Financial Accounting, 3/E solutions manual and test bank Robert Kemp
Chapter 2: Analyzing and Recording Business Transactions
Discussion Questions: Key Points
1. Assets are listed in order of liquidity, or closeness to cash. Discuss the steps that the business would have to go through in order to convert each asset to cash in the normal course of business.
2. When the company pays for something in advance that won’t be used up in this accounting period, it would record a prepaid asset. In a sense, plant assets are a type of prepaid asset, although it would not be classified as such. All prepaid assets would be used up, eventually. That is, they all become expenses over time or with use.
3. Revenue increases retained earnings. By definition, when revenue is increased as assets are acquired (or liabilities reduced) as a result of activities relating to the company’s line of business, the owners have a claim on those assets that are acquired. This ownership interest is reflected in the retained earnings account.
4. Not all events are transactions. A transaction is an event that has a financial impact on a company. Journal entries are recorded for all transactions.
5. The normal balance of an account is the side that increases the account.
a. Debit
b. Debit
c. Credit
d. Credit
e. Debit
6. The bank is keeping its own books, not yours. When you give the bank cash or deposit your paycheck, the bank needs to keep track of its liability to you. It is increasing its liability account with a credit (the debit that it makes is to its own cash account).
7. A credit balance in the cash account would indicate a negative cash balance. Negative cash does not make sense. If a company overdraws its checking account, it now has a liability to the bank. Rather than showing a credit balance in its cash account, it should show a credit balance in a liability account.
8. Journalizing is the process of recording a transaction in the journal. Posting is the process of transferring the information from the journal to the appropriate accounts in the ledger or to T-accounts.
9. False. A balanced trial balance is a necessary but not sufficient condition for accurate financial statements. If a debit to supplies is improperly recorded as a debit to supplies expense, for example, the trial balance will balance but the financial statements will be inaccurate.
10. The financial statement numbers generally come from the trial balance. However, the numbers on the trial balance come from the general ledger. So, the numbers on the trial balance really come from the general ledger.
Short Exercises
(5-10 min.) S 2-1
1. b
2. c
3. e
4. g
5. d
6. f
7. a
(5-10 min.) S 2-2
| | |
| L |
| A |
| R |
| A |
| E |
| SE |
(5-10 min.) S 2-3
1. Transactions occur.
5. Prepare the financial statements
4. Prepare the trial balance.
3. Post the transactions from the journal to the ledger.
2. Record the transactions in the journal.
(5-10 min.) S 2-4
| Example | A, 1 | |
| 1. | R, 4 | |
| 2. | SE, 3 | |
| 3. | A, 1 | |
| 4. | E, 5 | |
| 5. | L, 2 | |
| 6. | SE, 3 | |
| 7. | E ,5 |
(5-10 min.) S 2-5
The basic summary device in accounting is the account. The left side of an account is called the debit side, and the right side is called the credit side. We record transactions first in a journal. Then we post or copy the data to the ledger (or T-accounts). It is helpful to list all the accounts with their balances on a trial balance.
(5-10 min.) S 2-6
| | ||
| DR | 1. | Rent expense |
| CR | 2. | Accounts payable |
| CR | 3. | Service revenue |
| DR | 4. | Office furniture |
| CR | 5. | Common stock |
| DR | 6. | Land |
| DR | 7. | Dividends |
(5-10 min.) S 2-7
| Supplies | | Note payable | ||||||
| 3/8 | 250 | 3/27 | 400 | 3/20 | 1,250 | 3/5 | 9,500 | |
| 3/17 | 800 | 3/31 | 4,500 | |||||
| Bal. | 650 | Bal. | 3,750 | |||||
| | | | | | | | | |
(5-10 min.) S 2-8
| | | | |
| Account | Type | | |
| Office equipment | Asset | Dr. | Cr. |
| Dividends | Stockholder’s Equity | Dr. | Cr. |
| Service revenue | Revenue | Cr. | Dr. |
| Accounts payable | Liability | Cr. | Dr. |
| Rent expense | Expense | Dr. | Cr. |
| Cash | Asset | Dr. | Cr. |
(15-20 min.) S 2-9
| Transaction | Account Affected | Type |
| Dr. or Cr. |
| (1) | Cash | Asset | Increase | Dr |
| Common stock | Stockholders’ Equity | Increase | Cr | |
| (2) | Equipment | Asset | Increase | Dr |
| Cash | Asset | Decrease | Cr | |
| (3) | Supplies | Asset | Increase | Dr |
| Accounts payable | Liability | Increase | Cr | |
| (4) | Accounts receivable | Asset | Increase | Dr |
| Service revenue | Revenue | Increase | Cr | |
| (5) | Accounts payable | Liability | Decrease | Dr |
| Cash | Asset | Decrease | Cr | |
| (6) | Operating expenses | Expense | Increase | Dr |
| Cash | Asset | Decrease | Cr | |
| (7) | Dividends | Stockholders’ Equity | Increase | Dr |
| Cash | Asset | Decrease | Cr |
(10-15 min.) S 2-10
Journal | |||||
| DATE | ACCOUNTS | POST. REF. | Dr. | Cr. | |
| Aug | 1 | Cash | 50,000 | ||
| Common stock | 50,000 | ||||
| Sold stock. | |||||
| 5 | Dental supplies | 6,300 | |||
| Accounts payable | 6,300 | ||||
| Purchased supplies on account. | |||||
| 7 | Rent Expense | 1,000 | |||
| Cash | 1,000 | ||||
| Paid office rent. | |||||
| 10 | Cash | 1,200 | |||
| Accounts receivable | 2,600 | ||||
| Service revenue | 3,800 | ||||
| Performed service for patients. |
(10-15 min.) S 2-11
Journal | |||||
| DATE | ACCOUNTS | POST. REF. | Dr. | Cr. | |
| Sep | 3 | Cash | 35,000 | ||
| Note payable | 35,000 | ||||
| Borrowed money from the bank. | |||||
| 9 | Accounts receivable | 1,250 | |||
| Service revenue | 1,250 | ||||
| Performed service on account. | |||||
| 16 | Cash | 500 | |||
| Accounts receivable | 500 | ||||
| Received cash on account. | |||||
| 22 | Utilities expense | 380 | |||
| Accounts payable | 380 | ||||
| Received utility bill. | |||||
| 2,250 | |||||
| 30 | Salaries expense | 2,600 | |||
| Cash | 2,250 | ||||
| Paid salary expense. | |||||
| 30 | Interest expense | 170 | |||
| Cash | 170 | ||||
| Paid interest expense. |
(10-15 min.) S 2-12
| Audio Masters, Corp | ||
| Trial Balance | ||
| April 30, 2014 | ||
| | BALANCE | |
| | | |
| ACCOUNT TITLE | DEBIT | CREDIT |
| Cash | $18,300 | |
| Prepaid rent | 750 | |
| Equipment | 21,000 | |
| Accounts payable | $ 1,700 | |
| Note payable | 11,500 | |
| Common stock | 15,000 | |
| Dividends | 22,600 | |
| Service revenue | 63,000 | |
| Rent expense | 10,150 | |
| Utilities expense | 18,400 | |
| Total | $91,200 | $91,200 |
(5-10 min.) S 2-13
Mylar, Inc.
Trial Balance
December 31, 2014
| ACCOUNT | DEBIT | CREDIT | |||
| BS BS BS BS BS BS BS RE IS IS IS IS | Cash Accounts Receivable Supplies Equipment Accounts Payable Notes Payable Common Stock Dividends Service Revenue Salaries Expense Rent Expense Utilities Expense Total | $12,100 1,900 250 6,000
700 1,740 800 340 $23,830 | $1,830 10,000 8,500 3,500 _______ $23,830 |
(5-10 min.) S 2-14
| e | 1 | Posting |
| d | 2 | Normal balance |
| g | 3 | Payable |
| a | 4 | Journal |
| b | 5 | Receivable |
| h | 6 | Chart of accounts |
| c | 7 | Debit |
| f | 8 | Trial balance |
| i | 9 | Credit |
Exercises
(10-15 min.) E 2-15A
| Transaction | Account Affected | Type |
| Dr. or Cr. |
| Jul 1 | Advertising expense | Stockholders’ Equity | Increase | Dr |
| Cash | Asset | Decrease | Cr | |
| 3 | Cash | Asset | Increase | Dr |
| Service revenue | Stockholders’ Equity | Increase | Cr | |
| 5 | Supplies | Asset | Increase | Dr |
| Accounts payable | Liability | Increase | Cr | |
| 9 | Cash | Asset | Increase | Dr |
| Accounts receivable | Asset | Decrease | Cr | |
| 12 | Accounts Payable | Liability | Decrease | Dr |
| Cash | Asset | Decrease | Cr | |
| 17 | Accounts receivable | Asset | Increase | Dr |
| Service revenue | Stockholders’ Equity | Increase | Cr | |
| | | | | |
| | | | | |
(15-20 min.) E 2-16A
Journal | |||||
| DATE | ACCOUNTS | POST. REF. | Dr. | Cr. | |
| Apr. | 1 | Interest expense | 380 | ||
| Cash | 380 | ||||
| 5 | Office furniture | 3,200 | |||
| Accounts payable | 3,200 | ||||
| 10 | Accounts receivable | 2,650 | |||
| Service revenue | 2,650 | ||||
| 12 | Cash | 25,000 | |||
| Notes payable | 25,000 | ||||
| 19 | Cash | 53,000 | |||
| Land | 53,000 | ||||
| 21 | Building | 250,000 | |||
| Notes payable | 250,000 | ||||
| 27 | Accounts Payable | 1,800 | |||
| Cash | 1,800 |
(15-20 min.) E 2-17A
| Journal | |||||
| DATE | ACCOUNTS | POST. REF. | Dr. | Cr. | |
| Nov. | 1 | Cash | 85,000 | ||
| Common stock | 85,000 | ||||
| 3 | Supplies | 400 | |||
| Accounts Payable | 400 | ||||
| 5 | Building | 40,000 | |||
| Cash | 40,000 | ||||
| 6 | Cash | 1,600 | |||
| Service revenue | 1,600 | ||||
| 11 | Accounts payable | 350 | |||
| Cash | 350 | ||||
| 18 | Accounts receivable | 2,600 | |||
| Service revenue | 2,600 | ||||
| 24 | Cash | 1,300 | |||
| Accounts receivable | 1,300 | ||||
| 30 | Salaries expense | 700 | |||
| Rent expense | 1,800 | ||||
| Cash | 2,500 |
(10-15 min.) E 2-18A
Req. 1
| Cash | | Accounts Payable | ||||||
| Oct. 1 | 25,000 | Oct. 4 | 13,500 | Oct. 9 | 300 | Oct. 2 | 450 | |
| 6 | 6,700 | 9 | 300 | Bal. | 150 | |||
| 23 | 1,400 | 29 | 1,600 | |||||
| Bal. | 17,700 |
| Accounts Receivable | | Common stock | ||||||
| Oct. 17 | 2,300 | Oct. 23 | 1,400 | Oct. 1 | 25,000 | |||
| Bal. | 900 | Bal. | 25,000 |
| Supplies | | Service revenue | ||||||
| Oct. 2 | 450 | Oct. 6 | 6,700 | |||||
| Bal. | 450 | 17 | 2,300 | |||||
| | | Bal. | 9,000 |
| Equipment | | Salaries Expense | ||||||
| Oct. 4 | 13,500 | Oct. 29 | 1,600 | |||||
| Bal. | 13,500 | Bal. | 1,600 |
Req. 2
| Tiny Tykes Daycare, Inc. | ||
| Trial Balance | ||
| October 31, 2014 | ||
| | BALANCE | |
| ACCOUNT TITLE | DEBIT | CREDIT |
| Cash | $17,700 | |
| Accounts receivable | 900 | |
| Supplies | 450 | |
| Equipment | 13,500 | |
| Accounts payable | $ 150 | |
| Common stock | 25,000 | |
| Service revenue | 9,000 | |
| Salaries expense | 1,600 | |
| Total | $34,150 | $34,150 |
(15-20 min.) E 2-19A
Req 1
| Journal | |||||
| DATE | ACCOUNTS | POST. REF. | Dr. | Cr. | |
| Mar. | 2 | Rent expense | 1,000 | ||
| Cash | 1,000 | ||||
| 4 | Cash | 1,100 | |||
| Service revenue | 1,100 | ||||
| 8 | Supplies | 100 | |||
| Accounts payable | 100 | ||||
| 11 | Cash | 2,600 | |||
| Accounts receivable | 2,600 | ||||
| 15 | Cash | 45,000 | |||
| Common stock | 45,000 | ||||
| 19 | Accounts payable | 450 | |||
| Cash | 450 | ||||
| 27 | Accounts receivable | 3,300 | |||
| Service revenue | 3,300 | ||||
| 31 | Notes payable | 6,000 | |||
| Cash | 6,000 |
Req 2 & 3
| Cash | | Accounts payable | ||||||
| Mar 1 | 5,000 | Mar 2 | 1,000 | Mar 19 | 450 | Mar 1 | 400 | |
| Mar 4 | 1,100 | Mar 19 | 450 | Mar 8 | 100 | |||
| Mar 11 | 2,600 | Mar 31 | 6,000 | Bal. | 50 | |||
| Mar 15 | 45,000 | |||||||
| Bal. | 46,250 |
| Accounts receivable | | Notes payable | ||||||
| Mar 1 | 2,800 | Mar 11 | 2,600 | Mar 31 | 6,000 | Mar 1 | 9,000 | |
| Mar 27 | 3,300 | |||||||
| Bal. | 3,500 | Bal. | 3,000 |
| Supplies | | Common stock | ||||||
| Mar 1 | 550 | Mar 1 | 30,750 | |||||
| Mar 8 | 100 | Mar 15 | 45,000 | |||||
| Bal. | 650 | Bal. | 75,750 |
| Office furniture | | Service revenue | ||||||
| Mar 1 | 2,900 | Mar 1 | 2,600 | |||||
| Bal. | 2,900 | Mar 4 | 1,100 | |||||
| Mar 27 | 3,300 | |||||||
| Bal. | 7,000 |
| Building | | Rent expense | ||||||
| Mar 1 | 30,000 | Mar 1 | 1,500 | |||||
| Bal. | 30,000 | Mar 2 | 1,000 | |||||
| | | Bal. | 2,500 |
Req 4
| Baily Realty, Inc. | ||
| Trial Balance | ||
| March 31, 2014 | ||
| ACCOUNT TITLE | DEBIT | CREDIT |
| Cash | $ 46,250 | |
| Accounts receivable | 3,500 | |
| Supplies | 650 | |
| Office furniture | 2,900 | |
| Building | 30,000 | |
| Accounts payable | $ 50 | |
| Notes payable | 3,000 | |
| Common stock | 75,750 | |
| Service revenue | 7,000 | |
| Rent expense | 2,500 | |
| Total | $85,800 | $85,800 |
(20-25 min.) E 2-20A
Journal | |||||
| DATE | ACCOUNTS | POST. REF. | Dr. | Cr. | |
| Sep. | 1 | Cash | 53,000 | ||
| Common stock | 53,000 | ||||
| Sold stock. | |||||
| 2 | Supplies | 750 | |||
| Accounts Payable | 750 | ||||
| Purchased supplies on acct. | |||||
| 3 | Building | 140,000 | |||
| Notes payable | 140,000 | ||||
| Purchased building signing note payable. | |||||
| 4 | Equipment | 7,500 | |||
| Cash | 7,500 | ||||
| Paid cash to purchase equipment | |||||
| 5 | Notes Payable | 5,500 | |||
| Cash | 5,500 | ||||
| Made payment on note payable. | |||||
| 6 | Accounts payable | 500 | |||
| Cash | 500 | ||||
| Made payment on account. | |||||
Req. 2
| Cash | | Accounts payable | ||||||
| (1) | 53,000 | (4) | 7,500 | (6) | 500 | (2) | 750 | |
| (5) | 5,500 | Bal. | 250 | |||||
| (6) | 500 | |||||||
| Bal. | 39,500 |
| Supplies | | Notes payable | ||||||
| (2) | 750 | (5) | 5,500 | (3) | 140,000 | |||
| Bal. | 750 | Bal. | 134,500 |
| Equipment | | Common stock | ||||||
| (4) | 7,500 | (1) | 53,000 | |||||
| Bal. | 7,500 | Bal. | 53,000 |
| Building | | | ||||||
| (3) | 140,000 | |||||||
| Bal. | 140,000 | | | | |
Req. 3
| Rawlins Equipment, Inc. | ||
| Trial Balance | ||
| September 30, 2014 | ||
| | BALANCE | |
| ACCOUNT TITLE | DEBIT | CREDIT |
| Cash | $39,500 | |
| Supplies | 750 | |
| Equipment | 7,500 | |
| Building | 140,000 | |
| Accounts payable | $ 250 | |
| Notes payable | 134,500 | |
| Common stock | 53,000 | |
| Total | $187,750 | $187,750 |
Req. 4
| Rawlins Equipment, Inc. | |||
| Balance Sheet | |||
| September 30, 2014 | |||
| ASSETS | LIABILITIES | ||
| Cash | $ 39,500 | Accounts payable | $ 250 |
| Supplies | 750 | Notes payable | 134,500 |
| Equipment | 7,500 | Total liabilities | 134,750 |
| Building | 140,000 | STOCKHOLDERS’ EQUITY | |
| Common stock | 53,000 | ||
| Total liabilities and | |||
| Total assets | $187,750 | stockholder’s equity | $187,750 |
(25-30 min.) E 2-21A
Req. 2
Journal | |||||
| DATE | ACCOUNTS | POST. REF. | Dr. | Cr. | |
| Nov. | 2 | Cash | 80,000 | ||
| Common stock | 80,000 | ||||
| 3 | Rent expense | 1,700 | |||
| Cash | 1,700 | ||||
| 6 | Equipment | 1,800 | |||
Cash | 1,800 | ||||
| 8 | Furniture | 1,200 | |||
| Accounts payable | 1,200 | ||||
| 11 | Supplies | 400 | |||
| Accounts payable | 400 | ||||
| 19 | Accounts receivable | 2,600 | |||
| Service revenue | 2,600 | ||||
| 20 | Utility expense | 500 | |||
| Cash | 500 | ||||
| 28 | Cash | 1,600 | |||
| Service revenue | 1,600 | ||||
Req. 1, and 3
| Cash | | Accounts payable | ||||||
| Nov. 2 | 80,000 | Nov. 3 | 1,700 | Nov. 8 | 1,200 | |||
| 28 | 1,600 | 6 | 1,800 | 11 | 400 | |||
| 20 | 500 | Bal | 1,600 | |||||
| Bal. | 77,600 | | |
| Accounts receivable | | Common stock | ||||||
| Nov. 19 | 2,600 | Nov. 2 | 80,000 | |||||
| | | Bal. | 80,000 | |||||
| Bal. | 2,600 |
| Supplies | | Service revenue | ||||||
| Nov. 11 | 400 | Nov. 19 | 2,600 | |||||
| Bal. | 400 | 28 | 1,600 | |||||
| Bal. | 4,200 |
| Equipment | | Rent Expense | ||||||
| Nov. 6 | 1,800 | Nov. 3 | 1,700 | |||||
| Bal. | 1,800 | |||||||
| Bal. | 1,700 |
| Furniture | | Utilities expense | ||||||
| Nov. 8 | 1,200 | Nov 20 | 500 | |||||
| Bal. | 1,200 | Bal. | 500 |
Req. 4
| Munro Consulting, Inc. | ||
| Trial Balance | ||
| November 30, 2014 | ||
| | BALANCE | |
| ACCOUNT TITLE | DEBIT | CREDIT |
| Cash | $ 77,600 | |
| Accounts receivable | 2,600 | |
| Supplies | 400 | |
| Equipment | 1,800 | |
| Furniture | 1,200 | |
| Accounts payable | $ 1,600 | |
| Common stock | 80,000 | |
| Service revenue | 4,200 | |
| Rent expense | 1,700 | |
| Utilities expense | 500 | |
| Total | $85,800 | $85,800 |
Req. 5
| Munro Consulting, Inc. | ||
| Income Statement | ||
| Month Ended November 30, 2014 | ||
| Service revenue | $4,200 | |
| Expenses: | ||
| Rent expense | $1,700 | |
| Utilities expense | 500 | |
| Total expenses | 2,200 | |
| Net Income | $2,000 |
| Munro Consulting, Inc. | ||
| Statement of Retained Earnings | ||
| Month Ended November 30, 2014 | ||
| Retained earnings, November 1 | $0 | |
| Add: Net income | 2,000 | |
| Retained earnings, November 30 | $2,000 |
Note: There were no dividends during the month of November
| Munro Consulting, Inc. | |||
| Balance Sheet | |||
| November 30, 2014 | |||
| ASSETS | LIABILITIES | ||
| Cash | $ 77,600 | Accounts payable | $ 1,600 |
| Accounts receivable | 2,600 | | |
| Supplies | 400 | STOCKHOLDERS’ EQUITY | |
| Equipment | 1,800 | Common stock | 80,000 |
| Furniture | 1,200 | Retained earnings | 2,000 |
| Total Stockholders’ equity | 82,000 | ||
| Total liabilities and | |||
| Total assets | $83,600 | stockholder’s equity | $83,600 |
(20-25 min.) E 2-22A
| Effect on Trial Balance | Account(s) Misstated | |||
| a. | Total debits = Total credits | Cash | ||
| $405 too high | ||||
| Rent expense | ||||
| $405 too low | ||||
| b. | Total debits = Total credits | Accounts receivable | ||
| $800 too high | ||||
| Accounts Payable | ||||
| $800 too high | ||||
| c. | Total debits = Total credits | Cash | ||
| $180 too high | ||||
| Service revenue | ||||
| $180too high | ||||
| d. | Total debits = Total credits | Supplies | ||
| $550 too low | ||||
| Accounts payable | ||||
| $550 too low | ||||
| e. | Total debits > Total credits | Notes payable | ||
| $30,000 too low | ||||
(10-15 min.) E 2-23B
| Transaction | Account Affected | Type |
| Dr. or Cr. |
| Apr. 1 | Advertising expense | Stockholders’ Equity | Increase | Dr |
| Cash | Asset | Decrease | Cr | |
| 3 | Equipment | Asset | Increase | Dr |
| Cash | Asset | Decrease | Cr | |
| 5 | Cash | Asset | Increase | Dr |
| Common stock | Stockholders’ Equity | Increase | Cr | |
| 9 | Cash | Asset | Increase | Dr |
| Notes payable | Liability | Increase | Cr | |
| 12 | Utilities expense | Stockholders’ Equity | Increase | Dr |
| Cash | Asset | Decrease | Cr | |
| 17 | Supplies | Asset | Increase | Dr |
| Cash | Asset | Decrease | Cr | |
| | | | | |
| | | | | |
(15-20 min.) E 2-24B
Journal | |||||
| DATE | ACCOUNTS | POST. REF. | Dr. | Cr. | |
| Apr. | 1 | Interest expense | 1,000 | ||
| Cash | 1,000 | ||||
| 5 | Office furniture | 3,000 | |||
| Accounts payable | 3,000 | ||||
| 10 | Accounts receivable | 2,400 | |||
| Service revenue | 2,400 | ||||
| 12 | Cash | 20,000 | |||
| Notes payable | 20,000 | ||||
| 19 | Cash | 75,000 | |||
| Land | 75,000 | ||||
| 21 | Building | 300,000 | |||
| Notes payable | 300,000 | ||||
| 27 | Accounts Payable | 1,500 | |||
| Cash | 1,500 |
(15-20 min.) E 2-25B
| Journal | |||||
| DATE | ACCOUNTS | POST. REF. | Dr. | Cr. | |
| Dec. | 1 | Cash | 80,000 | ||
| Common stock | 80,000 | ||||
| 3 | Supplies | 160 | |||
| Accounts payable | 160 | ||||
| 5 | Building | 45,000 | |||
| Cash | 45,000 | ||||
| 6 | Cash | 3,700 | |||
| Service revenue | 3,700 | ||||
| 11 | Accounts payable | 120 | |||
| Cash | 120 | ||||
| 18 | Accounts receivable | 2,650 | |||
| Service revenue | 2,650 | ||||
| 24 | Cash | 2,100 | |||
| Accounts receivable | 2,100 | ||||
| 31 | Salaries expense | 1,100 | |||
| Rent expense | 1,450 | ||||
| Cash | 2,550 |
(10-15 min.) E 2-26B
Req. 1
| Cash | | Accounts Payable | ||||||
| May 1 | 35,000 | May. 4 | 12,700 | May 9 | 600 | May 2 | 900 | |
| 6 | 3,000 | 9 | 600 | Bal. | 300 | |||
| 23 | 750 | 29 | 1,500 | |||||
| Bal. | 23,950 |
| Accounts Receivable | | Common stock | ||||||
| May 17 | 5,100 | May 23 | 750 | May 1 | 35,000 | |||
| Bal. | 4,350 | Bal. | 35,000 |
| Supplies | | Service revenue | ||||||
| May 2 | 900 | May 6 | 3,000 | |||||
| Bal. | 900 | 17 | 5,100 | |||||
| | | Bal. | 8,100 |
| Equipment | | Salaries Expense | ||||||
| May 4 | 12,700 | May 29 | 1,500 | |||||
| Bal. | 12,700 | Bal. | 1,500 | | |
Req. 2
| Fun Time Daycare, Inc. | ||
| Trial Balance | ||
| May 31, 2014 | ||
| | BALANCE | |
| ACCOUNT TITLE | DEBIT | CREDIT |
| Cash | $23,950 | |
| Accounts receivable | 4,350 | |
| Supplies | 900 | |
| Equipment | 12,700 | |
| Accounts payable | $ 300 | |
| Common stock | 35,000 | |
| Service revenue | 8,100 | |
| Salaries expense | 1,500 | |
| Total | $43,400 | $43,400 |
(15-20 min.) E 2-27B
Req 1
| Journal | |||||
| DATE | ACCOUNTS | POST. REF. | Dr. | Cr. | |
| Dec | 2 | Rent expense | 1,600 | ||
| Cash | 1,600 | ||||
| 4 | Cash | 900 | |||
| Service revenue | 900 | ||||
| 8 | Supplies | 225 | |||
| Accounts payable | 225 | ||||
| 11 | Cash | 1,500 | |||
| Accounts receivable | 1,500 | ||||
| 15 | Cash | 5,000 | |||
| Common stock | 5,000 | ||||
| 19 | Accounts payable | 375 | |||
| Cash | 375 | ||||
| 27 | Accounts receivable | 1,640 | |||
| Service revenue | 1,640 | ||||
| 28 | Notes payable | 2,500 | |||
| Cash | 2,500 |
Req 2 & 3
| Cash | | Accounts payable | ||||||
| Dec 1 | 4,325 | Dec 2 | 1,600 | Dec 19 | 375 | Dec 1 | 875 | |
| Dec 4 | 900 | Dec 19 | 375 | Dec 8 | 225 | |||
| Dec 11 | 1,500 | Dec 28 | 2,500 | Bal. | 725 | |||
| Dec 15 | 5,000 | |||||||
| Bal. | 7,250 |
| Accounts receivable | | Notes payable | ||||||
| Dec 1 | 2,200 | Dec 11 | 1,500 | Dec 28 | 2,500 | Dec 1 | 17,500 | |
| Dec 27 | 1,640 | |||||||
| Bal. | 2,340 | Bal. | 15,000 |
| Supplies | | Common stock | ||||||
| Dec 1 | 450 | Dec 1 | 30,000 | |||||
| Dec 8 | 225 | Dec 15 | 5,000 | |||||
| Bal. | 675 | Bal. | 35,000 |
| Office furniture | | Service revenue | ||||||
| Dec 1 | 3,100 | Dec 1 | 5,300 | |||||
| Bal. | 3,100 | Dec 4 | 900 | |||||
| Dec 27 | 1,640 | |||||||
| Bal. | 7,840 |
| Building | | Rent expense | ||||||
| Dec 1 | 42,000 | Dec 1 | 1,600 | |||||
| Bal. | 42,000 | Dec 2 | 1,600 | |||||
| | | Bal. | 3,200 |
Req 4
| Going Green, Inc. | ||
| Trial Balance | ||
| December 31, 2014 | ||
| ACCOUNT TITLE | DEBIT | CREDIT |
| Cash | $ 7,250 | |
| Accounts receivable | 2,340 | |
| Supplies | 675 | |
| Office furniture | 3,100 | |
| Building | 42,000 | |
| Accounts payable | $ 725 | |
| Notes payable | 15,000 | |
| Common stock | 35,000 | |
| Service revenue | 7,840 | |
| Rent expense | 3,200 | |
| Total | $58,565 | $58,565 |
(20-25 min.) E 2-28B
Req. 1
Journal | |||||
| DATE | ACCOUNTS | POST. REF. | Dr. | Cr. | |
| Jun | 1 | Cash | 28,000 | ||
| Common stock | 28,000 | ||||
| Sold stock. | |||||
| 2 | Supplies | 1,100 | |||
| Accounts Payable | 1,100 | ||||
| Purchased supplies on acct. | |||||
| 3 | Building | 50,000 | |||
| Notes payable | 50,000 | ||||
| Purchased building signing note payable. | |||||
| 4 | Equipment | 9,000 | |||
| Cash | 9,000 | ||||
| Paid cash to purchase equipment | |||||
| 5 | Notes Payable | 2,500 | |||
| Cash | 2,500 | ||||
| Made payment on note payable. | |||||
| 6 | Accounts payable | 500 | |||
| Cash | 500 | ||||
| Made payment on account. | |||||
Req. 2
| Cash | | Accounts payable | ||||||
| (1) | 28,000 | (4) | 9,000 | (6) | 500 | (2) | 1,100 | |
| (5) | 2,500 | Bal. | 600 | |||||
| (6) | 500 | |||||||
| Bal. | 16,000 |
| Supplies | | Notes payable | ||||||
| (2) | 1,100 | (5) | 2,500 | (3) | 50,000 | |||
| Bal. | 1,100 | Bal. | 47,500 |
| Equipment | | Common stock | ||||||
| (4) | 9,000 | (1) | 28,000 | |||||
| Bal. | 9,000 | Bal. | 28,000 |
| Building | | | ||||||
| (3) | 50,000 | |||||||
| Bal. | 50,000 | | | | |
Req. 3
| Grinko, Inc. | ||
| Trial Balance | ||
| June 30, 2014 | ||
| | BALANCE | |
| ACCOUNT TITLE | DEBIT | CREDIT |
| Cash | $16,000 | |
| Supplies | 1,100 | |
| Equipment | 9,000 | |
| Building | 50,000 | |
| Accounts payable | $ 600 | |
| Notes payable | 47,500 | |
| Common stock | 28,000 | |
| Total | $76,100 | $76,100 |
Req. 4
| Grinko, Inc. | |||
| Balance Sheet | |||
| June 30, 2014 | |||
| ASSETS | LIABILITIES | ||
| Cash | $ 16,000 | Accounts payable | $ 600 |
| Supplies | 1,100 | Notes payable | 47,500 |
| Equipment | 9,000 | Total liabilities | 48,100 |
| Building | 50,000 | STOCKHOLDERS’ EQUITY | |
| Common stock | 28,000 | ||
| Total liabilities and | |||
| Total assets | $76,100 | stockholder’s equity | $76,100 |
(25-30 min.) E 2-29B
Req. 1
Journal | |||||
| DATE | ACCOUNTS | POST. REF. | Dr. | Cr. | |
| Sep | 2 | Cash | 50,000 | ||
| Common stock | 50,000 | ||||
| 3 | Rent expense | 1,750 | |||
| Cash | 1,750 | ||||
| 6 | Equipment | 1,400 | |||
Cash | 1,400 | ||||
| 8 | Furniture | 2,700 | |||
| Accounts payable | 2,700 | ||||
| 11 | Supplies | 225 | |||
| Accounts payable | 225 | ||||
| 19 | Accounts receivable | 1,835 | |||
| Service revenue | 1,835 | ||||
| 20 | Utility expense | 285 | |||
| Cash | 285 | ||||
| 28 | Cash | 975 | |||
| Service revenue | 975 | ||||
Req. 2
| Cash | | Accounts payable | ||||||
| Sep 2 | 50,000 | Sep 3 | 1,750 | Sep 8 | 2,700 | |||
| 28 | 975 | 6 | 1,400 | 11 | 225 | |||
| 20 | 285 | Bal | 2,925 | |||||
| Bal. | 47,540 | | |
| Accounts receivable | | Common stock | ||||||||||||
| Sep 19 | 1,835 | Sep 2 | 50,000 | |||||||||||
| | | Bal. | 50,000 | |||||||||||
| Bal. | 1,335 | |||||||||||||
| Supplies | | Service revenue | ||||||||||||
| Sep 11 | 225 | Sep 19 | 1,835 | |||||||||||
| Bal. | 225 | 28 | 975 | |||||||||||
| Bal. | 2,810 | |||||||||||||
| Equipment | | Rent Expense | ||||||||||||
| Sep 6 | 1,400 | Sep 3 | 1,750 | |||||||||||
| Bal. | 1,400 | |||||||||||||
| Bal. | 1,750 | |||||||||||||
| Furniture | | Utilities expense | ||||||||||||
| Sep 8 | 2,700 | Sep 20 | 285 | |||||||||||
| Bal. | 2,700 | Bal. | 285 | |||||||||||
Req. 3
| Nolan Consulting, Inc. | ||
| Trial Balance | ||
| September 30, 2014 | ||
| | BALANCE | |
| ACCOUNT TITLE | DEBIT | CREDIT |
| Cash | $ 47,540 | |
| Accounts receivable | 1,835 | |
| Supplies | 225 | |
| Equipment | 1,400 | |
| Furniture | 2,700 | |
| Accounts payable | $ 2,925 | |
| Common stock | 50,000 | |
| Service revenue | 2,810 | |
| Rent expense | 1,750 | |
| Utilities expense | 285 | |
| Total | $55,735 | $55,735 |
Req. 4
| Nolan Consulting, Inc. | ||
| Income Statement | ||
| Month Ended September 30, 2014 | ||
| Service revenue | $2,810 | |
| Expenses: | ||
| Rent expense | $1,750 | |
| Utilities expense | 285 | |
| Total expenses | 2,035 | |
| Net Income | $775 |
| Nolan Consulting, Inc. | ||
| Statement of Retained Earnings | ||
| Month Ended September 30, 2014 | ||
| Retained earnings, September 1, 2014 | $0 | |
| Add: Net income | 775 | |
| Retained earnings, September 30, 2014 | $775 |
Note: There were no dividends during the month of September
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