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FAC1601 Assignment 2 – Comprehensive Solutions with
Detailed Explanations, Graded A+, 2026/2027, Guaranteed
Pass
1. Question: Record accrued interest income KES 8,000. Solution and
Explanation:
• Step 1: Interest earned but not yet received is an asset.
• Step 2: Journal entry:
o Dr Interest Receivable 8,000
o Cr Interest Income
8,000
• Explanation: This follows the accrual principle: income is recognized when earned, even
if cash is received later.
2. Question: A company purchased office supplies KES 12,000; used KES
3,000 by year-end. Record the adjusting entry. Solution and Explanation:
• Step 1: Supplies used during the period are an expense; remaining supplies are an asset.
• Step 2: Journal entry:
o Dr Supplies Expense 3,000 o
Cr Office Supplies 3,000
• Explanation: Reflects expense in the period it is incurred and adjusts the asset balance
to match remaining supplies.
3. Question: A company borrowed KES 400,000 at 10% annual interest;
accrued 3 months of interest.
Solution and Explanation:
• Step 1: Interest = 400,000 × 10% × 3/12 = 10,000
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• Step 2: Journal entry:
o Dr Interest Expense 10,000 o
Cr Interest Payable 10,000
• Explanation: Recognizes expense in the period incurred even if not yet paid, in line with
accrual accounting.
4. Question: Record depreciation using reducing balance at 20% for an
asset costing KES 50,000, accumulated depreciation KES 10,000. Solution and
Explanation:
• Step 1: Depreciation = (Cost – Accumulated Depreciation) × Rate = (50,000 – 10,000) ×
20% = 8,000
• Step 2: Journal entry:
o Dr Depreciation Expense
8,000 o Cr
Accumulated Depreciation
8,000
• Explanation: Reducing balance method applies depreciation on net book value,
reflecting higher expense in earlier years.
5. Question: Record a bad debt write-off KES 7,000. Solution and
Explanation:
• Step 1: Uncollectible receivables are removed from books.
• Step 2: Journal entry:
o Dr Bad Debt Expense 7,000 o
Cr Accounts Receivable 7,000
• Explanation: Reduces accounts receivable and recognizes the loss in the income
statement.
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6. Question: Record partial payment of accounts payable KES 25,000.
Solution and Explanation:
• Step 1: Paying suppliers decreases cash and liability.
• Step 2: Journal entry:
o Dr Accounts Payable 25,000
o Cr Cash 25,000
• Explanation: Reduces both the obligation to the supplier and the cash balance.
7. Question: Recognize revenue KES 120,000 for services performed but
not yet billed. Solution and Explanation:
• Step 1: Revenue earned but not billed is an asset (receivable).
• Step 2: Journal entry:
o Dr Accounts Receivable
120,000 o Cr Service
Revenue 120,000
• Explanation: Revenue is recognized when earned per accrual accounting, even if invoice
is not sent.
8. Question: Record accrued utilities KES 6,500. Solution and
Explanation:
• Step 1: Utilities used but not yet paid are a liability.
• Step 2: Journal entry:
o Dr Utilities Expense 6,500 o
Cr Utilities Payable 6,500
• Explanation: Expense recognized in the current period; liability recorded for future
payment.
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9. Question: A company purchased a building KES 800,000, paid KES
200,000 cash and KES 600,000 via bank loan.
Solution and Explanation:
• Step 1: Building increases assets; cash decreases; loan increases liabilities.
• Step 2: Journal entry:
o Dr Building 800,000 o Cr
Cash 200,000
o Cr Bank Loan 600,000
• Explanation: Reflects dual aspect principle: asset acquired, part paid by cash, part
financed via liability.
10. Question: Closing entries for revenue KES 150,000, expenses KES
90,000. Solution and Explanation:
• Step 1: Close revenue: Dr Revenue 150,000, Cr Income Summary 150,000
• Step 2: Close expenses: Dr Income Summary 90,000, Cr Expenses 90,000
• Step 3: Transfer net income: Dr Income Summary 60,000, Cr Retained Earnings 60,000
• Explanation: Transfers temporary accounts to retained earnings; ensures accounts are
ready for next period.
11. Question: Record accrued rent income KES 4,000. Solution and
Explanation:
• Step 1: Rent earned but not received is an asset.
• Step 2: Journal entry:
o Dr Rent Receivable 4,000 o
Cr Rent Income 4,000
• Explanation: Recognizes revenue in the correct accounting period.
FAC1601 Assignment 2 – Comprehensive Solutions with
Detailed Explanations, Graded A+, 2026/2027, Guaranteed
Pass
1. Question: Record accrued interest income KES 8,000. Solution and
Explanation:
• Step 1: Interest earned but not yet received is an asset.
• Step 2: Journal entry:
o Dr Interest Receivable 8,000
o Cr Interest Income
8,000
• Explanation: This follows the accrual principle: income is recognized when earned, even
if cash is received later.
2. Question: A company purchased office supplies KES 12,000; used KES
3,000 by year-end. Record the adjusting entry. Solution and Explanation:
• Step 1: Supplies used during the period are an expense; remaining supplies are an asset.
• Step 2: Journal entry:
o Dr Supplies Expense 3,000 o
Cr Office Supplies 3,000
• Explanation: Reflects expense in the period it is incurred and adjusts the asset balance
to match remaining supplies.
3. Question: A company borrowed KES 400,000 at 10% annual interest;
accrued 3 months of interest.
Solution and Explanation:
• Step 1: Interest = 400,000 × 10% × 3/12 = 10,000
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• Step 2: Journal entry:
o Dr Interest Expense 10,000 o
Cr Interest Payable 10,000
• Explanation: Recognizes expense in the period incurred even if not yet paid, in line with
accrual accounting.
4. Question: Record depreciation using reducing balance at 20% for an
asset costing KES 50,000, accumulated depreciation KES 10,000. Solution and
Explanation:
• Step 1: Depreciation = (Cost – Accumulated Depreciation) × Rate = (50,000 – 10,000) ×
20% = 8,000
• Step 2: Journal entry:
o Dr Depreciation Expense
8,000 o Cr
Accumulated Depreciation
8,000
• Explanation: Reducing balance method applies depreciation on net book value,
reflecting higher expense in earlier years.
5. Question: Record a bad debt write-off KES 7,000. Solution and
Explanation:
• Step 1: Uncollectible receivables are removed from books.
• Step 2: Journal entry:
o Dr Bad Debt Expense 7,000 o
Cr Accounts Receivable 7,000
• Explanation: Reduces accounts receivable and recognizes the loss in the income
statement.
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6. Question: Record partial payment of accounts payable KES 25,000.
Solution and Explanation:
• Step 1: Paying suppliers decreases cash and liability.
• Step 2: Journal entry:
o Dr Accounts Payable 25,000
o Cr Cash 25,000
• Explanation: Reduces both the obligation to the supplier and the cash balance.
7. Question: Recognize revenue KES 120,000 for services performed but
not yet billed. Solution and Explanation:
• Step 1: Revenue earned but not billed is an asset (receivable).
• Step 2: Journal entry:
o Dr Accounts Receivable
120,000 o Cr Service
Revenue 120,000
• Explanation: Revenue is recognized when earned per accrual accounting, even if invoice
is not sent.
8. Question: Record accrued utilities KES 6,500. Solution and
Explanation:
• Step 1: Utilities used but not yet paid are a liability.
• Step 2: Journal entry:
o Dr Utilities Expense 6,500 o
Cr Utilities Payable 6,500
• Explanation: Expense recognized in the current period; liability recorded for future
payment.
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9. Question: A company purchased a building KES 800,000, paid KES
200,000 cash and KES 600,000 via bank loan.
Solution and Explanation:
• Step 1: Building increases assets; cash decreases; loan increases liabilities.
• Step 2: Journal entry:
o Dr Building 800,000 o Cr
Cash 200,000
o Cr Bank Loan 600,000
• Explanation: Reflects dual aspect principle: asset acquired, part paid by cash, part
financed via liability.
10. Question: Closing entries for revenue KES 150,000, expenses KES
90,000. Solution and Explanation:
• Step 1: Close revenue: Dr Revenue 150,000, Cr Income Summary 150,000
• Step 2: Close expenses: Dr Income Summary 90,000, Cr Expenses 90,000
• Step 3: Transfer net income: Dr Income Summary 60,000, Cr Retained Earnings 60,000
• Explanation: Transfers temporary accounts to retained earnings; ensures accounts are
ready for next period.
11. Question: Record accrued rent income KES 4,000. Solution and
Explanation:
• Step 1: Rent earned but not received is an asset.
• Step 2: Journal entry:
o Dr Rent Receivable 4,000 o
Cr Rent Income 4,000
• Explanation: Recognizes revenue in the correct accounting period.
