The Recording Process Solutions Part 5

PROBLEM 2-2B (a) Date Account Titles and Explanation Ref. Debit Apr. 1 Cash .................................................................. Maria Juarez, Capital ......................... (Owner’s investment of cash in business) 101 301 40,000 40,000 1 No entry—not a transaction. 2 Rent Expense................................................. Cash ........................................................ (Paid monthly office rent) 729 101 1,000 Supplies ........................................................... Accounts Payable............................... (Purchased supplies on account from Smile Company) 126 201 4,000 Accounts Receivable................................... Service Revenue ................................. (Billed clients for services provided) 112 400 5,100 Cash .................................................................. Unearned Revenue ............................. (Received cash for future service) 101 205 1,000 Cash .................................................................. Service Revenue ................................. (Received cash for services provided) 101 400 2,100 Salaries Expense .......................................... Cash ........................................................ (Paid monthly salary) 726 101 2,400 3 10 11 20 30 J1 Credit 1,000 4,000 5,100 1,000 2,100 2,400 PROBLEM 2-2B (Continued) Date Account Titles and Explanation Ref. Debits Apr. 30 Accounts Payable .................................... Cash .................................................... (Paid Smile Company on account) 201 101 1,600 Credit 1,600 (b) Cash Date Apr. Explanation 1 2 11 20 30 30 Ref. Debit J1 J1 J1 J1 J1 J1 40,000 Ref. J1 Debit 5,100 Credit 1,000 1,000 2,100 2,400 1,600 Accounts Receivable Date Apr. 10 Supplies Date Apr. 3 Explanation Explanation Explanation Unearned Revenue Date Explanation Apr. 11 40,000 39,000 40,000 42,100 39,700 38,100 No. 112 Credit Ref. J1 Debit 4,000 Credit Ref. J1 J1 Debit Credit 4,000 Accounts Payable Date Apr. 3 30 No. 101 Balance Balance 5,100 No. 126 Balance 4,000 No. 201 Ref. J1 1,600 Debit Credit 1,000 Balance 4,000 2,400 No. 205 Balance 1,000 PROBLEM 2-2B (Continued) Maria Juarez, Capital Date Explanation Apr. 1 Ref. J1 Debit Credit 40,000 No. 301 Balance 40,000 Ref. J1 J1 Debit Credit 5,100 2,100 Balance 5,100 7,200 Service Revenue Date Apr. 10 20 Explanation No. 400 Salaries Expense Date Apr. 30 Explanation No. 726 Ref. J1 Debit 2,400 Credit Rent Expense Date Apr. 2 (c) Explanation Balance 2,400 No. 729 Ref. J1 Debit 1,000 Credit Balance 1,000 Debit $38,100 5,100 4,000 Credit MARIA JUAREZ, DENTIST Trial Balance April 30, 2010 Cash................................................................................. Accounts Receivable ................................................. Supplies.......................................................................... Accounts Payable ....................................................... Unearned Revenue ..................................................... Maria Juarez, Capital.................................................. Service Revenue.......................................................... Salaries Expense......................................................... Rent Expense ............................................................... 2,400 1,000 $50,600 $ 2,400 1,000 40,000 7,200 $50,600 PROBLEM 2-3B (a) Trans. 1. Account Titles and Explanation Debit Cash ........................................................... Eric Clapton, Capital .................. 50,000 50,000 2. No entry—Not a transaction. 3. Prepaid Rent............................................ Cash................................................. 24,000 Furniture & Equipment ........................ Cash................................................. Accounts Payable ....................... 30,000 Prepaid Insurance ................................. Cash................................................. 1,800 Office Supplies ....................................... Cash................................................. 500 Office Supplies ....................................... Accounts Payable ....................... 1,500 Cash ........................................................... Accounts Receivable............................ Service Revenue.......................... 8,000 12,000 Accounts Payable.................................. Cash................................................. 400 Cash ........................................................... Accounts Receivable ................. 3,000 Utility Expense........................................ Accounts Payable ....................... 200 4. 5. 6. 7. 8. 9. 10. 11. Credit 24,000 10,000 20,000 1,800 500 1,500 20,000 400 3,000 200 PROBLEM 2-3B (Continued) Trans. 12. (b) (1) (8) (10) (8) (6) (7) (5) (3) Account Titles and Explanation Salaries Expense .................................. Cash ................................................. Cash 50,000 (3) (4) (5) (6) 8,000 (9) 3,000 (12) 18,700 24,000 10,000 1,800 500 (4) 400 5,600 (9) Accounts Receivable 12,000 (10) 3,000 9,000 Prepaid Rent 24,000 24,000 Credit 5,600 5,600 Furniture & Equipment 30,000 30,000 Accounts Payable (4) 20,000 (7) 1,500 400 (11) 200 21,300 Eric Clapton, Capital (1) 50,000 50,000 Service Revenue (8) Office Supplies 500 1,500 2,000 Prepaid Insurance 1,800 1,800 Debit (12) Salaries Expense 5,600 5,600 (11) Utility Expense 200 200 20,000 20,000 PROBLEM 2-3B (Continued) (c) SLOWHAND SERVICES Trial Balance May 31, 2010 Cash ............................................................................ Accounts Receivable............................................. Office Supplies ........................................................ Prepaid Insurance .................................................. Prepaid Rent............................................................. Furniture & Equipment.......................................... Accounts Payable................................................... Eric Clapton, Capital.............................................. Service Revenue ..................................................... Salaries Expense .................................................... Utility Expense......................................................... Debit $18,700 9,000 2,000 1,800 24,000 30,000 5,600 200 $91,300 Credit $21,300 50,000 20,000 $91,300 PROBLEM 2-4B SYED MOIZ CO. Trial Balance June 30, 2010 Cash ($3,340 + $360) ........................................................... Accounts Receivable ($2,731 – $360)............................ Supplies ($1,200 – $620) .................................................... Equipment ($2,600 + $620)................................................ Accounts Payable ($3,666 – $306 – $360).................... Unearned Revenue .............................................................. S. Moiz, Capital ..................................................................... S. Moiz, Drawing ($800 + $600)........................................ Service Revenue ($2,480 + $801) .................................... Salaries Expense ($3,200 + $700 – $600) ..................... Office Expense...................................................................... Debit $ 3,700 2,371 580 3,220 1,400 3,300 810 $15,381 Credit $ 3,000 1,100 8,000 3,281 $15,381 PROBLEM 2-5B (a) & (c) Cash Date Mar. 1 2 9 10 12 20 20 31 31 31 No. 101 Explanation Balance Ref. Debit Credit   J1 J1 J1 J1 J1 J1 J1 J1 J1 1,500 4,000 4,100 450 5,000 2,000 2,500 450 9,000 Accounts Receivable Date Mar. 31 Land Date Mar. 1 Explanation Explanation Balance No. 112 Ref. J1 Ref. Debit 450 Debit Credit Credit   Buildings Date Mar. 1 Balance 450 No. 140 Balance 24,000 No. 145 Explanation Balance Ref. Debit Credit   Equipment Date Mar. 1 Balance 9,000 7,500 11,500 7,400 6,950 11,950 9,950 7,450 7,900 16,900 Explanation Balance Balance 10,000 No. 157 Ref.   Debit Credit Balance 10,000 PROBLEM 2-5B (Continued) Accounts Payable Date Explanation Mar. 1 Balance 2 10 J. Micheals, Capital Date Explanation Mar. 1 Balance Ref. Debit Credit   J1 J1 4,100 Ref. Debit 2,000 Credit   Admission Revenue Date Mar. 9 20 31 Explanation Explanation Advertising Expense Date Explanation Mar.12 Ref. J1 J1 J1 Debit Credit 4,000 5,000 9,000 Balance 4,000 9,000 18,000 Ref. J1 Debit Credit 900 Balance 900 Ref. J1 Debit 450 Credit No. 610 Balance 450 Ref. J1 J1 Debit 3,500 2,000 Credit No. 406 Film Rental Expense Date Mar. 2 20 Explanation No. 301 Balance 46,000 No. 405 Concession Revenue Date Mar.31 No. 201 Balance 7,000 9,000 4,900 No. 632 Balance 3,500 5,500 PROBLEM 2-5B (Continued) Salaries Expense Date Mar. 31 Explanation No. 726 Ref. J1 Debit 2,500 Credit (b) Date Account Titles and Explanation Ref. Debit Mar. 2 Film Rental Expense.................................. Accounts Payable ............................ Cash...................................................... (Rented films for cash and on account) 632 201 101 3,500 No entry. 9 Cash ................................................................ Admission Revenue ........................ (Received cash for services provided) 101 405 4,000 Accounts Payable ($2,000 + $2,100)......... Cash...................................................... (Paid creditors on account) 201 101 4,100 4,000 4,100 11 No entry. 12 Advertising Expense.................................. Cash...................................................... (Paid advertising expense) 610 101 450 Cash ................................................................ Admission Revenue ........................ (Received cash for services provided) 101 405 5,000 Film Rental Expense.................................. Cash...................................................... (Paid film rental) 632 101 2,000 20 20 J1 Credit 2,000 1,500 3 10 Balance 2,500 450 5,000 2,000 PROBLEM 2-5B (Continued) Date Account Titles and Explanation Ref. Debit Mar. 31 Salaries Expense ......................................... Cash ...................................................... (Paid salaries expense) 726 101 2,500 Cash ................................................................. Accounts Receivable.................................. Concession Revenue....................... (15% X $6,000) (Received cash and balance on account for concession revenue) 101 112 406 450 450 Cash ................................................................. Admission Revenue......................... (Received cash for services provided) 101 405 9,000 31 31 (d) Credit 2,500 900 9,000 JOSIE THEATER Trial Balance March 31, 2010 Cash ............................................................................. Accounts Receivable.............................................. Land.............................................................................. Buildings..................................................................... Equipment .................................................................. Accounts Payable.................................................... J. Michaels, Capital ................................................. Admission Revenue................................................ Concession Revenue.............................................. Advertising Expense............................................... Film Rental Expense ............................................... Salaries Expense..................................................... Debit $16,900 450 24,000 10,000 10,000 450 5,500 2,500 $69,800 Credit $ 4,900 46,000 18,000 900 $69,800 BYP 2-1 FINANCIAL REPORTING PROBLEM (a) Account Accounts Payable Accounts Receivable (1) Increase Side Credit (1) Decrease Side Debit Debit Credit (2) Normal Balance Credit Debit Property, Plant, and Equipment Debit Credit Debit Income Taxes Payable Credit Debit Credit Interest Expense Debit Credit Debit Inventory Debit Credit Debit (b) 1. 2. 3. Cash is increased. Cash is decreased. Cash is decreased or Accounts Payable is increased. (c) 1. 2. Cash is decreased. Cash is decreased or Notes or Mortgage Payable is increased. BYP 2-2 (a) 1. COMPARATIVE ANALYSIS PROBLEM PepsiCo Inventory: debit Coca-Cola 1. Accounts Receivable: debit 2. Cash and Cash Equivalents: debit debit 2. Property, Plant, and Equipment: 3. Accounts Payable: credit 3. Cost of Goods Sold: debit 4. Interest Expense: debit 4. Sales (revenue): credit (b) The following other accounts are ordinarily involved: 1. Increase in Accounts Receivable: Service Revenue or Sales is increased (credited). 2. Decrease in Wages Payable: Cash is decreased (credited). 3. Increase in Property, Plant, and Equipment: Notes Payable is increased (credited) or Cash is decreased (credited). 4. Increase in Interest Expense: Cash is decreased (credited). EXPLORING THE WEB The answer is dependent upon the company selected by the student. BYP 2-4 DECISION MAKING ACROSS THE ORGANIZATION (a) May 1 Correct. 5 Cash .................................................................. Lesson Revenue ................................... 250 7 Cash .................................................................. Unearned Boarding Revenue ........... 300 14 Office Equipment.......................................... Cash .......................................................... 800 15 Lisa Ortega, Drawing................................... Cash .......................................................... 400 20 Cash .................................................................. Riding Revenue..................................... 184 30 Correct. 31 Hay and Feed Supplies............................... Accounts Payable................................. 1,700 250 300 800 400 184 1,700 (b) The errors in the entries of May 14 and 20 would prevent the trial balance from balancing. (c) Net income as reported................................................... Add: 5/15, Salaries expense (Lisa Ortega, Drawing).............................................................. 5/31, Hay and feed expense (still on hand) .................................................................... $4,500 $ 400 1,700 Less: 5/7, Boarding revenue unearned..................... Correct net income ........................................................... (d) Cash as reported ............................................................... Add: 5/20, Transposition error ................................... 5/31, Purchase on account................................ $ 36 1,700 2,100 6,600 300 $6,300 $12,475 1,736 $14,211 BYP 2-5 COMMUNICATION ACTIVITY Date: May 25, 2010 To: Accounting Instructor From: Student In the first transaction, bills totaling $6,000 were sent to customers for services rendered. Therefore, the asset Accounts Receivable is increased $6,000 and the revenue Service Revenue is increased $6,000. Debits increase assets and credits increase revenues, so the journal entry is: Accounts Receivable........................................................................ Service Revenue ....................................................................... (Bill customers for services provided) 6,000 6,000 The $6,000 amount is then posted to the debit side of the general ledger account Accounts Receivable and to the credit side of the general ledger account Service Revenue. In the second transaction, $2,000 was paid in salaries to employees. Therefore, the expense Salaries Expense is increased $2,000 and the asset Cash is decreased $2,000. Debits increase expenses and credits decrease assets, so the journal entry is: Salaries Expense ............................................................................... Cash .............................................................................................. (Salaries paid) 2,000 2,000 The $2,000 amount is then posted to the debit side of the general ledger account Salaries Expense and to the credit side of the general ledger account Cash. BYP 2-6 ETHICS CASE (a) The stakeholders in this situation are:    Mary Jansen, assistant chief accountant. Users of the company’s financial statements. The Casey Company. (b) By adding $1,000 to the Equipment account, that account total is intentionally misstated. By not locating the error causing the imbalance, some other account may also be misstated by $1,000. If the amount of $1,000 is determined to be immaterial, and the intent is not to commit fraud (cover up an embezzlement or other misappropriation of assets), Mary’s action might not be considered unethical in the preparation of interim financial statements. However, if Mary is violating a company accounting policy by her action, then she is acting unethically. (c) Mary’s alternatives are: 1. Miss the deadline but find the error causing the imbalance. 2. Tell her supervisor of the imbalance and suffer the consequences. 3. Do as she did and locate the error later, making the adjustment in the next quarter.