CHAPTER 2 The Recording Process

CHAPTER 2 The Recording Process ASSIGNMENT CLASSIFICATION TABLE Study Objectives Questions Brief Exercises Exercises Problems Set A Problems Set B 1. Explain what an account is and how it helps in the recording process. 2. Define debits and credits and illustrate how they are used to record business transactions. 1, 2, 3, 4, 5, 6, 7, 8, 9 1, 2, 3 1, 2, 3 1, 2 1, 2 3. Describe the basic steps in the recording process. 10, 18 4 10 10 4. Explain what a journal is, how it helps in the recording process, and journalize business transactions. 11, 12, 13, 14, 18 5, 6 4, 5, 6, 7 2, 3, 4, 5, 6, 7 2, 3, 4, 5, 6, 7 5. Explain what a ledger is and how it helps in the recording process. 6. Explain what posting is, and how it helps in the recording process. 14, 15, 18 4, 5, 6, 7 12 12 15, 16, 18 7 6, 8, 9 3, 4, 5, 6, 7 3, 4, 5, 6, 7 7. Explain the purpose of, and prepare, a trial balance. 17, 18, 19 8, 9 7, 8, 9, 10 3, 4, 5, 6, 7, 8, 9, 10, 11, 12 3, 4, 5, 6, 7, 8, 9, 10, 11, 12 2-1

ASSIGNMENT CHARACTERISTICS TABLE Problem Number Description Difficulty Level Time Allotted (min.) 1A Identify increases, decreases, normal balances, and types of accounts. Simple 15-20 2A Journalize a series of transactions. Simple 20-30 3A Journalize transactions, post, and prepare trial balance. Moderate 40-50 4A Journalize transactions, post, and prepare trial balance. Moderate 55-65 5A Journalize transactions, post, and prepare trial balance. Moderate 55-65 6A 7A Journalize transactions, post, and prepare trial balance and financial statements. Journalize transactions, post, prepare trial balance, and determine elements of financial statements. Moderate 80-90 Moderate 65-75 8A Prepare financial statements from trial balance. Simple 25-35 9A Prepare trial balance and financial statements. Simple 30-40 10A Answer questions about trial balance error and identify source documents. Moderate 25-30 11A Identify errors and prepare correct trial balance. Moderate 25-35 12A Prepare correct trial balance. Complex 30-40 1B Identify increases, decreases, normal balances, and types of accounts. Simple 15-20 2B Journalize a series of transactions. Simple 20-30 3B Journalize transactions, post, and prepare trial balance. Moderate 40-50 4B Journalize transactions, post, and prepare trial balance. Moderate 55-65 5B Journalize transactions, post, and prepare trial balance. Moderate 55-65 6B 7B Journalize transactions, post, and prepare trial balance and financial statements. Journalize transactions, post, prepare trial balance, and determine elements of financial statements. Moderate 80-90 Moderate 65-75 8B Prepare financial statements from trial balance. Simple 25-35 9B Prepare trial balance and financial statements. Simple 30-40 10B Answer questions about trial balance error and identify source documents. Moderate 25-30 11B Identify errors and prepare correct trial balance. Moderate 25-35 12B Prepare correct trial balance. Complex 30-40 2-2

BLOOM S TAXONOMY TABLE Correlation Chart between Bloom s Taxonomy, Study Objectives and End-of-Chapter Material Study Objective Knowledge Comprehension Application Analysis Synthesis Evaluation 1. Explain what an account is and how it helps in the recording process. 2. Define debits and credits and illustrate how they are used to record business transactions. 3. Describe the basic steps in the recording process. Q2-5 Q2-6 Q2-7 BE2-1 BE2-2 BE2-3 E2-1 E2-2 P2-1A P2-1B Q2-1 Q2-2 Q2-3 Q2-4 Q2-8 Q2-9 BE2-4 Q2-10 E2-3 P2-2A P2-2B Q2-18 P2-10A P2-10B 4. Explain what a journal is, how it helps in the recording process, and journalize business transactions. 5. Explain what a ledger is and how it helps in the recording process. Q2-11 Q2-12 Q2-13, Q2-14 Q2-18 BE2-5 BE2-6 E2-4 E2-5 E2-6 E2-7 P2-2A P2-3A Q2-14 Q2-15 Q2-18 P2-4A P2-5A P2-6A P2-7A P2-2B P2-3B P2-4B P2-5B P2-6B P2-7B P2-12A P2-12B 6. Explain what posting is, and how it helps in the recording process. 7. Explain the purpose of, and prepare, a trial balance. Broadening Your Perspective Q2-15 Q2-16 Q2-18 BE2-7 E2-6 E2-8 P2-3A P2-4A Q2-17 Q2-18 BE2-8 BE2-9 E2-7 E2-8 E2-10 P2-3A P2-4A P2-5A P2-6A P2-5A P2-6A P2-7A P2-3B P2-4B P2-5B P2-6B P2-7B P2-7A P2-8A P2-9A P2-3B P2-4B P2-5B P2-6B P2-7B P2-8B P2-9B E2-9 E2-9 P2-10A P2-11A P2-12A P2-10B P2-11B P2-12B Q2-19 BYP2-1 BYP2-2 BYP2-3 BYP2-4 BYP2-5 BYP2-6 2-3

ANSWERS TO QUESTIONS 01. A T account is the shape of the letter T. It has three parts: (1) the account title across the top of the T; (2) the left side of the T in which debit entries are recorded; and (3) the right side in which credit entries are recorded. 02. Disagree. The terms debit and credit are synonymous with the left and right sides of an account, respectively. Whether they mean increase or decrease depends on the type of account being considered. 03. Jos is incorrect. The double-entry system merely records the effect of a transaction on the accounting equation. A transaction is not recorded twice; it is recorded once, with a dual effect on the equation. 04. Kim is incorrect. A debit balance only means that debit amounts exceed credit amounts in an account. Conversely, a credit balance only means that credit amounts are greater than debit amounts in an account. Whether a debit or credit balance is favourable or unfavourable depends on the type of account being considered. 05. (a) Asset accounts are increased by debits and decreased by credits. The normal balance of asset accounts is a debit balance. (b) Liability accounts are decreased by debits and increased by credits. The normal balance of liability accounts is a credit balance. (c) Owner's equity accounts are decreased by debits and increased by credits. The normal balance of equity accounts is a credit balance. 06. (a) Accounts Receivable debit balance. (b) Cash debit balance. (c) Owner's Drawings debit balance. (d) Accounts Payable credit balance. (e) Service Revenue credit balance. (f) Salaries Expense debit balance. (g) Owner's Capital credit balance. 2-4

Questions Chapter 2 (Continued) 07. (a) Accounts Receivable asset debit balance. (b) Accounts Payable liability credit balance. (c) Equipment asset debit balance. (d) Owner's Drawings owner's equity debit balance (since it is a reduction of capital). (e) Supplies asset debit balance. (f) Unearned Revenue liability credit balance. 08. (a) Supplies and credit Accounts Payable. (b) Cash and credit Notes Payable. (c) Salaries Expense and credit Cash. 9. 1. Accounts Payable both debit and credit entries. 2. Accounts Receivable both debit and credit entries. 3. Cash both debit and credit entries. 4. Owner's Drawings debit entries only. 5. Salaries Expense debit entries only. 6. Service Revenue credit entries only. 10. The basic steps in the recording process are: (1) Analyse each transaction. In this step, business documents are examined to determine the effects of the transaction on the accounts. (2) Enter each transaction in a journal. This step is called journalizing and it results in making a chronological record of the transactions. (3) Transfer journal information to ledger accounts. This step is called posting. Posting makes it possible to accumulate the effects of journalized transactions on individual accounts. 11. (a) The debit should be entered first. (b) The credit should be indented. 12. When three or more accounts are required in one journal entry, the entry is referred to as a compound entry. An example of a compound entry is the purchase of equipment, part of which is paid for with cash and the remainder is on account ( Equipment, credit Cash and credit Accounts Payable). 2-5

Questions Chapter 2 (Continued) 13. (a) Cash... 9,000 Doris Wang, Capital... 9,000 Invested cash in the business. (b) Prepaid Insurance... 800 Cash... 800 Paid one-year insurance policy. (c) Supplies... 1,500 Accounts Payable... 1,500 Purchased supplies on account. (d) Cash... 7,500 Service Revenue... 7,500 Received cash for services rendered. 14. (a) Yes, debits and credits could be recorded directly in the ledger. (b) The benefits of using the journal are: 1. It discloses in one place the complete effect of a transaction. 2. It provides a chronological record of all transactions. 3. It helps to prevent or locate errors, because the debit and credit amounts for each entry can be readily compared. The advantage of the last step in the posting process is to indicate that the item has been posted, and to provide a cross-reference. 15. (a) The entire group of accounts maintained by a company, including all the asset, liability, and owners' equity accounts, is referred to collectively as the ledger. (b) The chart of accounts is important, particularly for a company that has a large number of accounts, because it helps organize the accounts and identify their location in the ledger. A chart of accounts lists the accounts and account numbers that identify their location in the ledger. The numbering system used to identify the accounts usually starts with the balance sheet accounts and follows with the income statement accounts. 2-6

Questions Chapter 2 (Continued) 16. The advantage of the last step in the posting process is to indicate that the item has been posted, and to provide a cross-reference. 17. A trial balance is a list of accounts and their balances at a given time. The primary purpose of a trial balance is to prove the mathematical equality of debits and credits, after all journalized transactions have been posted. A trial balance also facilitates the discovery of errors in journalizing and posting. In addition, it is useful in preparing financial statements. 18. The proper sequence is as follows: 1. Business transaction occurs. 2. Information entered in the journal. 3. s and credits posted to the ledger. 4. Trial balance is prepared. 5. Financial statements are prepared. 19. (a) The trial balance would balance, because the debits ($600) are equal to the credits ($600). (b) The trial balance would not balance, because the debits ($900) and credits ($90) are not equal. 2-7

SOLUTIONS TO BRIEF EXERCISES BRIEF EXERCISE 2-1 (a) Effect (a) Credit Effect (b) Normal Balance 1. Accounts Payable 2. Advertising Expense 3. Service Revenue 4. Accounts Receivable 5. J. Takamoto, Capital 6. J. Takamoto, Drawings 7. Prepaid Insurance 8. Office Equipment 9. Rent Expense 10. Unearned Revenue 11. Advertising Supplies 12. Notes Payable Decrease Increase Decrease Increase Decrease Increase Increase Increase Increase Decrease Increase Decrease Increase Decrease Increase Decrease Increase Decrease Decrease Decrease Decrease Increase Decrease Increase Credit Credit Credit Credit Credit BRIEF EXERCISE 2-2 Account ed Account Credited June 1 Cash D. Ing, Capital 2 Equipment Accounts Payable 3 Rent Expense Cash 12 Accounts Receivable Service Revenue 2-8

BRIEF EXERCISE 2-3 Aug. 1 4 16 27 (a) Basic Analysis The asset Cash is increased; the owner's equity account A. Fisher, Capital is increased. The asset Prepaid Insurance is increased; the asset Cash is decreased. The asset Cash is increased; the revenue Service Revenue is increased. The expense Salaries Expense is increased; the asset Cash is decreased. (b) -Credit Analysis s increase assets: debit Cash $6,000. Credits increase owner's equity: credit A. Fisher, Capital $6,000. s increase assets: debit Prepaid Insurance $1,800. Credits decrease assets: credit Cash $1,800. s increase assets: debit Cash $900. Credits increase revenues: credit Service Revenue $900. s increase expenses: debit Salaries Expense $500. Credits decrease assets: credit Cash $500. BRIEF EXERCISE 2-4 The basic steps in the recording process are: (1) Analyse each transaction. In this step, business documents are examined to determine the effects of the transaction on the accounts. (2) Enter each transaction in a journal. This step is called journalizing and it results in making a chronological record of the transactions. (3) Transfer journal information to ledger accounts. This step is called posting. Posting makes it possible to accumulate the effects of journalized transactions on individual accounts. 2-9

BRIEF EXERCISE 2-5 June 1 Cash... 2,000 D. Ing, Capital... 2,000 2 Equipment... 900 Accounts Payable... 900 3 Rent Expense... 500 Cash... 500 12 Accounts Receivable... 300 Service Revenue... 300 BRIEF EXERCISE 2-6 Aug. 1 Cash... 6,000 A. Fisher, Capital... 6,000 4 Prepaid Insurance... 1,800 Cash... 1,800 16 Cash... 900 Service Revenue... 900 27 Salaries Expense... 500 Cash... 500 2-10

BRIEF EXERCISE 2-7 Cash Service Revenue 5/12 2,400 5/5 3,200 5/15 2,000 5/15 2,000 4,400 5,200 Accounts Receivable 5/5 5/12 2,400 800 BRIEF EXERCISE 2-8 BEIRSDORF COMPANY Trial Balance June 30, 2003 Cash... Accounts Receivable... Equipment... Accounts Payable... Beirsdorf, Capital... Beirsdorf, Drawings... Service Revenue... Salaries Expense... Rent Expense... $04,800 003,000 017,000 001,200 4,000 001,000 $31,000 Credit $05,000 020,000 006,000 0000000 $31,000 2-11

BRIEF EXERCISE 2-9 BOURQUE COMPANY Trial Balance December 31, 2002 Cash... Prepaid Insurance... Accounts Payable... Unearned Revenue... Bourque, Capital... Bourque, Drawings... Service Revenue... Salaries Expense... Rent Expense... $16,800 003,500 004,500 018,600 002,400 $45,800 Credit $03,000 002,200 015,000 025,600 0000-00 $45,800 2-12

SOLUTIONS TO EXERCISES EXERCISE 2-1 Account (a) Normal Balance (b) Decreased By (c) Financial Statement 1. Accounts Payable Credit Balance Sheet 2. Accounts Receivable Credit Balance Sheet 3. Cash Credit Balance Sheet 4. H. Poitras, Drawings Credit Statement of Owner s Equity 5. Interest Revenue Credit Income Statement 6. Office Equipment Credit Balance Sheet 7. Prepaid Insurance Credit Balance Sheet 8. Rent Expense Credit Income Statement 2-13

2-14 EXERCISE 2-2 Account ed Account Credited Trans- action (a) Basic Type (b) Specific Account (c) Effect (d) Normal Balance (a) Basic Type (b) Specific Account (c) Effect (d) Normal Balance Mar. 3 6 7 12 21 25 28 31 Asset Asset Asset Asset Owner s Equity Expense Asset Liability Owner s Equity Drawings Cash Equipment (or Vehicle) Supplies Accounts Receivable Advertising Expense Cash Accounts Payable L. Visser, Drawings Increase Increase Increase Increase Increase Increase Decrease Increase Credit Owner s Equity Capital Asset Liability Owner s Equity Revenue Asset Asset Asset Asset L. Visser, Capital Cash Accounts Payable Service Revenue Cash Accounts Receivable Cash Cash Increase Decrease Increase Increase Decrease Decrease Decrease Decrease Credit Credit Credit

EXERCISE 2-3 Oct. 1 s increase assets: debit Cash $15,000. Credits increase owner's equity: credit Lynn Gardiner, Capital $15,000. 2 No transaction at this point in time (see Oct. 30). 3 s increase assets: debit Office Furniture $1,900. Credits increase liabilities: credit Accounts Payable $1,900. 6 s increase assets: debit Accounts Receivable $3,200. Credits increase revenues: credit Fees Earned $3,200. 10 s increase assets: debit Cash $140. Credits increase revenues: credit Fees Earned $140. 27 s decrease liabilities: debit Accounts Payable $700. Credits decrease assets: credit Cash $700. 30 s increase expenses: debit Salaries Expense $960. Credits decrease assets: credit Cash $960. 2-15

EXERCISE 2-4 GENERAL JOURNAL Date Account Titles and Explanation Ref. Credit March 3 Cash... L. Visser, Capital... 8,000 8,000 6 Equipment (or Vehicle)... Cash... 04,000 04,000 7 Supplies... Accounts Payable... 00,500 00,500 12 Accounts Receivable... Service Revenue... 01,800 01,800 21 Advertising Expense... Cash... 00,200 00,200 25 Cash... Accounts Receivable... 00,700 00,700 28 Accounts Payable... Cash... 00,300 00,300 31 L. Visser, Drawings... Cash... 00,500 00,500 Note: Explanations have not been reproduced from the text in this exercise. Students should recognize, however, that explanations are a critical part of the journal entry in real life. 2-16

EXERCISE 2-5 GENERAL JOURNAL Date Account Titles and Explanation Ref. Credit Oct. 1 Cash... Lynn Gardner, Capital... 15,000 15,000 2 No entry. 3 Office Furniture... Accounts Payable... 01,900 01,900 6 Accounts Receivable... Fees Earned... 03,200 03,200 10 Cash... Fees Earned... 00,140 00,140 27 Accounts Payable... Cash... 00,700 00,700 30 Salaries Expense... Cash... 00,960 00,960 Note: Explanations have not been reproduced from the text in this exercise. Students should recognize, however, that explanations are a critical part of the journal entry in real life. 2-17

EXERCISE 2-6 (a) GENERAL JOURNAL Date Account Titles and Explanation Ref. Credit Sept. 1 Cash... Shirley Basler, Capital... 101 301 12,000 12,000 5 Equipment... Cash... Accounts Payable... 157 101 201 10,000 04,000 06,000 25 Accounts Payable... Cash... 201 101 03,000 03,000 30 Shirley Basler, Drawings... Cash... 306 101 00,500 00,500 Note: Explanations have not been reproduced from the text in this exercise. Students should recognize, however, that explanations are a critical part of the journal entry in real life. 2-18

EXERCISE 2-6 (Continued) (b) Cash No. 101 Sept. 1 5 25 30 12,000 04,000 03,000 00,500 12,000 8,000 05,000 04,500 Equipment No. 157 Sept. 5 10,000 10,000 Accounts Payable No. 201 Sept. 5 25 03,000 6,000 6,000 3,000 Shirley Basler, Capital No. 301 Sept. 1 12,000 12,000 Shirley Basler, Drawings No. 306 Sept. 30 00,500 00,500 2-19

EXERCISE 2-7 (a) Oct. 1 Cash... 5,000 A. Fortin, Capital... 5,000 Invested cash in business. 3 Furniture... 2,000 Accounts Payable... 2,000 Purchased furniture on account. 4 Supplies... 400 Cash... 400 Purchased supplies. 6 Accounts Receivable... 800 Service Revenue... 800 Billed clients for services rendered. 10 Cash... 650 Service Revenue... 650 Received cash for services rendered. 10 Cash... 5,000 Notes Payable... 5,000 Obtained loan from bank. 12 Accounts Payable... 1,500 Cash... 1,500 Paid cash on account. 20 Cash... 500 Accounts Receivable... 500 Received cash in payment of account. 20 Accounts Receivable... 940 Service Revenue... 940 Billed clients for services provided. 25 Cash... 2,000 A. Fortin, Capital... 2,000 Invested cash in business. 2-20

EXERCISE 2-7 (Continued) (a) (Continued) Oct. 30 A. Fortin, Drawings... 300 Cash... 300 Withdrew cash for personal use. 31 Rent Expense... 250 Cash... 250 Paid rent for month. 31 Store Wages Expense... 500 Cash... 500 Paid store wages. (b) FORTIN CO. Trial Balance October 31, 2003 Cash... Accounts Receivable... Supplies... Furniture... Notes Payable... Accounts Payable... A. Fortin, Capital... A. Fortin, Drawings... Service Revenue... Store Wages Expense... Rent Expense... $10,200 001,240 000,400 002,000 000,300 000,500 250 $14,890 Credit $05,000 000,500 007,000 002,390 000000 $14,890 2-21

EXERCISE 2-8 (a) Aug. 01 2,600 10 2,400 31 900 4,900 Cash Notes Payable Aug. 12 1,000 Aug. 12 3,000 3,000 Accounts Receivable L. Meche, Capital Aug. 25 1,400 Aug. 31 900 Aug. 1 2,600 500 2,600 Office Equipment Service Revenue Aug. 12 4,000 Aug. 10 2,400 25 1,400 4,000 3,800 (b) L. MECHE, INVESTMENT BROKER Trial Balance August 31, 2003 Cash... Accounts Receivable... Office Equipment... Notes Payable... L. Meche, Capital... Service Revenue... $4,900 00,500 04,000 00000 $9,400 Credit $3,000 02,600 03,800 $9,400 2-22

EXERCISE 2-9 Error (a) In Balance (b) Difference (c) Larger Column 1. 2. 3. 4. 5. 6. No Yes Yes No Yes No $400 00 00 0300 00 180 Credit EXERCISE 2-10 EXPRESS DELIVERY SERVICE Trial Balance July 31, 2003 Cash ($81,907 $67,340 total debits without Cash) Accounts Receivable... Prepaid Insurance... Delivery Equipment... Notes Payable... Accounts Payable... Salaries Payable... T. Weld, Capital... T. Weld, Drawings... Service Revenue... Salaries Expense... Gas and Oil Expense... Repair Expense... Insurance Expense... $14,567 008,642 001,968 049,360 000,700 004,428 000,758 000,961 000,523 $81,907 Credit $18,450 007,396 000,815 044,636 010,610 000,000 $81,907 2-23

SOLUTIONS TO PROBLEMS PROBLEM 2-1A Account (1) Type of Account (2) Financial Statement 1. Cash Asset Balance Sheet 2. Accounts Asset Balance Receivable Sheet 3. Drawings Owner s Equity Drawings Equity Statement of Owner s 4. Interest Expense Expense Income Statement 5. Land Asset Balance Sheet 6. Office Asset Balance Supplies Sheet 7. Salary Owner s Income Expense Equity Statement 8. Service Revenue Expense Owner s Equity Revenue Income Statement (3) Normal Balance (4) Increase (5) Decrease Credit Credit Credit Credit Credit Credit Credit Credit Credit 2-24

PROBLEM 2-2A GENERAL JOURNAL Date Account Titles and Explanation Ref. Credit May 1 Cash... Amod Phatarpeker, Capital... Invested cash in business. 45,000 45,000 3 Land... Building... Equipment... Cash... Purchased Lee's Golf Land. 5 Advertising Expense... Cash... Paid for advertising. 6 Prepaid Insurance... Cash... Paid for one-year insurance policy. 10 Equipment... Accounts Payable... Purchased equipment on account. 18 Cash... Golf Fees Earned... Received cash for fees earned. 19 Cash... Unearned Golf Fees... Received cash for coupon books sold. 23,000 09,000 06,000 01,600 01,480 01,600 00,800 01,500 38,000 01,600 01,480 01,600 00,800 01,500 2-25

PROBLEM 2-2A (Continued) Date Account Titles and Explanation Ref. Credit May 25 Amod Phatarpeker, Drawings... Cash... Withdrew cash for personal use. 0,500 0,500 30 Salaries Expense... Cash... Paid salaries expense. 30 Accounts Payable... Cash... Paid creditor on account. 31 Cash... Golf Fees Earned... Received cash for fees earned. 0,600 1,600 0,500 0,600 1,600 0,500 2-26

PROBLEM 2-3A (a) GENERAL JOURNAL Date Account Titles and Explanation Ref. Credit Apr. 1 Cash... Maria Rojas, Capital... Invested cash in business. 1 No entry not a transaction. 101 301 15,000 15,000 2 Rent Expense... Cash... Paid monthly office rent. 3 Supplies... Accounts Payable... Purchased supplies on account from Halo Company. 10 Accounts Receivable... Service Revenue... Billed clients for services rendered. 11 Cash... Unearned Revenue... Received cash advance for future service. 20 Cash... Service Revenue... Received cash for services rendered. 729 101 126 201 112 400 101 209 101 400 00,800 01,500 00,900 00,500 01,500 00,800 01,500 00,900 00,500 01,500 2-27

PROBLEM 2-3A (Continued) (a) (Continued) Date Account Titles and Explanation Ref. Credit 0 1,200 Apr. 30 Salaries Expense... Cash... Paid monthly salary. 726 101 01,200 30 Accounts Payable... Cash... Paid Halo Company on account. 201 101 600 600 (b) Cash No. 101 Apr. 1 2 11 20 30 30 15,000 00,500 01,500 0,800 1,200 0,600 15,000 14,200 14,700 16,200 15,000 14,400 Accounts Receivable No. 112 Apr. 10 00,900 00,900 Supplies No. 126 Apr. 3 01,500 01,500 2-28

PROBLEM 2-3A (Continued) (b) (Continued) Accounts Payable No. 201 Apr. 3 30 00,600 1,500 01,500 00,900 Unearned Revenue No. 209 Apr.11 0,500 00,500 Maria Rojas, Capital No. 301 Apr. 1 15,000 15,000 Service Revenue No. 400 Apr.10 20 00,900 01,500 00,900 02,400 Salaries Expense No. 726 Apr.30 01,200 01,200 Rent Expense No. 729 Apr. 2 00,800 00,800 2-29

PROBLEM 2-3A (Continued) (c) MARIA ROJAS, ARCHITECT Trial Balance April 30, 2003 Cash... Accounts Receivable... Supplies... Accounts Payable... Unearned Revenue... Maria Rojas, Capital... Service Revenue... Salaries Expense... Rent Expense... $14,400 000,900 001,500 001,200 000,800 $18,800 Credit $00,900 000,500 015,000 002,400 000,000 $18,800 2-30

PROBLEM 2-4A (a) & (c) Cash No. 101 Oct. 1 5 15 20 22 29 31 Balance! 0,800 200 1,200 1,600 0, 500 0,600 7,500 8,300 7,100 5,500 5,700 5,200 4,600 Accounts Receivable No. 112 Oct. 1 5 10 Balance! 5,500 0,800 2,200 1,400 6,900 Supplies No. 126 Oct. 1 26 Balance! 300 1,700 2,000 Equipment No. 157 Oct. 1 Balance! 8,000 2-31

PROBLEM 2-4A (Continued) (a) & (c) (Continued) Accounts Payable No. 201 Oct. 1 20 26 Balance! 1,600 300 4,000 2,400 2,700 Unearned Revenue No. 209 Oct. 1 17 Balance! 0,400 00,700 00,300 Jane Kent, Capital No. 301 Oct. 1 Balance! 14,700 Jane Kent, Drawings No. 306 Oct. 29 0,500 00,500 Laundry Revenue No. 426 Oct. 10 17 22 5,500 0,400 200 05,500 05,900 6,100 Salaries Expense No. 726 Oct.15 1,200 01,200 2-32

PROBLEM 2-4A (Continued) (a) & (c) (Continued) Utilities Expense No. 732 Oct.31 0,600 00,600 (b) GENERAL JOURNAL Date Account Titles and Explanation Ref. Credit Oct. 5 Cash... Accounts Receivable... Received collections from customers on account. 101 112 0,800 0,800 10 Accounts Receivable... Laundry Revenue... Billed customers for services performed. 112 426 5,500 5,500 15 Salaries Expense... Cash... Paid employee salaries. 726 101 1,200 1,200 17 Unearned Revenue... Laundry Revenue... Performed services for customers who paid in advance. 209 426 0,400 0,400 20 Accounts Payable... Cash... Paid creditors on account. 201 101 1,600 1,600 2-33

PROBLEM 2-4A (Continued) (b) (Continued) GENERAL JOURNAL Date Account Titles and Explanation Ref. Credit Oct. 22 Cash... Laundry Revenue... Performed services for cash. 101 426 200 200 26 Supplies... Accounts Payable... Purchased supplies on account. 126 201 300 0, 300 29 Jane Kent, Drawings... Cash... Withdrew cash for personal use. 306 101 0,500 0,500 31 Utilities Expense... Cash... Paid utilities. 732 101 0,600 0,600 2-34

PROBLEM 2-4A (Continued) (d) SPEEDY LAUNDRY Trial Balance October 31, 2003 Cash... Accounts Receivable... Supplies... Equipment... Accounts Payable... Unearned Revenue... Jane Kent, Capital... Jane Kent, Drawings... Laundry Revenue... Salaries Expense... Utilities Expense... $04,600 006,900 002,000 008,000 000,500 001,200 600 $23,800 Credit $02,700 000,300 014,700 006,100 000000 $23,800 2-35

(a) & (c) PROBLEM 2-5A Cash No. 101 Mar. 1 2 9 10 12 20 21 31 31 31 Balance! J2 J2 J2 J2 J2 J2 J2 J2 J2 6,500 7,200 0,0600 12,500 03,000 9,000 800 3,000 3,800 16,000 13,000 19,500 10,500 9,700 16,900 13,900 10,100 10,700 23,200 Accounts Receivable No. 112 Mar.31 J2 0,0600 00,0600 Land No. 140 Mar. 1 Balance! 42,000 Buildings No. 145 Mar. 1 Balance! 018,000 Equipment No. 157 Mar. 1 Balance! 016,000 2-36

PROBLEM 2-5A (Continued) (a) & (c) (Continued) Accounts Payable No. 201 Mar. 1 2 10 Balance! J2 J2 9,000 6,000 012,000 18,000 9,000 L. Baroni, Capital No. 301 Mar. 1 Balance! 80,000 Admission Revenue No. 405 Mar. 9 20 31 J2 J2 J2 6,500 7,200 12,500 06,500 13,700 26,200 Concession Revenue No. 406 Mar. 31 J2 0,1,200 00,1,200 Advertising Expense No. 610 Mar. 12 J2 0,800 0,800 Film Rental Expense No. 632 Mar. 2 21 J2 J2 9,000 3,000 9,000 12,000 2-37

PROBLEM 2-5A (Continued) (a) & (c) (Continued) Salaries Expense No. 726 Mar. 31 J2 3,800 3,800 (b) GENERAL JOURNAL Date Account Titles and Explanation Ref. Credit Mar. 2 Film Rental Expense... Cash... Accounts Payable... Paid film rental. 3 No entry not a transaction. 632 101 201 0,9,000 J2 0,3,000 6,000 9 Cash... Admission Revenue... Received cash for admissions. 101 405 6,500 6,500 10 Accounts Payable ($6,000 + $3,000)... Cash... Paid balance due on Star Wars and $3,000 on account. 201 101 9,000 9,000 11 No entry Not a transaction. 12 Advertising Expense... Cash... Paid advertising expenses. 610 101 800 800 2-38

PROBLEM 2-5A (Continued) (b) (Continued) Date Account Titles and Explanation Ref. Credit Mar. 20 Cash... Admission Revenue... Received cash for admissions. 101 405 7,200 7,200 21 Film Rental Expense... Cash... Paid for Scream films. 632 101 3,000 3,000 31 Salaries Expense... Cash... Paid salaries expense. 726 101 3,800 3,800 31 Cash... Accounts Receivable... Concession Revenue... Received cash and balance on account for concession revenue. 101 112 406 0,0600 0,0600 0,1,200 31 Cash... Admission Revenue... Received cash for admissions. 101 405 12,500 12,500 2-39

PROBLEM 2-5A (Continued) (d) STARLITE THEATRE Trial Balance March 31, 2003 Cash... Accounts Receivable... Land... Buildings... Equipment... Accounts Payable... L. Baroni, Capital... Admission Revenue... Concession Revenue... Advertising Expense... Film Rental Expense... Salaries Expense... $ 23,200 0,0600 042,000 018,000 016,000 000,800 12,000 0003,800 $116,400 Credit $ 9,000 080,000 026,200 001,200 0000000 $116,400 2-40

PROBLEM 2-6A (a) Date Account Titles and Explanation Credit May 1 Cash... 120,000 Jacob Bablad, Capital... 120,000 5 No entry at this time. 5 Prepaid Rent... Rent Expense ($36,000 12 mos.)... Cash... 4433,000 3,000 036,000 8 Furniture & Equipment... Cash... Accounts Payable... 00,70,000 20,000 50,000 9 Prepaid Insurance... Insurance Expense ($3,000 12 mos.)... Cash... 12 Office Supplies... Cash... 15 Office Supplies... Accounts Payable... 20 Cash... Accounts Receivable... Brokerage Fees Earned... 22 Accounts Payable... Cash... 26 Cash... Accounts Receivable... 02,750 250 11,000 02,000 010,000 20,000 00, 800 00, 5,000 03,000 01,000 02,000 030,000 00,800 00,5,000 2-41

PROBLEM 2-6A (Continued) (a) (Continued) Date Account Titles and Explanation Credit 00 May 30 Utility Expense..., 400 Accounts Payable... 00,400 30 Salaries Expense... 00, 2,000 Cash... 00,2,000 2-42

120,000 10,000 5,000 72,200 Cash Credit 36,000 20,000 3,000 1,000 800 2,000 Prepaid Rent Credit 33,000 Accounts Receivable Credit 020,000 5,000 15,000 Office Supplies 01,000 2,000 3,000 Credit Prepaid Insurance Credit 0,2,750 2-43

PROBLEM 2-6A (Continued) (b) (Continued) Furniture & Equipment 0,70,000 Credit Accounts Payable 00,800 Credit 50,000 2,000 400 51,600 Utilities Expense Credit 0,400 Insurance Expense Credit 0,250 J. Bablad, Capital Credit 0120,000 Brokerage Fees Earned Credit 0, 30,000 Salaries Expense Credit 2,000 Rent Expense Credit 3,000 2-44

PROBLEM 2-6A (Continued) (c) BABLAD BROKERAGE SERVICES Trial Balance May 31, 2003 Cash... Accounts Receivable... Office Supplies... Prepaid Insurance... Prepaid Rent... Furniture and Equipment... Accounts Payable... J. Bablad, Capital... Brokerage Fees Earned... Salaries Expense... Rent Expense... Utilities Expense... Insurance Expense... $ 72,200 15,000 3,000 2,750 33,000 70,000 2,000 3,000 400 0000250 0$201,600 Credit $ 51,600 120,000 30,000,51 000,0600 $201,600 2-45

PROBLEM 2-6A (Continued) (d) BABLAD BROKERAGE SERVICES Income Statement For the Month Ended May 31, 2003 Revenues Brokerage fees earned... $30,000 Expenses Salaries expense... $2,000 Rent expense... 3,000 Insurance expense... 250 Utilities expense... 00,400 Total expenses... 0 5,650 Net income... $24,350 BABLAD BROKERAGE SERVICES Statement of Owner's Equity For the Month Ended May 31, 2003 Capital, May 1, 2003... $ 0 Add: Investment... 120,000 Net income... 24,350 Capital, May 31, 2003... $144,350 2-46

PROBLEM 2-6A (Continued) (d) (Continued) BABLAD BROKERAGE SERVICES Balance Sheet May 31, 2003 Assets Cash... $ 72,200 Accounts receivable... 15,000 Office supplies... 3,000 Prepaid insurance... 0442,750 Prepaid rent... 0033,000 Furniture & equipment... 0070,000 Total assets... $195,950 Liabilities and Owner's Equity Liabilities Accounts payable... 0$ 51,600 Owner's Equity Jacob Bablad, Capital... 00144,350 Total liabilities and owner's equity... $195,950 2-47

PROBLEM 2-7A (a) As indicated in item (9), $4,500 was paid for three months in advance on December 1. One month has passed, so 1/3 X $4,500 = $1,500 of rent has expired and become an expense. Two months are still to come, so 2/3 x $4,500 = $3,000 remains in the prepaid rent account as an asset. (b) & (d) Cash 10,000 (4) 13,000 (7) 4,000 1,500 (1) 500 (3) 2,000 (5) 15,000 (8) 3,000 (10) 5,000 Accounts Receivable 15,000 (7) 9,000 (4) 13,000 11,000 2-48

Repair Parts Inventory 13,000 (2) 2,000 (6) 4,000 11,000 Prepaid Rent 3,000 1,500 (9) 1,500 2-50

PROBLEM 2-7A (Continued) (b) & (d) (Continued) Shop Equipment 21,000 Accounts Payable (5) 15,000 19,000 (2) 2,000 6,000 Leo Mataruka, Capital 43,000 Leo Mataruka, Drawings (10) 5,000 5,000 Repair Services Revenue (7) 13,000 Advertising Expense (1) 500 Miscellaneous Expense (3) 2,000 Repair Parts Expense (6) 4,000 Wages Expense (8) 3,000 Rent Expense (9) 1,500 2-51

PROBLEM 2-7A (Continued) (c) GENERAL JOURNAL Account Titles and Explanation Credit 1. Advertising Expense Cash 500 500 2. Repair Parts Inventory Accounts Payable 3. Miscellaneous Expense Cash 4. Cash Accounts Receivable 5. Accounts Payable Cash 6. Repair Parts Expense Repair Parts Inventory 7. Cash Accounts Receivable Repair Services Revenues 8. Wages Expense Cash 9. Rent Expense Prepaid Rent 10. Leo Mataruka, Drawings Cash 2,000 2,000 0 2,000 0 2,000 0 13,000 0 13,000 0 15,000 0 15,000 0 4,000 0 4,000 4,000 9,000 0 13,000 0 3,000 0 3,000 0 1,500 0 1,500 0 5,000 0 5,000 2-52

PROBLEM 2-7A (Continued) (e) CYBERDYNE REPAIR SERVICE Trial Balance January 31, 2003 Cash... Accounts Receivable... Repair Parts Inventory... Prepaid Rent... Shop Equipment... Accounts Payable... Leo Mataruka, Capital... Leo Mataruka, Drawings... Repair Services Revenue... Advertising Expense... Miscellaneous Expense... Repair Parts Expense... Rent Expense... Wages Expense... (f) Cash $ 1,500 Accounts Receivable 11,000 Repair Parts Inventory 11,000 Prepaid Rent 1,500 Shop Equipment 21,000 Total Assets $46,000 $01,500 011,000 011,000 001,500 0021,000 5,000 500 2,000 4,000 1,500 0 3,000 $62,000 Credit $06,000 043,000 0 13,000 0000 00 $62,000 (g) Repairs Services Revenue $13,000 Advertising Expense (500) Miscellaneous Expense (2,000) Repair Parts Expense (4,000) Rent Expense (1,500) Wages Expense (3,000) Net Income $2,000 2-53

PROBLEM 2-8A (a) CYBERDYNE REPAIR SERVICE Income Statement For the Month Ended January 31, 2003 Revenues Repair services revenue... $13,000 Expenses Wages expense... $3,000 Rent expense... 1,500 Repair parts expense... 4,000 Miscellaneous expense... 00,2,000 Advertising expense... 00, 500 Total expenses... 11,000 Net income... $ 2,000 (b) CYBERDYNE REPAIR SERVICE Statement of Owner's Equity For the Month Ended January 31, 2003 Leo Mataruka, Capital, January 1, 2003... $43,000 Add: Net income... 2,000 45,000 Less: Drawings... 5,000 Leo Mataruka, Capital, January 31, 2003... $40,000 2-54

PROBLEM 2-8A (Continued) (c) CYBERDYNE REPAIR SERVICE Balance Sheet January 31, 2003 Assets Cash... $ 1,500 Accounts receivable... 11,000 Repair parts inventory... 11,000 Prepaid rent... 001,500 Shop equipment... 04421,000 Total assets... $46,000 Liabilities and Owner's Equity Liabilities Accounts payable... 0 $ 6,000 Owner's Equity Leo Mataruka, Capital... 040,000 Total liabilities and owner's equity... $46,000 2-55

PROBLEM 2-9A (a) KIA TAGGAR ENTERPRISES Trial Balance June 30, 2003 Credit Cash $ 180 Accounts receivable 500 Supplies 510 Prepaid insurance 90 Long-term investment 495 Land 800 Equipment 1,200 Notes payable, current $1,000 Long-term debt 1,200 Taggar, Capital 800 Service revenue 2,000 Operating expense 870 Insurance expense 130 Interest expense 225 00000 $5,000 $5,000 2-56

PROBLEM 2-9A (Continued) (b) KIA TAGGAR ENTERPRISES Income Statement For the Year Ended June 30, 2003 Revenue Service revenue... $2,000 Expenses Insurance expense... $130 Interest expense... 225 Operating expense... 870 Total expenses... 01,225 Net income... $ 775 KIA TAGGAR ENTERPRISES Statement of Owner's Equity For the Year Ended June 30, 2003 Taggar, Capital, July 1, 2002... $ 800 Add: Net income... 775 Taggar, Capital, June 30, 2003... $1,575 2-57

PROBLEM 2-9A (Continued) (b) (Continued) KIA TAGGAR ENTERPRISES Balance Sheet June 30, 2003 Assets Cash... $ 180 Accounts receivable... 500 Prepaid insurance... 00990 Supplies... 510 Long-term investment... 495 Land... 800 Equipment... 0441,200 Total assets... $3,775 Liabilities and Owner's Equity Liabilities Note payable... $1,000 Long-term debt... 1,200 Total liabilities... 2,200 Owner's Equity Taggar, Capital... 01,575 Total liabilities and owner's equity... $3,775 2-58

PROBLEM 2-10A (a) (b) 1. Correctly stated 2. Understated 3. Correctly stated (the debit posting was to a credit balance account, Accounts Payable) 4. Understated 5. $374,000 ($360,000 + $7,000 to reverse debit to Accounts Payable account + $7,000 to record credit to Accounts Payable account) 1. Invoice from supplier 3. Utility bill 4. Sales ticket 2-59

PROBLEM 2-11A (a) Errors in the trial balance are: 1. The trial balance should be dated at a specific point in time, not for the year ended. 2. Machinery and equipment should be a debit. 3. Accounts Payable should be a credit. 4. Prepaid Rent should be a debit. 5. Capital should be a credit. 6. Advertising Expenses should be a debit. 7. Notes Payable should be a credit. 8. Accounts Receivable should be a debit. 9. They are not arranged in the proper sequence: 1) assets; 2) liabilities; 3) owner s equity (capital and drawings); and 4) income statement accounts (revenues and expenses). 10. The totals should be equal. (b) MEHTA AUTOMOTIVE SERVICES Trial Balance December 31, 2002 Cash... Accounts Receivable... Prepaid Rent... Prepaid Insurance... Machinery and Equipment... Accounts Payable... Note Payable... Capital... Drawings... Service Revenues... Miscellaneous Expense... Wages Expense... Advertising Expense... $ 24 31 5 3 89 20 49 76 30 $327 Credit $ 38 45 42 202 0000 $327 2-60

PROBLEM 2-12A WINAU CO. Trial Balance June 30, 2003 Cash ($2,840 + $180)... Accounts Receivable ($3,231 $180)... Supplies ($800 $340)... Equipment ($3,000 + $340)... Accounts Payable ($2,666 $206 $260)... Unearned Fees... T. Winau, Capital... T. Winau, Drawings ($800 + $400)... Fees Earned ($2,380 + $801)... Salaries Expense ($3,400 + $600 $400)... Office Expense... $ 3,020 003,051 000,460 003,340 001,200 003,600 910 $15,581 Credit $02,200 001,200 009,000 003,181 000000 $15,581 2-61

PROBLEM 2-1B Account (1) Type of Account (2) Financial Statement (3) Normal Balance (4) Increase (5) Decrease 1. Cash Asset Balance Sheet Credit 2. Accounts Liability Balance Sheet Credit Credit Payable 3. Kobiashi, Capital Credit Credit 4. Kobiashi, Drawings Owner s Equity Capital Owner s Equity Drawings Balance Sheet and Statement of Owner s Equity Statement of Owner s Equity Credit 5. Office Asset Balance Sheet Credit Equipment 6. Office Supplies Asset Balance Sheet Credit 7. Rent Expense Expense Income Statement Credit 8. Service Revenue Revenue Income Statement Credit Credit 2-62

PROBLEM 2-2B GENERAL JOURNAL Date Account Titles and Explanation Ref. Credit April 1 Cash... Al Rossy, Capital... Invested cash in business. 50,000 50,000 4 Land... Cash... Purchased land. 8 Advertising Expense... Accounts Payable... Purchased advertising on account. 30,000 01,800 30,000 01,800 11 Salaries Expense... Cash... Paid employees salaries. 1,1,500 5 1,500 12 No entry required 13 Prepaid Insurance... Cash... Paid for one-year insurance policy. 01,500 01,500 17 Al Rossy, Drawings... Cash... Withdrew cash for personal use. 600600 00 600 20 Cash... Admissions Revenue... Received cash for admissions. 05,700 05,700 2-63

PROBLEM 2-2B (Continued) Date Account Titles and Explanation Ref. Credit April 25 Cash... Unearned Admissions Revenue... Received cash for coupon books sold. 30 Cash... Admissions Revenue... Received cash for fees earned. 30 Accounts Payable... Cash... Made payment on account. 02,500 00,5,900 0700 02,500 5,900 0700 2-64

PROBLEM 2-3B (a) GENERAL JOURNAL Date Account Titles and Explanation Ref. Credit May 1 Cash... Lisa Heins, Capital... Invested cash in business. 2 No entry not a transaction. 101 301 32,000 32,000 3 Supplies... Accounts Payable... Purchased supplies on account. 126 201 01,200 01,200 7 Rent Expense... Cash... Paid monthly office rent. 729 101 00,900 00,900 11 Accounts Receivable... Service Revenue... Billed clients for tax services. 112 400 00,1,100 001,100 12 Cash... Unearned Revenue... Received cash advance for future service. 101 209 033,500 03,500 17 Cash... Service Revenue... Received cash for fees earned. 101 400 01,200 01,200 31 Salaries Expense... Cash... Paid monthly salary. 726 101 01,000 01,000 31 Accounts Payable... Cash... Paid Read Supply 40% of amount owing. 2-65 201 101 480 480

PROBLEM 2-3B (Continued) (b) Cash No. 101 May 1 7 12 17 31 31 32,000 03,500 01,200 0,9900 1,000 0,480 32,000 31,100 34,600 35,800 34,800 34,320 Accounts Receivable No. 112 May 11 00,1,100 00,1,100 Supplies No. 126 May 3 01,200 01,200 Accounts Payable No. 201 May 3 31 00,480 1,200 01,200 00,720 Unearned Revenue No. 209 May 12 0,3,500 00,3,500 2-66

PROBLEM 2-3B (Continued) (b) (Continued) Lisa Heins, Capital No. 301 May 1 32,000 32,000 Service Revenue No. 400 May 11 17 0,1,100 01,200 01,100 02,300 Salaries Expense No. 726 May 31 01,000 01,000 Rent Expense No. 729 May 7 00,9900 00,900 2-67

PROBLEM 2-3B (Continued) (c) LISA HEINS, CGA Trial Balance May 31, 2003 Cash... Accounts Receivable... Supplies... Accounts Payable... Unearned Revenue... Lisa Heins, Capital... Service Revenue... Salaries Expense... Rent Expense... $34,320 001,100 001,200 001,000 000,900 $38,520 Credit $00,720 003,500 032,000 002,300 00 000 $38,520 2-68

PROBLEM 2-4B (a) & (c) Cash No. 101 July 1 8 9 11 14 30 31 Balance! 0,5,936 4,325 2,100 10,750, 5,190 0700 12,532 18,468 16,368 20,693 9,943 4,753 4,053 Accounts Receivable No. 112 July 1 8 22 Balance! 5,700 0,5,936 10,536 4,600 10,300 Supplies No. 126 July 1 17 Balance! 554 4,844 5,398 Equipment No. 157 July 1 Balance! 25,950 2-69

PROBLEM 2-4B (Continued) (a) & (c) (Continued) Accounts Payable No. 201 July 1 14 17 Balance! 10,750 554 15,878 5,128 5,682 Unearned Revenue No. 209 July 1 Balance! 1,730 C. Steiner, Capital No. 301 July 1 Balance! 36,254 C. Steiner, Drawings No. 306 July 31 0,700 00,700 Dry Cleaning Revenue No. 428 July 11 22 4,325 5,700 04,325 010,025 Repair Expense No. 622 July 30 0,692 00,692 2-70

PROBLEM 2-4B (Continued) (a) & (c) (Continued) Salaries Expense No. 726 July 9 30 2,100 3,114 02,100 5,214 Utilities Expense No. 732 July31 0,1,384 00,1,384 2-71

PROBLEM 2-4B (Continued) (b) GENERAL JOURNAL Date Account Titles and Explanation Ref. Credit July 8 Cash... Accounts Receivable... Received collections from customers on account. 101 112 0 5,936 0 5,936 9 Salaries Expense... Cash... Paid employee salaries. 726 101 2,100 2,100 11 Cash... Dry Cleaning Revenue... Performed services for cash. 101 428 4,325 4,325 14 Accounts Payable... Cash... Paid creditors on account. 201 101 10,750 10,750 17 Supplies... Accounts Payable... Purchased supplies on account. 126 201 0,554 0, 554 22 Accounts Receivable... Dry Cleaning Revenue... Billed customers for services rendered. 112 428 5,700 5,700 2-72

PROBLEM 2-4B (Continued) (b) (Continued) Date Account Titles and Explanation Ref. Credit 0, 3,114 1,384 692 July 30 Salaries Expense... Utilities Expense... Repair Expense... Cash... Paid salaries, utilities and repairs in cash. 726 732 622 101 0,5,190 31 C. Steiner, Drawings... Cash... Withdrew cash for personal use. 306 101 0,7700 0,700 (d) STEINER DRY CLEANERS Trial Balance July 31, 2003 Cash... Accounts Receivable... Supplies... Equipment... Accounts Payable... Unearned Revenue... C. Steiner, Capital... C. Steiner, Drawings... Dry Cleaning Revenue... Repair Expense... Salaries Expense... Utilities Expense... $04,053 0010,300 005,398 025,950 000,700 692 5,214 1,384 $53,691 Credit $ 5,682 1,730 36,254 10,025 000000 $53,691 2-73

PROBLEM 2-5B (a) & (c) Cash No. 101 Apr. 1 2 9 10 12 25 29 30 30 Balance! 1,800 5,200 8855 800 0,3,000 0 300 1,600 700, 6,000 5,200 7,000 4,000 3,700 8,900 7,300 7,385 6,685 Accounts Receivable No. 112 Apr. 30 85 85, Prepaid Rentals No. 136 Apr.30 03,700 00,700 Land No. 140 Apr. 1 Balance! 10,000 2-74

PROBLEM 2-5B (Continued) (a) & (c) (Continued) Buildings No. 145 Apr. 1 Balance! 0 8,000 Equipment No. 157 Apr. 1 Balance! 0 6,000 Accounts Payable No. 201 Apr. 1 20 Balance! 1,000 500 2,000 1,000 1,500 Mortgage Payable No. 275 Apr. 1 10 Balance! 2,000 8,000 6,000 Fran Holley, Capital No. 301 Apr. 1 Balance! 20,000 Admissions Revenue No. 405 Apr. 9 25 1,800 5,200 01,800 7,000 2-75

PROBLEM 2-5B (Continued) (a) & (c) (Continued) Concession Revenue No. 406 Apr. 30 0,170 00,170 Advertising Expense No. 610 Apr. 12 0,300 0,300 Film Rental Expense No. 632 Apr. 2 20 0,800, 500 800 1,300 Salaries Expense No. 726 Apr. 29 01,600 1,600 (b) GENERAL JOURNAL Date Account Titles and Explanation Ref. Credit Apr. 2 Film Rental Expense... Cash... Paid film rental. 3 No entry not a transaction. 632 101 0,800 0,800 9 Cash... Admissions Revenue... Received cash for admissions. 101 405 1,800 1,800 2-76

PROBLEM 2-5B (Continued) (b) (Continued) Date Account Titles and Explanation Ref. Credit Apr. 10 Mortgage Payable... Accounts Payable... Cash Made payments on mortgage and accounts payable. 11 No entry not a transaction. 275 201 101 0,2,000 1,000 0,3,000 12 Advertising Expense... Cash... Paid advertising expenses. 610 101 0,300 0,300 20 Film Rental Expense... Accounts Payable... Received film and billed on account. 632 201 0,500 0,500 25 Cash... Admissions Revenue... Received cash for admissions. 101 405 5,200 5,200 29 Salaries Expense... Cash... Paid salaries expense. 726 101 1,600 1,600 30 Cash... Accounts Receivable... Concession Revenue... Received cash and balance on account for concession revenue. 101 112 406 0,085 0,085 0,170 30 Prepaid Rentals... Cash... Paid for film to be shown next month. 136 101 700 700 2-77

PROBLEM 2-5B (Continued) (d) GRAND THEATRE Trial Balance April 30, 2003 Cash... Accounts Receivable... Prepaid Rentals... Land... Buildings... Equipment... Accounts Payable... Mortgage Payable... Fran Holley, Capital... Admissions Revenue... Concession Revenue... Advertising Expense... Film Rental Expense... Salaries Expense... $ 6,685 0,085 0,700 01110,000 08,000 06,000 000 300 001,300 1,600 $34,670 Credit $ 1,500 6,000 020,000 07,000 00170 000000 $34,670 2-78

PROBLEM 2-6B (a) GENERAL JOURNAL Date Account Titles and Explanation Credit Sept. 1 Cash... B. Rowland, Capital... 125,000 125,000 1 No entry. 5 Rent Expense... Cash... 8 Furniture & Equipment... Cash... Accounts Payable 443,750 00,75,000 3,750 25,000 50,000 10 Insurance Expense... Cash... 12 Office Supplies... Cash... 19 Office Supplies... Accounts Payable... 24 Cash... Accounts Receivable... Brokerage Fees Earned... 26 Accounts Payable... Cash... 29 Cash... Accounts Receivable... 0320 11,100 01,900 015,000 25,000 00, 750 00, 6,500 320 01,100 01,900 040,000 00,750 00,6,500 2-79

PROBLEM 2-6B (Continued) (a) (Continued) Date Account Titles and Explanation Credit 00, Sept. 30 Utility Expense... Accounts Payable... 450 0 0,450 30 Salaries Expense... Cash..., 3,600 0,3,600 Note: Journal entry explanations have not been reproduced from the text in part (a). Students should recognize, however, that explanations are a critical part of the journal entry in real life. 2-80

(b) 125,000 15,000 6,500 111,980 Ca sh Credit 3,750 25,000 320 1,100 750 3,600 00,750 Credit 50,000 1,900 450 51,600 Accounts Receivable Credit 025,000 6,500 18,500 Office Supplies 1,100 1,900 3,000 Credit Furniture & Equipment Credit 0,75,000 Accounts Payable 2-81

PROBLEM 2-6B (Continued) (b) (Continued) B. Rowland, Capital Credit 125,000 Brokerage Fees Earned Credit 0, 40,000 Salaries Expense Credit 3,600 Rent Expense Credit 3,750 Utilities Expense Credit 0,450 Insurance Expense Credit 0,320 2-82

PROBLEM 2-6B (Continued) (c) ROWLAND BROKERAGE SERVICES Trial Balance September 30, 2003 Cash... Accounts Receivable... Office Supplies... Furniture and Equipment... Accounts Payable... B. Rowland, Capital... Brokerage Fees Earned... Salaries Expense... Rent Expense... Utilities Expense... Insurance Expense... $111,980 18,500 3,000 75,000 3,600 3,750 450 320 0$216,600 Credit $ 51,600 125,000 40,000 51 000,0600 $216,600 2-83

PROBLEM 2-6B (Continued) (d) ROWLAND BROKERAGE SERVICES Income Statement For the Month Ended September 30, 2003 Revenues Brokerage fees earned... $40,000 Expenses Salaries expense... $3,600 Rent expense... 3,750 Insurance expense... 320 Utilities expense... 00,450 Total expenses... 008,120 Net income... $31,880 ROWLAND BROKERAGE SERVICES Statement of Owner's Equity For the Month Ended September 30, 2003 Capital, September 1, 2003... $ 0 Add: Investment... 125,000 Net income... 31,880 Capital, September 30, 2003... $156,880 2-84

PROBLEM 2-6B (Continued) (d) (Continued) ROWLAND BROKERAGE SERVICES Balance Sheet September 30, 2003 Assets Cash... $111,980 Accounts receivable... 18,500 Office supplies... 3,000 Furniture and equipment... 0075,000 Total assets... $208,480 Liabilities and Owner's Equity Liabilities Accounts payable... 0$ 51,600 Owner's Equity B. Rowland, Capital... 0156,880 Total liabilities and owner's equity... $208,480 2-85

PROBLEM 2-7B (a) As indicated in item (9), $4,800 was paid for three months in advance on March 1. One month has passed, so 1/3 X $4,800 = $1,600 of rent has expired and become an expense. Two months are still to come, so 2/3 x $4,800 = $3,200 remains in the Prepaid Rent account as an asset. (b) & (d) Cash 7,000 (1) 900 (3) 2,100 (4) 9,000 (5) 8,000 (7) 3,000 (8) 4,000 (10) 1,000 Accounts Receivable 12,000 (4) 9,000 (7) 9,000 3,000 12,000 Repair Parts Inventory Prepaid Rent 15,000 3,200 (2) 3,200 (9) 1,600 (6) 3,000 15,200 1,600 Shop Equipment 21,000 Accounts Payable 21,000 (2) 3,200 (5) 8,000 16,200 Gary Hobson, Capital Gary Hobson, Drawings 37,200 (10) 1,000 2-86

PROBLEM 2-7B (Continued) (b) & (d) (Continued) Repair Services Revenue Advertising Expense (7) 12,000 (1) 900 Miscellaneous Expense Repair Parts Expense (3) 2,100 (6) 3,000 Rent Expense Wages Expense (9) 1,600 (8) 4,000 2-87

PROBLEM 2-7B (Continued) (c) GENERAL JOURNAL Account Titles and Explanation Credit 1. Advertising Expense... Cash... 900 900 2. Repair Parts Inventory... Accounts Payable... 3. Miscellaneous Expense... Cash... 4. Cash... Accounts Receivable... 5. Accounts Payable... Cash... 6. Repair Parts Expense... Repair Parts Inventory... 7. Cash... Accounts Receivable... Repair Services Revenue... 8. Wages Expense... Cash 9. Rent Expense... Prepaid Rent... 10. Gary Hobson, Drawings... Cash... 3,200 3,200 0 2,100 0 2,100 0 9,000 0 9,000 0 8,000 0 8,000 0 3,000 0 3,000 3,000 9,000 0 12,000 0 4,000 0 4,000 0 1,600 0 1,600 0 1,000 0 1,000 Note: Journal entry explanations have not been reproduced from the text in this part of the problem. Students should recognize, however, that explanations are a critical part of the journal entry in real life. 2-88

PROBLEM 2-7B (Continued) (e) SOFT-Q REPAIR SERVICE Trial Balance April 30, 2003 Cash... Accounts Receivable... Repair Parts Inventory... Prepaid Rent... Shop Equipment... Accounts Payable... Gary Hobson, Capital... Gary Hobson, Drawings... Repair Services Revenue... Advertising Expense... Miscellaneous Expense... Repair Parts Expense... Rent Expense... Wages Expense... (f) Cash $ 3,000 Accounts Receivable 12,000 Repair Parts Inventory 15,200 Prepaid Rent 1,600 Shop Equipment 21,000 Total Assets $52,800 $03,000 012,000 015,200 001,600 0021,000 1,000 900 2,100 3,000 1,600 004,000 $65,400 Credit $16,200 037,200 0 12,000 000000 $65,400 (g) Repair Services Revenue $12,000 Advertising Expense (900) Miscellaneous Expense (2,100) Repair Parts Expense (3,000) Rent Expense (1,600) Wages Expense (4,000) Net Income $ 400 2-89