Financial & Managerial Accounting --- Fall2009
HW 1 (Please PRINT) NAME: ANSWER KEY
DUE Thursday, September 10th at 8:30
The following transactions relate to a small, privately owned retailer in the business of selling souvenirs to tourists. Record each of the transactions in the space provided.
1. The owner purchases inventory with cash in the amount of $100.
Date / Description / Debits / CreditsInventory / 100
Cash / 100
2. The owner sells $20 worth of merchandise for cash. The merchandise had cost the business $5.
Date / Description / Debits / CreditsCash / 20
Inventory / 5
Cost of Goods Sold (expense) / 5
Sales Revenue / 20
3. The owner pays her part-time sales clerk his weekly salary in the amount of $150.
Date / Description / Debits / CreditsWages (or, Salary) Expense / 150
Cash / 150
4. The owner takes out a small business loan from her local bank in the amount of $5,000.
Date / Description / Debits / CreditsCash / 5,000
Bank Loan (or, Long-Term Debt) / 5,000
5. The owner purchases the adjacent parking lot in the amount of $5,000.
Date / Description / Debits / CreditsProperty (or, Land) / 5,000
Cash / 5,000
6. The owner makes a $400 payment towards the small business loan ($300 went towards the principal of the loan, $100 went towards interest on the loan).
Date / Description / Debits / CreditsBank Loan / 300
Interest Expense / 100
Cash / 400
7. The owner sells merchandise on credit to another local merchant in the amount of $500. The merchandise had cost $400.
Date / Description / Debits / CreditsAccounts Receivable / 500
Inventory / 400
Cost of Goods Sold Expense / 400
Sales Revenue / 500
8. The owner receives payment in full the next day from the sale in question 7.
Date / Description / Debits / CreditsCash / 500
Accounts Receivable / 500
9. A cleaning service company that the owner has contracted has performed its monthly services. The cleaning service company gives the bill to the owner in the amount of $200. The owner plans to make the payment next week.
Date / Description / Debits / CreditsCleaning Expense / 200
Accounts Payable / 200
10. The owner pays the bill in full for the cleaning services provided in question 9.
Date / Description / Debits / CreditsAccounts Payable / 200
Cash / 200
11. The owner purchases inventory in the amount of $200 on credit.
Balance Sheet / Income StatementASSETS / LIABILITIES / EQUITY / REVENUE / EXPENSES / NET INCOME
+ 200 inventory / +200 accounts payable
12. The owner makes full payment for the purchase in question 11 within a week of the transaction.
Balance Sheet / Income StatementASSETS / LIABILITIES / EQUITY / REVENUE / EXPENSES / NET INCOME
- 200 cash / - 200 accounts payable
13. The owner makes a sale to a tourist in the amount of $30 cash. The merchandise had cost the owner $10.
Balance Sheet / Income StatementASSETS / LIABILITIES / EQUITY / REVENUE / EXPENSES / NET INCOME
+ 30 Cash / +20 Retained Earnings / 30 / 10 / +20
- 10 Inventory
14. The owner makes a $300 payment towards her small business loan ($200 went towards the principal of the loan, $100 went towards interest on the loan).
Balance Sheet / Income StatementASSETS / LIABILITIES / EQUITY / REVENUE / EXPENSES / NET INCOME
-300 Cash / -200 Bank Loan / - 100 Retained Earnings / 100 / - 100
15. The owner pays her part-time sales clerk his weekly salary in the amount of $150.
Balance Sheet / Income StatementASSETS / LIABILITIES / EQUITY / REVENUE / EXPENSES / NET INCOME
- 150 Cash / -150 Retained Earnings / 150 / - 150
16. The owner purchases office supplies in the amount of $100 cash.
Balance Sheet / Income StatementASSETS / LIABILITIES / EQUITY / REVENUE / EXPENSES / NET INCOME
+ 100 Supplies
-100 Cash
17. The owner buys advertising time on the local television station in the amount of $1,000. The commercials will run during the course of the next 3 months.
Balance Sheet / Income StatementASSETS / LIABILITIES / EQUITY / REVENUE / EXPENSES / NET INCOME
+1,000 Pre-Paid Ad
- 1,000 Cash
18. The owner pays the phone bill in the amount of $45 cash.
Balance Sheet / Income StatementASSETS / LIABILITIES / EQUITY / REVENUE / EXPENSES / NET INCOME
- 45 Cash / -45 Retained Earnings / 45 / - 45
19. The owner pays herself $600 cash from the business’ checking account.
Balance Sheet / Income StatementASSETS / LIABILITIES / EQUITY / REVENUE / EXPENSES / NET INCOME
- 600 Cash / - 600 Retained Earnings
20. The owner sells the adjacent lot it had purchased in question 5. The owner had paid $5,000 for the lot. The owner receives $7,000 cash for the sale of the lot.
Balance Sheet / Income StatementASSETS / LIABILITIES / EQUITY / REVENUE / EXPENSES / NET INCOME
+ 7,000 Cash / + 2,000 Retained Earnings / 2,000???? / +2,000???
- 5,000 Property / What do you think??????