ACT 201 - Assignment Solution (Summer 2025)
Q1 (a) Journal Entries
Date Debit Account Credit Account Amount ($) Explanation
Jan 1 Cash Capital 200,000 Capital invested
Jan 2 Prepaid Rent Cash 45,000 Advance rent paid
Jan 3 Equipment Cash 50,000 Equipment purchased (partial)
Notes Payable 40,000 Remaining equipment on credit
Jan 4 Office Supplies Accounts Payable 15,600 Supplies purchased on account
Jan 13 Cash Service Revenue 22,400 Service revenue received
Jan 13 Accounts Payable Cash 15,600 Payment of supplies
Jan 14 Wages Expense Cash 18,200 Wages paid
Jan 18 Cash Service Revenue 22,900 Service provided (cash)
Accounts Receivable Service Revenue 21,200 Service provided (credit)
Jan 23 Cash Accounts Receivable 16,300 Collection from A/R
Jan 25 Cash Unearned Revenue 3,000 Advance received
Jan 26 Office Supplies Accounts Payable 4,700 Supplies purchased on account
Jan 28 Utilities Expense (Water) Cash 17,000 Water bill paid
Jan 31 Advertising Expense Cash 7,000 Advertising expense
Jan 31 Utilities Expense (Electricity)
Accounts Payable 3,570 Electricity bill accrued
Jan 31 Telephone Expense Accounts Payable 2,594 Telephone bill accrued
Jan 31 Miscellaneous Expense Cash 4,280 Miscellaneous paid
Q1 (c) Trial Balance (Jan 31, 2023)
Account Debit ($) Credit ($)
Cash 156,220
Prepaid Rent 45,000
Equipment 90,000
Office Supplies 20,300
Accounts Receivable 4,900
Accounts Payable 10,864
Notes Payable 40,000
Unearned Revenue 3,000
Capital 200,000
Service Revenue 66,500
Wages Expense 18,200
Utilities Expense 20,570
Telephone Expense 2,594
Advertising Expense 7,000
Miscellaneous Expense 4,280
TOTAL 369,064 369,064
Q1 (d) Income Statement (Jan 31, 2023)
Revenue: $66,500
Total Expenses: $52,644
Net Income: $13,856
Q1 (d) Balance Sheet (Jan 31, 2023)
Assets
Cash: $156,220
Prepaid Rent: $45,000
Equipment: $90,000
Supplies: $20,300
Accounts Receivable: $4,900
Total Assets = $316,420
Liabilities
Accounts Payable: $10,864
Notes Payable: $40,000
Unearned Revenue: $3,000
Total Liabilities = $53,864
Equity
Capital: $200,000
Retained Earnings: $62,556
Total Equity = $262,556
Total Liabilities + Equity = $316,420
Q2. Accounting Principles (Short Notes)
a) Cost Principle – Assets recorded at purchase price.
b) Economic Entity – Separate business & personal transactions.
c) Monetary Unit – Only measurable items in money recorded.
d) Going Concern – Business assumed to continue.
e) Periodicity – Life divided into reporting periods.
f) Revenue Recognition – Revenue recorded when earned.
g) Matching Concept – Match expenses to revenues.
h) Accrual Basis – Record income/expenses when incurred.
i) Dual Aspect – Every transaction has two effects.
Q3 (A) Cash Flow Statement (2022)
Operating Activities:
Net Income: $106,000
+ Depreciation: $30,000
- Increase in A/R: (30,000)
- Increase in Inventory: (140,000)
+ Increase in A/P: 70,000
+ Increase in Notes Payable: 20,000
Net Cash from Operating: $56,000
Investing:
Purchase of Equipment: (40,000)
Financing:
Dividend Paid: (76,000)
Decrease in LT Debt: (30,000)
Net Cash from Financing: (106,000)
Net Change in Cash: (90,000)
Opening Cash: 70,000 → Closing: 40,000
Q3 (B) Ratios (2022)
Current Ratio = 1.58
Quick Ratio = 0.69
A/R Turnover = 6.88
Profit Margin = 4.8%
Asset Turnover = 1.83
ROA = 8.8%
ROE = 29.4%
Debt to Asset = 0.70
Times Interest Earned = 6.2
