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Exercise 2-12 (20 minutes)
Transactions that created expenses:
b. Salaries Expense........................................ 1,125
Cash..................................................... 1,125
Paid salary of receptionist.
d. Utilities Expense......................................... 930
Cash..................................................... 930
Paid utilities for the office.
[Note: Expenses are outflows or using up of assets (or the creation of liabilities) that occur in the process of providing goods or services to customers.]
Transactions a, c, and e are not expenses for the following reasons:
a. This transaction decreased assets in settlement of a previously existing liability, and equity did not change. Cash payment does not mean the same as using up of assets (expense was recorded when the supplies were used).
c. This transaction involves the purchase of an asset. The form of the company’s assets changed, but total assets did not change, and the equity did not decrease.
e. This transaction is a distribution of cash to the owner. Even though equity decreased, the decrease did not occur in the process of providing goods or services to customers.
Exercise 2-13 (15 minutes)
TECH TODAY
Income Statement
For Month Ended August 31
Revenues:
Consulting fees earned......................... $17,000
Expenses:
Salaries expense................................... $8,000
Rent expense........................................ 4,550
Telephone expense............................... 560
Miscellaneous expenses....................... 280
Total expenses..................................... 13,390
Net income................................................ $ 3,610
Exercise 2-14 (15 minutes)
TECH TODAY
Statement of Retained Earnings
For Month Ended August 31
Retained earnings, August 1..................... $ 0
Add: Net income (from Exercise 2-13)...... 3,610
3,610
Less: Cash dividends............................... (3,000)
Retained earnings, August 31................... $ 610
Exercise 2-15 (15 minutes)
TECH TODAY
Balance Sheet
August 31
Assets Liabilities
Cash............................. $ 8,360 Accounts payable................ $ 8,000
Accounts receivable..... 17,000 Equity
Office supplies............. 3,250 Common stock..................... 84,000
Office equipment.......... 18,000 Retained earnings................ 610*
Land.............................. 46,000 Total equity.......................... 84,610
Total assets.................. $92,610 Total liabilities & equity....... $92,610
* Amount from Exercise 2-14.
Exercise 2-16 (20 minutes)
a.
|
Assets
|
-
|
Liabilities
|
=
|
Equity
| |
Beginning of the year.......
|
$ 70,000
|
-
|
$30,000
|
=
|
$40,000
| |
End of the year.................
|
115,000
|
-
|
46,000
|
=
|
69,000
| |
Net increase in equity.......
|
$29,000
| |||||
Net income........................
|
$29,000
| |||||
Since there were no additional investments or dividends, the net income for the year equals the net increase in equity.
b. Net increase in equity......................................
|
$29,000
|
Add dividends (12 months @ $1,250)...............
|
15,000
|
Net income.......................................................
|
$44,000
|
The dividends were added back because they reduced equity without reducing income.
c. Net increase in equity......................................
|
$ 29,000
| |
Less additional investment..............................
|
(45,000)
| |
Net loss............................................................
|
$(16,000)
| |
The investment was deducted because it increased equity without creating income.
d. Net increase in equity......................................
|
$29,000
| |
Add dividends (12 months @ $1,250)...............
|
15,000
| |
Gross increase in equity..................................
|
$44,000
| |
Less additional investment..............................
|
(25,000)
| |
Net income.......................................................
|
$19,000
| |
The dividends were added back because they reduced equity without reducing income and the investments were deducted because they increased equity without creating income.
Exercise 2-17 (15 minutes)
(a)
|
(b)
|
(c)
|
(d)
| ||||
 Answers |
$(49,500)
|
$72,000
|
$73,000
|
$(45,000)
| |||
Computations:
| |||||||
Equity, Dec. 31, 2010....
|
$ 0
|
$ 0
|
$ 0
|
$ 0
| |||
Owner investments......
|
120,000
|
72,000
|
87,000
|
210,000
| |||
Dividends.....................
|
(49,500)
|
(54,000)
|
(10,000)
|
(55,000)
| |||
Net income (loss).........
|
31,500
|
81,000
|
(4,000)
|
(45,000)
| |||
Equity, Dec. 31, 2011....
|
$102,000
|
$99,000
|
$73,000
|
$110,000
|
Exercise 2-18 (25 minutes)
a. Owner created a new business and invested $7,000 cash, $5,600 of equipment, and $11,000 in automobile(s) in exchange for common stock.
b. Paid $3,600 cash in advance for insurance coverage.
c. Paid $600 cash for office supplies.
d. Purchased $200 of office supplies and $9,400 of equipment on credit.
e. Received $2,500 cash for delivery services provided.
f. Paid $2,400 cash towards accounts payable.
g. Paid $700 cash for gas and oil.
Exercise 2-19 (30 minutes)
a. Cash......................................................................... 7,000
Equipment............................................................... 5,600
Automobiles............................................................ 11,000
Common Stock................................................. 23,600
Owner invested in the business in exchange for common stock.
b. Prepaid Insurance.................................................... 3,600
Cash................................................................. 3,600
Purchased insurance coverage.
c. Office Supplies........................................................ 600
Cash................................................................. 600
Purchased supplies with cash.
d. Office Supplies........................................................ 200
Equipment............................................................... 9,400
Accounts Payable............................................. 9,600
Purchased supplies and equipment on credit.
e. Cash......................................................................... 2,500
Delivery Services Revenue............................... 2,500
Received cash from customer.
f. Accounts Payable.................................................... 2,400
Cash................................................................. 2,400
Made payment on payables.
g. Gas and Oil Expense................................................ 700
Cash................................................................. 700
Paid for gas and oil.
Exercise 2-20 (20 minutes)
Description |
(1)
Difference between Debit and Credit Columns |
(2)
Column with the Larger Total |
(3)
Identify account(s) incorrectly stated
|
(4)
Amount that account(s) is overstated or understated
| |
a.
|
$2,400 debit to Rent Expense is posted as a $1,590 debit.
|
$810
|
credit
|
Rent Expense
|
Rent Expense is understated by $810
|
b.
|
$4,050 credit to Cash is posted twice as two credits to Cash.
|
$4,050
|
credit
|
Cash
|
Cash is understated by $4,050
|
c.
|
$9,900 debit to the Dividends account is debited to Common Stock.
|
$0
|
––
|
Common Stock
Dividends
|
Common Stock account is understated by $9,900
Dividends is understated by $9,900
|
d.
|
$2,250 debit to Prepaid Insurance is posted as a debit to Insurance Expense.
|
$0
|
––
|
Prepaid Insurance
Insurance Expense
|
Prepaid Insurance is understated by $2,250 and Insurance Expense is overstated by $2,250
|
e.
|
$42,000 debit to Machinery is posted as a debit to Accounts Payable.
|
$0
|
––
|
Machinery
Accounts Payable
|
Machinery is understated by $42,000 and Accounts Payable is understated by $42,000
|
f.
|
$4,950 credit to Services Revenue is posted as a $495 credit.
|
$4,455
|
debit
|
Services Revenue
|
Services Revenue is understated by $4,455
|
g.
|
$1,440 debit to Store Supplies is not posted.
|
$1,440
|
credit
|
Store Supplies
|
Store Supplies is understated by $1,440
|
Exercise 2-21 (15 minutes)
a. The debit column is correctly stated because the erroneous debit (to Accounts Payable) is deducted from an account with a (larger assumed) credit balance.
b. The credit column is understated by $33,900 because of the error in debiting the Accounts Payable account — it should have been credited.
c. The Office Equipment account is correctly stated.
d. The Accounts Payable account is understated by $33,900. It should have been increased (credited) by $16,950 but the posting error decreased (debited) it by $16,950.
e. The credit column is $33,900 less than the debit column, or $326,100 in total ($360,000 - $33,900).
Exercise 2-22 (15 minutes)
a.
|
Co.
|
Liabilities
|
/
|
Assets
|
=
|
Debt
Ratio
|
Net
Income
|
/
|
Average
Assets
|
=
|
ROA
| |
1
|
$56,000
|
$147,000
|
0.38
|
$21,000
|
$200,000
|
0.105
| ||||||
2
|
51,500
|
104,500
|
0.49
|
12,000
|
70,000
|
0.171
| ||||||
3
|
12,000
|
90,500
|
0.13
|
20,000
|
100,000
|
0.200
| ||||||
4
|
31,000
|
92,000
|
0.34
|
7,500
|
40,000
|
0.188
| ||||||
5
|
47,000
|
64,000
|
0.73
|
3,800
|
40,000
|
0.095
| ||||||
6
|
26,500
|
32,500
|
0.82
|
660
|
50,000
|
0.013
|
b. Company 6 relies most heavily on creditor (non-owner) financing with 82% of its assets financed by liabilities.
c. Company 3 relies least on creditor (non-owner) financing at only 13%. This implies that 87% of the assets are financed by equity (owners).
d. The companies with the highest debt ratios indicate the greatest risk. The two companies with the highest debt ratios are 5 and 6.
e. Company 3 yields the highest return on assets at 20%; followed by Company 4 at 18.8%.
f. As an investor, one prefers high returns at low risk. Company 3 is the preferred investment since it yields the lowest risk (debt ratio is 13%) and highest return on assets (20%).
Exercise 2-23 (10 minutes)
BMW
Balance Sheet (in Euro millions)
December 31, 2009
Assets Equity and liabilities
Noncurrent assets........ € 6,984 Total equity.......................... € 5,354
Current assets.............. 17,663 Noncurrent liabilities........... 10,943
Current liabilities................. 8,350
Total assets.................. €24,647 Total equity and liabilities... €24,647
PROBLEM SET A
Problem 2-1A (90 minutes)
Part 1
April 1 Cash........................................................ 101 100,000
Office Equipment.................................... 163 24,000
Common Stock................................ 307 124,000
Owner invested cash and equipment for stock.
2 Prepaid Rent........................................... 131 7,200
Cash................................................. 101 7,200
Prepaid twelve months’ rent.
3 Office Equipment.................................... 163 12,000
Office Supplies....................................... 124 2,400
Accounts Payable............................ 201 14,400
Purchased equip. & supplies on credit.
6 Cash........................................................ 101 2,000
Services Revenue............................ 403 2,000
Received cash for services.
9 Accounts Receivable............................... 106 8,000
Services Revenue............................ 403 8,000
Billed client for completed work.
13 Accounts Payable................................... 201 14,400
Cash................................................. 101 14,400
Paid balance due on account.
19 Prepaid Insurance................................... 128 6,000
Cash................................................. 101 6,000
Paid premium for insurance.
22 Cash........................................................ 101 6,400
Accounts Receivable....................... 106 6,400
Collected part of amount owed by client.
25 Accounts Receivable............................... 106 2,640
Services Revenue............................ 403 2,640
Billed client for completed work.
28 Dividends................................................ 319 6,200
Cash................................................. 101 6,200
Paid cash dividends.
29 Office Supplies....................................... 124 800
Accounts Payable............................ 201 800
Purchased supplies on account.
30 Utilities Expense..................................... 690 700
Cash................................................. 101 700
Paid monthly utility bill.
Problem 2-1A (Continued)
Part 2
Cash
|
Acct. No. 101
| ||||||
Date
|
Explanation
|
PR
|
Debit
|
Credit
|
Balance
| ||
April
|
1
|
G1
|
100,000
|
100,000
| |||
2
|
G1
|
7,200
|
92,800
| ||||
6
|
G1
|
2,000
|
94,800
| ||||
13
|
G1
|
14,400
|
80,400
| ||||
19
|
G1
|
6,000
|
74,400
| ||||
22
|
G1
|
6,400
|
80,800
| ||||
28
|
G1
|
6,200
|
74,600
| ||||
30
|
G1
|
700
|
73,900
| ||||
Accounts Receivable
|
Acct. No. 106
| ||||||
Date
|
Explanation
|
PR
|
Debit
|
Credit
|
Balance
| ||
April
|
9
|
G1
|
8,000
|
8,000
| |||
22
|
G1
|
6,400
|
1,600
| ||||
25
|
G1
|
2,640
|
4,240
| ||||
Office Supplies
|
Acct. No. 124
| ||||||
Date
|
Explanation
|
PR
|
Debit
|
Credit
|
Balance
| ||
April
|
3
|
G1
|
2,400
|
2,400
| |||
29
|
G1
|
800
|
3,200
| ||||
Prepaid Insurance
|
Acct. No. 128
| ||||||
Date
|
Explanation
|
PR
|
Debit
|
Credit
|
Balance
| ||
April
|
19
|
G1
|
6,000
|
6,000
| |||
Prepaid Rent
|
Acct. No. 131
| ||||||
Date
|
Explanation
|
PR
|
Debit
|
Credit
|
Balance
| |
April
|
2
|
G1
|
7,200
|
7,200
| ||
Office Equipment
|
Acct. No. 163
| |||||
Date
|
Explanation
|
PR
|
Debit
|
Credit
|
Balance
| |
April
|
1
|
G1
|
24,000
|
24,000
| ||
3
|
G1
|
12,000
|
36,000
| |||
Problem 2-1A (Continued)
Accounts Payable
|
Acct. No. 201
| |||||
Date
|
Explanation
|
PR
|
Debit
|
Credit
|
Balance
| |
April
|
3
|
G1
|
14,400
|
14,400
| ||
13
|
G1
|
14,400
|
0
| |||
29
|
G1
|
800
|
800
| |||
Common Stock
|
Acct. No. 307
| |||||
Date
|
Explanation
|
PR
|
Debit
|
Credit
|
Balance
| |
April
|
1
|
G1
|
124,000
|
124,000
| ||
Dividends
|
Acct. No. 319
| |||||
Date
|
Explanation
|
PR
|
Debit
|
Credit
|
Balance
| |
April
|
28
|
G1
|
6,200
|
6,200
| ||
Services Revenue
|
Acct. No. 403
| |||||
Date
|
Explanation
|
PR
|
Debit
|
Credit
|
Balance
| |
April
|
6
|
G1
|
2,000
|
2,000
| ||
9
|
G1
|
8,000
|
10,000
| |||
25
|
G1
|
2,640
|
12,640
| |||
Utilities Expense
|
Acct. No. 690
| |||||
Date
|
Explanation
|
PR
|
Debit
|
Credit
|
Balance
| |
April
|
30
|
G1
|
700
|
700
| ||
Problem 2-1A (Continued)
Part 3
TECHNOLOGY CONSULTANTS
Trial Balance
April 30
Debit Credit
Cash.................................................................... $ 73,900
Accounts receivable............................................ 4,240
Office supplies.................................................... 3,200
Prepaid insurance............................................... 6,000
Prepaid rent........................................................ 7,200
Office equipment................................................ 36,000
Accounts payable................................................ $ 800
Common stock.................................................... 124,000
Dividends............................................................ 6,200
Services revenue................................................. 12,640
Utilities expense................................................. 700 _______
Total.................................................................... $137,440 $137,440
Problem 2-2A (90 minutes)
Part 1
a. Cash........................................................ 101 105,000
Office Equipment.................................... 163 6,000
Drafting Equipment................................. 164 45,000
Common Stock................................ 307 156,000
Owner invested cash and equipment for stock.
b. Land........................................................ 172 54,000
Cash................................................. 101 5,400
Note Payable.................................... 250 48,600
Purchased land with cash and note payable.
c. Building.................................................. 170 75,000
Cash.................................................... 101 75,000
Purchased building with cash.
d. Prepaid Insurance................................... 108 6,000
Cash................................................. 101 6,000
Purchased 18-month insurance policy.
e. Cash........................................................ 101 5,700
Engineering Fees Earned................. 402 5,700
Collected cash for completed work.
f. Drafting Equipment................................. 164 22,500
Cash................................................. 101 10,500
Note Payable.................................... 250 12,000
Purchased equipment with cash and note payable.
g. Accounts Receivable............................... 106 12,000
Engineering Fees Earned................. 402 12,000
Completed services for client.
h. Office Equipment.................................... 163 2,250
Accounts Payable............................ 201 2,250
Purchased equipment on credit.
i. Accounts Receivable............................... 106 18,000
Engineering Fees Earned................. 402 18,000
Billed client for completed work.
Problem 2-2A (Part 1 Continued)
j. Equipment Rental Expense..................... 602 1,200
Accounts Payable............................ 201 1,200
Incurred equipment rental expense.
k. Cash........................................................ 101 7,200
Accounts Receivable....................... 106 7,200
Collected cash on account.
l. Wages Expense....................................... 601 1,500
Cash................................................. 101 1,500
Paid assistant’s wages.
m. Accounts Payable................................... 201 2,250
Cash................................................. 101 2,250
Paid amount due on account.
n. Repairs Expense..................................... 604 675
Cash................................................. 101 675
Paid for repair of equipment.
o. Dividends................................................ 319 9,360
Cash................................................. 101 9,360
Paid cash dividends.
p. Wages Expense....................................... 601 1,500
Cash................................................. 101 1,500
Paid assistant’s wages.
q. Advertising Expense............................... 603 3,000
Cash................................................. 101 3,000
Paid for advertising expense.
Problem 2-2A (Continued)
Part 2
Cash No. 101
|
Accounts Payable No. 201
| |||||||||
Date
|
PR
|
Debit
|
Credit
|
Balance
|
Date
|
PR
|
Debit
|
Credit
|
Balance
| |
(a)
|
105,000
|
105,000
|
(h)
|
2,250
|
2,250
| |||||
(b)
|
5,400
|
99,600
|
(j)
|
1,200
|
3,450
| |||||
(c)
|
75,000
|
24,600
|
(m)
|
2,250
|
1,200
| |||||
(d)
|
6,000
|
18,600
| ||||||||
(e)
|
5,700
|
24,300
|
Notes Payable No. 250
| |||||||
(f)
|
10,500
|
13,800
|
Date
|
PR
|
Debit
|
Credit
|
Balance
| |||
(k)
|
7,200
|
21,000
|
(b)
|
48,600
|
48,600
| |||||
(l)
|
1,500
|
19,500
|
(f)
|
12,000
|
60,600
| |||||
(m)
|
2,250
|
17,250
| ||||||||
(n)
|
675
|
16,575
| ||||||||
(o)
|
9,360
|
7,215
|
Common Stock No. 307
| |||||||
(p)
|
1,500
|
5,715
|
Date
|
PR
|
Debit
|
Credit
|
Balance
| |||
(q)
|
3,000
|
2,715
|
(a)
|
156,000
|
156,000
| |||||
Accounts Receivable No. 106
|
Dividends No. 319
| |||||||||
Date
|
PR
|
Debit
|
Credit
|
Balance
|
Date
|
PR
|
Debit
|
Credit
|
Balance
| |
(g)
|
12,000
|
12,000
|
(o)
|
9,360
|
9,360
| |||||
(i)
|
18,000
|
30,000
| ||||||||
(k)
|
7,200
|
22,800
|
Engineering Fees Earned No. 402
| |||||||
Date
|
PR
|
Debit
|
Credit
|
Balance
| ||||||
Prepaid Insurance No. 108
|
(e)
|
5,700
|
5,700
| |||||||
Date
|
PR
|
Debit
|
Credit
|
Balance
|
(g)
|
12,000
|
17,700
| |||
(d)
|
6,000
|
6,000
|
(i)
|
18,000
|
35,700
| |||||
Office Equipment No. 163
|
Wages Expense No. 601
| |||||||||
Date
|
PR
|
Debit
|
Credit
|
Balance
|
Date
|
PR
|
Debit
|
Credit
|
Balance
| |
(a)
|
6,000
|
6,000
|
(l)
|
1,500
|
1,500
| |||||
(h)
|
2,250
|
8,250
|
(p)
|
1,500
|
3,000
| |||||
Drafting Equipment No. 164
|
Equipment Rental Expense No. 602
| |||||||||
Date
|
PR
|
Debit
|
Credit
|
Balance
|
Date
|
PR
|
Debit
|
Credit
|
Balance
| |
(a)
|
45,000
|
45,000
|
(j)
|
1,200
|
1,200
| |||||
(f)
|
22,500
|
67,500
| ||||||||
Building No. 170
|
Advertising Expense No. 603
| |||||||||
Date
|
PR
|
Debit
|
Credit
|
Balance
|
Date
|
PR
|
Debit
|
Credit
|
Balance
| |
(c)
|
75,000
|
75,000
|
(q)
|
3,000
|
3,000
| |||||
Land No. 172
|
Repairs Expense No. 604
| |||||||||
Date
|
PR
|
Debit
|
Credit
|
Balance
|
Date
|
PR
|
Debit
|
Credit
|
Balance
| |
(b)
|
54,000
|
54,000
|
(n)
|
675
|
675
| |||||
Problem 2-2A (Concluded)
Part 3
SHELTON ENGINEERING
Trial Balance
June 30
Debit Credit
Cash.......................................................... $ 2,715
Accounts receivable.................................. 22,800
Prepaid insurance..................................... 6,000
Office equipment....................................... 8,250
Drafting equipment................................... 67,500
Building..................................................... 75,000
Land.......................................................... 54,000
Accounts payable...................................... $ 1,200
Notes payable............................................ 60,600
Common stock.......................................... 156,000
Dividends.................................................. 9,360
Engineering fees earned............................ 35,700
Wages expense.......................................... 3,000
Equipment rental expense......................... 1,200
Advertising expense.................................. 3,000
Repairs expense........................................ 675
Totals........................................................ $253,500 $253,500
Problem 2-3A (60 minutes)
Part 1
FABIANO DISTRIBUTION
Balance Sheet
December 31, 2010
Assets Liabilities
Cash............................. $ 52,500 Accounts payable................ $ 7,500
Accounts receivable..... 28,500
Office supplies............. 4,500
Trucks.......................... 54,000 Equity
Office equipment.......... 138,000 Total equity.......................... 270,000
Total assets.................. $277,500 Total liabilities and equity... $277,500
FABIANO DISTRIBUTION
Balance Sheet
December 31, 2011
Assets Liabilities
Cash............................. $ 18,750 Accounts payable.................. $ 37,500
Accounts receivable..... 22,350 Note payable......................... 105,000
Office supplies............. 3,300 Total liabilities...................... 142,500
Trucks.......................... 54,000
Office equipment.......... 147,000
Building........................ 180,000 Equity
Land.............................. 45,000 Total equity........................... 327,900
Total assets.................. $470,400 Total liabilities and equity.... $470,400
Part 2
Computation of 2011 net income:
Equity, December 31, 2011........................................................
|
$327,900
|
Equity, December 31, 2010........................................................
|
(270,000)
|
Increase in equity in 2011..........................................................
|
57,900
|
Deduct additional investment...................................................
|
(35,000)
|
Net increase in equity in 2011, apart from new investment......
|
22,900
|
Add dividends ($3,000 x 12)......................................................
|
36,000
|
Net income earned in 2011........................................................ ..............
|
$ 58,900
|
Part 3
Debt Ratio = $142,500 / $470,400 = 30.29%
Problem 2-4A (90 minutes) Part 1
Mar. 1 Cash........................................................ 101 150,000
Office Equipment.................................... 163 22,000
Common Stock................................ 307 172,000
Owner invested cash and equipment for stock.
2 Prepaid Rent........................................... 131 6,000
Cash................................................. 101 6,000
Prepaid twelve months’ rent.
3 Office Equipment.................................... 163 3,000
Office Supplies....................................... 124 1,200
Accounts Payable............................ 201 4,200
Purchased equipment and supplies on credit.
6 Cash........................................................ 101 4,000
Services Revenue............................ 403 4,000
Received cash for services.
9 Accounts Receivable............................... 106 7,500
Services Revenue............................ 403 7,500
Billed client for completed work.
13 Accounts Payable................................... 201 4,200
Cash................................................. 101 4,200
Paid balance due on account.
19 Prepaid Insurance................................... 128 5,000
Cash................................................. 101 5,000
Paid premium for insurance.
22 Cash........................................................ 101 3,500
Accounts Receivable....................... 106 3,500
Collected part of amount owed by client.
25 Accounts Receivable............................... 106 3,820
Services Revenue............................ 403 3,820
Billed client for completed work.
29 Dividends................................................ 319 5,100
Cash................................................. 101 5,100
Paid cash for dividends.
30 Office Supplies....................................... 124 600
Accounts Payable............................ 201 600
Purchased supplies on account.
31 Utilities Expense..................................... 690 200
Cash................................................. 101 200
Paid monthly utility bill.
Problem 2-4A (Continued)
Part 2
Cash
|
Acct. No. 101
| ||||||
Date
|
Explanation
|
PR
|
Debit
|
Credit
|
Balance
| ||
Mar.
|
1
|
G1
|
150,000
|
150,000
| |||
2
|
G1
|
6,000
|
144,000
| ||||
6
|
G1
|
4,000
|
148,000
| ||||
13
|
G1
|
4,200
|
143,800
| ||||
19
|
G1
|
5,000
|
138,800
| ||||
22
|
G1
|
3,500
|
142,300
| ||||
29
|
G1
|
5,100
|
137,200
| ||||
31
|
G1
|
200
|
137,000
| ||||
Accounts Receivable
|
Acct. No. 106
| ||||||
Date
|
Explanation
|
PR
|
Debit
|
Credit
|
Balance
| ||
Mar.
|
9
|
G1
|
7,500
|
7,500
| |||
22
|
G1
|
3,500
|
4,000
| ||||
25
|
G1
|
3,820
|
7,820
| ||||
Office Supplies
|
Acct. No. 124
| ||||||
Date
|
Explanation
|
PR
|
Debit
|
Credit
|
Balance
| ||
Mar.
|
3
|
G1
|
1,200
|
1,200
| |||
30
|
G1
|
600
|
1,800
| ||||
Prepaid Insurance
|
Acct. No. 128
| ||||||
Date
|
Explanation
|
PR
|
Debit
|
Credit
|
Balance
| ||
Mar.
|
19
|
G1
|
5,000
|
5,000
| |||
Prepaid Rent
|
Acct. No. 131
| ||||||
Date
|
Explanation
|
PR
|
Debit
|
Credit
|
Balance
| ||
Mar.
|
2
|
G1
|
6,000
|
6,000
| |||
Office Equipment
|
Acct. No. 163
| ||||||
Date
|
Explanation
|
PR
|
Debit
|
Credit
|
Balance
| ||
Mar.
|
1
|
G1
|
22,000
|
22,000
| |||
3
|
G1
|
3,000
|
25,000
| ||||
Problem 2-4A (Continued)
Accounts Payable
|
Acct. No. 201
| |||||
Date
|
Explanation
|
PR
|
Debit
|
Credit
|
Balance
| |
Mar.
|
3
|
G1
|
4,200
|
4,200
| ||
13
|
G1
|
4,200
|
0
| |||
30
|
G1
|
600
|
600
| |||
Common Stock
|
Acct. No. 307
| |||||
Date
|
Explanation
|
PR
|
Debit
|
Credit
|
Balance
| |
Mar.
|
1
|
G1
|
172,000
|
172,000
| ||
Dividends
|
Acct. No. 319
| |||||
Date
|
Explanation
|
PR
|
Debit
|
Credit
|
Balance
| |
Mar.
|
29
|
G1
|
5,100
|
5,100
| ||
Services Revenue
|
Acct. No. 403
| |||||
Date
|
Explanation
|
PR
|
Debit
|
Credit
|
Balance
| |
Mar.
|
6
|
G1
|
4,000
|
4,000
| ||
9
|
G1
|
7,500
|
11,500
| |||
25
|
G1
|
3,820
|
15,320
| |||
Utilities Expense
|
Acct. No. 690
| |||||
Date
|
Explanation
|
PR
|
Debit
|
Credit
|
Balance
| |
Mar.
|
31
|
G1
|
200
|
200
| ||
Problem 2-4A (Concluded)
Part 3
SHOW-ME-THE-MONEY CONSULTANTS
Trial Balance
March 31
Debit Credit
Cash.................................................................... $137,000
Accounts receivable............................................ 7,820
Office supplies.................................................... 1,800
Prepaid insurance............................................... 5,000
Prepaid rent........................................................ 6,000
Office equipment................................................ 25,000
Accounts payable................................................ $ 600
Common stock.................................................... 172,000
Dividends............................................................ 5,100
Services revenue................................................. 15,320
Utilities expense................................................. 200 _______
Totals.................................................................. $187,920 $187,920
Problem 2-5A (90 minutes)
Part 1
a. Cash........................................................ 101 23,000
Office Equipment.................................... 163 12,000
Common Stock................................ 307 35,000
Owner invested cash and equipment for stock.
b. Land........................................................ 172 8,000
Building.................................................. 170 33,000
Cash................................................. 101 15,000
Notes Payable.................................. 250 26,000
Purchased land and building with cash and note payable.
c. Office Supplies....................................... 108 600
Accounts Payable............................ 201 600
Purchased office supplies on account.
d. Automobiles............................................ 164 7,000
Common Stock................................ 307 7,000
Owner contributed automobile to business for stock.
e. Office Equipment.................................... 163 1,100
Accounts Payable............................ 201 1,100
Purchased office equipment on account.
f. Salaries Expense..................................... 601 800
Cash................................................. 101 800
Paid assistant’s salary.
g. Cash........................................................ 101 2,700
Fees Earned..................................... 402 2,700
Provided services for cash.
h. Utilities Expense..................................... 602 430
Cash................................................. 101 430
Paid cash for utilities.
Problem 2-5A (Part 1 Continued)
i. Accounts Payable................................... 201 600
Cash................................................. 101 600
Paid cash on account.
j. Office Equipment.................................... 163 4,000
Cash................................................. 101 4,000
Purchased new equipment with cash.
k. Accounts Receivable............................... 106 2,400
Fees Earned..................................... 402 2,400
Provided services on account.
l. Salaries Expense..................................... 601 800
Cash................................................. 101 800
Paid assistant’s salary.
m. Cash........................................................ 101 1,000
Accounts Receivable....................... 106 1,000
Received cash due on account.
n. Dividends................................................ 319 1,050
Cash................................................. 101 1,050
Paid cash for dividends.
Problem 2-5A (Continued)
Part 2
Cash No. 101
|
Land No. 172
| ||||||||||
Date
|
PR
|
Debit
|
Credit
|
Balance
|
Date
|
PR
|
Debit
|
Credit
|
Balance
| ||
(a)
|
23,000
|
23,000
|
(b)
|
8,000
|
8,000
| ||||||
(b)
|
15,000
|
8,000
| |||||||||
(f)
|
800
|
7,200
|
Accounts Payable No. 201
| ||||||||
(g)
|
2,700
|
9,900
|
Date
|
PR
|
Debit
|
Credit
|
Balance
| ||||
(h)
|
430
|
9,470
|
(c)
|
600
|
600
| ||||||
(i)
|
600
|
8,870
|
(e)
|
1,100
|
1,700
| ||||||
(j)
|
4,000
|
4,870
|
(i)
|
600
|
1,100
| ||||||
(l)
|
800
|
4,070
| |||||||||
(m)
|
1,000
|
5,070
|
Notes Payable No. 250
| ||||||||
(n)
|
1,050
|
4,020
|
Date
|
PR
|
Debit
|
Credit
|
Balance
| ||||
(b)
|
26,000
|
26,000
| |||||||||
Accounts Receivable No. 106
| |||||||||||
Date
|
PR
|
Debit
|
Credit
|
Balance
| |||||||
(k)
|
2,400
|
2,400
|
Common Stock No. 307
| ||||||||
(m)
|
1,000
|
1,400
|
Date
|
PR
|
Debit
|
Credit
|
Balance
| ||||
(a)
|
35,000
|
35,000
| |||||||||
Office Supplies No. 108
|
(d)
|
7,000
|
42,000
| ||||||||
Date
|
PR
|
Debit
|
Credit
|
Balance
| |||||||
(c)
|
600
|
600
| |||||||||
Dividends No. 319
| |||||||||||
Office Equipment No. 163
|
Date
|
PR
|
Debit
|
Credit
|
Balance
| ||||||
Date
|
PR
|
Debit
|
Credit
|
Balance
|
(n)
|
1,050
|
1,050
| ||||
(a)
|
12,000
|
12,000
| |||||||||
(e)
|
1,100
|
13,100
|
Fees Earned No. 402
| ||||||||
(j)
|
4,000
|
17,100
|
Date
|
PR
|
Debit
|
Credit
|
Balance
| ||||
(g)
|
2,700
|
2,700
| |||||||||
(k)
|
2,400
|
5,100
| |||||||||
Automobiles No. 164
|
Salaries Expense No. 601
| ||||||||||
Date
|
PR
|
Debit
|
Credit
|
Balance
|
Date
|
PR
|
Debit
|
Credit
|
Balance
| ||
(d)
|
7,000
|
7,000
|
(f)
|
800
|
800
| ||||||
(l)
|
800
|
1,600
| |||||||||
Building No. 170
| |||||||||||
Date
|
PR
|
Debit
|
Credit
|
Balance
|
Utilities Expense No. 602
| ||||||
(b)
|
33,000
|
33,000
|
Date
|
PR
|
Debit
|
Credit
|
Balance
| ||||
(h)
|
430
|
430
| |||||||||
Problem 2-5A (Concluded)
Part 3
EP CONSULTING
Trial Balance
September 30
Debit Credit
Cash ......................................................... $ 4,020
Accounts receivable.................................. 1,400
Office supplies.......................................... 600
Office equipment....................................... 17,100
Automobiles.............................................. 7,000
Building..................................................... 33,000
Land.......................................................... 8,000
Accounts payable...................................... $ 1,100
Long-term notes payable........................... 26,000
Common stock.......................................... 42,000
Dividends.................................................. 1,050
Fees earned............................................... 5,100
Salaries expense....................................... 1,600
Utilities expense........................................ 430
Total.......................................................... $74,200 $74,200
Problem 2-6A (35 minutes)
Part 1
BELTRAN ENGINEERING
Trial Balance
May 31
Debit Credit
Cash.......................................................... $26,660
Office supplies.......................................... 660
Prepaid insurance..................................... 3,200
Office equipment....................................... 16,500
Accounts payable...................................... $16,500
Common stock.......................................... 17,000
Dividends.................................................. 3,740
Engineering fees earned............................ 24,000
Rent expense............................................. 6,740 ______
Totals........................................................ $57,500 $57,500
Part 2: Likely transactions (following order of trial balance).
1. Purchased $660 of office supplies for cash.
2. Paid $3,200 insurance premium in advance.
3. Purchased $16,500 office equipment on credit (with account payable).
4. C. Beltran invested $17,000 cash in the business (given) for stock.
5. Paid $3,740 cash for dividends.
6. Earned $24,000 cash for engineering services.
7. Paid $6,740 cash for rent expense.
Part 3
Report of Cash Received and Paid
Cash received
Amount invested ..................................... $17,000
Engineering fees ...................................... 24,000
Total cash received ................................. $41,000
Cash paid
Office supplies ........................................ 660
Insurance premium .................................. 3,200
Dividends ................................................. 3,740
Rent ......................................................... 6,740
Total cash paid ........................................ 14,340
Ending balance .......................................... $26,660
PROBLEM SET B
Problem 2-1B (90 minutes) Part 1
Nov. 1 Cash........................................................ 101 30,000
Office Equipment.................................... 163 15,000
Common Stock................................ 307 45,000
Owner invested cash and equipment for stock.
2 Prepaid Rent........................................... 131 4,500
Cash................................................. 101 4,500
Prepaid six months’ rent.
4 Office Equipment.................................... 163 2,500
Office Supplies....................................... 124 600
Accounts Payable............................ 201 3,100
Purchased equipment and supplies on credit.
8 Cash........................................................ 101 3,400
Services Revenue............................ 403 3,400
Received cash for services.
12 Accounts Receivable............................... 106 10,200
Services Revenue............................ 403 10,200
Billed client for completed work.
13 Accounts Payable................................... 201 3,100
Cash................................................. 101 3,100
Paid balance due on account.
19 Prepaid Insurance................................... 128 1,800
Cash................................................. 101 1,800
Paid premium for insurance.
22 Cash........................................................ 101 5,200
Accounts Receivable....................... 106 5,200
Collected part of amount owed by client.
24 Accounts Receivable............................... 106 1,750
Services Revenue............................ 403 1,750
Billed client for completed work.
28 Dividends................................................ 319 5,300
Cash................................................. 101 5,300
Paid cash for dividends.
29 Office Supplies....................................... 124 249
Accounts Payable............................ 201 249
Purchased supplies on account.
30 Utilities Expense..................................... 690 531
Cash................................................. 101 531
Paid monthly utility bill.
Problem 2-1B (Continued)
Part 2
Cash
|
Acct. No. 101
| ||||||
Date
|
Explanation
|
PR
|
Debit
|
Credit
|
Balance
| ||
Nov.
|
1
|
G1
|
30,000
|
30,000
| |||
2
|
G1
|
4,500
|
25,500
| ||||
8
|
G1
|
3,400
|
28,900
| ||||
13
|
G1
|
3,100
|
25,800
| ||||
19
|
G1
|
1,800
|
24,000
| ||||
22
|
G1
|
5,200
|
29,200
| ||||
28
|
G1
|
5,300
|
23,900
| ||||
30
|
G1
|
531
|
23,369
| ||||
Accounts Receivable
|
Acct. No. 106
| ||||||
Date
|
Explanation
|
PR
|
Debit
|
Credit
|
Balance
| ||
Nov.
|
12
|
G1
|
10,200
|
10,200
| |||
22
|
G1
|
5,200
|
5,000
| ||||
24
|
G1
|
1,750
|
6,750
| ||||
Office Supplies
|
Acct. No. 124
| ||||||
Date
|
Explanation
|
PR
|
Debit
|
Credit
|
Balance
| ||
Nov.
|
4
|
G1
|
600
|
600
| |||
29
|
G1
|
249
|
849
| ||||
Prepaid Insurance
|
Acct. No. 128
| ||||||
Date
|
Explanation
|
PR
|
Debit
|
Credit
|
Balance
| ||
Nov.
|
19
|
G1
|
1,800
|
1,800
| |||
Prepaid Rent
|
Acct. No. 131
| ||||||
Date
|
Explanation
|
PR
|
Debit
|
Credit
|
Balance
| ||
Nov.
|
2
|
G1
|
4,500
|
4,500
| |||
Office Equipment
|
Acct. No. 163
| ||||||
Date
|
Explanation
|
PR
|
Debit
|
Credit
|
Balance
| ||
Nov.
|
1
|
G1
|
15,000
|
15,000
| |||
4
|
G1
|
2,500
|
17,500
| ||||
Accounts Payable
|
Acct. No. 201
| ||||||
Date
|
Explanation
|
PR
|
Debit
|
Credit
|
Balance
| ||
Nov.
|
4
|
G1
|
3,100
|
3,100
| |||
13
|
G1
|
3,100
|
0
| ||||
29
|
G1
|
249
|
249
| ||||
Problem 2-1B (Continued)
Common Stock
|
Acct. No. 307
| |||||
Date
|
Explanation
|
PR
|
Debit
|
Credit
|
Balance
| |
Nov.
|
1
|
G1
|
45,000
|
45,000
| ||
Dividends
|
Acct. No. 319
| |||||
Date
|
Explanation
|
PR
|
Debit
|
Credit
|
Balance
| |
Nov.
|
28
|
G1
|
5,300
|
5,300
| ||
Services Revenue
|
Acct. No. 403
| |||||
Date
|
Explanation
|
PR
|
Debit
|
Credit
|
Balance
| |
Nov.
|
8
|
G1
|
3,400
|
3,400
| ||
12
|
G1
|
10,200
|
13,600
| |||
24
|
G1
|
1,750
|
15,350
| |||
Utilities Expense
|
Acct. No. 690
| |||||
Date
|
Explanation
|
PR
|
Debit
|
Credit
|
Balance
| |
Nov.
|
30
|
G1
|
531
|
531
| ||
Part 3
SHAW MANAGEMENT SERVICES
Trial Balance
November 30
Debit Credit
Cash.................................................................... $23,369
Accounts receivable............................................ 6,750
Office supplies.................................................... 849
Prepaid insurance............................................... 1,800
Prepaid rent........................................................ 4,500
Office equipment................................................ 17,500
Accounts payable................................................ $ 249
Common stock.................................................... 45,000
Dividends............................................................ 5,300
Services revenue................................................. 15,350
Utilities expense................................................. 531 ______
Totals.................................................................. $60,599 $60,599
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