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Chapter 2Analyzing and Recording TransactionsQUICK STUDIESQuick Study 2-1 (5 minutes) The likely source documents include: b. Telephone bill c. Sales ticket f. Invoice from supplier h. Bank statement

Quick Study 2-2 (10 minutes) a. b. c. d. e. f. g. h. i. I E B B B I B B B Income statement Statement of owners equity Balance sheet Balance sheet Balance sheet Income statement Balance sheet Balance sheet Balance sheet

Quick Study 2-3 (10 minutes) a. b. c. Debit Debit Credit d. e. f. Debit Debit Debit g. h. i. Credit Debit Credit

Quick Study 2-4 (10 minutes)McGraw-Hill Companies, 2009 Solutions Manual, Chapter 2 55

a. b. c. d.

Debit Debit Credit Credit

e. f. g. h.

Debit Credit Credit Debit

i. j. k. l.

Credit Debit Debit Credit

Quick Study 2-5 (10 minutes) a. b. c. d. Debit Credit Debit Credit e. f. g. h. Debit Credit Credit Credit i. j. Credit Debit

Quick Study 2-6 (15 minutes) Jan.13 Cash .......................................................................... 80,000 Equipment ............................................................... 30,000 D. Tyler, Capital............................................... 110,000Owner invests cash and equipment.

21 Office Supplies ........................................................ Accounts Payable ...........................................Purchased office supplies on credit.

820 820 8,700 8,700 4,000 4,000

29 Cash .......................................................................... Landscaping Services Revenue....................Received cash for landscaping services.

30 Cash .......................................................................... Unearned Landscaping Services Revenue ..Received cash in advance for landscaping services.

Quick Study 2-7 (10 minutes) The correct answer is c. Explanation: If a $2,250 debit to Rent Expense is incorrectly posted as a credit, the effect is to understate the Rent Expense debit balance by $4,500. This causes the Debit column total on the trial balance to be $4,500 less than the Credit column total.

Quick Study 2-8 (10 minutes) a. b.56

I I

e. f.

B I

i. j.

B I

McGraw-Hill Companies, 2009 Fundamental Accounting Principles, 19th Edition

c. d.

I B

g. h.

B B

k. l.

E B

McGraw-Hill Companies, 2009 Solutions Manual, Chapter 2 57

EXERCISESExercise 2-1 (15 minutes) Account Owner Capital............................. Accounts Receivable................. Owner Withdrawals.................... Cash ............................................ Equipment .................................. Fees Earned................................ Wages Expense.......................... Unearned Revenue .................... Accounts Payable ...................... Postage Expense ....................... Prepaid Insurance...................... Land ............................................ Type of Account equity asset equity asset asset revenue expense liability liability expense asset asset Increase(Dr. or Cr.)

a. b. c. d. e. f. g. h. i. j. k. l.

credit debit debit debit debit credit debit credit credit debit debit debit

Normal Balance credit debit debit debit debit credit debit credit credit debit debit debit

Exercise 2-2 (15 minutes) a.Beginning cash balance (debit)............................................. Cash received in October (debits) ........................................ Cash disbursed in October (credits)..................................... Ending cash balance (debit) .................................................. Beginning cash balance (debit)............................................. $ ? 104,750 (101,607) $ 17,069 $ 13,926 $ 83,250 ? (75,924) $ 85,830 $ 78,504 $148,000 271,876 ( ?) $137,492 $282,384

b.

Beginning accounts receivable (debit) ................................. Sales on account in October (debits) ................................... Collections on account in October (credits) ........................ Ending accounts receivable (debit) ...................................... Sales on account in October (debits) ...................................

c.

Beginning accounts payable (credit) .................................... Purchases on account in October (credits) ......................... Payments on accounts in October (debits).......................... Ending accounts payable (credit) ......................................... Payments on accounts in October (debits)..........................

McGraw-Hill Companies, 2009 58 Fundamental Accounting Principles, 19th Edition

Exercise 2-3 (15 minutes) The company would make the following entry (not required for answer): Cash .................................................................. 12,000 Computer Equipment ...................................... 90,000 Note Payable .............................................. 37,000 Services Revenue...................................... 65,000Accepted cash, equipment and note for services.

Thus, of the a through f items listed, the following effects should be included:

a. $37,000 increase in a liability account. b. $12,000 increase in the Cash account. e. $65,000 increase in a revenue account. Explanation: This transaction reflects $65,000 in revenue, which is the value of the service provided. Payment is received in the form of a $12,000 increase in cash, an $90,000 increase in computer equipment, and a $37,000 increase in its liabilities. The net value received by the company is $65,000.

Exercise 2-4 (25 minutes) Aug. 1 Cash .................................................................. 14,250 Photography Equipment ................................. 61,275 M. Harris, Capital .......................................Owner investment in business.

75,525

2 Prepaid Insurance............................................ Cash ............................................................Acquired 24 months of insurance coverage.

3,300 3,300 2,707 2,707 3,250 3,250 871 871

5 Office Supplies................................................. Cash ............................................................Purchased office supplies.

20 Cash .................................................................. Photography Fees Earned ........................Collected photography fees.

31 Utilities Expense .............................................. Cash ............................................................Paid for August utilities.

McGraw-Hill Companies, 2009 Solutions Manual, Chapter 2 59

Exercise 2-5 (30 minutes)Cash 14,250 Aug. 2 3,250 5 31 10,622 Office Supplies 2,707 Prepaid Insurance 3,300 Photography Equipment Aug. 1 61,275 M. Harris, Capital Aug. 1

Aug. 1 20 Balance

3,300 2,707 871

75,525

Aug. 5

Photography Fees Earned Aug. 20 3,250 Utilities Expense 871

Aug. 2

Aug. 31

SPECIAL PICS Trial Balance August 31Debit Credit

Cash ............................................................................... Office supplies .............................................................. Prepaid insurance ......................................................... Photography equipment............................................... M. Harris, Capital........................................................... Photography fees earned ............................................. Utilities expense............................................................ Totals..............................................................................

$10,622 2,707 3,300 61,275 $75,525 3,250 871 $78,775 _______ $78,775

McGraw-Hill Companies, 2009 60 Fundamental Accounting Principles, 19th Edition

Exercise 2-6 (30 minutes)Cash 14,000 1,652 1,246 7,040 Accounts Payable 7,742 (c) Balance

(a) (d) (h) Balance

(b) (e) (g) (i)

406 7,742 510 1,200

(e)

7,742 0

S. Amena, Capital (a) Balance S. Amena, Withdrawals 1,200 1,200 Fees Earned (d) (f) Balance Rent Expense 510 510

14,000 14,000

(f) Balance

Accounts Receivable 2,968 (h) 1,722 Office Supplies 406 406

1,246

(i) Balance

(b) Balance

1,652 2,968 4,620

(c) Balance

Office Equipment 7,742 7,742

(g) Balance

Exercise 2-7 (15 minutes)AMENA COMPANY Trial Balance May 31, 2009 Cash......................................................................................... Accounts receivable............................................................... Office supplies........................................................................ Office equipment .................................................................... Accounts payable ................................................................... S. Amena, Capital ................................................................... S. Amena, Withdrawals .......................................................... Fees earned............................................................................. Rent expense .......................................................................... Totals ....................................................................................... Debit $ 7,040 1,722 406 7,742 $ 1,200 510 $18,620 4,620 ______ $18,620 Credit

0 14,000

McGraw-Hill Companies, 2009 Solutions Manual, Chapter 2 61

Exercise 2-8 (20 minutes)Transactions that created expenses:

b.

Salaries Expense......................................... Cash .......................................................Paid salary of receptionist.

1,233 1,233 870 870

d.

Utili