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FIN005 Financial Accounting
Comprehensive Revision Exercises

Question 1
Tiffany Company carries on business as a retail trader. The trial balance of business as at 31 December 2011 was as follows: Dr Cr
$ $
Capital 204,800
Merchandise inventory 25,680
Salaries and wages 46,160
Motor expenses 3,720
Electricity 3,074
Fixtures and fittings at cost 28,000
- Accumulated depreciation
1 Jan 2011 16,800
Cost of merchandise sold 262,860
Office supplies 10,000
Building at cost 100,000
- Accumulated depreciation
1 Jan 2011 6,000
Sales 465,200
Rent 12,000
Prepaid insurance 1,760
Interest income on investment 1,226
Equipment at cost 24,000
- Accumulated depreciation 12,240
Premises 100,000
Account Receivables 18,530
Account Payables 23,004
Prepaid rates 16,000
Bank 277,486
Loan (repayable in 2017) 200,000
929,270 929,270

You are given the following additional information:

(1) Insurance expired at 31 December 2011 were $760.
(2) The following amounts were accrued at 31 December,2011:
Interest $5,000
Electricity $460

(3) Rates expenses unexpired at 31 December 2011 were $7,000

(4) Depreciation is to be provided as follows:

(a) building – 2% annually, straight – line method.
(b) fixtures and fittings – 20% annually, straight – line method. (c ) Equipment – 30% annually on a reducing balance basis.

(5) Supplies on hand at 31 December 2011 at cost, was $1,500.

Required

(a) Journalize the adjusting entries (1) to (5).
(b) Prepare for Tiffany Company,
(i) the income statement for the year ended 31 December 2011. (ii) the statement of owner’s equity for the year ended 31 December 2011. (iii) the balance sheet as at 31 December 2011.

Hints:
Gross profit = $202,340
Net income = $103,764
Capital at 31 December 2011 = $308,564
Current assets = $331,196
Property, plant and equipment = $205,832
Current liabilities = $28,464

Question 2
Brutus Corporation, a newly formed corporation, has the following transactions during May, 2011, it’s first month of operation.

May 1 Purchased 500 units @ $25.00 each
May 4Purchased 300 units @ $24.00 each
May 6Sold 400 units @ $38.00 each
May 8Purchased 700 units @ $23.00 each
May 13Sold 450 units @ $37.50 each
May 20Purchased 250 units @ $25.25 each
May 22Sold 275 units @ $36.00 each
May 27Sold 300 units @ $37.00 each
May 28Purchased 550 units @ $26.00 each
May 30Sold 100 units @ $39.00 each

Calculate cost of goods sold and ending inventory using each of the following inventory methods: 1. FIFO Perpetual
2. FIFO Periodic
3. LIFO Perpetual
4. LIFO Periodic
5. Average Cost Periodic (round average to nearest cent)

Question 3
The cash account for Discount Medical Co. at April 30, 2010, indicated a balance of $4,604. The bank statement indicated a balance of $9,158 on April 30, 2010. Comparing the bank statement and the accompanying canceled checks and memos with the records revealed the following reconciling items:

a. Checks outstanding totaled $5,225.
b. A deposit of $3,150, representing receipts of April 30, had been made too late to appear on the bank statement. c. The bank had collected $4,120 on a note left for collection. The face of the note was $4,000. d. A check for $2,490 returned with the statement had been incorrectly recorded by...
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