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B-1
SOLUTIONS TO APPENDIX B
1-1
Event Number
Account Debited
Account Credited
a.
Cash
Common Stock
b.
Cash
Unearned Revenue
c.
Accounts Receivable
Service Revenue
d.
Accounts Payable
Cash
e.
Prepaid Rent
Cash
f.
Operating Expenses
Cash
g.
Salaries Payable
Cash
h.
Supplies
Accounts Payable
i.
Dividends
Cash
j.
Unearned Revenue
Service Revenue
k.
Cash
Accounts Receivable
l.
Salaries Expense
Cash
m.
Rent Expense
Prepaid Rent
B-2
1-2
a.
Pearson Service Co.
General Journal
Event
Account Titles
Debit
Credit
1.
Cash
50,000
Common Stock
50,000
2.
Accounts Receivable
90,000
Service Revenue
90,000
3.
Salaries Expense
64,000
Cash
64,000
4.
Supplies
12,000
Accounts Payable
12,000
5.
Cash
78,000
Accounts Receivable
78,000
6.
Accounts Payable
8,500
Cash
8,500
7.
Dividends
5,000
Cash
5,000
8.
Supplies Expense
10,500
Supplies
10,500
B-3
1-2 (cont.)
b.
ASSETS
=
LIABILITIES
+
STOCKHOLDERS’
EQUITY
Cash
Accounts Payable
Common Stock
1. 50,000
3. 64,000
6. 8,500
4. 12,000
1. 50,000
5. 78,000
6. 8,500
Bal. 3,500
Bal. 50,000
7. 5,000
Bal. 50,500
Dividends
7. 5,000
Bal. 5,000
Accounts Receivable
2. 90,000
5. 78,000
Service Revenue
Bal. 12,000
2. 90,000
Bal. 90,000
Supplies
4. 12,000
8. 10,500
Bal. 1,500
Salaries Expense
3. 64,000
Bal. 64,000
Supplies Expense
8. 10,500
Bal. 10,500
c. Total Assets = $64,000 ($50,500 + $12,000 + $1,500)
B-4
1-3
a.
Complete Business Services
General Journal
Event
Account Titles
Debit
Credit
1.
Cash
30,000
Common Stock
30,000
2.
Accounts Receivable
25,000
Service Revenue
25,000
3.
Operating Expenses
10,000
Accounts Payable
10,000
4.
Cash
20,000
Service Revenue
20,000
5.
Land
8,000
Cash
8,000
6.
Cash
22,000
Accounts Receivable
22,000
7.
Cash
6,000
Unearned Revenue
6,000
8.
Supplies
900
Accounts Payable
900
9.
Accounts Payable
7,500
Cash
7,500
10.
Dividends
5,000
Cash
5,000
11.
Supplies Expense
500
Supplies
500
12.
Unearned Revenue
5,000
Service Revenue
5,000
B-5
B-6
1-3 (cont.)
b.
Complete Business Service
T-Accounts
ASSETS
=
LIABILITIES
+
STOCKHOLDERS’ EQUITY
Cash
Accounts Payable
Common Stock
Retained Earnings
Debit
Credit
Debit
Credit
Debit
Credit
Debit
Credit
1. 30,000
9. 7,500
3. 10,000
1. 30,000
-0-
4. 20,000
8. 900
Bal. 30,000
5. 8,000
Bal. 3,400
6. 22,000
7. 6,000
Unearned Revenue
Dividends
9. 7,500
Debit
Credit
Debit
Credit
10. 5,000
12. 5,000
7. 6,000
10. 5,000
Bal. 57,500
Bal. 1,000
Bal. 5,000
Service Revenue
Accounts Rec.
Debit
Credit
Debit
Credit
2. 25,000
2. 25,000
6. 22,000
4. 20,000
Bal. 3,000
12. 5,000
Bal. 50,000
Supplies
Operating Expense
Debit
Credit
Debit
Credit
8. 900
11. 500
3. 10,000
Bal. 400
Bal. 10,000
Land
Supplies Expenses
Debit
Credit
Debit
Credit
5. 8,000
11. 500
Bal. 8,000
Bal. 500
B-7
B-8
1-3 (cont.)
c.
Complete Business Service
Trial Balance
As of December 31
Account Titles
Debit
Credit
Cash
$ 57,500
Accounts Receivable
3,000
Supplies
400
Land
8,000
Accounts Payable
$ 3,400
Unearned Revenue
1,000
Common Stock
30,000
Dividends
5,000
Service Revenue
50,000
Operating Expenses
10,000
Supplies Expense
500
Totals
$84,400
$84,400
B-9
1-4
a.
Paradise Vacations
General Journal
Event
Account Titles
Debit
Credit
1.
Cash
20,000
Common Stock
20,000
2.
Supplies
800
Accounts Payable
800
3.
Prepaid Rent
4,200
Cash
4,200
4.
Accounts Receivable
28,000
Service Revenue
28,000
5.
Operating Expenses
12,500
Accounts Payable
12,500
6.
Cash
24,000
Accounts Receivable
24,000
7.
Accounts Payable
9,000
Cash
9,000
8.
Dividends
3,000
Cash
3,000
Adjusting Entries
9.
Supplies Expense ($800 − $150)
650
Supplies
650
10.
Rent Expense ($4,200 x 2/12)
700
Prepaid Rent
700
11.
Salaries Expense
3,600
Salaries Payable
3,600
B-10
1-4 (cont.)
b.
Paradise Vacations
T-Accounts
Assets
=
Liabilities
+
Stockholders’ Equity
Cash
Accounts Payable
Common Stock
1. 20,000
3. 4,200
7. 9,000
2. 800
1. 20,000
6. 24,000
7. 9,000
5. 12,500
Bal. 20,000
8. 3,000
Bal. 4,300
Bal. 27,800
Dividends
Salaries Payable
8. 3,000
Accounts Rec.
11. 3,600
Bal. 3,000
4. 28,000
6. 24,000
Bal. 3,600
Bal. 4,000
Service Revenue
4. 28,000
Supplies
Bal. 28,000
2. 800
9. 650
Bal. 150
Operating Expenses
5. 12,500
Prepaid Rent
Bal. 12,500
3. 4,200
10. 700
Bal. 3,500
Rent Expense
10. 700
Bal. 700
Salaries Expense
11. 3,600
Bal. 3,600
Supplies Expense
9. 650
Bal. 650
B-11
1-4 (cont.)
c.
Paradise Vacations
Trial Balance
December 31
Account Titles
Debit
Credit
Cash
$27,800
Accounts Receivable
4,000
Supplies
150
Prepaid Rent
3,500
Accounts Payable
$ 4,300
Salaries Payable
3,600
Common Stock
20,000
Dividends
3,000
Service Revenue
28,000
Operating Expenses
12,500
Rent Expense
700
Salaries Expense
3,600
Supplies Expense
650
Totals
$55,900
$55,900
B-12
1-4 (cont.)
d.
Paradise Vacations
Financial Statements
For the Year Ended December 31
Income Statement
Service Revenue
$28,000
Expenses
Operating Expenses
$12,500
Salaries Expense
3,600
Supplies Expense
650
Rent Expense
700
Total Expenses
(17,450)
Net Income
$10,550
Statement of Changes in Stockholders’ Equity
Beginning Common Stock
$ -0-
Plus: Stock Issued
20,000
Ending Common Stock
$20,000
Beginning Retained Earnings
-0-
Plus: Net Income
10,550
Less: Dividends
(3,000)
Ending Retained Earnings
7,550
Total Stockholders’ Equity
$27,550
B-13
1-4 (cont.)
Paradise Vacations
Balance Sheet
As of December 31
Assets
Cash
$27,800
Accounts Receivable
4,000
Supplies
150
Prepaid Rent
3,500
Total Assets
$35,450
Liabilities
Accounts Payable
$ 4,300
Salaries Payable
3,600
Total Liabilities
$ 7,900
Stockholders’ Equity
Common Stock
20,000
Retained Earnings
7,550
Total Stockholders’ Equity
27,550
Total Liabilities and Stockholders’
Equity
$35,450
Statement of Cash Flows
For the Year Ended December 31
Cash Flows From Operating Activities:
Inflow from Customers
$24,000
Outflow for Expenses
(13,200)
Net Cash Flow from Operating Activities
$10,800
Cash Flows From Investing Activities
-0-
Cash Flows From Financing Activities:
Inflow from Stock Issue
20,000
Outflow for Dividends
(3,000)
Net Cash Flow from Financing Activities
17,000
Net Change in Cash
27,800
B-14
Plus: Beginning Cash Balance
-0-
Ending Cash Balance
$27,800
