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Title: Exercise 2-8
QA_Ori:
Cash Photography Equipment
Aug. 1 6,500 Aug. 2 2,100 Aug. 1 33,50
0
Office Supplies Photography Fees Earned
Prepaid Insurance Utilities Expense
POSE-FOR-PICS
Trial Balance
August 31
Debit Credit
Cash................................................... $ 6,176
Office supplies.................................... 880
Prepaid insurance.............................. 2,100
Title: Exercise 2-9
QA_Ori:
100,75
Owner invested in the business.
b. Office Supplies 1,250
Cash 1,250
Purchased supplies with cash.
c. Office Equipment 10,050
Accounts Payable 10,050
Purchased office equipment on credit.
Owner withdrew cash for personal use.
Cash Accounts Payable
(a) 100,750 (b) 1,250 (e) 10,050 (c) 10,050
Balance 94,850 K. Spade, Capital
(a)
Accounts Receivable K. Spade, Withdrawals
Office Supplies Fees Earned
Office Equipment Rent Expense
Title: Exercise 2-10
QA_Ori:
SPADE COMPANY
Trial Balance
May 31, 2013
Debit Credit
Cash.......................................... $ 94,850
Accounts receivable.................. 1,575
Office supplies........................... 1,250
Transactions that did not create revenues along with the reasons are:
a. This transaction brought in cash, but this is an owner investment.
f. This transaction brought in cash and increased assets, but it also
Title: Exercise 2-12
QA_Ori:
Transactions that created expenses:
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 existing
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 equity
Title: Exercise 2-13
QA_Ori:
HELP TODAY
Income Statement
For Month Ended August 31
Revenues
Consulting fees earned $27,000
Expenses
Rent expense $9,550
Title: Exercise 2-14
QA_Ori:
HELP TODAY
Statement of Owner’s Equity
For Month Ended August 31
C. Camry, Capital, July 31 $2,000
Title: Exercise 2-15
QA_Ori:
HELP TODAY
Balance Sheet
31-Aug
Assets Liabilities
Cash $25,360 Accounts payable $10,500
* Amount from Exercise 2-14.
Title: Exercise 2-16
QA_Ori:
Calculation of change in equity for part a through part d
Assets - Liabilities = Equity
Beginning of the year............. $ 60,000 - $20,000 = $40,000
a. Net income........................................................... $ ?
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........................................................... $ ?
Net Income = $44,000
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
Title: Exercise 2-17
QA_Ori:
(a) (b) (c) (d)
Answers $(28,000) $42,000 $73,000 $(45,000)
Computations:
Title: Exercise 2-18
QA_Ori:
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.
Title: Exercise 2-19
QA_Ori:
a
. Cash 6,000
Owner investment in company.
b
c. Office Supplies 900
Cash 900
Purchased supplies with cash.
d
e
. Cash 4,500
Delivery Services Revenue 4,500
Received cash from customer for services provided.
Paid for gas and oil.
Title: Exercise 2-20
QA_Ori:
Description
(1)
Differenc
e
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
Rent Expense is
b. $6,500 credit to
to Cash.
c. $10,900 debit to the
Owner,
Owner, Capital is
d. $2,050 debit to
Prepaid Insurance
is posted as a debit
to Insurance
Expense.
$0 ––
Prepaid
Insurance
Insurance
Expense
Prepaid Insurance is
understated by
$2,050
Insurance Expense
is overstated by
$2,050
credit.
g. $1,390 debit to
Store Supplies is
not posted.
$1,390 Credit Store
Supplies
Store Supplies is
understated by
$1,390
Title: Exercise 2-21
QA_Ori:
a. The debit column is correctly stated because the erroneous debit (to
b. The credit column is understated by $37,900 because Accounts Payable was
debited — it should have been credited.
