Lesson FA Financial Accounting Fundamentals - Concepts and Transaction Analysis Part 3
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1 Lesson FA Financial Accounting Fundamentals - Concepts and Transaction Analysis Part 3 This workbook contains notes and worksheets to accompany the corresponding video lesson available online at: Permission is granted for educators and students to make copies and redistribute this document without fee provided the copyright notice and page footer is retained. All other intellectual property rights are reserved by the copyright holder. Copyright 2011 by Rocky Spears Enterprises LLC, All Rights Reserved Page 1 of 23
2 Financial Accounting Fundamentals Concepts and Transaction Analysis Part 3 [Clip 15] Comprehensive Problem 1 - January 20x0 Transactions - Malorie This part of our lesson includes journalizing some practice financial transactions and events for Malorie first month of operation. We will use the results of these exercises as a starting point for the lesson on adjusting entries. We have 10 transactions in January for you to journalize. Some are similar to those we looked at earlier. Others will require some creative thinking on your part. As an aid for these problems, you will find the following in the workbook that accompanies this lesson: 1. The expanded accounting equation with debit and credit guidelines 2. A list of common accounts in the chart of accounts 3. General journal 4. T-accounts with titles, plus a blank set of t-accounts 5. A trial balance worksheet This lesson is designed so that you can watch a video clip explaining each transaction. You can either work through the lesson by watching each video clip, then solving the transaction on your own before I show you the solution I will give a moment to press pause on the video before I show the solution... Or, you can work through the lesson by analyzing and journalizing all 10 transactions, check your answers in the workbook, and then watch the video clip if you need an explanation. Copyright 2011 by Rocky Spears Enterprises LLC, All Rights Reserved Page 2 of 23
3 Comprehensive Problem 1 Malorie Financial Transactions and Events Malorie established a hair salon and spa in January with the following transactions: 1. Jan. 2 Business received $5,000 in cash from Malorie in exchange for 500 shares of $10 par common stock 2. Jan. 2 Malorie obtained a loan from a local bank, signing a 6-month, 12% simple interest note for $5,000. The interest is payable monthly on the 1 st of the month. 3. Jan. 2 Incurred legal fees of $1200 for establishing the business 4. Jan. 2 Purchased styling supplies in the amount of $300 with cash 5. Jan. 2 Paid $900 cash for six-month insurance policy on the business 6. Jan. 2 Paid $1,500 cash to landlord for 3 months rent on salon. 7. Jan. 2 Received $3000 cash prepayment from a famous actor for monthly styling and spa treatments for a fixed fee of $1000 monthly. 8. Jan. 2 Paid $480 for 2-year subscriptions to several magazines. 9. Jan. 9 Purchased styling supplies in the amount of $1,100 on account from St. Paul Beauty Supply 10. Jan. 31 Recorded January cash sales of $6,200. Instructions: For each transaction, 1. Analyze the effect of the transaction on the accounting equation 2. Determine which accounts are affected 3. Write the journal entry in good form 4. Post the journal entry to t-accounts After all transactions are journalized and posted, complete a trial balance. Copyright 2011 by Rocky Spears Enterprises LLC, All Rights Reserved Page 3 of 23
4 [Clip 16] Comprehensive Problem 1 - January 20x0 - Transaction #1 - Malorie Comprehensive Problem 1 - January 20x0 - Transaction #1 - Malorie (see Appendix 1 for the Solution; see Appendix 2 for the Charts and Worksheets) Malorie established a hair salon and spa in January with the following transactions: 1. Jan. 2 Business received $5,000 in cash from Malorie in exchange for 500 shares of $10 par common stock General Journal Date Description Debit Credit Instructions: Write the journal entry and post to the t-accounts. [Clip 17] Comprehensive Problem 1 - January 20x0 - Transaction #2 - Malorie Comprehensive Problem 1 - January 20x0 - Transaction #2 - Malorie (see Appendix 1 for the Solution; see Appendix 2 for the Charts and Worksheets) 2. Jan. 2 Malorie obtained a loan from a local bank, signing a 6-month, 12% simple interest note for $5,000. The interest is payable monthly on the 1 st of the month. General Journal Date Description Debit Credit Instructions: Write the journal entry and post to the t-accounts. Copyright 2011 by Rocky Spears Enterprises LLC, All Rights Reserved Page 4 of 23
5 [Clip 18] Comprehensive Problem 1 - January 20x0 - Transaction #3 - Malorie Comprehensive Problem 1 - January 20x0 - Transaction #3 - Malorie (see Appendix 1 for the Solution; see Appendix 2 for the Charts and Worksheets) 3. Jan. 2 Incurred legal fees of $1200 for establishing the business General Journal Date Description Debit Credit Instructions: Write the journal entry and post to the t-accounts. [Clip 19] Comprehensive Problem 1 - January 20x0 - Transaction #4 - Malorie Comprehensive Problem 1 - January 20x0 - Transaction #4 - Malorie (see Appendix 1 for the Solution; see Appendix 2 for the Charts and Worksheets) 4. Jan. 2 Purchased styling supplies in the amount of $300 with cash General Journal Date Description Debit Credit Instructions: Write the journal entry and post to the t-accounts. Copyright 2011 by Rocky Spears Enterprises LLC, All Rights Reserved Page 5 of 23
6 [Clip 20] Comprehensive Problem 1 - January 20x0 - Transaction #5 - Malorie Comprehensive Problem 1 - January 20x0 - Transaction #5 - Malorie (see Appendix 1 for the Solution; see Appendix 2 for the Charts and Worksheets) 5. Jan. 2 Paid $900 cash for six-month insurance policy on the business General Journal Date Description Debit Credit Instructions: Write the journal entry and post to the t-accounts. [Clip 21] Comprehensive Problem 1 - January 20x0 - Transaction #6 - Malorie Comprehensive Problem 1 - January 20x0 - Transaction #6 - Malorie (see Appendix 1 for the Solution; see Appendix 2 for the Charts and Worksheets) 6. Jan. 2 Paid $1,500 cash to landlord for 3 months rent on salon. General Journal Date Description Debit Credit Instructions: Write the journal entry and post to the t-accounts. Copyright 2011 by Rocky Spears Enterprises LLC, All Rights Reserved Page 6 of 23
7 [Clip 22] Comprehensive Problem 1 - January 20x0 - Transaction #7 - Malorie Comprehensive Problem 1 - January 20x0 - Transaction #7 - Malorie (see Appendix 1 for the Solution; see Appendix 2 for the Charts and Worksheets) 7. Jan. 2 Received $3000 cash prepayment from a famous actor for monthly styling and spa treatments for a fixed fee of $1000 monthly. General Journal Date Description Debit Credit Instructions: Write the journal entry and post to the t-accounts. [Clip 23] Comprehensive Problem 1 - January 20x0 - Transaction #8 - Malorie Comprehensive Problem 1 - January 20x0 - Transaction #8 - Malorie (see Appendix 1 for the Solution; see Appendix 2 for the Charts and Worksheets) 8. Jan. 2 Paid $480 for 2-year subscriptions to several magazines. General Journal Date Description Debit Credit Instructions: Write the journal entry and post to the t-accounts. Copyright 2011 by Rocky Spears Enterprises LLC, All Rights Reserved Page 7 of 23
8 [Clip 24] Comprehensive Problem 1 - January 20x0 - Transaction #9 - Malorie Comprehensive Problem 1 - January 20x0 - Transaction #9 - Malorie (see Appendix 1 for the Solution; see Appendix 2 for the Charts and Worksheets) 9. Jan. 9 Purchased styling supplies in the amount of $1,100 on account from St. Paul Beauty Supply General Journal Date Description Debit Credit Instructions: Write the journal entry and post to the t-accounts. [Clip 25] Comprehensive Problem 1 - January 20x0 - Transaction #10 - Malorie Comprehensive Problem 1 - January 20x0 - Transaction #10 - Malorie (see Appendix 1 for the Solution; see Appendix 2 for the Charts and Worksheets) 10. Jan. 31 Recorded January cash sales of $6,200. General Journal Date Description Debit Credit Instructions: Write the journal entry and post to the t-accounts. Copyright 2011 by Rocky Spears Enterprises LLC, All Rights Reserved Page 8 of 23
9 [Clip 26] Comprehensive Problem 1 - January 20x0 - Trial Balance - Malorie Comprehensive Problem 1 - January 20x0 - Trial Balance - Malorie (see Appendix 1 for the Solution; see Appendix 2 for the Charts and Worksheets) Instructions: Determine the balance of each t-account and prepare the trial balance. Malorie Trial Balance January 31, 20x0 Balances Account Debits Credits Cash Prepaid Insurance Subscriptions Supplies Prepaid Rent Accounts Payable Legal Fees Payable Note Payable Unearned Sales Revenue Common Stock Retained Earnings Sales Revenue Insurance Expense Legal Fees Expense Rent Expense Subscriptions Expense Supplies Expense Copyright 2011 by Rocky Spears Enterprises LLC, All Rights Reserved Page 9 of 23
10 APPENDIX 1 - SOLUTIONS [Clip 16] Comprehensive Problem 1 - January 20x0 - Transaction #1 - Malorie SOLUTION: [Clip 17] Comprehensive Problem 1 - January 20x0 - Transaction #2 - Malorie SOLUTION: Copyright 2011 by Rocky Spears Enterprises LLC, All Rights Reserved Page 10 of 23
11 [Clip 18] Comprehensive Problem 1 - January 20x0 - Transaction #3 - Malorie SOLUTION: [Clip 19] Comprehensive Problem 1 - January 20x0 - Transaction #4 - Malorie SOLUTION: Copyright 2011 by Rocky Spears Enterprises LLC, All Rights Reserved Page 11 of 23
12 [Clip 20] Comprehensive Problem 1 - January 20x0 - Transaction #5 - Malorie SOLUTION: [Clip 21] Comprehensive Problem 1 - January 20x0 - Transaction #6 - Malorie SOLUTION: Copyright 2011 by Rocky Spears Enterprises LLC, All Rights Reserved Page 12 of 23
13 [Clip 22] Comprehensive Problem 1 - January 20x0 - Transaction #7 - Malorie SOLUTION: [Clip 23] Comprehensive Problem 1 - January 20x0 - Transaction #8 - Malorie SOLUTION: Copyright 2011 by Rocky Spears Enterprises LLC, All Rights Reserved Page 13 of 23
14 [Clip 24] Comprehensive Problem 1 - January 20x0 - Transaction #9 - Malorie SOLUTION: [Clip 25] Comprehensive Problem 1 - January 20x0 - Transaction #10 - Malorie SOLUTION: Copyright 2011 by Rocky Spears Enterprises LLC, All Rights Reserved Page 14 of 23
15 [Clip 26] Comprehensive Problem 1 - January 20x0 - Trial Balance - Malorie SOLUTION: Copyright 2011 by Rocky Spears Enterprises LLC, All Rights Reserved Page 15 of 23
16 APPENDIX 2 CHARTS AND WORKSHEETS CHART 1 GENERAL JOURNAL General Journal Date Description Debit Credit Copyright 2011 by Rocky Spears Enterprises LLC, All Rights Reserved Page 16 of 23
17 CHART 2 BLANK T-ACCOUNTS T-Accounts Worksheet CHART 3 COMMON ACCOUNTS IN THE CHART OF ACCOUNTS Copyright 2011 by Rocky Spears Enterprises LLC, All Rights Reserved Page 17 of 23
18 Copyright 2011 by Rocky Spears Enterprises LLC, All Rights Reserved Page 18 of 23
19 CHART 4 The Expanded Accounting Equation with Debit and Credit Guidelines Copyright 2011 by Rocky Spears Enterprises LLC, All Rights Reserved Page 19 of 23
20 CHART 5 T-Accounts for Comprehensive Problem 1 Malorie Cash Prepaid Insurance Subscriptions Supplies Prepaid Rent Copyright 2011 by Rocky Spears Enterprises LLC, All Rights Reserved Page 20 of 23
21 Chart 5. T-Accounts for Comprehensive Problem 1 Malorie (continued) Accounts Payable Legal Fees Payable Note Payable Unearned Sales Revenue Common Stock Retained Earnings Copyright 2011 by Rocky Spears Enterprises LLC, All Rights Reserved Page 21 of 23
22 Chart 5. T-Accounts for Comprehensive Problem 1 Malorie (continued) Sales Revenue Insurance Expense Legal Fees Expense Rent Expense Subscriptions Expense Supplies Expense Copyright 2011 by Rocky Spears Enterprises LLC, All Rights Reserved Page 22 of 23
23 CHART 6 Trial Balance Worksheet for Malorie Malorie Trial Balance January 31, 20x0 Balances Account Debits Credits Cash Prepaid Insurance Subscriptions Supplies Prepaid Rent Accounts Payable Legal Fees Payable Note Payable Unearned Sales Revenue Common Stock Retained Earnings Sales Revenue Insurance Expense Legal Fees Expense Rent Expense Subscriptions Expense Supplies Expense Copyright 2011 by Rocky Spears Enterprises LLC, All Rights Reserved Page 23 of 23
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