Question

Question 3 Following Data is taken from Afaq & Co on Dec 2002
14,300
5,000
18,600
85,300
Title of account
Debit
Credit
Cash
$1,000
N/c Receivable
25,600
Stationary
1500
Prepaid Insurance
300
Equipment
68,000
Furniture
69300
Traveling expense
5000
Alc payable
Allowance for depreciation equipment
Allowance for depreciation-fumiture
Service revenue
Salaries expense
24000
Advertising expense
4500
Drawing
17000
Interest expense
1200
Capital
267400
Additional data:
a) Bad debis estimated 5% of A/c receivable
b) Depreciation on furniture 10%
c) Depreciation on equipment 10%
d) Salaries outstanding Rs.2700
e) Interest payable Rs. 400
1) Stationary used by company Rs.900
8) Traveling expense is outstanding Rs. 1000
h) Accrued advertising Rs.1000.
1) Insurance expired during the period, Rs. 100.
1 Service Revenue includes an amount of Rs.2000 which relates to year 2003.
144,200
267400
Required. Adjusting entries, Adjusted Trail Balance, Income Statement and Balance Sheet​

Answer 1

Answer:

Correct option is

D

Rs. 1,02,000

Amount to be debited to furniture Account

Cost of second hand furniture + Cost of repaint + Wages

90000 + 10000 + 2000 = Rs 102000.

Fire insurance premium is not included in Furniture account.

Insurance premiums paid to the insurance companies cannot be capitalized, but expensed in profit or loss in line with an insurance policy terms.

The reason is that these costs are not inevitable to bring the assets to the condition and location to operate as desired by the management.

Explanation:

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