Rift valley university jimma campus

Department of Accounting and Finance

Fundamental of accounting II
Group Assignment (II) Maximum mark 20 %
NB: Maximum 5 students are allowed in each group
Instruction: Show all necessary steps and procedures. Only hand writing work
will be accepted. i.e. Photo copy and any printed materials are rejected.
1. Condensed income statement for Gada Supermarket for two years is shown below:
2020 2021
Sales (net) Br. 205,000 Br. 315,000
Cost of Goods Sold 150,000 175,000
Gross Margin Br. 75,000 Br.140, 000
Operating Expenses 40,000 85,000
Net Income Br. 35,000 Br. 55,000
After the end of 2021 it was discovered that an error had resulted in a Br. 12,000
understatement of 2020 ending inventory.

Required:
a. Compute the corrected net income for 2020
b. Compute the corrected cost of goods sold for 2021
c. Compute the corrected net income for 2021
d. What effect will the error have on net income and ending owner’s equity for 2022?
2. Gada Company uses a perpetual inventory system and the following
beginning Inventory, purchases and sales during 2020.
Jan. 1 Inventory 400 units at Br. 18
Jan. 15 Sales 250units
Mar.10 Purchase 300 units at Br. 22
Apr. 1 Sales 280 units
May 9 purchase 300 units at Br. 16
Sep. 22 Purchase 250 units at Br. 24
Nov.1 Sales 320 units at
Nov. 28 Purchase 150 units at Br. 21
Required:
Determine the cost of goods available for sale.
Determine ending inventory, and the cost of goods sold under each of the
assumed cost flow methods (FIFO, LIFO, and Weighted Average)
3. [Retail method]. The inventory of Addis book store was destroyed by fire accident occurred in
its main stock. For insurance purpose the company has to estimate the amount of inventory lost
by fire. The data related to cost and retail value of inventory for Addis book store were as
follows.

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 Cost Retail
Beginning inventory Br 80,000 Br 100,000
Purchases 115,000 158,000
Freight in 10,000
Purchase return and allowance 5,000 8,000
Sales 194,000
Sales discount 6,000
a. Compute the estimated cost of ending inventory.
b. What is the estimated amount of inventory lost by fire assuming that inventory costing
birr 15,000 was undestroyed by fire?
4. Alligator Delivery Company acquired an adjacent lot to construct a new
warehouse, paying birr 35,000 and giving a short-term note for birr 125,000. Legal
fees paid were birr 1,100, delinquent taxes assumed were birr 12,500, and fees paid
to remove an old building from the land were birr 18,000. Materials salvaged from
the demolition of the building were sold for birr 3,600. A contractor was paid birr
512,500 to construct a new warehouse. Determine the cost of the land to be reported
on the balance sheet.
5. Abdi Company purchases a factory machine at a cost of Birr 28,000 on July 1,
2016. The machine is expected to have a salvage value of Br. 6,000 at the end of its
4-year use full life. During its useful life, the machine is expected to be used
125,000 hours. Actual annual hourly use was: 35,000 for 1st year 30,000 for 2nd year
35,000 for 3rd Year and, 25,000 for 4th Year.
Required: Prepare depreciation schedules under the following deprecation
computation methods:

(a) The straight- line,

(b) Units-of- activity,
(c) Declining balance method
(d) Sum-of-year’s-digits
6. Assume Hone Land Hotel exchange its old machine for another new machine. The market
price of new machine is birr 42,000. The old machine had original cost and Acc. Depreciation to
date of birr 35,000 and birr 23,000 respectively. Hone Land Hotel paid additional cash to the
owner of new machine in the amount of birr 27,000.

Required:
a. Compute trade-in- allowance on old equipment
b. Compute gain or loss on exchange
c. Compute cost of new machine for financial reporting purpose
d. Compute cost of new machine for financial for income tax purpose
e. Prepare necessary journal entry to record the exchange.

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7. Equipment acquired on January 3, 2007, at a cost of birr 265,500, has an
estimated useful life of eight years and an estimated residual value of birr 31,500.
a. What was the annual amount of depreciation for the years 2007, 2008, and 2009,
using the straight-line method of depreciation?
b. What was the book value of the equipment on January 1, 2010?
c. Assuming that the equipment was sold on January 4, 2010, for birr 168,500,
journalize the entry to record the sale.
d. Assuming that the equipment had been sold on January 4, 2010, for birr 180,000
instead of $168,500, journalize the entry to record the sale
8. ABC Company purchases a patent for Br. 180,000 January 1, 2016. Its estimated
useful Life is 10 years.
(a) Prepare the January entries to record patent expense for the first
year.
(b) Show how this patent is reported on the balance sheet at the end of
the first year.
9. Koketi Co. acquired mineral rights for birr 16,200,000. The mineral deposit is estimated at
90,000,000 tons. During the current year, 13,750,000 tons were mined and sold.
a. Determine the amount of depletion expense for the current year.
b. Journalize the adjusting entry to recognize the depletion expense.
10. Moha Company pays the salary of its employees according to the Ethiopian calendar month.
The following data relates to the month of Mazia , 2012
Ser. Name of Basic Monthly OT hours Duration of OT
No. Employees Salary Allowance Worked work
TA PA
1 Chala Gemachu Br. 4,200 100 6 rest days
2 Tesfaye Abdisa 2,600 --- 8 10 p.m. -2 a.m.
3 Abdela Mohammed 2,400 800 10 6p.m. -8p.m.
4 Helen Geremu 8,000 1500 500 -- ----
5 Andinet Asmelash 520 50 9 Public Holiday
Additional information;
That management of the agency usually expects a worker to work 40 hours in a week and during
Mazia 2012 all workers have done as they have been expected. Besides, all workers of this
agency are permanent employees. Abdela Mohammed agreed to have a monthly 5 % be
deducted and paid to the credit Association of the agency as a monthly saving.
Instructions: Based on the above information:
1. Prepare a payroll register (or sheet) for the agency for the month of Mazia, 2012.
2. Record the payment of salary for the month of Mazia, 2012.
3. Record the payroll taxes expense for the month of Mazia, 2012.
4. Record the payment withholding taxes and payroll taxes of the month of Mazia, record
the required Journal entry.