1
Exercise 1.
On January 1, 20X3, CHAMELEON, S.A. reports the following list of accounts with
the corresponding beginning balances:
ACCOUNT BALANCE DEBIT CREDIT
Long-Term Loan 3,000
Short-Term Loan 1,500
Inventory 550
Customers 2,025
Cash 970
Common Stock 5,500
Suppliers 705
Buildings 4,500
Machinery 2,500
Notes receivable 980
Office Supplies 130
Equipment 1,100
Accumulated depreciation 2,050
TOTAL
CHAMALEON uses a periodic inventory system. The long-term and the short-term
loan accounts refer to the same bank loan obtained on January 1, 20X1. The transactions
during the year 20X3 were as follows:
1. Purchased merchandise for €3,500. It paid 20% cash and the rest on account.
CHAMALEON obtained a 5% discount for prompt payment for the part paid in cash.
2. Sold merchandise, €8,700. CHAMALEON received half in cash and the rest on
account. For the part on account, it received a note receivable.
3. Discounted notes receivable with a maturity of 90 days and for a total amount of
€2,700 with a bank. The expenses for bank services were €50, and the interest for
discounting the notes was €170.
4. Gross salaries were €1,200. Social security taxes (the firm’s portion) were €84. The
withheld tax payable was €120 and social security taxes (employees’ portion) were
€120. Payroll taxes were left unpaid.
5. Other payments and charges made during the year 20X3 are:
- Paid electricity, gas and telephone, €210.
- Paid €105 for interests on the residual loan. On December 31, paid the short-
term loan.
- Paid the rent for a building from 1/10/20X3 to 28/2/20X4, €600.
