Yardstick International College

Department of Master of Business Administration (MBA)

Financial and Managerial Accounting 15A/14B Assignment 1

Prepared by
Name: Naomi Metasebia
ID NO: MBAO/8773/14B

To be submitted to
Kirubel Asegidew (Ass Prof)
2/2/2023
FMA ASSIGNMENT ANSWERS

QUESTION 1:

ENTRY JOURNAL (MARCH TRANSACTION)

DATE TRANSACTION EXPLANATION DEBIT CREDIT

March 01 Stockholders invested Ordinary Shares Br.120,000

Br.120,000 cash in the
business in exchange
for ordinary shares

Cash Br.120,000

March 03 Purchased Mechare Land Br.76,000

Meda’s Golf Land for Building Br.20,000
Br.76,000 cash. The Equipment Br.44,000
price consists of land
Br.20,000, building
Br.44,000, and
equipment Br.12,000.
(record as a compound
entry)

Cash Br.140.000

March 05 Advertised the opening Advertising Br.3,200

of the driving range and Expense
miniature golf course,
paying advertising
expenses of Br. 3,200

Cash Br.3,200

March 06 Paid cash Br. 2,480 for Insurance Policy Br.2,480

a 1-year insurance
policy.

Cash Br.2,480

March 10 Purchased golf Equipments Br.5,000

equipment for Br.5,000
from Young Company,
payable in 30 days.
 Account Br.5,000
Payables

March 18 Received golf fees of Cash Br.2,400

Br.2,400 in cash.

Service Br.2,400
Revenue

March 25 Declared and paid a Dividend Br.2,000

Br.2,000 cash dividend.

Cash Br.2,000

March 30 Paid salaries and Salaries and Br.1,800

wages of Br.1,800. wage expenses

Cash Br.1,800

March 30 Paid Young Company in Account Payable Br.5,000

full.

Cash Br.5,000

March 31 Received Br. 1,500 of Cash Br.1,500

fees in cash.

Service Fee Br.1,500

QUESTION 2

A. ADJUSTING ENTRY FOR 3 MONTH PERIOD (JUNE 1- AUGUST 31)

Date Description Debit Credit

Aug 31 Insurance Expense (Birr 9000 Birr 2,250

X3/12)

Prepaid Expense Birr 2,250

(to record expired insurance)

Aug 31 Supplies (Birr 5,200-Birr 1,300) Birr 3,900

Supplies Expense Birr 3,900

(to record supplies used)

Aug 31 Depreciation Expense- Birr 2,160
Buildings 240,000 – Birr 24,000
=Birr 216,000;
Birr 216,000 X 4% = Birr 8,640
per year;
Birr 8640 X 3/12 = Birr 2160)

Acc.Depreciation of Buildings Birr 2,160

(to record account depreciation

of cottages)

Aug 31 Depreciation Expense- Birr 720

Equipment (Birr 32,000-Birr
3,200=Birr 28,800
Birr 28,800 X 10%= Birr 2,880
Birr 2,880 X 3/12= Birr 720

Acc. depreciation of Equipment Birr 720

(to record account depreciation

of Equipment)

Aug 31 Unearned rent Birr 7600

Rent Revenue Birr 7600

(to record rent earned)

Aug 31 Salaries Expense Birr750

Salaries Payable Birr 750

(to record accrued wages)

Aug 31 Accounts Receivable Birr 1600

Rent Revenue Birr 1600

(to record accrued rent)

Aug 31 Interest Expense Birr 2,250

(Birr 100,000X 9%= Birr 9000
Birr 9000 X 3/12= Birr 750

Interest Payable Birr 2,250

(to record interest payable)

B. Adjusted Trial Balance

Expense Debit Credit

Cash Birr 39,300

Accounts Recievable Birr 1,600

Prepaid Insurance Birr 6,750

(Birr 9,000- Birr 2,250)

Supplies Birr 1,300

Land Birr 40,000

Buildings Birr 240,000

Accumulated Depreciation- Birr 2,160

Building

Equipment Birr 32,000

Accumulated Depreciation- Birr 720

Equipment

Account Payable Birr 9,000

Unearned Rent Revenue Birr 1,600

(Birr 9,200- Birr 7,200)

Salaries and Wage Birr 750

Payable

Interest Payable Birr 2,250

Mortgage Payable Birr 100,000

Common Stock Birr 200,000

Dividend Birr 10,000

Rent Revenue Birr 181,600

(Birr 172,400+ Birr 7,600 +
Birr 1,600)

Salaries and Wages (Birr Birr 90,350

89,600+Birr 750)

Maintenance and Repairs Birr 7,200

Utilities Expense Birr 18,400

Interest Expense Birr 2,250

Insurance Expense Birr 2,250

Supplies Expense Birr 3,900

Depreciation Expense Birr 2,160

Depreciation Expense Birr 720

TOTAL BIRR 498,180 BIRR 498,080

QUESTION 3:

A. ANNUAL ADJUSTING ENTRIES (DEC 31)

Description Debit Credit

Service Revenue Birr 12,000

Unearned Service Birr 12,000

Revenue

Accounts Receivable Birr 9,800

Service Revenue Birr 9,800

Bad Debt Expense Birr 2,860

Allowance for Doubtful Birr 2,860

expense

Insurance Expense Birr 960

Prepaid Expense Birr 960

Depreciation Expense Birr 5,000

Accumulated Depreciation Birr 5,000

Interest Expense Birr 120

Interest Payable Birr 120

Prepaid Rent Birr 1,500

Rent Expense Birr 1,500

Salaries and Wages Birr 5,020

Expense
 Salaries and Wages Birr 5,020
Payment

C. Income Statement

Revenue
Service Revenue (Birr 200,000- Birr 12,000+ Birr 9,800).................... Birr 197,800
Expense
Salary and Wages Expense (Birr 61,000 - Birr 5,020)...........................Birr 55,980
Rent Expense (Birr 19,500- Birr 1,500)..................................................Birr 18,000
Depreciation Expense……………………………………………………….Birr 5,000
Bad Debt Expense…………………………………………………………..Birr 2,860
Utilities Expense……………………………………………………………..Birr 2,160
Office expense....................................................................................... Birr 1440
Insurance expense..................................................................................Birr 960
Interest expense.................................................................................... Birr 120
Total expenses………………………………………………………………Birr 85,520

Net Income …………………………………………………………………..Birr 112,280

Owner’s Capital and Equity

Owner’s Capital at the beginning of Jan 1st…………………………….Birr 104,020
Add net income……………………………………………………………..Birr 112,280
Owner’s Capital as of December 31st……………………………………Birr 216,300

B. Balance Sheet (Worksheet)

Asset
Current assets
Cash ………………………………………………………………………….…...…Birr 59,000
Accounts receivable (Birr 99,200 +Birr 9,800)............Birr 109,000
Less :Allowance for doubtful accounts............Birr 4,360……………. .Birr 104,640
Supplies...........................................................................................................Birr 3,920
Prepaid insurance (Birr 2,200 - Birr 960).........................................................Birr 1,240
Prepaid rent................................................................................... ……………Birr 1,500
Total current assets.............................................................. …………………………...Birr
113,600
Equipment ………………………………………………..Birr 50,000
Less: Accumulated depreciation......................Birr 17,500…………….Birr 32,500
Total assets........................................................................... …………………………Birr
146,100
 Liabilities and owners’ equity
Current liabilities
Notes payable............................................................................... Birr 14,400
Unearned service revenue.............................................................Birr 12,000
Salaries and wages payable..........................................................Birr 5,020
Interest payable............................................................................ .Birr 120

Owner’s Capital ($35,010 + $50,620).........................................................Birr 216,300

Total liabilities and owners’ equity...............................................................Birr 247,840

Question 4

A. Journal Entries

The required journal entries are as below-

Date Description Debit Credit

(Birr.) (Birr.)

Mar. 1 Cash a/c 35,000

To Capital a/c 35,000

(To start a business with cash)

Mar. 1 Truck a/c 6,000

To Cash 2,000

To Notes payable 4,000

Mar. 3 Cleaning supplies a/c 1,500

 To Accounts payable 1,500

(To purchase supplies on account)

Mar. 5 Insurance policy a/c 1,200

To Cash a/c 1,200

(To record the payment of insurance policy)

Mar. 14 Accounts receivable a/c 4,800

To Service revenue a/c 4,800

(To billed customers for services)

Mar. 18 Notes payable a/c 4,000

Accounts payable a/c 1,500

To Cash a/c 5,500

(Being cash paid to truck and cleaning service due

amount)

Mar. 20 Salary a/c

To Cash 7,000

(To paid salary) 7,000

Mar. 21 Cash a/c 3,800

To Accounts receivable a.c 3,800

 (To collect billed amount)

Mar. 28 Accounts receivable a/c 2,500

To Service revenue a/c 2,500

(To bill customers for services)

Mar. 31 Advertising expense a/c

To Cash a/c 2,000

(Being advertising expense paid) 2,000

Mar. 31 Dividends a/c 3,000

To Cash a/c 3,000

(Being dividend is paid)

B. THE LEDGER ACCOUNT ARE AS FOLLOWS

Cash

Date Transaction Debit Credit Balance

March 1 Investment 35,000 35,000

March 1 Purchase of Used Truck 2,000 33,000

March 5 Purchase of prepaid insurance 1,200 31,800

March 18 Payment of accounts payable 2,000 29,800

March 20 Payment of salaries 7,000 22,800

March 21 Collection of accounts receivable 3,800 26,600

March 31 Payment of advertising expense 2000 22,600

Accounts receivable

Date Transaction Debit Credit Balance(

(Birr) (Birr) Birr)

March 14 Sales on account 4,800 4,800

March 21 Collection of accounts receivable 3,800 1,000

March 28 Sales on account 2,500 3,500

Prepaid insurance

Date Transaction Debit Credit Balance

March 5 Paid insurance for the month of March 1,200 1,200

Cleaning supplies

Date Transaction Debit Credit Balance

March 3 Purchased on cleaning supplies 1,500 1,500

 Equipment

Date Transaction Debit Credit Balance

March 1 Purchased used Lorry 6,000 6,000

Accounts payable

Date Transaction Debit Credit Balance

March 1 Purchased on account 2,000 2,000

March 3 Purchased cleaning supplies 1,500 3,500

March 18 Payment of accounts payable 2,000 1,500

Capital

Date Transaction Debit Credit Balance

March 1 Investment 35,000 35,000

Cleaning services revenue

Date Transaction Debit Credit Balance

March 14 Service rendered 4,800 4,800

March 28 Service rendered 2,500 7,300

Advertising expense

Date Transaction Debit Credit Balance

March 31 Paid advertising 2000 2000

Salaries expense

Date Transaction Debit Credit Balance

March 20 Paid salaries 7,000 7,000

3. The trial balance on March 31, 2021

Arian's Carpet Cleaners

Trial Balance
March 31, 2021

Debit Credit

Cash 22,600

Accounts receivable 3,500

Equipment 6,000

Prepaid insurance 1,200

Cleaning supplies inventory 1,500

Account payable 1,500

Capital 35,000

Cleaning services revenue 7,300

Salaries expense 7,000

Advertising expense 2,000

Total 43,800 43,800

4. The adjusting entries on March 31, 2021:

Accounts receivable 1000

Cleaning services revenue 400

Depreciation expense - Equipment 200

Accumulated depreciation 200

Insurance expense 100

Prepaid insurance 100

(1,200 * 1/12 = 100)

Cost of sales 1,100

 Cleaning supplies inventory 1,100

Salaries expense 700

Salaries payable 700

● Adjusted Trial Balance

Arian's Carpet Cleaners

Adjusted Trial Balance

March 31, 2021

Debit Credit
(Birr) (Birr)

Cash 22,600

Accounts receivable 4,500

Equipment 6,000

Accumulated depreciation 200

Prepaid insurance 1,100

Cleaning supplies inventory 400

Salaries payable 700

Account payable 1,500

Capital 35,000

Cleaning services revenue 8,300

Salaries expense 7700

Advertising expense 2000

Insurance expense 100

Depreciation expense 200

Cost of sales 1,100

Total 45,700 45,700

5) The Income Statement on the month ending March 31, 2021:

Arian's Carpet Cleaners

Income Statement

For the month ending March 31, 2021

Cleaning services revenue 8,300

Less: Cost of sales (1,100)

Gross profit 7,200

Less: Expenses

Salaries expense 7,700

Advertising expense 2000

Insurance expense 100

Depreciation expense 200 (10,000)

Net income -2,800

Statement of Owner’s Equity

Birr Birr
Arian's Carpet Cleaners

Statement of Owner's Equity

March 31, 2021

Capital, beginning balance 35,000

Net income -2,800

Capital, ending balance 32,200

● Balance sheet

Arian's Carpet Cleaners

Balance Sheet

March 31, 2021

Cash 22,600

Accounts receivable 4,500

Prepaid insurance 1,100

Cleaning supplies inventory 400

Equipment 6,000

Accumulated depreciation (200) 5,800

Total Assets 34,400

Salaries payable 700

Account payable 1,500

capital 32,200

Total Liabilities and Capital 34,400

6. The closing entries are as follows:
Cleaning services revenue 8,300

Income Summary 8,300

Income Summary 11,100

Cost of sales 1,100

Salaries expense 7,700

Advertising expense 2000

Insurance expense 100

Depreciation expense 200

Income Summary -2,700

Capital -2,700