101
207) Jarrod Automotive, owned and operated by Jarrod Johnson, began business in September of
the current year. Jarrod, a mechanic, had no experience with recording business transactions. As
a result, Jarrod entered all of September’s transactions directly into the ledger accounts. When he
tried to locate a particular entry he found it confusing and time consuming. He has hired you to
improve his accounting procedures. The accounts in his General Ledger follow:
103
208) Sarah’s Paralegal Services completed these transactions in February:
a. Purchased office supplies on account, $300.
b. Completed work for a client on credit, $500.
c. Paid cash for the office supplies purchased in (a).
d. Completed work for a client and received $800 cash.
e. Received $500 cash for the work described in (b).
f. Received $1,000 in advance from a client for services to be performed in March.
Prepare journal entries to record the above transactions. Explanations are not necessary.
104
209) Larry Matt completed these transactions during December of the current year:
Dec. 1
Began a financial services practice by investing $15,000 cash and office
equipment with a $5,000 value in exchange for common stock.
2
Purchased $1,200 of office equipment on credit.
3
Purchased $300 of office supplies on credit.
4
Completed work for a client and immediately received payment of $900
cash.
8
Completed work for Precept Paper Co. on credit, $1,700.
10
Paid for the supplies purchased on credit on December 3.
14
Paid for the annual $960 premium on an insurance policy.
18
Received payment in full from Precept Paper Co. for the work completed
on December 8.
27
Paid $650 in cash dividends.
30
Paid $175 cash for the December utility bills.
30
Received $2,000 in advance from a client for services to be performed
next year.
Prepare general journal entries to record these transactions.
106
210) Mary Sunny, the sole stockholder, began business as Sunny Law Firm on November 1.
Record the following November transactions by making entries directly to the T-accounts
provided. Next, prepare a trial balance as of November 30.
a) Mary invested $15,000 cash and a law library valued at $6,000 in exchange for common
stock.
b) Purchased $7,500 of office equipment from John Bronx on credit.
c) Completed legal work for a client and received $1,500 cash in full payment.
d) Paid John Bronx $3,500 cash in partial payment of the amount owed.
e) Completed $4,000 of legal work for a client on credit.
f) Paid $2,000 in cash dividends.
g) Received $2,500 cash as partial payment for the legal work completed for the client in (e).
h) Paid $2,500 cash for the secretary’s salary.
108
211) Jerry’s Shop had the following assets and liabilities at the beginning and end of the current
year:
Assets Liabilities
Beginning of the year $114,000 $68,000
End of the year 135,000 73,000
If there were no stockholder investments or dividends paid during the year, what was the amount
of net income earned by Jerry’s Shop?
212) Victor Services had the following assets and liabilities at the beginning and end of the
current year:
Assets Liabilities
Beginning of the year $114,000 $68,000
End of the year 135,000 73,000
If $12,000 of common stock was issued during the year, but no dividends were paid during the
year, what was the amount of net income earned by Victor Services?
109
213) Archer Co. had the following assets and liabilities at the beginning and end of the current
year:
Assets Liabilities
Beginning of the year $114,000 $68,000
End of the year 135,000 73,000
If $12,000 of common stock was issued during the year, and the business paid $5,000 in
dividends during the year, what was the amount of net income earned by Archer Co.?
214) A company had total assets of $350,000, total liabilities of $101,500, and total equity of
$248,500. Calculate the company’s debt ratio.
215) Jackson Advertising Co. had assets of $475,000; liabilities of $275,500; and equity of
$199,500. Calculate its debt ratio.
216) List the four steps in recording transactions.
217) Given each of the following errors, indicate on the table below the amount by which the
trial balance will be out of balance and which trial balance column (debit or credit) will have the
larger total as a result of the error.
a. $100 debit to Cash was debited to the Cash account twice.
b. $1,900 credit to Sales was posted as a $190 credit.
c. $5,000 debit to Office Equipment was debited to Office Supplies.
d. $625 debit to Prepaid Insurance was posted as a $62.50 debit.
e. $520 credit to Accounts Payable was not posted.
Error
Amount Out
of Balance
Column Having
Larger Total
a.
b.
c.
d.
e.
Error
of Balance
Larger Total
a.
$100
Debit
b.
$1,710
Debit
c.
d.
$562.50
Credit
e.
$520
Debit
218) After preparing an (unadjusted) trial balance at year-end, R. Chang of Chang Window
Company discovered the following errors:
1. Cash payment of the $225 telephone bill for December was recorded twice.
2. Cash payment of a note payable was recorded as a debit to Cash and a debit to Notes Payable
for $1,000.
3. A $900 cash dividend was recorded to the correct accounts as $90.
4. An additional investment of $5,000 cash by a stockholder was recorded as a debit to Common
Stock and a credit to Cash.
5. A credit purchase of office equipment for $1,800 was recorded as a debit to the Office
Equipment account with no offsetting credit entry.
Using the form below, indicate whether the error would cause the trial balance to be out of
balance by placing an X in either the yes or no column.
Error
Yes
No
1.
2.
3.
4.
5.
Error
Yes
No
1
X
2
X
3
X
4
X
5
X
112
219) The balances for the accounts of Milo’s Management Co. for the year ended December 31
are shown below. Each account shown had a normal balance.
Accounts Payable…..
$ 6,500
Wages Expense………
36,000
Accounts Receivable…
7,000
Rent Expense…………
6,000
Cash…………………
?
Retained Earnings…………
68,700
Office Supplies.
1,200
Building…………….
125,000
Supplies Expense……
21,500
Land………………….
50,000
Common Stock………..
50,000
Unearned Management Fees
4,000
Management Revenue.
175,000
Dividends
48,000
Calculate the correct balance for Cash and prepare a trial balance.
Cash**
Accounts Receivable
Office Supplies
Land
Building
Accounts Payable
Unearned Management Fees
Common Stock
Retained Earnings
Dividends
Management Revenue
Wages Expense
Rent Expense
Supplies Expense
Totals
**Total credits
Total debits (excluding cash)
Cash
113
220) At year-end, Henry Laundry Service noted the following errors in its trial balance:
1. It understated the total debits to the Cash account by $500 when computing the account
balance.
2. A credit sale for $311 was recorded as a credit to the revenue account, but the offsetting debit
was not posted.
3. A cash payment to a creditor for $2,600 was never recorded.
4. The $680 balance of the Prepaid Insurance account was listed in the credit column of the trial
balance.
5. A $24,900 van purchase was recorded as a $24,090 debit to Equipment and a $24,090 credit to
Notes Payable.
6. A purchase of office supplies for $150 was recorded as a debit to Office Equipment. The
offsetting credit entry was correct.
7. An additional investment of $4,000 by stockholders was recorded as a debit to Common Stock
and as a credit to Cash.
8. The cash payment of the $510 utility bill for December was recorded (but not paid) twice.
9. The revenue account balance of $79,817 was listed on the trial balance as $97,817.
10. A $1,000 cash dividend was recorded as a $100 debit to Dividends and $100 credit to cash.
Using the form below, indicate whether each error would cause the trial balance to be out of
balance, the amount of any imbalance, and whether a correcting journal entry is required.
Would the error
cause the trial
balance to be out
of balance?
Amount of
Imbalance
Correcting
Journal Entry
Required
Error
Yes
No
Yes
No
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
114
115
221) The following trial balance is prepared from the general ledger of HG’s Auto Maintenance.
HG’S AUTO MAINTENANCE
Trial Balance
October 31
Debit
Credit
Cash
$ 1,975
Accounts receivable
2,800
Supplies
500
Shop equipment
13,000
Office equipment
6,600
Accounts payable
$ 4,510
Common Stock
22,000
Dividends
4,200
Repair fees earned
11,875
Supplies expense
8,600
Totals
$37,675
$38,385
Because the trial balance did not balance, you decided to examine the accounting records. You
found that the following errors had been made:
1. A purchase of supplies on account for $245 was posted as a debit to Supplies and as a debit to
Accounts Payable.
2. An investment of $500 cash by a stockholder was debited to Common Stock and credited to
Cash.
3. In computing the balance of the Accounts Receivable account, a debit of $600 was omitted
from the computation.
4. One debit of $300 to the Dividends account was posted as a credit.
5. Office equipment purchased for $800 was posted to the Shop Equipment account.
6. One entire entry was not posted to the general ledger. The transaction involved the receipt of
$125 cash for repair services performed for cash.
Prepare a corrected trial balance for the HG’s Auto Maintenance as of October 31.
117
222) Figgaro Company’s accounts and their balances, as of the end of August, are included
below. All accounts have normal balances:
Accounts receivable…..
$36,000
Cash…………………….
$27,000
Equipment……………..
59,000
Advertising expense…
5,000
Service revenues earned.
75,000
Accounts payable………
31,000
Rent expense…………..
3,600
Dividends..
24,000
Office supplies………
1,500
Salaries expense………..
30,000
Notes payable…………
22,000
Common Stock……..
58,100
a. Calculate net income.
b. Determine the amount of retained earnings to be shown on the August 31 balance sheet.
118
223) Sally’s Salon began operations on January 1 of the current year with an investment by Sally
of $21,155 in exchange for common stock. Based on the following trial balance prepare an
income statement, statement of retained earnings, and a balance sheet. There were no additional
common stock issuances during the year.
Sally’s Salon
Trial Balance
December 31
Cash
$ 6,500
Accounts receivable
475
Beauty supplies
2,500
Beauty shop equipment
17,000
Accounts payable
$ 745
Common Stock
21,155
Dividends
36,000
Revenue earned
72,000
Beauty supplies expense
3,425
Rent expense
6,000
Wages expense
22,000
Totals
$93,900
$93,900