204.
Jerry’s Butcher Shop, Inc. 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 Jerry invested an additional $12,000 in the business and withdrew $5,000 during the year,
what was the amount of net income earned by Jerry’s Butcher Shop, Inc.?
205.
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.
206.
Jackson Advertising Co. had assets of $475,000; liabilities of $275,500; and equity of $199,500.
Calculate its debt ratio.
207.
List the four steps in recording transactions.
208.
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
a.
b.
c.
d.
e.
209.
After preparing an (unadjusted) trial balance at year-end, R. Chang of Chang Window
Company, Inc. 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 paid to the owner was recorded to the correct accounts as $90.
4. An additional investment of $5,000 cash by the owner 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. Would the error cause the trial balance
to be out of balance?
Error
Yes
No
1.
2.
3.
4.
5.
Error
210.
The balances for the accounts of Milo‘s Management Co., Inc. 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
?
Dividends
48,000
Office supplies
1,200
Management revenue
175,000
Building
125,000
Unearned management fees
4,000
Supplies expense
21,500
Land
50,000
Common stock
118,700
Cash**
Accounts receivable
Office supplies
Land
Building
Accounts payable
Unearned management fees
Common stock
Dividends
Management revenue
Rent expense
Supplies expense
**Total credits
Total debits (excluding cash)
Calculate the correct balance for Cash and prepare a trial balance.
2-127
211.
At year-end, Henry Laundry Service, Inc. 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 Del Henry 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 withdrawal by the stockholder 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.
2-129
212.
The following trial balance is prepared from the general ledger of HG’s Auto Maintenance, Inc.
HG’S AUTO MAINTENANCE, Inc.
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 the owner 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, Inc. as of October 31.
213.
Figgaro Company Inc.’s accounts and their balances, as of the end of August, are included
below. All accounts have normal balances:
Accounts
receivable
$36,000
Cash
$28,000
Retained
earnings
58,100
Common stock
1,000
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
Service revenues earned
Rent expense
Advertising expense
Salaries expense
Net income
Retained earnings (beginning)
Net income
Dividends
Retained earnings (ending)
a. Calculate net income.
b. Determine the amount of retained earnings to be shown on the August 31 balance sheet.
214.
Based on the following trial balance for Sally’s Salon, Inc., prepare an income statement,
statement of retained earnings, and a balance sheet. Sally Crawford made no additional
investments in the company during the year.
Sally’s Salon, Inc.
Trial Balance
December 31
Cash
$7,500
Accounts receivable
475
Beauty supplies
2,500
Beauty shop equipment
17,000
Accounts payable
$745
Common stock
1,000
Retained earnings
21,155
Dividends
36,000
Revenue earned
72,000
Beauty supplies expense
3,425
Rent expense
6,000
Wages expense
22,000
Totals
$94,900
$94,900
Sally’s Salon, Inc.
Revenue earned
Net Income
215.
George Butler owned a tugboat and was tired of his current job. He decided to open a
business, Butler, Inc., that provides day tugboat tours to tourists along the Mississippi River
near his hometown. Prepare journal entries to record the following transactions.
May 1
Butler invested $20,000 cash and his
tugboat valued at $90,000 in the business.
May 2
Butler paid $3,000 cash for office
equipment to help him keep track of
business activities.
May 3
Butler bought boating supplies costing
$2,500 on credit.
May 4
Butler paid the river master $500 cash for
the first month’s dock rental.
May 5
Butler paid $1,800 cash for a six-month
insurance policy.
May
10
Butler received $2,000 cash from clients
for his first tour.
May
12
Butler provided a $3,500 tour on credit, the
customer has agreed to pay within 10 days.
May
19
Butler paid for the boating supplies
originally purchased on May 3.
May
22
Butler receives payment on the account
from the client entry on May 12.
May
25
Butler received $2,750 cash for additional
tours.
May
31
Butler paid his crew member a salary of
$1,000.
May
31
The company paid $2,000 cash in
dividends to the owner. (sole shareholder)
May
2-136
216.
Based on the following trial balance for Barry’s Automotive Shop, Inc., prepare an income
statement, statement of retained earnings, and a balance sheet. Barry made no additional
investments in the company during the year.
Barry’s Automotive Shop, Inc.
Trial Balance
December 31
Cash
$13,500
Accounts
receivable
1,500
Supplies
500
Repair shop
equipment
27,000
Service truck
33,000
Accounts
payable
$2,600
Common stock
1,000
Retained
earnings
38,525
Dividends
36,000
Service
revenue
125,000
Supplies
expense
3,425
Rent expense
18,000
Utilities
expense
5,000
Gas expense
7,200
Wages expense
22,000
Totals
$167,125
$167,125