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Exercise 2-8 (30 minutes)
Cash Photography Equipment
20 3,331 5 880
31 675 Common Stock
Office Supplies Photography Fees Earned
Prepaid Insurance Utilities Expense
POSE-FOR-PICS
Trial Balance
August 31
Debit Credit
Cash.................................................. $ 6,176
Office supplies................................. 880
Prepaid insurance............................ 2,100
Totals................................................. $43,331 $43,331
Exercise 2-9 (30 minutes)
a. Cash............................................................................ 100,750
Common Stock................................................... 100,750
Owner invested in the business for stock.
c. Office Equipment....................................................... 10,050
Accounts Payable.............................................. 10,050
Purchased office equipment on credit.
e. Accounts Payable..................................................... 10,050
Cash.................................................................... 10,050
Made payment toward account payable.
Paid for this period’s rental charge.
h. Cash............................................................................ 1,125
Accounts Receivable......................................... 1,125
Received cash toward an account receivable.
Financial and Managerial Accounting, 6th Edition
70
Exercise 2-9 (concluded)
Cash Accounts Payable
(i) 10,000
Balance 94,850 Common Stock
Balance 100,750
Accounts Receivable Dividends
(f) 2,700 (h) 1,125 (i) 10,000
Office Supplies Fees Earned
(b) 1,250 (d) 15,500
Office Equipment Rent Expense
(c) 10,050 (g) 1,225
Exercise 2-10 (15 minutes)
SPADE COMPANY
Trial Balance
May 31, 2015
Debit Credit
Cash.............................................. $ 94,850
Accounts receivable.................... 1,575
Office supplies............................. 1,250
Office equipment......................... 10,050
Accounts payable........................ $ 0
Exercise 2-11 (20 minutes)
Transactions that created expenses:
b. Salaries Expense......................................... 1,233
Cash........................................................ 1,233
[Note: Expenses are outflows or using up of assets (or the creation of
liabilities) that occur in the process of providing goods or services to
customers.]
Transactions a, c, and e are not expenses for the following reasons:
a. This transaction decreased assets in settlement of a previously
c. This transaction involves the purchase of an asset. The form of the
equity did not decrease.
e. This transaction is a distribution of cash to the owner. Even though
providing goods or services to customers.
Exercise 2-12 (20 minutes)
Transactions that created revenues:
b. Accounts Receivable.......................................... 2,300
Services Revenue......................................... 2,300
Provided services on credit.
[Note: Revenues are inflows of assets (or decreases in liabilities)
received in exchange for goods or services provided to customers.]
Transactions that did not create revenues along with the reasons are:
a. This transaction brought in cash, but this is an owner investment.
e. This transaction changed the form of the asset from accounts
f. This transaction brought in cash and increased assets, but it also
provided to generate revenue).
Exercise 2-13 (25 minutes)
a. Belle created a new business and invested $6,000 cash, $7,600 of
equipment, and $12,000 in automobiles in exchange for stock.
c. Paid $900 cash for office supplies.
e. Received $4,500 cash for delivery services provided.
g. Paid $820 cash for gas and oil expenses.
Exercise 2-14 (30 minutes)
a. Cash............................................................................ 6,000
Equipment.................................................................. 7,600
Owner investment in company for stock.
b. Prepaid Insurance..................................................... 4,800
c. Office Supplies.......................................................... 900
d. Office Supplies.......................................................... 300
e. Cash............................................................................ 4,500
f. Accounts Payable..................................................... 1,600
g. Gas and Oil Expense................................................. 820
Exercise 2-15 (20 minutes)
Calculation of change in equity for part a through part d
Assets -Liabilities =Equity
Beginning of the year........... $ 60,000 - $20,000 = $40,000
Net increase in equity.......... $29,000
a. Net income.......................................................... $ ?
Plus owner investments.................................... 0
Less dividends .................................................. (0 )
b. Net income.......................................................... $ ?
Plus owner investments.................................... 0
Less dividends ($1,250/mo. x 12 mo.).............. (15,000 )
without reducing net income.
c. Net income.......................................................... $ ?
Plus owner investment...................................... 55,000
Less dividends................................................... (0 )
d. Net income.......................................................... $ ?
Plus owner investment...................................... 35,000
Less dividends ($1,250/mo. X 12 mo.).............. (15,000 )
Exercise 2-16 (15 minutes)
HELP TODAY
Income Statement
For Month Ended August 31
Revenues
Consulting fees earned......................... $ 27,000
Expenses
Rent expense......................................... $ 9,550
Salaries expense................................... 5,600
Telephone expense............................... 860
Exercise 2-17 (15 minutes)
HELP TODAY
Statement of Retained Earnings
For Month Ended August 31
Retained earnings, July 31........................ $ 0
Add: Net income (from Exercise 2-16)...... 10,470
10,470
Exercise 2-18 (15 minutes)
HELP TODAY
Balance Sheet
August 31
Assets Liabilities
Cash............................... $ 25,360 Accounts payable................ $ 10,500
Accounts receivable.... 22,360
Office supplies.............. 5,250 Equity
* Amount from Exercise 2-17.
Exercise 2-19 (15 minutes)
Computations:
Equity, Dec. 31, 2014..............$ 0 $ 0 $ 0 $ 0
Owner's investments.............110,000 42,000 87,000 210,000
Dividends................................(28,000) (47,000) (10,000) (55,000)
Exercise 2-20 (20 minutes)
Description
(1)
Difference
between
Debit and
Credit
Columns
(2)
Column
with the
Larger
Total
(3)
Identify
account(s)
incorrectly
stated
(4)
Amount that account(s)
is overstated or
understated
a. $3,600 debit to Rent
Expense is posted as
a $1,340 debit.
$2,260 Credit Rent Expense Rent Expense is
understated by $2,260
b. $6,500 credit to Cash
is posted twice as two
credits to Cash.
$6,500 Credit Cash Cash is understated by
$6,500
f. $5,850 credit to
Services Revenue is
posted as a $585
credit.
$5,265 Debit Services
Revenue
Services Revenue is
understated by $5,265
g. $1,390 debit to Store
Supplies is not
posted.
$1,390 Credit Store
Supplies
Store Supplies is
understated by $1,390
