1. Ms. Anna started her business (“Anna Car Repairing Shop”) on January 1, 2018. During the first month of its operations, the business engaged in the following transactions: Date Transactions

Date Transactions 

Jan 1 Jan 2 Anna invested cash $100,000 as initial capital to start the business.

jan 2 An amount of $36,000 was paid as advance rent for three months. 

Jan 3 Paid $60,000 cash on the purchase of equipment costing $80,000. The remaining amount was recognized as note payable.

 Jan 4 Purchased office supplies costing $17,600 on account. 

Jan 13 Provided services to its customers and received $28,500 in cash. Jan 13 Paid the accounts payable on the office supplies purchased on January 4. 

Jan 14 Paid wages to its employees for the month of January, aggregating $19,100. Jan 18 Provided $54,100 worth of services to its customers. They paid $32,900 and promised to pay the remaining amount in the next month.

 Jan 23 Received $15,300 from customers for the services provided on January 18.

 Jan 25 Received $4,000 as an advance payment from customers. Jan 26 Purchased office supplies costing $5,200 on account.

 Jan 28 Paid water bill of $19,000 for January

 Jan 31 Paid $5,000 advertising expense. 

Jan 31 Received electricity bill of $2,470 for January.

 Jan 31 Received telephone bill of $1,494 for January.

 Jan 31 Miscellaneous expenses paid during the month totaled $3,470.

Instructions: 

a) Journalize the transactions with explanations (Ignore the reference numbers). (16) 

b) Post the transactions in the ledger account. (16)

 c) Prepare a Trial Balance for Jan 31, 2018. (10)

 d) Prepare an Income Statement and a classified Balance for Jan 31, 2018, based on the information available in the trial balance. (10)

2.Write short notes on the following accounting principles with proper example: (18) 

a) Cost Principle

 b) Economic Entity Assumption 

c) Monetary Unit Assumption 

d) Going Concern 

e) Periodicity 

f) Revenue Recognition Principle 

g) Matching Concept 

h) Accrual Basis of Accounting 

i) Dual Aspect of Accounting

3. Baker Corporation provided the following Statements for 2014-15 –

 Balance Sheet

 2015 2014 Assets $ $ Cash 40,000 70,000 Accounts Receivable 320,000 350,000 Inventory 460,000 320,000 Total Current Asset 820,000 740,000 Gross Fixed Assets 560,000 520,000 Accumulated Depreciation 180,000 150,000 Net Fixed Asset 380,000 370,000 Total Asset 1,200,000 1,110,000 Liabilities & Stockholders’ Equity Current Liabilities Accounts Payable 390,000 320,000 Notes Payable 110,000 90,000 Accrued Expense 20,000 20,000 Total Current Liabilities 520,000 430,000 Long Term Debt 320,000 350,000 Total Liabilities 840,000 780,000 Stockholders’ Equity Common Stock at par 100,000 100,000 Share Premium Reserve 150,000 150,000 Retained Earnings 110,000 80,000 Total Liabilities & Stockholders’ Equity 1,200,000 1,110,000

 Income Statement

 2015 $ Sales 2,200,000 Cogs 1,420,000 Gross Profit 780,000 Operating Expenses 600,000 Operating Income (EBIT) 180,000 Interest 29,000 Earnings before Tax (EBT) 151,000 Tax (30%) 45,000 Earnings after Tax (Net Income) 106,000

Additional Information: 

1. Purchased equipment paying $40,000 cash.

 2. Annual depreciation expense was $30,000. 

3. Paid cash dividend of $76,000.

 4. No sale of fixed assets. 

Required

 A) Prepare a Cash Flow Statement for the year 2015. (12)

 B) Calculate the following Ratios for the year 2015 and also indicate the significance of each ratio – (18) 

Current Ratio, Quick Ratio, Accounts Receivable Turnover, Profit Margin, Asset Turnover, ROA, Return on Common Stockholders’ Equity, Debt to Asset, Times Interest Earned Ratio.

Answer rating: 100% (QA)

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