A. Pass necessary adjusting entries. (15 marks)
B. Prepare the Income statement of Hyper Star Traders for the year ending on 31st December, 2009. (15 marks)
C. Prepare the Balance sheet of Hyper Star Traders as on 31st December, 2009. (10 marks)
Question:
Mr. X is running “Hyper Star Traders” a sole proprietorship business located at the Mall Road, Lahore. At the year end the business has:
Furniture Rs. 40,000
Plant 200,000
Capital 280,000
On 30th November 2009 Mr. X submitted a tender for sale of goods of Rs. 20,000 which is likely to be confirmed shortly. Bank debited service charges Rs. 150 and interest on loan Rs. 500 and credited dividend for Rs. 2,000 in the month of December (intimation from bank was received on 7th January 2010). Mr. X also estimates that 5% of the amount will not be collectable from sundry debtors. House rent allowance Rs. 5,000 has been paid on 31st December from his personal account, on the same date stock was valued at Rs. 200,000 and plant Rs. 160,000 because of its wear and tear.
The following balances (in the books of Hyper Star Traders) are also given along with above information as on 31st December 2009:
| Particulars | Rs. | Particulars | Rs. |
| Opening stock | 120000 | Bank balance | 36000 |
| Sundry Debtors | 100000 | Bills payable | 20000 |
| Long term Investments | 60000 | Returns outwards | 4800 |
| Returns inwards | 8000 | Commission | 2000 |
| Purchases | 680000 | Sales | 924000 |
| Cash in hand | 4000 | Interest received | 800 |
| Bills receivable | 44000 | Sundry Creditors | 160000 |
| Carriage out | 3600 | Salaries | 48000 |
| Insurance paid | 2800 | Wages | 45200 |
Solution:
| Adjusting Entry # 01 | ||
| | Debit | Credit |
| Particulares | Amount(Rs) | Amount(Rs) |
| Bank Services Charges Account | 150 | |
| Bank Account | | 150 |
| Total | 150 | 150 |
| Adjusting Entry for bank Charges collected by bank but informed on 7th of January 2010 | ||
| Adjusting Entry # 02 | ||
| | Debit | Credit |
| Particulares | Amount(Rs) | Amount(Rs) |
| Interest on loan Account | 500 | |
| Loan Account | | 500 |
| Total | 500 | 500 |
| Adjusting Entry for interest on loan deducted by bank but informed on 7th of January 2010 | ||
| Adjusting Entry # 03 | ||
| | Debit | Credit |
| Particulares | Amount(Rs) | Amount(Rs) |
| Receivable Dividend Account | 2000 | |
| Dividend Account | | 2000 |
| Total | 2000 | 2000 |
| Adjusting Entry for Dividend receivable from Bank but informed on 7th of January 2010 by the bank | ||
| Adjusting Entry # 04 | ||
| | Debit | Credit |
| Particulares | Amount(Rs) | Amount(Rs) |
| Provision for Bad Debts Account | 5000 | |
| Debtor Account | | 5000 |
| Total | 5000 | 5000 |
| Adjusting Entry for Provision for Bad Debts at 5%. | ||
| Adjusting Entry # 05 | ||
| | Debit | Credit |
| Particulares | Amount(Rs) | Amount(Rs) |
| House Rent Allowance Account | 5000 | |
| Bank Account | | 5000 |
| Total | 5000 | 5000 |
| Adjusting Entry for House Rent Allowance paid by Owner from his personal account. | ||
| Adjusting Entry # 06 | ||
| | Debit | Credit |
| Particulares | Amount(Rs) | Amount(Rs) |
| Closing Stock Account | 20000 | |
| Trading Account | | 20000 |
| Total | 20000 | 20000 |
| Adjusting Entry for Closing Stock at the end of the year. | ||
| Adjusting Entry # 07 | ||
| | Debit | Credit |
| Particulares | Amount(Rs) | Amount(Rs) |
| Depreciation Account | 40000 | |
| Plant Account | | 40000 |
| Total | 40000 | 40000 |
| Adjusting Entry for Depreciation on Plant . | ||
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