Exercise 2-16 (15 minutes)
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Income Statement
For Month Ended August 31
Revenues
Consulting fees earned…………………… $ 27,000
Expenses
Rent expense…………………………………. $ 9,550
Exercise 2-17 (15 minutes)
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Statement of Owner’s Equity
For Month Ended August 31
C. Camry, Capital, July 31……………………. $ 0
Add: Investment by owner…………………. 102,000
Exercise 2-18 (15 minutes)
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Balance Sheet
August 31
Assets Liabilities
Cash………………………… $ 25,360 Accounts payable……………. $ 10,500
Accounts receivable…. 22,360
* Amount from Exercise 2-17.
Exercise 2-19 (15 minutes)
(a) (b) (c) (d)
Answers $(28,000) $42,000 $73,000 $(45,000)
Computations:
Equity, Dec. 31, 2014…………..$ 0 $ 0 $ 0 $ 0
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
c. $10,900 debit to the
Withdrawals account
Owner,
Capital
Owner, Capital is
understated by $10,900
posted.
Exercise 2-21 (15 minutes)
a. The debit column is correctly stated because the erroneous debit (to
Accounts Payable) is deducted from an account with a (larger assumed)
credit balance.
Exercise 2-22 (10 minutes)
HEINEKEN N.V.
Balance Sheet (in Euro millions)
December 31, 2013
Assets Equity and liabilities
Noncurrent assets…….. € 27,842 Total equity…………………….. € 12,356
Exercise 2-23 (15 minutes)
a.
Co. Liabilities / Assets =
Debt
Ratio
Net
Income /
Average
Assets = ROA
1 $11,765 $ 90,500 0.13 $20,000 $100,000 0.200
2 46,720 64,000 0.73 3,800 40,000 0.095
b. Company 3 relies most heavily on creditor (non-owner) financing with
c. Company 1 relies least on creditor (non-owner) financing at only 13%.
d. The companies with the highest debt ratios indicate the greatest risk. The
f. As an investor, one prefers high returns at low risk. Company 1 is the
PROBLEM SET A
Problem 2-1A (90 minutes)
Part 1
April 1 Cash……………………………………………………101 80,000
Prepaid twelve months’ rent.
3 Office Equipment…………………………………163 8,000
Office Supplies…………………………………….124 3,600
Accounts Payable…………………………201 11,600
Purchased equip. & supplies on credit.
6 Cash……………………………………………………101 4,000
Services Revenue………………………….403 4,000
Received cash for services.
Paid monthly utility bill.
Problem 2-1A (Continued)
Part 2
Cash Acct. No. 101
Date Explanation PR Debit Credit Balance
April 1 G1 80,000 80,000
2 G1 9,000 71,000
Accounts Receivable Acct. No. 106
Date Explanation PR Debit Credit Balance
April 9 G1 6,000 6,000
Office Supplies Acct. No. 124
Date Explanation PR Debit Credit Balance
Prepaid Insurance Acct. No. 128
Date Explanation PR Debit Credit Balance
Prepaid Rent Acct. No. 131
Date Explanation PR Debit Credit Balance
Office Equipment Acct. No. 163
Date Explanation PR Debit Credit Balance
Problem 2-1A (Continued)
Accounts Payable Acct. No. 201
Date Explanation PR Debit Credit Balance
K. Tanner, Capital Acct. No. 301
Date Explanation PR Debit Credit Balance
K. Tanner, Withdrawals Acct. No. 302
Date Explanation PR Debit Credit Balance
Services Revenue Acct. No. 403
Date Explanation PR Debit Credit Balance
April 6 G1 4,000 4,000
Utilities Expense Acct. No. 690
Date Explanation PR Debit Credit Balance
Problem 2-1A (Continued)
Part 3
LINKWORKS
Trial Balance
April 30
Debit Credit
Cash…………………………………………………………… $ 59,465
Accounts receivable……………………………………. 4,490
Office supplies……………………………………………. 4,200
Problem 2-2A (90 minutes)
Part 1
a. Cash……………………………………………………101 100,000
Owner invested cash and equipment.
b. Land……………………………………………………172 49,000
Purchased land with cash and note payable.
Purchased building.
Purchased 18-month insurance policy.
Collected cash for completed work.
Purchased equipment with cash and note
payable.
g. Accounts Receivable……………………………106 14,000
Purchased equipment on credit.