EXERCISE 0-4 (Essay)
1. Stockholders invested $20,000 cash in the business.
2. Purchased equipment for $5,000, paying $1,000 in cash and the balance of
$4,000 on account.
EXERCISE 0-4
(b) Issued common stock ………………………………………………………………….. $20,000
Service revenue …………………………………………………………………………… 9,500
Dividends …………………………………………………………………………………….. (2,000)
Rent expense ……………………………………………………………………………….. (800)
(c) Service revenue …………………………………………………………………………… $9,500
EXERCISE 0-5
Account
(a)
Normal Balance Debit
or Credit
(b)
Balance Sheet or Income
Statement
Accounts payable
Credit
Balance sheet
Accounts receivable
Debit
Balance sheet
Common stock
Credit
Balance sheet
Depreciation expense
Debit
Income statement
Interest expense
Debit
Income statement
Interest income
Credit
Income statement
Inventories
Debit
Balance sheet
Prepaid expenses
Debit
Balance sheet
Property and equipment
Debit
Balance sheet
Revenues
Credit
Income statement
(a)
Account Debited
Account Credited
3-18 Copyright © 2016 John Wiley & Sons, Inc. Kimmel, Financial Accounting, 8/e, Solutions Manual (For Instructor Use Only
EXERCISE 0-6 (Continued)
(b)
General Journal
Trans.
Account Titles
Debit
Credit
1.
Cash
Common Stock ………………………………………………
15,000
15,000
2.
Equipment ……………………………………………………………..
Cash ………………………………………………………………
10,000
10,000
3.
4.
Accounts Receivable ……………………………………………..
Service Revenue …………………………………………….
3,700
3,700
5.
Advertising Expense ………………………………………………
Cash ………………………………………………………………
200
200
6.
Cash
Accounts Receivable ……………………………………..
1,100
1,100
7.
Accounts Payable …………………………………………………..
300
8.
Dividends ………………………………………………………………
400
Supplies ………………………………………………………………..
300
EXERCISE 0-7
Oct. 1 Debits increase assets: debit Cash $30,000.
Credits increase stockholders’ equity: credit Common Stock
$30,000.
EXERCISE 0-7 (Continued)
Oct. 6 Debits increase assets: debit Accounts Receivable $10,800.
Credits increase revenues: credit Service Revenue $10,800.
EXERCISE 0-8
General Journal
Date
Account Titles
Debit
Credit
Oct. 1
Cash
Common Stock ……………………………………………..
30,000
30,000
2
No entry.
EXERCISE 0-9
General Journal
Date
Account Titles
Debit
Credit
May 4
Accounts Payable …………………………………………………
Cash …………………………………………………………….
700
700
7
Accounts Receivable …………………………………………….
Service Revenue …………………………………………..
6,800
6,800
8
Supplies ……………………………………………………………….
Accounts Payable …………………………..…………….
9
Equipment ……………………………………………………………
Cash …………………………………………………………….
1,000
1,000
17
Salaries and Wages Expense …………………………………
Cash …………………………………………………………….
530
22
Maintenance and Repairs Expense ………………………..
Accounts Payable …………………………..…………….
900
EXERCISE 0-10
General Journal
Date
Account Titles
Debit
Credit
March 1
Rent Expense ……………………………………………………….
Cash ……………………………………………………………..
1,200
1,200
3
Accounts Receivable ……………………………………………..
Service Revenue ……………………………………………
140
140
5
Cash
Service Revenue ……………………………………………
75
12
Cash
Accounts Receivable ……………………………………..
140
140
14
Salaries and Wages Expense …………………………………
Cash ……………………………………………………………..
525
525
22
Utilities Expense ……………………………………………………
Cash ……………………………………………………………..
72
72
24
Cash
Notes Payable ……………………………………………….
1,500
27
Maintenance and Repairs Expense …………………………
Cash ……………………………………………………………..
220
220
30
Prepaid Insurance ………………………………………………….
Cash ……………………………………………………………..
EXERCISE 0-11
Trans.
Account Titles
Debit
Credit
1.
Cash
Common Stock ………………………………………………
24,000
24,000
2.
Notes Payable ………………………………………………..
7,000
3.
Equipment ……………………………………………………………..
Cash ………………………………………………………………
11,000
11,000
4.
Rent Expense …………………………………………………………
Cash ………………………………………………………………
1,200
1,200
1,450
6.
Advertising Expense ………………………………………………
Accounts Payable …………………………………………..
600
Cash
7,000
7.
Cash
Accounts Receivable ……………………………………………..
Service Revenue …………………………………………….
2,000
16,000
18,000
8.
Dividends ………………………………………………………………
Cash ………………………………………………………………
400
400
9.
Utilities Expense …………………………………………………….
Cash ………………………………………………………………
2,000
2,000
Accounts Payable …………………………………………………..
Cash ………………………………………………………………
600
Interest Expense …………………………………………………….
Cash ………………………………………………………………
Salaries and Wages Expense ………………………………….
Cash ………………………………………………………………
6,400
6,400
Cash
Accounts Receivable ……………………………………..
12,000
12,000
Income Tax Expense ………………………………………………
Cash ………………………………………………………………
1,500
EXERCISE 0-12
(a)
Assets
=
Liabilities
+
Stockholders’ Equity
Cash
+
Accounts
Receivable
+
Equipment
=
Accounts
Payable
+
Common
Stock
+
Revenues
–
Exp.
–
Div.
Sept. 1
+$20,000
+$20,000
Issued stock
Ser. Rev.
Salar. Exp.
(b)
General Journal J1
Date
Account Titles
Debit
Credit
Sept. 1
Cash
Common Stock …………………………………………..
20,000
20,000
8
Accounts Receivable ………………………………………….
Service Revenue …………………………………………
14
Salaries and Wages Expense ………………………………
Cash …………………………………………………………..
25
Accounts Payable ……………………………………………….
4,000
30
Dividends …………………………………………………………..
500
Retained Earnings
EXERCISE 0-12 (Continued)
(c)
Cash
9/1 20,000
9/5 3,000
9/14 1,200
9/25 4,000
9/30 500
Bal. 11,300
9/8 18,000
Bal. 18,000
9/5 9,000
Bal. 9,000
9/25 4,000
9/5 6,000
Bal. 2,000
Bal. 500
9/8 18,000
Bal. 18,000
9/14 1,200
Bal. 1,200
Common Stock
9/1 20,000
Bal. 20,000
Dividends
9/30 500
LO 3 BT: AP Difficulty: Hard TOT:20 min. AACSB: Analytic AICPA FC: Reporting
EXERCISE 0-13
(a)
Cash
Accounts Payable
Oct. 1
30,000
Oct. 27
700
Oct. 27
700
Oct. 3
3,800
10
140
30
3,000
Bal.
3,100
Bal.
26,440
Oct. 1
Oct. 6
10,800
Bal.
Oct. 6
Oct. 3
Bal.
Bal.
Oct. 30
Bal.
3,000
(b) MCCALL REAL ESTATE AGENCY
Trial Balance
October 31, 2017
Debit
Credit
Cash ……………………………………………………………………….
Accounts Receivable ……………………………………………….
$26,440
10,800
EXERCISE 0-14
(a)
General Journal
Date
Account Titles and Explanation
Debit
Credit
Apr. 1
Cash
Common Stock ……………………………………………..
(Issued stock for cash)
15,000
15,000
7
Accounts Receivable …………………………………………….
Service Revenue …………………………………………..
3,400
3,400
12
Cash
Service Revenue …………………………………………..
(Received cash for revenue
earned)
700
700
15
Salaries and Wages Expense …………………………………
Cash …………………………………………………………….
(Paid salaries)
800
800
25
Accounts Payable …………………………………………………
3,500
EXERCISE 0-14 (Continued)
(b) SALVADOR’s GARDENING COMPANY, INC.
Trial Balance
April 30, 2017
Debit
Credit
Cash ……………………………………………………………………….
Accounts Receivable ……………………………………………….
$13,100
2,600
EXERCISE 0-15
(a)
Cash
Aug. 1 8,000
10 1,700
31 600
Aug. 12 1,200
Bal. 9,100
Aug. 25 3,400
Aug. 31 600
Bal. 2,800
Aug. 12 6,200
Bal. 6,200
Aug. 1 8,000
Bal. 8,000
Bal. 5,100
Notes Payable
Aug. 12 5,000
Bal. 5,000
(b) BAYLEE INC.
Trial Balance
August 31, 2017
Debit
Credit
Cash ……………………………………………………………………….
$ 9,100
EXERCISE 0-16
(a) Oct. 1 Cash …………………………………………………………………. 7,000
Common Stock ………………………………………….. 7,000
(Issued stock for cash)
10 Cash …………………………………………………………………. 980
Service Revenue ………………………………………… 980
EXERCISE 0-16 (Continued)
(b) KRISCOE CO.
Trial Balance
October 31, 2017
Debit
Credit
Cash ……………………………………………………………………….
Accounts Receivable ……………………………………………….
Supplies ………………………………………………………………….
Equipment ……………………………………………………………….
$15,730
1,020
220
3,000
EXERCISE 0-17
(a)
Date
Account Titles
Debit
Credit
Oct. 1
Cash
Common Stock ……………………………………………..
66,000
66,000
2
No entry
8
Advertising Expense ……………………………………………..
Cash ……………………………………………………………..
500
500
10
Maintenance and Repairs Expense …………………………
Accounts Payable ………………………………………….
390
390
12
Accounts Receivable ……………………………………………..
Service Revenue ……………………………………………
3,200
3,200
16
Supplies ………………………………………………………………..
Accounts Payable ………………………………………….
410
410
21
Accounts Payable ………………………………………………….
Cash ……………………………………………………………..
14,000
14,000
Cash ……………………………………………………………..
148
27
Cash
Accounts Receivable ……………………………………..
3,200
31
Salaries and Wages Expense …………………………………
Cash ……………………………………………………………..
5,100
EXERCISE 0-17 (Continued)
(b)
Cash
10/1 66,000
10/27 3,200
Bal. 43,452
10/12 3,200
10/27 3,200
10/8 500
Bal. 500
10/31 5,100
Bal. 5,100
10/4 2,000
10/7 4,000
Supplies
10/16 410
Bal. 410
Equipment
10/7 18,000
Bal. 18,000
10/16 410
Bal. 800
10/1 66,000
Bal. 66,000
Utilities Expense
10/24 148
Bal. 148
Service Revenue
10/12 3,200
Bal. 3,200
Maintenance & Repairs Expense
10/10 390
Bal. 390
Rent Expense
10/4 2,000
Bal. 2,000
EXERCISE 0-17 (Continued)
(c) BEYERS CORPORATION
Trial Balance
October 31, 2017
Debit
Credit
Cash ……………………………………………………………………….
Supplies ………………………………………………………………….
Equipment ……………………………………………………………….
$43,452
410
18,000
$70,000
$70,000
(Total of debit account balances = Total of credit account balances)
LO 4 BT: AP Difficulty: Hard TOT: 20 min. AACSB: Analytic AICPA FC: Reporting
EXERCISE 0-18
Error
(a)
In Balance
(b)
Difference
(c)
Larger Column
1.
2.
No
Yes
$400
—
Debit
—
EXERCISE 0-19
The revenue recognition principle requires that companies recognize revenue in the
accounting period in which the performance obligation is satisfied.
(a) Since the sales effort is not complete until the flight actually occurs, revenue
should not be recognized until December. Southwest Airlines should recognize the
revenue in December when the customer has been provided with the flight.
EXERCISE 0-20
(a) 8. Going concern assumption.
(b) 1. Economic entity assumption.
(c) 7. Full disclosure principle.