Chapter 02 – Accounting System and Financial Statements
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 2-11 (20 minutes)
Transactions that created revenues:
b. Accounts Receivable …………………………………… 2,300
Services Revenue ………………………………….. 2,300
Provided services on credit.
Exercise 2-14 (15 minutes)
HELP TODAY
Statement of Retained Earnings
For Month Ended August 31
Retained earnings, July 31 …………………… $ 0
Exercise 2-15 (15 minutes)
HELP TODAY
Balance Sheet
August 31
Assets Liabilities
Cash …………………………. $ 25,360 Accounts payable ……………. $ 10,500
* Amount from Exercise 2-14.
Exercise 2-17 (15 minutes)
(a)
(b)
(c)
(d)
Answers
$(28,000)
$42,000
$73,000
$(45,000)
Computations:
Equity, Dec. 31, 2012 …………..
$ 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, 2013 …………..
$104,000
$85,000
$73,000
$110,000
Exercise 2-18 (25 minutes)
a. Belle created a new business and invested $6,000 cash, $7,600 of
equipment, and $12,000 in automobiles, all in exchange for stock.
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