Analyzing and Recording Transactions QUESTIONS

Transcription

1 Chapter 2 Analyzing and Recording Transactions QUESTIONS 1. a. Common asset accounts: cash, accounts receivable, notes receivable, prepaid expenses (rent, insurance, etc.), office supplies, store supplies, equipment, building, and land. b. Common liability accounts: accounts payable, notes payable, and unearned revenue, wages payable, and taxes payable. c. Common equity accounts: owner, capital and owner, withdrawals. 2. A note payable is formal promise, usually denoted by signing a promissory note to pay a future amount. A note payable can be short-term or long-term, depending on when it is due. An account payable also references an amount owed to an entity. An account payable can be oral or implied, and often arises from the purchase of inventory, supplies, or services. An account payable is usually short-term. 3. There are several steps in processing transactions: (1) Identify and analyze the transaction or event, including the source document(s), (2) apply double-entry accounting, (3) record the transaction or event in a journal, and (4) post the journal entry to the ledger. These steps would be followed by preparation of a trial balance and then with the reporting of financial statements. 4. A general journal can be used to record any business transaction or event. 5. Debited accounts are commonly recorded first. The credited accounts are commonly indented. 6. Expense accounts have debit balances because they are decreases to equity (and equity has a credit balance). 7. A transaction is first recorded in a journal to create a complete record of the transaction in one place. (The journal is often referred to as the book of original entry.) This process reduces the likelihood of errors in ledger accounts. 8. The recordkeeper prepares a trial balance to summarize the contents of the ledger and to verify the equality of total debits and total credits. The trial balance also serves as a helpful internal document for preparing financial statements and other reports. Solutions Manual, Chapter 2 55

2 9. The error should be corrected with a separate (subsequent) correcting entry. The entry s explanation should describe why the correction is necessary. 10. The four financial statements are: income statement, balance sheet, statement of owner s equity, and statement of cash flows. 11. The income statement lists the types and amounts of revenues and expenses, and reports whether the business earned a net income (also called profit or earnings) or a net loss. 12. An income statement user must know what time period is covered to judge whether the company s performance is satisfactory. For example, a statement user would not be able to assess whether the amounts of revenue and net income are satisfactory without knowing whether they were earned over a week, a month, a quarter, or a year. 13. The balance sheet provides information that helps users understand a company s financial position at a point in time. Accordingly, it is often called the statement of financial position. The balance sheet lists the types and dollar amounts of assets, liabilities, and equity of the business. 14. (a) Assets are probable future economic benefits obtained or controlled by a specific entity as a result of past transactions or events. (b) Liabilities are probable future sacrifices of economic benefits arising from present obligations of a particular entity to transfer assets or provide services to other entities in the future as a result of past transactions or events. (c) Equity is the residual interest in the assets of an entity that remains after deducting its liabilities. (d) Net assets refer to equity. 15. The balance sheet is sometimes referred to as the statement of financial position. 16. Debit balance accounts on the Best Buy balance sheet include: Cash and cash equivalents; Short-term investments; Receivables; Merchandise inventories; Other current assets; Land and buildings; Leasehold improvements; Fixtures and equipment; Property under capital lease; Goodwill, Tradenames; Long-term investments; Other assets Credit balance accounts on the Best Buy balance sheet include: Accounts payable; Unredeemed gift card liabilities; Accrued compensation and related expenses; Accrued liabilities; Accrued income taxes; Short-term debt; Current portion of longterm debt; Long-term liabilities; Long-term debt; Minority interests; Preferred stock; Common stock; Additional paid-in capital; Retained earnings; Accumulated other comprehensive income. 17. Circuit City calls the liability that is incurred due to the purchase of inventory Merchandise payable. 18. The asset account with receivable in its account title is Accounts and notes receivable, net. The liabilities with payable in their account titles are Accounts payable and Income taxes payable. 19. Apple s revenue account is titled Net Sales. 56 Fundamental Accounting Principles, 19th Edition

3 Quick Study 2-1 (5 minutes) The likely source documents include: b. Telephone bill c. Sales ticket f. Invoice from supplier h. Bank statement QUICK STUDIES Quick Study 2-2 (10 minutes) a. I Income statement b. E Statement of owner s equity c. B Balance sheet d. B Balance sheet e. B Balance sheet f. I Income statement g. B Balance sheet h. B Balance sheet i. B Balance sheet Quick Study 2-3 (10 minutes) a. Debit d. Debit g. Credit b. Debit e. Debit h. Debit c. Credit f. Debit i. Credit Quick Study 2-4 (10 minutes) a. Debit e. Debit i. Credit b. Debit f. Credit j. Debit c. Credit g. Credit k. Debit d. Credit h. Debit l. Credit Solutions Manual, Chapter 2 57

4 Quick Study 2-5 (10 minutes) a. Debit e. Debit i. Credit b. Credit f. Credit j. Debit c. Debit g. Credit d. Credit h. Credit Quick Study 2-6 (15 minutes) Jan.13 Cash... 80,000 Equipment... 30,000 D. Tyler, Capital ,000 Owner invests cash and equipment. 21 Office Supplies Accounts Payable Purchased office supplies on credit. 29 Cash... 8,700 Landscaping Services Revenue... 8,700 Received cash for landscaping services. 30 Cash... 4,000 Unearned Landscaping Services Revenue.. 4,000 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. I e. B i. B b. I f. I j. I c. I g. B k. E d. B h. B l. B 58 Fundamental Accounting Principles, 19th Edition

5 Exercise 2-1 (15 minutes) EXERCISES Type of Increase Normal Account Account (Dr. or Cr.) Balance a. Owner Capital... equity credit credit b. Accounts Receivable... asset debit debit c. Owner Withdrawals... equity debit debit d. Cash... asset debit debit e. Equipment... asset debit debit f. Fees Earned... revenue credit credit g. Wages Expense... expense debit debit h. Unearned Revenue... liability credit credit i. Accounts Payable... liability credit credit j. Postage Expense... expense debit debit k. Prepaid Insurance... asset debit debit l. Land... asset debit debit Exercise 2-2 (15 minutes) a. Beginning cash balance (debit)... $? Cash received in October (debits) ,750 Cash disbursed in October (credits)... (101,607) Ending cash balance (debit)... $ 17,069 Beginning cash balance (debit)... $ 13,926 b. Beginning accounts receivable (debit)... $ 83,250 Sales on account in October (debits)...? Collections on account in October (credits)... (75,924) Ending accounts receivable (debit)... $ 85,830 Sales on account in October (debits)... $ 78,504 c. Beginning accounts payable (credit)... $148,000 Purchases on account in October (credits) ,876 Payments on accounts in October (debits)... (?) Ending accounts payable (credit)... $137,492 Payments on accounts in October (debits)... $282,384 Solutions Manual, Chapter 2 59

6 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... 65,000 Accepted 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... 75,525 Owner investment in business. 2 Prepaid Insurance... 3,300 Cash... 3,300 Acquired 24 months of insurance coverage. 5 Office Supplies... 2,707 Cash... 2,707 Purchased office supplies. 20 Cash... 3,250 Photography Fees Earned... 3,250 Collected photography fees. 31 Utilities Expense Cash Paid for August utilities. 60 Fundamental Accounting Principles, 19th Edition

7 Exercise 2-5 (30 minutes) Cash Photography Equipment Aug. 1 14,250 Aug. 2 3,300 Aug. 1 61, , , M. Harris, Capital Balance 10,622 Aug. 1 75,525 Office Supplies Photography Fees Earned Aug. 5 2,707 Aug. 20 3,250 Prepaid Insurance Utilities Expense Aug. 2 3,300 Aug SPECIAL PICS Trial Balance August 31 Debit Cash... $10,622 Office supplies... 2,707 Prepaid insurance... 3,300 Photography equipment... 61,275 Credit M. Harris, Capital... $75,525 Photography fees earned... 3,250 Utilities expense Totals... $78,775 $78,775 Solutions Manual, Chapter 2 61

8 Exercise 2-6 (30 minutes) Cash Accounts Payable (a) 14,000 (b) 406 (e) 7,742 (c) 7,742 (d) 1,652 (e) 7,742 Balance 0 (h) 1,246 (g) 510 (i) 1,200 Balance 7,040 S. Amena, Capital (a) 14,000 Balance 14,000 Accounts Receivable S. Amena, Withdrawals (f) 2,968 (h) 1,246 (i) 1,200 Balance 1,722 Balance 1,200 Office Supplies Fees Earned (b) 406 (d) 1,652 Balance 406 (f) 2,968 Balance 4,620 Office Equipment Rent Expense (c) 7,742 (g) 510 Balance 7,742 Balance 510 Exercise 2-7 (15 minutes) AMENA COMPANY Trial Balance May 31, 2009 Debit Cash... $ 7,040 Accounts receivable... 1,722 Office supplies Office equipment... 7,742 Credit Accounts payable... $ 0 S. Amena, Capital... 14,000 S. Amena, Withdrawals... 1,200 Fees earned... 4,620 Rent expense Totals... $18,620 $18, Fundamental Accounting Principles, 19th Edition

9 Exercise 2-8 (20 minutes) Transactions that created expenses: b. Salaries Expense... 1,233 Cash... 1,233 Paid salary of receptionist. d. Utilities Expense Cash Paid utilities for the office. [Note: Expenses are outflows or using up of assets (or the creation of liabilities) that occur in the process of providing goods or services to customers.] Transactions a, c, and e are not expenses for the following reasons: a. This transaction decreased assets in settlement of a previously existing liability, and equity did not change. Cash payment does not mean the same as using up of assets (expense was recorded when the supplies were used). c. This transaction involves the purchase of an asset. The form of the company s assets changed, but total assets did not change, and the equity did not decrease. e. This transaction is a distribution of cash to the owner. Even though equity decreased, the decrease did not occur in the process of providing goods or services to customers. Solutions Manual, Chapter 2 63

10 Exercise 2-9 (20 minutes) Transactions that created revenues: b. Accounts Receivable... 2,300 Services Revenue... 2,300 Provided services on credit. c. Cash Services Revenue Provided services for cash. [Note: Revenues are inflows of assets (or decreases in liabilities) received in exchange for goods or services provided to customers.] Transactions that did not create revenues along with the reasons are: a. This transaction brought in cash, but this is an owner investment. d. This transaction brought in cash, but it created a liability because the services have not yet been provided to the client. e. This transaction changed the form of the asset from accounts receivable to cash. Total assets were not increased (revenue was recognized when the receivable was originally recorded). f. This transaction brought in cash and increased assets, but it also increased a liability by the same amount (no goods or services were provided to generate revenue). Exercise 2-10 (15 minutes) TECH TALK Income Statement For Month Ended October 31 Revenues Consulting fees earned... $25,620 Expenses Salaries expense... $12,405 Rent expense... 6,859 Telephone expense Miscellaneous expenses Total expenses... 20,104 Net income... $ 5, Fundamental Accounting Principles, 19th Edition

11 Exercise 2-11 (15 minutes) TECH TALK Statement of Owner s Equity For Month Ended October 31 D. Shabazz, Capital, October 1... $ 0 Add: Investments by owner ,114 Net income (from Exercise 2-10)... 5, ,630 Less: Withdrawals by owner... 2,000 D. Shabazz, Capital, October $127,630 Exercise 2-12 (15 minutes) TECH TALK Balance Sheet October 31. Assets Liabilities Cash...$ 12,614 Accounts payable... $ 12,070 Accounts receivable... 25,648 Office supplies... 4,903 Equity Office equipment... 27,147 D. Shabazz, Capital ,630 * Land... 69,388 Total assets...$139,700 Total liabilities & equity... $139,700 * Computation shown in Exercise Solutions Manual, Chapter 2 65

12 Exercise 2-13 (20 minutes) a. Assets - Liabilities = Equity Beginning of the year... $131,000 - $56,159 = $74,841 End of the year ,000-72,900 = 107,100 Net increase in equity... $32,259 Net Income... $? Plus owner investments... 0 Less owner withdrawals... (0) Change in equity... $32,259 Therefore, income must equal $32,259. b. Net income... $? Plus owner investments... 0 Less owner withdrawals ($650/mo. x 12 mo.)... (7,800) Change in equity... $32,259 Therefore, net income must equal ($32,259 + $7,800) = $40,059 c. Net income... $? Plus owner investments... 45,000 Less owner withdrawals... (0) Change in equity... $32,259 Therefore, the net loss must equal ($32,259 - $45,000) = $(12,741) d. Net income... $? Plus owner investments... 25,000 Less owner withdrawals ($650/mo. x 12 mo.)... (7,800) Change in equity... $32,259 Therefore, income must equal ($32,259+$7,800-$25,000)= $15, Fundamental Accounting Principles, 19th Edition

13 Exercise 2-14 (15 minutes) (a) (b) (c) (d) Answers $(45,000) $64,665 $71,347 $(47,000) Computations: Equity, Dec. 31, $ 0 $ 0 $ 0 $ 0 Owner investments ,500 64,665 85, ,871 Owner withdrawals... (45,000) (51,000) (8,000) (53,000) Net income (loss)... 27,000 78,000 (6,000) (47,000) Equity, Dec. 31, $94,500 $91,665 $71,347 $101,871 Exercise 2-15 (25 minutes) a. Belle created a new business and invested $12,000 cash, $15,200 of equipment, and $24,000 in automobiles. b. Paid $4,800 cash in advance for insurance coverage. c. Paid $2,000 cash for office supplies. d. Purchased $300 of office supplies and $9,700 of equipment on credit. e. Received $9,000 cash for delivery services provided. f. Paid $4,600 cash towards accounts payable. g. Paid $820 cash for gas and oil expenses. Solutions Manual, Chapter 2 67

14 Exercise 2-16 (30 minutes) a. Cash... 12,000 Equipment... 15,200 Automobiles... 24,000 D. Belle, Capital... 51,200 Owner invested in business. b. Prepaid Insurance... 4,800 Cash... 4,800 Purchased insurance coverage. c. Office Supplies... 2,000 Cash... 2,000 Purchased supplies with cash. d. Office Supplies Equipment... 9,700 Accounts Payable... 10,000 Purchased supplies and equipment on credit. e. Cash... 9,000 Delivery Services Revenue... 9,000 Received cash from customer. f. Accounts Payable... 4,600 Cash... 4,600 Made payment on payables. g. Gas and Oil Expense Cash Paid for gas and oil. 68 Fundamental Accounting Principles, 19th Edition

15 Exercise 2-17 (20 minutes) Description a. $1,870 debit to Rent Expense is posted as a $1,780 debit. b. $3,560 credit to Cash is posted twice as two credits to Cash. (1) Difference between Debit and Credit Columns (2) Column with the Larger Total (3) Identify account(s) incorrectly stated (4) Amount that account(s) is overstated or understated $90 credit Rent Expense Rent Expense is understated by $90 $3,560 credit Cash Cash is understated by $3,560 c. $7,120 debit to the Withdrawals account is debited to Owner s Capital. $0 Owner, Capital Owner, Withdrawals Owner, Capital is understated by $7,120 Owner, Withdrawals is understated by $7,120 d. $1,630 debit to Prepaid Insurance is posted as a debit to Insurance Expense. $0 Prepaid Insurance Insurance Expense Prepaid Insurance is understated by $1,630 Insurance Expense is overstated by $1,630 e. $31,150 debit to Machinery is posted as a debit to Accounts Payable. $0 Machinery Accounts Payable Machinery is understated by $31,150 Accounts Payable is understated by $31,150 f. $4,460 credit to Services Revenue is posted as a $446 credit. g. $820 debit to Store Supplies is not posted. $4,014 debit Services Revenue $820 credit Store Supplies Services Revenue is understated by $4,014 Store Supplies is understated by $820 Solutions Manual, Chapter 2 69

16 Exercise 2-18 (15 minutes) a. The debit column is correctly stated because the erroneous debit (to Accounts Payable) is deducted from an account with a (larger assumed) credit balance. b. The credit column is understated by $22,500 because Accounts Payable was debited it should have been credited. c. The Office Equipment account balance is correctly stated. d. The Accounts Payable account balance is understated by $22,500. It should have been increased (credited) by $11,250 but the posting error decreased (debited) it by $11,250. e. The credit column is $22,500 less than the debit column, or $213,750 in total ($236,250 - $22,500). Exercise 2-19 (15 minutes) a. Debt Net Average Co. Liabilities / Assets = Ratio Income / Assets = ROA 1 $56,000 $147, $21,000 $200, , , ,000 70, ,000 90, , , ,000 92, ,500 40, ,000 64, ,800 40, ,500 32, , b. Company 6 relies most heavily on creditor (non-owner) financing with 82% of its assets financed by liabilities. c. Company 3 relies least on creditor (non-owner) financing at only 13%. This implies that 87% of the assets are financed by equity (owners). d. The companies with the highest debt ratios indicate the greatest risk. The two companies with the highest debt ratios are 5 and 6. e. Company 3 yields the highest return on assets at 20%; followed by Company 4 at 18.8%. f. As an investor, one prefers high returns at low risk. Company 3 is the preferred investment since it yields the lowest risk (debt ratio is 13%) and highest return on assets (20%). 70 Fundamental Accounting Principles, 19th Edition

17 Problem 2-1A (90 minutes) Part 1 PROBLEM SET A a. Cash ,000 Office Equipment ,200 Drafting Equipment ,000 J. Lancet, Capital ,200 Owner invested cash and equipment. b. Land ,000 Cash ,900 Note Payable ,100 Purchased land with cash and note payable. c. Building ,000 Cash ,000 Purchased building. d. Prepaid Insurance ,300 Cash ,300 Purchased 18-month insurance policy. e. Cash ,600 Engineering Fees Earned ,600 Collected cash for completed work. f. Drafting Equipment ,000 Cash ,600 Note Payable ,400 Purchased equipment with cash and note payable. g. Accounts Receivable ,500 Engineering Fees Earned ,500 Completed services for client. h. Office Equipment ,100 Accounts Payable ,100 Purchased equipment on credit. Solutions Manual, Chapter 2 71

18 Problem 2-1A (Part 1 Continued) i. Accounts Receivable ,000 Engineering Fees Earned ,000 Billed client for completed work. j. Equipment Rental Expense ,410 Accounts Payable ,410 Incurred equipment rental expense. k. Cash ,000 Accounts Receivable ,000 Collected cash on account. l. Wages Expense ,500 Cash ,500 Paid assistant s wages. m. Accounts Payable ,100 Cash ,100 Paid amount due on account. n. Repairs Expense Cash Paid for repair of equipment. o. J. Lancet, Withdrawals ,450 Cash ,450 Owner withdrew cash. p. Wages Expense ,000 Cash ,000 Paid assistant s wages. q. Advertising Expense ,400 Cash ,400 Paid for advertising expense. 72 Fundamental Accounting Principles, 19th Edition

19 Problem 2-1A (Continued) Part 2 Cash No. 101 Accounts Payable No. 201 Date PR Debit Credit Balance Date PR Debit Credit Balance (a) 195, ,000 (h) 1,100 1,100 (b) 8, ,100 (j) 1,410 2,510 (c) 55, ,100 (m) 1,100 1,410 (d) 2, ,800 (e) 6, ,400 Notes Payable No. 250 (f) 9, ,800 Date PR Debit Credit Balance (k) 8, ,800 (b) 43,100 43,100 (l) 2, ,300 (f) 14,400 57,500 (m) 1, ,200 (n) ,230 (o) 10, ,780 J. Lancet, Capital No. 301 (p) 2, ,780 Date PR Debit Credit Balance (q) 2, ,380 (a) 283, ,200 Accounts Receivable No. 106 J. Lancet, Withdrawals No. 302 Date PR Debit Credit Balance Date PR Debit Credit Balance (g) 14,500 14,500 (o) 10,450 10,450 (i) 23,000 37,500 (k) 8,000 29,500 Engineering Fees Earned No. 402 Date PR Debit Credit Balance Prepaid Insurance No. 108 (e) 6,600 6,600 Date PR Debit Credit Balance (g) 14,500 21,100 (d) 2,300 2,300 (i) 23,000 44,100 Office Equipment No. 163 Wages Expense No. 601 Date PR Debit Credit Balance Date PR Debit Credit Balance (a) 8,200 8,200 (l) 2,500 2,500 (h) 1,100 9,300 (p) 2,000 4,500 Drafting Equipment No. 164 Equipment Rental Expense No. 602 Date PR Debit Credit Balance Date PR Debit Credit Balance (a) 80,000 80,000 (j) 1,410 1,410 (f) 24, ,000 Building No. 170 Advertising Expense No. 603 Date PR Debit Credit Balance Date PR Debit Credit Balance (c) 55,000 55,000 (q) 2,400 2,400 Land No. 172 Repairs Expense No. 604 Date PR Debit Credit Balance Date PR Debit Credit Balance (b) 52,000 52,000 (n) Solutions Manual, Chapter 2 73

20 Problem 2-1A (Concluded) Part 3 LANCET ENGINEERING Trial Balance June 30 Debit Credit Cash... $114,380 Accounts receivable... 29,500 Prepaid insurance... 2,300 Office equipment... 9,300 Drafting equipment ,000 Building... 55,000 Land... 52,000 Accounts payable... $ 1,410 Notes payable... 57,500 J. Lancet, Capital ,200 J. Lancet, Withdrawals... 10,450 Engineering fees earned... 44,100 Wages expense... 4,500 Equipment rental expense... 1,410 Advertising expense... 2,400 Repairs expense Totals... $386,210 $386, Fundamental Accounting Principles, 19th Edition

21 Problem 2-2A (90 minutes) Part 1 Mar. 1 Cash ,000 Office Equipment ,000 D. Brooks, Capital ,000 Owner invested cash and equipment. 2 Prepaid Rent ,000 Cash ,000 Prepaid six months rent. 3 Office Equipment ,300 Office Supplies ,400 Accounts Payable ,700 Purchased equipment and supplies on credit. 6 Cash ,000 Services Revenue ,000 Received cash for services. 9 Accounts Receivable ,200 Services Revenue ,200 Billed client for completed work. 12 Accounts Payable ,700 Cash ,700 Paid balance due on account. 19 Prepaid Insurance ,500 Cash ,500 Paid premium for insurance. 22 Cash ,300 Accounts Receivable ,300 Collected part of amount owed by client. 25 Accounts Receivable ,590 Services Revenue ,590 Billed client for completed work. 29 D. Brooks, Withdrawals ,900 Cash ,900 Owner withdrew cash. 30 Office Supplies ,700 Accounts Payable ,700 Purchased supplies on account. 31 Utilities Expense Cash Paid monthly utility bill. Solutions Manual, Chapter 2 75

22 Problem 2-2A (Continued) Part 2 Cash Acct. No. 101 Mar. 1 G1 180, ,000 2 G1 8, ,000 6 G1 6, , G1 4, , G1 7, , G1 4, , G1 4, , G ,700 Accounts Receivable Acct. No. 106 Mar. 9 G1 9,200 9, G1 4,300 4, G1 3,590 8,490 Office Supplies Acct. No. 124 Mar. 3 G1 1,400 1, G1 1,700 3,100 Prepaid Insurance Acct. No. 128 Mar. 19 G1 7,500 7,500 Prepaid Rent Acct. No. 131 Mar. 2 G1 8,000 8,000 Office Equipment Acct. No. 163 Mar. 1 G1 30,000 30,000 3 G1 3,300 33, Fundamental Accounting Principles, 19th Edition

23 Problem 2-2A (Continued) Accounts Payable Acct. No. 201 Mar. 3 G1 4,700 4, G1 4, G1 1,700 1,700 D. Brooks, Capital Acct. No. 301 Mar. 1 G1 210, ,000 D. Brooks, Withdrawals Acct. No. 302 Mar. 29 G1 4,900 4,900 Services Revenue Acct. No. 403 Mar. 6 G1 6,000 6,000 9 G1 9,200 15, G1 3,590 18,790 Utilities Expense Acct. No. 690 Mar. 31 G Solutions Manual, Chapter 2 77

24 Problem 2-2A (Concluded) Part 3 VENTURE CONSULTANTS Trial Balance March 31 Debit Credit Cash... $164,700 Accounts receivable... 8,490 Office supplies... 3,100 Prepaid insurance... 7,500 Prepaid rent... 8,000 Office equipment... 33,300 Accounts payable... $ 1,700 D. Brooks, Capital ,000 D. Brooks, Withdrawals... 4,900 Services revenue... 18,790 Utilities expense Totals... $230,490 $230, Fundamental Accounting Principles, 19th Edition

25 Problem 2-3A (90 minutes) Part 1 April 1 Cash ,000 Office Equipment ,800 J. Lanelle, Capital ,800 Owner invested cash and equipment. 2 Prepaid Rent ,200 Cash ,200 Prepaid twelve months rent. 3 Office Equipment ,400 Office Supplies ,280 Accounts Payable ,680 Purchased equip. & supplies on credit. 6 Cash ,000 Services Revenue ,000 Received cash for services. 9 Accounts Receivable ,600 Services Revenue ,600 Billed client for completed work. 13 Accounts Payable ,680 Cash ,680 Paid balance due on account. 19 Prepaid Insurance ,000 Cash ,000 Paid premium for insurance. 22 Cash ,080 Accounts Receivable ,080 Collected part of amount owed by client. 25 Accounts Receivable ,640 Services Revenue ,640 Billed client for completed work. 28 J. Lanelle, Withdrawals ,200 Cash ,200 Owner withdrew cash. 29 Office Supplies Accounts Payable Purchased supplies on account. 30 Utilities Expense Cash Paid monthly utility bill. Solutions Manual, Chapter 2 79

26 Problem 2-3A (Continued) Part 2 Cash Acct. No. 101 April 1 G1 95,000 95,000 2 G1 7,200 87,800 6 G1 2,000 89, G1 13,680 76, G1 6,000 70, G1 6,080 76, G1 6,200 70, G ,300 Accounts Receivable Acct. No. 106 April 9 G1 7,600 7, G1 6,080 1, G1 2,640 4,160 Office Supplies Acct. No. 124 April 3 G1 2,280 2, G ,040 Prepaid Insurance Acct. No. 128 April 19 G1 6,000 6,000 Prepaid Rent Acct. No. 131 April 2 G1 7,200 7,200 Office Equipment Acct. No. 163 April 1 G1 22,800 22,800 3 G1 11,400 34, Fundamental Accounting Principles, 19th Edition

27 Problem 2-3A (Continued) Accounts Payable Acct. No. 201 April 3 G1 13,680 13, G1 13, G J. Lanelle, Capital Acct. No. 301 April 1 G1 117, ,800 J. Lanelle, Withdrawals Acct. No. 302 April 28 G1 6,200 6,200 Services Revenue Acct. No. 403 April 6 G1 2,000 2,000 9 G1 7,600 9, G1 2,640 12,240 Utilities Expense Acct. No. 690 April 30 G Solutions Manual, Chapter 2 81

28 Problem 2-3A (Continued) Part 3 VIVA CONSULTANTS Trial Balance April 30 Debit Credit Cash... $ 69,300 Accounts receivable... 4,160 Office supplies... 3,040 Prepaid insurance... 6,000 Prepaid rent... 7,200 Office equipment... 34,200 Accounts payable... $ 760 J. Lanelle, Capital ,800 J. Lanelle, Withdrawals... 6,200 Services revenue... 12,240 Utilities expense Total... $130,800 $130, Fundamental Accounting Principles, 19th Edition

29 Problem 2-4A (60 minutes) Part 1 FAVIANA SHIPPING Balance Sheet December 31, 2008 Assets Liabilities Cash... $ 47,867 Accounts payable... $ 68,310 Accounts receivable... 25,983 Office supplies... 4,098 Office equipment ,816 Equity Trucks... 49,236 Total equity ,690 Total assets... $253,000 Total liabilities and equity... $253,000 FAVIANA SHIPPING Balance Sheet December 31, 2009 Assets Liabilities Cash... $ 8,154 Accounts payable... $ 33,879 Accounts receivable... 20,370 Note payable... 85,080 Office supplies... 3,002 Total liabilities ,959 Office equipment ,018 Trucks... 58,236 Building ,124 Equity Land... 40,956 Total equity ,901 Total assets... $428,860 Total liabilities and equity... $428,860 Part 2 Computation of 2009 net income: Equity, December 31, $184,690 Equity, December 31, (309,901) Increase in equity during $125,211 Owner investments... 34,000 Add net income...? Deduct owner withdrawals ($2,400 x 12)... (28,800) Increase in equity during $125,211 Therefore, net income must equal ($125,211-$34,000+$28,800) = $120,011 Part 3 Debt Ratio = $118,959 / $428,860 = 27.7% Solutions Manual, Chapter 2 83

30 Problem 2-5A (35 minutes) Part 1 MIN ENGINEERING Trial Balance May 31 Debit Credit Cash... $44,132 Office supplies... 1,090 Prepaid insurance... 4,700 Office equipment... 11,200 Accounts payable... $11,200 Y. Min, Capital... 18,000 Y. Min, Withdrawals... 4,328 Engineering fees earned... 44,000 Rent expense... 7,750. Totals... $73,200 $73,200 Part 2: Likely transactions (following order of trial balance). 1. Purchased $1,090 of office supplies for cash. 2. Paid $4,700 insurance premium in advance. 3. Purchased $11,200 of office equipment on credit (with account payable). 4. Yi Min invested $18,000 cash in business. 5. Paid $4,328 cash for owner withdrawals. 6. Earned $44,000 cash for engineering services, all in cash. 7. Paid $7,750 cash for rent expense. Part 3 Report of Cash Received and Paid Cash received Owner investments... $18,000 Engineering fees... 44,000 Total cash received... $62,000 Cash paid Office supplies... 1,090 Insurance premium... 4,700 Owner withdrawals... 4,328 Rent... 7,750 Total cash paid... 17,868 Ending balance... $44, Fundamental Accounting Principles, 19th Edition

31 Problem 2-6A (90 minutes) Part 1 a. Cash ,000 Office Equipment ,000 A. Emitt, Capital ,000 Owner invested cash and equipment. b. Land ,000 Building ,000 Cash ,000 Notes Payable ,000 Purchased land and building with cash and note payable. c. Office Supplies ,700 Accounts Payable ,700 Purchased office supplies on account. d. Automobiles ,800 A. Emitt, Capital ,800 Owner contributed automobile to business. e. Office Equipment ,900 Accounts Payable ,900 Purchased office equipment on account. f. Salaries Expense ,500 Cash ,500 Paid assistant s salary. g. Cash ,600 Fees Earned ,600 Provided services for cash. h. Utilities Expense Cash Paid cash for utilities. Solutions Manual, Chapter 2 85

32 Problem 2-6A (Part 1 Continued) i. Accounts Payable ,700 Cash ,700 Paid cash on account. j. Office Equipment ,200 Cash ,200 Purchased new equipment with cash. k. Accounts Receivable ,750 Fees Earned ,750 Provided services on account. l. Salaries Expense ,000 Cash ,000 Paid assistant s salary. m. Cash ,000 Accounts Receivable ,000 Received cash due on account. n. A. Emitt, Withdrawals ,900 Cash ,900 Owner withdrew cash. 86 Fundamental Accounting Principles, 19th Edition

33 Problem 2-6A (Continued) Part 2 Cash No. 101 Land No. 172 Date PR Debit Credit Balance Date PR Debit Credit Balance (a) 82,000 82,000 (b) 40,000 40,000 (b) 25,000 57,000 (f) 1,500 55,500 Accounts Payable No. 201 (g) 7,600 63,100 Date PR Debit Credit Balance (h) ,470 (c) 1,700 1,700 (i) 1,700 60,770 (e) 5,900 7,600 (j) 20,200 40,570 (i) 1,700 5,900 (l) 2,000 38,570 (m) 4,000 42,570 Notes Payable No. 250 (n) 2,900 39,670 Date PR Debit Credit Balance (b) 180, ,000 Accounts Receivable No. 106 Date PR Debit Credit Balance (k) 6,750 6,750 A. Emitt, Capital No. 301 (m) 4,000 2,750 Date PR Debit Credit Balance (a) 104, ,000 Office Supplies No. 108 (d) 16, ,800 Date PR Debit Credit Balance (c) 1,700 1,700 A. Emitt, Withdrawals No. 302 Office Equipment No. 163 Date PR Debit Credit Balance Date PR Debit Credit Balance (n) 2,900 2,900 (a) 22,000 22,000 (e) 5,900 27,900 Fees Earned No. 402 (j) 20,200 48,100 Date PR Debit Credit Balance (g) 7,600 7,600 (k) 6,750 14,350 Automobiles No. 164 Salaries Expense No. 601 Date PR Debit Credit Balance Date PR Debit Credit Balance (d) 16,800 16,800 (f) 1,500 1,500 (l) 2,000 3,500 Building No. 170 Date PR Debit Credit Balance Utilities Expense No. 602 (b) 165, ,000 Date PR Debit Credit Balance (h) Solutions Manual, Chapter 2 87

34 Problem 2-6A (Concluded) Part 3 AE CONSULTING Trial Balance September 30 Debit Credit Cash... $ 39,670 Accounts receivable... 2,750 Office supplies... 1,700 Office equipment... 48,100 Automobiles... 16,800 Building ,000 Land... 40,000 Accounts payable... $ 5,900 Notes payable ,000 A. Emitt, Capital ,800 A. Emitt, Withdrawals... 2,900 Fees earned... 14,350 Salaries expense... 3,500 Utilities expense Total... $321,050 $321, Fundamental Accounting Principles, 19th Edition

35 Problem 2-1B (90 minutes) Part 1 PROBLEM SET B a. Cash ,000 Office Equipment ,100 Computer Equipment ,000 V. Wende, Capital ,100 Owner invested cash and equipment. b. Land ,000 Cash ,700 Note Payable ,300 Purchased land with cash and note payable. c. Building ,000 Cash ,000 Purchased building. d. Prepaid Insurance ,500 Cash ,500 Purchased 24-month insurance policy. e. Cash ,000 Fees Earned ,000 Collected cash for completed work. f. Computer Equipment ,000 Cash ,800 Note Payable ,200 Purchased equipment with cash and note payable. g. Accounts Receivable ,500 Fees Earned ,500 Completed services for client. h. Office Equipment ,800 Accounts Payable ,800 Purchased equipment on credit. Solutions Manual, Chapter 2 89

36 Problem 2-1B (Part 1 Continued) i. Accounts Receivable ,000 Fees Earned ,000 Billed client for completed work. j. Computer Rental Expense ,685 Accounts Payable ,685 Incurred computer rental expense. k. Cash ,000 Accounts Receivable ,000 Collected cash on account. l. Wages Expense ,300 Cash ,300 Paid assistant s wages. m. Accounts Payable ,800 Cash ,800 Paid amount due on account. n. Repairs Expense Cash Paid for repair of equipment. o. V. Wende, Withdrawals ,230 Cash ,230 Owner withdrew cash. p. Wages Expense ,300 Cash ,300 Paid assistant s wages. q. Advertising Expense ,300 Cash ,300 Paid for advertising expense. 90 Fundamental Accounting Principles, 19th Edition

37 Problem 2-1B (Continued) Part 2 Cash No. 101 Accounts Payable No. 201 Date PR Debit Credit Balance Date PR Debit Credit Balance (a) 155, ,000 (h) 1,800 1,800 (b) 8, ,300 (j) 1,685 3,485 (c) 59,000 87,300 (m) 1,800 1,685 (d) 3,500 83,800 (e) 7,000 90,800 Notes Payable No. 250 (f) 11,800 79,000 Date PR Debit Credit Balance (k) 10,000 89,000 (b) 46,300 46,300 (l) 1,300 87,700 (f) 14,200 60,500 (m) 1,800 85,900 (n) ,915 (o) 10,230 74,685 V. Wende, Capital No. 301 (p) 1,300 73,385 Date PR Debit Credit Balance (q) 4,300 69,085 (a) 238, ,100 Accounts Receivable No. 106 V. Wende, Withdrawals No. 302 Date PR Debit Credit Balance Date PR Debit Credit Balance (g) 16,500 16,500 (o) 10,230 10,230 (i) 28,000 44,500 (k) 10,000 34,500 Fees Earned No. 402 Date PR Debit Credit Balance Prepaid Insurance No. 108 (e) 7,000 7,000 Date PR Debit Credit Balance (g) 16,500 23,500 (d) 3,500 3,500 (i) 28,000 51,500 Office Equipment No. 163 Wages Expense No. 601 Date PR Debit Credit Balance Date PR Debit Credit Balance (a) 5,100 5,100 (l) 1,300 1,300 (h) 1,800 6,900 (p) 1,300 2,600 Computer Equipment No. 164 Computer Rental Expense No. 602 Date PR Debit Credit Balance Date PR Debit Credit Balance (a) 78,000 78,000 (j) 1,685 1,685 (f) 26, ,000 Building No. 170 Advertising Expense No. 603 Date PR Debit Credit Balance Date PR Debit Credit Balance (c) 59,000 59,000 (q) 4,300 4,300 Land No. 172 Repairs Expense No. 604 Date PR Debit Credit Balance Date PR Debit Credit Balance (b) 55,000 55,000 (n) Solutions Manual, Chapter 2 91

38 Problem 2-1B (Concluded) Part 3 SOFTWORKS Trial Balance April 30 Debit Credit Cash... $ 69,085 Accounts receivable... 34,500 Prepaid insurance... 3,500 Office equipment... 6,900 Computer equipment ,000 Building... 59,000 Land... 55,000 Accounts payable... $ 1,685 Notes payable... 60,500 V. Wende, Capital ,100 V. Wende, Withdrawals... 10,230 Fees earned... 51,500 Wages expense... 2,600 Computer rental expense... 1,685 Advertising expense... 4,300 Repairs expense Totals... $351,785 $351, Fundamental Accounting Principles, 19th Edition

39 Problem 2-2B (90 minutes) Part 1 Nov. 1 Cash ,000 Office Equipment ,000 R. Kylan, Capital ,000 Owner invested cash and equipment.. 2 Prepaid Rent ,000 Cash ,000 Prepaid six months rent. 4 Office Equipment ,300 Office Supplies ,100 Accounts Payable ,400 Purchased equipment and supplies on credit. 8 Cash ,000 Services Revenue ,000 Received cash for services. 12 Accounts Receivable ,200 Services Revenue ,200 Billed client for completed work. 13 Accounts Payable ,400 Cash ,400 Paid balance due on account. 19 Prepaid Insurance ,100 Cash ,100 Paid premium for 24 months of insurance. 22 Cash ,700 Accounts Receivable ,700 Collected part of amount owed by client. 24 Accounts Receivable ,010 Services Revenue ,010 Billed client for completed work. 28 R. Kylan, Withdrawals ,300 Cash ,300 Owner withdrew cash. 29 Office Supplies ,200 Accounts Payable ,200 Purchased supplies on account. 30 Utilities Expense ,100 Cash ,100 Paid monthly utility bill. Solutions Manual, Chapter 2 93

40 Problem 2-2B (Continued) Part 2 Cash Acct. No. 101 Nov. 1 G1 190, ,000 2 G1 10, ,000 8 G1 7, , G1 6, , G1 4, , G1 3, , G1 6, , G1 1, ,800 Accounts Receivable Acct. No. 106 Nov. 12 G1 9,200 9, G1 3,700 5, G1 4,010 9,510 Office Supplies Acct. No. 124 Nov. 4 G1 2,100 2, G1 1,200 3,300 Prepaid Insurance Acct. No. 128 Nov. 19 G1 4,100 4,100 Prepaid Rent Acct. No. 131 Nov. 2 G1 10,000 10,000 Office Equipment Acct. No. 163 Nov. 1 G1 29,000 29,000 4 G1 4,300 33,300 Accounts Payable Acct. No. 201 Nov. 4 G1 6,400 6, G1 6, G1 1,200 1, Fundamental Accounting Principles, 19th Edition

41 Problem 2-2B (Continued) R. Kylan, Capital Acct. No. 301 Nov. 1 G1 219, ,000 R. Kylan, Withdrawals Acct. No. 302 Nov. 28 G1 6,300 6,300 Services Revenue Acct. No. 403 Nov. 8 G1 7,000 7, G1 9,200 16, G1 4,010 20,210 Utilities Expense Acct. No. 690 Nov. 30 G1 1,100 1,100 Part 3 KYLAN MANAGEMENT SERVICES Trial Balance November 30 Debit Credit Cash... $172,800 Accounts receivable... 9,510 Office supplies... 3,300 Prepaid insurance... 4,100 Prepaid rent... 10,000 Office equipment... 33,300 Accounts payable... $ 1,200 R. Kylan, Capital ,000 R. Kylan, Withdrawals... 6,300 Services revenue... 20,210 Utilities expense... 1,100 Totals... $240,410 $240,410 Solutions Manual, Chapter 2 95

42 Problem 2-3B (90 minutes) Part 1 Sept. 1 Cash ,000 Office Equipment ,200 J. Hassan, Capital ,200 Owner invested in the business. 2 Prepaid Rent ,200 Cash ,200 Prepaid twelve months rent. 4 Office Equipment ,600 Office Supplies ,120 Accounts Payable ,720 Purchased equipment and supplies on credit. 8 Cash ,000 Service Fees Earned ,000 Received cash for services. 12 Accounts Receivable ,400 Service Fees Earned ,400 Billed client for completed work. 13 Accounts Payable ,720 Cash ,720 Paid balance due on account. 19 Prepaid Insurance ,000 Cash ,000 Paid premium for insurance. 22 Cash ,320 Accounts Receivable ,320 Collected part of amount owed by client. 24 Accounts Receivable ,640 Service Fees Earned ,640 Billed client for completed work. 28 J. Hassan, Withdrawals ,200 Cash ,200 Owner withdrew cash. 29 Office Supplies ,040 Accounts Payable ,040 Purchased supplies on account. 30 Utilities Expense Cash Paid monthly utility bill. 96 Fundamental Accounting Principles, 19th Edition

43 Problem 2-3B (Continued) Part 2 Cash Acct. No. 101 Sept. 1 G1 130, ,000 2 G1 7, ,800 8 G1 2, , G1 18, , G1 6, , G1 8, , G1 6, , G ,500 Accounts Receivable Acct. No. 106 Sept. 12 G1 10,400 10, G1 8,320 2, G1 2,640 4,720 Office Supplies Acct. No. 124 Sept. 4 G1 3,120 3, G1 1,040 4,160 Prepaid Insurance Acct. No. 128 Sept. 19 G1 6,000 6,000 Prepaid Rent Acct. No. 131 Sept. 2 G1 7,200 7,200 Office Equipment Acct. No. 163 Sept. 1 G1 31,200 31,200 4 G1 15,600 46,800 Solutions Manual, Chapter 2 97

44 Problem 2-3B (Continued) Accounts Payable Acct. No. 201 Sept. 4 G1 18,720 18, G1 18, G1 1,040 1,040 J. Hassan, Capital Acct. No. 301 Sept. 1 G1 161, ,200 J. Hassan, Withdrawals Acct. No. 302 Sept. 28 G1 6,200 6,200 Service Fees Earned Acct. No. 401 Sept. 8 G1 2,000 2, G1 10,400 12, G1 2,640 15,040 Utilities Expense Acct. No. 690 Sept. 30 G Fundamental Accounting Principles, 19th Edition

45 Problem 2-3B (Concluded) Part 3 HASSAN MANAGEMENT SERVICES Trial Balance September 30 Debit Credit Cash... $101,500 Accounts receivable... 4,720 Office supplies... 4,160 Prepaid insurance... 6,000 Prepaid rent... 7,200 Office equipment... 46,800 Accounts payable... $ 1,040 J. Hassan, Capital ,200 J. Hassan, Withdrawals... 6,200 Service fees earned... 15,040 Utilities expense Totals... $177,280 $177,280 Solutions Manual, Chapter 2 99

46 Problem 2-4B (60 minutes) Part 1 TRINITY CO. Balance Sheet December 31, 2008 Assets Liabilities Cash... $ 54,773 Accounts payable...$ 78,165 Accounts receivable... 29,731 Office supplies... 4,689 Office equipment ,968 Equity Machinery... 56,339 Total equity ,335 Total assets...$289,500 Total liabilities & equity... $289,500 TRINITY CO. Balance Sheet December 31, 2009 Assets Liabilities Cash... $ 10,629 Accounts payable...$ 38,767 Accounts receivable... 23,309 Note payable ,666 Office supplies... 3,435 Total liabilities ,433 Office equipment ,353 Machinery... 65,339 Building ,802 Equity Land... 46,864 Total equity ,298 Total assets... $490,731 Total liabilities & equity... $490,731 Part 2 Calculation of 2010 net income: Equity, December 31, $211,335 Equity, December 31, (337,298) Increase in equity during $125,963 Owner investments during $ 35, Net income...? Owner withdrawals during 2009 ($4,000 x 12)... (48,000) Increase in equity during $125,963 Therefore, 2009 income must equal ($125,963-35,000+ $48,000) = $138,963 Part 3 Debt ratio = $153,433 / $490,731 = 31.3% 100 Fundamental Accounting Principles, 19th Edition

47 Problem 2-5B (35 minutes) Part 1 GOULD SOLUTIONS Trial Balance April 30 Debit Credit Cash... $46,518 Office supplies Prepaid rent... 4,700 Office equipment... 11,300 Accounts payable... $11,300 R. Gould, Capital... 22,500 R. Gould, Withdrawals... 4,172 Consulting fees earned... 43,000 Operating expenses... 9,260 Totals... $76,800 $76,800 Part 2: Likely transactions (following order of trial balance). 1. Purchased $850 of office supplies for cash. 2. Paid $4,700 cash for prepaid rent. 3. Purchased $11,300 office equipment on credit. 4. Gould invested $22,500 cash in business. 5. Paid $4,172 cash for owner withdrawals. 6. Earned $43,000 cash in consulting fees. 7. Paid $9,260 cash for operating expenses. Part 3 Report of Cash Received and Paid Cash received Owner investments... $22,500 Consulting fees... 43,000 Total cash received... $65,500 Cash paid Office supplies Prepaid rent... 4,700 Owner withdrawals... 4,172 Operating expenses... 9,260 Total cash paid... 18,982 Ending balance... $46,518 Solutions Manual, Chapter 2 101

48 Problem 2-6B (90 minutes) Part 1 a. Cash ,000 Office Equipment ,000 D. Witter, Capital ,000 Owner invested cash and equipment. b. Land ,000 Building ,000 Cash ,000 Notes Payable ,000 Purchased land and building with cash and note payable. c. Office Supplies ,200 Accounts Payable ,200 Purchased office supplies on account. d. Automobiles ,800 D. Witter, Capital ,800 Owner contributed automobile to business. e. Office Equipment ,100 Accounts Payable ,100 Purchased office equipment on account. f. Salaries Expense ,500 Cash ,500 Paid assistant s salary. g. Cash ,000 Fees Earned ,000 Provided services for cash. h. Utilities Expense Cash Paid cash for utilities. 102 Fundamental Accounting Principles, 19th Edition

49 Problem 2-6B (Part 1 Continued) i. Accounts Payable ,200 Cash ,200 Paid cash on account. j. Office Equipment ,400 Cash ,400 Purchased equipment for cash. k. Accounts Receivable ,500 Fees Earned ,500 Provided services on account. l. Salaries Expense ,000 Cash ,000 Paid assistant s salary. m. Cash ,000 Accounts Receivable ,000 Received cash due on account. n. D. Witter, Withdrawals ,700 Cash ,700 Owner withdrew cash. Solutions Manual, Chapter 2 103

50 Problem 2-6B (Continued) Part 2 Cash No. 101 Land No. 172 Date PR Debit Credit Balance Date PR Debit Credit Balance (a) 82,000 82,000 (b) 50,000 50,000 (b) 30,000 52,000 (f) 1,500 50,500 Accounts Payable No. 201 (g) 8,000 58,500 Date PR Debit Credit Balance (h) ,870 (c) 2,200 2,200 (i) 2,200 55,670 (e) 5,100 7,300 (j) 20,400 35,270 (i) 2,200 5,100 (l) 2,000 33,270 (m) 4,000 37,270 Notes Payable No. 250 (n) 2,700 34,570 Date PR Debit Credit Balance (b) 185, ,000 Accounts Receivable No. 106 Date PR Debit Credit Balance (k) 6,500 6,500 D. Witter, Capital No. 301 (m) 4,000 2,500 Date PR Debit Credit Balance (a) 105, ,000 Office Supplies No. 108 (d) 16, ,800 Date PR Debit Credit Balance (c) 2,200 2,200 D. Witter, Withdrawals No. 302 Office Equipment No. 163 Date PR Debit Credit Balance Date PR Debit Credit Balance (n) 2,700 2,700 (a) 23,000 23,000 (e) 5,100 28,100 Fees Earned No. 402 (j) 20,400 48,500 Date PR Debit Credit Balance (g) 8,000 8,000 (k) 6,500 14,500 Automobiles No. 164 Salaries Expense No. 601 Date PR Debit Credit Balance Date PR Debit Credit Balance (d) 16,800 16,800 (f) 1,500 1,500 (l) 2,000 3,500 Building No. 170 Date PR Debit Credit Balance Utilities Expense No. 602 (b) 165, ,000 Date PR Debit Credit Balance (h) Fundamental Accounting Principles, 19th Edition

51 Problem 2-6B (Concluded) Part 3 WITTER CONSULTING Trial Balance June 30 Debit Credit Cash... $ 34,570 Accounts receivable... 2,500 Office supplies... 2,200 Office equipment... 48,500 Automobiles... 16,800 Building ,000 Land... 50,000 Accounts payable... $ 5,100 Notes payable ,000 D. Witter, Capital ,800 D. Witter, Withdrawals... 2,700 Fees earned... 14,500 Salaries expense... 3,500 Utilities expense Total... $326,400 $326,400 Solutions Manual, Chapter 2 105

52 Part 1 (120 minutes) Serial Problem SP Oct. 1 Cash ,000 Office Equipment ,000 Computer Equipment ,000 A. Lopez, Capital ,000 Owner invests cash and equipment. 2 Prepaid Rent ,300 Cash ,300 Paid four months rent in advance. 3 Computer Supplies ,420 Accounts Payable ,420 Purchased supplies on credit. 5 Prepaid Insurance ,220 Cash ,220 Paid 12 months premium in advance. 6 Accounts Receivable ,800 Computer Services Revenue ,800 Billed customer for services. 8 Accounts Payable ,420 Cash ,420 Paid balance due on account payable. 10 No entry necessary in the journal. 12 Accounts Receivable ,400 Computer Services Revenue ,400 Billed customer for services. 15 Cash ,800 Accounts Receivable ,800 Collected accounts receivable. 17 Repairs Expense Computer Cash Paid for computer repairs. 20 Advertising Expense ,940 Cash ,940 Purchased ad in local newspaper. 22 Cash ,400 Accounts Receivable ,400 Collected accounts receivable. 106 Fundamental Accounting Principles, 19th Edition

53 Serial Problem, Success Systems (Continued) 28 Accounts Receivable ,208 Computer Services Revenue ,208 Billed customer for services. 31 Wages Expense Cash Paid employee for part-time work. 31 A. Lopez, Withdrawals ,600 Cash ,600 Owner withdrew cash. Nov. 1 Mileage Expense Cash Reimbursed Lopez for mileage. 2 Cash ,633 Computer Services Revenue ,633 Collected cash revenue from client. 5 Computer Supplies ,125 Cash ,125 Purchased computer supplies for cash. 8 Accounts Receivable ,668 Computer Services Revenue ,668 Billed customer for services. 13 No entry necessary. (No revenue recognized until work performed.) 18 Cash ,208 Accounts Receivable ,208 Collected accounts receivable. 22 Miscellaneous Expenses Cash Record donation. (Some companies use a Donations account.) 24 Accounts Receivable ,950 Computer Services Revenue ,950 Billed customer for services. 25 No entry necessary. 28 Mileage Expense Cash Reimbursed Lopez for mileage. 30 Wages Expense ,750 Cash ,750 Paid employee for part-time work. 30 A. Lopez, Withdrawals ,000 Cash ,000 Owner withdrew cash. Solutions Manual, Chapter 2 107