Haramaya University

College of Business and Economics

Departments of Accounting and Finance
Fundamentals of Accounting II Individual Assignment

1. Haramaya University pays the salary of its employees according to the Ethiopian Calendar month.
The forth-coming data relates to the month of Meskerem, 2009.

Name of Basic Monthly OT Duration of OT

S/No. Employee Salary Allowance Hours Work
Worked
1 Neju Mohammed 3,100 600 10 Up to 10 pm
2 Habtamu Dejen 6,570 600 8 10 pm to 5 am
3 Haftom Kiros 8,310 800 6 Weekly Rest Days
4 Meriyem Asefa 10,470 800 --- ----
5 Shegitu Ali 1,500 50 10 Public Holiday

Note that management of the university usually expects a worker to work 40 hours in a week and during
meskerem 2009 all workers have done as they have been expected. Besides, all workers of the University
are permanent employees; the monthly allowance of Haftom Kiros is not taxable; Habtamu Dejen agreed
to have a monthly Br. 200 be deducted and paid to the Credit Association of the University as a monthly
saving.
INSTRUCTIONS: Based on the information given above:
i. Prepare a payroll register (or sheet) for the agency for the month of Meskerem 2009.
ii. Record the payment of salary as of Meskerem 27, 2009 using CK. No 41 as a source document.
iii. Record the payroll taxes expense for the month of Meskerem 2009.
iv. Record the payment of the claim of the Credit Association of the agency that arose from
Meskerem’s payroll assuming that the payment was made on Tkimt 1, 2009.
v. Assuming that the withholding and payroll taxes for the month of Meskerem 2009 have been paid
on Tkimt 5, 2009 via CK. No. 50, recorded the required journal entry.

2. Indris and Bedria formed a partnership on January 1, 2014, the income and loss sharing
agreement of the partners is as follows:

1. Annual salary allowance to Bedria of $53,000.

2. Interest of 14% on each partner’s capital balance on January 1.
3. Any remaining net income based on 2:3 ratio.

Indris and Bedria had $150,000 and $250,000 capital balance on January 1. Respectively.
Net income for the year was $100,000.
Required: Distribute the reported net income of the period for Indris and Bedria
3. Record the following transactions for Dell Corporation in general journal on each date.

Jan1. Issued 10,000 shares of Br 10 par value common stock for Br 10 per share
Jan5. Issued 10,000 shares of Br 10 par value common stock for Br. 12 per share
Jan10. Issued 10,000 shares of no-par common stock for Br 15 per share
Jan 15.Issued 10,000 shares of no-par common stock of Br 10 stated value for Br 15 per
share.
4. Miky Abie and Kedir established a partnership business called MAK trading on January 10.
2010. Due to frequent loss and stagnant growth of the partnership the partners decide tocease
the operation of their business and liquidate their partnership on January 1, 2020. Prior to the
liquidation after all assets of the partnership are updated to their market value the prepared
balance sheet is as follow:

MAK Partnership
BALANCE SHEET
On December 31, 2019
Assets:
Cash 100,000
Equipment 500,000
Total Assets 600,000
Liability and Owners’ Equity
Liability 300,000
Miky, Capital 150,000
Abie, Capital 40,000
Kedir, Capital 110,000
Liability and Owners’ Equity 600,000
The income and loss sharing agreement of partners is 3:1:2.
Assuming that a partner with deficiency can pay the amount
Required: prepare statement of liquidation and pass the necessary journal entries on January 1,
2020 under each of the three cases listed below.
A. if the equipment was sold for birr 600,000
B. if the equipment was sold for birr 350,000
C. if the equipment was sold for birr 200,000
 5. The partners share income and loss 5:3:2. During the process of liquidation, the following
transactions were completed in the following sequence.

i. A total of €50,000 was received from converting non-cash assets into cash.
ii. Gain or loss on realization was allocated to partners.
iii. Liabilities were paid in full.
iv. M. Posada paid his capital deficiency.
v. Cash was paid to the partners with credit balances
Instructions
(a) Prepare the entries to record the transactions.
(b) Post to the cash and capital accounts.
(c) Assume that Posada is unable to pay the capital deficiency.
(1) Prepare the entry to allocate Posada’s debit balance to Ruscoe and Sorenson.
(2) Prepare the entry to record the final distribution of cash
6. Salvador SA purchases 3,000 shares of its R$50 par value ordinary shares for R$180,000
cash on July 1. It will hold the shares in the treasury until resold. On November 1, the
corporation sells 1,000 treasury shares for cash at R$70 per share. Journalize the treasury
share transactions.

7. MasterMind SA has 2,000 shares of 6%, €100 par value preference shares outstanding at
December 31, 2017. At December 31, 2017, the company declared a €60,000 cash dividend.
Determine the dividend paid to preference shareholders and ordinary shareholders under each
of the following scenarios.

A. The preference shares are non-cumulative, and the company has not missed any dividends
in previous years.
B. The preference shares are non-cumulative, and the company did not pay a dividend in each
of the two previous years.
C. The preference shares are cumulative, and the company did not pay a dividend in each of
the two previous years.
8. Sing CD Company has had five years of record earnings. Due to this success, the market
price of its 500,000 shares of £2 par value ordinary shares has tripled from £15 per share to
£45. During this period, the sum of share capital and share premium remained the same at
£2,000,000. Retained earnings increased from £1,500,000 to £10,000,000. CEO Joan Elbert
is considering either a 10% share dividend or a 2-for-1 share split. She asks you to show the
before-and-after effects of each option on retained earnings, total equity, total shares
outstanding, and par value per share.

9. Cabral SA is authorized to issue 1,000,000 R$5 par value ordinary shares. In its first year, the
company has the following share transactions.

Jan. 10: Issued 400,000 ordinary shares at R$8 per share.

July 1: Issued 100,000 ordinary shares for land. The land had an asking price of
R$900,000. The shares are currently selling on a national exchange at R$8.25 per share.
Sept. 1: Purchased 10,000 ordinary shares for the treasury at R$9 per share.
Dec. 1: Sold 4,000 treasury shares at R$10 per share.
Instructions: (a) Journalize the transactions. (b) Prepare the equity section assuming the
company had retained earnings of R$200,000 at December 31.

10. As an auditor for the firm of Gratis and Goode, you encounter the following situations in
auditing different clients.

A. JR SpA is a closely held corporation whose shares are not publicly traded. On
December 5, the corporation acquired land by issuing 5,000 €10 par value ordinary
shares. The owners’ asking price for the land was €138,000, and the fair value of the
land was €124,000.

B. Novak A/S is a publicly held corporation whose ordinary shares are traded on the
securities markets. On June 1, it acquired land by issuing 20,000 €10 par value
ordinary shares. At the time of the exchange, the land was advertised for sale at
€250,000. The shares were selling at €11 per share.

Instructions: Prepare the journal entries for each of the situations above.

11. On January 1, 2017, Richard Industries Ltd. had retained earnings of £550,000.During the
year, Richard had the following selected transactions.

a. Declared cash dividends £96,000.

b. Corrected overstatement of 2016 net income because of depreciation error £31,000.
c. Earned net income £350,000.
d. Declared share dividends £62,000.
Instructions: Prepare a retained earnings statement for the year.
12. Gão Limited was organized on January 1, 2017. It is authorized to issue 10,000 8%,
HK$1,000 par value preference shares, and 500,000 no-par ordinary shares with a stated
value of HK$20 per share. The following share transactions were completed during the first
year.
A. Jan. 10: Issued 100,000 ordinary shares for cash at HK$48 per share.
B. Mar. 1: Issued 5,000 preference shares for cash at HK$1,050 per share.
C. Apr. 1: Issued 18,000 ordinary shares for land. The asking price of the land was
HK$980,000. The fair value of the land was HK$920,000.
D. May 1: Issued 80,000 ordinary shares for cash at HK$45 per share.
E. Aug. 1: Issued 10,000 ordinary shares to attorneys in payment of their bill of
HK$320,000 for services provided in helping the company organize.
F. Sept. 1: Issued 10,000 ordinary shares for cash at HK$50 per share.
G. Nov. 1: Issued 1,000 preference shares for cash at HK$1,060 per share.
Instructions:
A. Journalize the transactions.
B. Post to the equity accounts. (Use J5 as the posting reference.)
C. Prepare the share capital section of the statement of financial position at December 31, 2017.