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Exercise III: The Accounting Cycle - Problem Set

1. The document provides information about the accounting cycle for ABC Company including its balance sheet as of November 30, 2014 and a list of 13 transactions that occurred in December. 2. It asks to prepare journal entries for the opening balance on December 1st and transactions 1-13, a trial balance, adjusting entries, and closing entries to produce financial statements as of December 31, 2014. 3. The required tasks will demonstrate the full accounting cycle from original entries through adjusted trial balance and final financial statements.

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Камилла Молдалиева
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91 views1 page

Exercise III: The Accounting Cycle - Problem Set

1. The document provides information about the accounting cycle for ABC Company including its balance sheet as of November 30, 2014 and a list of 13 transactions that occurred in December. 2. It asks to prepare journal entries for the opening balance on December 1st and transactions 1-13, a trial balance, adjusting entries, and closing entries to produce financial statements as of December 31, 2014. 3. The required tasks will demonstrate the full accounting cycle from original entries through adjusted trial balance and final financial statements.

Uploaded by

Камилла Молдалиева
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Exercise III

Accounting Cycle

The Accounting Cycle – Problem Set ABC Company Ltd.


Balance Sheet on Nov. 30, 2014
Assets Equities

Equipment 5 000 Paid-in Capital 4 000

Office Supplies Inventory 1 000 Retained Earnings 3 600

Accounts Receivable 1 000 Tax payable 1 000

Cash, Bank 6 600 Accounts payable 5 000

Total assets 13 600 Total equities 13 600

Summary of transactions during December:


1. Cash-Purchase of €1,000 of Office Supplies Inventory
2. A company receives rent for 3 months in advance, €6,000
3. At the beginning of the month Company took out a 9 % p.a., 90 day, €10,000
loan with the Bank
4. Performed consulting services, for which we received € 2,000 cash immediately.
5. A subscription rights for newspaper of 1 200 was paid for the whole year in
advance
6. Received an invoice for a series of advertisements, € 1 000, that appeared in the
local news during December and will be paid in January.
7. Performed additional consulting work, € 1 800 on credit.
8. Performed advertisement services, for which we received € 1,000 cash
immediately.
9. Paid salaries to employees of € 2,000 for December.
10. Paid outstanding tax € in the amount 800
11. Paid creditors € 1,300.
12. The cost of office supplies used during December is € 850.
13. Depreciation of equipment for December amounts to € 250.

Required:
a) Prepare the opening journal entry on Dec. 1, 2014.
b) Prepare the journal entries for the transactions (1. – 13.) for the month of
December and post them to the T-accounts, opening additional T-accounts for
accounts as needed. Cross-reference the entries using the numbers of the
transactions above.
c) Prepare a trial balance.
d) Prepare the adjusting journal entries and record them at the end of December in
the T-accounts as well as in the trial balance.
e) Prepare the closing entries for the temporary accounts and the Income
Statement.
f) Prepare the closing entries for the permanent accounts and the Balance Sheet as
of Dec. 31, 2014.

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