Question

question # 2: (5marks: 1 mark for each closing entry, 2 marks for the secou closing entry) At December 31, the account balances after adjustments for Wabel Company are as follows: Bank Account Credit Debit S 50 000 2250 3000 1 500 27 000 Prepaid Insurance Account Receivable Supplies Equipment Accumulated Dep. - Equipment Account Payable Notes Payable Uneared Revenue Capital Drawings Sales Revenue Interest Expense Dep. Expense Wages Expense Utilities Expenses $ 5500 2000 12500 5500 44 450 1000 225 00 400 1500 5 000 300 5 92 450 S 92 450 Instructions: Prepare closing entries for Wabel Coco Dec. 31 Question # 3: (5 Marks: 1 mark for each transaction) On May 1, Abu Dhabi company had an inventory of 10 computer at a cost of $ 200 each. The company uses a periodic inventory system. During May, the following transactions happened May 9 Purchased 20 computers 200 Scach from XYZ company, terms 2/10./30. May 11 Received credit of 600 S for the return of 3 computers purchased on May 9 that were defective. May 13 Sold 4 computers for $ 210 cach to Emirates College of Technology. terms 2/10.30 May 16 Sold 5 computers for $ 225 each Snow Supply, terms 2/10, 1/30 May 17 Paid XYZ Company. Instructions: Journalize the May transactions for Abu Dhabi company.

Answer 1

Answer to Question #2

Only nominal accounts (Income and expenses) will be closed at the end the reporting period and thus transferred to Income statement. The real accounts (Assets and liabilities) and personal accounts will be carried forward to next period and shown in statement of financial position (Balance sheet). following are the closing entries:

Date		Accounts	Ref.	Debit	Credit
Dec	31	Sales revenue		$ 22,500
		Income summary			$ 22,500
		Sales revenue transferred to Income summary account
Dec	31	Income summary		$   7,700
		Interest expense			$      400
		Depreciation expense			$   1,500
		Wages expense			$   5,000
		Utilities expense			$      800
		Expenses transferred to Income summary account
Dec	31	Income Summary		$ 14,800
		Retained earnings			$ 14,800
		Balance in Income summary transferred to retained earnings

Answer to Question #3

Date		Accounts	Ref.	Debit	Credit
May	9	Purchases		$   4,000
		XYZ company			$   4,000
		Purchased inventory on credit
May	11	XYZ company		$      600
		Purchase returns			$      600
		Received credit from supplier for defective inventory
May	13	Emirates College of Technology		$      840
		Sales			$      840
		Sold inventory on credit
May	16	Snow Supply		$   1,125
		Sales			$   1,125
		Sold inventory on credit
May	17	XYZ company		$   3,400
		Cash			$   3,400
		Paid to XYZ company

Answer to Question #4:

Under FIFO					Cost of goods sold			Ending inventory
Date	Explanation	Units	Unit cost	Total cost	Units	Unit cost	Total cost	Units	Unit cost	Total cost
Jan-01	Beginning inventory	15	$         35	$         525	15	$         35	$         525		$         35	$            -
Feb-03	Purchase	20	$         37	$         740	20	$         37	$         740		$         37	$            -
Jun-16	Purchase	25	$         40	$     1,000	15	$         40	$         600	10	$         40	$         400
Sep-05	Purchase	15	$         45	$         675	0	$         45	$            -	15	$         45	$         675
	Total			$     2,940	50		$     1,865	25		$     1,075

Under FIFO the first 50 units will be assumed to be sold,

Under LIFO					Cost of goods sold			Ending inventory
Date	Explanation	Units	Unit cost	Total cost	Units	Unit cost	Total cost	Units	Unit cost	Total cost
Jan-01	Beginning inventory	15	$         35	$         525	0	$         35	$            -	15	$         35	$         525
Feb-03	Purchase	20	$         37	$         740	10	$         37	$         370	10	$         37	$         370
Jun-16	Purchase	25	$         40	$     1,000	25	$         40	$     1,000		$         40	$            -
Sep-05	Purchase	15	$         45	$         675	15	$         45	$         675		$         45	$            -
	Total			$     2,940	50		$     2,045	25		$         895

Under LIFO latest inventory is sold first