Exercise VIII VIII.A. Accounting Cycle The Accounting Cycle – Problem Set ABC Company Ltd. Summary of transactions during December: 1. Paid outstanding salary payables. 2. Paid trade creditors € 2,500. 3. Salaries to employees of € 1 200 were calculated for December to be paid in January. 4. Purchase of € 1 500 of Office Supplies Inventory with 10% cash discount for cash transaction. 5. Purchase of raw materials Inventory of € 1 900 was done with two month trade credit. 6. The freight in for both supplies and raw material inventory was paid in the amount of € 200. 7. Due to the low quality of the purchased office supplies inventory the company returned back € 300 of inventory. 8. Performed advertisement services for Customer XYZ, for which we will receive € 2,000 on 3 month credit sale. 9. At the end of month the Customer XYZ made a claim on the advertisement services and we agreed to sales allowance (a reduction of the original selling price) in the amount of 25%. 10. Received an invoice for a series of advertisements, € 3 000, that appeared in the local news during December and will be paid in January. 11. Received an invoice for external services of € 1 500 for December to be paid with 60 credit term 12. Performed consulting services, in the amount of € 2,000 with 20% for cash discount on sales (cash immediately received). 13. In November 2014 we performed additional consulting work, € 2 100 on credit (10/30, n 90) and in December 2014 the customer used the discount for prompt payment. 14. We sold office supplies inventory on the market for € 2000 through credit card transaction (a straight 2% of credit card services were taken). 15. The cost of office supplies used during December is € 200. 16. The cost of raw materials inventory used during December is € 3 000. 17. In the beginning of October 2014 a subscription rights for local newspaper magazine of € 2 500 was paid for five month term in advance; 18. In the beginning of November 2014 company receives rent for 3 months in advance, €3,000 19. At the end of the month Company repaid to the Bank credit tranche € 500 and paid interest charges (interest rate as of 5% p.a.) 20. Depreciation of equipment for December amounts to € 250. 21. ABC company acknowledged the € 1 500 worth of bad debts in December 2014. Required: a) Prepare the opening journal entry on Dec. 1, 2014. b) Prepare the journal entries for the transactions (1– 21) 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. VIII.B. Valuatio.

1. Exercise VIII
VIII.A. Accounting Cycle
The Accounting Cycle – Problem Set ABC Company Ltd.
Summary of transactions during December:
1. Paid outstanding salary payables.
2. Paid trade creditors € 2,500.
3. Salaries to employees of € 1 200 were calculated for
December to be paid in January.
4. Purchase of € 1 500 of Office Supplies Inventory with 10%
cash discount for cash transaction.
5. Purchase of raw materials Inventory of € 1 900 was done with
two month trade credit.
6. The freight in for both supplies and raw material inventory
was paid in the amount of € 200.
7. Due to the low quality of the purchased office supplies
inventory the company returned back € 300 of inventory.
8. Performed advertisement services for Customer XYZ, for
which we will receive € 2,000 on 3 month credit sale.
9. At the end of month the Customer XYZ made a claim on the
advertisement services and we agreed to sales allowance (a
reduction of the original selling price) in the amount of 25%.
10. Received an invoice for a series of advertisements, € 3 000,
that appeared in the local news during December and will be
paid in January.
11. Received an invoice for external services of € 1 500 for
December to be paid with 60 credit term
12. Performed consulting services, in the amount of € 2,000
with 20% for cash discount on sales (cash immediately
received).
13. In November 2014 we performed additional consulting
work, € 2 100 on credit (10/30, n 90) and in December 2014 the
customer used the discount for prompt payment.
14. We sold office supplies inventory on the market for € 2000

2. through credit card transaction (a straight 2% of credit card
services were taken).
15. The cost of office supplies used during December is € 200.
16. The cost of raw materials inventory used during December
is € 3 000.
17. In the beginning of October 2014 a subscription rights for
local newspaper magazine of € 2 500 was paid for five month
term in advance;
18. In the beginning of November 2014 company receives rent
for 3 months in advance, €3,000
19. At the end of the month Company repaid to the Bank credit
tranche € 500 and paid interest charges (interest rate as of 5%
p.a.)
20. Depreciation of equipment for December amounts to € 250.
21. ABC company acknowledged the € 1 500 worth of bad debts
in December 2014.
Required:
a) Prepare the opening journal entry on Dec. 1, 2014.
b) Prepare the journal entries for the transactions (1– 21) 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.
VIII.B. Valuation of Inventories
The inventory of ABC Company on November 30, 2014 shows
500 units at € 100 per unit. A physical inventory on December
31, 2014, shows a total of 700 units on hand. Revenue from

3. sales for December totals € 300,000 (= 2,000 units at € 150 per
unit). The following purchases were made during December
2014:
Dec. 11: 1,100 units at € 110 per unit
Dec. 23: 700 units at € 115 per unit
Dec. 27: 400 units at € 135 per unit
Requirement:
1. Calculate the cost of goods sold for December 2014 and the
inventory cost as of December 31, 2014, using the FIFO method
and LIFO method.
2. Compute the gross profit for December 2014.
VIII.C. Valuation of Inventories
Assume a vendor of soft drinks starts out the week with no
inventory. He buys and sells cola as follows:
· Buys 5 cans on Monday for 40 cents
· Buys 4 cans on Tuesday for 30 cents
· Buys 2 cans on Wednesday for 50 cents
· Sells 10 cans on Thursday for 70 cents
Please shows the vendor’s cost of goods sold and ending
inventory under the four methods.
VIII.D. Cost of goods sold under the periodic system inventory
for 2015
The gross sales from whole 2015 period were € 2 500 and the
sales returns were 5%. Additionally the company is offering 4%
of cash discount of sales to their customers (the cash sales was
€ 1 000). At the beginning of the period December 31, 2014 the
merchandise inventory level was € 500 and during the year 2015
the company purchased € 1 500 of merchandise with 10% cash
discount (the cash purchases was € 500). Due to the low quality
of the merchandise the company agreed with the suppliers on €
200 purchase allowance. The freight –in cost for the 2015
period were € 50. The ending inventory as of December 31,
2015 level was € 250. Please calculate cost of goods sold and
gross profit under the periodic system inventory for 2015.

4. AssetsEquities
Equipment 2 000Paid-in Capital 3 000
Land1 500Retained Earnings 1 800
Raw materials Inventory 1 800Loan Payable 2 500
Office Supplies Inventory 1 200Salary payables 1 500
Accounts Receivable3 200Accounts payable 3 400
Cash, Bank 4 500Unearned rent revenue2 000
Prepaid expenses 1 500
Allowance for
uncollectible accounts
1 500
Total assets15 700Total equities15 700
Balance Sheet on Nov. 30, 2014
EXERCISES IX_ABalance Sheet on Nov. 30,
2014AssetsEquitiesEquipment 1,500Paid-in Capital
4,000Land1,500Retained Earnings 1,300Raw materials
Inventory 1,500Loan Payable 3,000Office Supplies Inventory
2,000Salary payables 1,400Accounts Receivable3,000Accounts
payable 2,400Cash, Bank 5,600Unearned rent
revenue2,000Prepaid expenses 1,000Allowance for uncollectible
accounts2,000Total assets16,100Total equities16,100ASSETS
ACCOUNTSCASH, BANK OFFICE SUPPLY
INVENTORYRAW MATERIALS INVENTORYACCOUNT
RECEIVABLESEQUIPMENTLANDPREPAID
EXPENSESDtCtDtCtDtCtDtCtDtCtDtCtDtCtEQUITY AND
LIABILITIES ACCOUNTSPAID IN CAPITAL RETAINED
EARNINGSTAX PAYABLESACCOUNTS PAYABLES LOAN
PAYABLE SALARY PAYABLESUNEARNED RENT
REVENUEDtCT DtCtDtCtDtCtDtCtDtCtDtCtTEMPORARY
ACCOUNTS transactions INCOME STATEMENTEXPENSES
REVENUESBalance Sheet on Dec. 30,
2014AssetsEquitiesEquipment Paid-in Capital LandRetained
Earnings Raw materials Inventory Loan Payable Office Supplies
Inventory Salary payables Accounts ReceivableAccounts
payable Cash, Bank Unearned rent revenuePrepaid expenses

5. Allowance for uncollectible accountsTotal assets0Total
equities0
EXERCISE IX_BFIFO method Valuation of
InventoriesUnitsPrice per Unit Total Cost of goods sold Ending
balanceBeginning balance Purchase Dec. 11Purchase Dec.
23Purchase Dec. 27Total UnitsPrice per Unit Total Sales
revenues Cost of Goods Sold for December Gross Profit for
DecemberInventory cost on Dec. 31LIFO methodValuation of
InventoriesUnitsPrice per Unit Total Cost of goods sold Ending
balanceBeginning balance Purchase Dec. 11Purchase Dec.
23Purchase Dec. 27Total UnitsPrice per Unit Total Sales
revenues Cost of Goods Sold for December Gross Profit for
DecemberInventory cost on Dec. 31
Inventory_methods_IX_CAmounts i USDMonday Buys 3 cans
for 35 centsTuesdayBuys 4 cans for 30 centsWednesdayBuys 4
cans for 40 centsThursdaySells 8 cans for 60 centsnumber of
cans purchasedtotal price for purchased cansweighted average
for purchased cansLIFO methodFIFO methodWeighted
averageSpecific identificationSpecific identificationSales
revenues Cost of goods soldTotal CoGS- 0Gross profit- 0Ending
inventory - 0
EXERCISES IX_DGross sales Deduct: Sales returns and
allowances Cash discounts on salesNet sales Deduct: Cost of
goods sold Merchandise inventory, December 31, 2014
Purchases (gross) Deduct: Purchase returns and allowances
Cash discounts on purchases Net purchases Add: Freight-in
Total cost of merchandise acquired Cost of goods available for
sale Deduct: Merchandise inventory, December 31, 2015 Cost of
goods sold Gross profit
Exercise IX
IX.A. Accounting Cycle
The Accounting Cycle – Problem Set ABC Company Ltd.
Summary of transactions during December:
1. Paid outstanding salary payables.

6. 2. Paid outstanding trade creditors.
3. Salaries to employees of € 1 300 were calculated for
December to be paid in January.
4. Purchase of € 2 000 of Office Supplies Inventory with 10%
cash discount for cash transaction.
5. Purchase of raw materials Inventory of € 2 000 was done with
three month trade credit.
6. Due to the low quality of the purchased office supplies
inventory the company returned back € 200 of inventory that
diminished the accounts payable by that amount.
7. The freight in for both supplies and raw material inventory
was paid in the amount of € 400.
8. Performed advertisement services for Customer XYZ, for
which we will receive € 4,500 on 3 month credit sale.
9. At the end of month the Customer XYZ made a claim on the
advertisement services and we agreed to sales allowance (a
reduction of the original selling price) in the amount of 15%.
10. Received an invoice for a series of advertisements, € 2 000,
that appeared in the local news during December and will be
paid in January.
11. Received an invoice for external services of € 2 000 for
December to be paid with 60 credit term
12. Performed consulting services, in the amount of € 5,000
with 10% for cash discount on sales (cash immediately
received).
13. In November 2014 we performed additional consulting
work, € 2 000 on credit (10/30, n 90) and in December 2014 the
customer used the discount for prompt payment.
14. We sold office supplies inventory on the market for € 2500
through credit card transaction (a straight 5% of credit card
services were taken).
15. The cost of office supplies used during December is € 800.
16. The cost of raw materials inventory used during December
is € 2 000.
17. In the beginning of October 2014 a subscription rights for
local newspaper magazine of € 3 000 was paid for three month

7. term in advance;
18. In the beginning of September 2014 company receives rent
for 5 months in advance, €5,000
19. At the end of the month Company repaid to the Bank credit
tranche € 1 000 and paid interest charges (interest rate as of
10% p.a.)
20. Depreciation of equipment for December amounts to € 50.
21. ABC company acknowledged the € 2 000 worth of bad debts
in December 2014.
Required:
a) Prepare the opening journal entry on Dec. 1, 2014.
b) Prepare the journal entries for the transactions (1– 21) 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.
IX.B. Valuation of Inventories
The inventory of ABC Company on November 30, 2014 shows
200 units at € 160 per unit. A physical inventory on December
31, 2014, shows a total of 400 units on hand. Revenue from
sales for December totals € 400,000 (= 2,000 units at € 200 per
unit). The following purchases were made during December
2014:
Dec. 11: 900 units at € 175 per unit
Dec. 23: 900 units at € 165 per unit
Dec. 27: 400 units at € 180 per unit
Requirement:

8. 1. Calculate the cost of goods sold for December 2014 and the
inventory cost as of December 31, 2014, using the FIFO method
and LIFO method.
2. Compute the gross profit for December 2014.
IX.C. Valuation of Inventories
Assume a vendor of soft drinks starts out the week with no
inventory. He buys and sells cola as follows:
· Buys 3 cans on Monday for 35 cents
· Buys 4 cans on Tuesday for 30 cents
· Buys 4 cans on Wednesday for 40 cents
· Sells 8 cans on Thursday for 60 cents
Please shows the vendor’s cost of goods sold and ending
inventory under the four methods.
IX.D. Cost of goods sold under the periodic system inventory
for 2015
The gross sales from whole 2015 period were € 4 500 and the
sales returns were 10%. Additionally the company is offering
10% of cash discount of sales to their customers (the cash sales
was € 2 500). At the beginning of the period December 31, 2014
the merchandise inventory level was € 900 and during the year
2015 the company purchased € 2 500 of merchandise with 15%
cash discount (the cash purchases was € 1 500). Due to the low
quality of the merchandise the company agreed with the
suppliers on € 500 purchase allowance. The freight –in cost for
the 2015 period were € 150. The ending inventory as of
December 31, 2015 level was € 500. Please calculate cost of
goods sold and gross profit under the periodic system inventory
for 2015.
AssetsEquities
Equipment 1 500Paid-in Capital 4 000
Land1 500Retained Earnings 1 300
Raw materials Inventory 1 500Loan Payable 3 000
Office Supplies Inventory 2 000Salary payables 1 400
Accounts Receivable3 000Accounts payable 2 400

9. Cash, Bank 5 600Unearned rent revenue2 000
Prepaid expenses 1 000
Allowance for
uncollectible accounts
2 000
Total assets16 100Total equities16 100
Balance Sheet on Nov. 30, 2014
EXERCISE IIBalance Sheet on Nov. 30,
2014AssetsEquitiesEquipment 6,000Paid-in Capital 5,000Office
Supplies Inventory 1,000Retained Earnings 3,600Account
Receivables1,000Tax Payable 1,000Cash, Bank 8,600Accounts
payable 7,000Total assets16,600Total
equities16,600EQUIPMENTPAID IN CAPITAL DtCtDtCT OP.
BAL.OP. BAL. OFFICE SUPPLY INVENTORYREATINED
EARNINGSDtCtDtCtOP. BAL.OP. BAL.ACCOUNT
RECEIVABLESTAX PAYABLESDtCtDtCtOP. BAL.€ 1,000OP.
BAL.CASH, BANK ACCOUNTS PAYABLES DtCtDtCtOP.
BAL.OP. BAL.transactions 1. Performed consulting services,
for which we received € 2,000 cash immediatelyDtCtDtCt2.
Received an invoice for a series of advertisements, € 600, that
appeared in the
local news during December and will be paid in
JanuaryDtCtDtCt3. Performed additional consulting work, € 2
500 on credit.DtCtDtCt4. Issued a check for € 800 for rent of
shop space for DecemberDtCtDtCt5. Performed advertisement
services, for which we received € 1,000 cash
immediately.DtCtDtCt6. Paid salaries to employees of € 2,000
for December.DtCtDtCt7. Paid outstanding tax € 1
000DtCtDtCt8. Paid creditors € 2,800.CASH ACCOUNTS
PAYABLES DtCtDtCt9. The cost of office supplies used during
December is € 450DtCtDtCt10. Depreciation of equipment for
December amounts to € 150DtCtDtCtclosing the temporary
accounts DtCtDtCtDtCtDtCtDtCtSALARY EXPENSES
DEPRECIATION EXPENSES EXPENSES
REVENUESTOTAL € 0€ 0€ 0Closing the permament accounts

10. EQUIPMENTPAID IN CAPITAL DtCtDtCT CASH RETAINED
EARNINGSDtCtDtCtTAX PAYABLESDtCtINVENTORY
DtCtACCOUNTS PAYABLES DtCtACCOUNTS
RECEIVABLESDtCtBalance Sheet on Dec.
2014AssetsEquitiesEquipment Paid-in Capital Office Supplies
Inventory Retained Earnings Accounts Reeceivables Tax
PayablesCash, Bank Accounts payable Total assets- 0Total
equities- 0
Exercise VII
VII.A. Accounting Cycle
The Accounting Cycle – Problem Set ABC Company Ltd.
Balance Sheet on Nov. 30, 2014
Assets
Equities
Equipment
2 000
Paid-in Capital
11 000
Land
5 500
Retained Earnings
1 000
Office Supplies Inventory
1 200
Loan Payable
2 000
Accounts Receivable
7 400
Tax payables
900
Cash, Bank
3 000

11. Accounts payable
3 200
Prepaid expenses
3 000
Unearned rent revenue
4 000
Allowance for uncollectible Accounts
3 000
Total assets
22 100
Total equities
22 100
Summary of transactions during December:
1. Cash-Purchase of € 1 800 of Office Supplies Inventory
2. Performed consulting services, for which we received € 9,100
cash immediately.
3. Received an invoice for a series of advertisements, € 1 200,
that appeared in the local news during December and will be
paid in January.
4. In November 2014 we performed additional consulting work,
€ 2 000 on credit (5/30, n 90) and in December the customer
used the discount for prompt payment..
5. Performed advertisement services for Customer XYZ, for
which we will receive € 1,000 on 2 month credit sale.
6. Paid salaries to employees of € 1 200 for December.
7. We sold some of the redundant office supplies inventory on
the market –€ 500 through credit card transaction (a straight
3% of credit card services were taken).
8. Received an invoice for external services of € 1 400 for
December to be paid with 60 credit term
9. Paid outstanding tax payables.
10. Paid trade creditors € 1,300.
11. The cost of office supplies used during December is €
1,100.

12. 12. In the beginning of September 2014 a subscription rights for
local newspaper magazine of € 6 000 was paid for half-a year
term in advance;
13. In the beginning of October 2014 company receives rent for
6 months in advance, €6,000
14. At the end of the month Company repaid to the Bank credit
tranche 500 and paid interest charges (interest rate as of 9 %
p.a.)
15. At the end of month the Customer XYZ made a claim on the
advertisement services and we agreed to sales allowance (a
reduction of the original selling price) in the amount of 20%.
16. Depreciation of equipment for December amounts to € 100.
17. ABC company acknowledged the $2,000 worth of bad debts
in December 2014.
Required:
a) Prepare the opening journal entry on Dec. 1, 2014.
b) Prepare the journal entries for the transactions (1. – 17) 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.
VII.B. Account Receivables valuation
Thomson Corp. had sales of € 100,000 during 2015, including €
60,000 on credit. Balances on Dec. 31, 2014, were Accounts

13. Receivable, € 9,000, and Allowance for Bad Debts, € 800 (=
credit balance). Data for 2015: collections on accounts
receivable were € 56,000. Bad debts expense was estimated at 2
% of credit sales, as in previous years. Write-offs of bad debts
during 2015 were € 1,000.
Requirements:
1. Prepare all journal entries for 2015.
2. Show the ending balances of the balance sheet accounts on
Dec. 31, 2015.
VII.C. Aging of accounts receivables
The aging of accounts receivable method directly incorporates
the customers’ payment histories. As more time elapses after
the sale, collection becomes less likely. The $126,000 balance
in Accounts Receivable on December 31, 2014, might be aged
as shown below. The beginning balance in the Allowance
account is amounted to € 1 000.
Exercise III
Accounting Cycle
The Accounting Cycle – Problem Set ABC Company Ltd.
Balance Sheet on Nov. 30, 2018
Assets
Equities
Equipment
5 000
Paid-in Capital
4 000
Office Supplies Inventory
1 000

14. 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. At the end of the month Company took out a 9 % p.a., 90 day,
€10,000 loan with the Bank
3. Performed consulting services, for which we received € 2,000
cash immediately.
4. Received an invoice for a series of advertisements, € 1 000,
that appeared in the local news during December and will be
paid in January.
5. Performed additional consulting work, € 1 800 on credit.
6. Performed advertisement services, for which we received €
1,000 cash immediately.
7. Paid salaries to employees of € 2,000 for December.
8. Paid outstanding tax € in the amount 800
9. Paid creditors € 1,300.
10. The cost of office supplies used during December is € 850.
11. Depreciation of equipment for December amounts to € 250.
Required:
a) Prepare the opening journal entry on Dec. 1, 2018.
b) Prepare the journal entries for the transactions (1. – 11.) for

15. 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 closing entries for the temporary accounts and
the Income Statement.
e) Prepare the closing entries for the permanent accounts and
the Balance Sheet as of Dec. 31, 2018.
EXERCISE IVBalance Sheet on Nov. 30,
2018AssetsEquitiesEquipment 2,500Paid-in Capital
3,000Land1,000Retained Earnings 2,400Office Supplies
Inventory 1,200Loan Payable 1,000Accounts
Receivable1,400Tax payable800Cash, Bank 3,500Accounts
payable 2,400Total assets9,600Total equities9,600ASSETS
ACCOUNTSEQUITY AND LIABILITIES
ACCOUNTSTEMPORARY ACCOUNTS transactions
EXPENSES REVENUESTOTAL Balance Sheet on Nov. 30,
2018
Exercise II
Accounting Cycle
The Accounting Cycle – Problem Set ABC Company Ltd.
Balance Sheet on Nov. 30, 2014
Assets
Equities
Equipment
6 000
Paid-in Capital
5 000
Office Supplies Inventory

16. 1 000
Retained Earnings
3 600
Accounts Receivable
1 000
Tax payable
1 000
Cash, Bank
8 600
Accounts payable
7 000
Total assets
16 600
Total equities
16 600
Summary of transactions during December:
1. Performed consulting services, for which we received € 2,000
cash immediately.
2. Received an invoice for a series of advertisements, € 600,
that appeared in the local news during December and will be
paid in January.
3. Performed additional consulting work, € 2 500 on credit.
4. Issued a check for € 800 for rent of shop space for December.
5. Performed advertisement services, for which we received €
1,000 cash immediately.
6. Paid salaries to employees of € 2,000 for December.
7. Paid outstanding tax € 1 000
8. Paid creditors € 2,800.
9. The cost of office supplies used during December is € 450.
10. Depreciation of equipment for December amounts to € 150.
Required:
a) Prepare the opening journal entry on Dec. 1, 2014.
b) Prepare the journal entries for the transactions (1. – 10.) for
the month of December and post them to the T-accounts,

17. 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.
EXERCISE IIIBalance Sheet on Nov. 30,
2018AssetsEquitiesEquipment 5,000Paid-in Capital 4,000Office
Supplies Inventory 1,000Retained Earnings 3,600Accounts
Receivable1,000Tax payable1,000Cash, Bank 6,600Accounts
payable 5,000Total assets13,600Total equities13,600ASSETS
ACCOUNTSCASH, BANK OFFICE SUPPLY
INVENTORYACCOUNT
RECEIVABLESEQUIPMENTDtCtDtCtDtCtDtCtOP. BAL.OP.
BAL.OP. BAL.OP. BAL.EQUITY AND LIABILITIES
ACCOUNTSPAID IN CAPITAL RETAINED EARNINGSTAX
PAYABLESACCOUNTS PAYABLES LOAN PAYABLE DtCT
DtCtDtCtDtCtDtCtOP. BAL. OP. BAL.OP. BAL.OP. BAL.OP.
BAL.TEMPORARY ACCOUNTS DtCtDtCttransactions 1. Cash-
Purchase of €1,000 of Office Supplies Inventory2. At the end
of the month Company took out a 9 % p.a., 90 day, €10,000 loan
with the Bank 3. Performed consulting services, for which we
received € 2,000 cash immediately4. Received an invoice for a
series of advertisements, € 1 000, that appeared in the local
news during December and will be paid in January. 5.
Performed additional consulting work, € 1 800 on credit6.
Performed advertisement services, for which we received €
1,000 cash immediately. 7. Paid salaries to employees of €
2,000 for December8. Paid outstanding tax € in the amount 800

18. 9. Paid creditors € 1,300. 10. The cost of office supplies used
during December is € 85011. Depreciation of equipment for
December amounts to € 250EXPENSES REVENUESTOTAL
Balance Sheet on Nov. 30, 2018AssetsEquitiesEquipment Paid-
in Capital Office Supplies Inventory Retained Earnings
Accounts Receivables Loan Payable Cash, Bank Tax
PayablesAccounts payable Total assetsTotal equities
Exercise IV
Accounting Cycle
The Accounting Cycle – Problem Set ABC Company Ltd.
Balance Sheet on Nov. 30, 2014
Assets
Equities
Equipment
2 500
Paid-in Capital
3 000
Land
1 000
Retained Earnings
2 400
Office Supplies Inventory
1 200
Loan Payable
1 000
Accounts Receivable
1 400
Tax payable
800
Cash, Bank
3 500

19. Accounts payable
2 400
Total assets
9 600
Total equities
9 600
Summary of transactions during December:
1. Cash-Purchase of €1,500 of Office Supplies Inventory
2. Performed consulting services, for which we received € 1,000
cash immediately.
3. Received an invoice for a series of advertisements, € 200,
that appeared in the local news during December and will be
paid in January.
4. Performed additional consulting work, € 1 900 on credit.
5. Performed advertisement services, for which we received €
1,000 cash immediately.
6. Paid salaries to employees of € 700 for December.
7. Received an invoice for external services of € 400 for
December to be paid with 60 credit term
8. Paid outstanding tax in the amount € 800
9. Paid trade creditors € 1,300.
10. The cost of office supplies used during December is €
1,900.
11. At the end of the month Company repaid to the Bank credit
tranche 200 and paid interest charges (interest rate as of 9 %
p.a.)
12. 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. – 12) 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.

20. 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.
Exercise V
The Accounting Cycle – Problem Set ABC Company Ltd.
Balance Sheet on Nov. 30, 2014
Assets
Equities
Equipment
2 000
Paid-in Capital
3 000
Land
2 500
Retained Earnings
1 000
Office Supplies Inventory
1 200
Loan Payable
2 400
Accounts Receivable
3 600
Tax payables
900
Cash, Bank
3 900

21. Accounts payable
3 700
Prepaid expenses
3 000
Salary payable
1 200
Unearned rent revenue
4 000
Total assets
16 200
Total equities
16 200
Summary of transactions during December:
1. Cash-Purchase of € 1 800 of Office Supplies Inventory
2. Performed consulting services, for which we received € 2,100
cash immediately.
3. Received an invoice for a series of advertisements, € 1 200,
that appeared in the local news during December and will be
paid in January.
4. Performed advertisement services for Customer XYZ, for
which we will receive € 3,000 on 2 month credit sale.
5. Paid salaries to employees of € 1 200 for December.
6. Received an invoice for external services of € 1 400 for
December to be paid with 60 credit term
7. Paid outstanding tax payables.
8. Paid trade creditors € 1,300.
9. Account for salaries that have been executed in December for
the amount of € 1 300.
10. The cost of office supplies used during December is €
1,100.
11. In the beginning of September 2014 a subscription rights for
local newspaper magazine of € 6 000 was paid for half-a year
term in advance;

22. 12. In the beginning of October 2014 company receives rent for
6 months in advance, €6,000
13. At the end of the month Company repaid to the Bank credit
tranche 500 and paid interest charges (interest rate as of 10 %
p.a.)
14. Depreciation of equipment for December amounts to € 100.
Required:
a) Prepare the opening journal entry on Dec. 1, 2014.
b) Prepare the journal entries for the transactions (1. – 14) 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.
EXERCISE VIIIFIFO method Valuation of
InventoriesUnitsPrice per Unit Total Cost of goods sold Ending
balanceBeginning balance 900130117000900117000-
00Purchase Dec. 10 1,1001201320001,100132000- 00Purchase
Dec. 18
1,00011011000020022000800880003,0003590002,20027100080
088000UnitsPrice per Unit Total Sales revenues
2,200200440000Cost of Goods Sold for December 271000Gross
Profit for December169000Inventory cost on Dec. 3188000LIFO

23. methodValuation of InventoriesUnitsPrice per Unit Total Cost
of goods sold Ending balanceBeginning balance
90013011700010013000800104000Purchase Dec. 10
1,1001201320001,100132000- 00Purchase Dec. 18
1,0001101100001,000110000-
003,0003590002,200255000800104000UnitsPrice per Unit Total
Sales revenues 2,200200440000Cost of Goods Sold for
December 255000Gross Profit for December185000Inventory
cost on Dec. 31104000Gross sales $1,740 Deduct: Sales returns
and allowances$70 Cash discounts on sales$100$170Net sales
$1 570 Deduct: Cost of goods sold Merchandise inventory,
December 31, 20X1$100 Purchases (gross)$960 Deduct:
Purchase returns and allowances $75 Cash discounts on
purchases $5$80 Net purchases $ 880 Add: Freight-in 30 $ 30
Total cost of merchandise acquired$ 910 Cost of goods
available for sale $1,010 Deduct: Merchandise inventory,
December 31, 20X2 $ 140 Cost of goods sold $ 870 Gross
profit $ 700Balance Sheet on Nov. 30,
2014AssetsEquitiesEquipment 2,000Paid-in Capital
4,000Land2,500Retained Earnings 800Raw materials Inventory
1,200Loan Payable 1,500Office Supplies Inventory 2,000Tax
payables900Accounts Receivable3,000Salary payables 800Cash,
Bank 4,300Accounts payable 3,000Prepaid expenses
1,000Unearned rent revenue5,000Total assets16,000Total
equities16,000
Inventory_methods_Exe_VIIIAmounts i USDMonday Buys 2
cans for 50 100TuesdayBuys 2 cans for 60120WednesdayBuys 3
cans for 70210ThursdaySells 5 cans for 90 450number of cans
purchased7total price for purchased cans430weighted average
for purchased cans61LIFO methodFIFO methodWeighted
averageSpecific identificationSpecific identificationSales
revenues 4504504504504502 cans from Monday and 3 cans
from Wednesday1 can from Monday and 2 cans from
Wednesday 2 cans from TuesdayCost of goods
sold1001005021012021012012070140Total
CoGS330290307310310Gross profit120160143140140Ending

24. inventory 100140122.9120120
EXERCISES VIII_ABalance Sheet on Nov. 30,
2014AssetsEquitiesEquipment 2,000Paid-in Capital
3,000Land1,500Retained Earnings 1,800Raw materials
Inventory 1,800Loan Payable 2,500Office Supplies Inventory
1,200Salary payables 1,500Accounts Receivable3,200Accounts
payable 3,400Cash, Bank 4,500Unearned rent
revenue2,000Prepaid expenses 1,500Allowance for uncollectible
accounts1,500Total assets15,700Total equities15,700
EXERCISE VIII_BFIFO method Valuation of
InventoriesUnitsPrice per Unit Total Cost of goods sold Ending
balanceBeginning balance Purchase Dec. 11Purchase Dec.
23Purchase Dec. 27Total UnitsPrice per Unit Total Sales
revenues Cost of Goods Sold for December Gross Profit for
DecemberInventory cost on Dec. 31LIFO methodValuation of
InventoriesUnitsPrice per Unit Total Cost of goods sold Ending
balanceBeginning balance Purchase Dec. 11Purchase Dec.
23Purchase Dec. 27Total UnitsPrice per Unit Total Sales
revenues Cost of Goods Sold for December Gross Profit for
DecemberInventory cost on Dec. 31Gross sales $1,740 Deduct:
Sales returns and allowances$70 Cash discounts on
sales$100$170Net sales $1 570 Deduct: Cost of goods sold
Merchandise inventory, December 31, 20X1$100 Purchases
(gross)$960 Deduct: Purchase returns and allowances $75 Cash
discounts on purchases $5$80 Net purchases $ 880 Add:
Freight-in 30 $ 30 Total cost of merchandise acquired$ 910 Cost
of goods available for sale $1,010 Deduct: Merchandise
inventory, December 31, 20X2 $ 140 Cost of goods sold $ 870
Gross profit $ 700Balance Sheet on Nov. 30,
2014AssetsEquitiesEquipment 2,000Paid-in Capital
4,000Land2,500Retained Earnings 800Raw materials Inventory
1,200Loan Payable 1,500Office Supplies Inventory 2,000Tax
payables900Accounts Receivable3,000Salary payables 800Cash,
Bank 4,300Accounts payable 3,000Prepaid expenses
1,000Unearned rent revenue5,000Total assets16,000Total
equities16,000

25. Inventory_methods_VIII_CAmounts i USDMonday Buys 5 cans
for 40 TuesdayBuys 4 cans for 30WednesdayBuys 2 cans for
50ThursdaySells 10 cans for 70 number of cans purchasedtotal
price for purchased cansweighted average for purchased
cansLIFO methodFIFO methodWeighted averageSpecific
identificationSpecific identificationSales revenues Cost of
goods soldTotal CoGS- 0Gross profit- 0Ending inventory - 0
EXERCISES VIII_DGross sales Deduct: Sales returns and
allowances Cash discounts on salesNet sales Deduct: Cost of
goods sold Merchandise inventory, December 31, 2014
Purchases (gross) Deduct: Purchase returns and allowances
Cash discounts on purchases Net purchases Add: Freight-in
Total cost of merchandise acquired Cost of goods available for
sale Deduct: Merchandise inventory, December 31, 2015 Cost of
goods sold Gross profit
EXERCISE VAssetsEquitiesEquipment 2,000Paid-in Capital
3,000Land2,500Retained Earnings 1,000Office Supplies
Inventory 1,200Loan Payable 2,400Accounts
Receivable3,600Tax payables900Cash, Bank 3,900Accounts
payable 3,700Prepaid expenses 3,000Salary payable
1,200Unearned rent revenue4,000Total assets16,200Total
equities16,200ASSETS ACCOUNTSCASH, BANK OFFICE
SUPPLY INVENTORYACCOUNT
RECEIVABLESEQUIPMENTLANDPREPAID
EXPENSESDtCtDtCtDtCtDtCtDtCtDtCtEQUITY AND
LIABILITIES ACCOUNTSPAID IN CAPITAL RETAINED
EARNINGSTAX PAYABLESACCOUNTS PAYABLES LOAN
PAYABLE SALARY PAYABLESUNEARNED RENT
REVENUEDtCT DtCtDtCtDtCtDtCtDtCtDtCtTEMPORARY
ACCOUNTS 412transactions 1. Cash-Purchase of € 1 800 of
Office Supplies Inventory2. Performed consulting services, for
which we received € 2,100 cash immediately3. Received an
invoice for a series of advertisements, € 1 200, that appeared in
the local news during December and will be paid in January. 4.
Performed advertisement services for Customer XYZ, for which

26. we will receive € 3,000 on 2 month credit sale. 5. Paid salaries
to employees of € 1 200 for December. 6. Received an invoice
for external services of € 1 400 for December to be paid with 60
credit term7. Paid outstanding tax payables8. Paid trade
creditors € 1,300. 9. Account for salaries that have been
executed in December for the amount of € 1 300.10. The cost of
office supplies used during December is € 1,10011. In the
beginning of September 2014 a subscription rights for local
newspaper magazine of € 6 000 was paid for half-a year term in
advance;12. In the beginning of October 2014 company receives
rent for 6 months in advance, €6,00013. At the end of the month
Company repaid to the Bank credit tranche 500 and paid interest
charges (interest rate as of 10 % p.a.) 14. Depreciation of
equipment for December amounts to € 100. INCOME
STATEMENTEXPENSES REVENUESAssetsEquitiesEquipment
Paid-in Capital LandRetained Earnings Office Supplies
Inventory Loan Payable Accounts ReceivableTax payablesCash,
Bank Accounts payable Prepaid expenses Salary payable
Unearned rent revenueTotal assets0Total equities0
Exercise VI
The Accounting Cycle – Problem Set ABC Company Ltd.
Assets
Equities
Equipment
4 000
Paid-in Capital
3 000
Land
10 200
Retained Earnings
1 000
Office Supplies Inventory

27. 2 000
Loan Payable
4 800
Accounts Receivable
3 600
Tax payables
900
Cash, Bank
6 500
Accounts payable
4 100
Prepaid expenses
900
Salary payable
1 400
Unearned rent revenue
12 000
Total assets
27 200
Total equities
27 200
Summary of transactions during December:
1. Purchase of € 1 200 of Office Supplies Inventory with 60 day
credit term
1. Performed consulting services, for which we received € 3,900
cash immediately.
1. Received an invoice for a series of advertisements, € 1 500,
that appeared in the local news during December and will be
paid in January.
1. Performed advertisement services for Customer XYZ, for
which we will receive € 1,700 on 2 month credit sale.
1. Paid salaries to employees of € 1 000 for December.
1. Received an invoice for external services of € 1 300 for

28. December to be paid with 60 credit term
1. Paid outstanding tax payables.
1. Paid trade creditors € 2,300.
1. The cost of office supplies used during December is € 1,000.
1. In the beginning of September 2014 a subscription rights for
local newspaper magazine of € 1 200 was paid for whole year
term in advance;
1. In the beginning of October 2014 company receives rent for 8
months in advance, €16,000
1. Salaries to employees of € 1 300 were calculated for
December to be paid in January.
1. At the end of the month Company repaid to the Bank credit
tranche 1,000 and paid interest charges (interest rate as of 10 %
p.a.)
1. Depreciation of equipment for December amounts to € 500.
Required:
a) Prepare the opening journal entry on Dec. 1, 2014.
b) Prepare the journal entries for the transactions (1. – 14) 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.

29. EXERCISE VIAssetsOwner`s equity and liabilities Equipment
4,000Paid-in Capital 3,000Land10,200Retained Earnings
1,000Office Supplies Inventory 2,000Loan Payable
4,800Accounts Receivable3,600Tax payables900Cash, Bank
6,500Accounts payable 4,100Prepaid expenses 900Salary
payable 1,400Unearned rent revenue12,000Total
assets27,200Total equities27,200ASSETS ACCOUNTSCASH,
BANK OFFICE SUPPLY INVENTORYACCOUNT
RECEIVABLESEQUIPMENTLANDPREPAID
EXPENSESDtCtDtCtDtCtDtCtDtCtDtCtEQUITY AND
LIABILITIES ACCOUNTSPAID IN CAPITAL RETAINED
EARNINGSTAX PAYABLESACCOUNTS PAYABLES LOAN
PAYABLE SALARY PAYABLESUNEARNED RENT
REVENUEDtCT DtCtDtCtDtCtDtCtDtCtDtCtTEMPORARY
ACCOUNTS transactions 1. Purchase of € 1 200 of Office
Supplies Inventory with 60 day credit term 2. Performed
consulting services, for which we received € 3,900 cash
immediately. 3. Received an invoice for a series of
advertisements, € 1 500, that appeared in the local news during
December and will be paid in January. 4. Performed
advertisement services for Customer XYZ, for which we will
receive € 1,700 on 2 month credit sale. 5. Paid salaries to
employees of € 1 000 for December. 6. Received an invoice
for external services of € 1 300 for December to be paid with 60
credit term 7. Paid outstanding tax payables. 8. Paid trade
creditors € 2,300. 9. The cost of office supplies used during
December is € 1,000. 10. In the beginning of September 2014 a
subscription rights for local newspaper magazine of € 1 200 was
paid for whole year term in advance; 11. In the beginning of
October 2014 company receives rent for 8 months in advance,
€16,000 12. Salaries to employees of € 1 300 were calculated
for December to be paid in January. 13. At the end of the
month Company repaid to the Bank credit tranche 1,000 and
paid interest charges (interest rate as of 10 % p.a.) 14.
Depreciation of equipment for December amounts to € 500.
INCOME STATEMENTEXPENSES REVENUESAssetsOwner`s

30. equity and liabilities Equipment Paid-in Capital LandRetained
Earnings Office Supplies Inventory Loan Payable Accounts
ReceivableTax payablesCash, Bank Accounts payable Prepaid
expenses Salary payable Unearned rent revenueTotal assetsTotal
equities
EXERCIES VIIAging of accounts receivables NameTotal1-30
days31-60 days61-90 daysmore than 90 daysA€ 15,000€
15,000B€ 24,000€ 24,000C€ 24,000€ 12,000€ 12,000D€
15,000€ 2,000€ 3,000€ 10,000E€ 12,000€ 3,000€ 5,000€ 3,000€
1,000Other € 36,000€ 25,000€ 7,000€ 2,000€ 2,000Total €
126,000€ 81,000€ 27,000€ 15,000€ 3,000Historical bad debt
percentages1.0%3.0%6.0%60.0%Bad debt allowance to be
providedAccount Receivables valuationThomson Corp. had
sales of € 100,000 during 2015, including € 60,000 on credit.
Balances on Dec. 31, 2014, were Accounts Receivable, € 9,000,
and Allowance for Bad Debts, € 800 (= credit balance). Data for
2015: collections on accounts receivable were € 56,000. Bad
debts expense was estimated at 2 % of credit sales, as in
previous years. Write-offs of bad debts during 2015 were €
1,000. DtCtDtCtDtCtDtCtESTIMATIONS OF BAD DEBT
EXPENSEDtCtCREDIT SALESBalance Sheet on Nov. 30,
2014AssetsEquitiesEquipment 2,000Paid-in Capital
8,000Land2,500Retained Earnings 1,000Office Supplies
Inventory 1,200Loan Payable 2,000Accounts
Receivable7,400Tax payables900Cash, Bank 3,000Accounts
payable 3,200Prepaid expenses 3,000Unearned rent
revenue4,000Total assets19,100Total equities19,100ASSETS
ACCOUNTSCASH, BANK OFFICE SUPPLY
INVENTORYACCOUNT
RECEIVABLESEQUIPMENTLANDPREPAID
EXPENSESDtCtDtCtDtCtDtCtDtCtDtCtEQUITY AND
LIABILITIES ACCOUNTSPAID IN CAPITAL RETAINED
EARNINGSTAX PAYABLESACCOUNTS PAYABLES LOAN
PAYABLE SALARY PAYABLESUNEARNED RENT
REVENUEDtCT DtCtDtCtDtCtDtCtDtCtDtCtEND.BAL.€

31. 0TEMPORARY ACCOUNTS € 0€ 0transactions 1. Cash-
Purchase of € 1 800 of Office Supplies Inventory2. Performed
consulting services, for which we received € 9,100 cash
immediately3. Received an invoice for a series of
advertisements, € 1 200, that appeared in the local news during
December and will be paid in January. 4. In November 2014 we
performed additional consulting work, € 2 000 on credit (5/30, n
90) and in December the customer used the discount for prompt
payment.5. Performed advertisement services for Customer
XYZ, for which we will receive € 1,000 on 2 month credit sale.
6. Paid salaries to employees of € 1 200 for December. 7. We
sold some of the redundant office supplies inventory on the
market –€ 500 through credit card transaction (a straight 3% of
credit card services were taken).8. Received an invoice for
external services of € 1 400 for December to be paid with 60
credit term9. Paid outstanding tax payables.10. Paid trade
creditors € 1,300. 11. The cost of office supplies used during
December is € 1,100. 12. In the beginning of September 2014 a
subscription rights for local newspaper magazine of € 6 000 was
paid for half-a year term in advance;13. In the beginning of
October 2014 company receives rent for 6 months in advance,
€6,00014. At the end of the month Company repaid to the Bank
credit tranche 500 and paid interest charges (interest rate as of 9
% p.a.) 15. At the end of month the Customer XYZ made a
claim on the advertisement services and we agreed to sales
allowance (a reduction of the original selling price) in the
amount of 20%. 16. Depreciation of equipment for December
amounts to € 100. INCOME STATEMENTEXPENSES
REVENUESAssetsOwner`s equity and liabilities Equipment
Paid-in Capital LandRetained Earnings Office Supplies
Inventory Loan Payable Accounts ReceivableTax payablesCash,
Bank Accounts payable Prepaid expenses Unearned rent
revenueTotal assetsTotal equities