Financial and Managerial Accounting

Assignment 02

By Assaye Eshetu Kamo

ID MBAO/4613/16A

Submitted to: Abraham Amanuel (Ph.D.)

Name Assaye Eshetu ID. No. MBAO/4613/16A

Instruction:
 Give your answer in the space provided
 Make your writings clear and readable
Part I Multiple choice ( point each)
1. Ethics are the standards of conduct by which one's actions are judged as: (D)
A. Right or wrong. C. Fair or not fair.
B. Honest or dishonest. D. All of the above
2. Which of the following is correct Accounting Equation (C)
A. Asset-Liabilities = Capital D. Asset –Capital = Liabilities
B. Liabilities –capital = Asset E. All of the above
C. Asset = Liabilities + Capital
3. Net income will result during a time period when: (D)
A. Assets exceed Expenses. C. Expenses exceed revenues.
B. Assets exceed revenues. D. Revenues exceed expenses.
4. Which of the following financial statements is prepared as of a specific date? (B)
A. Balance sheet. C. Owner's equity statement.
B. Income statement. D. Statement of cash flows.
5. Debit signify (C)
A. Increase both assets &liabilities. C. Increase assets and decrease liabilities.
B. Decrease both assets & liabilities. D. Decrease assets and increase liabilities.
6. Credit signify(C)
A. Increase both assets & liabilities. B. Increase assets and decrease liabilities.
B. Decrease both assets C. Decrease assets and increase liabilities.
7. Accounts that normally have debit balances are: (C)
A. Assets, expenses, and revenues. C. Assets, liabilities, and owners’ drawing.
B. Assets, expenses, and equity. D. Assets, owners’ drawing, and expenses.
8. Posting:
A. Normally occurs before journalizing. (D)
B. Transfers ledger transaction data to the journal.
C. Is an optional step in the recording process
D. Transfers journal entries to ledger accounts.
9. A trial balance will not balance if: (C)
A. A correct journal entry is posted twice.
B. The purchase of supplies on account is debited to Supplies and credited to Cash.
C. A Br.100 cash drawing by the owner is debited to Owner’s Drawing for Br.1,000 and credited to Cashfor
Br.100.
D. A Br.450 payment on account is debited to Accounts Payable for Br.45 and credited to Cash for Br.45.
10. A trial balance: (A)
A. is the same under IFRS and GAAP.
B. proves that transactions are recorded correctly.
C. proves that all transactions have been recorded.
D. will not balance if a correct journal entry is posted twice.

Answer:
1. D 6. C
2. C 7. C
3. B 8. D
4. B 9. C
5. C 10. A
Part II Work out 15 %
1. The following are transactions done in the month of February 2023 by Alene Insurance
Agency
Feb 1. Ato Alene transferred Br. 35,000 cash from his persona bank account to the account
opened in name ofAlene Insurance Agency
5. Paid office rent Br. 1,200
10. purchased office equipment Br. 24,500 paying 15,000 cash and the remaining on account
14. Purchased office supplies for cash Br, 1,900
15. Received commission from Awash Insurance for services delivered Br. 10,800
21. Paid creditor the full amount owed for office Equipment purchased in Feb. 10
23. Recorded services done on account for customer Br. 28,000
26. Paid maintenance Expense for Printers Br. 750
28. Paid wages of Employees Br. 4,500
28. Withdrew cash from customers on Account Br. 2,000
Required:
Journalize the above transactions using two-column General journal

Feb Debit Credit

01 Cash 35,000
05 Rent expense 1,200
10 Equipment expense 24,500
14 Supplies expense 1,900
15 Service revenue 10,800
21 Equipment expense 24,500
23 Service expense 28,000
26 Maintenance & repairs expense 750
28 Salary & wages expense 4,500
28 Dividend 2,000

2. The following is the comparative financial statements of YonAB Company

YONAB COMPANY
Income Statement
For the Year
Ended December 31

2019 2018
Net sales (all on account) Br.850,000 Br.790,000
Cost of goods sold (620,000) (575,000)
Gross Profit 230,000 215,000
Operating Expense 187,000 173,000
Net income Br. 43,000 Br. 42,000
YONAB Co.
Balance Sheet
On the date
December 31
 Assets 2019 2018
Current assets:
Cash Br. 70,000 Br. 65,000
Short-term investments 52,000 40,000
Accounts receivable (net) 98,000 80,000
Inventory 125,000 135,000
Prepaid Rent 29,000 23,000
Plant assets (net) 310,000 305,000
Total assets Br. 684,000 Br.648,000
Liabilities and Stockholders’ Equity
Liabilities:
Accounts payable Br.148,000 Br.142,000
Income taxes payable 50,000 40,000
Bonds payable 150,000 150,000
Stockholders’ equity
Common stock (Br.10 par) 200,000 200,000
Retained earnings 136,000 116,000
Total liabilities and stockholders’ equity Br.684,000 Br.648,000
Additional Data
The common stock is recently
been sold at Br. 28.75Required:
Based on the information give, compute the following

2019
A. Current Ration =current assets/current liability=684/684=1, 684/684=1

B. Account receivable turnover ratio=net credit sales/average account

receivable=620,000/98,000=6.327
C. Inventory Turnover ratio=cost of goods sold/average value of
inventory=620000/200000=3.1
D. Profit Margin= net -cost of goods sold/net sales X100=43,000-620,000/850,000X100= -
67.882
E. Return on Asset = net income/average assets=43,000/310,000= 0.139
F. Return on Equity =Net income (annual)/total asset=43,000/684,000=0.063
G. Price Earnings Ratio = = stock price per share/earning per share=28.75/10=2.875
H. Asset Turnover ratio =Net sales /average total asset=850,000/684,000=1.243

2018
A. Current Ration =current assets/current liability=684/684=1

B. Account receivable turnover ratio=net credit sales/average account

receivable=575,000/80,000=7.1875
C. Inventory Turnover ratio=cost of goods sold/average value of
inventory=575000/200000=2.875
D. Profit Margin = net -cost of goods sold/net sales X100=42,000-575,000/790,000X100= -
67.468
E. Return on Asset = net income/average assets=42,000/305,000= 0.138
F. Return on Equity =Net income (annual)/total asset=42,000/684,000= 0.061
G. Price Earnings Ratio = stock price per share/earning per share=28.75/10=2.875
H. Asset Turnover ratio =Net sales /average total asset=790,000/684,000=1.155