Alexander S Payment Was Not an Expense

Full file at

Chapter 2

Transaction Analysis

Short Exercises

(5 min.) S 2-1

Alexander’s payment was not an expense.

Alexander acquired an asset, Equipment, because the computer is an economic resource of the business.

(5 min.) S 2-2

a.$19,400 ($15,000 + $4,400 + $7,500 − $7,500)

b.$ 4,400

(5-10 min.) S 2-3

Cash
60,000 / 4,700
4,200
Bal. / 59,500

(5 min.) S 2-4

Increased total assets:July 1(Cash)

July 1(Medical Supplies)

July 3(Cash, Accounts Receivable)

(5-10 min.) S 2-5

a.Purchase of asset on account

Borrow money

b.Payment of dividends to owners

Expense transaction (ex: received and paid utility bill)

c.Pay a liability

Return an asset purchased on account

d.Issuance of stock

Revenue transaction (ex: provided services on account or for cash)

e.Purchase of asset for cash

Sale of asset for cash

Collection of an account receivable

(Answers may vary.)

(10 min.) S 2-6

Journal
DATE / ACCOUNT TITLES AND EXPLANATION / DEBIT / CREDIT
Oct. / 15 /

Cash......

/ 64,000
Note Payable...... / 64,000
Borrowed money from the bank.
22 / Accounts Receivable...... / 17,100
Service Revenue...... / 17,100
Performed service on account.
28 /

Cash......

/ 10,300
Accounts Receivable...... / 10,300
Received cash on account.
29 / Utilities Expense...... / 1,450
Accounts Payable...... / 1,450
Received utility bill to be paid next month.
31 / Salary Expense...... / 10,100
Cash...... / 10,100
Paid salary expense.

(10-15 min.) S 2-7

Req.1

Journal
DATE / ACCOUNT TITLES AND EXPLANATION / DEBIT / CREDIT

Supplies......

/ 4,800
Accounts Payable...... / 4,800
Purchased supplies on account.
Accounts Payable...... / 1,350
Cash...... / 1,350
Paid cash on account.

Req. 2

Accounts Payable

1,350 / 4,800
Bal. / 3,450

Req. 3

The business owes $3,450, as shown in the Accounts Payable account.

(10-15 min.) S 2-8

Req. 1

Journal
DATE / ACCOUNT TITLES AND EXPLANATION / DEBIT / CREDIT

Accounts Receivable......

/ 3,900

Service Revenue......

/ 3,900
Performed service on account.

Cash......

/ 2,000

Accounts Receivable......

/ 2,000
Received cash on account.

Req. 2

Cash / Accounts Receivable / Service Revenue
2,000 / 3,900 / 2,000 / 3,900
Bal. / 2,000 / Bal. / 1,900 / Bal. / 3,900

(10 min.) S 2-9

First Mortgage Company
Trial Balance
December 31, 2014
ACCOUNT / DEBIT / CREDIT
Millions
Cash...... / $ 5
Other assets...... / 20
Accounts payable...... / $ 6
Other liabilities...... / 2
Stockholders’ equity...... / 6
Revenues...... / 38
Expenses...... / 27 / ___
Total...... / $52 / $52

First Mortgage Company’s net income: $11 million ($38 − $27)

(10 min.) S 2-10

1. Total assets = $88,500 ($5,400 + $18,300 + $2,500 +

$21,700 + $40,600)

2. Total liabilities = $48,900 ($26,000 + $22,900)

3. Net income = $19,900 ($63,600 − $33,000 − $8,000 − $2,700)

(10 min.) S 2-11

1.Total debits=$ 95,660 ($132,200 + $4,060 − $40,600)

Total credits=$132,200

Difference=$ 36,540 ($132,200 − $95,660);

$36,540 / 9 = $4,060 (an integer), which suggests either a transposition or a slide.

2.Total debits=$127,700 ($132,200 + $13,800 − $18,300)

Total credits=$132,200

Difference=$ 4,500 ($127,700 − $132,200);

$4,500 / 9 = $500 (an integer), which suggests either a transposition or a slide.

3.Total debits=$113,900 ($132,200 − $18,300)

Total credits=$150,500 ($132,200 + $18,300)

Difference=$ 36,600 ($150,500 − $113,900)

$36,600 / 2 = $18,300 (original amount of accounts receivable).

(10 min.) S 2-12

G / 1. Debit
A / 2. Expense
F / 3. Net income
C / 4. Ledger
D / 5. Posting
I / 6. Normal balance
J / 7. Payable
E / 8. Journal
H / 9. Receivable
B / 10. Owners’ equity

(5 min.) S 2-13

Cash / Computer Equipment
200,000 / 56,000
Accounts Payable / Common Stock
56,000 / 200,000

Total debits=$256,000 ($200,000 + $56,000)

Total credits=$256,000 ($200,000 + $56,000)

Exercises

(10-15 min.) E 2-14A

TO:Home Office

FROM:Patti Brown, Store Manager

During the first week, I used the store’s beginning cash to purchase equipment and supplies. I signed a note payable to buy land and a building. After all these transactions, the store’s balance sheet appears as follows:

Dresses Unlimited
San Antonio Store
Balance Sheet
Date
ASSETS /

LIABILITIES

Cash / $ 104,900 / Note payable* / $279,000
Supplies / 6,100
Land / 75,000 / STOCKHOLDERS’ EQUITY
Building / 204,000 / Common stock / 150,000
Equipment / 39,000 / Total liabilities and
Total assets / $429,000 / stockholders’ equity / $429,000

*$75,000 + $204,000 = $279,000

Cash
150,000 / 39,000
6,100
104,900

(10-15 min.) E 2-15A

a.Increased assets (cash)

b.No effect (a personal transaction)

c.No effect on total assets. Increase in cash offsets the decrease in land.

d.No effect on total assets. Increase in cash offsets the decrease in accounts receivable.

e.No effect on total assets. Increase in land offsets the decrease in cash.

f.Increased assets (cash)

g.Decreased assets (cash)

h.Increased assets (equipment)

i.Increased assets (office supplies)

j.Decreased assets (cash)

2-1

Full file at

(10-20 min.) E 2-16A

Req. 1

Analysis of Transactions

ASSETS

=

/ LIABILITIES + STOCKHOLDERS’
EQUITY
Date / Cash + / Accounts
Receivable + / Medical
Supplies + / Land / = / Accounts
Payable + / Note
Payable + / Common
Stock + / Retained
Earnings / Type of Stockholders’
Equity Transaction
Jan. 6 / 150,000 / 150,000 / Issued stock
9 / (63,000) / 63,000
12 / 1,900 / 1,900
15 / Not a transaction of the business.
15-31 / 4,800 / 4,800 / 9,600 / Service revenue
15-31 / (3,300) / (3,300) / Salary expense
(1,200) / (1,200) / Rent expense
(900) / / (900) / Utilities expense
31 / 700 / (700)
31 / 35,000 / 35,000
31 / (500) / (500)
Bal. / 121,600 / 4,800 / 1,200 / 63,000 / 1,400 / 35,000 / 150,000 / 4,200

$190,600=$190,600

2-1

Full file at

(continued) E 2-16A

Req. 2

a.$190,600

b.$4,800

c.$36,400 ($1,400 + $35,000)

d.$154,200 ($190,600 − $36,400, or $150,000 + $4,200)

e.$4,200 (Revenue, $9,600 minus expenses, $5,400 equals net income, $4,200.)

(10-15 min.) E 2-17A

Journal
DATE / ACCOUNT TITLES AND EXPLANATION / DEBIT / CREDIT

Jan.

6 Cash......

150,000

Common Stock......

150,000

Issued stock to owner.

9

Land......

63,000

Cash......

63,000

Purchased land.

Medical Supplies......

1,900

Accounts Payable......

1,900

Purchased supplies on account.

Not a transaction of the business.

15-31

Cash......

4,800

Accounts Receivable......

4,800

Service Revenue......

9,600

Performed service for cash and on account.

15-31

Salary Expense......

3,300

Rent Expense......

1,200

Utilities Expense......

900

Cash......

5,400

Paid expenses.

Cash......

700

Medical Supplies......

700

Sold supplies.

Cash......

35,000

Note Payable......

35,000

Borrowed money.

Accounts Payable......

500

Cash......

500

Paid on account.

(20-30 min.) E 2-18A

Req. 1

Cash / Accounts Receivable
Jan. 6 / 150,000 / Jan. 9 / 63,000 / Jan. 15-31 / 4,800
15-31 / 4,800 / 15-31 / 5,400 / Bal. / 4,800
31 / 700 / 31 / 500
31 / 35,000
Bal. / 121,600
Medical Supplies / Land
Jan. 12 / 1,900 / Jan. 31 / 700 / Jan. 9 / 63,000
Bal. / 1,200 / Bal. / 63,000
Accounts Payable / Note Payable
Jan. 31 / 500 / Jan. 12 / 1,900 / Jan. 31 / 35,000
Bal. / 1,400 / Bal. / 35,000
Common Stock / Service Revenue
Jan. 6 / 150,000 / Jan. 15-31 / 9,600
Bal. / 150,000 / Bal. / 9,600
Salary Expense / Rent Expense
Jan. 15-31 / 3,300 / Jan. 15-31 / 1,200
Bal. / 3,300 / Bal. / 1,200
Utilities Expense
Jan. 15-31 / 900
Bal. / 900

(continued) E 2-18A

Req. 2

Dr. Rebecca Gray, P.C.
Trial Balance
January 31, 2014
ACCOUNT / DEBIT / CREDIT
Cash...... / $121,600
Accounts receivable...... / 4,800
Medical supplies...... / 1,200
Land...... / 63,000
Accounts payable...... / $ 1,400
Note payable...... / 35,000
Common stock...... / 150,000
Service revenue...... / 9,600
Salary expense...... / 3,300
Rent expense...... / 1,200
Utilities expense...... / 900
Total...... / $196,000 / $196,000

Req. 3

Total assets ($121,600 + $4,800 + $1,200 + $63,000)...$190,600

Total liabilities ($1,400 + $35,000)...... (36,400)

Total stockholders’ equity ($150,000 + $4,200*)...... $154,200

*Net income = $4,200 ($9,600 – $3,300 – $1,200 – $900)

(10-15 min.) E 2-19A

Req.1

Journal
ACCOUNT TITLES AND EXPLANATION / DEBIT / CREDIT
1. / Cash...... / 8,700
Common Stock...... / 8,700
Issued common stock.
2. / Cash...... / 9,000
Note Payable...... / 9,000
Borrowed money; signed note payable.
3. / Supplies...... / 500
Accounts Payable...... / 500
Purchased supplies on account.
4. / Land...... / 33,000
Cash...... / 3,000
Note Payable...... / 30,000
Purchased land by paying cash and signing
a note payable.
5. / Cash...... / 65
Supplies...... / 65
Sold supplies for cash.
6. / Accounts Payable...... / 270
Cash...... / 270
Paid cash on account.
7. / Equipment...... / 3,500
Cash...... / 3,500
Paid cash for equipment.

Cash balance = $10,995 ($8,700 + $9,000 − $3,000 + $65 − $270 − $3,500)

Company owes $39,230 ($9,000 + $30,000 + $500 − $270)

(10-20 min.) E 2-20A

Req. 1

Lake Oaks Pool Service, Inc.
Trial Balance
April 30, 2014
ACCOUNT / DEBIT / CREDIT
Cash...... / $19,760
Accounts receivable...... / 5,300
Equipment...... / 29,200
Accounts payable...... / $ 4,800
Note payable...... / 21,500
Common stock...... / 16,800
Retained earnings...... / 4,700
Dividends...... / 3,500
Service revenue...... / 20,910
Salary expense...... / 8,700
Utilities expense...... / 1,800
Delivery expense...... / 450
Total...... / $68,710 / $68,710

Req. 2

Lake Oaks Pool Service, Inc.

Income Statement
For the Month Ended April 30, 2014
Service revenue...... / $20,910
Salary expense...... / $8,700
Utilities expense...... / 1,800
Delivery expense...... / 450
Total expenses...... / 10,950
Net income...... / $ 9,960

(15-25 min.) E 2-21A

Amanda’s Candies, Inc.
Trial Balance
September 30, 2014
ACCOUNT / DEBIT / CREDIT
Cash...... / $14,400*
Accounts receivable...... / 12,600*
Inventory...... / 17,300
Supplies...... / 400
Land...... / 41,000
Accounts payable...... / $13,140*
Common stock...... / 47,300*
Sales revenue...... / 33,800
Insurance expense...... / 3,700*
Salary expense...... / 2,200
Utilities expense...... / 1,640*
Rent expense...... / 1,000 / ______
Total...... / $94,240 / $94,240

_____

*Computations:

Cash: $14,200 + $200 = $14,400

Accounts Receivable: $12,800 − $200 = $12,600

Accounts Payable: $11,600 + $1,000 − $100 + $640 = $13,140

Common Stock: $47,100 + $200 = $47,300

Insurance Expense: $0 + $3,700 = $3,700

Utilities Expense: $1,000 + $640 = $1,640

(10-15 min.) E 2-22A

Cash / Accounts Receivable
(a) / 25,000 / (b) / 1,800 / (f) / 10,000
(d) / 3,600 / Bal. / 10,000
(e) / 500
(g) / 3,200
Bal. / 15,900
Office Supplies / Office Furniture
(c) / 1,050 / (a) / 10,400
Bal. / 1,050 / Bal. / 10,400
Accounts Payable / Common Stock
(e) / 500 / (c) / 1,050 / (a) / 35,400
Bal. / 550 / Bal. / 35,400
Dividends / Service Revenue
(g) / 3,200 / (f) / 10,000
Bal. / 3,200 / Bal. / 10,000
Salary Expense / Rent Expense
(d) / 3,600 / (b) / 1,800
Bal. / 3,600 / Bal. / 1,800

(10-20 min.) E 2-23A

Req. 1

Stephen Garner, Attorney
Trial Balance
November 30, 2014
ACCOUNT / DEBIT / CREDIT
Cash...... / $15,900
Accounts receivable...... / 10,000
Office supplies...... / 1,050
Office furniture...... / 10,400
Accounts payable...... / $ 550
Common stock...... / 35,400
Dividends...... / 3,200
Service revenue...... / 10,000
Salary expense...... / 3,600
Rent expense...... / 1,800
Total...... / $45,950 / $45,950

Req. 2

The business performed well during November. The result of operations was net income of $4,600, as shown by the income statement accounts:

Service revenue...... $ 10,000

Salary expense...... $3,600

Rent expense...... 1,800

Total expenses...... (5,400)

Net income...... $ 4,600

(10-15 min.) E 2-24B

TO:Home Office

FROM:Lori Lyons, Store Manager

L. Deveta Fashions
New Orleans Store
Balance Sheet
Date
ASSETS /

LIABILITIES

Cash / $ 49,500 / Note payable* / $211,000
Supplies / 7,500
Land / 86,000 / STOCKHOLDERS’ EQUITY
Building / 125,000 / Common stock / 100,000
Equipment / 43,000 / Total liabilities and
Total assets / $311,000 / stockholders’ equity$324,000 / $311,000

_____

*($86,000 + $125,000) = $211,000

Cash
100,000 / 43,000
7,500
49,500

(10-15 min.) E 2-25B

a.Increased assets (cash)

b.Increased assets (land)

c.Increased assets (supplies)

d.No effect (a personal transaction)

e.No effect on total assets. Increase in equipment offsets the decrease in cash.

f.Increased assets (cash)

g.No effect on total assets. Increase in notes receivable offsets the decrease in land.

h.Increased assets (accounts receivable)

i.Decreased assets (cash)

j.Decreased assets (cash)

2-1

Full file at

(10-20 min.) E 2-26B

Req. 1

Analysis of Transactions

ASSETS=

/ LIABILITIES + STOCKHOLDERS’
EQUITY
Date / Cash + / Accounts
Receivable + / Medical
Supplies + / Land = / Accounts
Payable + / Note
Payable + / Common
Stock + / Retained
Earnings / Type of Stockholders’
Equity Transaction
March 6 / 40,000 / 40,000 / Issued stock
9 / (21,000) / 21,000
12 / 3,500 / 3,500
15 / Not a transaction of the business.
15-31 / 10,050 / 10,050 / 20,100 / Service revenue
15-31 / (7,500) / (7,500) / Salary expense
(2,400) / (2,400) / Rent expense
(3,600) / (3,600) / Utilities expense
31 / 920 / (920)
31 / 32,000 / 32,000
31 / (500) / _(500)
Bal. / 47,970 / 10,050 / 2,580 / 21,000 / 3,000 / 32,000 / 40,000 / 6,600

$81,600$81,600

2-1

Full file at

(continued)E2-26B

Req. 2

a.$81,600

b.$10,050

c.$35,000 ($3,000 + $32,000)

d.$46,600 ($81,600 − $35,000, or $40,000 + $6,600)

e.$6,600 (Revenue, $20,100 minus expenses,$13,500, equals net income, $6,600.)

(10-15 min.) E 2-27B

Journal
DATE / ACCOUNT TITLES AND EXPLANATION / DEBIT / CREDIT
Mar. / 6 /

Cash......

/ 40,000

Common Stock......

/ 40,000

Issued stock to owner.

9 /

Land......

/ 21,000

Cash......

/ 21,000

Purchased land.

12 /

Medical Supplies......

/ 3,500

Accounts Payable......

/ 3,500

Purchased supplies on account.

15 /

Not a transaction of the business.

15-31

Cash......

/ 10,050

Accounts Receivable......

/ 10,050

Service Revenue......

/ 20,100

Performed service for cash and on account.

15-31 /

Salary Expense......

/ 7,500

Rent Expense......

/ 2,400

Utilities Expense......

/ 3,600

Cash......

/ 13,500

Paid expenses.

31 /

Cash......

/ 920

Medical Supplies......

/ 920

Sold supplies.

31 /

Cash......

/ 32,000

Note Payable......

/ 32,000

Borrowed money.

31 /

Accounts Payable......

/ 500

Cash......

/ 500

Paid on account.

(20-30 min.) E 2-28B

Req. 1

Cash / Accounts Receivable
Mar. 6 / 40,000 / Mar. 9 / 21,000 / Mar. 15-31 / 10,050
15-31 / 10,050 / 15-31 / 13,500 / Bal. / 10,050
31 / 920 / 31 / 500
31 / 32,000
Bal. / 47,970
Medical Supplies / Land
Mar. 12 / 3,500 / Mar. 31 / 920 / Mar. 9 / 21,000
Bal. / 2,580 / Bal. / 21,000
Accounts Payable / Note Payable
Mar. 31 / 500 / Mar. 12 / 3,500 / Mar. 31 / 32,000
Bal. / 3,000 / Bal. / 32,000
Common Stock / Service Revenue
Mar. 6 / 40,000 / Mar. 15-31 / 20,100
Bal. / 40,000 / Bal. / 20,100
Salary Expense / Rent Expense
Mar. 15-31 / 7,500 / Mar. 15-31 / 2,400
Bal. / 7,500 / Bal. / 2,400
Utilities Expense
Mar. 15-31 / 3,600
Bal. / 3,600

(continued) E 2-28B

Req. 2

Dr. Fred Grimes, P.C.
Trial Balance
March 31, 2014
ACCOUNT / DEBIT / CREDIT
Cash...... / $47,970
Accounts receivable...... / 10,050
Medical supplies...... / 2,580
Land...... / 21,000
Accounts payable...... / $ 3,000
Note payable...... / 32,000
Common stock...... / 40,000
Service revenue...... / 20,100
Salary expense...... / 7,500
Utilities expense...... / 3,600
Rent expense...... / 2,400
Total...... / $95,100 / $95,100

Req. 3

Total assets ($47,970 + $10,050 + $2,580 + $21,000)...... $81,600

Total liabilities ($3,000 + $32,000)...... (35,000)

Total stockholders’ equity ($40,000 + $6,600*)...... $46,600

*Net income = $6,600 ($20,100 − $7,500 − $3,600 − $2,400)

(10-15 min.) E 2-29B

Req. 1

Journal
ACCOUNT TITLES AND EXPLANATION / DEBIT / CREDIT

Cash......

7,000

Common Stock......

7,000

Issued common stock.

Cash......

8,300

Note Payable......

8,300

Borrowed money; signed note payable.

Equipment......

5,900

Cash......

5,900

Paid cash for equipment.

Supplies......

820

Accounts Payable......

820

Purchased supplies on account.

Cash…......

130

Supplies......

130

Sold supplies for cash.

Land......

36,000

Cash......

7,000

Note Payable......

29,000

Purchased land by paying cash and signing

a note payable.

Accounts Payable......

140

Cash......

140

Paid cash on account.

Cash balance = $2,390 ($7,000 + $8,300 − $5,900 + $130 − $7,000 − $140)

Company owes $37,980 ($8,300 + $820 + $29,000 − $140)

(10-20 min.) E 2-30B

Req. 1

Castlerock Tree Service, Inc.
Trial Balance
September 30, 2014
ACCOUNT / DEBIT / CREDIT
Cash...... / $19,300
Accounts receivable...... / 8,200
Land...... / 29,600
Accounts payable...... / $ 5,100
Note payable...... / 21,700
Common stock...... / 12,000
Retained earnings...... / 13,100
Dividends...... / 5,100
Service revenue...... / 32,300
Salary expense...... / 18,500
Utilities expense...... / 2,700
Delivery expense...... / 800
Total...... / $84,200 / $84,200

Req. 2

Castlerock Tree Service, Inc.

Income Statement
For the Month Ended September 30, 2014
Service revenue...... / $32,300
Salary expense...... / $18,500
Utilities expense...... / 2,700
Delivery expense...... / 800
Total expenses...... / 22,000
Net income...... / $10,300

(15-25 min.) E 2-31B

Yellow Car Sales, Inc.
Trial Balance
June 30, 2014
ACCOUNT / DEBIT / CREDIT
Cash…...... / $10,200*
Accounts receivable...... / 12,600*
Inventory...... / 17,100
Supplies...... / 800
Land...... / 53,000
Accounts payable...... / $15,550*
Common stock...... / 47,600*
Sales revenue...... / 37,100
Salary expense...... / 1,900
Insurance expense...... / 1,800*
Utilities expense...... / 1,750*
Rent expense...... / 1,100 / ______
Total...... / $100,250 / $100,250

_____

*Computations:

Cash: $9,600 + $600 = $10,200

Accounts Receivable: $13,200 − $600 = $12,600

Accounts Payable: $12,200 + $3,000 − $300 + $650 = $15,550

Common Stock: $47,400 + $200 = $47,600

Insurance Expense: $0 + $1,800 = $1,800

Utilities Expense: $1,100 + $650 = $1,750

(10-15 min.) E 2-32B

Cash / Accounts Receivable
(a) / 26,000 / (b) / 2,600 / (f) / 9,100
(d) / 3,700 / Bal. / 9,100
(e) / 1,000
(g) / 2,800
Bal. / 15,900
Office Supplies / Office Furniture
(c) / 1,900 / (a) / 8,100
Bal. / 1,900 / Bal. / 8,100
Accounts Payable / Common Stock
(e) / 1,000 / (c) / 1,900 / (a) / 34,100
Bal. / 900 / Bal. / 34,100
Dividends / Service Revenue
(g) / 2,800 / (f) / 9,100
Bal. / 2,800 / Bal. / 9,100
Salary Expense / Rent Expense
(d) / 3,700 / (b) / 2,600
Bal. / 3,700 / Bal. / 2,600

(10-20 min.) E 2-33B

Req. 1

Laura Hull, Attorney
Trial Balance
July 31, 2014
ACCOUNT / DEBIT / CREDIT
Cash...... / $ 15,900
Accounts receivable...... / 9,100
Office supplies...... / 1,900
Office furniture...... / 8,100
Accounts payable...... / $ 900
Common stock...... / 34,100
Dividends...... / 2,800
Service revenue...... / 9,100
Salary expense...... / 3,700
Rent expense...... / 2,600
Total...... / $44,100 / $44,100

Req. 2

The business performed well during July. The result of operations was net income of $2,800, as shown by the income statement accounts:

Service revenue...... $ 9,100

Salary expense...... $3,700

Rent expense...... 2,600

Total expenses...... (6,300)

Net income...... $ 2,800

Serial Exercise

(20-30 min.) E 2-34

Req. 1

Journal
DATE / ACCOUNT TITLES AND EXPLANATION / DEBIT / CREDIT
Jan. / 2 /

Cash......

/ 11,000

Common Stock......

/ 11,000
2 /

Rent Expense......

/ 700

Cash......

/ 700
3 /

Equipment......

/ 3,900

Cash......

/ 3,900
4 /

Furniture......

/ 4,700

Accounts Payable......

/ 4,700
5 /

Supplies......

/ 400

Accounts Payable......

/ 400
9 /

Cash......

/ 1,000

Service Revenue......

/ 1,000
12 /

Utilities Expense......

/ 200

Cash......

/ 200
18 /

Accounts Receivable......

/ 1,500

Service Revenue......

/ 1,500

(continued) E 2-34

Req. 2

Cash / Accounts Receivable
Jan. 2 / 11,000 / Jan. 2 / 700 / Jan. 18 / 1,500
9 / 1,000 / 3 / 3,900 / Bal. / 1,500
12 / 200
Bal. / 7,200
Supplies / Equipment
Jan. 5 / 400 / Jan. 3 / 3,900
Bal. / 400 / Bal. / 3,900
Furniture / Accounts Payable
Jan. 4 / 4,700 / Jan. 4 / 4,700
Bal. / 4,700 / 5 / 400
Bal. / 5,100
Common Stock / Service Revenue
Jan. 2 / 11,000 / Jan. 9 / 1,000
Bal. / 11,000 / 18 / 1,500
Bal. / 2,500
Rent Expense / Utilities Expense
Jan. 2 / 700 / Jan. 12 / 200
Bal. / 700 / Bal. / 200

(continued) E 2-34

Req. 3

Sean Huffman, Certified Public Accountant, P.C.
Trial Balance
January 18, 2014
ACCOUNT / DEBIT / CREDIT
Cash...... / $ 7,200
Accounts receivable...... / 1,500
Supplies...... / 400
Equipment...... / 3,900
Furniture...... / 4,700
Accounts payable...... / $ 5,100
Common stock...... / 11,000
Dividends...... / —
Service revenue...... / 2,500
Rent expense...... / 700
Utilities expense...... / 200
Salary expense...... / —
Total...... / $18,600 / $18,600

Quiz

Q2-35 / b
Q2-36 / d
Q2-37 / d
Q2-38 / a
Q2-39 / c
Q2-40 / b
Q2-41 / c
Q2-42 / d
Q2-43 / a
Q2-44 / c
Q2-45 / d
Q2-46 / a
Q2-47 / b
Q2-48 / c
Q2-49 / b
Q2-50 / d
Q2-51 / b
Q2-52 / c
Q2-53 / b
Q2-54 / a / ($54,000 + $30,000 + $22,000) = $106,000

2-1

Full file at

Problems

(15-30 min.) P 2-55A

Dear Annie,

This trial balance lists the accounts of the company, along with their balances at December 31, 2014. The trial balance provides the data for computing total assets, total liabilities, and net income or net loss.

Dallas Design Specialties

a.Total assets = $438,600 ($31,600 + $65,000 + $3,000 + $235,000

+ $104,000)

b.Total liabilities = $184,200 ($52,200 + $132,000)

c.Net income = $24,400 ($180,600 − $59,000 − $12,000− $76,200

− $9,000)

Student responses may vary.

2-1

Full file at

(45-60 min.) P 2-56A

Req. 1

Analysis of Transactions

ASSETS

/ = LIABILITIES + STOCKHOLDERS’
EQUITY
Cash / Accounts
+ Receivable / + Supplies / + Equipment / Accounts
= Payable / Common
+Stock / Retained
+ Earnings / Type of Stockholders’
Equity Transaction
Bal. / 2,600 / 3,300 / 11,700 / 8,100 / 6,500 / 3,000
a) / 4,000 / 4,000 / Issued stock
b) / 6,300 / 6,300 / Service revenue
c) / (4,100) / (4,100)
d) / 1,200 / 1,200
e) / 1,700 / (1,700)
f) / 4,200 / 4,200 / Service revenue
g) / (1,600) / (1,600) / Rent expense
(1,200) / (1,200) / Advertising expense
h) / (2,700) / (2,700) / Dividends
Bal. / 5,000 / 5,800 / 1,200 / 11,700 / 5,200 / 10,500 / 8,000

$23,700 $23,700

2-1

Full file at

(continued) P 2-56A

Req. 2

Taylor Computing, Inc.

Income Statement
Month Ended November 30, 2014
Revenues:
Service revenue ($6,300 + $4,200)...... / $10,500
Expenses:
Rent expense...... / $1,600
Advertising expense...... / 1,200
Total expenses...... / 2,800
Net income...... / $7,700

Req. 3

Taylor Computing, Inc.
Statement of Retained Earnings
Month Ended November 30, 2014
Retained earnings, November 1, 2014...... / $ 3,000
Add: Net income...... / 7,700
Subtotal / 10,700
Less: Dividends declared...... / (2,700)
Retained earnings, November 30, 2014...... / $ 8,000

Req. 4

Taylor Computing, Inc.
Balance Sheet
November 30, 2014
ASSETS /

LIABILITIES

Cash......

/ $5,000 / Accounts payable...... / $ 5,200
Accounts receivable... / 5,800 /

STOCKHOLDERS’

Supplies...... / 1,200 / EQUITY
Equipment...... / 11,700 / Common stock...... / 10,500
Retained earnings...... / 8,000
Total stockholders’ equity / 18,500
Total liabilities and
Total assets...... / $23,700 / stockholders' equity..... / $23,700

(30-40 min.) P 2-57A

Req. 1

Journal
ACCOUNT TITLES / DEBIT / CREDIT
a. /

Cash......

/ 4,000
Common Stock...... / 4,000
b. / Cash...... / 6,300
Service Revenue...... / 6,300
c. / Accounts Payable...... / 4,100
Cash...... / 4,100
d. / Supplies...... / 1,200
Accounts Payable...... / 1,200
e. / Cash...... / 1,700
Accounts Receivable...... / 1,700
f. / Accounts Receivable...... / 4,200
Service Revenue...... / 4,200
g. / Rent Expense...... / 1,600
Advertising Expense...... / 1,200
Cash...... / 2,800
h. / Dividends...... / 2,700
Cash...... / 2,700

(continued) P 2-57A

Reqs. 2 and 3

Cash / Accounts
Receivable / Supplies / Equipment
2,600 / 4,100 / 3,300 / 1,700 / 1,200 / 11,700
4,000 / 2,800 / 4,200
6,300 / 2,700 / 5,800 / 1,200 / 11,700
1,700
5,000
Accounts
Payable / Common Stock / Retained
Earnings / Dividends
4,100 / 8,100 / 6,500 / 3,000 / 2,700
1,200 / 4,000
5,200 / 10,500 / 3,000 / 2,700
Service
Revenue / Rent Expense / Advertising
Expense
6,300 / 1,600 / 1,200
4,200
10,500 / 1,600 / 1,200

The balances of all the accounts Cash through Common Stock agree with the ending balances obtained in Problem 2-56A.

2-1

Full file at

(50-60 min.) P 2-58A

Req. 1

Journal
DATE / ACCOUNT TITLES / DEBIT / CREDIT
Jan. / 2 / Cash...... / 65,000
Common Stock...... / 65,000
3 / Supplies...... / 1,000
Equipment ...... / 12,000
Accounts Payable...... / 13,000
4 / Cash...... / 5,500
Service Revenue...... / 5,500
7 / Land...... / 39,000
Cash...... / 39,000
11 / Accounts Receivable...... / 4,100
Service Revenue...... / 4,100
16 / Accounts Payable...... / 12,000
Cash...... / 12,000
17 / Advertising Expense...... / 600
Cash...... / 600
18 / Cash...... / 2,000
Accounts Receivable...... / 2,000
22 /

Utilities Expenses ......

/ 430
Cash...... / 430
29 / Cash...... / 2,600
Service Revenue...... / 2,600
31 / Salary Expense...... / 2,900
Cash...... / 2,900
31 / Dividends...... / 1,800
Cash...... / 1,800

(continued) P 2-58A

Req. 2

Cash / Accounts Receivable
Jan. 2 / 65,000 / Jan. 7 / 39,000 / Jan. 11 / 4,100 / Jan. 18 / 2,000
4 / 5,500 / 16 / 12,000 / Bal. / 2,100
18 / 2,000 / 17 / 600
29 / 2,600 / 22 / 430
31 / 2,900 / Supplies
31 / 1,800 / Jan. 3 / 1,000
Bal. / 18,370 / Bal. / 1,000
Equipment / Land
Jan. 3 / 12,000 / Jan. 7 / 39,000
Bal. / 12,000 / Bal. / 39,000
Accounts Payable / Common Stock
Jan. 16 / 12,000 / Jan. 3 / 13,000 / Jan. 2 / 65,000
Bal. / 1,000 / Bal. / 65,000
Dividends / Service Revenue
Jan. 31 / 1,800 / Jan. 4 / 5,500
Bal. / 1,800 / 11 / 4,100
29 / 2,600
Salary Expense / Bal. / 12,200
Jan. 31 / 2,900
Bal. / 2,900 / Advertising Expense
Jan. 17 / 600
Utilities Expense / Bal. / 600
Jan. 22 / 430
Bal. / 430

(continued) P 2-58A

Req. 3

Wortham Service, Inc.
Trial Balance
January 31, 20XX
ACCOUNT / DEBIT / CREDIT
Cash...... / $18,370
Accounts receivable...... / 2,100
Supplies...... / 1,000
Land...... / 39,000
Equipment...... / 12,000
Accounts payable...... / $ 1,000
Common stock...... / 65,000
Dividends...... / 1,800
Service revenue...... / 12,200
Salary expense...... / 2,900
Advertising expense...... / 600
Utilities expense...... / 430
Total...... / $78,200 / $78,200

Req. 4

Total resources (assets) = $72,470 ($18,370 + $2,100 + $1,000 + $12,000 + $39,000)

Amount owed (total liabilities) = $1,000

Profit (net income)= $8,270 ($12,200 − $2,900 − $600− $430)

(40-50 min.) P 2-59A

Reqs. 1 and 2

Cash / Accounts Receivable
(a) / 50,000 / (c) / 47,000 / (g) / 12,800 / (j) / 1,600
(b) / 60,000 / (e) / 6,100 / Bal. / 11,200
(f) / 3,790 / (h) / 100
(j) / 1,600 / (k) / 1,800
Bal. / 60,390
Supplies / Music Equipment
(d) / 450 / (c) / 47,000
Bal. / 450 / Bal. / 47,000
Building / Accounts Payable
(a) / 107,000 / (h) / 100 / (d) / 450
Bal. / 107,000 / (i) / 700
Bal. / 1,050
Note Payable
(b) / 60,000 / Common Stock
Bal. / 60,000 / (a) / 157,000
Bal. / 157,000
Service Revenue
(f) / 3,790 / Salary Expense
(g) / 12,800 / (e) / 6,100
Bal. / 16,590 / Bal. / 6,100
Rent Expense / Advertising Expense
(k) / 1,400 / (k) / 400
Bal. / 1,400 / Bal. / 400
Utilities Expense
(i) / 700
Bal. / 700

(continued) P 2-59A

Req. 3

Holt Music Services Corporation
Trial Balance
September 30, 2014
ACCOUNT / DEBIT / CREDIT
Cash...... / $ 60,390
Accounts receivable...... / 11,200
Supplies...... / 450
Building...... / 107,000
Music equipment...... / 47,000
Accounts payable...... / $1,050
Note payable…...... / 60,000
Common stock...... / 157,000
Service revenue...... / 16,590
Salary expense...... / 6,100
Rent expense…...... / 1,400
Advertising expense...... / 400
Utilities expense...... / 700
Total...... / $234,640 / $234,640

(15-30 min.) P 2-60B

Dear Ramona,

This trial balance lists the accounts of the company, along with their balances at December 31, 2014.The trial balance provides the data for computing total assets, total liabilities, and net income or net loss.

Tampa Outdoor Design

a.Total assets = $409,300 ($27,300 + $38,100 + $6,000 + $140,900

+ $197,000)

b.Total liabilities = $189,300 ($54,000 + $135,300)

c.Net income = $48,800 ($164,700 − $24,700 − $10,000 − $77,000

− $4,200)

Student responses may vary.

2-1

Full file at

(45-60 min.) P 2-61B

Req. 1

Analysis of Transactions

ASSETS

/ = LIABILITIES + STOCKHOLDERS’ EQUITY
Cash + / Accounts
Receivable + / Supplies + / Equipment = / Accounts
Payable + / Common
Stock + / Retained
Earnings / Type of Stockholders’
Equity Transaction
Bal. / 2,050 / 3,350 / 21,700 / 8,900 / 13,600 / 4,600
a) / 9,800 / 9,800 / Issued stock
b) / 5,800 / 5,800 / Service revenue
c) / (4,900) / (4,900)
d) / 700 / 700
e) / 600 / (600)
f) / 3,400 / 3,400 / Service revenue
g) / (1,500) / (1,500) / Rent expense
(2,000) / (2,000) / Advertising expense
h) / (2,400) / ___ / (2,400) / Dividends
Bal. / 7,450 / 6,150 / 700 / 21,700 / 4,700 / 23,400 / 7,900