Chapter 2 – Analyzing Transactions
206. On December 1, JumpStart Company provides $2,800 in services to clients.
(a) Journalize this event as if the clients had paid cash at the time the services were rendered.
(b)(1) Journalize this event as if the clients had been rendered the services on account.
(b)(2) Assume that the clients paid $1,200 of the amount on account on December 30. Journalize this transaction.
Chapter 2 – Analyzing Transactions
207. Analyze the effect of the following transactions on the accounting equation.
(a)
The company paid $725 to a vendor for supplies purchased previously on account.
(b)
The company performed $850 of services and billed the customer.
(c)
The company received a utility bill for $395 and will pay it next month.
(d)
The company paid dividends of $145.
(e)
The company paid $315 in salaries to its employees.
(f)
The company collected $730 of cash from its customers on account.
Some of the possible effects of a transaction on the accounting equation are listed below:
(1)
Assets, Dr.; Assets, Cr.
(2)
Assets, Dr.; Stockholders’ Equity, Cr.
(3)
Assets, Dr.; Liabilities, Cr.
(4)
Assets, Dr.; Revenues, Cr.
(5)
Liabilities, Dr.; Assets, Cr.
(6)
Dividends, Dr.; Assets, Cr.
(7)
Expenses, Dr.; Assets, Cr.
(8)
Expenses, Dr.; Liabilities, Cr.
Put the appropriate letter next to each transaction.
Chapter 2 – Analyzing Transactions
208. Prepare a journal entry on October 12 for the fees earned on account, $14,600. Omit explanation.
Oct. 12
Accounts Receivable
209. State for each account whether it is likely to have (a) debit entries only, (b) credit entries only, or (c) both debit and
credit entries when recording business transactions during the month. Also, indicate the normal balance of each account.
1.
Fees Earned
4.
Supplies
2.
Utilities Expense
5.
Cash
3.
Accounts Payable
6.
Accounts Receivable
6. Both debit and credit entries, normal debit balance
Chapter 2 – Analyzing Transactions
210. The bookkeeper for Brockton Industries prepared the following journal entries and posted the entries to the general
ledger as indicated in the T accounts presented. Assume that the dollar amounts and the descriptions of the entries are
correct.
July
3
Accounts Receivable
1,000
Service Revenue
1,000
Customers were billed for services
completed.
11
Cash
500
Accounts Receivable
500
Payment is received from a customer
billed for services on July 3.
12
Office Supplies
600
Accounts Payable
600
Purchased office supplies on account;
payment is due in 30 days.
25
Office Furniture
700
Cash
700
Payment is made for office furniture
received on July 25.
ACCOUNTS RECEIVABLE
SERVICE REVENUE
7/3
1,000
7/3
1,000
7/11
500
CASH
ACCOUNTS PAYABLE
7/11
500
7/25
700
7/12
600
OFFICE SUPPLIES
OFFICE FURNITURE
7/12
600
7/25
700
Required: If you assume that all journal entries have been recorded correctly, use the above information to:
(1) Identify the postings to the general ledger that were made incorrectly.
(2) Describe how each incorrect posting should have been made.
Chapter 2 – Analyzing Transactions
211. Journalize the entries to correct the following errors:
(a)
A purchase of supplies for $500 on account was recorded and posted as a debit to
Supplies for $200 and as a credit to Accounts Receivable for $200.
(b)
A receipt of $2,500 from fees earned was recorded and posted as a debit to Fees
Earned for $2,500 and a credit to Cash for $2,500.
Accounts Receivable
212. On November 30, the company accountant discovers that $550 of a transaction recording the purchase of office
supplies was really office equipment. Prepare the journal entry to correct this situation.
Nov. 30
Office Equipment
213. The following errors took place in journalizing and posting transactions:
a.
Dividends were recorded as a debit to Office Expense and a credit to Cash.
b.
Accounts receivable payment for $7,800 was recorded as a debit to Cash and a
credit to Fees Earned.
Journalize the entries to correct the errors. Omit the explanations.
Chapter 2 – Analyzing Transactions
Fees Earned
214. For each of the following errors, considered individually, indicate whether the error would cause the trial balance
totals to be unequal. If the error would cause the trial balance totals to be unequal, indicate whether the debit or credit
total is higher and by how much.
A.
Payment of a cash dividend $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.
The totals are equal.
The totals are unequal. The credit total is higher by $1,800.
The totals are unequal. The credit total is higher by $6,000.
Chapter 2 – Analyzing Transactions
215. 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
Common Stock
110,000
Dividends
18,500
Service Revenue
236,600
Salary Expense
98,930
Miscellaneous Expense
4,970
424,020
424,020
Cash
Accounts Receivable
Prepaid Insurance
Equipment
Accounts Payable
Salaries Payable
Common Stock
Dividends
Service Revenue
Salary Expense
Miscellaneous Expense
Chapter 2 – Analyzing Transactions
216. 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
Common Stock
17,800
Supplies
3,125
Dividends
7,500
Supplies Expense
1,700
Equipment
14,500
Utilities Expense
4,000
Miscellaneous Expense
850
Cash
Accounts Receivable
Supplies
Equipment
Accounts Payable
Common Stock
Dividends
Fees Earned
Salary Expense
Rent Expense
Utilities Expense
Supplies Expense
Miscellaneous Expense
Chapter 2 – Analyzing Transactions
217.
(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
Trial Balance
For Month Ending April 30
Cash
19,475
Accounts Receivable
?
Supplies
1,000
Equipment
15,000
Prepaid Insurance
500
Accounts Payable
2,500
Common Stock
17,000
Dividends
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
(a)
(1)
(2)
The Cash balance should be a debit.
(3)
The Accounts Receivable balance is missing.
(4)
The Supplies balance should be a debit.
(5)
The Prepaid Insurance balance should be a debit and this account should
follow Supplies.
(6)
The Common Stock balance should be a credit.
(7)
The Dividends balance should be a debit.
(8)
Rent Expense should be a debit.
(9)
Utilities Expense should appear after Supplies Expense.
(10)
The trial balance does not balance.
($69,100 total credits − $66,025 corrected debits).
Chapter 2 – Analyzing Transactions
218. 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:
(1)
A dividend of $3,000 cash to shareholders was recorded by a debit of $3,000 to
Salary Expense and a credit of $3,000 to Cash.
(2)
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.
(3)
A purchase of equipment for $3,450 on account was not recorded.
(4)
A $870 receipt on account was recorded as a $870 debit to Cash and a $780
credit to Accounts Receivable.
(5)
A payment of $1,530 cash on account was recorded only as a credit to Cash.
(6)
Cash sales of $8,500 were recorded as a credit of $8,500 to Cash and a credit
of $8,500 to Fees Earned.
(7)
The debit to record a $4,000 cash receipt on account was posted twice; the
credit was posted once.
(8)
The credit to record a $300 cash payment on account was posted twice; the
debit was posted once.
(9)
The debit balance of $7,400 in Accounts Receivable was recorded in the trial
balance as a debit of $7,200.
Difference in Totals
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
Chapter 2 – Analyzing Transactions
Use the information below to answer the question that follows.
All nine transactions for Ralston Sports Co. for September, the first month of operations, are recorded in the following T
accounts:
Cash
Common Stock
(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
Dividends
(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
219. Prepare a trial balance, listing the accounts in their proper order.
Cash
Accounts Receivable
Supplies
Equipment
Accounts Payable
Common Stock
Dividends
Fees Earned
Operating Expense
Chapter 2 – Analyzing Transactions
220. 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.
Sales
Wage expenses
Rent expenses
Utilities expenses
Total operating expenses
expenses, resulting in a small increase in net income.
221. 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’ 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.
Stockholders’ Equity
d.
Revenue
e.
Expenses
DIFFICULTY:
Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES:
FNMN.WARD.17.02-01 – LO: 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
222. Unearned Rent
223. Prepaid Insurance
224. Fees Earned
Sales
DIFFICULTY:
Bloom’s: Applying
LEARNING OBJECTIVES:
225. Patents
226. Dividends
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:
FNMN.WARD.17.02-02 – LO: 02–02
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.02 – GAAP
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
227. Common Stock
228. Accounts Receivable
229. Accounts Payable
230. Interest Revenue
231. Copyrights
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:
FNMN.WARD.17.02-04 – LO: 02–04
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.02 – GAAP
ACCT.ACBSP.APC.06 – Recording Transactions
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
Chapter 2 – Analyzing Transactions
232. Balance incorrectly computed.
233. Debit or credit posting omitted.
234. Wrong amount posted to an account.
235. Trial balance column incorrectly added.
236. Balance entered on wrong side of account.
237. Amount incorrectly entered on trial balance.
238. Balance entered in wrong trial balance column or omitted.
239. Debit posted as credit, or vice versa.