Worksheet For Financial Acc. I

Part I.
For each of the following questions, write “True” if the statement is correct
or “False” if the statement is incorrect on the space provided.
_________1. Reversing entries are never required as long as adjusting entries bring
existing asset or liability accounts up to date.
_________2. When cumulative effect of change in accounting principle has a debit
balance, it will be reported as an addition to the net income.
_________3. Investments by owners are part of comprehensive income.
_________4. A discounted note receivable is an example of a loss contingency.
_________5. The future amount of a deferred annuity is normally greater than the future
amount of an annuity not deferred.
Part II. For each of the following multiple-choice questions select the answer which
you think best fits to the question and write the letter of your choice in Block
Letter on the space provided.
_________ 1. Identify the important characteristics of accounting information?

A. Materiality
B. Comparability
C. Usefulness for decision making
D. Conservatism
E. None of the above.
_________2. One of the following is basic objective of financial accounting and
reporting.
A. Helping investors and creditors make investment and credit decisions
B. Helping investors and creditors assess the amount, timing and
uncertainties about future cash inflows.
C. Enabling users assess resources of a business enterprise, changes in
resources and the claims to these resources.
D. All of the above
E. None of the above
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_________3. Which of the following is/are not reported as an extraordinary item in the
income statement.
A. Disposal of a plant asset
B. Discontinuation of a business segment
C. Cumulative effect of changes in accounting principle
D. All of the above
_________4. A recovery in the aggregate market value of marketable equity securities
which had been written down to market value below cost requires the
recognition of:
A. Realized gain
B. Realized loss
C. Unrealized gain
D. Unrealized loss
_________5. (An) item(s) not included under cash include(s):
A. Checks and certified payment orders (CPOs)
B. Petty cash fund
C. Certificates of deposits
D. Change funds
2
Part III. Attempt the following exercise type question. Show all the necessary
computations and steps.
Exercise I:
Couple Company is established during 1999 to sale merchandise for cash and on
installment plan. Information for the first two years of its operations is summarized
below:
1999 2000
Cash sales----------------------------------------------Br. 900, 000 Br. 600, 000
Installment sales-------------------------------------------450, 000 750, 000
Collections on installment
receivables from sales made in:
1999------------------------------------------------150, 000 180, 000
2000 - 630, 000
Cost of cash sales 600, 000 480, 000
Cost of installment sales 270, 000 262, 500
Operating Expenses 30, 000 120, 000
Required:
A. Prepare income statement for Couple Company for each of the two years under
each of the following method of accounting for installment sales (disregard,
interest and carrying charges, doubtful account expense and income tax).
i. Accrual basis of accounting
ii. Installment method of accounting
B. Assuming that the cost recovery method is employed, and all operating expenses
are incurred in cash, record all the necessary journal entries for 1999 and 2000.
3
Exercise II.
The following information is gathered from the accounting records and general ledger of
GAD Company, and the bank statement of July 31, 2001. GAD Company uses a bank
account for all receipts and disbursements.
1. The adjusted cash balance on June 30, 2001 was Br. 61, 322.
2. The balance per bank statement on June 30, 2001 was Br. 69, 100.
3. The total cash receipts in the cash receipts journal in July was Br. 153, 300 and the
total disbursements in the cash payments journal was Br. 120, 515.48.
4. The total credits and total debits made by the bank to the account of GAD Company
in July were Br. 155, 000 and Br. 127, 525.80 respectively.
5. Deposits in transit and checks outstanding as of July 31, 2001 were Br. 4, 000 and
Br. 5, 512.50 respectively.
6. Bond interest collected by the bank in the name of GAD Company in July was Br.
3, 200.
7. Bank service charges for July was Br. 50
8. A check received from a customer in July and returned by the bank marked NSF
was Br. 2, 122.82.
9. A check for Br. 691 was recorded by GAD Company as Br. 619 in July 2001.
Required:
1. Prepare bank reconciliation as of July 31, 2001 using the format that
reconciles bank balance to the balance in the depositor’s records.
2. Prepare any journal entries required to adjust the cash account at July 31,
2001.
3. What is the amount of deposit in transit at June 30, 2001?
Exercise III:
Sun Company entered into an assignment with Moon Finance Company where by Sun
would be advanced 90% of all accounts assigned less Br. 2000 service charge. During the
year, Br. 300, 000 of accounts receivable were assigned and Sun must continue the
collection responsibilities on the assigned accounts. The Moon Finance Company charges
4
annual interest of 10% on the unpaid balance on the loan. All collections on assigned
accounts plus accrued interest were remitted to Moon Finance Company at the end of the
month. (Assume a 30-day month for your interest calculation).
Based on the above information, prepare the necessary journal entries on

1990
Jan. Assignment of accounts and segregation in separate account
Jan. Receipt of loan proceeds less service charge.
Jan 31. Collection of accounts during January Br. 175, 800 less discounts and returns of
Br. 3000 and Br. 1200 respectively
Jan 31. Payment to assignee plus interest for one month on unpaid balance
Feb. 28 Collection of accounts during August, Br. 110, 000 less returns of Br. 3000

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Part I.

_________ 1. Identify the important characteristics of accounting information?

Based on the above information, prepare the necessary journal entries on

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