Principles of Financial Accounting

Quiz # 2

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 ACCT 100, Fall Semester 2020-21
Quiz 2

The fiscal year of Baker Street Cinema Limited ends on December 31. The business adjusts its accounts on a monthly
The unadjusted trial balance for the month ended August 31, 2020 is given below along with further information relat
adjustments for the month (adjusting entries for the period January 1 – July 31, 2020 have already been made).

BAKER STREET CINEMA LIMITED

UNADJUSTED TRIAL BALANCE
AUGUST 31, 2020
Dr Cr
Cash 46,500
Prepaid movie rental 61,200
Land 120,000
Building 168,000
Accumulated depreciation - Building 14,000
Fixtures 72,000
Accumulated depreciation - Fixtures 24,000
Notes payable 240,000
Accounts payable 40,400
Unearned ticket revenue 1,000
Income taxes payable 4,740
Share Capital - Ordinary 40,000
Retained earnings 38,810
Dividends 15,000
Ticket revenue 305,200
Kiosk revenue 14,350
Salaries expense 68,500
Movie rental expense 94,500
Utilities expense 9,500
Depreciation:Building 4,900
Depreciation: Fixtures 8,400
Interest expense 14,000
Income taxes expense 40,000

722,500 722,500

Additional Items

1. The expenses relating to movie rental are $10,500 per month. These have been paid in advance.
2. Depreciation rates applied to the building are 5% and the fixtures are 20%.
3. Interest on the note payable is paid on the first of the following month (interest for the month of January is paid on
etc.) It is a 10%, two year note issued on January 1, 2020.
4. Limited time offers are regularly offered to the public. Recently the cinema has introduced a special deal for the loc
home allowing buy one get one free each Wednesday afternoon. The care home has made a $1,500 advance payment
this facility for its residents for the months of July, August, and September.

5. Baskin Robbins runs a kiosk in the premises and pays the cinema a share of its revenues on or before the 10 th of the
following month. The amount payable by Baskin Robbins for the month of August amounted to $2,250. This revenue
yet been recorded. (Use the account Kiosk Revenue.)
6. Unrecorded but accrued salaries at August 31 amount to $1,700.
7. The August income tax expense is estimated at $4,200 (payable before November 15).
8. Utilities expense is recorded as monthly bills are received during the month. No adjusting entries for utilities expen
9. Cash received from Barnabus School as an advance payment for an upcoming school trip to the cinema was debite
$500, and Accounts Payable was credited for the same amount.
10. A dividend paid during the period of 1,000 was debited to Salaries and Wages Expense for 1,000 and credited to C

Instructions
Where necessary, round numbers to the nearest whole number

a. Journalize the above transactions (omit explanations)

b. Prepare the adjusted trial balance for the period ended August 31, 2020
c. Prepare the Income Statement for the period ended August 31, 2020
d. Prepare the Statement of Retained Earnings for the period ended August 31, 2020
e. Prepare a Classified Statement of Financial Position at August 31, 2020
f. Refer to the balances shown in the unadjusted trial balance at August 31. How many months of expense are include
1.         Utilities Expense
2.         Depreciation Expense - Building
3.         Accumulated Depreciation: Building
g. Calculate the total amount of interest expense that will be charged to the income statement over the life of the Note
and the interest payable balance in respect of this Notes Payable at December 31, 2021.
h. If Baker Street Cinema Limited were to close its temporary accounts on August 31, 2020, state the entries for closi
 accounts on a monthly basis.
urther information relating to
ady been made).
h of January is paid on Feb 1 st,

special deal for the local care

,500 advance payment to avail

or before the 10 th of the

o $2,250. This revenue has not

ntries for utilities expense are therefore made at month-end.

the cinema was debited for
1,000 and credited to Cash for the same amount.

of expense are included in each of the following account balances?

ver the life of the Notes Payable

ate the entries for closing the revenue and dividend accounts.
Marks
21 (a) Journalize the transactions (omit explanations)
Negative marking: Overall 2 marks will be deducted if incorrect account titles are
used.
General Journal
Date Account Title and Explanation Debit Credit

4.5 (c) Prepare Income Statement

Baker Street Cinema Limited

Income Statement
August 31, 2020
 Revenue:

Less: Expenses

Net Income

2 (d) Prepare Statement of Retained Earnings

Baker Street Cinema Limited

Retained Earnings Statement
August 31, 2020

3 (f) How many months of expense are included in the following account balances?
1. Utilities expense
2. Depreciation expense - Building
3. Accumulated depreciation - Building

3.5 (g) Total interest expense and interest liability at December 31 2021.

2.5 (h) Prepare closing entries

Negative marking: Overall 1 mark will be deducted if incorrect account titles are
used.
General Journal
Date Account Title and Explanation Debit Credit
EN
Marks
13 (b) Prepare adjusted trial balance

Baker Street Cinema Limited

Adjusted Trial Balance
August 31, 2020
Debit Credit

0 0

10.5 (e) Prepare Statement of Financial Position

Negative marking: -1 mark if current assets not in correct order, -
1 mark if current liabilities not in correct order.
Baker Street Cinema Limited
Statement of Financial Position
August 31, 2020
ASSETS
Property, plant and equipment

Current assets

Total Assets

Equities and Liabilities

Equity

Non Current Liabilities

Current Liabilities

Total Equities and Liabilities

END OF QUIZ
Rough Work

Rough Work
Marks
21 (a) Journalize the transactions (omit explanations)
Negative marking: Overall 2 marks will be deducted if incorrect account titles are
used.
General Journal
Date Account Title and Explanation Debit Credit
1 31-Aug Movie rental expense 10,500
1 Prepaid Movie Rental 10,500

1 31-Aug Depreciation Expense: Buildings 700

1 Accumulated Depreciation - Buildings 700

1 31-Aug Depreciation Expense: Fixtures 1,200

1 Accumulated Depreciation - Fixtures 1,200

1 31-Aug Interest Expense 2,000

1 Interest Payable 2,000

1 31-Aug Unearned ticket revenue 500

1 Ticket Revenue 500

1 31-Aug Accounts receivable 2,250

1 Kiosk Revenue 2,250

1 31-Aug Salaries Expense 1,700

1 Salaries Payable 1,700

1 31-Aug Income Taxes Expense 4,200

1 Income Taxes Payable 4,200

1 31-Aug No adjusting entry required.

1 31-Aug Accounts Payable 500

1 Unearned ticket revenue 500

1 31-Aug Dividend 1000

1 Salaries expense 1000

4.5 (c) Prepare Income Statement

Baker Street Cinema Limited

Income Statement
August 31, 2020
 Revenue:
0.5 Ticket revenue 305,700
0.5 Kiosk revenue 16,600 322,300
Less: Expenses
0.5 Salaries expense 69,200
0.5 Movie rental expense 105,000
0.5 Utilities expense 9,500
0.5 Depreciation:Building 5,600
0.5 Depreciation: Fixtures 9,600
0.5 Interest expense 16,000
0.5 Income taxes expense 44,200 259,100
Net Income 63,200

2 (d) Prepare Statement of Retained Earnings

Baker Street Cinema Limited

Retained Earnings Statement
August 31, 2020
0.5 Opening Retained Earnings 38,810
0.5 Add: Net income 63,200
0.5 Less: Dividends (16,000)
0.5 Retained Earnings $ 86,010

3 (f) How many months of expense are included in the following account balances?
1 Utilities expense 8 months
1 Depreciation expense 7 months
1 Accumulated depreciation - Building 20 months

3 (g) Total interest expense and interest liability at December 31 2021.

1.5 Interest expense: 48000
1.5 Interest liability: 2000

2.5 (h) Prepare closing entries

Negative marking: Overall 1 mark will be deducted if incorrect account titles are
used.
General Journal
Date Account Title and Explanation Debit Credit
0.5 31-Dec Ticket revenue 305,700
0.5 Kiosk revenue 16,600
0.5 Income Summary 322,300
0.5 31-Dec Retained Earnings 16,000
0.5 Dividends 16,000

EN
Marks
13 (b) Prepare adjusted trial balance

Baker Street Cinema Limited

Adjusted Trial Balance
August 31, 2020
Debit Credit
0.5 Cash 46,500
0.5 Accounts receivable 2,250
0.5 Prepaid movie rental 50,700
0.5 Land 120,000
0.5 Building 168,000
0.5 Accumulated depreciation - Building 14,700
0.5 Fixtures 72,000
0.5 Accumulated depreciation - Fixtures 25,200
0.5 Notes payable 240,000
0.5 Accounts payable 39,900
0.5 Salaries payable 1,700
0.5 Unearned ticket revenue 1,000
0.5 Interest payable 2,000
0.5 Income taxes payable 8,940
0.5 Share Capital - Ordinary 40,000
0.5 Retained earnings 38,810
0.5 Dividends 16,000
0.5 Ticket revenue 305,700
0.5 Kiosk revenue 16,600
0.5 Salaries expense 69,200
0.5 Movie rental expense 105,000
0.5 Utilities expense 9,500
0.5 Depreciation:Building 5,600
0.5 Depreciation: Fixtures 9,600
0.5 Interest expense 16,000
0.5 Income taxes expense 44,200
734,550 734,550

10.5 (e) Prepare Statement of Financial Position

Negative marking: -1 mark if current assets not in correct order, -
1 mark if current liabilities not in correct order.
Baker Street Cinema Limited
Statement of Financial Position
August 31, 2020
 ASSETS
Property, plant and equipment
0.5 Land 120,000
0.5 Building 168,000
0.5 Less: Accumulated depreciation - building 14,700 153,300

0.5 Equipment and fixtures 72,000

0.5 Less: Accumulated depreciation - equipment and 25,200 46,800

Current Assets
0.5 Prepaid movie rental 50,700
0.5 Accounts receivable 2,250
0.5 Cash 46,500
0.5 Total Current Assets 99,450

0.5 Total Assets $ 419,550

Equities and Liabilities

Equity
0.5 Share Capital - Ordinary 40,000
0.5 Retained earnings 86,010
126,010

Non Current Liabilities

0.5 Notes payable 240,000
0.5 Total Non Current Liabilities 240,000

0.5 Current Liabilities

0.5 Accounts payable 39,900

0.5 Salaries payable 1,700
0.5 Unearned ticket revenue 1,000
0.5 Interest payable 2,000
0.5 Income taxes payable 8,940

0.5 Total Current Liabilities 53,540

0.5 Total Equities and Liabilities $ 419,550
END OF QUIZ
Rough Work

Rough Work