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Exercise 2-8 (30 minutes)
Cash
Photography Equipment
Aug. 1
6,500
Aug. 2
2,100
Aug. 1
33,500
20
3,331
5
880
31
675
Common Stock
Balance
6,176
Aug. 1
40,000
Office Supplies
Photography Fees Earned
Aug. 5
880
Aug. 20
3,331
Prepaid Insurance
Utilities Expense
Aug. 2
2,100
Aug. 31
675
POSE-FOR-PICS
Trial Balance
August 31
Debit
Credit
Cash ..................................................
$ 6,176
Office supplies ................................
880
Prepaid insurance ............................
2,100
Photography equipment..................
33,500
Common stock ................................
$40,000
Photography fees earned ................
3,331
Utilities expense ...............................
675
______
Totals ................................................
$43,331
$43,331
Exercise 2-9 (30 minutes)
a. Cash ........................................................................... 100,750
Common Stock .................................................. 100,750
Owner invested in the business for stock.
b. Office Supplies .......................................................... 1,250
Exercise 2-9 (concluded)
Cash
Accounts Payable
(a)
100,750
(b)
1,250
(e)
10,050
(c)
10,050
(d)
15,500
(e)
10,050
Balance
0
(h)
1,125
(g)
1,225
(i)
10,000
Balance
94,850
Common Stock
(a)
100,750
Balance
100,750
Accounts Receivable
Dividends
(f)
2,700
(h)
1,125
(i)
10,000
Balance
1,575
Balance
10,000
Office Supplies
Fees Earned
(b)
1,250
(d)
15,500
Balance
1,250
(f)
2,700
Balance
18,200
Office Equipment
Rent Expense
(c)
10,050
(g)
1,225
Balance
10,050
Balance
1,225
Exercise 2-10 (15 minutes)
SPADE COMPANY
Trial Balance
May 31, 2015
Debit
Credit
Cash .............................................
$ 94,850
Accounts receivable ...................
1,575
Office supplies.............................
1,250
Office equipment .........................
10,050
Accounts payable........................
$ 0
Common stock ............................
100,750
Dividends .........................................................
10,000
Fees earned .................................
18,200
Rent expense ................................
1,225
_______
Totals .............................................
$118,950
$118,950
Exercise 2-11 (20 minutes)
Transactions that created expenses:
b. Salaries Expense......................................... 1,233
Cash ....................................................... 1,233
Paid salary of receptionist.
Exercise 2-12 (20 minutes)
Transactions that created revenues:
b. Accounts Receivable .......................................... 2,300
Services Revenue ......................................... 2,300
Provided services on credit.
Exercise 2-13 (25 minutes)
a. Belle created a new business and invested $6,000 cash, $7,600 of
equipment, and $12,000 in automobiles in exchange for stock.
Exercise 2-14 (30 minutes)
a. Cash ........................................................................... 6,000
Equipment ................................................................. 7,600
Automobiles .............................................................. 12,000
Common Stock .................................................. 25,600
Exercise 2-15 (20 minutes)
Calculation of change in equity for part a through part d
Assets
-
Liabilities
=
Equity
Beginning of the year ..........
$ 60,000
-
$20,000
=
$40,000
End of the year .....................
105,000
-
36,000
=
69,000
Net increase in equity ..........
$29,000
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
Exercise 2-17 (15 minutes)
HELP TODAY
Statement of Retained Earnings
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
