Chapter 2: Analyzing Transactions
219.
For each of the following errors, considered individually, indicate whether the error would cause the trial balance
tot
to be unequal. If the error would cause the trial balance totals to be unequal, indicate whether the debit or
credit tot
is higher and by how much.
A.
Payment of a cash withdrawal of $6,800 was journalized and posted as a
debit
of $8,600 to Salaries Expense and a credit of $8,600 to Cash.
B.
A fee of $9,780 earned was debited to Accounts Receivable for $7,980 and
credited to Fees Earned for $9,780.
C.
A payment of $3,000 to a creditor was posted as a credit of $3,000 to Accounts
Payable and a credit of $3,000 to Cash.
220.
Below is the unadjusted trial balance for Dawson Designs.
REQUIRED:
(1)
Identify the errors in the trial balance. All accounts have normal balances.
(2)
Prepare a corrected trial balance.
Dawson Designs Co.
Unadjusted Trial Balance
For the Month of January
Debits
Credits
Cash
23,000
Accounts Receivable
49,700
Prepaid Insurance
11,300
Equipment
150,500
Accounts Payable
6,050
Salaries Payable
4,250
Tim Dawson, Capital
110,000
Tim Dawson, Drawing
18,500
Service Revenue
236,600
Salary Expense
98,930
Miscellaneous Expense
4,970
424,020
424,020
Chapter 2: Analyzing Transactions
Chapter 2: Analyzing Transactions
221.
Prepare a trial balance, listing the following accounts in proper sequence. The accounts (all normal balances)
were
taken from the ledger of Sophie Designs Co. on April 30.
Accounts Payable
$ 4,100
Rent Expense
$11,500
Accounts Receivable
3,450
Salary Expense
14,000
Cash
6,700
Fees Earned
45,425
Sophie Dawson, Capital
17,800
Supplies
3,125
Sophie Dawson, Drawing
7,500
Supplies Expense
1,700
Equipment
14,500
Utilities Expense
4,000
Miscellaneous Expense
850
Accounts Receivable
Supplies
Equipment
Accounts Payable
4,100
Sophie Dawson, Capital
17,800
Sophie Dawson, Drawing
Fees Earned
45,425
Salary Expense
Rent Expense
Utilities Expense
Supplies Expense
Miscellaneous Expense
Chapter 2: Analyzing Transactions
222. (a) List the errors in the following trial balance. All accounts have normal balances.
(b) What would be the new totals of the trial balance after errors are
corrected?
What would be the balance of Accounts Receivable?
Winslow’s Auto Body
19,475
Trial Balance
For Month Ending April 30
Cash
Accounts Receivable
?
Supplies
1,000
Equipment
15,000
Prepaid Insurance
500
Accounts Payable
2,500
Thad Winslow, Capital
17,000
Thad Winslow, Drawing
1,000
Fees Earned
49,600
Salary Expense
14,500
Rent Expense
9,000
Utilities Expense
1,400
Supplies Expense
3,900
Miscellaneous Expense
250
55,000
81,575
Chapter 2: Analyzing Transactions
223.
Answer the following questions for each of the errors listed below, considered individually:
a. Did the error cause the trial balance totals to be unequal?
b. What is the amount of the difference between the trial balance totals
(where
applicable)?
c. Which of the trial balance totals, debit or credit, is the larger
(where
applicable)?
Present your answers in columnar form, using the following headings:
Error Totals
Difference in Totals
Larger of Totals
(identifying number) (equal or unequal)
(amount)
(debit or credit)
Errors:
i. A withdrawal of $3,000 cash by the owner was recorded by a
debit of $3,000
to Salary Expense and a credit of $3,000 to Cash.
ii. A $650 purchase of supplies on account was recorded as a debit
of $1,650 to
Equipment and a credit of $1,650 to Accounts
Payable.
iii. A purchase of equipment for $3,450 on account was not recorded.
iv. A $870 receipt on account was recorded as a $870 debit to
Cash and a $780
credit to Accounts Receivable.
v. A payment of $1,530 cash on account was recorded only as a credit to Cash.
vi. Cash sales of $8,500 were recorded as a credit of $8,500 to Cash
and a credit
of $8,500 to Fees Earned.
vii. The debit to record a $4,000 cash receipt on account was
posted twice; the
credit was posted once.
viii. The credit to record a $300 cash payment on account was
posted twice; the
debit was posted once.
ix. The debit balance of $7,400 in Accounts Receivable was
recorded in the trial
balance as a debit of $7,200.
Chapter 2: Analyzing Transactions
224.
Set up T accounts for Cash; Accounts Receivable; Supplies; Accounts Payable; Clay Potter, Capital; Clay Potter,
Drawing; Professional Fees; and Operating Expenses.
a. In the T accounts, record the following transactions of Potter Pool Services for June,
identifying each entry by number:
i. Potter invested $12,500 cash in the business.
ii. Purchased supplies on account, $6,250.
iii. Paid operating expenses, $5,500.
iv. Billed clients for fees, $7,440.
v. Received cash from cash clients, $4,700.
vi. Paid creditors on account, $1,400.
vii. Received $3,100 from clients on account.
viii. Withdrew $1,500 cash for personal use.
b. Prepare a trial balance as of June 30 for Potter Pool Services.
c. Assuming that supplies expense (which has not been recorded) amounts to $1,500
for
June, determine the following:
i. Net income for the month.
ii. Owner’s equity as of June 30.
Chapter 2: Analyzing Transactions
Chapter 2: Analyzing Transactions
Exhibit 2-1
All nine transactions for Ralston Sports Co. for September, the first month of operations, are recorded in the
following T accounts:
Cash
James Ralston, Capital
(1)
25,000
(3)
12,500
(1)
25,000
(7)
11,900
(5)
7,600
(9)
9,700
(6)
10,500
(8)
7,000
Accounts Receivable
James Ralston, Drawing
(4)
9,900
(9)
9,700
(8)
7,000
Supplies
Fees Earned
(3)
12,500
(4)
9,900
(7)
11,900
Equipment
Operating Expense
(2)
9,500
(6)
10,500
Accounts Payable
(5)
7,600
(2)
9,500
225.
Refer to Exhibit 2-1. Prepare a trial balance, listing the accounts in their proper order.
Cash
Accounts Receivable
Supplies
Equipment
Accounts Payable
James Ralston, Capital
James Ralston, Drawing
Fees Earned
Operating Expense
Chapter 2: Analyzing Transactions
226.
Lewis Company has a condensed income statement as shown::
Year 2
Year 1
Sales
$178,400
$162,500
Wage expenses
$100,000
$92,500
Rent expenses
33,000
30,000
Utilities expenses
30,000
25,000
Total operating expenses
$163,000
$147,500
Net income
$15,400
$15,000
REQUIRED:
Prepare a horizontal analysis of Lewis Company’s income statements. Comment on the trends, both favorable and
unfavorable.
Chapter 2: Analyzing Transactions
227.
Nebraska Technologies has a condensed income statement as shown:
Year 2
Year 1
Sales
$158,400
$162,500
Wage expenses
$80,000
$92,500
Rent expenses
28,000
30,000
Utilities expenses
30,000
25,000
Total operating expenses
$138,000
$147,500
Net income
$20,400
$15,000
REQUIRED:
Prepare a horizontal analysis of Nebraska Technologies’s income statements. Comment on the trends, both
favorable and unfavorable.
Chapter 2: Analyzing Transactions
Match each of the following accounts with its proper account group from groups listed below.
a.
Assets
b.
Liabilities
c.
Owners’ Equity
d.
Revenue
e.
Expenses
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.02-01 – 02–01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP
ACCT.ACBSP.APC.09 – Financial Statements
ACCT.ACBSP.APC.13 – Long-term Assets Reporting
ACCT.ACBSP.APC.15 – Current Assets Reporting
ACCT.ACBSP.APC.16 – Current Liabilities Reporting
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
228.
Unearned Rent
229.
Prepaid Insurance
230.
Fees Earned
231.
Patents
232.
Chris Clark, Drawing
Chapter 2: Analyzing Transactions
For each of the following accounts, indicate whether its normal balance is on the credit side or the debit
side of
the T account.
a.
Credit side
b.
Debit side
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.02-02 – 02–02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
233.
John Smith, Capital
234.
Accounts Receivable
235.
Accounts Payable
236.
Interest Earned
Chapter 2: Analyzing Transactions
Several types of errors can be made during the journalizing and posting process. Match the following with
their
best description.
a.
Trial balance preparation errors
b.
Account balance errors
c.
Posting errors
DIFFICULTY: Challenging
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.02–04 – 02–04
ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 – GAAP
ACCT.ACBSP.APC.06 – Recording Transactions
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
238.
Balance incorrectly computed.
239.
Debit or credit posting omitted.
240.
Wrong amount posted to an account.
241.
Column incorrectly added.
242.
Balance entered on wrong side of account.
243.
Amount incorrectly entered on trial balance.
244.
Balance entered in wrong column or omitted.
Chapter 2: Analyzing Transactions
245.
Debit posted as credit, or vice versa.