ACCOUNTS & BUDGET SERVICE LEVEL-IV

₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2
 Rental income tax is calculated according to table “C”, if maintained proper books of records, but
less legal expenditures. If not maintained proper books of records then, 20% or 1/5th of gross rental
income is allowance for repair, maintenance, & depreciation. [In Project 6; at the end]

Project Information
Given the necessary materials, tools & equipment, the candidate is expected to perform the following
projects:
The assessor may ask oral question in case she/he has doubt on the performance of the candidate.
Total Time Allotted: 4:35 hours
Assessment Venue: Well Equipped Assessment Center or Real Work Place
Project 1: Perform Cost Accounting and Planning
Time Allotted: 40 minutes
Competences Covered
EIS ACB4 10 0812 Produce Job Costing Information
EIS ACB4 11 0812 Prepare Operational Budget
EIS ACB4 17 0812 Plan & Organize Work

Assumption:
The following data is related to Tullu wood work shop for the month March, 2014.
Beginning Direct Material Inventory .......................................................... Br 100,000
Ending Direct Material Inventory ............................................................... 17,000
Beginning WIP Inventory ........................................................................... 31,000
Ending WIP Inventory ................................................................................ 29,000
Beginning Finished Goods Inventory ......................................................... 62,000
Ending Finished Goods Inventory .............................................................. 48,000
Direct Labor ................................................................................................ 80,000
Direct Material ............................................................................................ 142,000
Indirect Material ......................................................................................... 9,000
Indirect Labor ............................................................................................. 12,000
Other Manufacturing Overhead .................................................................. 27,000
Direct Materials Purchase ........................................................................... 59,000

Required:
Task 1.1 Compute:
A. The cost of goods manufactured
B. The cost of goods sold for the given period
A. The cost of goods manufactured
Cost of goods manufactured = Direct Material + Direct Labor + Manufacture Overhead+ Beginning WIP - Ending WIP
Cost of goods manufactured = 142,000 + 80,000 + [9,000+12,000+27,000] +31,000 – 29,000
Cost of goods manufactured = 272,000

B The cost of goods sold for the given period

Cost of goods sold = Beginning Finished Goods + Cost of goods manufactured - Ending Finished Goods

1 SOLE OWNER ₡₮2

 ACCOUNTS & BUDGET SERVICE LEVEL-IV
₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2
Cost of goods sold = 62,000 + 272,000 – 48,000
Cost of goods sold = 286,000

≈Standard Form≈
Tullu wood work shop
Statement of Goods Manufactured
For Month Ended March 31, 2014
Direct material:
Raw materials Inventory, March 1, 2014 ----------------------------- 100,000
Add: Purchases of raw materials --------------------------------------- 59,000
Raw materials Available for Use -------------------------------------- 159,000
Less: Raw materials Inventory, March 31, 2014 -------------------- 17,000
Raw materials Used ------------------------------------------------------------------- 142,000
Direct Labor ---------------------------------------------------------------------------- 80,000
Manufacturing Factory Overhead:
Indirect Materials ------------------------------------------------------- 9,000
Indirect Labor ------------------------------------------------------------ 12,000
Depreciation on Factory ----------------------------------------------- 0
Depreciation on Equipment ------------------------------------------- 0
Utilities Expense -------------------------------------------------------- 0
Insurance Expense ------------------------------------------------------ 0
Other Manufacturing Overhead --------------------------------------- 27,000
Total Manufacturing Overhead ----------------------------------------------------- 48,000
Total Manufacturing Costs ---------------------------------------------------------------- 270,000
Add: Work in Process Inventory, March 1, 2014 --------------------------------------- 31,000
Total Work in Process during the Period ------------------------------------------------- 301,000
Less: Work in Process Inventory, March 31, 2014 ------------------------------------- 29,000
Cost of Goods Manufactured -------------------------------------------------------------- 272,000

Tullu wood work shop

Cost of Goods Sold
For Month Ended March 31, 2014
Finished Goods Inventory, March 1, 2014 ------------------------------------- 62,000
Add: Cost of Goods Manufactured ---------------------------------------------- 272,000
Cost of Goods Available for Sales ----------------------------------------------- 334,000
Less: Finished Goods Inventory, March 31, 2014 ----------------------------- 48,000
Cost of Goods Sold ----------------------------------------------------------------- 286,000

Assumption:

2 SOLE OWNER ₡₮2

 ACCOUNTS & BUDGET SERVICE LEVEL-IV
₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2
XYZ Company manufactures and sells adding machines. The company’s income statement for the most
recent year is given below;
Total Unit Cost
Sales [40,000 units] Br 1,600,000 Br 40
Variable expenses 1,200,000 30
Contribution margin 400,000 10
Fixed expense 240,000
Net income Br 160,000

Required: Based on the above data, perform the following tasks.

Task 1.2 Compute the company’s break-even point both in units & sales birr
Task 1.3 Compute cash disbursement in August

Langano trading has the following purchases budget for the last half of 2015
July Br 100,000 October Br 90,000
August Br 80,000 November Br 100,000
September Br 110,000 December Br 94,000
Required:
If the company pays one half at the time of purchases & the remainder in the month following purchases,
calculate the expected cash disbursements for purchases in August.

Task 1.2 Compute the company’s break-even point both in units & sales birr
Net Income = Revenue – Variable Expense – Fixed Expense
0 = PQ – VQ – FC OR
0 = 40Q – 30Q – 240,000 Units of BEP = Fixed Expense/CM per unit
0 = 10Q – 240,000 Units of BEP = 240,000/(40 - 30)
-10Q = -240,000 Units of BEP = 240,000/10
Q = 24,000 units Units of BEP = 24,000

Br of BEP = PQ Br of BEP = Fixed Expense/CM ratio

Br of BEP = 40*24,000 Br of BEP = 240,000 / (25%)
Br of BEP = 960,000 Br of BEP = 960,000

Task 1.3 Compute cash disbursement in August

Cash disbursement for purchases in July ----- [Br 100,000*1/2] -------- 50,000
Cash disbursement for purchases in August --- [Br 80,000*1/2] -------- 40,000
Cash disbursement for purchases in August ---------------------------- Br 90,000

Ratio = [Selling Price – Contribution Margin]/Selling Price

Ratio = [40 – 30]/40
Ratio = 25%

Project 2: prepare Business Documents & Financial Reports

3 SOLE OWNER ₡₮2

 ACCOUNTS & BUDGET SERVICE LEVEL-IV
₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2
Time Allotted: 1:45hours
Competences Covered

EIS ACB4 02 0812 Prepare Financial Statements for Non-Reporting Entities

EIS ACB4 05 0812 Prepare Financial Reports
EIS ACB4 13 0812 Establish & Maintain Cash Accounting System
EIS ACB4 14 0812 Establish & Maintain Accrual Accounting System
EIS ACB4 19 0812 Establish Quality Standard

Assumption:
The following transactions are related to Bacha website design for the month of July, 2015
July 1 Bacha invested Br 40,000 in cash to Bacha website design

July 2 Orders office supplies Br 5,200

July 3 Rented an office; pays two months’ rent in advance Br 3,200

July 5 Received office supplies ordered on July 2 & an invoice for Br 5,200
July 9 Made a partial payment of the amount owed for the office supplies received on July 5 Br 2,600
July 10 Performed a service for an automobile dealer by designing a website & collects a fee in cash Br 2,800
July 12 Purchased office equipment for Br 16,320 cash
July 15 Purchased a service for a department store by designing a website; bills for the fee now but will
collect the fee later Br 9,600
July 19 Accepted an advance fee as a deposit on a website to be designed Br 1,400
July 22 Received cash from customer previously billed on July 15 Br 5,000
July 26 Paid employees four week’s wages Br 4,800
July 30 Received, but does not pay, the utility bill the is due next monthItBr
is 680
not a completed action!
July 31 Withdrew Br 2,800 in cash

Required:
Task 2.1: Record journal entries for the above transactions
Task 2.2: Prepare unadjusted trial balance

The following data are given as additional information for adjustments required on July 31,2015
a) Expiration of one month’s rent Br 1,600
b) Consumption of office supplies Br 1,540
c) Depreciation of office equipment Br 300
d) Accrual of unrecorded wage Br 720
e) Performance of service for which cash was received in advance Br 800
f) Accrual of unrecorded revenue Br 400
Required:
Task 2.3 Record the adjusting entry for each of the above transaction
Task 2.4 Prepare the adjusted trial balance
Task 2.5 Prepare financial statements (Ignore business profit tax)

Task 2.1: Record journal entries for the above transactions

4 SOLE OWNER ₡₮2

 ACCOUNTS & BUDGET SERVICE LEVEL-IV
₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2
July 1 Cash ....................................................................... 40,000
Capital ............................................................................... 40,000

July 2 CGS................................................................... aYs™M Since it is

CT2..................................................................................... Hin hojjatamu Not a txn!

July 3 Prepaid rent ............................................................ 3,200

Cash .................................................................................. 3,200

July 5 Office supplies ....................................................... 5,200

Account payable ............................................................... 5,200

July 9 Account payable .................................................... 2,600

Cash .................................................................................. 2,600

July 10 Cash ..................................................................... 2,800

Service income ................................................................. 2,800

July 12 Office equipment ................................................. 16,320

Cash .................................................................................. 16,320

July 15 Account receivable .............................................. 9,600

Service income ................................................................. 9,600

July 19 Cash ..................................................................... 1,400

Unearned service income ................................................. 1,400

July 22 Cash ..................................................................... 5,000

Account receivable ........................................................... 5,000

July 26 Wage expense ...................................................... 4,800

Cash .................................................................................. 4,800

July 30 Utilities expense ................................................... 680

Utilities payable ................................................................ 680

July 31 Drawing ............................................................... 2,800

Cash .................................................................................. 2,800

Cash A/R Office supplies

40,000 3,200 9,600 5,000 5,200

5 SOLE OWNER ₡₮2

 ACCOUNTS & BUDGET SERVICE LEVEL-IV
₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2
2,800 2,600 4,600 1,540
1,400 16,320 400 3,660
5,000 4,800 5,000
2,800
49,200 29,720
19,480

Prepaid rent Office equipment Accu. Dep.-equip

3,200 16,320 300
1,600 300
1,600 16,020

A/P Unearned service income Utility Payable Wage payable

2,600 5,200 1,400 680 720
2,600 800
600

Bacha, capital Bacha, drawing ........ Service income

40,000 2,800 2,800
9,600
12,400
400
800
13,600

Wage expense Utilities expense Rent expense

4,800 680 1,600

Office supplies expense Depreciation expense

1,540 300

Task 2.2: Prepare unadjusted trial balance

Bacha website design

6 SOLE OWNER ₡₮2

 ACCOUNTS & BUDGET SERVICE LEVEL-IV
₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2
Unadjusted trial balance
For month ended July 31,2015
Cash ............................................................................................... 19,480
Account receivable ........................................................................ 4,600
Office supplies ............................................................................... 5,200
Prepaid rent .................................................................................... 3,200
Office equipment ........................................................................... 16,320
Account payable ...................................................................................................... 2,600
Utilities Payable ....................................................................................................... 680
Unearned service income ......................................................................................... 1,400
Bacha, capital ........................................................................................................... 40,000
Bacha, drawing .............................................................................. 2,800
Service income ......................................................................................................... 12,400
Wage expense ................................................................................ 4,800
Utilities expense ............................................................................ 680
57,080 57,080

Task 2.3 Record the adjusting entry for each of the above transaction

July 31 Rent expense................................................................................... 1,600

Prepaid rent ------------------------------------------------------------------ 1,600

July 31 Office supplies expense ................................................................. 1,540

Office supplies --------------------------------------------------------------- 1,540

July 31 Depreciation expense ..................................................................... 300

Accumulated depreciation-equipment ------------------------------------ 300

July 31 Wage expense ................................................................................ 720

Wage payable ------------------------------------------------------------------ 720

July 31 Unearned service income ............................................................... 800

Service income ----------------------------------------------------------------- 800

July 31 Account receivable ......................................................................... 400

Service income ------------------------------------------------------------------ 400

Task 2.4 Prepare the adjusted trial balance

Bacha website design

Adjusted trial balance

7 SOLE OWNER ₡₮2

 ACCOUNTS & BUDGET SERVICE LEVEL-IV
₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2
For month ended July 31,2015
Cash ............................................................................................... 19,480
Account receivable ........................................................................ 5,000
Office supplies ............................................................................... 3,660
Prepaid rent .................................................................................... 1,600
Office equipment ........................................................................... 16,320
Accumulated depreciation-equipment ..................................................................... 300
Account payable ...................................................................................................... 3,280
Unearned service income ......................................................................................... 600
Wage payable ........................................................................................................... 720
Bacha, capital ........................................................................................................... 40,000
Bacha, drawing .............................................................................. 2,800
Service income ......................................................................................................... 13,600
Wage expense ................................................................................ 5,520
Rent expense ..................................................................................1,600
Office supplies expense .................................................................1,540
Depreciation expense ..................................................................... 300
Utilities expense ............................................................................ 680
58,500 58,500

Task 2.5 Prepare financial statements (Ignore business profit tax)

Bacha website design

Income statement
For month ended July 31,2015
Revenue:
Service income..................................................................................................... 13,600
Expenses:
Wage expense ........................................................................... 5,520
Rent expense .............................................................................1,600
Office supplies expense ............................................................1,540
Depreciation expense ................................................................ 300
Utilities expense ........................................................................ 680
Total operating expenses...................................................................................... 9,640
Net income .......................................................................................................... 3,960

Bacha website design

Statement of Owner’s equity
For month ended July 31,2015
Bacha, capital, July 1,2015 ...................................................................................... 0
Add: Investment ............................................................................40,000
Net income ............................................................................ 3,960 43,960
Increase in capital ........................................................................................... 43,960
Less: Owner’s drawing ............................................................................................ 2,800
Bacha, capital, July 31,2015 .................................................................................... 41,160

Bacha website design

Balance sheet
July 31,2015
Asset

8 SOLE OWNER ₡₮2

 ACCOUNTS & BUDGET SERVICE LEVEL-IV
₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2
Cash ------------------------------------------------------------------------19,480
A/R ------------------------------------------------------------------------- 5,000
Office supplies ----------------------------------------------------------- 3,660
Prepaid rent --------------------------------------------------------------- 1,600
Office equipment ................................................. 16,320
Accu. Dep.-equipment ......................................... 300 16,020
Total assets ----------------------------------------------------------------45,760

Liabilities
A/P -------------------------------------------------------------------------2,600
Utilities Payable ---------------------------------------------------------- 680
Unearned service income ----------------------------------------------- 600
Wage payable ------------------------------------------------------------- 720
Total liabilities -----------------------------------------------------------4,600
Capital
Bacha, capital -------------------------------------------------------------41,160
Total liabilities & capital -----------------------------------------------45,760

Bacha website design

Statement of cash flow
For month ended July 31,2015
Cash flow from operating activities:
Cash received from customer ........................................... 9,200
Deduct: cash payment for expenses & to creditors ..........10,600
Net cash flow from operating activities ---------------------------------------- (1,400)

Cash flow from investing activities:

Sales of property, plant & equipment ............................... 0
Deduct: cash payment for acquisition of plant asset ........16,320
Net cash flow from investing activities -----------------------------------------(16,320)

Cash flow from financing activities:

Cash received from as owner’s investment ......................40,000
Deduct: cash withdrawal by owner .................................. 2,800
Net cash flows from financing activities --------------------------------------- 37,200
Beginning cash balance ----------------------------------------------------------- 0
Ending cash balance & January balance sheet---------------------------------19,480

Project 3: Plan & Manage Customer Accounts

Time Allotted: 30 minutes

Competences Covered

EIS ACB4 04 0812 Apply Principles of Professional Practice to Work in the Financial Services Industry

9 SOLE OWNER ₡₮2

 ACCOUNTS & BUDGET SERVICE LEVEL-IV
₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2
EIS ACB4 15 0812 Manage Overdue Customer Accounts

Assumption:
In the first year of operation Hope Company a dealer of household appliances had a total installment sales
of Br 800,000 with a related cost of Br 480,000 of merchandise sold. The collections of installment
account receivable are spread over three years as follows:

1st year Br 300,000

2nd year Br 280,000
3rd year Br 220,000

Required: Show your computations clearly for the following tasks

Task 3.1: Compute the gross profit recognized based on point of sales method
Task 3.2: Compute the gross profit recognized for each year based on installment method

Task 3.1: Compute the gross profit recognized based on point of sales method

1st year

Sales ------------------------------- 800,000

Less: CGS ------------------------- 480,000
Gross profit ----------------------- 320,000

Task 3.2: Compute the gross profit recognized for each year based on installment method

Rate = [Gross profit/Sales]*100%

Rate = [320,000/800,000]*100%
Rate = 40%

1st year Installment = Collection*rate

1st year Installment = Br 300,000*40%
1st year Installment = Br 120,000

2nd year Installment = Collection*Rate

2nd year Installment = Br 280,000*40%
2nd year Installment =Br 112,000

3rd year Installment = Collection*Rate

3rd year Installment = Br 220,000*40%
3rd year Installment = Br 88,000

Installment Sales = Br 320,000

Project 4: Design & Develop Accounting System & Inventory Management

Time Allotted: 30 minutes
Competences Covered
EIS ACB4 03 0812 Setup & Operate a Computerized Accounting System
EIS ACB4 06 0812 Process Business Tax Requirements
EIS ACB4 12 0812 Maintain Inventory Records
EIS ACB4 16 0812 Administer Levies, Fines & other Taxes

10 SOLE OWNER ₡₮2

 ACCOUNTS & BUDGET SERVICE LEVEL-IV
₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2
EIS ACB4 18 0812 Migrate to New Technology

Assumption:
Abdi boru private limited company had the beginning inventory & purchases during the month of
December 2015 as given below. The Company uses a periodic inventory system.
Units Unite Cost
December 1 Inventory ................................................................................ 300 Br 10
December 10 Purchase ............................................................................... 350 11
December 21 Purchase ............................................................................... 450 12
December 28 Purchase ............................................................................... 500 13

Additional information:
At the end of the month physical count of the remaining inventory items shows that 650 units are on
hand. The Company uses periodic FIFO inventory method.

Required: Perform the following tasks

Task 4.1 Compute the cost of merchandise sold & cost of ending inventory on December 2015
Task 4.2 Compute the gross profit of Abdi Boru Company for the month of December 2015, assuming
sales price is Br 20 for the merchandise inventory
Task 4.3 Compute the business profit tax if the Company has incurred Br 3,500 general expenses
including Br 1,000 entertainment expenses during the fiscal year

Task 4.1 Compute the cost of merchandise sold & cost of ending inventory on December 2015

CGS:
Dec. 1 Inventory 300 units @ Br 10/unit = Br 3,000
Dec. 10 Purchases 350 units @ Br 11/unit = Br 3,850
Dec. 21 Purchases 300 units @ Br 12/unit = Br 3,600
950 units Br 10,450

Cost of Ending Inventory:  Under periodic FIFO

Dec. 28 Purchase 500 units @ Br 13/unit = Br 6,500
Dec. 21 Purchase 150 units @ Br 12/unit = Br 1,800
Totals -------------650 units--------------------Br 8,300

Task 4.2 Compute the gross profit of Abdi Boru Company for the month of December 2015, assuming
sales price is Br 20 for the merchandise inventory

Sales ---------------------- 950 units @ Br 20/unit ------------------------ Br 19,000

Cost of goods sold ----------------------------------------------------------- 10,450
Gross profit -------------------------------------------------------------------- Br 8,550

Task 4.3 Compute the business profit tax if the Company has incurred Br 3,500 general expenses
including Br 1,000 entertainment expenses during the fiscal year

Sales ---------------------- 950 units @ Br 20/unit ...........................Br 19,000

Less: Cost of goods sold ................................................................ 10,450
Gross profit .................................................................................... Br 8,550
Less: Expense ---------------------------- [3,500 – 1,000] ................ 2,500
Operating income .......................................................................... Br 6,050

11 SOLE OWNER ₡₮2

 ACCOUNTS & BUDGET SERVICE LEVEL-IV
₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2
Less: Business profit tax ------------------ [6,050*0%- 0] .............. 0
Net income ..................................................................................... Br 6,050

According table ‘B’ business income between 0 to7,200 is tax exempted or free from tax. So tax = 0

Project 5: Perform Payroll, Accounting & Tax Calculation

Time Allotted: 1:10hours
Competences Covered
EIS ACB4 01 0812 Make Decision in a Legal Context
EIS ACB4 07 0812 Evaluate & Authorize Payment Requests
EIS ACB4 08 0812 Establish & Maintain a Payroll System
EIS ACB4 09 0812 Develop & use Complex Spreadsheet

Assumption:

12 SOLE OWNER ₡₮2

 ACCOUNTS & BUDGET SERVICE LEVEL-IV
₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2
CYZ Agency, a government enterprise pays the salary of its employees as per the Ethiopian calendar
month. The agency has an eight hours working per day & five working days per week. The following data
relates to the month of Tir 2008 E.C

Monthly OT hours Duration of OT

No Name of Employees Basic Salary Allowance Worked Worked
1 Hawi Tola 7,800 1,000 - -
2 Ware Bulcha 4,000 200 10 Public Holiday
3 Sorsa Debela 2,800 600 8 Up to 10pm
4 Gelane Bedasa 1,800 200 6 10pm to 5am
5 Momina Jemal 600 200 10 Weekend

Additional information:
All employees are permanent
Gelane agreed to contribute monthly Br 50 from her salary to credit association
The workers are expected to work 40 hours in a week or 160 hours per month
Allowances in excess of Br 800 are taxable

Required:
Based on the above data perform the following tasks

Task 5.1 Prepare payroll register for the month of Tir2008

Task 5.2 Record the payment of salary as of Tir 30,2008
Task 5.3 Record payroll tax expense (Pension Contribution by Employer)
Task 5.4 Record payment of payroll withholdings to concerned bodies, assuming the payment was made
on Yekatit 15,2008

Task 5.1 Prepare payroll register sheet

CYZ Company
Payroll Register Sheet
For month ended Tir 30,2008
Emplo Earnings Gross Deductions Total Net
SN Name B.Sala. Allowance Overtim Earning Tax Pension Other Deduction Pay
01 Hawi 7,800 1,000 - 8,800 2,137.50 546 - 2,683.50 6,116.
02 Ware 4,000 200 625 4,825 275 280 - 555 4,27

13 SOLE OWNER ₡₮2

 ACCOUNTS & BUDGET SERVICE LEVEL-IV
₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2

03 Sorsa 2,800 600 175 3,575 508.75 196 - 704.75 2,870.

04 Gelane 1,800 200 101.25 2,101.25 262.75 126 50 438.75 1,662.
05 Momina 600 200 75 875 53.75 47 - 100.75 774.2
Totals 17,000 2,200 976.25 20176.25 3,237.75 1,190 50 4,482.75 15,693

Prepared by Checked by Approved by

 Journal Entries Relating with Payroll:

Recording the Payment of Salary as of Tir 30, 2008

Tir30, 2008 Salary Expense ……………. 20,176.25

Employee Income Tax Payable…………………… 3,237.75
Pension Contribution Payable…..[18200*7%]…... 1,190.00
Other Charge Payable…………………...…………. 50.00
Cash ……………………………………………….15,693.50

Tir 30, 2008 Pension Contribution Payable -------- [17,000*11%] --------- 1,870
Cash ---------------------------------------------------------------------- 1,870

Yekatit 15, 2008 Income Tax Payable -------------------------------------- 3,237.75

Pension Contribution Payable ---- [17,000*18%] -----3,060.00
Cash ---------------------------------------------------------------- 6,297.75

14 SOLE OWNER ₡₮2

 ACCOUNTS & BUDGET SERVICE LEVEL-IV
₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2

Project Information
Project one:
Perform Payroll, Accounting & Tax Calculation
Time Allotted: 40 minutes
Competences Covered
EIS ACB4 01 0812 Make Decision in a Legal Context
EIS ACB4 07 0812 Evaluate & Authorize Payment Requests
EIS ACB4 08 0812 Establish & Maintain a Payroll System
EIS ACB4 09 0812 Develop & use Complex Spreadsheet

IT Company pays the salary of its employees as per the Ethiopian calendar month. The company pays its
employees every calendar month. The following data relates to the month of April 2013.

Name of Employees Basic Salary Monthly OT hours Duration of OT

No Allowance Worked Worked
1 Melaku 5,000 500 8 Weekend
2 Oljo 650 100 - -
3 Gidamu 2,350 230 4 Public holiday
4 Bedhatu 3,600 400 12 Public holiday

Additional information:
All employees are permanent
Melaku agreed to contribute 35% of his salary to credit association & Oljo agreed Br 150 per month
The workers are expected to work 40 hours in a week or 160 hours per month
All allowances are note taxable

Required:
Based on the above data perform the following tasks

Task 1.1 Prepare payroll register for the month of April 2013
Task 1.2 If salary is paid in May (not in the month of April) make a journal entry
Task 1.3 Record payroll tax expense (Pension Contribution by Employer)
Task 1.4 Record payment of payroll withholdings to concerned bodies, assuming the payment was made
on May 2,2013

15 SOLE OWNER ₡₮2

 ACCOUNTS & BUDGET SERVICE LEVEL-IV
₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2

Task 1.1 Prepare payroll register sheet

IT Company
Payroll Register Sheet
For month ended April 30,2013
Emplo Earnings Gross Deductions Total Net
SN Name B. Salary Allowance Overtime Earning Tax Pension C.A Deduction Pay
1 Melaku 5,000 500 500 6,000 1,262.50 300 1,750 3,312.50 2,687.50
2 Oljo 650 100 - 750 50 39 150 239 511
3 Gidam 2,350 230 146.90 2,726.90 389.23 141 - 530.23 2,196.67
4 Bedhatu 3,600 400 675 4,675 870 216 - 1,086 3,589
Totals 11,600 1,230 1,321.90 14,151.90 2,571.73 696 1,900 5,167.73 8,984.17

Prepared by Checked by Approved by

 Journal Entries Relating with Payroll:

1. Recording the Payment of Salary as of April 30,2013
April 30, 2013 Salary Expense ……………. 14,151.90
Employee Income Tax Payable…………………… 2,571.73
Pension Contribution Payable… [11600*6%] ….. 696.00
Credit Association Payable……………..…….…. 1,900.00
Cash ………………………………………………. 8,984.17

April 30,2013 Payroll Tax Expense ---------- [11,600*8%] ------------ 928

Pension Contribution Payable ---------------------------- 928

April 30,2013 Credit association payable ---------- 1,900

Cash ---------------------------------- 1,900

May 2,2013 Income tax payable ----------------------------------------- 2,571.73

Pension contribution payable ---- [11,600*14%] ------ 1,624.00
Cash ----------------------------------------------------------------- 4,195.73

16 SOLE OWNER ₡₮2

 ACCOUNTS & BUDGET SERVICE LEVEL-IV
₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2

Project two:
Defense Metal Corporation manufactures three products ‘A’, ‘B’ & ‘C’. The factory has the following production at the beginning of the
current year.
Product “A” Product “B” Product “C”
Desired ending inventory ---------- 60,000 70,000 65,000
Estimated beginning inventory ----51,000 45,000 41,000
Selling price per unit ---------------- Br 30 Br 35 Br 40

Sales estimated in units;

Area ‘1’ Area ‘2’

Product ‘A’----------------------------------- 30,000 30,000
Product ‘B’----------------------------------- 20,000 50,000
Product ‘C’----------------------------------- 26,000 56,000

The product uses the following raw materials;

Product “A” Product “B” Product “C”
Raw material “X” 2Kg per unit 3Kg per unit 4Kg per unit
Raw material “Y” 10Kg per unit 12Kg per unit 15Kg per unit

Task 2.1 Prepare sales budget

Task 2.2 Prepare production budget

Task 2.1 Prepare sales budget

Defense Metal Corporation

Sales budget
For month ended ---
Product “A” Product “B” Product “C” Total Sales
Unit sales in all areas 60,000 70,000 82,000
Unit price Br 30 Br 35 Br 40
Sales budget Br 1,800,000 Br 2,450,000 Br 3,280,000 7,530,000

17 SOLE OWNER ₡₮2

 ACCOUNTS & BUDGET SERVICE LEVEL-IV
₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2
Task 2.2 Prepare product budget

Defense Metal Corporation

Production budget
For month ended ---
Product “A” Product “B” Product “C”
Sales in units 60,000 70,000 82,000
Add: Desired ending inventory 60,000 70,000 65,000
Total Needs 120,000 140,000 147,000
Less: Estimated beginning inventory 51,000 45,000 41,000
Required production 69,000 95,000 106,000

Project three
During the month of February the following transactions occurred to produce product “xx”
1. Raw materials purchase ------------------------------------------- 25,000
2. Raw materials issued ---------------------------------------------- 21,000
3. Direct labor cost --------------------------------------------------- 35,000
Inventory
4. Beginning inventory finished goods --------------------------- 16,000
5. Beginning inventory raw materials ----------------------------- 13,000
6. Ending inventory finished goods ------------------------------- 18,000
7. Factory overhead is 80% of direct labor cost ----------------
8. Total sales ---------------------------------------------------------- 117,000
Task 3.1 Calculate Cost of Goods Manufactured
Task 3.2 Calculate Cost of Goods Sold
Task 3.3 Calculate Total Amount of Gross Profit
Task 3.1 Calculate Cost of Goods Manufactured

Cost of goods manufactured = RM Issued+ DL + FOH + Beg. Inv. WIP – End. Inv. WIP
Cost of goods manufactured = 21,000+ 35,000 + 28,000 + 0 - 0
Cost of goods manufactured = 84,000
ABC PLC
Statement of Cost of Goods Manufactured
For Month Ended February 28, ---

18 SOLE OWNER ₡₮2

 ACCOUNTS & BUDGET SERVICE LEVEL-IV
₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2
Beginning Work in Process Inventory ----------------------------------------------------- 0.00
Raw materials Inventory, March 1, 2014 ----------------------- 13,000
Add: Purchases of raw materials -------------------------------- 25,000
Raw materials Available for Use -------------------------------- 38,000
Less: Raw materials Inventory, March 31, 2014 -------------- 17,000 <== RM beg + Pur – RM issued
Raw materials Used ----------------------------------------------- 21,000
Less: Indirect Materials ------------------------------------------ 0.00
Direct Materials Used --------------------------------------------------------- 21,000
Add: Direct Labor ------------------------------------------------------------- 35,000
Manufacturing Overhead Applied ------------------------------------------- 28,000
Total Manufacturing Costs ----------------------------------------------------------------- 84,000
Total Costs in Process ----------------------------------------------------------------------- 84,000
Less: Ending Work in Process Inventory ------------------------------------------------ 0.00
Cost of Goods Manufactured ----------------------------------------------------- 84,000
Task 3.2 Calculate Cost of Goods Sold
CGS = Beginning inventory finished goods + Cost of goods manufactured - Ending inventory finished goods
CGS = 16,000 + 84,000 – 18,000
CGS = 82,000
ABC PLC
Statement of Cost of Goods Sold
For Month Ended February 28, ---
Finished Goods Inventory, March 1, 2014 ------------------------------------- 16,000
Add: Cost of Goods Manufactured ---------------------------------------------- 84,000
Cost of Goods Available for Sales -----------------------------------------------100,000
Less: Finished Goods Inventory, March 31, 2014 ----------------------------- 18,000
Cost of Goods Sold -------------------------------------------------------- 82,000
Task 3.3 Calculate Total Amount of Gross Profit
Gross profit = Sales - CGS
Gross profit = 117,000 – 82,000
Gross profit = 35,000
Project four
Cash in bank account for Horn Company on May 31 of the current year indicated a balance of Br 13,215.80 after both cash receipts &
check register has been posted. The bank statement indicates a balance of Br 19,513.90 on May 31 of the current year. Comparison of
bank statement & accompanying cancelled checks & memorandum with the records revealed the following items.
A. Outstanding checks total of Br 7,070.10
B. A deposit of Br 3,915.20 representing receipt of May 31 had been made too late to appear on the bank statement
C. The bank had collected Br 3,120 an interest bearing left for collection the face amount of the note was Br 3,000

19 SOLE OWNER ₡₮2

 ACCOUNTS & BUDGET SERVICE LEVEL-IV
₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2
D. A check paid to settle a liability of Br 69 returned with the statement had been recorded erroneously in the check registered as Br
96
E. A check drawn Br 42 had been erroneously charged as Br 24
F. Bank service charge for May amounted Br 21.80

Required:
Task 4.1 Prepare bank reconciliation for the month of May 31 of current year
Task 4.2 Record the necessary journal entries
Horn Company
Bank Reconciliation
For Month Ended May31of Current year
1. Balance per bank statement ----------------------------------------------------------------19,513.90
2. Add: Deposit in transit ........................................3,915.80
Bank error (Understating) .......................... 0.00 3,915.00
Sub-total ------------------------------------------------------------------------------------------23,429.90
3. Less: Check outstanding ......................................7,070
Bank error (Overstating) ........................... 180 7,088.00
4. True cash balance __________________________________________________16,341.00
5. Balance per cash book ----------------------------------------------------------------------13,215.20
6. Add: N/R .............................................................3,000
Interest Income ........................................... 120
Depositor error (Understating) ................... 27 3,147.00
Sub-total --------------------------------------------------------------------------------------16,362.20
7. Less: NSF cheque/check ...................................... 0
Bank service charge ..................................21.80
Collection fee ............................................ 0
Depositor error (Overstating) .................... 0 21.80
8. True cash balance __________________________________________________16,340.40

Task: 4.2 Journalize the necessary entries.

May 31 Cash in Bank .......................................................3,120

N/R --------------------------------------------------3,000
Interest Income ------------------------------------ 120

20 SOLE OWNER ₡₮2

 ACCOUNTS & BUDGET SERVICE LEVEL-IV
₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2
May 31 Administrative Miscellaneous Expense -------- 21.80
Cash at bank --------------------------------------- 21.80

Project five
Greater Manufacturing has the following information on July

Inventory:
July 1 .............................................................................................. 20 units@Br50

Sales
July 7 .............................................................................................. 10 units
July 18 ............................................................................................ 5 units
July 27 ............................................................................................ 10 units

Purchase
July 3 .............................................................................................. 20 units@51
July 20 ............................................................................................ 18 units@52

Task 5.1 Greater Manufacturing uses perpetual inventory system & LIFO costing method
Determine cost of goods sold and inventory on hand

Task 5.2 Greater Manufacturing uses periodic inventory system & FIFO costing method
Determine cost of goods sold and inventory on hand

Task 5.1 Determine cost of goods sold & inventory on hand

Determine cost of goods sold and inventory on hand

Purchase Cost of Goods Sold Inventory

Date Unit Unit Cost T Cost Units U Cost T Cost Units U Cost T Cost
s
July 1 20 50 1,000
20 51 1,020 20 50 1,000
July 3 20 51 1,020
July 7 10 51 510 20 50 1,000

21 SOLE OWNER ₡₮2

 ACCOUNTS & BUDGET SERVICE LEVEL-IV
₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2
10 51 510
July 18 5 51 255 20 50 1,000
5 51 255
July 20 18 52 936 20 50 1,000
5 51 255
18 52 936
July 27 10 52 520 20 50 1,000
5 51 255
8 52 416
25 1,285 33 1,671

CGS Inventory on hand

Task 5.2 If Greater Manufacturing uses periodic inventory system & FIFO costing method

Determine cost of goods sold and inventory on hand

July 1 Inventory ------------------20 Units @ Br 50 = Br 1,000

July 3 Purchases ------------------20 Units @ Br 51 = Br 1,020
July 27 Purchases -----------------18 Units @ Br 52 = Br 936
Goods Available for Sale ------- 58 Units Br 2,956

Most recent costs, July 27-----------------18 Units @ Br 52 = Br 936

Next most recent costs, July 18 ----------15 Units @ Br 50 = Br 900
Ending inventory, July 31 -----------------33 Units Br 1,836

Cost of goods sold = Goods Available for Sale - Ending inventory

Cost of goods sold = Br 2,956 - Br 1,836
Cost of goods sold = Br 1,120

Project six

22 SOLE OWNER ₡₮2

 ACCOUNTS & BUDGET SERVICE LEVEL-IV
₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2
Hurisa is a private Company registered in Ethiopia that show cost of accounting during the year 2012. The Company leases a building for
Br 4,500 per month to foreign Company. The Company paid Adamu Zerihun a regular employees & paid monthly salary of Br 5,400 per
month. Adamu Zerihun is a lecturer of Addis Ababa University earns basic salary of Br 7,060 per month.

Task 6.1 Determine the amount of monthly employment income tax collected from salary of Adamu Zerihun to ERCA
Task 6.2 Determine the taxable income & rental income tax liability paid by Hurisa to ERCA

Task 6.1 Determine the amount of monthly employment income tax collected from salary of Adamu Zerihun to ERCA

1
Salary = 5,400 Regular
2
Salary = 7,060
Regular Salary Tax = Salary*Rate – Deduction
Regular Salary Tax = 5,400*25% - 565
Regular Salary Tax = 785

Par-time Salary Tax = Salary*2%  [30%]

Par-time Salary Tax = 7,060*2%  [30%]
Par-time Salary Tax = 141.20  [2,115]

Total EIT = 785+141.20  [785+2,115]

Total EIT =926.20  [2,900]
Task 6.2 Determine the taxable income & rental income tax liability paid by Hurisa to ERCA

Annual rental income  4,500*12 = 54,000

Allowable deduction  54,000*20% = 10,800
Taxable rental income54,000 –10,800=43,200
and
Rental income tax 43,200*20% -3,630=5,020

23 SOLE OWNER ₡₮2

 ACCOUNTS & BUDGET SERVICE LEVEL-IV
₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2

Project one:
OSU Accountancy Training & Consultancy Center pays the salary of its employees according to the Ethiopian calendar month. The
accountant of the center has the following payroll data related to month of September 2010
No Name of Employees Basic Salary Allowance OT hours Worked Duration of OT
01 Jaga 10,000 2,000 - -
02 Naga 680 - 20 Weekly rest days
03 Gada 4,500 500 10 Up to 10pm
04 Lata 2,600 200 15 10pm to 5am
05 Kana 1,100 100 10 Public holidays

N.B
 All workers of this center are permanent employees except Naga
 Note that management of the center usually expects a worker to work 40 hours in a week & during September 2010 all workers
have done as they have been expected
 Allowance in excess of Br 800 are taxable
 All permanent employees contribute 10% of their basic salary to Ethiopian renaissance dam in this month

OT rate 1.25 for up to 4pm 2.00 for rest days

I.50 from 4pm to 6am 2.50 for holidays

Information:
Task 1.1 Prepare payroll register sheet
Task 1.2 Prepare
Task 1.3 Record payment

24 SOLE OWNER ₡₮2

 ACCOUNTS & BUDGET SERVICE LEVEL-IV
₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2

25 SOLE OWNER ₡₮2

 ACCOUNTS & BUDGET SURVICE LEVEL- IV
₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2

Task 1.1 Prepare payroll register sheet

OSU Accountancy Training & Consultancy

Payroll Register Sheet
For month ended September 31,2010
Emplo Earnings Gross Deductions Total Net
S.N Name B. Salary Allowance Overtime Earning Tax Pension Abay Deduction Pay
01 Jaga 10,000 2,000 - 12,000 2,420 700 1,000 4,120 7,880
02 Naga 680 - 170 850 25 - - 25 825
3 Gaga 4,500 500 357.63 5,351.63 667.83 315 450 1,432.83 3,918.80
04 Tata 2,600 200 365.63 3,165.63 302.34 182 260 744.34 2,421.29
05 Kana 1,100 100 172 1,372 67.20 77 110 254.20 1,117.80
Totals 18,880 2,800 1,059.26 22,739.26 3,482.37 1,274 1,820 6,576.37 16,162.89

Prepared by Checked by Approved by

 Journal Entries Relating with Payroll:

2. Recording the Payment of Salary as of September 2010
September 2010 Salary Expense ……………. 22,739.26
Employee Income Tax Payable………………………3,482.37
Pension Contribution Payable….[18200*7%]….. 1,274.00
Abay dam Charge Payable…………………...……. 1,820.00
Cash ……………………………………………….16,162.89

Task 1.2 Prepare payroll tax expense

September 31,2010 Payroll tax expense ---- [18200*11%] ------ 1,510.40
Pension contribution payable ----------------------- 1,510.40

Task 1.3 Record the necessary journal entry

September 31,2010 Income tax payable ------------------------- 3,482.37
Pension contribution payable ------------- 3,276.00
Cash ----------------------------------------------------- 6,758.37

26
SOLE OWNER  ₡₮2
 ACCOUNTS & BUDGET SURVICE LEVEL- IV
₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2
Project two:
The accounts listed below appear on the ledger of the company on June 30 of this fiscal year
Cash ...............................................................................................60,000
Fees receivable .............................................................................. 8,200
Supplies ......................................................................................... 675
Prepaid insurance ........................................................................... 3,725
Prepaid advertising ........................................................................ 1,000
Salary payable --------------------------------------------------------------------------------11,400
Unearned rent -------------------------------------------------------------------------------- 2,100
Capital -----------------------------------------------------------------------------------------40,790
Fees earned ----------------------------------------------------------------------------------- 62,250
Rental income -------------------------------------------------------------------------------- 9,100
Salary expense ...............................................................................41,700
Advertising expense ......................................................................10,340
Insurance expense ..........................................................................
Supplies expense ............................................................................
Rent expense ..................................................................................

Additional information:
A. Unbilled fees at June 30 Br 7,750
B. Inventory of supplies at June 30 Br 190
C. Br 2,100 of insurance has expired during the year
D. Out of payment of Br 1,000 for advertising space in Ethiopia Herald newspaper 75% has been
used & the remaining will be used in the following year
E. Salary accrued at a June Br 1,140
F. Rent collection in advance that will be earned until the following year Br 700
The company registered for business income tax of 30% flat rate
Required:
Task 2.1 Post the necessary adjusting entry based on the above information
Task 2.2 Prepare adjusted trial balance
Task 2.3 Prepare profit and loss statement & balance sheet statement
Task 2.1 Post the necessary adjusting entry based on the above information
1. June 30 Fees receivable ---------------- 7,750
Fees earned -------------------- 7,750

2. 30 Supplies expense ------------ 485

Supplies ------------------------ 485

3. 30 Insurance expense ---------- 2,100

Prepaid insurance ------------- 2,100

4. 30 Advertising expense ------- 750

Prepaid advertising ------------ 750

5. 30 Salary expense -------------- 1,140

Salary payable ------------------ 1,140

6. 30 Unearned rent ------------- 1,400

Rental income ------------------- 1,400
27 SOLE OWNER  ₡₮2
 ACCOUNTS & BUDGET SURVICE LEVEL- IV
₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2

Task 2.2 Prepare adjusted trial balance

Yado Kedir Company

Adjusted Trial Balance
For Month Ended June 30
Cash .....................................................................………………. 60,000
Fees receivable ....................................................………………. 15,950
Supplies ...............................................................………………. 190
Prepaid insurance ………………………………………….. 1,625
Prepaid advertising ..............................................……………….. 250
Salary payable ................................................................................……………… 12,540
Unearned rent ................................................................................……………… 700
Yado, Capital .................................................................................……………… 40,790
Fees earned ....................................................................................……………… 70,000
Rental income ................................................................................………………. 10,500
Salary expense .....................................................………………… 42,840
Advertising expense ............................................………………… 11,090
Insurance expense ................................................………………… 2,100
Supplies expense .................................................………………… 485
134,530 134,530

Task 2.3 Prepare profit and loss statement & balance sheet statement

Yado Kedir Company

Income Statement
For Month Ended June 30
Revenue:
Fees Earned ................................................................................................. 70,000
Expenses:
Salary expense ........................................ 42,840
Advertising expense ............................... 11,090
Insurance expense ................................... 2,100
Supplies expense …………………….. 485
Total Operating Expense ......................................................................................... 56,515
Income from Operation ............................................................................................ 13,485
Other Income:
Rental Income ..........................................................................................................10,500
Other Expense:
Interest Expense ....................................................................................................... 0.00
Business Income before Tax .................................................................................... 23,985
Business Profit Tax .................................................................................................. 7,195.50
Net Income ...............................................................................................................16,789.50

28 SOLE OWNER  ₡₮2

 ACCOUNTS & BUDGET SURVICE LEVEL- IV
₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2

Yado Kedir Company

Balance Sheet
For Month Ended June 30

Asset
Cash --------------------------------------------------------------------------------- 60,000
Fees receivable ---------------------------------------------------------------------15,950
Supplies ----------------------------------------------------------------------------- 190
Prepaid advertising ---------------------------------------------------------------- 1,625
Prepaid insurance ------------------------------------------------------------------ 250
Total asset ---------------------------------------------------------------------------78,015

Liabilities
Salary payable ----------------------------------------------------------------------12,540
Unearned rent ---------------------------------------------------------------------- 700
Business profit tax payable -------------------------------------------------------7,195.50
Total liabilities ---------------------------------------------------------------------20,435.50

Capital
Yado, capital ---------------------------------------------------------------------- 57,579.50
Total liabilities & capital -------------------------------------------------------- 78,015

Yado Kedir Company

Statement of Cash Flow
For Month Ended June 30

Cash flow from operating activities:

Cash received from customer ...........................................
Deduct: cash payment for expenses & to creditors ..........
Net cash flow from operating activities ----------------------------------------

Cash flow from investing activities:

Sales of property, plant & equipment ...............................
Deduct: cash payment for acquisition of plant asset ........
Net cash flow from investing activities -----------------------------------------

Cash flow from financing activities:

Cash received from as owner’s investment ......................
Deduct: cash withdrawal by owner ..................................
Net cash flows from financing activities ---------------------------------------
Beginning cash balance -----------------------------------------------------------
Ending cash balance & January balance sheet--------------------------------- 60,000

29 SOLE OWNER  ₡₮2

 ACCOUNTS & BUDGET SURVICE LEVEL- IV
₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2

Project three:
Printer Corporation employs the voucher system in controlling expenditures and disbursements. All cash
receipts are deposited cash Wednesday and Friday in a night depository after banking hours. The data
required to reconcile the bank statement as of April 30 have been abstracted from various documents and
records and are reproduced as follow.
To facilitate identification the sources of the data are printed in capital letters.

CASH IN BANK ACCOUNT

Cash in bank account as of April 1, 2012 .............................................................................7,817.40

CASH RECEIPTS JOURNAL

Cash receipt journal as of during April 30, 2012 ..................................................................7,829.58

Checks accompanying April bank statement

Deposit of April CK No Amount

731 162.15
Date Amount 738 60.55
April 1, 2012 690.25 740 287.50
April 2, 2012 848.63 741 555.15
April 4, 2012 914.04 742 501.90
April 9, 2012 840.50 743 671.30
April 11, 2012 971.71 744 506.88
April 16, 2012 975.85 746 415.91
April 18, 2012 946.74 748 490.90
April 23, 2012 897.34 750 1016.90
April 25, 2012 942.71 751 251.40
753 1217.33
754 249.75
756 345.95
757 1021.90
760 486.39
Bank statement for April
Balance as of April1, 2012 ------------------------------------------------------- 7,947.20
Deposit & other credits -----------------------------------------------------------10,652.77
Checks & other debits ------------------------------------------------------------- 8,232.21
Balance of April 30, 2012 --------------------------------------------------------10,367.76

30 SOLE OWNER  ₡₮2

 ACCOUNTS & BUDGET SURVICE LEVEL- IV
₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2

Checks issued by depositor

Deposit tickets collected from bank CK No Amount
Date Amount 740 287.50
April 1, 2012 848.63 741 555.15
April 3, 2012 914.04 742 501.90
April 8, 2012 840.50 743 671.30
April 10, 2012 971.71 744 506.88
April 15, 2012 957.85 746 415.91
April 18, 2012 946.74 748 490.90
April 22, 2012 897.34 750 1016.90
April 24, 2012 942.71 753 1217.33
April 29, 2012 510.06 754 249.75
755 172.75
757 1021.90
758 359.60
759 601.50
760 486.39

BANK RECONCILIATION FOR PRECEDING MONTH

Printer Corporation
Bank reconciliation
March 31, 2015
Balance per bank statement --------------------------------------------------------------------- 7,947.20
Add:-deposit for March 31, not recorded by bank --------------------------------------------- 690.25
Sub-total ------------------------------------------------------------------------------------------- 8,637.45
Deduct outstanding checks:
No 731---------------------------------------------------------162.15
736 ------------------------------------------------------- 345.95
738 ------------------------------------------------------- 251.40
739 --------------------------------------------------------- 60.55 820.05
Adjusted bank balance --------------------------------------------------------------------------7,817.40
Balance per depositors records ----------------------------------------------------------------7,832.50
Deduct service charges ------------------------------------------------------------------------- 15.10
Adjusted depository balance -------------------------------------------------------------------7,817.40

31 SOLE OWNER  ₡₮2

 ACCOUNTS & BUDGET SURVICE LEVEL- IV
₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2

Instructions:
1. Prepare bank reconciliation as of April 30.if errors in recording deposits or checks are discovered
assume that the errors were made by the company. Assume that all deposits are from cash sales. All
checks are in payment of vouchers
2. Record the necessary entries in general journal form. The accounts have not been closed.
Bank memorandum accompanying April bank statement
April 4, 2015 bank credit memo for note collected principal Br 2,500 and interest Br 150
April 24, 2015 bank debit memo for check returned because of installment fund 311.80
April 30, 2015 bank debit memo for service charge Br 24.50
The bank erroneously added other company’s daily deposit with check No 736 amount of Br 345.95
Required:
Task 3.1 Prepare bank reconciliation statement for the month of April 2015
Task 3.2 Record the necessary journal entry
Deposit of April Deposit tickets collected from bank

Date Amount Date Amount

April 1, 2012 690.25 DT
April 2, 2012 848.63 April 1, 2012 848.63
April 4, 2012 914.04 April 3, 2012 914.04
April 9, 2012 840.50 April 8, 2012 840.50
April 11, 2012 971.71 April 10, 2012 971.71
April 16, 2012 975.85 Depositor Error April 15, 2012 957.85
April 18, 2012 946.74 April 18, 2012 946.74
April 23, 2012 897.34 April 22, 2012 897.34
April 25, 2012 942.71 April 24, 2012 942.71
April 29, 2012 510.06DT

Checks accompanying April bank statement Checks issued by depositor

CK No Amount CK No Amount
731 March OC 162.15 731 XXX
738 March OC 60.55 738 XXX
740 287.50 740 287.50
741 555.15 741 555.15
742 501.90 742 501.90
743 671.30 743 671.30
744 506.88 744 506.88
746 415.91 746 415.91
748 490.90 748 490.90
750 1016.90 750 1016.90
751 March OC 251.40 751 XXX
753 1217.33 753 1217.33
754 249.75 754 249.75
755 XXX 755 April OC 172.75
756 March OC 345.95 756 XXX
757 1021.90 757 1021.90
758 XXX2 758 April OC 359.60
32 SOLE OWNER
759  ₡₮
XXX 759 April OC 601.50
760 486.95 760 486.39
 ACCOUNTS & BUDGET SURVICE LEVEL- IV
₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2

Task 3.1 Prepare bank reconciliation statement for the month of April 2015
Pointer PLC
Bank reconciliation
April 30, 2015

1. Balance per bank statement ----------------------------------------------------------------10,367.76

2. Add: Deposit in transit ........................................510.06
Bank error (Understating) ............................ 0.00 510.06
Sub-total -------------------------------------------------------------------------------------- 10,877.82
3. Less: Check outstanding
Bank Error Check No 736 ......................345.95
Check No 755 .......................................172.75
Check No 758 .......................................359.60
Check No 759..........................................601.50 1,479.80
4. True cash balance __________________________________________________9,398.02

5. Balance per cash book … [7,817.40+7,829.58] – [Tot Check Issued(8,555.66)] -- 7,091.32

6. Add: N/R .............................................................2,500
Interest Income ............................................ 125
Depositor error (Understating) .................... 18 2,643.00
Sub-total --------------------------------------------------------------------------------------- 9,734.32
7. Less: NSF cheque/check ......................................311.80
Bank service charge ..................................... 24.50
Collection fee ............................................... 0.00
Depositor error (Overstating) ...................... 0.00 336.30
8. True cash balance __________________________________________________9,398.02

Task 3.2 Record the necessary journal entry

April 30,2015 Cash at bank ---------------------------------- 2,643

Note receivable -----------------------------------------2,500
Interest income ----------------------------------------- 125
A/R -------------------------------------------------------- 18

April 30, 2015 Account receivable ---------------------------311.80

Cash at bank --------------------------------------------- 311.80

33 SOLE OWNER  ₡₮2

 ACCOUNTS & BUDGET SURVICE LEVEL- IV
₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2
April 30, 2015 Administrative miscellaneous expense ----24.50
Cash at bank --------------------------------------------- 24.50

Project four:
KK Steel Factory manufactures product “A” and “B” & sells them in zone A and in zone B. the budget
department of the factory has the following information at the beginning of the current year.
Product “A” Product “B”
Desired ending inventory for each month in units ---------------- 20,000 10,000
Estimated beginning inventory for each month in units ---------- 21,000 9,000
Selling price per unit -----------------------------------------------------Br 50 Br 70
Estimated sales in unit during the current quarter

Zone A
January February March Totals
Product “A” ---------------------------------------- 6,500 6,900 6,600 20,000
Product “B” ---------------------------------------- 1,600 1,700 1,500 4,800

Zone B
January February March Totals
Product “A” ---------------------------------------- 4,500 4,900 5,600 15,000
Product “B” ---------------------------------------- 1,950 1,500 1,500 4,950
For the productions of “A” & “B” KK Steel Factory uses the following raw materials
Material Unit cost For product “A” For product “B”
Sand Br 0.50 20 Kg per unit 15 Kg per unit
Steel Br 1.00 10 Kg per unit 15 Kg per unit
Chemicals Br 5.00 10 Lt per unit 15 Lt per unit

Instructions:
Task 4.1 Prepare sales budget for the current quarter
Task 4.2 Prepare production budget for the current quarter
Task 4.3 Prepare raw material purchase budget for the current quarter

Total Sales in Units

Product “A”
Zonal Sales January February March Totals
Product “A” ---------------------------------------- 6,500 6,900 6,600 20,000
Product “A” ---------------------------------------- 4,500 4,900 5,600 15,000
Units of total sales 11,000 11,800 12,200 35,000

Product “B”
Zonal Sales January February March Totals
Product “B” ---------------------------------------- 1,600 1,700 1,500 4,800
Product “B” ---------------------------------------- 1,950 1,500 1,500 4,950

34 SOLE OWNER  ₡₮2

 ACCOUNTS & BUDGET SURVICE LEVEL- IV
₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2
Units of total sales 3,550 3,200 3,000 9,750

Task 4.1 Prepare sales budget for the current quarter

KK Steel Factory
Sales Budget
From January – March
Product “A”
January February March Totals
Estimated Sales in Units 11,000 10,800 11,200 35,000
Selling Price per Unit Br 50 Br 50 Br 50 Br 50
Total Sales Br 550,000 Br 540,000 Br 560,000 Br 1,750,000

KK Steel Factory
Sales Budget
From January – March
Product “B”
January February March Totals
Estimated Sales in Units 3,550 3,200 3,000 9,750
Selling Price per Unit Br 70 Br 70 Br 70 Br 70
Total Sales Br 248,500 Br 224,000 Br 210,000 Br 682,500

Task 4.2 Prepare production budget for the current quarter

KK Steel Factory
Production Budget
From January – March
Product “A”
January February March
Desired ending inventory in Units 20,000 20,000 20,000
Add: Estimated sales budget Units 11,000 11,800 12,200
Total production required in Units 31,000 31,800 32,200
Less: beginning inventory in Units 21,000 21,000 21,000
Production budget in Units 10,000 10,800 11,200

KK Steel Factory
Production Budget
From January – March
Product “B”
January February March
Desired ending inventory in Units 10,000 10,000 10,000
Add: Estimated sales budget Units 3,550 3,200 3,000
Total production required in Units 13,550 13,200 13,000

35 SOLE OWNER  ₡₮2

 ACCOUNTS & BUDGET SURVICE LEVEL- IV
₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2
Less: beginning inventory in Units 9,000 9,000 9,000
Production budget in Units 4,550 4,200 4,000

Task 4.3 Prepare raw material purchase budget for the current quarter

KK Steel Factory
Raw material purchase Budget
From January – March
Needed Sand for Product “A”
January February March
Total production budget of product “A” in units 10,000 10,800 11,200
Required Sand for production per units 20Kg 20Kg 20Kg
Total sand required in Kg 200,000 216,000 224,000
Cost of sand per Kg Br 0.50 Br 0.50 Br 0.50
Total sand purchase budget Br 100,000 Br 108,000 Br 112,000

KK Steel Factory
Raw material purchase Budget
From January – March
Needed Sand for Product “B”
January February March
Total production budget of product “A” in units 4,550 4,200 4,000
Required Sand for production per units 15Kg 15Kg 15Kg
Total sand required in Kg 68,250 63,000 60,000
Cost of sand per Kg Br 0.50 Br 0.50 Br 0.50
Total sand purchase budget Br 34,125 Br 31,500 Br 30,000

KK Steel Factory
Raw material purchase Budget
From January – March
Needed Steel for Product “A”
January February March
Total production budget of product “A” in units 10,000 10,800 11,200
Required Steel for production per units 10Kg 10Kg 10Kg
Total steel required in Kg 100,000 108,000 112,000
Cost of steel per Kg Br 1.00 Br 1.00 Br 1.00
Total steel purchase budget Br 100,000 Br 108,000 Br 112,000

KK Steel Factory
Raw material purchase Budget
From January – March
Needed Steel for Product “B”
January February March

36 SOLE OWNER  ₡₮2

 ACCOUNTS & BUDGET SURVICE LEVEL- IV
₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2
Total production budget of product “A” in units 4,550 4,200 4,000
Required Steel for production per units 15Kg 15Kg 15Kg
Total sand required in Kg 38,250 33,000 30,000
Cost of steel per Kg Br 1.00 Br 1.00 Br 1.00
Total steel purchase budget Br 38,250 Br 33,000 Br 30,000

KK Steel Factory
Raw material purchase Budget
From January – March
Needed Chemicals for Product “A”
January February March
Total production budget of product “A” in units 10,000 10,800 11,200
Required Chemicals for production per units 10Lt 10Lt 10Lt
Total chemicals required in Lt 100,000 108,000 112,000
Cost of chemicals per Lt Br 5.00 Br 5.00 Br 5.00
Total chemicals purchase budget Br 500,000 Br 540,000 Br 560,000

KK Steel Factory
Raw material purchase Budget
From January – March
Needed Chemicals for Product “B”
January February March
Total production budget of product “A” in units 4,550 4,200 4,000
Required Chemicals for production per units 15Lt 15Lt 15t
Total chemicals required in Lt 68,250 63,000 60,000
Cost of chemicals per Lt Br 5.00 Br 5.00 Br 5.00
Total chemicals purchase budget Br341250 Br 315,000 Br 300,000

37 SOLE OWNER  ₡₮2

 ACCOUNTS & BUDGET SURVICE LEVEL- IV
₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2

Project five:
During the month of January the following transaction will occur to produce the products
1. Raw materials purchased on account
Sand 500
Steel 790
Chemicals 4,500
2. Materials issued & direct factory labor cost used
Material Direct labor
Job #1 227.50 160
Job #2 780 210
Job #3 3,900 175
4907.50 545

Factory overhead is 80% of direct labor cost

Finished product sold for Br 7,800
Required:
Task 5.1 Record the necessary journal entry for the above transaction
Task 5.2 Calculate the cost of each job
Task 5.3 Calculate total amount of gross profit

Task 5.1 Record the necessary journal entry for the above transaction

Raw material ---------------------------------5,790

Account payable -------------------------------------5,790

Work in process ----------------------------4,907.50

Raw material -------------------------------------------4,907.50

Work in process -------------------------------545

Salary payable --------------------------------------545

Work in process -------------------------------436

Factory overhead ----------------------------------------436

Finished goods -------- [4907.50+545+436] ---------5,888.50

Work in process ------------------------------------------------5,888.50

38 SOLE OWNER  ₡₮2

 ACCOUNTS & BUDGET SURVICE LEVEL- IV
₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2
Cash ----------------------------------------7,800
Sales --------------------------------------------------7,800

Cost of goods sold -----------------------------------------5,888.50

Finished goods ----------------------------------------------5,888.50

Task 5.2 Calculate the cost of each job

 First job
Raw material ----------------- 227.50
Direct labor ------------------- 160.00
Factory overhead ------------ 128.00
Cost of manufacturing ------ 515.50

 Second job
Raw material -----------------------------780
Direct labor -------------------------------210
Factory overhead ------------------------168
Cost of manufacturing ---------------1,158

 Third job
Raw material --------------------------------------3,900
Direct labor ------------------------------------------175
Factory overhead -----------------------------------140
Cost of manufacturing -------------------------4,215

Task 5.3 Calculate total amount of gross profit

Sales ------------------------------------------------------------ 7,800.00

Less: Cost of goods sold ------------------------------------ 5,888.50
Gross profit ---------------------------------------------------- 1,911.50

39 SOLE OWNER  ₡₮2

 ACCOUNTS & BUDGET SURVICE LEVEL- IV
₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2

Project six:
ABC merchandising business is a VAT registered company has the following transaction for month of
March 2013. Sales & purchase transaction are VAT inclusive price.
March 15 received cash from sales of merchandise Br 250,000
March 16 paid entertainment expense Br 5,000
March 19 purchased raw materials for Br 49,000 on cash
March 25 paid salary expense during the month of March Br 60,000
March 26 purchased raw materials on account Br 80,000
March 27 paid utilities expense for the period Br 800
March 28 supplies purchased during the month of March Br 15,500
March 31 doubtful account expense for the period is Br 8,000
Required:
Task 6.1 Record the above entries in a journal
Task 6.2 Calculate the amount of VAT receivable/payable from/to ERCA
Task 6.1 Record the above entries in a journal
March 15 Cash -------------------------------------250,000
VAT payable --------------------------- 32,608.70
Sales ------------------------------------ 217,391.30
March 19 Raw material ------------------------- 42,608.70
VAT receivable --------------------- 6,391.30
Cash -------------------------------------- 49,000.00
March 25 Salary expense ----------------------- 60,000.00
Cash -------------------------------------- 60,000.00
March 26 Raw materials ------------------------ 69,565.22
VAT receivable --------------------- 10,434.78
VAT payable --------------------------- 80,000.00

March 27 Utilities expense ------------------------- 800.00

Cash ---------------------------------------- 800.00

March 28 Supplies ------------------------------- 13,478.26

VAT receivable ---------------------- 2,021.74
Cash ------------------------------------ 15,500.00

March 31 Doubtful account expense ------------ 8,000.00

Cash ------------------------------------ 8,000.00
Task 6.2 Calculate the amount of VAT receivable/payable from/to ERCA
I. Output VAT = Total Sales*rate
Output VAT = [250,000]*15/115
Output VAT = 32,608.70

40 SOLE OWNER  ₡₮2

 ACCOUNTS & BUDGET SURVICE LEVEL- IV
₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2
II. Input VAT = Total Purchase*rate
Input VAT = [49,000+80,000+5,000]*15/115
Input VAT = 17,478.26

III. VAT payable = Output VAT – Input VAT

VAT payable = 32,608.70 – 17,478.26
VAT payable = 15,130.44
Project seven:
DXY Company purchased commodity M for resale. During the month of October the following
transaction occurred in relation to commodity M.

October 1 Inventory .............................................15 units @ Br 30

October 4 Sales .................................................... 5 units @ Br 35
October 10 Purchase ............................................10 units @ Br 32
October 17 Sales ..................................................12 units @ Br 39
October 22 Sales .................................................. 3 units @ Br 40
October 30 Purchase ............................................10 units @ Br 33

Task 7.1 DXY Company uses periodic inventory & FIFO costing method

Calculate:
a) Cost of goods sold during October
b) Cost of inventory on hand at the end of October
c) Determine the amount of gross profit

a) Cost of goods sold during October

Cost of goods sold:

Merchandise inventory October 1-------------------------------------------------------- 450
Purchase --------------------------------------------------------------------- 650
Less: Purchase return & allowance ------------------- 0.00
Purchase discount -------------------------------- 0.00 0.00
Net purchase ---------------------------------------------------------------- 650
Add: Transportation-in --------------------------------------------------- 0.00
Cost of goods purchased ----------------------------------------------------------- 650
Cost of goods available for sale --------------------------------------------------------- 1,100
Less: Merchandise inventory October 30 ---------------------------------------------- 490
Cost of goods sold ------------------------------------------------------------------ 610

b) Cost of inventory on hand at the end of October

10units@ Br 33 ------------- 330

5 units @Br 32 -------------- 160
15 units Br 490

41 SOLE OWNER  ₡₮2

 ACCOUNTS & BUDGET SURVICE LEVEL- IV
₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2

c) Determine the amount of gross profit

Revenue:
Sales -------------------------------------------------------------------------------- 763
Less: Sales return & allowance ------------------- 0.00
Sales discount -------------------------------- 0.00 0.00
Net sales -------------------------------------------------------------------------------------------- 763
Cost of goods sold:
Merchandise inventory October 1------------------------------------------------450
Purchase ----------------------------------------------------------------- 650
Less: Purchase return & allowance ------------------- 0.00
Purchase discount -------------------------------- 0.00 0.00
Net purchase ------------------------------------------------------------- 650
Add: Transportation-in ------------------------------------------------- 0.00
Cost of goods purchased -------------------------------------------------- 650
Cost of goods available for sale ------------------------------------------------ 1,100
Less: Merchandise inventory October 30 ------------------------------------- 490
Cost of goods sold -------------------------------------------------------------------------- 610
Gross profit ---------------------------------------------------------------------------------------- 153

END

42 SOLE OWNER  ₡₮2

 ACCOUNTS & BUDGET SURVICE LEVEL- IV
₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2

CT2 Merchandising
Income Statement
For Month Ended April 30, 2012

Sales ---------------------------------------------------------------------------------- 550,000

Cost of Merchandise Sold:
Merchandise Inventory, April 1,2012 --------------------- 45,000
Purchases ------------------------------------------------------ 450,000
Merchandise Available for Sales -------------------------- 495,000
Less: Merchandise Inventory, April 30,2012 ------------ 60,000
Cost of Merchandise Sold ------------------------------------------------- 435,000
Gross Profit -------------------------------------------------------------------------- 115,000
Operating Expenses:
Selling Expenses -------------------------------------------- 42,500
Administrative Expenses -----------------------------------37,500
Total Operating Expenses --------------------------------------------------------- 80,000
Net Income--------------------------------------------------------------------------- 35,000

Manufacturing Summary
Work in Process Inventory, April 1 27,500 Work in Process Inventory, April 30 32,900.00
Direct Materials Inventory, April 1 31,000 Direct Materials Inventory, April 30 29,362.50

Direct Materials Purchases 110,400 To Income Summary 275,437.50

Direct Labor 109,375
Factory Overhead 59,425
337,700 337,700

Income Summary
Finished Goods Inventory, April 1 39,250 Finished Goods Inventory, April 30 45,500
From Manufacturing Summary 275,437.50 nn 269,187.50

43 SOLE OWNER  ₡₮2

 ACCOUNTS & BUDGET SURVICE LEVEL- IV
₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2

CT2 Manufacturing
Income Statement
For Month Ended April 30, 2012

Sales ---------------------------------------------------------------------------------- 457,900.00

Cost of Merchandise Sold:
Finished Goods Inventory, April 1,2012 ------------------- 39,250.00
Cost of Goods Manufactured ------------------------------- 275,437.50
Cost of Finished Goods Available for Sales -------------- 314,687.50
Less: Finished Goods Inventory, April 30,2012 ----------- 45,500.00
Cost of Merchandise Sold --------------------------------------------------------- 269,187.50
Gross Profit -------------------------------------------------------------------------- 188,712.50
Operating Expenses:
Selling Expenses -------------------------------------------- 82,500.00
Administrative Expenses -----------------------------------42,212.50
Total Operating Expenses -------------------------------------------------------- 124,712.50
Net Income--------------------------------------------------------------------------- 64,000.00

CT2 Manufacturing
Statement of Goods Manufactured
For Month Ended April 30, 2012

Work in Process Inventory, April 1, 2012 ---------------------------------------- 27,500.00

Direct Materials:
Inventory, April 1, 2012 ----------------------- 31,000.00
Purchases ---------------------------------------- 110,400.00
Cost of Materials Available for Use --------- 141,400.00
Less: Inventory, December 31, 2012 -------- 29,362.50
Cost of Materials needed for production --------------------- 112,037.50
Direct Labor ------------------------------------------------------ 109,375.00
Factory Overhead:
Indirect Labor ---------------------------------- 24,650.00
Depreciation of Building --------------------- 3,000.00
Depreciation of Factory Equipment -------- 11,250.00
Insurance Expense ---------------------------- 2,375.00
44 SOLE OWNER  ₡₮2
 ACCOUNTS & BUDGET SURVICE LEVEL- IV
₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2
Supplies Expense ----------------------------- 1,450.00
Tax Expense ----------------------------------- 4,875.00
Utilities Expense ------------------------------ 10,900.00
Miscellaneous Factory Cost ----------------- 1,025.00
Total Factory Overhead ------------------------------------------ 59425.00
Total Manufacturing Costs ----------------------------------------------------- 280,837.50
Total Work in Process during Period ----------------------------------------- 308,337.50
Less: Work in Process Inventory April 30, 2012 ---------------------------- 32,900.00
Cost of Goods Manufactured --------------------------------------------------- 275,437.50

1. Which of the following is not a characteristic of managerial accounting report?

A. Timeliness C. Conciseness
B. Relevance D. Cost-benefit balance

2. Which of the following expenditures would normally be recorded initially as an expense rather
than as an asset?
A. Payment of a three-year insurance premium
B. Payment of a Br 3,000 for the current month’s rent
C. Purchase of office equipment
D. Purchase of direct materials to be used in manufacturing a product
3. Which of the following is not considered a cost of manufacturing a product?

A. Direct materials cost C. Sales salaries

B. Factory overhead cost D. Direct labor

4. Which of the following costs would be included as part of the factory overhead costs of a
microcomputer manufacturer?

A. The cost of memory chips C. Wages of computer assemblers

B. Depreciation on testing equipment D. The cost of disk drives

5. Which of the following costs would normally be considered a variable cost?

A. Direct materials cost
B. Direct labor cost
C. Electricity to operate factory equipment
D. All of the above
6. The account maintained by a manufacturing business for inventory of goods in the process of
manufacture is:

A. Finished goods C. Work in process

B. Materials D. None of the above

7. For a manufacturing business, finished goods inventory includes:

A. Direct materials costs
B. Direct labor costs
C. Factory overhead costs

45 SOLE OWNER  ₡₮2

 ACCOUNTS & BUDGET SURVICE LEVEL- IV
₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2₡₮2
D. All of the above
8. An example of a factory overhead cost is:
A. Wages of factory assembly-line workers
B. Salaries for factory plant supervisors
C. Bearings for electric motors being manufactured
D. All of the above
9. For which of the following would the job order cost system be appropriate?

A. Antique furniture repair shop aÅg_ C. Coal manufacturer

B. Rubber manufacturer D. All of the above

10. If the factory overhead account has a credit balance, factory overhead is said to be:

A. Under applied D. Over absorbed

B. Over applied E. B & D
C. Under absorbed

46 SOLE OWNER  ₡₮2