Exercise 2-1 (LO 2-1)
1. d.
2. b.
3. a.
4. e.
5. c.
Exercise 2-2 (LO 2-2)
Assets =Liabilities +Stockholders’ Equity
1. Increase =No effect +Increase
2. Increase =Increase +No effect
3. Increase =No effect +Increase
* One asset (cash) increases while another asset (accounts receivable) decreases.
Exercise 2-3 (LO 2-2)
Dual Effect
1. Issue 10,000 shares of common stock
Assets
Stockholders’
2. Purchase land for $19,000. A note
Assets
Liabilities
3. Purchase storage containers for
One asset (containers) increases
EXERCISES
4. Hire three employees for $2,000 per
No effect on the accounting
5. Receive cash of $12,000 in rental fees
Assets
Stockholders’
6. Purchase office supplies for $2,000
Assets
Liabilities
7. Pay employees $6,000 for the first
Assets
Stockholders’
Exercise 2-4 (LO 2-2)
Dual Effect
1. Paint houses in the current month for
Assets
Stockholders’
2. Purchase painting equipment for
One asset (equipment) increases
3. Purchase office supplies on account
Assets
Liabilities
4. Pay employee salaries of $3,200 for
Assets
Stockholders’
5. Purchase advertising to appear in the
Assets
Stockholders’
6. Pay office rent of $4,400 for the
Assets
Stockholders’
7. Receive $10,000 from customers
One asset (cash) increases and another
8. Receive cash of $5,000 in advance
house painted in the following month.
Assets
Liabilities
Exercise 2-5 (LO 2-2)
Transaction Balance
Retained earnings, April 1 $13,000
1. Issue common stock for cash, $11,000 0
2. Provide services to customers on account, $8,500. +8,500
3. Provide services to customers in exchange for cash, $3,200. +3,200
4. Purchase equipment and pay cash, $7,600. 0
Exercise 2-6 (LO 2-3)
Debit or Credit Account
1. Debit Cash
2. Credit Service Revenue
3. Debit Salaries Expense
4. Credit Accounts Payable
Exercise 2-7 (LO 2-3)
Account
Debited
Account
Credited
Example: Purchase equipment in exchange for
cash.
Equipment Cash
1. Pay a cash dividend. Dividends Cash
2. Pay rent in advance for the next three months. Prepaid
3. Provide services to customers on account. Accounts
Service
4. Purchase office supplies on account. Supplies Accounts
5. Pay salaries for the current month. Salaries
Cash
6. Issue common stock in exchange for cash. Cash Common
7. Collect cash from customers for services provided
8. Borrow cash from the bank and sign a note. Cash Notes
9. Pay for the current month’s utilities. Utilities
10. Pay for office supplies purchased in (4) above. Accounts
Exercise 2-8 (LO 2-4)
(1) Debit Credit
Equipment 23,400
(2)
Cash 6,800
(3)
Rent Expense 1,300
(4)
Supplies 1,000
(5)
Salaries Expense 2,100
Exercise 2-9 (LO 2-4)
1. Purchase equipment with cash, $8,800.
2. Provide services to customers on account, $3,200.
Exercise 2-10 (LO 2-4)
February 2 Debit Credit
Advertising Expense 700
February 7
Supplies 1,300
February 14
Cash 2,900
February 15
Salaries Expense 900
February 25
Accounts Receivable 1,000
February 28
Utilities Expense 300
Exercise 2-11 (LO 2-4)
March 1 Debit Credit
Cash 21,000
March 5
Cash 9,000
March 10
Equipment 25,000
March 15
Advertising Expense 1,100
March 22
Accounts Receivable 18,000
March 27
Cash 13,000
March 28
Salaries Expense 6,000
Exercise 2-12 (LO 2-4)
Corrections
External Transaction Accounts Debit Credit
1. Owners invest $15,000 in the
Cash 15,000
2. Receive cash of $4,000 for services
Cash 4,000
3. Purchase office supplies on account,
Supplies 300
4. Pay $600 for next month’s rent. Prepaid Rent 600
5. Purchase office equipment with cash
Equipment 2,200
Note: Accounts in blue are corrected items.
Accounts in black need no correction.
Exercise 2-13 (LO 2-4)
Corrections
External Transaction Accounts Debit Credit
1. Pay cash dividends of $800 to
Dividends 800
2. Provide services on account for
Accounts Receivable 3,400
3. Pay a $500 utilities bill for the current
Utilities Expense 500
4. Receive cash of $400 from previously
Cash 400
5. Pay for supplies previously purchased
Accounts Payable 1,200
Note: Accounts in blue are corrected items.
Accounts in black need no correction.