Wild, Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 2
81
Exercise 2-16 (15 minutes)
HELP TODAY
Income Statement
For Month Ended August 31
Revenues
Consulting fees earned ……………………. $ 27,000
Expenses
Exercise 2-17 (15 minutes)
HELP TODAY
Statement of Retained Earnings
For Month Ended August 31
Retained earnings, August 1 ………………… $ 0
Wild, Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 2
82
Exercise 2-18 (15 minutes)
HELP TODAY
Balance Sheet
August 31
Assets Liabilities
Cash …………………………. $ 25,360 Accounts payable ……………. $ 10,500
Exercise 2-19 (15 minutes)
CBS
ABC
CNN
NBC
Answers
$(28,000)
$42,000
$73,000
$(45,000)
Computations:
Equity, beginning of year ……….
$ 0
$ 0
$ 0
$ 0
Equity, end of year ………………..
$104,000
Wild, Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 2
83
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
debited to Common
Stock.
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.
posted as a $585
credit.
$1,390 debit to Store
posted.
$38,000 debit to
Machinery
Machinery is
Wild, Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 2
84
Exercise 2-21 (15 minutes)
Overstated, Understated, or Correctly-Stated
Amount
a.
Correctly-stated. The debit column is correctly stated because
the erroneous debit (to Accounts Payable) is deducted from an
account with a (larger assumed) credit balance.
$0
b.
Correctly-stated. The Automobiles account balance is correctly
stated.
understated by $37,900. It should have been increased
Understated. The credit column is understated by $37,900
$37,900
Exercise 2-22 (15 minutes)
a.
Company
Liabilities
/
Assets
=
Debt Ratio
Dreamworks
$ 30,000
$ 40,000
0.75
Pixar
0.98
Wild, Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 2
85
Exercise 2-23 (25 minutes)
June 1 Cash ………………………………………………………… 11,000
Common Stock …………………………………… 11,000
Owner investment in exchange for stock.
4 Accounts Receivable ………………………………… 3,000
Fees Earned ……………………………………….. 3,000
Billed customer for services provided.
12 Accounts Payable …………………………………….. 4,000
Cash …………………………………………………… 4,000
Made payment toward account payable.
Wild, Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 2
86
PROBLEM SET A
Problem 2-1A (90 minutes)
Part 1
April 1 Cash……………………………………………………. 101 80,000
Office Equipment …………………………………. 163 26,000
Common Stock …………………………….. 307 106,000
Owner investment in exchange for stock.
6 Cash……………………………………………………. 101 4,000
Services Revenue …………………………. 403 4,000
Received cash for services.
9 Accounts Receivable …………………………... 106 6,000
Services Revenue …………………………. 403 6,000
Billed client for completed work.
25 Accounts Receivable …………………………... 106 2,890
Services Revenue …………………………. 403 2,890
Billed client for completed work.
28 Dividends ……………………………………………. 319 5,500
Cash …………………………………………….. 101 5,500
87
Problem 2-1A (Continued)
Part 2
Cash
Acct. No. 101
Date
Explanation
PR
Debit
Credit
Balance
April
1
G1
80,000
80,000
2
G1
9,000
71,000
6
G1
4,000
75,000
13
G1
11,600
63,400
19
G1
2,400
61,000
22
G1
4,400
65,400
28
G1
5,500
59,900
30
G1
59,465
Accounts Receivable
Acct. No. 106
Date
Explanation
PR
Debit
Credit
Balance
April
9
G1
6,000
6,000
22
G1
4,400
1,600
25
G1
2,890
4,490
Office Supplies
Acct. No. 124
Date
Explanation
PR
Debit
Credit
Balance
April
3
G1
3,600
3,600
29
G1
4,200
Acct. No. 128
Date
Explanation
PR
Debit
Credit
Balance
April
19
G1
2,400
2,400
Prepaid Rent
Acct. No. 131
Date
Explanation
PR
Debit
Credit
Balance
April
2
G1
9,000
9,000
Acct. No. 163
Date
Explanation
PR
Debit
Credit
Balance
April
1
G1
26,000
26,000
3
G1
8,000
34,000
Wild, Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 2
88
Problem 2-1A (Continued)
Accounts Payable
Acct. No. 201
Date
Explanation
PR
Debit
Credit
Balance
April
3
G1
11,600
11,600
13
G1
11,600
0
29
G1
600
600
Acct. No. 307
Date
Explanation
PR
Debit
Credit
Balance
April
1
G1
Acct. No. 319
Date
Explanation
PR
Debit
Credit
Balance
April
28
G1
5,500
Services Revenue
Acct. No. 403
Date
Explanation
PR
Debit
Credit
Balance
April
6
G1
4,000
4,000
9
G1
6,000
10,000
25
G1
2,890
12,890
Acct. No. 690
Date
Explanation
PR
Debit
Credit
Balance
April
30
G1
435
435
Wild, Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 2
89
Problem 2-1A (Continued)
Part 3
LINKWORKS
Trial Balance
April 30
Debit Credit
Cash …………………………………………………………….. $ 59,465
Accounts receivable …………………………………….. 4,490
Office supplies ……………………………………………… 4,200
Wild, Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 2
90
Problem 2-2A (90 minutes)
Part 1
a. Cash……………………………………………………. 101 100,000
Office Equipment …………………………………. 163 5,000
Drafting Equipment ……………………………… 164 60,000
Common Stock …………………………….. 307 165,000
Owner investment in exchange for stock.
d. Prepaid Insurance ……………………………….. 108 3,000
Cash …………………………………………….. 101 3,000
Purchased 18-month insurance policy.
g. Accounts Receivable …………………………... 106 14,000
Engineering Fees Earned ……………… 402 14,000
Completed services for client.
Wild, Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 2
91
Problem 2-2A (Part 1 Continued)
i. Accounts Receivable …………………………... 106 22,000
Engineering Fees Earned ……………… 402 22,000
Billed client for completed work.
l. Wages Expense …………………………………… 601 1,200
Cash …………………………………………….. 101 1,200
Paid assistant’s wages.
m. Accounts Payable ……………………………….. 201 1,150
Cash …………………………..……………… 101 1,150
Paid amount due on account.
Wild, Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 2
92
Problem 2-2A (Continued)
Part 2
Cash No. 101
Accounts Payable No. 201
Date
PR
Debit
Credit
Balance
Date
PR
Debit
Credit
Balance
(a)
100,000
100,000
(h)
1,150
1,150
(b)
6,300
93,700
(j)
1,333
2,483
(c)
55,000
38,700
(m)
1,150
1,333
(d)
3,000
35,700
Notes Payable No. 250
Date
PR
Debit
Credit
Balance
(k)
7,000
39,400
(b)
(l)
1,200
38,200
(f)
37,050
(n)
36,125
Common Stock No. 307
Date
PR
Debit
Credit
Balance
(q)
2,500
22,945
(a)
165,000
165,000
Accounts Receivable No. 106
Dividends No. 319
Date
PR
Debit
Credit
Balance
Date
PR
Debit
Credit
Balance
(g)
14,000
14,000
(o)
9,480
9,480
(i)
22,000
36,000
(k)
7,000
29,000
Engineering Fees Earned No. 402
Date
PR
Debit
Credit
Balance
(e)
Date
PR
Debit
Credit
Balance
(g)
(d)
3,000
(i)
Date
PR
Debit
Credit
Balance
Date
PR
Debit
Credit
Balance
(a)
5,000
(l)
1,200
1,200
(h)
1,150
(p)
1,200
2,400
Drafting Equipment No. 164
Equipment Rental Expense No. 602
Date
PR
Debit
Credit
Balance
Date
PR
Debit
Credit
Balance
(a)
60,000
60,000
(j)
1,333
1,333
(f)
20,000
80,000
Building No. 170
Date
PR
Debit
Credit
Balance
Date
PR
Debit
Credit
Balance
(c)
55,000
55,000
(q)
2,500
2,500
Repairs Expense No. 604
Date
PR
Debit
Credit
Balance
Date
PR
Debit
Credit
Balance
Wild, Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 2
93
Problem 2-2A (Concluded)
Part 3
ARACEL ENGINEERING
Trial Balance
June 30
Debit Credit
Cash ……………………………………………………. $ 22,945
Accounts receivable ……………………………. 29,000
Prepaid insurance ……………………………….. 3,000
Notes payable ……………………………………… 53,200
Common stock ……………………………………. 165,000
Dividends ……………………………………………. 9,480
Wild, Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 2
94
Problem 2-3A (90 minutes)
Part 1
Mar. 1 Cash……………………………………………………. 101 150,000
Office Equipment …………………………………. 163 22,000
Common Stock …………………………….. 307 172,000
Owner investment in exchange for stock.
Received cash for services.
9 Accounts Receivable …………………………... 106 7,500
Services Revenue …………………………. 403 7,500
Billed client for completed work.
12 Accounts Payable …………………………..…… 201 4,200
Cash …………………………………………….. 101 4,200
Paid balance due on account.
19 Prepaid Insurance ……………………………….. 128 5,000
Cash …………………………………………….. 101 5,000
Paid premium for insurance.
Wild, Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 2
95
Problem 2-3A (Continued)
Part 2
Cash
Acct. No. 101
Date
Explanation
PR
Debit
Credit
Balance
Mar.
1
G1
150,000
150,000
2
G1
6,000
144,000
6
G1
4,000
148,000
12
G1
4,200
143,800
19
G1
5,000
138,800
22
G1
3,500
142,300
29
G1
5,100
137,200
Accounts Receivable
Acct. No. 106
Date
Explanation
PR
Debit
Credit
Balance
Mar.
9
G1
7,500
7,500
22
G1
3,500
4,000
25
G1
3,820
7,820
Office Supplies
Acct. No. 124
Date
Explanation
PR
Debit
Credit
Balance
Mar.
3
G1
1,200
1,200
30
G1
600
1,800
Acct. No. 128
Date
Explanation
PR
Debit
Credit
Balance
Mar.
19
G1
5,000
5,000
Acct. No. 131
Date
Explanation
PR
Debit
Credit
Balance
Mar.
2
G1
6,000
6,000
Acct. No. 163
Date
Explanation
PR
Debit
Credit
Balance
Mar.
1
G1
3
G1
3,000
Wild, Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 2
96
Problem 2-3A (Continued)
Part 2 (Continued)
Accounts Payable
Acct. No. 201
Date
Explanation
PR
Debit
Credit
Balance
Mar.
3
G1
4,200
4,200
G1
4,200
G1
Common Stock
Acct. No. 307
Date
Explanation
PR
Debit
Credit
Balance
Mar.
1
G1
172,000
172,000
Dividends
Acct. No. 319
Date
Explanation
PR
Debit
Credit
Balance
Mar.
G1
5,100
5,100
Acct. No. 403
Date
Explanation
PR
Debit
Credit
Balance
Mar.
6
G1
4,000
4,000
G1
3,820
Acct. No. 690
Date
Explanation
PR
Debit
Credit
Balance
Mar.
G1
Wild, Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 2
97
Problem 2-3A (Concluded)
Part 3
VENTURE CONSULTANTS
Trial Balance
March 31
Debit Credit
Cash ……………………………………………………………. $136,700
Accounts receivable …………………………………….. 7,820
Office supplies ……………………………………………… 1,800
Wild, Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 2
98
Problem 2-4A (90 minutes)
Part 1
a. Cash …………………………………………………. 101 60,000
Office Equipment ………………………………. 163 25,000
Common Stock …………………………... 307 85,000
Owner investment in exchange for stock.
d. Automobiles ……………………………………… 164 16,500
Common Stock…………………………... 307 16,500
Owner investment in exchange for stock.
e. Office Equipment ………………………………. 163 5,600
Accounts Payable ………………………. 201 5,600
Purchased office equipment on account.
Wild, Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 2
99
Problem 2-4A (Part 1 Continued)
i. Accounts Payable …………………………….. 201 2,000
Cash ………………………………………….. 101 2,000
Paid cash on account.
l. Salaries Expense ………………………………. 601 1,800
Cash ………………………………………….. 101 1,800
Paid assistant’s salary.
Wild, Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 2
100
Problem 2-4A (Continued)
Part 2
Cash No. 101
Land No. 172
Date
PR
Debit
Credit
Balance
Date
PR
Debit
Credit
Balance
(a)
60,000
60,000
(b)
40,000
40,000
(b)
30,000
30,000
(f)
1,800
28,200
Accounts Payable No. 201
Date
PR
Debit
Credit
Balance
(h)
35,565
(c)
2,000
2,000
(i)
33,565
(e)
5,600
7,600
(j)
20,300
13,265
(i)
2,000
5,600
(l)
11,465
(m)
4,000
15,465
Notes Payable No. 250
2,800
Date
PR
Debit
Credit
Balance
(b)
170,000
170,000
Accounts Receivable No. 106
Date
PR
Debit
Credit
Balance
(k)
6,250
6,250
Common Stock No. 307
(m)
4,000
2,250
Date
PR
Debit
Credit
Balance
(a)
85,000
Date
PR
Debit
Credit
Balance
Dividends No. 319
Office Equipment No. 163
Date
PR
Debit
Credit
Balance
Date
PR
Debit
Credit
Balance
(n)
2,800
2,800
(a)
25,000
25,000
(e)
5,600
30,600
Fees Earned No. 402
(j)
20,300
50,900
Date
PR
Debit
Credit
Balance
(g)
8,000
8,000
(k)
6,250
14,250
Salaries Expense No. 601
Date
PR
Debit
Credit
Balance
Date
PR
Debit
Credit
Balance
(d)
16,500
16,500
1,800
1,800
(l)
1,800
3,600
Date
PR
Debit
Credit
Balance
Date
PR
Debit
Credit
Balance
(h)