Solution Manual For Accounting Principles, 10th Edition

CHAPTER 2 The Recording Process ASSIGNMENT CLASSIFICATION TABLE Brief Exercises Study Objectives Questions Do It! 1. Explain what an account is and how it helps in the recording process. 1 2. Define debits and credits and explain their use in recording business transactions. 2, 3, 4, 5, 6, 7, 8, 9, 14, 21 1, 2, 5 3. Identify the basic steps in the recording process. 10, 19 4 4. Explain what a journal is and how it helps in the recording process. 11, 12, 13, 14, 16 3, 6 5. Explain what a ledger is and how it helps in the recording process. 17 6. Explain what posting is and how it helps in the recording process. 15, 17 7, 8 3 7. Prepare a trial balance and explain its purposes. 18, 20 9, 10 4 A Exercises Problems B Problems 1 1 2, 4, 6, 7, 14 1A, 2A, 3A, 5A 1B, 2B, 3B, 5B 1A, 2A, 3A, 5A 1B, 2B, 3B, 5B 9, 12 2A, 3A, 5A 2B, 3B, 5B 9, 10, 11, 13, 14 2A, 3A, 4A, 5A 2B, 3B, 4B, 5B 6, 7 2 3, 5, 6, 7 10, 11, 12 8 ASSIGNMENT CHARACTERISTICS TABLE Problem Number Description Difficulty Level Time Allotted (min.) 1A Journalize a series of transactions. Simple 20–30 2A Journalize transactions, post, and prepare a trial balance. Simple 30–40 3A Journalize transactions, post, and prepare a trial balance. Moderate 40–50 4A Prepare a correct trial balance. Moderate 30–40 5A Journalize transactions, post, and prepare a trial balance. Moderate 40–50 1B Journalize a series of transactions. Simple 20–30 2B Journalize transactions, post, and prepare a trial balance. Simple 30–40 3B Journalize transactions, post, and prepare a trial balance. Moderate 40–50 4B Prepare a correct trial balance. Moderate 30–40 5B Journalize transactions, post, and prepare a trial balance. Moderate 40–50 WEYGANDT ACCOUNTING PRINCIPLES 10E CHAPTER 2 THE RECORDING PROCESS Number SO BT Difficulty Time (min.) BE1 2 C Simple 6–8 BE2 2 C Simple 4–6 BE3 4 AP Simple 4–6 BE4 3 C Moderate 4–6 BE5 2 C Simple 6–8 BE6 4 AP Simple 4–6 BE7 6 AP Simple 4–6 BE8 6 AP Simple 4–6 BE9 7 AP Simple 4–6 BE10 7 AN Moderate 6–8 DI1 2 C Simple 3–5 DI2 4 AP Simple 3–5 DI3 6 AP Simple 2–4 DI4 7 AP Simple 6–8 EX1 1 K Simple 2–4 EX2 2 C Simple 10–15 EX3 4 AP Simple 8–10 EX4 2 C Simple 6–8 EX5 4 AP Simple 6–8 EX6 2–4 AP Simple 6–8 EX7 2–4 AP Simple 8–10 EX8 5 K Simple 2–4 EX9 6, 7 AP Simple 10–12 EX10 4, 7 AP Moderate 10–12 EX11 4, 7 AP Moderate 12–15 EX12 4, 6 AP Moderate 12–15 EX13 7 AP Moderate 6–8 EX14 2, 7 AP Simple 8–10 THE RECORDING PROCESS (Continued) Number SO BT Difficulty Time (min.) P1A 2, 4 AP Simple 20–30 P2A 2, 4, 6, 7 AP Simple 30–40 P3A 2, 4, 6, 7 AP Moderate 40–50 P4A 7 AN Moderate 30–40 P5A 2, 4, 6, 7 AP Moderate 40–50 P1B 2, 4 AP Simple 20–30 P2B 2, 4, 6, 7 AP Simple 30–40 P3B 2, 4, 6, 7 AP Moderate 40–50 P4B 7 AN Moderate 30–40 P5B 2, 4, 6, 7 AP Moderate 40–50 BYP1 2 C Simple 8–10 BYP2 2, 6 AN Simple 8–10 BYP3 — AP Simple 15–20 BYP4 6, 7 AP, S Moderate 20–30 BYP5 3, 6 S Simple 10–15 BYP6 7 AN, E Moderate 10–15 BYP7 — E Moderate 15–20 Study Objective Knowledge Comprehension Application Analysis 1. Explain what an account is and how it helps in the recording process. 2. Define debits and credits and Q2–21 explain their use in recording business transactions. Q2-2 Q2-3 Q2-4 Q2-5 Q2-6 3. Identify the basic steps in the recording process. Q2-10 Q2-19 BE2-4 E2-6 E2-7 4. Explain what a journal is and how it helps in the recording process. Q2-12 Q2-11 Q2-13 Q2-14 Q2-16 BE2-3 BE2-6 DI2-2 E2-3 E2-5 E2-6 E2-7 P2-5A E2-10 P2-1B E2-11 P2-2B E2-12 P2-3B P2-1A P2-5B P2-2A P2-3A 5. Explain what a ledger is and how it helps in the recording process. E2-8 Q2-17 6. Explain what posting is and how it helps in the recording process. Q2-15 Q2-17 BE2-7 BE2-8 DI2-3 E2-9 E2-12 P2-2B P2-2A P2-3B P2-3A P2-5B P2-5A 7. Prepare a trial balance and explain its purposes. Q2-18 BE2-9 DI2-4 E2-9 E2-10 E2-11 P2-5A Q2-20 E2-14 P2-2B BE2-10 P2-2A P2-3B E2-13 P2-3A P2-5B P2-4A Broadening Your Perspective Synthesis Evaluation Q2-1 E2-1 Q2-7 BE2-2 E2-6 Q2-8 BE2-5 E2-7 Q2-9 DI2-1 E2-14 Q2-14 E2-2 P2-1A BE2-1 E2-4 P2-2A P2-3A P2-5B P2-5A P2-1B P2-2B P2-3B Financial Reporting Decision Making Across the Organization On the Web P2-4B Comparative Analysis Communication All About You Decision Making Ethics Case Across the Organization BLOOM’S TAXONOMY TABLE Correlation Chart between Bloom’s Taxonomy, Study Objectives and End-of-Chapter Exercises and Problems ANSWERS TO QUESTIONS 1. A T account has the following parts: (a) the title, (b) the left or debit side, and (c) the right or credit side. 2. Disagree. The terms debit and credit mean left and right respectively. 3. Jeff is incorrect. The double-entry system merely records the dual effect of a transaction on the accounting equation. A transaction is not recorded twice; it is recorded once, with a dual effect. 4. Maria is incorrect. A debit balance only means that debit amounts exceed credit amounts in an account. Conversely, a credit balance only means that credit amounts are greater than debit amounts in an account. Thus, a debit or credit balance is neither favorable nor unfavorable. 5. (a) Asset accounts are increased by debits and decreased by credits. (b) Liability accounts are decreased by debits and increased by credits. (c) Revenues and owner’s capital are increased by credits and decreased by debits. Expenses and owner’s drawing are increased by debits and decreased by credits. 6. (a) (b) (c) (d) (e) (f) (g) Accounts Receivable—debit balance. Cash—debit balance. Owner’s Drawings—debit balance. Accounts Payable—credit balance. Service Revenue—credit balance. Salaries and Wages Expense—debit balance. Owner’s Capital—credit balance. 7. (a) (b) (c) (d) (e) Accounts Receivable—asset—debit balance. Accounts Payable—liability—credit balance Equipment—asset—debit balance. Owner’s Drawings—owner’s equity—debit balance. Supplies—asset—debit balance. 8. (a) Debit Supplies and credit Accounts Payable. (b) Debit Cash and credit Notes Payable. (c) Debit Salaries and Wages Expense and credit Cash. 9. (1) (2) (3) (4) (5) (6) 10. The basic steps in the recording process are: (1) Analyze each transaction for its effect on the accounts. (2) Enter the transaction information in a journal. (3) Transfer the journal information to the appropriate accounts in the ledger. Cash—both debit and credit entries. Accounts Receivable—both debit and credit entries. Owner’s Drawings—debit entries only. Accounts Payable—both debit and credit entries. Salaries and Wages Expense—debit entries only. Service Revenue—credit entries only. Questions Chapter 2 (Continued) 11. The advantages of using the journal in the recording process are: (1) It discloses in one place the complete effects of a transaction. (2) It provides a chronological record of all transactions. (3) It helps to prevent or locate errors because the debit and credit amounts for each entry can be easily compared. 12. (a) The debit should be entered first. (b) The credit should be indented. 13. When three or more accounts are required in one journal entry, the entry is referred to as a compound entry. An example of a compound entry is the purchase of equipment, part of which is paid for with cash and the remainder is on account. 14. (a) No, debits and credits should not be recorded directly in the ledger. (b) The advantages of using the journal are: 1. It discloses in one place the complete effects of a transaction. 2. It provides a chronological record of all transactions. 3. It helps to prevent or locate errors because the debit and credit amounts for each entry can be easily compared. 15. The advantage of the last step in the posting process is to indicate that the item has been posted. 16. (a) Cash ……………………………………………………………………………….. Owner’s Capital …………………………………………………………. (Invested cash in the business) 9,000 (b) Prepaid Insurance ……………………………………………………………… Cash ……………………………………………………………………….. (Paid one-year insurance policy) 800 (c) 17. 9,000 800 Supplies …………………………………………………………………………… Accounts Payable ……………………………………………………… (Purchased supplies on account) 2,000 (d) Cash ……………………………………………………………………………….. Service Revenue ……………………………………………………….. (Received cash for services rendered) 7,500 2,000 7,500 (a) The entire group of accounts maintained by a company, including all the asset, liability, and owner’s equity accounts, is referred to collectively as the ledger. (b) A chart of accounts is a list of accounts and the account numbers that identify their location in the ledger. The chart of accounts is important, particularly for a company that has a large number of accounts, because it helps organize the accounts and define the level of detail that a company desires in its accounting system. Questions Chapter 2 (Continued) 18. A trial balance is a list of accounts and their balances at a given time. The primary purpose of a trial balance is to prove (check) that the debits equal the credits after posting. A trial balance also facilitates the discovery of errors in journalizing and posting. In addition, it is useful in preparing financial statements. 19. No, Jim is not correct. The proper sequence is as follows: (b) Business transaction occurs. (c) Information entered in the journal. (a) Debits and credits posted to the ledger. (e) Trial balance is prepared. (d) Financial statements are prepared. 20. (a) The trial balance would balance. (b) The trial balance would not balance. 21. The normal balances are Cash debit, Accounts Payable credit, and Interest Expense debit. SOLUTIONS TO BRIEF EXERCISES BRIEF EXERCISE 2-1 1. 2. 3. 4. 5. 6. Accounts Payable Advertising Expense Service Revenue Accounts Receivable Owner’s Capital Owner’s Drawings (a) Debit Effect Decrease Increase Decrease Increase Decrease Increase (b) Credit Effect Increase Decrease Increase Decrease Increase Decrease (c) Normal Balance Credit Debit Credit Debit Credit Debit BRIEF EXERCISE 2-2 June 1 2 3 12 Account Debited Cash Equipment Rent Expense Accounts Receivable Account Credited Owner’s Capital Accounts Payable Cash Service Revenue BRIEF EXERCISE 2-3 June 1 2 3 12 Cash …………………………………………………………… Owner’s Capital ……………………………………. 5,000 Equipment ………………………………………………….. Accounts Payable…………………………………. 2,100 Rent Expense ……………………………………………… Cash ……………………………………………………. 800 Accounts Receivable …………………………………… Service Revenue …………………………………… 300 5,000 2,100 800 300 BRIEF EXERCISE 2-4 The basic steps in the recording process are: 1. Analyze each transaction. In this step, business documents are examined to determine the effects of the transaction on the accounts. 2. Enter each transaction in a journal. This step is called journalizing and it results in making a chronological record of the transactions. 3. Transfer journal information to ledger accounts. This step is called posting. Posting makes it possible to accumulate the effects of journalized transactions on individual accounts. BRIEF EXERCISE 2-5 (a) Aug. Effect on Accounting Equation (b) Debit-Credit Analysis 1 The asset Cash is increased; the owner’s equity account Owner’s Capital is increased. Debits increase assets: debit Cash $8,000. Credits increase owner’s equity: credit Owner’s Capital $8,000. 4 The asset Prepaid Insurance is increased; the asset Cash is decreased. Debits increase assets: debit Prepaid Insurance $1,800. Credits decrease assets: credit Cash $1,800. 16 The asset Cash is increased; the revenue Service Revenue is increased. Debits increase assets: debit Cash $3,400. Credits increase revenues: credit Service Revenue $3,400. 27 The expense Salaries and Wages Expense is increased; the asset Cash is decreased. Debits increase expenses: debit Salaries and Wages Expense $1,000. Credits decrease assets: credit Cash $1,000. BRIEF EXERCISE 2-6 Aug. 1 4 16 27 Cash……………………………………………………………. Owner’s Capital …………………………………….. 8,000 Prepaid Insurance………………………………………… Cash …………………………………………………….. 1,800 Cash……………………………………………………………. Service Revenue …………………………………… 3,400 Salaries and Wages Expense………………………… Cash …………………………………………………….. 1,000 8,000 1,800 3,400 1,000 BRIEF EXERCISE 2-7 Cash 5/12 2,400 5/15 3,000 Ending Bal. 5,400 5/5 Accounts Receivable 4,100 5/12 Service Revenue 5/5 4,100 5/15 3,000 Ending Bal. 7,100 2,400 Ending Bal. 1,700 BRIEF EXERCISE 2-8 Cash Date May 12 15 Explanation Ref. J1 J1 Debit 2,400 3,000 Credit Balance 2,400 5,400 BRIEF EXERCISE 2-8 (Continued) Accounts Receivable Date Explanation May 5 12 Ref. J1 J1 Debit 4,100 Service Revenue Date Explanation May 5 15 Ref. J1 J1 Debit Credit 2,400 Balance 4,100 1,700 Credit 4,100 3,000 Balance 4,100 7,100 Debit $ 5,800 3,000 17,000 Credit BRIEF EXERCISE 2-9 AFALAVA COMPANY Trial Balance June 30, 2012 Cash …………………………………………………………………. Accounts Receivable …………………………………………. Equipment…………………………………………………………. Accounts Payable ……………………………………………… Owner’s Capital …………………………………………………. Owner’s Drawings ……………………………………………… Service Revenue ……………………………………………….. Salaries and Wages Expense ……………………………… Rent Expense ……………………………………………………. $ 9,000 15,000 1,200 10,000 6,000 1,000 $34,000 $34,000 BRIEF EXERCISE 2-10 WALTER COMPANY Trial Balance December 31, 2012 Cash …………………………………………………………………. Prepaid Insurance ……………………………………………… Accounts Payable ……………………………………………… Unearned Service Revenue ………………………………… Owner’s Capital …………………………………………………. Owner’s Drawings ……………………………………………… Service Revenue ……………………………………………….. Salaries and Wages Expense ……………………………… Rent Expense ……………………………………………………. Debit $10,800 3,500 Credit $ 3,000 2,200 9,000 4,500 25,600 18,600 2,400 $39,800 $39,800 SOLUTIONS FOR DO IT! REVIEW EXERCISES DO IT! 2-1 Joe would likely need the following accounts in which to record the transactions necessary to ready his photography studio for opening day: Cash (debit balance) Supplies (debit balance) Notes Payable (credit balance) Equipment (debit balance) Accounts Payable (credit balance) Owner’s Capital (credit balance) DO IT! 2-2 Each transaction that is recorded is entered in the general journal. The three activities would be recorded as follows: 1. 2. 3. Cash…………………………………………………….. Owner’s Capital…………………………….. 6,300 Supplies ………………………………………………. Cash …………………………………………….. Accounts Payable …………………………. 1,100 No entry because no transaction has occurred. 6,300 400 700 DO IT! 2-3 Cash 4/1 1,600 4/16 700 4/3 3,400 4/20 300 4/30 4,000 DO IT! 2-4 ANGULO COMPANY Trial Balance December 31, 2012 Debit Cash …………………………………………………………………. $ 6,000 Accounts Receivable …………………………………………. 8,000 Supplies ……………………………………………………………. 6,000 Equipment…………………………………………………………. 80,000 Notes Payable ……………………………………………………. Accounts Payable ……………………………………………… Salaries and Wages Payable ………………………………. Owner’s Capital …………………………………………………. Owner’s Drawings ……………………………………………… 8,000 Service Revenue ……………………………………………….. Supplies Expense………………………………………………. 4,000 Salaries and Wages Expense ……………………………… 38,000 $150,000 Credit $ 20,000 11,000 3,000 28,000 88,000 $150,000 SOLUTIONS TO EXERCISES EXERCISE 2-1 1. False. An account is an accounting record of a specific asset, liability, or owner’s equity item. 2. False. An account shows increases and decreases in the item it relates to. 3. False. Each asset, liability, and owner’s equity item has a separate account. 4. False. An account has a left, or debit side, and a right, or credit side. 5. True. Transaction (a) Basic Type (b) Specific Account Jan. 2 Asset 3 (c) Account Credited Effect (d) Normal Balance (a) Basic Type (b) Specific Account Cash Increase Debit Owner’s Equity Asset Equipment Increase Debit 9 Asset Supplies Increase 11 Asset Accounts Receivable 16 Owner’s Equity 20 (c) Effect (d) Normal Balance Owner’s Capital Increase Credit Asset Cash Decrease Debit Debit Liability Accounts Payable Increase Credit Increase Debit Owner’s Equity Service Revenue Increase Credit Advertising Expense Increase Debit Asset Cash Decrease Debit Asset Cash Increase Debit Asset Accounts Decrease Receivable Debit 23 Liability Accounts Payable Decrease Credit Asset Cash Decrease Debit 28 Owner’s Equity Owner’s Drawings Increase Debit Asset Cash Decrease Debit EXERCISE 2-2 Account Debited EXERCISE 2-3 General Journal Account Titles and Explanation Date Jan. 2 3 9 11 16 20 23 28 Ref. Debit Cash …………………………………………… Owner’s Capital ……………………. 10,000 Equipment ………………………………….. Cash ……………………………………. 4,000 Supplies ……………………………………… Accounts Payable ………………… 500 Accounts Receivable …………………… Service Revenue …………………… 2,100 Advertising Expense……………………. Cash ……………………………………. 350 Cash …………………………………………… Accounts Receivable ……………. 700 Accounts Payable ……………………….. Cash ……………………………………. 300 Owner’s Drawings ……………………….. Cash ……………………………………. 1,000 J1 Credit 10,000 4,000 500 2,100 350 700 300 1,000 EXERCISE 2-4 Oct. 1 Debits increase assets: debit Cash $15,000. Credits increase owner’s equity: credit Owner’s Capital $15,000. 2 No transaction. 3 Debits increase assets: debit Equipment $1,900. Credits increase liabilities: credit Accounts Payable $1,900. EXERCISE 2-4 (Continued) Oct. 6 Debits increase assets: debit Accounts Receivable $3,600. Credits increase revenues: credit Service Revenue $3,600. 27 Debits decrease liabilities: debit Accounts Payable $1,100. Credits decrease assets: credit Cash $1,100. 30 Debits increase expenses: debit Salaries and Wages Expense $2,500. Credits decrease assets: credit Cash $2,500. EXERCISE 2-5 Date Oct. 1 General Journal Account Titles and Explanation Cash …………………………………………… Owner’s Capital …………………… Ref. Debits 15,000 15,000 2 No entry. 3 Equipment ………………………………….. Accounts Payable ……………….. 1,900 Accounts Receivable …………………… Service Revenue …………………. 3,600 Accounts Payable ……………………….. Cash …………………………………… 1,100 Salaries and Wages Expense ……….. Cash …………………………………… 2,500 6 27 30 Credit 1,900 3,600 1,100 2,500 EXERCISE 2-6 (a) 1. 2. 3. Increase the asset Cash, increase the liability Notes Payable. Increase the asset Equipment, decrease the asset Cash. Increase the asset Supplies, increase the liability Accounts Payable. (b) 1. Cash ……………………………………………………….. Notes Payable ……………………………………. Equipment……………………………………………….. Cash …………………………………………………. Supplies ………………………………………………….. Accounts Payable ………………………………. 2. 3. 5,000 5,000 3,100 3,100 850 850 EXERCISE 2-7 (a) Assets = Liabilities + Owner’s Equity 1. + + (Investment) 2. – – (Expense) 3. + + (Revenue) 4. – – (Drawings) (b) 1. 2. 3. 4. Cash ……………………………………………………….. Owner’s Capital …………………………………. Rent Expense ………………………………………….. Cash …………………………………………………. Accounts Receivable ……………………………….. Service Revenue ………………………………… Owner’s Drawings ……………………………………. Cash …………………………………………………. 4,000 4,000 950 950 5,200 5,200 750 750 EXERCISE 2-8 1. 2. 3. 4. 5. False. The general ledger contains all the asset, liability, and owner’s equity accounts. True. False. The accounts in the general ledger are arranged in financial statement order: first the assets, then the liabilities, owner’s capital, owner’s drawings, revenues, and expenses. True. False. The general ledger is not a book of original entry; transactions are first recorded in the general journal, then in the general ledger. EXERCISE 2-9 (a) Aug. 1 10 31 Bal. Cash 5,000 Aug. 12 2,400 900 5,300 Accounts Receivable Aug. 25 1,700 Aug. 31 Bal. 800 Aug. 12 (b) Equipment 5,000 3,000 900 Notes Payable Aug. 12 2,000 Owner’s Capital Aug. 1 5,000 Service Revenue Aug. 10 25 Bal. 2,400 1,700 4,100 CONSUELA BROWN, INVESTMENT BROKER Trial Balance August 31, 2012 Cash………………………………………………………………. Accounts Receivable ………………………………………. Equipment ……………………………………………………… Notes Payable ………………………………………………… Owner’s Capital ……………………………………………… Service Revenue …………………………………………….. Debit $ 5,300 800 5,000 $11,100 Credit $ 2,000 5,000 4,100 $11,100 EXERCISE 2-10 (a) Date Apr. 1 12 15 25 29 30 General Journal Account Titles and Explanation Ref. Cash ……………………………………………. Owner’s Capital ………………………… (Owner’s investment of cash in business) Debit 12,000 Credit 12,000 Cash ……………………………………………. Service Revenue ………………………. (Received cash for services provided) 900 Salaries and Wages Expense ………… Cash ………………………………………… (Paid salaries to date) 1,300 Accounts Payable …………………………. Cash ………………………………………… (Paid creditors on account) 1,500 Cash ……………………………………………. Accounts Receivable ………………… (Received cash in payment of account) 400 Cash ……………………………………………. Unearned Service Revenue ……….. (Received cash for future services) 1,000 900 1,300 1,500 400 1,000 EXERCISE 2-10 (Continued) (b) BENNET LANDSCAPING COMPANY Trial Balance April 30, 2012 Cash……………………………………………………………….. Accounts Receivable ……………………………………….. Supplies …………………………………………………………. Accounts Payable ……………………………………………. Unearned Service Revenue ………………………………. Owner’s Capital ………………………………………………. Service Revenue ……………………………………………… Salaries and Wages Expense …………………………… Debit $11,500 2,800 1,800 Credit $ 300 1,000 12,000 4,100 1,300 $17,400 $17,400 EXERCISE 2-11 (a) Oct. 1 Cash ……………………………………………………. Owner’s Capital ……………………………… (Owner’s investment of cash in business) 3,000 10 Cash ……………………………………………………. Service Revenue ……………………………. (Received cash for services provided) 500 10 Cash ……………………………………………………. Notes Payable ……………………………….. (Obtained loan from bank) 4,000 20 Cash ……………………………………………………. Accounts Receivable ……………………… (Received cash in payment of account) 500 20 Accounts Receivable ……………………………. Service Revenue ……………………………. (Billed clients for services provided) 940 3,000 500 4,000 500 940 EXERCISE 2-11 (Continued) (b) BOWMAN CO. Trial Balance October 31, 2012 Cash…………………………………………………………… Accounts Receivable …………………………………… Supplies …………………………………………………….. Equipment ………………………………………………….. Notes Payable …………………………………………….. Accounts Payable ……………………………………….. Owner’s Capital ………………………………………….. Owner’s Drawings ………………………………………. Service Revenue …………………………………………. Salaries and Wages Expense ………………………. Rent Expense …………………………………………….. Debit $ 7,050 1,240 400 2,000 Credit $ 4,000 500 5,000 300 2,240 500 250 $11,740 $11,740 EXERCISE 2-12 (a) Date Sept. 1 5 25 30 General Journal Account Titles and Explanation Cash …………………………………………… Owner’s Capital ……………………. Ref. 101 301 Debit 10,000 Equipment ………………………………….. Cash ……………………………………. Accounts Payable ………………… 157 101 201 12,000 Accounts Payable ……………………….. Cash ……………………………………. 201 101 3,000 Owner’s Drawings……………………….. Cash ……………………………………. 306 101 700 J1 Credit 10,000 4,000 8,000 3,000 700 EXERCISE 2-12 (Continued) (b) Cash Date Sept. 1 5 25 30 Explanation Equipment Date Explanation Sept. 5 Accounts Payable Date Explanation Sept. 5 25 Owner’s Capital Date Explanation Sept. 1 Owner’s Drawings Date Explanation Sept. 30 Ref. J1 J1 J1 J1 Ref. J1 Ref. J1 J1 Ref. J1 Ref. J1 Debit 10,000 Credit 4,000 3,000 700 Debit 12,000 Debit Credit No. 157 Balance 12,000 Credit 8,000 No. 201 Balance 8,000 5,000 3,000 Debit Debit 700 No. 101 Balance 10,000 6,000 3,000 2,300 Credit 10,000 Credit No. 301 Balance 10,000 No. 306 Balance 700 EXERCISE 2-13 Error 1. 2. 3. 4. 5. 6. (a) In Balance No Yes Yes No Yes No (b) Difference $525 — — 415 — 18 (c) Larger Column Debit — — Credit — Credit EXERCISE 2-14 BULLUCKS DELIVERY SERVICE Trial Balance July 31, 2012 Debit Cash ($78,821 – Debit total without Cash $66,340) …………………………………………………………. Accounts Receivable …………………………………………. Prepaid Insurance ……………………………………………… Equipment…………………………………………………………. Notes Payable ……………………………………………………. Accounts Payable ……………………………………………… Salaries and Wages Payable ………………………………. Owner’s Capital …………………………………………………. Owner’s Drawings ……………………………………………… Service Revenue ……………………………………………….. Salaries and Wages Expense ……………………………… Maintenance and Repairs Expense ……………………… Gasoline Expense ……………………………………………… Insurance Expense…………………………………………….. Credit $12,481 7,642 1,968 49,360 $17,000 8,396 815 42,000 700 10,610 4,428 961 758 523 $78,821 $78,821 SOLUTIONS TO PROBLEMS PROBLEM 2-1A Date Apr. 1 4 8 11 Account Titles and Explanation Cash ………………………………………………. Owner’s Capital ……………………….. (Owner’s investment of cash in business) Ref. Debit 35,000 35,000 Land ………………………………………………. Cash ……………………………………….. (Purchased land for cash) 27,000 Advertising Expense ……………………….. Accounts Payable ……………………. (Incurred advertising expense on account) 1,800 Salaries and Wages Expense …………… Cash ……………………………………….. (Paid salaries) 1,500 27,000 1,800 1,500 12 No entry—Not a transaction. 13 Prepaid Insurance …………………………… Cash ……………………………………….. (Paid for one-year insurance policy) 1,650 Owner’s Drawings …………………………… Cash ……………………………………….. (Withdrew cash for personal use) 1,000 Cash ………………………………………………. Service Revenue ………………………. (Received cash for services provided) 6,800 17 20 J1 Credit 1,650 1,000 6,800 PROBLEM 2-1A (Continued) Date Account Titles and Explanation Apr. 25 Cash ……………………………………………… Unearned Service Revenue …………. (Received cash for future services) 2,500 Cash ……………………………………………… Service Revenue ………………………. (Received cash for services provided) 8,900 Accounts Payable ………………………….. Cash ……………………………………….. (Paid creditor on account) 900 30 30 Ref. Debit Credit 2,500 8,900 900 PROBLEM 2-2A (a) Date Account Titles and Explanation Ref. Debit May 1 Cash ………………………………………………. Owner’s Capital ……………………….. (Owner’s investment of cash in business) 101 301 20,000 20,000 2 No entry—not a transaction. 3 Supplies …………………………………………. Accounts Payable ……………………. (Purchased supplies on account) 126 201 2,500 Rent Expense …………………………………. Cash ……………………………………….. (Paid office rent) 729 101 900 Accounts Receivable ………………………. Service Revenue ………………………. (Billed client for services provided) 112 400 3,200 Cash ………………………………………………. Unearned Service Revenue ………. (Received cash for future services) 101 209 3,500 Cash ………………………………………………. Service Revenue ………………………. (Received cash for services provided) 101 400 1,200 Salaries and Wages Expense …………… Cash ……………………………………….. (Paid salaries) 726 101 2,000 7 11 12 17 31 J1 Credit 2,500 900 3,200 3,500 1,200 2,000 PROBLEM 2-2A (Continued) Date Account Titles and Explanation Ref. Debit May 31 Accounts Payable ($2,500 X 60%)……….. Cash ………………………………………. (Paid creditor on account) 201 101 1,500 Credit 1,500 (b) Cash Date May 1 7 12 17 31 31 Explanation Accounts Receivable Date Explanation May 11 Supplies Date Explanation May 3 Accounts Payable Date Explanation May 3 31 Unearned Service Revenue Date Explanation May 12 Ref. J1 J1 J1 J1 J1 J1 Ref. J1 Ref. J1 Ref. J1 J1 Ref. J1 Debit 20,000 Credit 900 3,500 1,200 2,000 1,500 Debit 3,200 Debit 2,500 Debit Credit No. 112 Balance 3,200 Credit No. 126 Balance 2,500 Credit 2,500 No. 201 Balance 2,500 1,000 1,500 Debit No. 101 Balance 20,000 19,100 22,600 23,800 21,800 20,300 Credit 3,500 No. 209 Balance 3,500 PROBLEM 2-2A (Continued) Owner’s Capital Date Explanation May 1 Ref. J1 Service Revenue Date Explanation May 11 17 Ref. J1 J1 Salaries and Wages Expense Date Explanation May 31 Rent Expense Date Explanation May 7 (c) Ref. J1 Ref. J1 Debit Debit Debit 2,000 Debit 900 Credit 20,000 No. 301 Balance 20,000 Credit 3,200 1,200 No. 400 Balance 3,200 4,400 Credit No. 726 Balance 2,000 Credit No. 729 Balance 900 DESIREE CLARK, CPA Trial Balance May 31, 2012 Debit Cash…………………………………………………………… $20,300 Accounts Receivable …………………………………… 3,200 Supplies …………………………………………………….. 2,500 Accounts Payable ……………………………………….. Unearned Service Revenue ………………………….. Owner’s Capital ………………………………………….. Service Revenue …………………………………………. Salaries and Wages Expense ………………………. 2,000 Rent Expense ……………………………………………… 900 $28,900 Credit $ 1,000 3,500 20,000 4,400 $28,900 PROBLEM 2-3A (a) & (c) Balance (4) (7) Cash 8,000 (1) (3) 14,000 (5) 6,000 (8) (9) 3,500 Owner’s Capital Balance 1,000 2,000 15,000 (9) 3,500 3,000 Balance (2) Balance Balance (5) Supplies 13,000 4,200 (6) 13,200 (1) Advertising Expense 1,000 1,000 (3) Miscellaneous Expense 2,000 2,000 (6) Supplies Expense 4,000 4,000 4,000 Prepaid Rent 3,000 3,000 Equipment 20,000 20,000 Accounts Payable Balance (2) 15,000 19,000 4,200 8,200 Owner’s Drawings 3,000 3,000 Service Revenue (7) Accounts Receivable Balance 15,000 (4) 14,000 (7) 9,000 10,000 40,000 40,000 15,000 15,000 Salaries and Wages Expense (8) 3,500 3,500 PROBLEM 2-3A (Continued) (b) Trans. 1. 2. 3. 4. 5. 6. 7. 8. 9. Account Titles and Explanation Debit Advertising Expense ………………………… Cash ……………………………………….. 1,000 Supplies ………………………………………….. Accounts Payable ……………………. 4,200 Miscellaneous Expense ……………………. Cash ……………………………………….. 2,000 Cash ……………………………………………….. Accounts Receivable ……………….. 14,000 Accounts Payable ……………………………. Cash ……………………………………….. 15,000 Supplies Expense ……………………………. Supplies ………………………………….. 4,000 Cash ……………………………………………….. Accounts Receivable ……………………….. Service Revenue ……………………… 6,000 9,000 Salaries and Wages Expense ……………. Cash ……………………………………….. 3,500 Owner’s Drawings ……………………………. Cash ……………………………………….. 3,000 Credit 1,000 4,200 2,000 14,000 15,000 4,000 15,000 3,500 3,000 PROBLEM 2-3A (Continued) (d) MEGA REPAIR SERVICE Trial Balance January 31, 2012 Cash…………………………………………………………… Accounts Receivable …………………………………… Supplies …………………………………………………….. Prepaid Rent ………………………………………………. Equipment ………………………………………………….. Accounts Payable ……………………………………….. Owner’s Capital ………………………………………….. Owner’s Drawings ………………………………………. Service Revenue …………………………………………. Advertising Expense …………………………………… Miscellaneous Expense……………………………….. Supplies Expense ……………………………………….. Salaries and Wages Expense ………………………. Debit $ 3,500 10,000 13,200 3,000 20,000 Credit $ 8,200 40,000 3,000 15,000 1,000 2,000 4,000 3,500 $63,200 $63,200 PROBLEM 2-4A KELLEN DAVIS COMPANY Trial Balance May 31, 2012 Debit Cash ($5,850 + $520 – $486) …………………………………. $ 5,884 Accounts Receivable ($2,570 – $210) ……………………. 2,360 Prepaid Insurance ($700 + $100) …………………………… 800 Supplies ($0 + $520) …………………………………………….. 520 Equipment ($8,000 – $520)……………………………………. 7,480 Accounts Payable ($4,500 – $100 + $520 – $210) ……. Unearned Service Revenue ………………………………….. Owner’s Capital ($11,700 + $1,000) ……………………….. Owner’s Drawings ($0 + $1,000) ……………………………. 1,000 Service Revenue …………………………………………………. Salaries and Wages Expense ($4,200 + $200) ………… 4,400 Advertising Expense ($1,100 + $486) …………………….. 1,586 Insurance Expense ($890 + $100) …………………………. 990 $25,020 Credit $ 4,710 650 12,700 6,960 $25,020 PROBLEM 2-5A (a) & (c) Cash Date Apr. 1 2 9 10 12 25 29 30 30 Explanation Balance Accounts Receivable Date Explanation Apr. 30 Prepaid Rent Date Explanation Apr. 30 Land Date Apr. 1 Explanation Balance Buildings Date Explanation Apr. 1 Balance Ref.  J1 J1 J1 J1 J1 J1 J1 J1 Ref. J1 Ref. J1 Ref.  Ref.  Debit Credit 1,100 2,800 3,000 500 5,200 2,000 85 1,200 Debit 85 Debit Credit Credit No. 101 Balance 4,000 2,900 5,700 2,700 2,200 7,400 5,400 5,485 4,285 No. 112 Balance 85 No. 136 Balance 1,200 1,200 Debit Credit No. 140 Balance 10,000 Credit No. 145 Balance 8,000 Debit PROBLEM 2-5A (Continued) Equipment Date Explanation Apr. 1 Balance Accounts Payable Date Explanation Apr. 1 Balance 10 20 Mortgage Payable Date Explanation Apr. 1 Balance 10 Owner’s Capital Date Explanation Apr. 1 Balance Service Revenue Date Explanation Apr. 9 25 Rent Revenue Date Explanation Apr. 30 Ref.  Ref.  J1 J1 Ref.  J1 Ref.  Ref. J1 J1 Ref. J1 Debit Debit Credit Credit 1,000 1,000 Debit Credit 2,000 Debit Debit Debit Credit No. 157 Balance 6,000 No. 201 Balance 2,000 1,000 2,000 No. 275 Balance 8,000 6,000 No. 301 Balance 18,000 Credit 2,800 5,200 No. 400 Balance 2,800 8,000 Credit 170 No. 429 Balance 170 PROBLEM 2-5A (Continued) Advertising Expense Date Explanation Apr. 12 Salaries and Wages Expense Date Explanation Apr. 29 Rent Expense Date Explanation Apr. 2 20 Ref. J1 Ref. J1 Ref. J1 J1 Debit 500 Debit 2,000 Debit 1,100 1,000 Credit No. 610 Balance 500 Credit No. 726 Balance 2,000 Credit No. 729 Balance 1,100 2,100 (b) Date Apr. 2 Account Titles and Explanation Rent Expense ………………………………. Cash……………………………………. (Paid film rental) Ref. 632 101 Debit 1,100 1,100 3 No entry—not a transaction. 9 Cash …………………………………………… Service Revenue ………………….. (Received cash for services provided) 101 400 2,800 Mortgage Payable ………………………… Accounts Payable ………………………… Cash……………………………………. (Made payments on mortgage and accounts payable) 275 201 101 2,000 1,000 10 J1 Credit 2,800 3,000 PROBLEM 2-5A (Continued) Date Account Titles and Explanation Apr. 11 No entry—not a transaction. 12 20 25 29 30 30 Ref. Debit Advertising Expense ……………………….. Cash ………………………………………. (Paid advertising expenses) 610 101 500 Rent Expense …………………………………. Accounts Payable …………………… (Rented film on account) 729 201 1,000 Cash ………………………………………………. Service Revenue……………………… (Received cash for services provided) 101 400 5,200 Salaries and Wages Expense …………… Cash ………………………………………. (Paid salaries expense) 726 101 2,000 Cash ………………………………………………. Accounts Receivable ………………………. Rent Revenue …………………………. (17% X $1,000) (Received cash and balance on account for rent revenue) 101 112 429 85 85 Prepaid Rent …………………………………… Cash ………………………………………. (Paid cash for future film rentals) 136 101 1,200 Credit 500 1,000 5,200 2,000 170 1,200 PROBLEM 2-5A (Continued) (d) CHICAGO THEATER Trial Balance April 30, 2012 Cash…………………………………………………………… Accounts Receivable …………………………………… Prepaid Rent ………………………………………………. Land …………………………………………………………… Buildings ……………………………………………………. Equipment ………………………………………………….. Accounts Payable ……………………………………….. Mortgage Payable ……………………………………….. Owner’s Capital ………………………………………….. Service Revenue …………………………………………. Rent Revenue ……………………………………………… Advertising Expense …………………………………… Rent Expense ……………………………………………… Salaries and Wages Expense ………………………. Debit $ 4,285 85 1,200 10,000 8,000 6,000 Credit $ 2,000 6,000 18,000 8,000 170 500 2,100 2,000 $34,170 $34,170 PROBLEM 2-1B Date Mar. 1 3 5 6 10 18 19 Account Titles and Explanation Ref. Cash………………………………………………… Owner’s Capital ………………………… (Owner’s investment of cash in business) Debit 20,000 Land ………………………………………………… Buildings …………………………………………. Equipment ……………………………………….. Cash ………………………………………… (Purchased Heeren’s Golf Land) 12,000 2,000 1,000 Advertising Expense ………………………… Cash ………………………………………… (Paid for advertising) 700 Prepaid Insurance ……………………………. Cash ………………………………………… (Paid for one-year insurance policy) 600 Equipment ……………………………………….. Accounts Payable …………………….. (Purchased equipment on account) 1,050 Cash………………………………………………… Service Revenue ……………………….. (Received cash for services provided) 1,100 Cash………………………………………………… Unearned Service Revenue ……….. (Received cash for coupon books sold) 1,500 J1 Credit 20,000 15,000 700 600 1,050 1,100 1,500 PROBLEM 2-1B (Continued) Date Mar. 25 30 30 31 Account Titles and Explanation Owner’s Drawings…………………………. Cash ……………………………………… (Withdrew cash for personal use) Ref. Debit 800 Credit 800 Salaries and Wages Expense …………. Cash ……………………………………… (Paid salaries) 250 Accounts Payable …………………………. Cash ……………………………………… (Paid creditor on account) 1,050 Cash …………………………………………….. Service Revenue ……………………. (Received cash for services provided) 2,100 250 1,050 2,100 PROBLEM 2-2B (a) Date Account Titles and Explanation Ref. Debit Apr. 1 Cash……………………………………………….. Owner’s Capital ……………………….. (Owner’s investment of cash in business) 101 301 20,000 20,000 1 No entry—not a transaction. 2 Rent Expense ………………………………….. Cash ……………………………………….. (Paid monthly office rent) 729 101 1,100 Supplies …………………………………………. Accounts Payable ……………………. (Purchased supplies on account from Smile Company) 126 201 4,000 Accounts Receivable……………………….. Service Revenue ………………………. (Billed clients for services provided) 112 400 5,100 Cash……………………………………………….. Unearned Service Revenue ………. (Received cash for future service) 101 205 1,000 Cash……………………………………………….. Service Revenue ………………………. (Received cash for services provided) 101 400 2,100 Salaries and Wages Expense …………… Cash ……………………………………….. 726 101 2,800 3 10 11 20 30 J1 Credit 1,100 4,000 5,100 1,000 2,100 2,800 (Paid monthly salary) PROBLEM 2-2B (Continued) Date Account Titles and Explanation Ref. Debits Apr. 30 Accounts Payable ………………………… Cash …………………………………….. (Paid Smile Company on account) 201 101 2,400 Credit 2,400 (b) Cash Date Apr. 1 2 11 20 30 30 Explanation Accounts Receivable Date Explanation Apr. 10 Supplies Date Explanation Apr. 3 Accounts Payable Date Explanation Apr. 3 30 Unearned Service Revenue Date Explanation Apr. 11 Ref. J1 J1 J1 J1 J1 J1 Ref. J1 Ref. J1 Ref. J1 J1 Ref. J1 Debit 20,000 Credit 1,100 1,000 2,100 2,800 2,400 Debit 5,100 Debit 4,000 Debit Credit No. 112 Balance 5,100 Credit No. 126 Balance 4,000 Credit 4,000 No. 201 Balance 4,000 1,600 2,400 Debit No. 101 Balance 20,000 18,900 19,900 22,000 19,200 16,800 Credit 1,000 No. 209 Balance 1,000 PROBLEM 2-2B (Continued) Owner’s Capital Date Explanation Apr. 1 Ref. J1 Service Revenue Date Explanation Apr. 10 20 Ref. J1 J1 Salaries and Wages Expense Date Explanation Apr. 30 Rent Expense Date Explanation Apr. 2 (c) Ref. J1 Ref. J1 Debit Debit Debit 2,800 Debit 1,100 Credit 20,000 No. 301 Balance 20,000 Credit 5,100 2,100 No. 400 Balance 5,100 7,200 Credit No. 726 Balance 2,800 Credit No. 729 Balance 1,100 VICTORIA HALL, DENTIST Trial Balance April 30, 2012 Cash…………………………………………………………… Accounts Receivable …………………………………… Supplies …………………………………………………….. Accounts Payable ……………………………………….. Unearned Service Revenue ………………………….. Owner’s Capital ………………………………………….. Service Revenue …………………………………………. Salaries and Wages Expense ………………………. Rent Expense ……………………………………………… Debit $16,800 5,100 4,000 Credit $ 1,600 1,000 20,000 7,200 2,800 1,100 $29,800 $29,800 PROBLEM 2-3B (a) Trans. 1. Account Titles and Explanation Debit Cash ……………………………………………. Owner’s Capital ……………………. 40,000 40,000 2. No entry—Not a transaction. 3. Prepaid Rent ………………………………… Cash ……………………………………. 24,000 Equipment …………………………………… Cash ……………………………………. Accounts Payable ………………… 30,000 Prepaid Insurance ………………………… Cash ……………………………………. 1,800 Supplies ………………………………………. Cash ……………………………………. 500 Supplies ………………………………………. Accounts Payable ………………… 1,500 Cash ……………………………………………. Accounts Receivable ……………………. Service Revenue ………………….. 8,000 12,000 Accounts Payable ………………………… Cash ……………………………………. 400 Cash ……………………………………………. Accounts Receivable ……………. 3,000 Utilities Expense ………………………….. Accounts Payable ………………… 350 4. 5. 6. 7. 8. 9. 10. 11. Credit 24,000 10,000 20,000 1,800 500 1,500 20,000 400 3,000 350 PROBLEM 2-3B (Continued) Trans. 12. Account Titles and Explanation Debit Salaries and Wages Expense ……….. Cash ……………………………………. 6,100 Credit 6,100 (b) (1) (8) (10) (8) (6) (7) (5) (3) Cash 40,000 (3) (4) (5) (6) 8,000 (9) 3,000 (12) 8,200 (4) 24,000 10,000 1,800 500 400 (9) 6,100 Service Revenue (8) Supplies 500 1,500 2,000 Prepaid Rent 24,000 24,000 Accounts Payable (4) 20,000 (7) 1,500 400 (11) 350 21,450 Owner’s Capital (1) Accounts Receivable 12,000 (10) 3,000 9,000 Prepaid Insurance 1,800 1,800 Equipment 30,000 30,000 40,000 40,000 20,000 20,000 Salaries and Wages Expense (12) 6,100 6,100 (11) Utilities Expense 350 350 PROBLEM 2-3B (Continued) (c) SAN JOSE SERVICES Trial Balance May 31, 2012 Cash……………………………………………………….. Accounts Receivable ……………………………….. Supplies …………………………………………………. Prepaid Insurance……………………………………. Prepaid Rent …………………………………………… Equipment ………………………………………………. Accounts Payable ……………………………………. Owner’s Capital ………………………………………. Service Revenue ……………………………………… Salaries and Wages Expense …………………… Utilities Expense ……………………………………… Debit $ 8,200 9,000 2,000 1,800 24,000 30,000 Credit $21,450 40,000 20,000 6,100 350 $81,450 $81,450 PROBLEM 2-4B ROBBIE GOULD CO. Trial Balance June 30, 2012 Cash ($3,340 + $270) ………………………………………….. Accounts Receivable ($2,812 – $270) ………………….. Supplies ($1,200 – $710) …………………………………….. Equipment ($2,600 + $710) …………………………………. Accounts Payable ($3,666 – $306 – $360)…………….. Unearned Service Revenue ………………………………… Owner’s Capital …………………………………………………. Owner’s Drawings ($800 + $600) …………………………. Service Revenue ($2,480 + $882) ………………………… Salaries and Wages Expense ($3,200 + $700 – $600) ……………………………………… Supplies Expense………………………………………………. Debit $ 3,610 2,542 490 3,310 Credit $ 3,000 1,100 8,000 1,400 3,362 3,300 810 $15,462 $15,462 PROBLEM 2-5B (a) & (c) Cash Date Mar. 1 2 9 10 12 20 20 31 31 31 Explanation Balance Accounts Receivable Date Explanation Mar. 31 Land Date Mar. 1 Explanation Balance Buildings Date Explanation Mar. 1 Balance Equipment Date Explanation Mar. 1 Balance Ref.  J1 J1 J1 J1 J1 J1 J1 J1 J1 Ref. J1 Ref.  Ref.  Ref.  450 9,000 No. 101 Balance 3,000 1,500 5,500 1,400 600 5,600 3,600 500 950 9,950 Debit 450 Credit No. 112 Balance 450 Credit No. 140 Balance 24,000 Credit No. 145 Balance 10,000 Credit No. 157 Balance 10,000 Debit Credit 1,500 4,000 4,100 800 5,000 2,000 3,100 Debit Debit Debit PROBLEM 2-5B (Continued) Accounts Payable Date Explanation Mar. 1 Balance 2 10 Owner’s Capital Date Explanation Mar. 1 Balance Service Revenue Date Explanation Mar. 9 20 31 Rent Revenue Date Explanation Mar. 31 Advertising Expense Date Explanation Mar. 12 Salaries and Wages Expense Date Explanation Mar. 31 Ref.  J1 J1 Ref.  Ref. J1 J1 J1 Ref. J1 Ref. J1 Ref. J1 Debit Credit 2,000 4,100 Debit Debit Debit Debit 800 Debit 3,100 Credit No. 201 Balance 7,000 9,000 4,900 No. 301 Balance 40,000 Credit 4,000 5,000 9,000 No. 400 Balance 4,000 9,000 18,000 Credit 900 No. 429 Balance 900 Credit No. 610 Balance 800 Credit No. 726 Balance 3,100 PROBLEM 2-5B (Continued) Rent Expense Date Explanation Mar. 2 20 Ref. J1 J1 Debit 3,500 2,000 Credit No. 729 Balance 3,500 5,500 (b) J1 Date Account Titles and Explanation Ref. Debit Mar. 2 Rent Expense ………………………………… Accounts Payable ………………….. Cash ……………………………………… (Rented films for cash and on account) 632 201 101 3,500 2,000 1,500 3 No entry. 9 Cash ……………………………………………… Service Revenue …………………….. (Received cash for services provided) 101 400 4,000 Accounts Payable ($2,000 + $2,100) …… Cash ……………………………………… (Paid creditors on account) 201 101 4,100 10 4,000 4,100 11 No entry. 12 Advertising Expense ………………………. Cash ……………………………………… (Paid advertising expense) 610 101 800 Cash ……………………………………………… Service Revenue …………………….. (Received cash for services provided) 101 400 5,000 Rent Expense ………………………………… Cash ……………………………………… (Paid film rental) 729 101 2,000 20 20 Credit 800 5,000 2,000 PROBLEM 2-5B (Continued) Date Account Titles and Explanation Ref. Debit Mar. 31 Salaries and Wages Expense ………….. Cash ……………………………………… (Paid salaries expense) 726 101 3,100 Cash………………………………………………. Accounts Receivable………………………. Rent Revenue ………………………… (15% X $6,000) (Received cash and balance on account for rent revenue) 101 112 429 450 450 Cash………………………………………………. Service Revenue …………………….. (Received cash for services provided) 101 405 9,000 31 31 (d) Credit 3,100 900 9,000 CORA THEATER Trial Balance March 31, 2012 Cash ……………………………………………………….. Accounts Receivable ……………………………….. Land ……………………………………………………….. Buildings …………………………………………………. Equipment……………………………………………….. Accounts Payable ……………………………………. Owner’s Capital ……………………………………….. Service Revenue ……………………………………… Rent Revenue ………………………………………….. Advertising Expense ………………………………… Rent Expense ………………………………………….. Salaries and Wages Expense …………………… Debit $ 9,950 450 24,000 10,000 10,000 Credit $ 4,900 40,000 18,000 900 800 5,500 3,100 $63,800 $63,800 CCC2 (a) Nov. CONTINUING COOKIE CHRONICLE GENERAL JOURNAL Account Titles and Explanation Debit J1 Credit 8 No entry required for cashing U.S. Savings Bonds—this is a personal transaction. 8 Cash ………………………………………………… Owner’s Capital ……………………………. 500 11 Advertising Expense …………………………. Cash…………………………………………….. 65 13 Supplies …………………………………………… Cash…………………………………………….. 125 14 Equipment ……………………………………….. Owner’s Capital ……………………………. 300 16 Cash ………………………………………………… Notes Payable ………………………………. 2,000 17 Equipment ……………………………………….. Cash…………………………………………….. 900 20 Cash ………………………………………………… Service Revenue …………………………… 125 25 Cash ………………………………………………… Unearned Service Revenue ……………. 30 30 Prepaid Insurance …………………………….. Cash…………………………………………….. 1,320 500 65 125 300 2,000 900 125 30 1,320 CCC2 (Continued) (b) Date Nov. Explanation 8 11 13 16 17 20 25 30 Date J1 J1 J1 J1 J1 J1 J1 J1 Explanation Nov. 13 Date Explanation Explanation Nov. 14 17 Date Nov. 25 J1 J1 Explanation Credits Balance 900 125 30 125 125 Credits 1,320 Balance 1,320 Credits 300 900 Unearned Service Revenue Ref. Debits J1 1,320 2,000 Equipment Ref. Debits Balance 500 435 310 2,310 1,410 1,535 1,565 245 65 125 Prepaid Insurance Ref. Debits J1 Credits 500 Supplies Ref. Debits J1 Nov. 30 Date Cash Ref. Debits Balance 300 1,200 Credits Balance 30 30 CCC2 (Continued) (b) (Continued) Date Explanation Nov. 16 Date Nov. J1 Explanation 8 14 Date Notes Payable Ref. Debits Owner’s Capital Ref. Debits J1 J1 Explanation Service Revenue Ref. Debits Nov. 20 J1 Date Advertising Expense Ref. Debits Nov. 11 Explanation J1 65 Credits Balance 2,000 2,000 Credits Balance 500 300 500 800 Credits Balance 125 125 Credits Balance 65 CCC2 (Continued) (c) COOKIE CREATIONS Trial Balance November 30, 2011 Debit Cash ………………………………………………………………… $ 245 Supplies …………………………………………………………… 125 Prepaid Insurance …………………………………………….. 1,320 Equipment ……………………………………………………….. 1,200 Unearned Service Revenue ……………………………….. Credit $ 30 Notes Payable ………………………………………………….. 2,000 Owner’s Capital ………………………………………………… 800 Advertising Expense …………………………………………. 65 Service Revenue ………………………………………………. 125 $2,955 $2,955 Note to instructors: Because the notes payable is not due for 24 months, it follows Unearned Service Revenue in the accounts and the trial balance. BYP 2-1 FINANCIAL REPORTING PROBLEM (a) (1) Increase Side Credit (1) Decrease Side Debit (2) Normal Balance Credit Accounts Receivable Debit Credit Debit Property, Plant, and Equipment Debit Credit Debit Income Taxes Payable Credit Debit Credit Interest Expense Debit Credit Debit Inventory Debit Credit Debit Account Accounts Payable (b) 1. 2. 3. Cash is increased. Cash is decreased. Cash is decreased or Accounts Payable is increased. (c) 1. 2. Cash is decreased. Cash is decreased or Notes or Mortgage Payable is increased. BYP 2-2 (a) 1. COMPARATIVE ANALYSIS PROBLEM PepsiCo Inventory: debit Coca-Cola 1. Accounts Receivable: debit 2. Property, Plant, and Equipment: debit 2. Cash and Cash Equivalents: debit 3. Accounts Payable: credit 3. Cost of Goods Sold: debit 4. Interest Expense: debit 4. Sales (revenue): credit (b) The following other accounts are ordinarily involved: 1. Increase in Accounts Receivable: Service Revenue or Sales is increased (credited). 2. Decrease in Salaries and Wages Payable: Cash is decreased (credited). 3. Increase in Property, Plant, and Equipment: Notes Payable is increased (credited) or Cash is decreased (credited). 4. Increase in Interest Expense: Cash is decreased (credited). BYP 2-3 EXPLORING THE WEB The answer is dependent upon the company selected by the student. BYP 2-4 DECISION MAKING ACROSS THE ORGANIZATION (a) May 1 5 7 14 15 20 Correct. Cash ……………………………………………….. Lesson Revenue ………………………… 250 Cash ……………………………………………….. Unearned Boarding Revenue ……… 300 Office Equipment……………………………… Cash …………………………………………. 800 Owner’s Drawings ……………………………. Cash …………………………………………. 400 Cash ……………………………………………….. Riding Revenue …………………………. 184 30 Correct. 31 Hay and Feed Supplies …………………….. Accounts Payable………………………. 250 300 800 400 184 1,700 1,700 (b) The errors in the entries of May 14 and 20 would prevent the trial balance from balancing. (c) Net income as reported ……………………………………. Add: 5/15, Salaries expense (Owner’s Drawings) …………………………….. 5/31, Hay and feed expense (still on hand) ……………………………………… $ 4,500 $ 400 1,700 Less: 5/7, Boarding revenue unearned …………….. Correct net income ………………………………………….. (d) Cash as reported …………………………………………….. Add: 5/20, Transposition error ………………………… 5/31, Purchase on account ……………………… 2,100 6,600 300 $ 6,300 $12,475 $ 36 1,700 1,736 $14,211 BYP 2-5 COMMUNICATION ACTIVITY Date: May 25, 2012 To: Accounting Instructor From: Student In the first transaction, bills totaling $6,000 were sent to customers for services rendered. Therefore, the asset Accounts Receivable is increased $6,000 and the revenue Service Revenue is increased $6,000. Debits increase assets and credits increase revenues, so the journal entry is: Accounts Receivable …………………………………………………… Service Revenue …………………………………………………… (Bill customers for services provided) 6,000 6,000 The $6,000 amount is then posted to the debit side of the general ledger account Accounts Receivable and to the credit side of the general ledger account Service Revenue. In the second transaction, $2,000 was paid in salaries to employees. Therefore, the expense Salaries and Wages Expense is increased $2,000 and the asset Cash is decreased $2,000. Debits increase expenses and credits decrease assets, so the journal entry is: Salaries and Wages Expense ……………………………………….. Cash…………………………………………………………………….. (Salaries and wages paid) 2,000 2,000 The $2,000 amount is then posted to the debit side of the general ledger account Salaries and Wages Expense and to the credit side of the general ledger account Cash. BYP 2-6 ETHICS CASE (a) The stakeholders in this situation are:  Mary Jansen, assistant chief accountant.  Users of the company’s financial statements.  The Casey Company. (b) By adding $1,000 to the Equipment account, that account total is intentionally misstated. By not locating the error causing the imbalance, some other account may also be misstated by $1,000. If the amount of $1,000 is determined to be immaterial, and the intent is not to commit fraud (cover up an embezzlement or other misappropriation of assets), Mary’s action might not be considered unethical in the preparation of interim financial statements. However, if Mary is violating a company accounting policy by her action, then she is acting unethically. (c) Mary’s alternatives are: 1. Miss the deadline but find the error causing the imbalance. 2. Tell her supervisor of the imbalance and suffer the consequences. 3. Do as she did and locate the error later, making the adjustment in the next quarter. BYP 2-7 ALL ABOUT YOU ACTIVITY (a) Students’ responses to this question will vary. It is important that the steps that they identify be as specific as possible, and clearly directed toward achieving their goal. You may wish to ask a follow-up question asking them to explain how each step will assist them in achieving their goal. (b) There are many sites on the Internet that provide information about preparing a résumé. For example, you can find extensive resources at: http://www.rileyguide.com/resprep.html. Many schools also have resources in their placement centers or writing labs. The Writing Center at Rensselaer Polytechnic Institute provides useful, concise information on its website at http://www.rpi.edu/web/writingcenter/resume.html. A wide variety of sample résumés can be found. For example, Monster.com provides samples for a wide variety of professions and situations at http://content.monster.com/experts/resume/library/. (c) It is important to provide accurate and complete documentation of all relevant training, education, and employment experiences so as to provide assurance to the potential employer, and also to enable that employer to do follow-up work. If you say you have certain skills, such as computer skills, try to substantiate the claim with recognized proof of proficiency. Make sure that all addresses and phone numbers are accurate and up-to-date. Also, ensure that the people you use as references have a copy of your résumé and cover letter, and that they are informed that you are interviewing so they know to expect a call. (d) See the sample résumés provided in the websites above for various format options. You might also mention to students that there are electronic résumé templates available on the Internet. IFRS CONCEPTS AND APPLICATION IFRS 2-1 In deciding whether the U.S. should adopt IFRS, the SEC should consider the following.       Whether IFRS is sufficiently developed and consistent in application Whether the IASB is sufficiently independent Whether IFRS is established for the benefit to investors The issues involved in educating investors about IFRS The impact of a switch to IFRS on U.S. laws and regulations The impact on companies including changes to their accounting systems, contractual arrangements, corporate governance, and litigation  The issues involved in educating accountants, so they can prepare statements under IFRS IFRS 2-2 INTERNATIONAL FINANCIAL REPORTING PROBLEM Account Financial Statement Other Consolidated Income administrative statement expenses Cash at bank Consolidated Balance Sheet Borrowings and Consolidated overdrafts Balance Sheet Finance costs Consolidated Income Statement Position in Financial Statement After gross profit and before operating profit Current assets Current and Non-current liabilities After Operating profit and before Profit from continuing operations before taxations.