Chapter 3 4 Cash Asset Account Debit Increases Credit Decreases

Document Type
Test Prep
Book Title
Financial Accounting-- Binder Ready Version: Tools for Business Decision Making 8th Edition
Authors
Donald E. Kieso, Jerry J. Weygandt, Paul D. Kimmel
The Accounting Information System
FOR INSTRUCTOR USE ONLY
3-61
Ex. 241
Under a double-entry system, show how the entry in each statement is entered in the ledger by
using debit or credit to indicate the increase or decrease in the affected account.
Debit or Credit
1. An increase in Salaries and Wages Expense. __________________
2. An increase in Accounts Payable. __________________
3. An increase in Prepaid Insurance. __________________
4. An increase in Common Stock. __________________
5. A increase in Supplies. __________________
6. An increase in Dividends. __________________
7. An increase in Service Revenue. __________________
8. A decrease in Accounts Receivable. __________________
9. An increase in Rent Expense. __________________
10. A decrease in Equipment. __________________
Test Bank for Financial Accounting: Tools for Business Decision Making, Eighth Edition
3-62
Ex. 242
For the accounts listed below, indicate if the normal balance of the account is a debit or credit.
Normal Balance
Accounts Debit or Credit
1. Service Revenue _________________
2. Rent Expense _________________
3. Accounts Receivable _________________
4. Accounts Payable _________________
5. Common Stock _________________
6. Supplies _________________
7. Insurance Expense _________________
8. Dividends _________________
9. Buildings _________________
10. Notes Payable _________________
Ex. 243
During an accounting period, a business has numerous transactions affecting each of the
following accounts. 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.
(1) Advertising Expense (6) Dividends
(2) Service Revenue (7) Cash
(3) Accounts Payable (8) Salaries and Wages Expense
(4) Accounts Receivable (9) Notes Payable
(5) Common Stock (10) Insurance Expense
The Accounting Information System
FOR INSTRUCTOR USE ONLY
3-63
Ex. 244
Eight transactions are recorded in the following T-accounts:
Cash
Accounts Receivable
(1)
35,000
3,500
(5)
27,500
(7)
22,500
(7)
22,500
1,950
2,225
8,000
4,500
Supplies
Equipment
(3)
1,950
(2)
13,500
Common Stock
Service Revenue
35,000
(5)
27,500
Accounts Payable
Dividends
(6)
8,000
10,000
(8)
4,500
Salaries and Wages Expense
(4)
2,225
Indicate for each debit and each credit: (a) whether an asset, liability, common stock, dividends,
revenue, or expense account was affected and (b) whether the account was increased (+) or ()
decreased. Answers should be presented in the following chart form:
Transaction Account Debited Account Credited
No. Type Effect Type Effect
___________________________________________________________________________
(1) (Example) Asset + Common Stock +
___________________________________________________________________________
(2)
___________________________________________________________________________
(3)
___________________________________________________________________________
(4)
___________________________________________________________________________
(5)
___________________________________________________________________________
(6)
___________________________________________________________________________
(7)
___________________________________________________________________________
(8)
Test Bank for Financial Accounting: Tools for Business Decision Making, Eighth Edition
FOR INSTRUCTOR USE ONLY
3-64
Ex. 245
For each of the following accounts indicate (a) the type of account (Asset, Liability, Stockholders’
Equity, Revenue, and Expense), (b) the debit and credit effects, and (c) the normal account
balance.
Example
0. Cash a. Asset account
b. Debit increases, credit decreases
c. Normal balance - debit
Accounts
1. Accounts Payable 5. Service Revenue
2. Accounts Receivable 6. Insurance Expense
3. Common Stock 7. Notes Payable
4. Dividends 8. Equipment
The Accounting Information System
FOR INSTRUCTOR USE ONLY
3-65
Ex. 246
Journalize the following business transactions in general journal form. Identify each transaction
by number. You may omit explanations of the transactions.
1. Stockholders invest $40,000 in cash in starting a real estate office operating as a
corporation.
2. Purchased $500 of supplies on credit.
3. Purchased equipment for $25,000, paying $3,500 in cash and signed a 30-day, $21,500,
note payable.
4. Real estate commissions billed to clients amount to $4,000.
5. Paid $700 in cash for the current month's rent.
6. Paid $250 cash on account for office supplies purchased in transaction 2.
7. Received a bill for $800 for advertising for the current month.
8. Paid $2,500 cash for office salaries.
9. Paid $1,200 cash dividends to stockholders.
10. Received a check for $2,000 from a client in payment on account for commissions billed in
transaction 4.
Test Bank for Financial Accounting: Tools for Business Decision Making, Eighth Edition
FOR INSTRUCTOR USE ONLY
3-66
Ex. 247
Journalize the following business transactions in general journal form. Identify each transaction
by number. You may omit explanations of the transactions.
1. Received $50,000 from stockholders.
2. Purchased equipment for $75,000, paying $15,000 in cash and giving a note payable for
the remainder.
3. Paid $3,000 rent for the month.
4. Recorded $12,500 of services provided on account.
5. Paid wages of $9,500.
6. Received $7,000 in cash for services provided.
7. Collected $2,000 from customers on account.
The Accounting Information System
FOR INSTRUCTOR USE ONLY
3-67
Ex. 248
Transactions for the Hartman Company for the month of November are presented below.
Journalize each transaction and identify each transaction by number. You may omit journal
explanations.
1. Stockholders invested an additional $40,000 cash in the business.
2. Purchased land costing $18,000 for cash.
3. Purchased equipment costing $45,000 for $4,500 cash and the remainder on credit.
4. Purchased supplies on account for $800.
5. Paid $3,000 for a one-year insurance policy.
6. Received $2,000 cash for services performed.
7. Received $5,000 for services previously performed on account.
8. Paid wages to employees for $2,500.
9. Paid dividends to stockholders of $400.
Test Bank for Financial Accounting: Tools for Business Decision Making, Eighth Edition
3-68
Ex. 249
This information relates to Hanshew Real Estate Agency.
Oct. 1 Stockholders invested $35,000 in exchange for common stock of the corporation.
2 Hires an administrative assistant at an annual salary of $36,000.
3 Buys equipment for $3,500 on account.
6 Sells a house and lot for M Springer; commissions due from Springer, $10,000 (not
paid by Springer at this time).
10 Receives cash of $140 as commission for acting as rental agent renting an
apartment.
27 Pays $700 on account for the equipment purchased on October 3.
30 Pays the administrative assistant $3,000 in salary for October.
Instructions
(a) Journalize the transactions. Do not provide explanations.
(b) Post the transactions to T accounts.
The Accounting Information System
FOR INSTRUCTOR USE ONLY
3-69
Solution 249 (Cont.)
Ex. 250
These T accounts summarize the ledger of Garner Gardening Company Inc. at the end of the first
month of operations, April 2017.
Cash
Unearned Service Revenue
Apr.
1
20,000
Apr.
15
1,200
Apr.
30
900
12
700
25
3,500
29
800
30
900
Accounts Receivable
Common Stock
Apr.
7
3,400
Apr.
29
800
Apr.
1
20,000
Supplies
Service Revenue
Apr.
4
5,700
Apr.
7
3,400
12
700
Account Payable
Salaries and Wages Expense
25
3,500
Apr.
4
5,700
Apr.
15
1,200
Test Bank for Financial Accounting: Tools for Business Decision Making, Eighth Edition
FOR INSTRUCTOR USE ONLY
3-70
Ex. 250 (Cont.)
Instructions
(a) Prepare in the order they occurred the journal entries (including explanations) that resulted
in the amounts posted to the accounts.
(b) Prepare a trial balance at April 30, 2017.
The Accounting Information System
FOR INSTRUCTOR USE ONLY
3-71
Solution 250 (Cont.)
Ex. 251
The transactions of the Speedy Delivery Service are recorded in the general journal below. You
are to post the journal entries to the accounts in the general ledger. After all entries have been
posted, you are to prepare a trial balance on the form provided.
General Journal
____________________________________________________________________________
Date Account Titles and Explanation Debit Credit
____________________________________________________________________________
2017
Sept. 1 Cash 25,000
Common Stock 25,000
(Stockholders invested cash in business)
4 Equipment 60,000
Cash 10,000
Notes Payable 50,000
(Paid cash and issued 2-year, 6%, note for
delivery trucks)
8 Rent Expense 1,000
Cash 1,000
(Paid September rent)
15 Prepaid Insurance 1,400
Cash 1,400
(Paid one-year liability insurance)
18 Cash 4,500
Service Revenue 4,500
(Received cash for delivery services)
Test Bank for Financial Accounting: Tools for Business Decision Making, Eighth Edition
FOR INSTRUCTOR USE ONLY
3-72
Ex. 251 (Cont.)
20 Salaries and Wages Expense 500
Cash 500
(Paid salaries for current period)
25 Utilities Expense 100
Accounts Payable 100
(Received a bill for September utilities)
30 Dividends 750
Cash 750
(Paid dividends)
30 Accounts Receivable 1,000
Service Revenue 1,000
(Billed customer for delivery service)
General Ledger
Cash
Accounts Receivable
Prepaid Insurance
Equipment
Accounts Payable
Notes Payable
The Accounting Information System
FOR INSTRUCTOR USE ONLY
3-73
Ex. 251 (Cont.)
Common Stock
Dividends
Service Revenue
Rent Expense
Salaries and Wages Expense
Utilities Expense
SPEEDY DELIVERY SERVICE
Trial Balance
September 30, 2017
Accounts
Credit
Debit
Test Bank for Financial Accounting: Tools for Business Decision Making, Eighth Edition
FOR INSTRUCTOR USE ONLY
3-74
The Accounting Information System
FOR INSTRUCTOR USE ONLY
3-75
Ex. 252
Selected transactions from the journal of Giambi Inc. during its first month of operations are
presented here.
Date
Account Titles
Debit
Credit
Aug. 1
Cash
10,000
Common Stock
10,000
10
Cash
1,700
Service Revenue
1,700
12
Equipment
12,200
Cash
1,200
Notes Payable
11,000
25
Accounts Receivable
2,500
Service Revenue
2,500
31
Cash
600
Accounts Receivable
600
Test Bank for Financial Accounting: Tools for Business Decision Making, Eighth Edition
FOR INSTRUCTOR USE ONLY
3-76
Ex. 252 (Cont.)
Instructions
(a) Post the transactions to T-accounts.
(b) Prepare a trial balance at August 31, 2017.

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