The Recording Process Solutions Part 2

BRIEF EXERCISE 2-6 Aug. 1 Cash .................................................................................. T. J. Carlin, Capital .............................................. 8,000 4 Prepaid Insurance......................................................... Cash.......................................................................... 1,800 16 Cash .................................................................................. Service Revenue................................................... 800 27 Salaries Expense........................................................... Cash.......................................................................... 1,000 8,000 1,800 800 1,000 BRIEF EXERCISE 2-7 Cash 5/12 2,400 5/15 3,000 Ending Bal. 5,400 5/5 Accounts Receivable 5,000 5/12 Service Revenue 5/5 5,000 5/15 3,000 Ending Bal. 8,000 2,400 Ending Bal. 2,600 BRIEF EXERCISE 2-8 Cash Date May 12 15 Explanation Ref. J1 J1 Debit 2,400 3,000 Credit Balance 2,400 5,400 BRIEF EXERCISE 2-8 (Continued) Accounts Receivable Date May 5 12 Explanation Ref. J1 J1 Debit 5,000 Credit 2,400 Balance 5,000 2,600 Ref. J1 J1 Debit Credit 5,000 3,000 Balance 5,000 8,000 Debit $ 8,800 3,000 17,000 Credit Service Revenue Date May 5 15 Explanation BRIEF EXERCISE 2-9 CLELAND COMPANY Trial Balance June 30, 2010 Cash.......................................................................................... Accounts Receivable .......................................................... Equipment .............................................................................. Accounts Payable ................................................................ Cleland, Capital..................................................................... Cleland, Drawing .................................................................. Service Revenue................................................................... Salaries Expense.................................................................. Rent Expense ........................................................................ 1,200 6,000 1,000 $37,000 $ 9,000 20,000 8,000 $37,000 BRIEF EXERCISE 2-10 KWUN COMPANY Trial Balance December 31, 2010 Cash ......................................................................................... Prepaid Insurance ............................................................... Accounts Payable................................................................ Unearned Revenue.............................................................. P. Kwun, Capital................................................................... P. Kwun, Drawing ................................................................ Service Revenue .................................................................. Salaries Expense ................................................................. Rent Expense........................................................................ Debit $14,800 3,500 4,500 18,600 2,400 $43,800 Credit $ 3,000 2,200 13,000 25,600 $43,800 SOLUTIONS FOR DO IT! REVIEW EXERCISES DO IT! 2-1 Josh would likely need the following accounts in which to record the transactions necessary to ready his photography studio for opening day: Cash (debit balance) Photography Supplies (debit balance) Notes Payable (credit balance) Photography Equipment (debit balance) Accounts Payable (credit balance) J. Borke, Capital (credit balance) DO IT! 2-2 Each transaction that is recorded is entered in the general journal. The three activities would be recorded as follows: 1. Cash.......................................................................... J. Borke, Capital......................................... 8,000 2. Photography Supplies........................................ Cash ............................................................... Accounts Payable...................................... 1,100 3. No entry because no transaction has occurred. 8,000 400 700 DO IT! 2-3 Cash 4/1 1,600 4/16 600 4/3 3,400 4/20 300 4/30 4,100 DO IT! 2-4 BOARDIN’ COMPANY Trial Balance December 31, 2010 Debit Cash.......................................................................................... $ 6,000 Accounts Receivable .......................................................... 8,000 Supplies .................................................................................. 5,000 Equipment .............................................................................. 80,000 Notes Payable ....................................................................... Accounts Payable ................................................................ Salaries Payable ................................................................... Hawk, Capital......................................................................... Hawk, Drawing ...................................................................... 8,000 Service Revenue................................................................... Supplies Expense ................................................................ 2,000 Salaries Expense.................................................................. 38,000 $147,000 Credit $ 20,000 11,000 3,000 25,000 88,000 $147,000 SOLUTIONS TO EXERCISES EXERCISE 2-1 1. False. An account is an accounting record of a specific asset, liability, or owner’s equity item. 2. False. An account shows increases and decreases in the item it relates to. 3. False. Each asset, liability, and owner’s equity item has a separate account. 4. False. An account has a left, or debit side, and a right, or credit side. 5. True. (a) Basic Type Asset Asset Asset Asset Owner’s Equity Asset Liability Owner’s Equity Transaction Jan. 2 3 9 11 16 20 23 28 D. Reyes, Drawing Accounts Payable Cash Advertising Expense Accounts Receivable Supplies Equipment Cash (b) Specific Account Increase Decrease Increase Increase Increase Increase Increase Increase Effect (c) Account Debited Debit Credit Debit Debit Debit Debit Debit Debit (d) Normal Balance Asset Asset Asset Asset Owner’s Equity Liability Asset Owner’s Equity (a) Basic Type Cash Cash Accounts Receivable Cash Service Revenue Accounts Payable Cash D. Reyes, Capital (b) Specific Account Decrease Decrease Decrease Decrease Increase Increase Decrease Increase Effect (c) Account Credited Debit Debit Debit Debit Credit Credit Debit Credit (d) Normal Balance EXERCISE 2-2 EXERCISE 2-3 General Journal J1 Date Account Titles and Explanation Ref. Debit Jan. 2 Cash............................................................. D. Reyes, Capital ............................ 10,000 3 Equipment ................................................. Cash.................................................... 4,000 9 Supplies ..................................................... Accounts Payable .......................... 500 11 Accounts Receivable ............................. Service Revenue............................. 1,800 16 Advertising Expense.............................. Cash.................................................... 200 20 Cash............................................................. Accounts Receivable .................... 700 23 Accounts Payable ................................... Cash.................................................... 300 28 D. Reyes, Drawing................................... Cash.................................................... 1,000 Credit 10,000 4,000 500 1,800 200 700 300 1,000 EXERCISE 2-4 Oct. 1 Debits increase assets: debit Cash $15,000. Credits increase owner’s equity: credit Pete Hanshew, Capital $15,000. 2 No transaction. 3 Debits increase assets: debit Office Furniture $1,900. Credits increase liabilities: credit Accounts Payable $1,900. EXERCISE 2-4 (Continued) Oct. 6 Debits increase assets: debit Accounts Receivable $3,200. Credits increase revenues: credit Service Revenue $3,200. 27 Debits decrease liabilities: debit Accounts Payable $700. Credits decrease assets: credit Cash $700. 30 Debits increase expenses: debit Salaries Expense $2,500. Credits decrease assets: credit Cash $2,500. EXERCISE 2-5 Date Oct. 1 General Journal Account Titles and Explanation Cash ............................................................ Pete Hanshew, Capital................ Ref. Debits 15,000 2 No entry. 3 Office Furniture ....................................... Accounts Payable ........................ 1,900 6 Accounts Receivable............................. Service Revenue........................... 3,200 27 Accounts Payable................................... Cash.................................................. 700 30 Salaries Expense .................................... Cash.................................................. 2,500 Credit 15,000 1,900 3,200 700 2,500 EXERCISE 2-6 (a) 1. 2. 3. Increase the asset Cash, increase the liability Notes Payable. Increase the asset Computer, decrease the asset Cash. Increase the asset Supplies, increase the liability Accounts Payable. (b) 1. Cash ............................................................................. Notes Payable ................................................... Computer.................................................................... Cash ..................................................................... Supplies ...................................................................... Accounts Payable............................................ 2. 3. 5,000 2,500 700 5,000 2,500 700 EXERCISE 2-7 (a) Assets = Liabilities + Owners’ Equity 1. + + (Investment) 2. – – (Expense) 3. + + (Revenue) 4. – – (Drawings) (b) 1. 2. 3. 4. Cash ............................................................................. A. Rowand, Capital.......................................... Rent Expense............................................................ Cash ..................................................................... Accounts Receivable.............................................. Consulting Revenue ....................................... A. Rowand, Drawing ............................................... Cash ..................................................................... 4,000 1,100 5,200 700 4,000 1,100 5,200 700 EXERCISE 2-8 1. 2. 3. 4. 5. False. The general ledger contains all the asset, liability, and owner’s equity accounts. True. False. The accounts in the general ledger are arranged in financial statement order: first the assets, then the liabilities, owner’s capital, owner’s drawing, revenues, and expenses. True. False. The general ledger is not a book of original entry; transactions are first recorded in the general journal, then in the general ledger. EXERCISE 2-9 (a) Aug. 1 10 31 Bal. Cash 5,000 Aug. 12 2,400 900 7,300 Accounts Receivable Aug. 25 1,600 Aug. 31 Bal. 700 Aug. 12 (b) Office Equipment 5,000 1,000 Notes Payable Aug. 12 4,000 Teresa Gonzalez, Capital Aug. 1 5,000 900 Service Revenue Aug. 10 25 Bal. 2,400 1,600 4,000 TERESA GONZALEZ, INVESTMENT BROKER Trial Balance August 31, 2010 Cash ..................................................................................... Accounts Receivable...................................................... Office Equipment ............................................................. Notes Payable ................................................................... Teresa Gonzalez, Capital............................................... Service Revenue .............................................................. Debit $ 7,300 700 5,000 $13,000 Credit $ 4,000 5,000 4,000 $13,000