Fundamentals of Financial Accounting, 5/e 2-1
© 2016 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
Chapter 2
The Balance Sheet
ANSWERS TO QUESTIONS
1. (a) An asset is a resource owned by a company that has measurable value
and is expected to provide future benefits.
(b) A current asset is an asset that will be used up or turned into cash within
the next 12 months.
2. A transaction is an exchange or event that has a direct and measurable financial
effect on the assets, liabilities, or stockholders’ equity of a business. Transactions
3. Accounts are used to accumulate and report the effects of different business
5. Debit is the left side of a T-account and credit is the right side of a T-account. A
6. Transaction analysis is the process of studying a transaction to determine its
financial effect on the business in terms of the basic accounting equation:
7. The accounting equalities in transaction analysis are:
8. A journal entry is a method for expressing the effects of a transaction on
accounts in a debits equal credits format. The title of the account(s) to be
9. T-accounts are a simplified version of the ledger, which summarizes transaction
effects for each account. T-accounts show increases on the left (debit) side for
11. Because the customer list was not purchased by her salon (it was developed
Fundamentals of Financial Accounting, 5/e 2-3
Education.
Authors’ Recommended Solution Time
(Time in minutes)
Mini-exercises
Exercises
Problems
Skills
Development
Cases*
Continuing
Case
No.
Time
No.
Time
No.
Time
No.
Time
No. Time
1
2
1
8
CP2-1
45
1
15
1 30
2
2
2
10
CP2-2
50
2
15
3
4
3
5
CP2-3
50
3
45
4
4
4
5
PA2-1
45
4
20
5
4
5
3
PA2-2
50
5
20
6
4
6
5
PA2-3
50
6
10
7
3
7
3
PB2-1
45
7
35
8
3
8
10
PB2-2
50
9
5
9
5
PB2-3
50
10
6
10
15
11
6
11
20
12
6
12
25
13
10
13
10
14
10
14
15
15
10
15
30
16
10
17
10
18
10
19
10
20
10
21
15
22
10
23
3
24
8
25
8
Financial
Analysis
Research
Ethical
Reasoning
Critical
Thinking
Technology
Writing
Teamwork
x
x
x
x
x
x
x
x
X
x
x
X
x
x
x
x
x
x
© 2016 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
ANSWERS TO MINI-EXERCISES
M2–1
Debit
Credit
Assets
Increases
Decreases
Liabilities
Decreases
Increases
Stockholders’ Equity
Decreases
Increases
M2–2
Increase
Decrease
Assets
Debit
Credit
Liabilities
Credit
Debit
Stockholders’ Equity
Credit
Debit
M2–3 (1) D (2) C (3) A (4) I (5) F (6) B
M2–5
Req. 1 Req. 2
Category
Normal Balance
1) CA
Debit
2) CL
Credit
3) SE
Credit
4) NCL
Credit
5) CL
Credit
6) NCA
Debit
7) SE
Credit
8) CL
Credit
9) CA
Debit
M2–6
Req.1 Req.2
Category
Normal Balance
1) CL
Credit
2) CA
Debit
3) CA
Debit
4) SE
Credit
5) NCL
Credit
6) NCA
Debit
7) SE
Credit
8) CL
Credit
M2–7
1) Yes
M2–8
1) Yes
M2–9
Assets
=
Liabilities
+
Stockholders’ Equity
a.
Cash
+3,940
Note Payable
(short-term)
+3,940
b.
Cash
+4,630
Common
Stock
+4,630
c.
Cash
Equipment
–200
+1,000
Note Payable
(short-term)
+800
d.
Cash
Supplies
–300
+300
e.
Supplies
+700
Accounts
Payable
+700
M2–10
a.
Cash (+A) ………………………………………………………………….
3,940
Note Payable (short-term) (+L)…………………………………
3,940
b.
Cash (+A) ………………………………………………………………….
4,630
Common Stock (+SE) …………………………………………….
4,630
c.
Equipment (+A) …………………………………………………………
1,000
Cash (-A) ……………………………………………………………..
200
Note Payable (short-term) (+L) ………………………………..
800
d.
Supplies (+A) ……………………………………………………………..
300
Cash (-A) ………………………………………………………………
300
e.
Supplies (+A) ……………………………………………………………..
700
Accounts Payable (+L) ……………………………………………
700
M2–11
Cash (A)
Supplies (A)
Equipment (A)
Beg.
0
Beg.
0
Beg.
0
(a)
3,940
200
(c)
(d)
300
(c)
1,000
(b)
4,630
300
(d)
(e)
700
End.
8,070
End.
1,000
End.
1,000
Beg.
Beg.
Beg.
(e)
(a)
(b)
800
(c)
End.
End.
End.
Assets
Liabilities
$ 8,070
Cash (+A) ………………………………………………………………….
Land (+A) …………………………………………………………………..
c.
Supplies (+A) …………………………………………………………….
Cash (+A) ………………………………………………………………….
No transaction
M2–14
Assets
=
Liabilities
+
Stockholders’ Equity
(a
Cash
+ 70,000
Common
Stock + 70,000
(b)
Cash
– 60,000
Land
+ 60,000
(c)
Supplies
+ 9,000
Accounts
Payable
+ 9,000
(d)
Cash
+ 25,000
Note Payable
(long-term)
+ 25,000
(e)
No transaction
104,000
34,000
70,000
M2–15
a.
Equipment (+A) ………………………………………………………….
4,000
Cash (-A) ……………………………………………………..
4,000
b.
Inventory (+A) …………………………………………………………….
7,000
Accounts Payable (+L) ……………………………………………
7,000
c.
Cash (+A) …………………………………………………………………
4,000
Note Payable (short-term) (+L)…………………………………
4,000
d.
Accounts Payable (-L) …………………………………………………
1,500
Cash (-A) ………………………………………………………………
1,500
e. Note Payable (short-term) (-L)…………………………….
4,000
Cash (-A) ……………………………………………….
4,000
M2–16
Assets
=
Liabilities
+
Stockholders’
Equity
(a)
Cash
– 4,000
Equipment
+ 4,000
(b)
Inventory
+ 7,000
Accounts Payable
+ 7,000
(c)
Cash
+ 4,000
Note Payable
(short-term)
+ 4,000
(d)
Cash
– 1,500
Accounts Payable
– 1,500
(e)
Cash
– 4,000
Note Payable
(short-term)
– 4,000
5,500
5,500
M2–17
a.
Equipment (+A) ………………………………………………………….
12,000
Accounts Payable (+L) …………………………………..
12,000
b.
Accounts Payable (-L) …………………………………………………
6,000
Cash (-A) ………………………………………………………………
6,000
c.
Cash (+A) …………………………………………………………………
400
Accounts Receivable (-A) ………………………………………..
400
d.
Cash (+A) ………………………………………………………………….
15,000
Common Stock (+SE) …………………………………………….
15,000
e.
Equipment(+A)…………………………… ………………………….
60,000
Cash (-A) ………………………………………………………………
10,000
Note Payable (long-term) (+L) ………………………………….
50,000