1. d.
2. b.
3. a.
4. e.
5. c.
Assets =Liabilities +Stockholders’ Equity
1. Increase =No effect +Increase
2. Decrease =No effect +Decrease
3. Increase =Increase +No effect
Chapter 2
The Accounting Cycle: During the Period
EXERCISES
Exercise 2-1
Exercise 2-2
1. Pay for rent in the current
Assets decrease Stockholders’
2. Purchase equipment for
One asset (equipment) increases and
3. Purchase office supplies on
Assets increase Liabilities
4. Provide services for $20,000
Assets increase Stockholders’
5. Pay workers’ salaries of $5,000
Assets decrease Stockholders’
6. Receive $15,000 from
One asset (cash) increases and another
7. Receive cash of $5,000 in
Assets increase Liabilities increase
Exercise 2-3
Dual Effect
1. Pay dividends of $2,000 to
Assets
Stockholders’
2. Purchase a building for $60,000 cash. One asset (building) increases and
another asset (cash) decreases
3. Pay advertising of $1,000 for the
Assets
Stockholders’
4. Purchase land for $25,000 by issuing
Assets
Liabilities
5. Provide services to customers for
Assets
Stockholders’
6. Issue common stock for $50,000. Assets
Stockholders’
Transaction Balance
Retained earnings, April 1 $15,200
1. Issue common stock for cash, $12,000 0
2. Provide services to customers on account, $9,800. +9,800
Exercise 2-4
Dual Effect
Exercise 2-5
6. Pay workers’ salaries for April, $3,600. −3,600
7. Pay dividends to stockholders, $2,400. −2,400
Retained earnings, April 30 $21,500
Debit or Credit Account
1. Debit Cash
2. Credit Service Revenue
3. Debit Salaries Expense
4. Credit Accounts Payable
5. Debit Equipment
6. Credit Retained Earnings
7. Debit Utilities Expense
8. Debit Accounts Receivable
9. Debit Dividends
10. Credit Common Stock
Account
Debited
Account
Credited
Example: Purchase equipment in exchange for
cash.
Equipment Cash
1. Provide services to customers on account. Accounts
Receivable
Service
Revenue
2. Purchase land for cash. Land Cash
3. Purchase supplies on account. Supplies Accounts
Payable
4. Pay workers’ salaries for the current month. Salaries
Expense
Cash
5. Purchase advertising for the current month. Advertising Cash
Exercise 2-6
Exercise 2-7
Payable
(1) Debit Credit
Prepaid Insurance 1,800
(2)
Buildings 50,000
(3)
Utilities Expense 1,200
(4)
Accounts Payable 2,400
(5)
Accounts Receivable 16,600
Exercise 2-8
February 2 Debit Credit
Accounts Receivable 4,500
February 7
Cash 4,200
February 14
Cash 10,000
February 15
Salaries Expense 2,750
February 25
Repairs and Maintenance Expense 2,200
Exercise 2-9
1. Receive cash by issuing a note payable, $8,600.
2. Receive cash from customers on account, $1,900.
Exercise 2-10
February 28
Equipment 5,200
March 1 Debit Credit
Cash 21,300
March 5
Cash 11,000
March 10
Cash 14,600
March 15
Salaries Expense 1,190
March 22
Prepaid Rent 15,700
March 27
Dividends 9,000
Exercise 2-11
March 28
Supplies 3,800
Corrections
External Transaction Account Titles Debit Credit
1. Provider services to customers on
Accounts Receivable 1,300
2. Pay advertising for the current period,
$1,100.
Advertising Expense 1,100
Cash 1,100
3. Receive cash of $2,500 from a bank
Cash 2,500
4. Pay cash dividend of $1,000 to
Dividend 1,000
5. Pay for workers salaries in the current
Salaries Expense 1,800
Exercise 2-13
Corrections
External Transaction Account Titles Debit Credit
1. Provider services to customers for
Cash 1,300
2. Pay advertising for the current period,
Advertising Expense 1,100
3. Receive cash of $2,500 from
Cash 2,500
4. Dividend 1,000
Exercise 2-12
stockholders.
5. Pay for rent in the current period,
Rent Expense 1,800