SOLUTIONS FOR MARKSTAT

1. 1
Question 1 (10 Marks)
Verity Siding Company, owned by S. Verity, its sole stockholder, began operations in May and
completed the following transactions during that first month of operations. Show the effects of the
transactions on the accounts of the accounting equation and also the Journal Entry by recording
increases and decreases in the appropriate columns in the table below .
May 1
S. Verity invested $90,000 cash in the company in exchange for common
stock.
2
The company purchased $25,000 in office equipment. It paid $10,000 in cash
and signed a note payable promising to pay the $15,000 over the next three
years.
2 The company rented office space and paid $3,000 for the May rent.
6
The company installed new vinyl siding for a customer and immediately
collected $5,000.
7
The company paid a supplier $2,000 for siding materials used on the May 6
job.
8 The company purchased a $2,500 copy machine for office use on credit.
9
The company completed work for additional customers on credit in the
amount of $16,000.
15
The company paid its employees' salaries $2,300 for the first half of the
month.
17
The company installed new siding for a customer and immediately collected
$2,400.
20
The company received $10,000 in payments from the customers billed on May
9.
28
The company paid $1,500 on the copy machine purchased on May 8. It will
pay the remaining balance in June.
31
The company paid its employees' salaries $2,400 for the second half of the
month.
31
The company paid a supplier $5,300 for siding materials used on the
remaining jobs completed during May.
31 The company paid $450 for this month's utility bill.

2. 2
Question 2 ( 9 Marks)
At the end of its first year of operations, the records of Roadmaster Auto Rentals show the
following information. $52,000 of cash dividends were paid during the year. Prepare a December
income statement and a December 30 balance sheet.
Accounts payable $36,000 Wages expense $75,000
Insurance expense 2,000 Advertising expense 22,000
Accounts receivable 24,000 Cash 11,000
Common stock 150,000 Office Furniture 15,000
Airplanes 150,000 Maintenance expense 39,000
Notes payable 47,000 Revenues 217,000
Hangar 60,000
Question 3:
Eurasia Enterprise: Eurasia Enterprise was incorporated by three friends, Vardhman, Gautam,
and Aseem, on 1 April 2018. To commence the activities, each friend introduced Rs. 2,00,000 in
cash. In addition, Eurasia borrowed Rs. 4,00,000 from the Maharastra Cooperative Bank, giving a
three-year note payable. The note was dated 1 April 2018, and indicated an interest payable half
yearly at the rate of 8% per annum.
As the necessary funds were available, Vardhman made arrangements for a place of work. The
shop premise was taken on a rent of Rs. 20,000 per month.
As on 31 March 2019, the net profit of the firm was determined to be Rs.2,00,000 after providing
for rent and all other administrative and selling expenses and one payment of interest. Each
friend even withdrew Rs. 40,000 incash to meet their day-to-day expenses.
Questions
1. What were the different sources of cash and amounts to start Eurasia Enterprise? (4 Marks)
2. Prepare a capital account of each friend individually, and in total for the firm as a whole,
as on 31 March 2019.(4 Marks )

3. 3
Question 4 :
From the followinginformationcalculate:(i) GrossProfitRatio (ii) CurrentRatio(iii) LiquidRatio(iv) Net
Profit Ratio ( 8 Marks)
Revenue fromOperationsRs.25,20,000
NetProfitRs.3,60,000
Cost of Revenue fromOperationsRs.19,20,000
Long-termDebtsRs.9,00,000
Trade PayablesRs.2,00,000
Average InventoryRs.8,00,000
LiquidAssetsRs.7,60,000
FixedAssetsRs.14,40,000
CurrentLiabilitiesRs.6,00,000
NetProfitbefore InterestandTax Rs. 8,00,000