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QUESTION 1 (12 marks)

Given the following accounts.

	Asset	Liability	Owners Equity	Revenue	Expense	Normal Balance
Account						Dr	Cr
e.g. Cash	X					X
a) Sales Commission Payable
b) Service Revenue
c) Supplies Expense
d) Inventories
e) Accounts Receivable
f) Smith, Capital
g) Smith, Drawings
h) Prepaid Rent
i) Unearned Service Revenue
j) Salary Payable
k) Interest Earned
l) Loan Payable

Required:

Copy the table on to your answer paper and use the symbol X on the respective column to classify each of the accounts and indicate its normal balance. The Cash account (first row) of the table is given as an example. Each row should have only two (2) Xs )

QUESTION 2 (23 marks)

Given the following transactions.

1. James Manny invests $200,000 cash into the business.
2. Purchased land and a building for $4,100,000, paying $500,000 cash and borrowed a loan for the balance from a local bank. The land has a market value of $3,100,000 with the remainder for the building.
3. Installed special insulation and soundproofing throughout most of the building at a cost of $320,000. Paid $50,000 cash for the installation and agreed to pay the remaining balance in 60 days. Manny considers these items to be additional costs to the building as it increases the value of the asset.

(d.) Purchased office furnishings costing $18,000 and recording equipment costing

$88,400 from Music Supplies. Sounds paid $28,000 cash with the balance due in 30 days.

5. Borrowed $180,000 from a bank by a signing 60 days, 6% interest notes payable.
6. Paid the full amount owed to Music Supplies arising from the purchases of office furnishing and recording equipment.
7. Received $25,000 from a client on credit.
8. Paid $1,500 for electricity usage for the month.
9. Received a deposit of $5,000 cash in advance from a client for renovation services on his residence. Renovation work to be performed upon the clients return from the United States.

Required:

Record the above transactions in a good general journal format. Explanation is required.

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