CHAPTER 0
Accounting Cycle Review
SOLUTIONS TO BRIEF EXERCISES
BRIEF EXERCISE 0-1
Assets
Liabilities
Stockholders’ Equity
(a)
+
+
NE
BRIEF EXERCISE 0-2
Assets
=
Liabilities
+
Stockholders’ Equity
Cash
+
Accounts
Receivable
+
Supplies
=
Accounts
Payable
+
Bonds
Payable
+
Common
Stock
+
Retained
Earnings
(1)
+$60,000
+$60,000
(3)
BRIEF EXERCISE 0-3
Assets
=
Liabilities
+
Stockholders’
Equity
Accounts
Common
Retained
(1)
-$286,176
+$286,176
BRIEF EXERCISE 0-4
Debit
Effect
Credit
Effect
Normal
Balance
(a)
Accounts Payable
Decrease
Increase
Credit
BRIEF EXERCISE 0-5
Account Debited
Account Credited
June 1
Cash
Common Stock
BRIEF EXERCISE 0-6
June 1 Cash ……………………………………………………………………….. 5,000
Common Stock ………………………………………………………… 5,000
BRIEF EXERCISE 0-7
(a)
Basic Analysis
(b)
Debit-Credit Analysis
Aug. 1
The asset Cash is increased;
the stockholders’ equity
account Common Stock is
Debits increase assets:
debit Cash $10,000. Credits
increase stockholders’ equity:
BRIEF EXERCISE 0-8
Aug. 1 Cash ………………………………………………………………………… 10,000
Common Stock …………………………..…………………….. 10,000
BRIEF EXERCISE 0-9
Cash
Service Revenue
5/12 1,600
5/15 2,000
5/5 3,800
5/15 2,000
5/5 3,800
5/12 1,600
BRIEF EXERCISE 0-10
PEETE COMPANY
Trial Balance
June 30, 2017
Debit
Credit
Cash ……………………………………………………………………………….
Accounts Receivable ……………………………………………………….
$ 5,400
3,000
BRIEF EXERCISE 0-11
BIRELLIE COMPANY
Trial Balance
December 31, 2017
Debit
Credit
Cash ……………………………………………………………………………….
Prepaid Insurance ……………………………………………………………
$20,800
3,500
BRIEF EXERCISE 0-12
Cash
Net Income
(a)
$–100
$0
BRIEF EXERCISE 0-13
(a) Prepaid Insurance—to recognize insurance expired during the period.
BRIEF EXERCISE 0-14
Item
(1)
Type of Adjustment
(2)
Accounts Before Adjustment
(a)
Prepaid Expenses
Assets Overstated
Expenses Understated
(b)
Accrued Revenues
Assets Understated
BRIEF EXERCISE 0-15
Dec. 31 Supplies Expense ………………………………………………… 7,700
Supplies ……………………………………………………… 7,700
BRIEF EXERCISE 0-16
Dec. 31 Depreciation Expense ………………………………………….. 2,750
Accumulated Depreciation—
Equipment ……………………………………………….. 2,750
BRIEF EXERCISE 0-17
July 1 Prepaid Insurance ……………………………………………….. 12,400
Cash……………………………………………………………. 12,400
BRIEF EXERCISE 0-18
July 1 Cash …………………………………………………………………… 12,400
Unearned Service Revenue ………………………….. 12,400
BRIEF EXERCISE 0-19
(a) Dec. 31 Interest Expense ………………………………………….. 300
Interest Payable …………………………………… 300
BRIEF EXERCISE 0-20
Account
(1)
Type of Adjustment
(2)
Related Account
(a)
Accounts Receivable
Accrued Revenues
Service Revenue
(b)
Prepaid Insurance
Prepaid Expenses
Insurance Expense
(c)
Equipment
Not required
Not required
(d)
Accum. Depreciation—
Equipment
Prepaid Expenses
Depreciation Expense
(e)
Notes Payable
Not required
Not required
Interest Payable
Accrued Expenses
Interest Expense
(g)
Unearned Service
Revenue
Unearned Revenues
Service Revenue
BRIEF EXERCISE 0-21
LEVIN CORPORATION
Income Statement
For the Year Ended December 31, 2017
Revenues
Service revenue ………………………………………………………… $32,000
Expenses
BRIEF EXERCISE 0-22
LEVIN CORPORATION
Retained Earnings Statement
For the Year Ended December 31, 2017
Retained earnings, January 1 ………………………………………………………………… $17,200
Add: Net income / (Loss) ……………………………………………………………………… 10,400
BRIEF EXERCISE 0-23
Account
(a)
Accumulated Depreciation
Balance Sheet
BRIEF EXERCISE 0-24
(a) Closing Entries
July 31 Service Revenue ………………………………………….. 16,000
Income Summary …………………………………. 16,000
(To close revenue account)
(Income statement accounts are closed to the Income Summary account)
(b) Retained Earnings
1,300
7/1 Bal. 20,000
4,100
7/31 Bal. 22,800
BRIEF EXERCISE 0-25
The accounts that will appear in the post-closing trial balance are:
Accumulated Depreciation
Retained Earnings (ending)
SOLUTIONS TO DO IT! REVIEW EXERCISES
DO IT! 0-1
Assets
=
Liabilities
+
Stockholders’ Equity
Accounts
Accounts
Common
Retained Earnings
DO IT! 0-2
Boyd would likely need the following accounts in which to record the transactions
necessary to ready his photography studio for opening day:
DO IT! 0-3
Each transaction that is recorded is entered in the general journal. The three activities
would be recorded as follows:
1. Cash …………………………………………………………………………… 8,000
DO IT! 0-4
Cash
DO IT! 0-5
CHILLIN’ COMPANY
Trial Balance
December 31, 2017
Debit Credit
Cash ………………………………………………………………………………. $ 6,000
Accounts Receivable ………………………………………………………. 8,000
DO IT! 0-6
DO IT! 0-7
1. Insurance Expense …………………………………………………………….. 300
Prepaid Insurance ……………………………………………………….. 300
(To record insurance expired)
2. Supplies Expense ………………………………………………………………. 1,600
DO IT! 0-8
1. Salaries and Wages Expense ………………………………………………. 1,100
Salaries and Wages Payable ………………………………………… 1,100
(To record accrued salaries)
DO IT! 0-9a
Income statement: Service Revenue, Utilities Expense
DO IT! 0-10a
Dec. 31 Service Revenue …………………………………………………………… 108,000
Income Summary ………………………………………………….. 108,000
(To close revenue to income summary)
Dec. 31 Income Summary………………………………………………………….. 72,000
Salaries and Wages Expense …………………………………. 40,000
SOLUTIONS TO EXERCISES
EXERCISE 0-1
1. Increase in assets and increase in stockholders’ equity.
2. Decrease in assets and decrease in stockholders’ equity.
EXERCISE 0-2
Assets
=
Liabilities
+
Stockholders’ Equity
Cash
+
Accounts
Receivable
+
Equipment
=
Accounts
Payable
+
Common
Stock
+
Retained Earnings
Revenues
–
Expenses
(1)
+$40,000
+$40,000
Issued Stock
(2)
+$30,000
+$30,000
(3)
–4,000
–$4,000
Rent Expense
(4)
Service Revenue
(5)
Service Revenue
(6)
–8,000
–8,000
Utilities Expense
(7)
(8)
Advertising Expense
(9)
+
=
+
+
$13,300
Exercise 0-3
Assets
=
Liabilities
+
Stockholders’ Equity
Cash
+
Accounts
Receivable
+
Supplies
+
Equipment
=
Accounts
Payable
+
Bonds
Payable
+
Common
Stock
+
Retained Earnings
Revenues
–
Expenses
–
Dividends
(1)
+$100,000
+$100,000
Issued Stock
(2)
+45,000
+$45,000
(3)
(4)
+16,000
+$16,000
Service Revenue
(5)
+$4,700
(6)
Rent Expense
(7)
+$10,000
+10,000
Service Revenue
(9)
–11,000
Dividends