ACCT 100 Fall Semester 2020-2021

QUIZ 2

Time allowed attempting quiz: 1 hour 10 minutes

Time to take pictures of attempt and upload on LMS: 10 minutes

Total marks: 55

MARIUM SHAHID
24100071

1. Periodicity Assumption divides the economic life of a business into artificial time periods.
True or False?

FALSE

2. Adjusting entries
A. ensure that the revenue recognition and expense recognition principles are followed.
B. are necessary to enable the financial statements to conform to International Financial
Reporting Standards (IFRS).
C. are required because some costs expire with the passage of time and have not yet
been journalized.
D. all of the above.
E. none of the above.

Answer = D

3. Red Ltd’s financial year ends on December 31. It pays Rent charges for each year ending May 31
in two equal instalments, on June 1 and December 1, in advance. The total Rental expense for the
year from June 1, 2019 to May 31, 2020 was £15,000 (this represented a 25% increase from the
previous year).

(a) What was the prepaid rent included in the balance sheet at December 31, 2019? (Give answer to
the nearest £) (1 point)

ANSWER = 6250

(b) What was the rent expense for the year ended December 31, 2019? (Give answer to the nearest £)
(2 points)

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 ANSWER =
12000/12 = 1000 x 5 +1250 x 7
= 13750

Question 4

Pet Care Inc. runs a veterinary clinic for pet care services. Pet Care Inc. also provides veterinary services
at home. It is the policy of Pet Care Inc. to record adjusting entries on a monthly basis. Pet Care Inc.’s
fiscal year ends on June 30, 2020. The unadjusted trial balance dated June 30, 2020 is given below (this
reflects the adjusting entries up until May 31, 2020, but not for June).

Pet Care Inc.

Unadjusted Trial Balance
June 30, 2020
$ $
Cash 18,170
Accounts Receivable 2,415
Unexpired Insurance 3,680
Prepaid Rent 6,900
Medical supplies 517
Office Equipment 207,000
Accumulated depreciation: Office Equipment 82,800
Account Payable 4,025
Notes Payable 5,750
Dividends Payable 1,150
Interest Payable 29
Income Taxes Payable 3,910
Unearned Veterinary Revenue 1,265
Share Capital - Ordinary 23,000
Retained Earnings 65,090
Dividends 1,150
Veterinary Revenue Earned 177,531
Advertising Expense 8,510
Insurance Expense 5,060
Rent Expense 18,975
Medical Supplies Expense 897
Utilities Expense 5,750
Depreciation Expense: Office Equipment 37,950
Salaries Expense 31,625
Interest Expense 29
Income Taxes Expense 15,922

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 364,550 364,550

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 Other Information

1. According to the records, $650 of cash receipts originally recorded as unearned veterinary
revenue had been earned as of June 30.
2. On April 1, 2020, the company paid $10,350 for rent through September 30, 2020.
3. Accrued but unrecorded salaries at June 30 are $5,500.
4. Based on a count taken at June 30, medical supplies on hand amount to $250.
5. Accrued but unrecorded veterinary revenue earned as of June 30, 2020 is $4,500.
6. On May 1, 2020 the company borrowed $5,750 by signing a six months note payable with a
semi-annual interest rate of 3%. The entire note, plus six months accrued interest is due on
November 1, 2020.
7. The company purchased a 9 months insurance policy on May 1, 2020 for $4,140.
8. Estimated income taxes expense for entire year totals $25,000. Taxes are due in the first quarter
of the next fiscal year.
9. The office equipment was acquired when the business was first formed. Its estimated useful life at
that time was five years (or 60 months).
10. A cash payment of advertising expense for $570 was recorded as a debit to Utilities expense $750
and a credit to Cash $750.

Instructions:
Where necessary, you may round your answer to the nearest whole number.

a. Prepare the necessary adjusting/correcting entry for (1) to (10). Omit explanation. (20 marks)
b. Prepare Pet Care Inc.’s adjusted trial balance for June 30, 2020. (14 marks)
c. Prepare Pet Care Inc.’s Income Statement for June 30, 2020. (5 marks)
d. Prepare Pet Care Inc.’s Retained Earnings Statement for June 30, 2020. (2 marks)
e. Prepare Pet Care Inc.’s Statement of Financial Position for June 30, 2020. (10 marks)
f. Prepare the necessary year-end closing entries for Pet Care Inc. (8 marks)
g. Pet Care Inc.’s unadjusted trial balance reports dividends of $1,150. As of June 30, 2020, have
these dividends been paid? Briefly explain. (1 marks)

ANSWER
a)
Date Account title Debit credit
30thJune,2020 Unearned veterinary revenue 650
Veterinary revenue Earned 650
st
1 April 2020 Rent Expense 5175
Prepaid rent 5175
th
30 June 2020 Salaries Expense 5500
Salaries payable 5500
th
30 June 2020 Medical supplies expense 250
Medical supplies 250

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 30th June 2020 Accounts receivable 4500
Veterinary Revenue earned 4500
30th June 2020 Interest Expense 58
Interest Payable 58
30th June 2020 Insurance expense 920
Unexpired insurance 920
30th June 2020 Income Taxes expense 6250
Income Tax payable 6250
30th June 2020 Depreciation expense: office equipment 3450
Accumulated Depreciation: office equipment 3450
th
30 June 2020 Cash 180
Utilities expense 750
Advertising expense 570

b)
Pet Care Inc.
Adjusted Trial Balance
June 30, 2020
Debit Credit
Cash 18,350
Accounts Receivable 6,915
Unexpired Insurance 2760
Prepaid Rent 1725
Medical supplies 250
Office Equipment 207,000
Accumulated depreciation: Office Equipment 86250
Salaries payable 5500
Account Payable 4,025
Notes Payable 5,750
Dividends Payable 1,150
Interest Payable 87
Income Taxes Payable 10,160
Unearned Veterinary Revenue 615
Share Capital - Ordinary 23,000
Retained Earnings 65,090
Dividends 1,150
Veterinary Revenue Earned 182,681
Advertising Expense 9,080
Insurance Expense 5,980
Rent Expense 24,150
Medical Supplies Expense 1164
Utilities Expense 5,000
Depreciation Expense: Office Equipment 37125

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 Salaries Expense 37125
Interest Expense 87
Income Taxes Expense 22172

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