Exercises. 2) Owners Equity is ( ) (1). Occurs when Revenues exceed Expenses. (2) Debts owed by a business, (3). The excess of Assets over Liabilities

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1 Exercises 1 Please answer the following questions 1 Please explain Assets 2 Please explain Liabilities 3 Please explain Owner Equity 4 Please explain Revenues 5 Please explain Expenses 2 Please select one of the following 1 Assets is ( (2. Debts owed by a business. (3. The excess of Assets over Liabilities (5. The s of operating a business 2 Owners Equity is ( (2 Debts owed by a business, (3. The excess of Assets over Liabilities (5. The s of operating a business 3 Expenses is ( (2. Debts owed by a business, (3. The excess of Assets over Liabilities (5. The s of operating a business

2 4 Liabilities is ( (2 Debts owed by a business, (3. The excess of Assets over Liabilities (5. The s of operating a business 5 Revenues is ( (2 Debts owed by a business, (3. The excess of Assets over Liabilities (5. The s of operating a business 3 Circle T if the statement is true, F if it is false (1Liabilities are things owned by a business ( (2Accounts payable are examples of current liabilities ( (3Revenues increase owners equity. ( (4Whenever an expense is incurred, the owners equity will be decreased. ( (5If revenues exceed expenses for the same accounting period, the entity is deemed to suffer a loss. ( 4 North co incurred the following transactions during July 2012, its first month of operations: July 1 the owner, Greg Duggan, invested $10000 cash 10 purchased $5000 worth of equipment on credit. 12 performed services for a client and received $20000 cash. 14 paid for expenses $ completed services for a client and sent a bill for $ the owner withdrew $500 cash. Required: (1Journalize the July transactions in the general Journal.

3 (2Prepare an income statement, statement of owners equity and a balance sheet based your trial balance. 5 Carrie fond opened a new accounting practice called carrie ford, public accountant, and completed these transactions during march 2012: March 1 1 invested in cash and office equipment that had a fair value of prepaid 1800 cash for three months rent for an office. 3 made credit purchases of office equipment for 3000 and office supplies for 600 5completed work for a client and immediately received 500 cash. 9 completed a 2000 project for a client, who will pay within 30 day 11 paid the account payable created on March 3 15 paid 1500 cash for the annual premium on an insurance policy. 20 received 1600 as partial payment for the work completed on March completed work for another client for 660 on credit. 27 carrie ford withdrew 1800 cash from the business to pay some personal expenses. 30 purchased 200 of additional office supplies on credit. 31 paid 175 for the month s utility bill. Prepare general journal entries to record the transactions, 6 Using the general journal entries prepared in the last question, complete the following: Prepare a trial balance as of the end of the month. 7 In the start-up of Amy, a CPA, the following transaction for the month for the month of December 2012 were recorded in the business s general journal: Dec 1: Amy invested $12000 cash to start her business. Dec 2: She paid rent of the month for $500 Dec 3: she purchased equipment for cash at $3000 Dec 4: she purchased furniture on account at $3600 Dec 5: she purchased supplies on account at $300. Dec 6: she earned service revenue for cash at $800 Dec 7: she paid the utilities expense for the month at $200 Dec 8: she earned credit revenue at $1700

4 Required: 1 Journalize the transactions in the general Journal. 2 Prepare a trial balance 8 Please complete the following columnar form. Kind of increase decrease Normal account balance Asset Debit credits Debit Liability ( ( ( Owners ( ( ( capital Owners ( ( ( withdrawals Revenue ( ( ( Expense ( ( ( 9 Please complete the following table based on first in, first out method Date purchase sold Balance quantity Unit Total quantity Unit Total quantity Unit Total 3 1 balance purchase ( 35 ( ( 10 sales 20 ( ( ( ( ( 18 purchase ( ( ( ( 28 sales 20 ( ( ( ( ( 31 ( ( ( ( ( ( (

5 Answer 1 Please answer the following questions 1Please explain Assets Assets are the economic resources that are owned or controlled by a business and can be expressed in monetary units. Assets can be classified into current assets and non-current assets. Current assets are the economic resources that would be liquidated within one year or one operating cycle (whichever is longer. Examples of current assets include cash, short-term investment (marketable securities, notes receivable, accounts receivable, supplies, inventories. Non-current assets consist of long-term investment and those economic resources that are held for operational purposes. Examples of this type assets include plant and equipment, natural resources, and intangible assets. 2Please explain Liabilities Liabilities are the obligations or debts that a business must pay in money or services at some time in the future. They represent creditors claims or equity on the firm s assets. Liabilities can be divided into current liabilities and long-term liabilities. Current liabilities are the debts that are due within one year or the normal operating cycle, whichever is longer. Examples of current liabilities include notes payable, short-term accounts payable, accrued expenses1, taxes payable, and portions of long-term debt due within one year (or the operating cycle, if longer. Long- term liabilities are the debts whose maturity period is longer than one year. Long-term notes, mortgages, and bonds payable are common examples. 3 Please explain Owner Equity Owner s equity represents the owner s interest in or claim upon a business net assets which is the difference between the amount of assets and the amount of liabilities. Owner s equity includes owner s investment in a business and accumulated operating results since the beginning of the operation. Capital, proprietorship, net worth and shareholders equity are the other terms for owner s equity. 4 Please explain Revenues Revenues are the economic resources flowing into a business as a result of

6 operational activities (such as providing goods or services to other economic entities. Sales revenue, service revenue, and investment revenue are subdivisions of revenues. Increase in Revenues will increase Owner s Equity. 5 Please explain Expenses Expenses are the outflow of a business s economic resources resulting from the operational activities (such as purchasing goods or receiving services from other economic entities. They are the of doing business. Expenses can be termed in different ways according to the business activities. Cost of goods sold, administrative expenses, selling expenses, and financial expenses are special terms of expenses. Increase in expenses will decrease owner s equity. Revenues and expenses are the subdivisions of Owner s Equity. 2 Please select one of the following 1Assets is ( (2 Debts owed by a business, (3. The excess of Assets over Liabilities (5. The s of operating a business Answer:(4 2 Owners Equity is ( (2. Debts owed by a business, (3. The excess of Assets over Liabilities (5. The s of operating a business Answer:(3 3 Expenses is ( (2. Debts owed by a business,

7 (3. The excess of Assets over Liabilities (5. The s of operating a business Answer:(5 4 Liabilities is ( (2. Debts owed by a business, (3. The excess of Assets over Liabilities (5. The s of operating a business Answer:(2 5 Revenues is ( (2. Debts owed by a business, (3. The excess of Assets over Liabilities (5. The s of operating a business Answer:(6 3 Circle T if the statement is true, F if it is false (1Liabilities are things owned by a business ( (2Accounts payable are examples of current liabilities ( (3Revenues increase owners equity. ( (4Whenever an expense is incurred, the owners equity will be decreased. ( (5If revenues exceed expenses for the same accounting period, the entity is deemed to suffer a loss. ( Answer:FTTTF 4 North co incurred the following transactions during July 2012, its first month of

8 operations: July 1 the owner, Greg Duggan, invested $10000 cash 10 purchased $5000 worth of equipment on credit. 12 performed services for a client and received $20000 cash. 14 paid for expenses $ completed services for a client and sent a bill for $ the owner withdrew $500 cash. Required: 1 Journalize the July transactions in the general Journal. 2 Prepare an income statement, statement of owners equity and a balance sheet based your trial balance. Answer: 1 July 1 cash $10000 Capital $ equipment 5000 Accounts payable cash Service revenue expensed 7000 Cash accounts receivable 3000 Service revenue withdrawal 500 Cash Income statement July 2012 Revenue Expense 7000 Net income Statement of owners equity

9 July 31, 2012 Capital, July 1 0 Add: investment Net income Less: withdrawal 500 Capital, July Balance sheet July 31, 2012 cash Accounts payable 5000 Accounts 3000 receivable equipment 5000 Capital Total assets Total lia capital Carrie fond opened a new accounting practice called carrie ford, public accountant, and completed these transactions during march 2012: March 1 1 invested in cash and office equipment that had a fair value of prepaid 1800 cash for three months rent for an office. 3 made credit purchases of office equipment for 3000 and office supplies for 600 5completed work for a client and immediately received 500 cash. 9 completed a 2000 project for a client, who will pay within 30 day 11 paid the account payable created on March 3 15 paid 1500 cash for the annual premium on an insurance policy. 20 received 1600 as partial payment for the work completed on March completed work for another client for 660 on credit. 27 carrie ford withdrew 1800 cash from the business to pay some personal expenses. 30 purchased 200 of additional office supplies on credit. 31 paid 175 for the month s utility bill. Prepare general journal entries to record the transactions, Answer: March 1 cash 25000

10 Equipment 6000 Capital prepaid rent 1800 Cash equipment 3000 Office supplies 600 Accounts payable cash 500 Service revenue accounts receivable 2000 service revenue accounts payable 3600 cash insurance expense 1500 cash cash 1600 accounts receivable accounts receivable 660 service revenue withdrawals 1800 cash office supplies 200 accounts payable utilities expense 175 cash Using the general journal entries prepared in the last question, complete the following: Prepare a trial balance as of the end of the month. Answer: Carrie ford, public accountant Trial balance March 31, 2012

11 Account Title Debit Credit cash Accounts 1060 receivable Office supplies 800 Prepaid insurance 1500 Prepaid rent 1800 Office equipment 9000 Accounts payable 200 Carrie ford, capital Carrie ford, 1800 withdrawals Accounting fees 3160 earned Utilities expense 175 totals In the start-up of Amy, a CPA, the following transaction for the month for the month of December 2012 were recorded in the business s general journal: Dec 1: Amy invested $12000 cash to start her business. Dec 2: She paid rent of the month for $500 Dec 3: she purchased equipment for cash at $3000 Dec 4: she purchased furniture on account at $3600 Dec 5: she purchased supplies on account at $300. Dec 6: she earned service revenue for cash at $800 Dec 7: she paid the utilities expense for the month at $200 Dec 8: she earned credit revenue at $1700 Required: 1 Journalize the transactions in the general Journal. 2 prepare a trial balance Journal Date Account titles and explanation debit credit Dec 1 cash 12000

12 capital Dec 2 cash 500 Rent expense 500 Dec 3 cash 3000 equipment 3000 Dec 4 Account payable 3600 furniture 3600 Dec 5 Account payable 300 supplies 300 Dec 6 cash 800 Service revenue 800 Dec 7 cash 200 utilities expense 200 Dec 8 Service revenue 1700 Accounts receivable 1700 Trial balance Accounting title debit credit cash 9100 Accounts receivable 1700 supplies 300 equipment 3000 furniture 3600 Accounts payable 3900 capital Service revenue 2500 Rent expense 500 utilities 200 totals Complete the following columnar form. Kind of increase decrease Normal account balance

13 Asset Debit credits Debit Liability credit debit Credit Owners credit debit Credit capital Owners debit credit Debit withdrawals revenue credit debit Credit Expense debit credit debit 9 Please complete the following table based on first in, first out method Date purchase sold Balance quantity Unit Total quantity Unit Total quantity Unit Total 3 1 balance purchase ( =35 (10 14 ( = sales 20 =10+10 (10 14 ( =240 (15 (14 (210 1 purchase (450 (15 ( =40 ( = sales 20 (14 18 ( =300 (20 (18 ( (50 (800 (40 (540 (20 (18 (360