Accounting Test

• This document should have 15 pages.
• Showing your work is optional, but if you do not show it I cannot give you part marks.
• Use the marks per question as a guide as to how in-depth your response to questions requiring explanation should be.
• Journal entry descriptions are

 

Problem 1 – Part 1                                                                                    (______/32 marks)

Shanti Yoga Studio has the following account balances on May 1, 2020. (all accounts have their ‘normal’ balances)

Part 1) During May 2020, the following events took place. Where appropriate, record a journal entry for each transaction. If no journal entry is required, write ‘no entry’. (2 marks each: ______/20 marks)

1. On May 2, the company prepaid rent for June to August for $6,000.

Date	Account name & description	Debit	Credit

 

1. On May 5, the owner, Jenny, invested $5,000 cash and a computer system valued at $4,700 into Shanti Yoga Studio.

 

1. On May 7, the company collected $3,500 it was owed on account.

 

 

1. On May 8 Shanti Yoga Studio provided a quotation for membership fees to a corporation looking to provide fitness benefits to its employees. The quotation was for $10,000. The corporation will decide next month if Shanti is a good fit.

500. On May 15 the yoga studio provided classes and collected $4,500.

 

1. On May 17 the company received a $820 bill for advertising expense that it will pay in the near future.

 

1. On May 18 the company paid $2,000 cash on account.

 

1. On May 20 the owner, Jenny, withdrew $500 for personal use.

 

1. On May 25 Shanti Yoga Studio purchased $900 of supplies on account.

 

 

500. On May 31 the company paid employee salaries of $1,500.

 

 

 

Problem 1 – Part 2                                                                                                                        

Part 2) Open T-accounts using the beginning balances provided and post entries into T-accounts. Calculate the balance of each one. (              /7 marks)

 

 

This page is intentionally blank for you to show your work.

Problem 1 – Part 3                                                                                                                        

Part 3) Prepare the unadjusted trial balance for Shanti Yoga Studio at May 31, 2020. (          /5 marks)

 

 

 

Problem 2                                                                                                   (______/33 marks)

City Movers had the following account balances, in random order, on December 31, 2020.

Additional Information:

• During the year, Sam Chiang invested $15,000 into the business.
• $7,500 of the notes payable is due this year.

Required:

1. Prepare an income statement for City Movers for the year ended December 31, 2020.
2. Prepare a statement of owner’s equity for City Movers for the year ended December 31, 2020.
3. Prepare a classified balance sheet at December 31, 2020.

 

 

 

 

 

 

 

 

 

 

 

 

Problem 2                                                                                                   (______/33 marks)

Prepare income statement here:

Prepare statement of owner’s equity here:

 

 

 

Problem 2 (continued)                                                                                                                

 

Prepare balance sheet here:

 

Problem 3                                                                                                   (______/18 marks)

Journalize the adjusting entry needed on December 31, 2020 the company’s year end, for each of the following independent cases. Adjusting entries are only made on December 31 in this company.                 (3 marks each)

1. Details of the Prepaid Rent Expense account are shown:

 

The company pays office rent semi-annually on March 31 and September 30. At December 31, part of the last payment is still available to cover January to march of the next year. No rent expense has been recorded for the year yet.

Date	Account name & description	Debit	Credit

 

2. The company pays its employees each Friday. The amount of the weekly payroll is $12,500 for a five day work week. December 31 is on a Wednesday, the employees will be paid on Friday, January 2.

 

1. The company purchased equipment on March 1, 2020 for $120,000. The equipment has a useful life of 5 years and a residual value of $0. No depreciation has been recorded yet this year.

 

 

 

2021. On May 1 the company received $36,000 for services to be provided from May 1, 2020 to April 30, 2021. The company provided its services from May 1-December 31, 2020.

 

1. The company provided services valued at $15,000 for a customer in December but has not yet sent out a bill or received any cash.

 

400. The beginning balance of Supplies on January 1, 2020 was $6,400. During 2019 the company purchased supplies costing $18,200. On December 31, 2020, there were $8,000 worth of supplies remaining.

 

 

 

Problem 4                                                                                                     (______/9 marks)

You are the accountant for XYZ Company. For the following situations, record the correcting journal entry. If no entry is needed, write ‘no entry’.

1. The bookkeeper was recording $10,000 revenue earned which had been paid in advance. He debited service revenue and credited unearned revenue.

 

450. The bookkeeper was recording a payment received on account for $450. He recorded the payment as $540.

 

500. The bookkeeper was recording an accrual for interest that was owed to XYZ Company from ABC Co. for $500. He debited interest expense and credited interest payable.

 

 

 

Problem 5                                                                                                     (______/6 marks)

In your own words, describe the process of closing the accounts and why we close the accounts at the end of the year.

 

 

 

Problem 6                                                                                                     (______/6 marks)

If management gets a bonus based on the Profit of the company, describe in your own words how management could change the net income using an estimate. Give a clear example.

 

 

 

 

Problem 7                                                                                                     (______/6 marks)

If you were starting a restaurant, would you choose to start as a proprietorship, partnership, or corporation. Give a full analysis of your reasons.