Exercise 2-14 (30 minutes)
a. Cash ………………………………………………………………… 6,000
Equipment ……………………………………………………….. 7,600
Automobiles …………………………………………………….. 12,000
Common Stock ………………………………………….. 25,600
Owner investment in company for stock.
Purchased insurance coverage.
Purchased supplies with cash.
Purchased supplies and equipment on credit.
Received cash from customer for services
provided.
Made payment on payables.
Paid for gas and oil.
Exercise 2-15 (20 minutes)
Calculation of change in equity for part a through part d
Assets
–
Liabilities
=
Beginning of the year ……….
$ 60,000
–
$20,000
=
End of the year ………………...
105,000
–
36,000
=
Net increase in equity ……….
a. Net income ………………………………………………….
$ ?
Plus owner investments …………………………..….
0
Less dividends …………………………………………..
(0)
Change in equity …………………………………………
$29,000
Net Income = $29,000
Since there were no additional investments or dividends, the net
income for the year equals the net increase in equity.
b. Net income ………………………………………………….
$ ?
Plus owner investments …………………………..….
0
Less dividends ($1,250/mo. x 12 mo.) …………..
(15,000)
Change in equity …………………………………………
$29,000
Net Income = $44,000
The dividends were added back because they reduced equity
without reducing net income.
c. Net income ………………………………………………….
$ ?
Plus owner investment ………………………………..
55,000
Less dividends ……………………………………………
(0)
Change in equity …………………………………………
$29,000
Net Loss = $26,000
The investment was deducted because it increased equity without
creating net income.
d. Net income ………………………………………………….
$ ?
Plus owner investment ………………………………..
35,000
Less dividends ($1,250/mo. X 12 mo.) …………..
(15,000)
Change in equity …………………………………………
$29,000
Net Income = $9,000
The dividends were added back because they reduced equity
without reducing net income and the investments were deducted
because they increased equity without creating net income.
Exercise 2-16 (15 minutes)
HELP TODAY
Income Statement
For Month Ended August 31
Revenues
Consulting fees earned ……………………. $ 27,000
Exercise 2-17 (15 minutes)
HELP TODAY
Statement of Retained Earnings
For Month Ended August 31
Retained earnings, July 31 …………………… $ 0
Exercise 2-18 (15 minutes)
HELP TODAY
Balance Sheet
August 31
Assets Liabilities
Cash …………………………. $ 25,360 Accounts payable ……………. $ 10,500
* 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
Owner’s investments …..……..
110,000
42,000
87,000
210,000
Dividends …………………………..
(28,000)
(47,000)
(10,000)
(55,000)
Net income (loss) ………..……..
22,000
90,000
(4,000)
(45,000)
Equity, Dec. 31, 2015 …………..
$104,000
$85,000
$73,000
$110,000
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
Dividends account is
debited to Common
Stock
$0
––
Common
Stock
Dividends
Common Stock is
understated by $10,900
Dividends is
understated by $10,900
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
e.
$38,000 debit to
Machinery is posted
as a debit to Accounts
Payable.
$0
––
Machinery
Accounts
Payable
Machinery is
understated by $38,000
Accounts Payable is
understated by $38,000
f.
$5,850 credit to
Services Revenue is
posted as a $585
credit.
$5,265
Debit
Services
Revenue
Services Revenue is
understated by $5,265
g.
$1,390 debit to Store
Supplies is not
posted.
$1,390
Credit
Store
Supplies
Store Supplies is
understated by $1,390
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)
Exercise 2-22 (10 minutes)
HEINEKEN N.V.
Balance Sheet (in Euro millions)
December 31, 2013
Assets Equity and liabilities
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
3
26,650
32,500
0.82
650
50,000
0.013
4
55,860
147,000
0.38
21,000
200,000
0.105
5
31,280
92,000
0.34
7,520
40,000
0.188
6
52,250
104,500
0.50
12,000
80,000
0.150
PROBLEM SET A
Problem 2-1A (90 minutes)
Part 1
April 1 Cash……………………………………………………. 101 80,000
Office Equipment …………………………………. 163 26,000
Common Stock …………………………….. 307 106,000
Owner invested cash and equipment for stock.
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 balance due on account.
19 Prepaid Insurance ……………………………….. 128 2,400
Cash …………………………………………….. 101 2,400
Paid premium for insurance.
22 Cash……………………………………………………. 101 4,400
28 Dividends ……………………………………………. 319 5,500
Cash …………………………………………….. 101 5,500
Paid cash dividends.
29 Office Supplies ……………………………………. 124 600
Accounts Payable …………………………. 201 600
Problem 2-1A (Continued)
Part 2
Cash
Acct. No. 101
Date
Explanation
PR
Credit
April
1
G1
2
G1
9,000
6
G1
13
G1
11,600
19
G1
2,400
22
G1
28
G1
5,500
30
G1
435
Accounts Receivable
Acct. No. 106
Date
Explanation
PR
Credit
April
9
G1
22
G1
4,400
25
G1
Office Supplies
Acct. No. 124
Date
Explanation
PR
Credit
April
3
G1
29
G1
Prepaid Insurance
Acct. No. 128
Date
Explanation
PR
Credit
April
19
G1
Prepaid Rent
Acct. No. 131
Date
Explanation
PR
Credit
April
2
G1
Office Equipment
Acct. No. 163
Date
Explanation
PR
Credit
April
1
G1
3
G1
Problem 2-1A (Continued)
Accounts Payable
Acct. No. 201
Date
Explanation
PR
Credit
April
3
G1
11,600
13
G1
29
G1
600
Common Stock
Acct. No. 307
Date
Explanation
PR
Credit
April
1
G1
106,000
Dividends
Acct. No. 319
Date
Explanation
PR
Credit
April
28
G1
Services Revenue
Acct. No. 403
Date
Explanation
PR
Credit
April
6
G1
4,000
9
G1
6,000
25
G1
2,890
Utilities Expense
Acct. No. 690
Date
Explanation
PR
Credit
April
30
G1
Problem 2-1A (Continued)
Part 3
LINKWORKS
Trial Balance
April 30
Debit Credit
Problem 2-2A (90 minutes)
Part 1
a. Cash……………………………………………………. 101 100,000
Office Equipment …………………………………. 163 5,000
Drafting Equipment ……………………………… 164 60,000
Cash …………………………………………….. 101 9,500
Notes Payable ………………………………. 250 10,500
Purchased equipment with cash and note
payable.
g. Accounts Receivable …………………………... 106 14,000
©2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in
any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Financial Accounting Fundamentals, 5th Edition
86
Problem 2-2A (Part 1 Continued)
i. Accounts Receivable …………………………... 106 22,000
Engineering Fees Earned ……………… 402 22,000
Billed client for completed work.
Cash …………………………………………….. 101 9,480
Paid cash dividends.
p. Wages Expense …………………………………… 601 1,200
Cash …………………………………………….. 101 1,200
©2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in
any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Solutions Manual, Chapter 2
87
Problem 2-2A (Continued)
Part 2
Cash No. 101
Accounts Payable No. 201
Date
PR
Debit
Credit
Balance
Date
PR
Debit
Credit
Balance
(a)
100,000
100,000
(h)
1,150
1,150
(b)
6,300
93,700
(j)
1,333
2,483
(c)
55,000
38,700
(m)
1,150
1,333
(d)
3,000
35,700
(e)
6,200
41,900
Notes Payable No. 250
(f)
9,500
32,400
Date
PR
Debit
Credit
Balance
(k)
7,000
39,400
(b)
42,700
42,700
(l)
1,200
38,200
(f)
10,500
53,200
(m)
1,150
37,050
(n)
925
36,125
(o)
9,480
26,645
Common Stock No. 307
(p)
1,200
25,445
Date
PR
Debit
Credit
Balance
(q)
2,500
22,945
(a)
165,000
165,000
Accounts Receivable No. 106
Dividends No. 319
Date
PR
Debit
Credit
Balance
Date
PR
Debit
Credit
Balance
(g)
14,000
14,000
(o)
9,480
9,480
(i)
22,000
36,000
(k)
7,000
29,000
Engineering Fees Earned No. 402
Date
PR
Debit
Credit
Balance
Prepaid Insurance No. 108
(e)
6,200
6,200
Date
PR
Debit
Credit
Balance
(g)
14,000
20,200
(d)
3,000
3,000
(i)
22,000
42,200
Office Equipment No. 163
Wages Expense No. 601
Date
PR
Debit
Credit
Balance
Date
PR
Debit
Credit
Balance
(a)
5,000
5,000
(l)
1,200
1,200
(h)
1,150
6,150
(p)
1,200
2,400
Drafting Equipment No. 164
Equipment Rental Expense No. 602
Date
PR
Debit
Credit
Balance
Date
PR
Debit
Credit
Balance
(a)
60,000
60,000
(j)
1,333
1,333
(f)
20,000
80,000
Building No. 170
Advertising Expense No. 603
Date
PR
Debit
Credit
Balance
Date
PR
Debit
Credit
Balance
(c)
55,000
55,000
(q)
2,500
2,500
Land No. 172
Repairs Expense No. 604
Date
PR
Debit
Credit
Balance
Date
PR
Debit
Credit
Balance
(b)
49,000
49,000
(n)
925
925
Problem 2-2A (Concluded)
Part 3
ARACEL ENGINEERING
Trial Balance
June 30
Debit Credit
Cash ……………………………………………………. $ 22,945
Accounts receivable ……………………………. 29,000
Prepaid insurance ……………………………….. 3,000
Office equipment …………………………………. 6,150