Professional Documents
Culture Documents
In December 2016, the following transactions occurred in Macchiato’s Coffee Roasters business that
supplies cafés and also sells direct to the public:
Dec. 2 Michael Macchiato invested $2 650 000 into the business of Macchiato’s
Coffee Roasters by purchasing a fully equipped coffee roasting business. The
business acquired consisted of the following assets and liabilities:
Required
A. Prepare general journal entries for each of the above transactions and events.
B. Post the entries to ledger T accounts and balance the accounts as at 31 December 2016.
A.
MACCHIATO’S COFFEE ROASTERS (ignore GST)
2 Land 1 200 000
Building 1 000 000
Coffee Roasting Equipment 420 000
Office Equipment 60 000
Accounts Payable 30 000
Michael Macchiato, Capital 2 650 000
Assets and liabilities contributed by the owner
Michael
30 Macchiato, Drawings 8 000
Cash at Bank 8 000
Cash withdrawn by owner
* Alternatively, debit Prepaid Advertising (asset), as not all of the expense applies to the month of
December.
B.
Cash at Bank
Dec 6 Coffee Sales 220 000 Dec 12 Accounts Payable 30 000
23 Coffee Sales 46 000 14 Prepaid Insurance 6 000
30 Michael
Macchiato, 8 000
Drawings
31 Balance c/d 222 000
266 000 266 000
31 Balance c/d 222 000
Land
Dec 2 Macchiato, Capital 1 200 000
Building
Dec 2 Macchiato, Capital 1 000 00
0
Office Equipment
Dec 1 Michael Macchiato, 60 000
Capital
Prepaid Insurance
Dec 14 Cash at Bank 6 000
Accounts Payable
Dec 12 Cash at Bank 30 000 Dec 2 Macchiato, 30 000
Capital
31 Balance c/d 168 000 5 Coffee Roasting 160 000
Equipment
18 Advertising 8 000
Expense
198 000 198 000
Dec 31 Balance b/d 168 000
Coffee Sales
Dec 6 Cash at Bank 220 000
Dec 31 Balance c/d 266 000 23 Cash at Bank 46 000
266 000 266 000
31 Balance b/d 266 000
Advertising Expense
Dec 18 Cash at Bank 8 000
FAA 2015.1 Discussion problems_ week 3
When processing the accounts for Ellise’s Electrical Contractors, the following errors were made:
(a) Electrical equipment purchased for $7800 cash was debited to Equipment and credited to
Accounts Payable for an incorrect amount of $8700.
(b) Collection of an account receivable for $4500 was recorded by a debit to Cash at Bank and a
debit to the equity account of the owner.
(c) A cheque for $6000 issued to pay for an account payable was recorded as a debit to Accounts
Payable and a credit to Accounts Receivable for $6000.
(d) A $2100 payment for assorted electrical tools was recorded as a debit to Equipment and a credit
to Cash at Bank for $210.
(e) Cash of $2000 withdrawn by the owner from the business was debited to Salaries Expense and
credited to Cash at Bank.
Required
A. Identify which of the above errors would cause unequal totals in a trial balance prepared at
the end of the period.
B. Write a brief explanation for each error to indicate how it could be fixed in the accounting
records.
A.
(a) The trial balance will still balance in spite of this error as there is an equal debit and credit for
$8700, even though the credit to the Accounts Payable account was incorrect. The correct
entry should have been to debit Office Equipment and credit Cash at Bank for the amount of
$8700.
(b) There should have been a credit to Accounts Receivable instead of a debit to the Capital
account. This will cause an unequal total in the trial balance because two debit entries were
recorded in error, and no credit.
(c) The trial balance will still balance in spite of this error as there is an equal debit and credit for
$6000, even though the wrong account was credited.
(d) The trial balance will still balance in spite of this error, as the debit and credit were both equal
to $210.
(e) The trial balance will still balance in spite of this error as there is an equal debit and credit for
$2000, even though the wrong account was debited.
B.
(a) To fix this error, the following journal entry is needed:
This entry will bring the balance in the Office Equipment account to its correct amount of
$7800, as $900 is deducted from the amount already recorded. $8700 is reversed out of the
Accounts Payable account and the correct amount of $7800 is then credited to Cash at Bank.
(b) In order to fix this error, the error in the Capital account will need to be eliminated by
crossing out the amount of $4500 from the account; and the debit in the Accounts Receivable
FAA 2015.1 Discussion problems_ week 3
account for $4500 will need to be crossed out and then the amount will need to be credited to
the account.
(c) To fix this error, the entity needs to record another journal entry to debit Accounts Receivable
and to credit Cash at Bank for $6000.
(d) To fix this error, there will need to be an additional journal entry to debit the Equipment
account and credit the Cash at Bank account for $1890.
(e) To fix this error, the entity needs to record another journal entry to debit the Drawings account
and to credit Salaries Expense for $2000.
On 1 July 2015 Nicole Andreou opened a beauty parlour. The following transactions occurred during
the first month of operations (ignore GST):
July 2 Andreou invested $120 000 in the business by depositing cash into a
business cheque account with the Eastpac Bank.
2 Paid $1800 for the first month’s rent.
3 Purchased equipment by an online bank transfer for $32 000 and signing
a commercial loan agreement for $38 000.
4 Purchased supplies for $8400.
6 Paid advertising expense of $890.
16 Recorded beauty services revenue for the first half of the month of $3250
in cash and $620 on credit.
20 Paid insurance expense for July of $480 using an online bank transfer.
23 Received a $140 payment from customers who paid on credit in the first
half of the month.
28 Andreou withdrew $560 cash for personal living expenses.
31 Recorded revenue for the second half of the month of $3680 in cash and
31 $580 on credit.
Paid telephone account of $330 by electronic transfer.
Use the following account titles and numbers: Cash at Bank, 100; Accounts Receivable, 101;
Supplies, 102; Equipment, 103; Loan Payable, 200; Nicole Andreou, Capital, 300; Nicole
Andreou, Drawings, 301; Revenue, 400; Rent Expense, 500; Advertising Expense, 501;
Insurance Expense, 502; Telephone Expense, 503.
Required
A. Prepare the general journal entries to record the transactions.
B. Post the entries from the general journal to the general ledger accounts (running balance
format) and enter the posting references in the general journal.
C. Prepare a trial balance as at 31 July 2015.
A.
General Journal
Rent paid.
B.
ACCOUNT: Cash at Bank Account No. 100
Date Explanation Post Debit Credit Balance
Ref
2015
2 7 Nicole Andreou, Capital 120 000 120 000
2 7 Rent Expense 1 800 118 200
3 7 Equipment 32 000 86 200
4 7 Supplies 8 400 77 800
6 7 Advertising Expense 890 76 910
1 7 Revenue 3 250 80 160
6
2 7 Insurance Expense 480 79 680
0
2 7 Accounts Receivable 140 79 820
3
2 7 Nicole Andreou, Drawings 560 79 260
8
3 7 Revenue 3 680 82 940
1
3 7 Telephone Expense 330 82 610
1
The 31 May 2017 trial balance of Amy Wait, Physiotherapist, is shown below. Ignore GST.
Required
A. Prepare journal entries to record each transaction.
B. 1. Open T accounts for the accounts shown in the trial balance.
2. Enter the 31 May balance in each account.
3. Post the journal entries to the T accounts.
C. Prepare a trial balance as at 30 June 2017.
FAA 2015.1 Discussion problems_ week 3
FAA 2015.1 Discussion problems_ week 3
A.
General Journal
(GST ignored)
June 1 Supplies 5 800
Accounts Payable 5 800
Purchase of supplies on credit.
B.
Cash at Bank
31/5 Balance b/d 105 000 6/6 Electricity Account 9 500
Payable
3/6 Accounts 24 400 20/6 Salary Expense 65 880
Receivable
14/6 Services Revenue 178 600 23/6 Furniture & Equipment 15 400
29/6 Accounts 12 000 24/6 A. Wait, Drawings 60 000
Receivable
30/6 Services Revenue 124 600 26/6 Accounts Payable 7 000
27/6 Prepaid Insurance 24 000
30/6 Rent Expense 24 000
30/6 Balance c/d 238 820
$444 600 $444 600
30/6 Balance b/d 238 820
Accounts Receivable
31/5 Balance b/d $48 000 3/6 Cash at Bank 24 400
14/6 Services Revenue 13 650 29/6 Cash at Bank 12 000
30/6 Services Revenue 25 000 30/6 Balance c/d 50 250
$86 650 $86 650
30/6 Balance b/d 50 250
Supplies
31/5 Balance b/d 12 300
1/6 Accounts Payable 5 800 Balance c/d 18 100
18 100 18 100
30/6 Balance b/d 18 100
Prepaid Insurance
31/5 Balance b/d $8 200
26/6 Cash at Bank 24 000 30/6 Balance c/d 32 200
32 200 32 200
30/6 Balance b/d 32 200
FAA 2015.1 Discussion problems_ week 3
Accounts Payable
31/5 Balance b/d 9 700
26/6 Cash at Bank 7 000 1/6 Supplies 5 800
30/6 Balance c/d 8 500
15 500 15 500
30/6 Balance b/d 8 500
Unearned Revenue
10/6 Services Revenue 2 000 31/5 Balance b/d 2 900
30/6 Balance c/d 900
2 900 2 900
30/6 Balance b/d 900
A. Wait, Capital
31/5 Balance b/d 314 960
A. Wait, Drawings
31/5 Balance b/d 161 200
24/6 Cash at Bank 60 000 30/6 Balance c/d 221 200
221 200 221 200
30/6 Balance b/d 221 200
Services Revenue
31/5 Balance b/d 462 000
10/6 Unearned Revenue 2 000
14/6 Cash at Bank/AR 192 250
30/6 Balance c/d 805 850 30/6 Cash at Bank/AR 149 600
805 850 805 850
30/6 Balance b/d 805 850
FAA 2015.1 Discussion problems_ week 3
Salary Expense
31/5 Balance b/d 170 300
20/6 Cash at Bank 65 880 30/6 Balance c/d 236 180
236 180 236 180
30/6 Balance b/d 236 180
Electricity Expense
31/5 Balance b/d 9 460
Rent Expense
31/5 Balance b/d 24 000
30/6 Cash at Bank 24 000 30/6 Balance c/d 48 000
48 000 48 000
30/6 Balance b/d 48 000
C.
AMY WAIT, PHYSIOTHERAPIST
Trial Balance
as at 30 June 2017
Debit Credit
Cash at Bank $238 820
Accounts Receivable 50 250
Supplies 18 100
Prepaid Insurance 32 200
Furniture and Equipment 276 000
Accounts Payable $8 500
Unearned Revenue 900
A. Wait, Capital 314 960
A. Wait, Drawings 221 200
Services Revenue 805 850
Salary Expense 236 180
Electricity Expense 9 460
Rent Expense 48 000
$1 130 210 $1 130 210
FAA 2015.1 Discussion problems_ week 3
On 1 March 2014, James Taylor decided to open Taylor’s Tailormade that makes suits, trousers and
jackets and repairs and alters clothes. He contributed for this purpose sewing equipment $46 000 and
a commercial van $48 000, and deposited $10 000 cash in a business bank account. Transactions
during March were as follows (ignore GST):
March 4 Took a 3-year lease on a shop and paid first month’s rent $1200.
4 Purchased haberdashery supplies for $4200, and paid with an
electronic transfer of $1200 and paid for the rest with credit.
6 Cash received for minor clothing repairs, $120.
Revenue earned for tailor making a two piece suit for Andrea Fraser
on credit, $840.
7 Purchased a sewing machine, $3800, paying $800 cash and taking
out a loan for the balance.
8 Cash revenue earned, $1260.
Engaged a sewer at an agreed wage of $1100 per week.
11 Paid petrol $120, postage $20, and electricity bill $760.
12 Cash of $200 received for over-the-counter repairs.
13 Revenue of $1500 earned from a customer on credit.
14 Paid for haberdashery supplies purchased on credit on 4 March.
15 Withdrew $600 for own use.
16 Cash revenue received, $380.
17 Haberdashery supplies purchased for $500 on credit.
18 Paid wages to employee.
21 Revenue earned for making clothes: cash $240; on account $1200.
23 Andrea Fraser paid the bill for services rendered on 6 March.
24 Petrol expenses paid $80.
25 Paid weekly wages to employee.
28 Revenue earned for clothes $2420, receiving $200 in cash and the
remainder on credit.
31 Haberdashery supplies used, $620.
Required
A. Prepare three-column running balance ledger accounts. Give each account a suitable
account number.
B. Prepare a trial balance as at 31 March 2016.
A.
ACCOUNT: Cash at Bank Account No. 100
Date Explanation Post Debit Credit Balance
Ref
2016
1 3 James Taylor, Capital 10 000 10 000
4 3 Rent Expense 1 200 8 800
4 3 Haberdashery Supplies 1 200 7 600
6 3 Tailoring Revenue 120 7 720
7 3 Sewing Equipment 800 6 920
8 3 Tailoring Revenue 1 260 8 180
1 3 Petrol, postage & 900 7 280
2 electricity
FAA 2015.1 Discussion problems_ week 3
B.
TAYLOR’S TAILORMADE
Trial Balance
as at 31 March 2016
Account Account Debit Credit
No.