QUESTION 1

i). The purpose of accounting is to provide useful information for decision makers. Specifically focus on the mentioned purpose, explain three (3) reasons of why ethics are an integral part of accounting. (6 marks)

ii). You are reviewing the accounting records of Cathy's Antiques, owned by Cathy Miller. You have uncovered the following situations. Compose a memo to Ms. Miller. Cite the appropriate accounting principle and suggest an action for each separate item.

a. In August, a check for $500 was written to Wee Day Care Center. This amount represents child care for her son Brandon.

b. Cathy plans a clearance sale in May to clear all inventories, since she will be closing her business for a month-long vacation in June. In other words, she plans to stop the business and totally close it because she is going for vacation in June. She plans to reopen and start again the business on July 1 and will continue operating Cathy's Antiques indefinitely.

c. Cathy received a shipment of pine furniture from Quebec, Canada. The invoice was stated in Canadian dollars.

d. Joseph Clark paid $1,500 for a dining table. The amount was recorded as revenue. The table will be delivered to Mr. Clark in six (6) weeks. (8 marks)

QUESTION 2

i). Chan Enterprise had an inventory balance of $15,250 on January 1, 2019, purchased $37,000 during the accounting period, and the cost of goods sold for the year ended December 31, 2019, was $25,000. What is the ending balance in the inventory account? (3 marks)

ii). Zerdax Enterprise identified several errors in their accounting record and stated in the transactions

a. to d. Identify the affected accounts (e.g. Account Payable, Cash, Electricity Expense etc.) and it effect on the affected accounts (i.e. understated or overstated). (3 marks each question 0.5 for determining account, 1 mark for the correct effect) Example: Collection from customer amounting to $6,300 was wrongly recorded as $3,600. Answer: Cash will be understated, Account Receivable overstated.

a. A cash payment was made to pay for Delivery Expense, but was mistakenly charged to Advertising Expense.

b. A credit purchase of inventory was recorded by debiting Supplies and crediting Cash.

c. Payment made to supplier had been omitted. d. Cash paid for Electricity Bill was wrongly recorded in Sundry Expense account. (12 marks)

QUESTION 3 i). Jerry opens a computer shop called JR Tech. JR Tech offers technology products and services. The following are transactions completed in June 2020: June 1 Jerry invested $30,000 cash along with $10,000 furniture in JR Tech. 6 JR Tech made credit purchases of nine (9) computers $13,000 and deviceparts $3,000. These items are bought to be used during providing services to clients. 7 JR Tech issued a quotation of software installation to Jaya Enterprise with stated amount of $6,000 10 JR Tech completed a job amounting to $6,000 for Jaya Enterprise (client) with 5/15, n/30 term of payment. GA20203 Sem II 2019/2020 3 13 JR Tech signed a short term job contract to provide computers service and maintenance to Obena Cyber Caf with stated amount of $14,500. The job will start in August. 17 JR Tech received $5,700 cash from Jaya Enterprise (client) for the job completed on June 10. 30 JR Tech received a bank statement with ending balance of bank account $37,550. Additional information: 1) Staff salaries $3,000 and utilities expenses $150 have not been paid. These expenses are expected to be paid on July 2. 2) JR Tech applies straight line method for furniture depreciation. The furniture is estimated to have a useful life of five (5) years with no scrap value. You are required to; a. Identify the accounts that are involved in each of the transactions for June 2020. Some of the transactions may not involve any account (state No account involve). Example: June 1 Account Cash, Account Furniture and Account Owners Equity. (6 marks) b. Prepare journal entries to record the transactions happened in June (omit the explanation). Some of the transactions may not require to record journal entry (state No entry required and justify the reason). (12 marks) c. Assuming JR Tech financial year ended 30th June 2020, prepare adjusting entries for Depreciation Expense, Salary Payable and Accrued Utilities (omit the explanation). (7 marks) GA20203 Sem II 2019/2020 4 ii). Adjex Printing Services reported Cash and Bank Ledger Account balance as of 31st December 2019 amounting to $32,000. Closing balance stated in the bank statement as at 31 th December 2019 is $37,550, explain two (2) possible situations lead to the different between Cash and Bank Account Ledger Account and the bank statement. (4 marks) QUESTION 4 i). Classify the following items according to its respective activities in the Statement of Cash Flows. a. Gain on sale of equipment b. Proceed from sales of equipment c. Retirement of long-term debt d. Depreciation expense e. Payment of cash dividend f. Increase in accounts receivable g. Purchase of equipment h. Increase in inventory i. Issuance of common stock j. Decrease in accounts payable (10 marks) ii). For the year of 2019, LJ Fashion reported the following record for the companys inventory. Goods available for sale are $28,000; beginning inventory is $13,000; ending inventory is $15,000; and cost of goods sold is $42,000. a. Calculate inventory turnover. (3 marks) b. Interpret your answer in a. (2 marks)