99
232) Reed owns a consulting services company, while Sophie operates an auto maintenance
shop. For the month of June, the following transactions occurred.
June 2
Sophie decides that she would like consulting services at the end of the
month and pays Reed $300 in advance.
June 5
Sophie provides maintenance services to Reed on account, $175.
June 7
Reed borrows $500 from Sophie by signing a note promising to repay her.
June 14
Sophie purchases maintenance supplies from Tap Corporation, paying
cash of $250.
June 19
Reed pays $175 to Sophie for maintenance services provided on June 5.
June 25
Reed pays the utility bill for the month of June, $200.
June 28
Sophie receives consulting services from Reed, equaling the amount paid
on June 2.
June 30
Reed pays $500 to Sophie for money borrowed on June 7.
Reed Sophie
Assets
=
Liabilities
+
Stockholders’
Equity
=
Liabilities
+
Stockholders’
Equity
June
2
+$300
=
+$300
+
$0
=
$0
+
$0
5
7
14
19
25
28
30
Required:
1. Record transactions for Sophie. Keep in mind that Sophie may not need to record all
transactions.
2. Using the format shown above, indicate the impact of each transaction on the accounting
equation for each company.
102
233) Below is a list of typical accounts.
Accounts
Type of Account
Normal Balance
(Debit or Credit)
1. Service Revenue
2. Common Stock
3. Dividends
4. Salaries Expense
5. Accounts Payable
6. Buildings
7. Deferred Revenue
8. Accounts Receivable
9. Retained Earnings
10. Notes Payable
11. Utilities Expense
12. Advertising Expense
Required:
For each account, (1) indicate the type of account and (2) whether the normal account balance is
a debit or credit. For type of account, choose from asset, liability, stockholders’ equity, dividend,
revenue, or expense.
(Debit or Credit)
1. Service Revenue
Revenue
Credit
2. Common Stock
Stockholders’ equity
Credit
3. Dividends
Dividends
Debit
4. Salaries Expense
Expense
Debit
5. Accounts Payable
Liability
Credit
6. Building
Asset
Debit
7. Deferred Revenue
Liability
Credit
8. Accounts Receivable
Asset
Debit
9. Retained Earnings
Stockholders’ equity
Credit
10. Notes Payable
Liability
Credit
11. Utilities Expense
Expense
Debit
12. Advertising Expense
Expense
Debit
103
234) Below are the transactions for Cleaning Racer, Inc. for April, the first month of operations.
April 1
Borrow$50,000 from the bank by signing a note.
April 2
Issue common stock in exchange for cash of $20,000.
April 7
Purchase equipment for $40,000 cash.
April 10
Purchase cleaning supplies of $4,000 on account.
April 12
Provide services of $5,000 for cash.
April 16
Pay employees $1,200 for work performed.
April 19
Pay for advertising in a local newspaper, costing $500.
April 23
Provide services of $7,000 on account.
April 29
Pay employees $1,500 for work performed.
April 30
A utility bill of $1,200 for the current month is paid.
April 30
Pay dividends of $700 to stockholders.
Required:
1. Record each transaction.
2. Post each transaction to the appropriate T-accounts.
3. Calculate the balance of each account.
4. Prepare a trial balance for June.
Racer uses the following accounts: Cash, Accounts Receivable, Supplies, Equipment, Accounts
Payable, Notes Payable, Common Stock, Dividends, Service Revenue, Salaries Expense,
Advertising Expense, and Utilities Expense.
106
235) Wolverine Incorporated had the following trial balance at the beginning of April.
Account Title
Debits
Credits
Cash
$2,800
Accounts receivable
900
Supplies
3,600
Equipment
9,100
Accounts payable
$2,200
Notes payable
3,600
Common stock
9,000
Retained earnings
1,600
The following transactions occur in April:
April 1
Issue common stock in exchange for $15,000 cash.
April 2
Purchase equipment with a long-term note for $4,500 from Hoosier
Corporation.
April 4
Purchase supplies for $1,500 on account.
April 10
Provide services to customers on account for $9,000.
April 15
Pay creditors on accounts payable, $1,200.
April 20
Pay employees $2,300 for the first half of the month.
April 22
Provide services to customers for $11,500 cash.
April 24
Pay $1,300 on the note from Hoosier Corporation.
April 26
Collect $7,100 on account from customers.
April 28
Pay $1,700 to the local utility company for April gas and electricity.
April 30
Pay $3,200 rent for the month of April.
Required:
1. Record each transaction.
2. Post each transaction to the appropriate T-accounts.
3. Calculate the balance of each account at April 30. (Hint: Be sure to include the balance at the
beginning of April in each T-account.)
4. Prepare a trial balance as of April 30.
109
236) Baker Incorporated specializes in training and veterinary services for household pets, such
as cats, dogs, birds, lizards, and fish. After the first 11 months of operations in 2021, Baker has
the following account balances.
Account Title
Debits
Credits
Cash
$13,300
Supplies
2,600
Prepaid rent
4,800
Equipment
82,100
Buildings
200,000
Accounts payable
$9,500
Deferred revenue
3,400
Common stock
145,000
Retained earnings
50,200
Dividends
9,000
Service revenue
250,000
Salaries expense
100,000
Advertising expense
15,600
Utilities expense
30,700
Totals
458,100
$458,100
The following transactions occur during December 2021:
December 1-31
Throughout the month, Baker provides services to customers for
cash, $25,400.(Hint: Record the entire month’s services in a single
entry.)
December 4
Purchase pet supplies on account, $2,700.
December 8
Pay for fliers to be distributed to local residences to advertise the
company’s services, $3,100.
December 9
Pay for supplies purchased on December 4.
December 12
Issue additional shares of common stock for cash, $6,000.
December 16
Pay cash on accounts payable, $6,600.
December 19
Purchase equipment with cash, $7,800.
December 22
Pay utilities for December, $4,400.
December 24
Receive cash from customers for services to be provided next
January, $2,500.
December 27
One of Baker’s trainers takes a part-time job at the zoo and earns a
salary of $1,300. The zoo and Baker are separate companies.
December 30
Pay employees’ salaries for the current month, $10,000.
December 31
Pay dividends to stockholders, $3,000.
110
Required:
1. Record each transaction.
2. Post each transaction to the appropriate T-accounts.
3. Calculate the balance of each account at December 31. (Hint: Be sure to include the balance at
the beginning of December in each T-account.)
4. Prepare a trial balance as of December 31.
113
114
237) Below are the account balances of Heron Company at the end of November.
Accounts
Balances
Cash
$12,000
Accounts Receivable
?
Rent Expense
1,000
Supplies
5,000
Equipment
19,000
Accounts Payable
7,000
Service Revenue
40,000
Utilities Payable
1,000
Deferred Revenue
6,000
Common Stock
19,000
Utilities Expense
2,000
Retained Earnings
15,000
Salaries Payable
2,000
Salaries Expense
9,000
Insurance Expense
6,000
Advertising Expense
1,000
Supplies Expense
10,000
Dividends
3,000
Prepaid Insurance
4,000
Legal Fees Expense
6,000
Required:
Prepare a trial balance by placing amounts in the appropriate debit or credit column and
determining the balance of the Accounts Receivable account.
115
238) Describe the external events and give two examples.
116
239) Describe the six steps in the measurement process of external transactions.
240) Explain what it means that external transactions have a dual effect.