Chapter 2
Transaction Analysis
Short Exercises
(5 min.) S 2-1
Alexander’s payment was not an expense.
Alexander acquired an asset, Equipment, because the computer is an
economic resource of the business.
(5 min.) S 2-2
(5-10 min.) S 2-3
Cash
60,000
4,700
4,200
Bal.
59,500
(5 min.) S 2-4
(5-10 min.) S 2-5
(10 min.) S 2-6
Journal
DATE
ACCOUNT TITLES AND EXPLANATION
DEBIT
CREDIT
Oct.
15
Cash ………………………………………………..
64,000
Note Payable …………………………...
64,000
Borrowed money from the bank.
22
Accounts Receivable ………………………..
17,100
Service Revenue ………………………
17,100
Performed service on account.
28
Cash ………………………………………………..
10,300
Accounts Receivable ………………..
10,300
Received cash on account.
29
Utilities Expense ………………………………
1,450
Accounts Payable …………………….
1,450
Received utility bill to be paid next
month.
31
Salary Expense ………………………………..
10,100
Cash ………………………………………..
10,100
Paid salary expense.
(10-15 min.) S 2-7
Req. 1
Journal
DATE
ACCOUNT TITLES AND EXPLANATION
DEBIT
CREDIT
Supplies …………………………………………..
4,800
Accounts Payable ……………………..
4,800
Purchased supplies on account.
Accounts Payable ……………………………..
1,350
Cash …………………………………………
1,350
Paid cash on account.
Req. 2
Accounts Payable
1,350
4,800
Bal.
3,450
Req. 3
(10-15 min.) S 2-8
Req. 1
Journal
DATE
ACCOUNT TITLES AND EXPLANATION
DEBIT
CREDIT
Accounts Receivable …………………………
3,900
Service Revenue …………………………
3,900
Performed service on account.
Cash …………………………………………………
2,000
Accounts Receivable ………………….
2,000
Received cash on account.
Req. 2
Cash
Accounts Receivable
Service Revenue
2,000
3,900
2,000
3,900
Bal.
2,000
Bal.
1,900
Bal.
3,900
(10 min.) S 2-9
First Mortgage Company
Trial Balance
December 31, 2014
ACCOUNT
DEBIT
CREDIT
Millions
Cash ………………………………………..
$ 5
Other assets …………………………….
20
Accounts payable …………………….
$ 6
Other liabilities …………………………
2
Stockholders’ equity …………………
6
Revenues …………………………………
38
Expenses …………………………………
27
___
Total ………………………………………..
$52
$52
First Mortgage Company’s net income: $11 million ($38 − $27)
(10 min.) S 2-10
1. Total assets = $88,500 ($5,400 + $18,300 + $2,500 +
(10 min.) S 2-11
1. Total debits = $ 95,660 ($132,200 + $4,060 − $40,600)
2. Total debits = $127,700 ($132,200 + $13,800 − $18,300)
3. Total debits = $113,900 ($132,200 − $18,300)
(5 min.) S 2-13
Cash
Computer Equipment
200,000
56,000
Accounts Payable
Common Stock
56,000
200,000
Exercises
(10-15 min.) E 2-14A
TO: Home Office
FROM: Patti Brown, Store Manager
During the first week, I used the store’s beginning cash to purchase
equipment and supplies. I signed a note payable to buy land and a
building. After all these transactions, the store’s balance sheet appears
as follows:
Dresses Unlimited
San Antonio Store
Balance Sheet
Date
ASSETS
LIABILITIES
Cash
$ 104,900
Note payable*
$279,000
Supplies
6,100
Land
75,000
STOCKHOLDERS’ EQUITY
Building
204,000
Common stock
150,000
Equipment
39,000
Total liabilities and
Total assets
$429,000
stockholders’ equity
$429,000
*$75,000 + $204,000 = $279,000
Cash
150,000
39,000
6,100
104,900
(10-15 min.) E 2-15A
a. Increased assets (cash)
b. No effect (a personal transaction)
(10-20 min.) E 2-16A
Req. 1
Analysis of Transactions
ASSETS
=
LIABILITIES + STOCKHOLDERS’
EQUITY
Date
Cash +
Accounts
Receivable +
Medical
Supplies +
Land
=
Accounts
Payable
+
Note
Payable +
Common
Stock +
Retained
Earnings
Type of Stockholders’
Equity Transaction
Jan. 6
150,000
150,000
Issued stock
9
(63,000)
63,000
12
1,900
1,900
15
Not a transaction of the business.
15–31
4,800
4,800
9,600
Service revenue
15–31
(3,300)
(3,300)
Salary expense
(1,200)
(1,200)
Rent expense
(900)
(900)
Utilities expense
31
700
(700)
31
35,000
35,000
31
(500)
(500)
Bal.
121,600
4,800
1,200
63,000
1,400
35,000
150,000
4,200
(continued) E 2-16A
Req. 2
(10-15 min.) E 2-17A
Journal
DATE
ACCOUNT TITLES AND EXPLANATION
DEBIT
CREDIT
Jan.
6
Cash …………………………………………………………
150,000
Common Stock………………………………….
150,000
Issued stock to owner.
9
Land …………………………..…………………………….
63,000
Cash …………………………………………………
63,000
Purchased land.
12
Medical Supplies ………………………………………
1,900
Accounts Payable ……………………………..
1,900
Purchased supplies on account.
15
Not a transaction of the business.
15–31
Cash …………………………………………………………
4,800
Accounts Receivable ………………………………..
4,800
Service Revenue ……………………………….
9,600
Performed service for cash and on account.
15–31
Salary Expense …………………………………………
3,300
Rent Expense ……………………………………………
1,200
Utilities Expense ……………………………………….
900
Cash …………………………………………………
5,400
Paid expenses.
31
Cash …………………………………………………………
700
Medical Supplies ……………………………….
700
Sold supplies.
31
Cash …………………………………………………………
35,000
Note Payable …………………………..………..
35,000
Borrowed money.
31
Accounts Payable …………………………………….
500
Cash …………………………………………………
500
Paid on account.
(20-30 min.) E 2-18A
Req. 1
Cash
Accounts Receivable
Jan. 6
150,000
Jan. 9
63,000
Jan. 15–31
4,800
15–31
4,800
15–31
5,400
Bal.
4,800
31
700
31
500
31
35,000
Bal.
121,600
Medical Supplies
Land
Jan. 12
1,900
Jan. 31
700
Jan. 9
63,000
Bal.
1,200
Bal.
63,000
Accounts Payable
Note Payable
Jan. 31
500
Jan. 12
1,900
Jan. 31
35,000
Bal.
1,400
Bal.
35,000
Common Stock
Service Revenue
Jan. 6
150,000
Jan. 15–31
9,600
Bal.
150,000
Bal.
9,600
Salary Expense
Rent Expense
Jan. 15–31
3,300
Jan. 15–31
1,200
Bal.
3,300
Bal.
1,200
Utilities Expense
Jan. 15–31
900
Bal.
900
(continued) E 2-18A
Req. 2
Dr. Rebecca Gray, P.C.
Trial Balance
January 31, 2014
ACCOUNT
DEBIT
CREDIT
Cash……………………………………..
$121,600
Accounts receivable ………………
4,800
Medical supplies ……………………
1,200
Land ……………………………………..
63,000
Accounts payable ………………….
$ 1,400
Note payable …………………………
35,000
Common stock ………………………
150,000
Service revenue …………………….
9,600
Salary expense ……………………..
3,300
Rent expense ………………………..
1,200
Utilities expense ……………………
900
Total ……………………………………..
$196,000
$196,000
Req. 3
(10-15 min.) E 2-19A
Req. 1
Journal
ACCOUNT TITLES AND EXPLANATION
DEBIT
CREDIT
1.
Cash …………………………..……………………………..
8,700
Common Stock ……………………………………..
8,700
Issued common stock.
2.
Cash …………………………..……………………………..
9,000
Note Payable ………………………………………..
9,000
Borrowed money; signed note payable.
3.
Supplies …………………………………………………….
500
Accounts Payable …………………………………
500
Purchased supplies on account.
4.
Land ………………………………………………………….
33,000
Cash …………………………………………………….
3,000
Note Payable ………………………………………..
30,000
Purchased land by paying cash and signing
a note payable.
5.
Cash …………………………..……………………………..
65
Supplies ……………………………………………….
65
Sold supplies for cash.
6.
Accounts Payable ………………………………………
270
Cash …………………………………………………….
270
Paid cash on account.
7.
Equipment …………………………………………………
3,500
Cash …………………………………………………….
3,500
Paid cash for equipment.
(10-20 min.) E 2-20A
Req. 1
Lake Oaks Pool Service, Inc.
Trial Balance
April 30, 2014
ACCOUNT
DEBIT
CREDIT
Cash ………………………………………..
$19,760
Accounts receivable ………………..
5,300
Equipment ……………………………….
29,200
Accounts payable ……………………
$ 4,800
Note payable …………………………...
21,500
Common stock ………………………..
16,800
Retained earnings ……………………
4,700
Dividends ………………………………..
3,500
Service revenue ……………………….
20,910
Salary expense ………………………..
8,700
Utilities expense ………………………
1,800
Delivery expense ……………………..
450
Total ………………………………………..
$68,710
$68,710
Req. 2
Lake Oaks Pool Service, Inc.
Income Statement
For the Month Ended April 30, 2014
Service revenue ……………………………..
$20,910
Salary expense ………………………………
$8,700
Utilities expense …………………………….
1,800
Delivery expense …………………………...
450
Total expenses ………………………………
10,950
Net income …………………………………….
$ 9,960
(15-25 min.) E 2-21A
Amanda’s Candies, Inc.
Trial Balance
September 30, 2014
ACCOUNT
DEBIT
CREDIT
Cash ………………………………………
$14,400*
Accounts receivable ……………….
12,600*
Inventory ……………………………….
17,300
Supplies…………………………………
400
Land ………………………………………
41,000
Accounts payable …………………..
$13,140*
Common stock ……………………….
47,300*
Sales revenue ………………………..
33,800
Insurance expense …………………
3,700*
Salary expense ………………………
2,200
Utilities expense …………………….
1,640*
Rent expense …………………………
1,000
_______
Total ………………………………………
$94,240
$94,240
_____
*Computations:
(10-15 min.) E 2-22A
Cash
Accounts Receivable
(a)
25,000
(b)
1,800
(f)
10,000
(d)
3,600
Bal.
10,000
(e)
500
(g)
3,200
Bal.
15,900
Office Supplies
Office Furniture
(c)
1,050
(a)
10,400
Bal.
1,050
Bal.
10,400
Accounts Payable
Common Stock
(e)
500
(c)
1,050
(a)
35,400
Bal.
550
Bal.
35,400
Dividends
Service Revenue
(g)
3,200
(f)
10,000
Bal.
3,200
Bal.
10,000
Salary Expense
Rent Expense
(d)
3,600
(b)
1,800
Bal.
3,600
Bal.
1,800
(10-20 min.) E 2-23A
Req. 1
Stephen Garner, Attorney
Trial Balance
November 30, 2014
ACCOUNT
DEBIT
CREDIT
Cash ……………………………………..
$15,900
Accounts receivable ………………
10,000
Office supplies ………………………
1,050
Office furniture ………………………
10,400
Accounts payable ………………….
$ 550
Common stock ………………………
35,400
Dividends ……………………………..
3,200
Service revenue …………………….
10,000
Salary expense ……………………..
3,600
Rent expense ………………………..
1,800
Total ……………………………………..
$45,950
$45,950
Req. 2
The business performed well during November. The result of
operations was net income of $4,600, as shown by the income
statement accounts:
(10-15 min.) E 2-24B
TO: Home Office
FROM: Lori Lyons, Store Manager
During the first week, I used the store’s beginning cash to purchase
equipment and supplies. I signed a note payable to buy land and a
building. After all these transactions, the store’s balance sheet appears
as follows:
L. Deveta Fashions
New Orleans Store
Balance Sheet
Date
ASSETS
LIABILITIES
Cash
$ 49,500
Note payable*
$211,000
Supplies
7,500
Land
86,000
STOCKHOLDERS’ EQUITY
Building
125,000
Common stock
100,000
Equipment
43,000
Total liabilities and
Total assets
$311,000
stockholders’ equity
$311,000
_____
*($86,000 + $125,000) = $211,000
Cash
100,000
43,000
7,500
49,500