Question

Internal Control and Accountin Required . Record the above transactions in general journal form. b. Post the transactions to the T-accounts. c. Prepare a bank reco for the bank reconciliation: (1) Checks written but not paid by the bank, $8,350. (2) A deposit of $6,500 made on December 31 nciliation at the end of the year. The following information is available , 2016, had been recorded but was not shown hecks. (Hint: Use Office Supplies Expense on the bank statement. (3) A debit memo for $55 for a new supply of c account.) (4) A credit memo for $30 for interest earned on the checking account (5) An NSF check for $120. (6) The balance shown on the bank statement was $80,822. d. Record and post any adjustments necessary from the bank reconciliation. e. Prepare a trial balance. f. Prepare an income statement, statement of changes in stockholders' equity, balance sheet, g. Close the temporary accounts to retained earnings. h. Post the closing entries to the T-accounts and prepare a post-closing trial balance. and statement of cash flows Which company is more likely to be able to pay its current liabilit Whisch company carries a greater financial risk? Which company is more prolitable from the stockholders 362 Chapter 6 e. e sales were tmade on Notice that Retained on profitability alone, which company performed better? bi Adjust the balance sheet and income statement for the effects will also need to be Prepare a for the bank Checks A depo g As sume that sales increased 10 percent and that the additional adjustod to kep the balance sheet in bal on the ratios? (3) A debi OMPREHENSIVE PROBLEM (4) A cred (5) An NS The trial balince of Pacilio Security Services Inc. as of sanuary i, 2016, had the normal balances (6) The b $74,210 13,500 200 3,200 6,620 4,000 ,950 900 1,000 50,000 47,880 Cash Accounts Receivable f. Prepare a and state s. Close the h. Post the Prepaid Rent Merchandise Iinvertory (24 $265 1 $260) Accounts Payable Unearned Revenue Salaries Payable Common Stock Retained Eanings During 2016 Pacilio Security Services experienced the following transactions: 1. Paid the salaries payable from 2015 2. On March 1, 2016, Pacilio established a $100 petty cash fund to handle small 3. Paid $4,800 on March 1, 2016, for one year's lease on the company van in advance Paid $7,200 on May 2, 2016, for one year's office rent in advance. 5. Purchased $400 of supplies on account. 6. Purchased 100 alarm systems for $28,000 cash during the year 7. Sold 102 alarm systems for $57,120. All sales were on account. (Compute cost of gds sil using the FIFO cost flow method.) 8. Paid $2,100 on accounts payable during the year 9. Replenished the petty cash fund on August 1. At this time, the petty cash fund had only S7d currency left. It contained the following receipts: office supplies expense, $23, cutting gs $33; and miscellaneous expense, $14. 10. Billed $52,000 of monitoring services for the year. 11. Paid installers and other employees a total of $25,000 cash for salaries. 12. Collected S89,300 of accounts receivable during the year. 13. Paid $3,.600 of advertising expense during the year. 14. Paid $2,500 of utilities expense for the year 15. Paid a dividend of $10,000 to the shareholders Adjustments 16. There was $160 of supplies on hand at the end of the year. 17. Recognized the expired rent for both the van and the office building for the year. 18. Recognized the balance of the revenue earned in 2016 where cash had been 19. Accrued salaries at December 31., 2016, were $1.400. (The for both the van and the office remained the same for 2015 and 2016.) cted in

Answer 1

General Journal S No Particulars Debit Credit 1 Salary Payable 1,000 To Cash (Being salary payable for 2015 paid) 1,000 2 Petty Cash 100 To Cash 100 (Being Petty cash established) Prepaid Lease To Cash (being lease on van paid in advance) 3 4,800 4,800 Prepaid Rent To Cash (being 1 year rent paid in advance) 4 7,200 7,200 5 Supplies 400 To Accounts Payable (Being supplies purchased) 400

Merchandise Inventory To Cash (Being 100 alarms purchased) 28,000 28,000 7 Accounts Receivable 57,120 To Sales 57,120 (Being 102 alarms sold) Cost of Goods Sold* To Merchandise Inventory (Being Cost of goods sold recorded) 28,180 28,180 Accounts Payable To Cash (Being Accounts payable paid) 2,100 2,100 Office supply expense Cutting grass expense Misc expense To Petty Cash (Being petty expenses recognised) 23 56 14 93

Petty Cash To Cash (Being Petty cash fund replenished) 93 93 10 Accounts Receivable 52,000 To Service Revenue 52,000 (Being minitoring services billed) 11 Salary expense 25,000 To Cash 25,000 (Being salaries paid) 12 Cash 89,300 To Accounts Receivable 89,300 (Being cash collected from AR) 13 Advertising expense 3,600 To Cash 3,600 (Being advertising expense paid) 14 Utilities expense 2,500 To Cash 2,500 (Being utilities expense paid)

15 Retained Earnings 10,000 To Cash 10,000 (Being dividend paid) Adjustments Office Supply expenses To Supplies (Being Supply expense recorded) 16 440 440 (200+400-160) 4,800 7,200 17 Lease expense Rent expense To Prepaid Lease To Prepaid Rent (Being lease on van and rent expired) 4,800 7,200 18 Unearned Revenue 900 To Revenue (Being uearned revenue recognized as revenue) 900 19 Salary expense 1,400 To Salary Payable Being Salaries accrued 1,400

Calculation of Cost of Gooods sold Units Price/Unit Value Opening Stock 265 260 6,360 260 28,000 34,620 6,360 260 21,560 28,180 6,440 Add: Purchases Units available Less: Sales 100 280 125 265 260 1 280 Cost of Goods Sold Ending Balance 102 23 280 b) T Accounts Salary Payable Amount Particulars Particulars To Cash To Closing Balance Amount 1,000 By Opening Balance 1,400 By Salary Expense 1,000 1,400 2,400 2,400

Cash Account Amount Particulars Particulars To Opening Balance To Accounts Receivable Amount 74,210 By Salary Payable 89,300 By Petty Cash By Prepaid lease By Prepaid rent By Merchandise Inventory By Accounts Payable By Petty Cash By Salary By Advertising expense By Utility expense By Retained Earnings By Closing Balance 1,000 100 4,800 7,200 28,000 2,100 93 25,000 3,600 2,500 10,000 79,117 163,510 163,510 Petty Cash Amount Particulars Particulars To Cash To Cash Amount 100 By Office supply expense 93 By Cutting grass expense 23 56 14 100 193 By Misc expense By Closing Balance 193

Prepaid Lease Amount Particulars Particulars Amount To Cash 4,800 By Lease expense 4,800 4,800 4,800 Prepaid Rent Amount Particulars Particulars To Opening Balance To Cash Amount 3,200 By Rent expense 7,200 By Closing Balance 7,200 3,200 10,400 10,400 Supplies Account Amount Particulars Particulars To Opening Balance To Cash Amount 200 By Supply expense 400 By Closing Balance 600 440 160 600 Accounts Payable Amount Particulars Particulars To Cash To Closing Balance Amount 2,100 By Opening Balance 250 By supplies 2,350 1,950 400 2,350

Merchandise Invento Amount Particulars Particulars To Opening Balance To Cash Amount 6,620 By Cost of Goods Sold 28,000 By Closing Balance 28,180 6,440 34,620 34,620 Accounts Receivable Amount Particulars Particulars To Opening Balance To Sales To Service Revenue Amount 13,500 By Cash 57,120 By Closing Balance 52,000 89,300 33,320 122,620 122,620 Unearned Revenue Amount Particulars Particulars Amount 900 By Opening Balance 900 To Revenue 900 900

c) Bank Reconciliation Balance as per Books Add: Checks written but not paid by Bank Less: Deposit not shown on Bank Statement Less: Debit Memo Add: Credit Meno Less: NSF check Balance as per Bank Statement 79,117 8,350 (6,500) (55) 30 (120) 80,822 d) Office supplies expense To Cash (Being Debit memo recorded) Cash To Interest income (Being credit memo for interest) 30 30 120 Misc expense To Cash (Being NSF check) 120

e) Trial Balance Beginning balances Debit As at 31st Dec 2016 Particulars Cash Petty Cash Accounts Receivable Supplies Prepaid Rent Merchandise Inventory Land Accounts Payable Unearned Revenue Salaries Payable Common Stock Retained Earnings Sales Service Revenue Interest income Cost of Goods Sold Office supply expense Cutting grass expense Misc expense Salary expense Debit Credit Credit 78,972 100 33,320 160 3,200 6,440 4,000 74,210 19,820 40 13,500 200 3,200 6,620 4,000 (180) 1,950 (1,700) 900 (900) 250 1,000400 1,400 50,000 37,880 57,120 52,900 30 50,000 47,880 28,180 518 56 134 26,400

Advertising expense Utilities expense Lease expense Rent expense Total 3,600 2,500 4,800 7,200 199,580 199,580 101,730 101,730 Income Statement Sales Service Revenue 57,120 52,900 110,020 28,180 81,840 Less: Cost of Goods Sold Gross Profit Less: Operating Expenses Salary expense Advertising expense Utilities expense Lease expense Rent expense Office supply expense Cutting grass expense Misc expense (26,400) (3,600) (2,500) (4,800) (7,200) (518) (56) 134 45,208 36,632

Add: Interest income Net Profit 30 36,662 Balance Sheet Assets Cash Petty Caslh Accounts Receivable Merchandise Inventory Prepaid Rent Supplies Land Total Assets Liabilities & Stockholder's Equity Accounts Payable Salaries Payable Common Stock Retained Earnings Amount 78,972 100 33,320 6,440 3,200 160 4,000 126,192 250 1,400 50,000 74,542 126,192

Statement of Stockholder's Equit Opening balance in Retained Earnings Less: Dividend paid Add: Profit for the year Closing Balance in Retained Earnings 47,880 (10,000) 36,662 74,542 Cash Flow Net Profit Add: Adjustment for Non cash item Adjusted Net Income Working Capital changes Less: Increase in AR Add: Decrease in Supplies Add: Decrease in Inventory Less: Decrease in Accounts Payable Add: Increase in Salary payable Less: Decrease in Unearned Revenue Cash Flow from Operating Activities Cash Flow from Investing activities Cash Flow from Financing activities Dividend paid Net Cash Inflow 36,662 36,662 (19,820) 40 180 (1,700) 400 900 14,862 10,000 4,862

Add: Opening Balance Closing Cash and Petty Cash 74,210 79,072 Sales Service Revenue Interest income ToCost of Goods Sold ToOffice supply expense ToCutting grass expense ToMisc expense ToSalary expense ToAdvertising expense ToUtilities expense ToLease expense ToRent expense To Retained Earnings Being closing the temporary accounts g) 57,120 52,900 30 28,180 518 56 134 26,400 3,600 2,500 4,800 7,200 36,662

h) Post Closing Trial Balance As at 31st Dec 2016 Particulars Cash Petty Cash Accounts Receivable Supplies Prepaid Rent Merchandise Inventory Land Accounts Payable Unearned Revenue Salaries Payable Common Stock Retained Earnings Debit Credit 78,972 100 33,320 160 3,200 6,440 4,000 250 1,400 50,000 74,542 126,192 126,192