Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
EXERCISES
Exercise 2-1 (10 minutes)
4 a. Prepare and analyze the trial balance.
Exercise 2-2 (10 minutes)
a. 5 “Three” d. 1 “Asset”
Exercise 2-3 (5 minutes)
Exercise 2-4 (15 minutes)
Type of Normal Increase
Account Account Balance (Dr. or Cr.)
a. Land............................................ asset debit debit
b. Cash........................................... asset debit debit
c. Legal Expense........................... expense debit debit
Exercise 2-5 (15 minutes)
Of the items listed, the following effects should be included:
a. $28,000 increase in a liability account.
Explanation: This transaction created $62,000 in revenue, which is the
value of the service provided. Payment is received in the form of a $10,000
increase in cash, an $80,000 increase in computer equipment, and a
$28,000 increase in its liabilities. The net value received by the company is
$62,000.
Exercise 2-6 (15 minutes)
a. Beginning accounts payable (credit)............................................. $152,000
Payments on accounts in October (debits)................................... $300 ,500
Sales on account in October (debits)............................................ $ 89 ,390
c. Beginning cash balance (debit).....................................................$ ?
Exercise 2-7 (25 minutes)
Aug. 1 Cash................................................................. 6,500
Photography Equipment................................. 33,500
Paid for August utilities.
Exercise 2-8 (30 minutes)
Cash Photography Equipment
Aug. 1 6,500 Aug. 2 2,100 Aug. 1 33,500
20 3,331 5 880
31 675 M. Harris, Capital
POSE-FOR-PICS
Trial Balance
August 31
Debit Credit
Cash................................................. $ 6,176
Office supplies................................ 880
Exercise 2-9 (30 minutes)
a. Cash.......................................................................... 100,750
K. Spade, Capital.............................................. 100,750
Owner invested in the business.
b. Office Supplies......................................................... 1,250
Cash.................................................................. 1,250
Purchased supplies with cash.
Owner withdrew cash for personal use.
Exercise 2-9 (concluded)
Cash Accounts Payable
(a) 100,750 (b) 1,250 (e) 10,050 (c) 10,050
Accounts Receivable K. Spade, Withdrawals
Office Supplies Fees Earned
Balance 18,200
Office Equipment Rent Expense
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
Exercise 2-11 (20 minutes)
Transactions that created expenses:
b. Salaries Expense........................................ 1,233
Paid utilities for the office.
[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
e. This transaction is a distribution of cash to the owner. Even though
0
Exercise 2-12 (20 minutes)
Transactions that created revenues:
Provided services on credit.
Provided services for cash.
[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.
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.
b. Paid $4,800 cash in advance for insurance coverage.
Exercise 2-14 (30 minutes)
a. Cash.......................................................................... 6,000
Owner investment in company.
Purchased insurance coverage.
Purchased supplies with cash.
d. Office Supplies......................................................... 300
Purchased supplies and equipment on credit.
Received cash from customer for services
provided.
Made payment on payables.
Paid for gas and oil.
Exercise 2-15 (20 minutes)
Calculation of change in equity for part a through part d
Assets -Liabilities =Equity
a. Net income........................................................ $ ?
Plus owner investments................................... 0
Since there were no additional investments or withdrawals, the net
income for the year equals the net increase in owner's equity.
b. Net income........................................................ $ ?
Plus owner investments................................... 0
The withdrawals were added back because they reduced equity
without reducing net income.
c. Net income........................................................ $ ?
The investment was deducted because it increased equity without
creating net income.
d. Net income........................................................ $ ?
The withdrawals were added back because they reduced equity
without reducing net income and the investments were deducted
because they increased equity without creating net income.
