difference between the terms FOB shipping point and FOB destination. (03)

F-103: Principles of Accounting

University of Dhaka, Department of Finance
BBA 27th Batch 1st Year 1st Semester Final Examination-2022
Time: 3 Hours Full Marks: 60
Answer any four questions in sequential form (4 X 15)

01. a. Evaluate the accounting equation and state the normal balance of associated components. (4)
b. Accounting consists of three basic activities" in light of this statement, explain the activities and
users associated with accounting. (4)
c) Charlie Fox started his own consulting firm Snow consulting, on June 1, 2021. The following
transactions occurred during the month of June. (7)

June 1 Fox invested £5,500 cash in the business.

2 Paid £720 for office rent for the month.
3 Purchased £640 of supplies on account.
5 Paid £100 to advertise in the National News.
9 Received £3,200 cash for services performed.
12 Withdrew £800 cash for personal use.
15 Performed £5,100 of services on account.
17 Paid £2,000 for employee salaries.
20 Made a partial payment of £480 for the supplies purchased on account on June 3.

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 Course 103: Principles of Accounting [Including Course Outline, Question Bank & Notes]

23 Received a cash payment of £3,200 for services performed on account on June 15.
26 Borrowed £4,000 from the bank on a note payable.
29 Purchased equipment for £3,300 on account.
30 Paid £250 for utilities.
Requirements
i. Show the effects of the previous transactions on the accounting equation.
ii. Prepare an income statement for the month of June.
iii. Prepare a balance sheet at June 30, 2021.

02. a) "The key to successful business operations is effective inventory management." Do you agree?
Explain. (3)
b) Explain the difference between the terms FOB shipping point and FOB destination. (3)
c) The accounting records of Shumway Ag Implements shows the following data. (9)

Beginning inventory 4,000 units at $3

Purchases 6,000 units at $4
Sales 7,000 units at $12

Determine the cost of goods sold during the period under a periodic inventory system using
(i) the FIFO method, (ii) the LIFO method, and (iii) the average-cost method.

3. a) Why do firms prepare separate sub-classification of revenues? (5)

b) Briefly discuss the rationales of keeping record of sales return and allowances. (5)
c) Vera Ernst is a licensed dentist. During the first month of the operation of her business, the following
events and transactions occurred. (5)

April 1 Invested $20,000 cash in her business.

1 Hired a secretary-receptionist at a salary of $700 per week payable monthly.
2 Paid office rent for the month $1,100.
3 Purchased dental supplies on account from Dazzle Company $4,000.
10 Performed dental services and billed insurance companies $5,100.
11 Received $1,000 cash advance from Leah Mataruka for an implant.
20 Received $2,100 cash for services performed from Michael Santos.
30 Paid secretary-receptionist for the month $2,800.
30 Paid $2,400 to Dazzle for accounts payable due.

Vera uses the following chart of accounts: No. 101 Cash, No. 112 Accounts Receivable, No. 126 Supplies,
No. 201 Accounts Payable, No. 209 Unearned Service Revenue, No. 301 Owner's Capital, No, 400 Service
Revenue, No. 726 Salaries and Wages Expense, and No. 729 Rent Expense.

Instructions
i. Journalize the transactions
ii. Post to the ledger accounts.
iii. Prepore a trial balance on April 30, 2020.

04. a) Devin Wolf Company has the following balances in selected accounts on December 31, 2020. (7)

Accounts Receivable $ -0-

Accumulated Depreciation-Equipment -0-
Equipment 7000

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 Course 103: Principles of Accounting [Including Course Outline, Question Bank & Notes]

Interest Payable -0-

Notes Payable 10000
Prepaid Insurance 2100
Salaries and Wages Payable -0-
Supplies 2450
Unearned Service Revenue 3200

All the accounts have normal balances. The information below has been gathered at December 31, 2020.

i. Devin Wolf Company borrowed $10,000 by signing a 9%, one-year note on September 1, 2020.
ii. A count of supplies on December 31, 2020, indicates that supplies of $900 are on hand.
iii. Depreciation on the equipment for 2020 is $1,000.
iv. Devin Wolf Company paid $2,100 for 12 months of insurance coverage on June 1, 2020.
v. On December 1, 2020, Devin Wolf collected $32,000 for consulting services to be performed from
December 1, 2020, through March 31, 2021.
vi. Devin Wolf performed consulting services for a client in December 2020. The client will be billed
$4,200.
vii. Devin Wolf Company pays its employees total salaries of $9,000 every Monday for the preceding
5-day week (Monday through Friday). On Monday, December 29, employees were paid for the
week ending December 26. All employees worked the last 3 days of 2020.

Prepare adjusting entries for the seven items described above.

b) Explain the terms fiscal year, calendar year, and interim periods. (6)
c) Why do accrual-basis financial statements provide more useful information than cash basis statements? (2)

05. a) The following expenditures were incurred by McCoy Company in purchasing land: cash price
$50,000, accrued taxes $3,000, attorneys fees $2,500, real estate broker's commission 52,000, and
clearing and grading $3,500. What is the cost of the land? (5)

b) What is salvage value? Is salvage value used in determining periodic depreciation under each
depreciation method? (5)
c) On January 1, 2020, Emporia Country Club purchased a new riding mower for $15,000. The mower
is expected to have an 8-year life with a 53,000 salvage value. What journal entry would Emporia
make at December 31, 2020, if it uses straight-line depreciation? (5)

06. a) What is special journal? Why do firms prepare a subsidiary ledger? (5)
b) Following tables show the sales journal of Alex Co. under perpetual inventory system (10) and cash
transactions. Prepare subsidiary journal and general journal. Prove that,
i. he total of the general ledger debit balances is equal to the total of the general ledger credit
balances.
ii. The sum of the subsidiary ledger balances is equal to the balance in the control account.
Date Account debited Invoice No. Ref Account receivable Cost of goods said
Dr. Sales revenue Cr. Dr. Inventory Cr.
March 01 ASDA 201 £ 10600 £ 6360
09 John Lewis 202 11350 7370
13 Target 203 7800 5070
19 Vans 204 9300 6510
21 ASDA 205 15400 10780
25 Vans 206 21210 15900

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 Course 103: Principles of Accounting [Including Course Outline, Question Bank & Notes]

30 John Lewis 207 14570 10200

90230 62190
(175/311) (515/153)

Furthermore, Alex Co. has following cash transactions

March 1 Alex Co. makes an investment of £5,000 in the business.

7 Cash sales of merchandise total £1,900 (cost, £1,240).
10 Received a check for £10,388 from ASDA in payment of invoice No. 201 for £10,600 less a
2% discount.
12 Cash sales of merchandise total £2,600 (cost, £1,690)
17 Received a check for £11,123 from John Lewis in payment of invoice No. 202 for £11,350 less
a 2% discount
22 Received cash by signing a note for £6,000
23 Received a check for £7,644 from Target in full for invoice No. 203 for £7,800 less a 2%
discount.
28 Received a check for 19,114 from Vans in full for invoice No. 204 for 19,300
less a 2% discount.

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