Wild and Shaw, Financial and Managerial Accounting 9e Solutions Manual: Chapter 2
59
Chapter 2
Accounting for Business Transactions
QUICK STUDIES
Quick Study 2-1 (10 minutes)
The likely source documents include:
Quick Study 2-2 (5 minutes)
a. Asset
d. Asset
g. Liability
Quick Study 2-3 (5 minutes)
a. Expense 655
d. Asset 169
g. Liability 245
Quick Study 2-4 (10 minutes)
a.
Credit
d.
Debit
g.
Credit
b.
Debit
Debit
h.
Debit
Quick Study 2-5 (10 minutes)
Debit
Credit
e.
Debit
b.
Credit
Credit
f.
Credit
Wild and Shaw, Financial and Managerial Accounting 9e Solutions Manual: Chapter 2
60
Quick Study 2-6 (10 minutes)
a.
Debit
e.
Debit
i.
Credit
Credit
Credit
j.
Debit
c.
Credit
Credit
Debit
Credit
Quick Study 2-7 (10 minutes)
a. b. c.
Cash
Accounts Payable
Supplies
100
50
2,000
8,000
10,000
3,800
300
60
2,700
1,100
20
Bal.
310
Bal.
3,300
Bal.
7,300
600
150
700
150
700
800
150
100
100
Bal.
50
Bal.
Bal.
100
Quick Study 2-8 (15 minutes)
a.
1) Analyze:
Assets
=
Liabilities
+
Equity
=
+
2) Record:
Date
Account Titles and Explanation
PR
Debit
Credit
May 15
Cash ……………………………………………………….
101
7,000
167
3,000
307
3) Post
Cash 101
Common Stock 307
Equipment 167
Wild and Shaw, Financial and Managerial Accounting 9e Solutions Manual: Chapter 2
Quick Study 2-8 (Continued)
b.
1) Analyze:
Assets
=
Liabilities
+
Equity
=
+
2) Record:
Date
Account Titles and Explanation
PR
Debit
Credit
May 21
Office Supplies …………………………………………….
124
500
201
3) Post
Office Supplies 124
c.
1) Analyze:
Assets
=
Liabilities
+
Equity
2) Record:
Date
Account Titles and Explanation
PR
Debit
Credit
May 25
3) Post
Accounts Payable 201
Landscaping Revenue 403
Cash 101
Wild and Shaw, Financial and Managerial Accounting 9e Solutions Manual: Chapter 2
Quick Study 2-8 (Concluded)
d.
1) Analyze:
Assets
=
Liabilities
+
Equity
=
+
2) Record:
Date
Account Titles and Explanation
PR
Debit
Credit
Cash …………………………..………………………………..
3) Post
Quick Study 2-9 (15 minutes)
May 1 Accounts Receivable ………………………………… 2,000
Consulting Revenue ……………………………. 2,000
Billed customer for services provided.
Cash 101
Unearned Landscaping Revenue 236
63
Quick Study 2-10 (15 minutes)
Date
Assets
=
Liabilities
+
Equity
May
1
Accounts
Receivable
+2,000
Consulting
Revenue
+2,000
Date
Assets
=
Liabilities
+
Equity
May
3
Supplies
+300
Accounts
Payable
+300
Assets
=
+
May
+500
Assets
=
+
Assets
=
+
Quick Study 2-11 (10 minutes)
a. Cash ………………………………………………………... 6,500
Equipment ……………………………………………….. 3,500
Quick Study 2-12 (10 minutes)
The correct answer is a.
Explanation: If a $2,250 debit to Utilities Expense is incorrectly posted as a
Wild and Shaw, Financial and Managerial Accounting 9e Solutions Manual: Chapter 2
64
Quick Study 2-13 (10 minutes)
a.
Income Statement
e.
Balance Sheet
i.
Balance Sheet
c.
Balance Sheet
Balance Sheet
k.
Income Statement
Quick Study 2-14 (15 minutes)
LAWSON CONSULTING
Trial Balance
December 31
Debit
Credit
Cash …………………………………………………….
$ 5,000
Accounts receivable ……………………………..
4,500
Equipment …………………………………………….
6,500
Accounts payable ………………………………….
$ 3,000
Common stock ……………………………………..
Dividends ……………………………………………..
1,500
Services revenue …………………………………..
Rent expense ………………………………………..
Quick Study 2-15 (15 minutes)
LAWSON CONSULTING
Income Statement
For Month Ended December 31
Revenues
Services revenue …………………………….. $ 12,000
Wild and Shaw, Financial and Managerial Accounting 9e Solutions Manual: Chapter 2
Quick Study 2-16 (15 minutes)
LAWSON CONSULTING
Statement of Retained Earnings
For Month Ended December 31
Retained earnings, December 1 ……………. $ 0
Quick Study 2-17 (15 minutes)
LAWSON CONSULTING
Balance Sheet
December 31
Assets Liabilities
Cash …………………………. $ 5,000 Accounts payable ……………. $ 3,000
Quick Study 2-18 (5 minutes)
Increased
Explanation: Deutsche Auto’s debt ratio increased over each of the three
Quick Study 2-19 (10 minutes)
a. Total liabilities / Total assets = $38,633 mil / $42,966 mil = 89.9%
b. Home Demo
Wild and Shaw, Financial and Managerial Accounting 9e Solutions Manual: Chapter 2
EXERCISES
Exercise 2-1 (10 minutes)
4 a. Prepare and analyze the trial balance.
Exercise 2-2 (10 minutes)
a. Sales receipt
Explanation: A sales receipt identifies and describes the details
Exercise 2-3 (10 minutes)
a.
5. Three
d.
1. Asset
c.
4. Liability
Exercise 2-4 (5 minutes)
a.
1. Chart
d.
4. Account
c.
5. Source document
Wild and Shaw, Financial and Managerial Accounting 9e Solutions Manual: Chapter 2
67
Exercise 2-5 (15 minutes)
(1)
(2)
(3)
Type of
Normal
Increase
Account
Account
Balance
(Dr. or Cr.)
a.
Land
Asset
Debit
Debit
c.
Legal Expense
Debit
Debit
Accounts Receivable
Asset
Debit
Debit
h.
Services Revenue
j.
Exercise 2-6 (15 minutes)
a. Analyze:
Assets
=
Liabilities
+
Equity
b. Record:
Account Titles and Explanation
PR
Debit
Credit
c. Post
Note Payable 245
28,000
62,000
Cash 101
10,000
Wild and Shaw, Financial and Managerial Accounting 9e Solutions Manual: Chapter 2
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Exercise 2-7 (15 minutes)
a.
Beginning accounts payable (credit) …………………………..………….
$152,000
Purchases on account in October (credits) …………………………..
281,000
Payments on accounts in October (debits) …………………………..
Ending accounts payable (credit) …………………………………………..
$132,500
Payments on accounts in October (debits) …………………………..
$300,500
b.
Beginning accounts receivable (debit) ……………………………………
$102,500
Sales on account in October (debits) ……………………………………..
?
Ending accounts receivable (debit) ………………………………………..
$ 89,000
Sales on account in October (debits) ……………………………………..
$ 89,390
c.
Beginning cash balance (debit) ………………………………………………
$ ?
Cash received in October (debits) ………………………………………….
102,500
Cash disbursed in October (credits) ……………………………………….
Ending cash balance (debit) …………………………………………………..
$ 18,600
Beginning cash balance (debit) ………………………………………………
$ 19,250
Alternative solution format:
a. Accounts Payable
Sep. 30
152,000
Purchases
281,000
Payments
Oct. 31
Sep. 30
102,500
Credit sales
89,390
Collections
102,890
c. Cash
Sep. 30
19,250
Cash receipts
102,500
Cash
disbursements
103,150
Oct. 31
Wild and Shaw, Financial and Managerial Accounting 9e Solutions Manual: Chapter 2
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Exercise 2-8 (25 minutes)
June 1 Cash ………………………………………………………… 11,000
Common Stock …………………………………… 11,000
Owner investment in exchange for stock.
2 Furniture ………………………………………………….. 4,000
12 Accounts Payable …………………………………….. 4,000
Cash …………………………………………………… 4,000
Made payment toward account payable.
20 Cash ………………………………………………………... 3,000
Accounts Receivable ………………………….. 3,000
Received cash toward account receivable.
21 Cash ………………………………………………………… 10,000
Wild and Shaw, Financial and Managerial Accounting 9e Solutions Manual: Chapter 2
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Exercise 2-9 (25 minutes)
Aug. 1 Cash ………………………………………………………… 6,500
Equipment ……………………………………………….. 33,500
Common Stock …………………………………… 40,000
Exercise 2-10 (10 minutes)
Cash
Acct. No. 101
Date
Explanation
PR
Debit
Credit
Balance
Aug.
1
G1
6,500
6,500
5
G1
3,520
G1
G1
Wild and Shaw, Financial and Managerial Accounting 9e Solutions Manual: Chapter 2
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Exercise 2-11 (15 minutes)
Date
Assets
=
Liabilities
+
Equity
Aug.
1
Cash
+6,500
Common
Stock
+40,000
Equipment
+33,500
Date
=
+
Aug.
+2,100
Date
=
+
Equity
Aug.
5
Date
Assets
=
Liabilities
+
Equity
Aug.
20
Cash
+3,331
Services
Revenue
+3,331
Date
=
+
Equity
Aug.
31
Wild and Shaw, Financial and Managerial Accounting 9e Solutions Manual: Chapter 2
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Exercise 2-12 (30 minutes)
1.
Cash
Equipment
Aug. 1
6,500
Aug. 2
2,100
Aug. 1
33,500
20
3,331
5
880
675
Balance
6,176
Aug. 1
Aug. 5
Aug. 20
Aug. 2
2,100
Aug. 31
2.
POSE-FOR-PICS
Trial Balance
August 31
Debit
Credit
Cash …………………………………………..
$ 6,176
Supplies ……………………………………..
880
Wild and Shaw, Financial and Managerial Accounting 9e Solutions Manual: Chapter 2
73
Exercise 2-13 (30 minutes)
1.
a. Cash ………………………………………………………………… 100,750
Common Stock ………………………………………….. 100,750
Owner investment in exchange for stock.
b. Supplies …………………………………………………………… 1,250
Cash ………………………………………………………….. 1,250
Purchased supplies with cash.
f. Accounts Receivable ………………………………………… 2,700
Services Revenue ………………………………………. 2,700
Billed customer for services provided.
g. Rent Expense …………………………………………………… 1,225
Cash ………………………………………………………….. 1,225
Paid for this period’s rental charge.
Wild and Shaw, Financial and Managerial Accounting 9e Solutions Manual: Chapter 2
74
Exercise 2-13 (concluded)
2.
Cash
Accounts Payable
(a)
100,750
(b)
1,250
(e)
10,050
(c)
10,050
(d)
15,500
(e)
10,050
Balance
0
(h)
(g)
1,225
(i)
10,000
Balance
94,850
(a)
100,750
Balance
(h)
(i)
10,000
Balance
Balance
10,000
Services Revenue
(b)
(d)
Balance
Balance
Equipment
Rent Expense
(c)
10,050
(g)
1,225
Balance
10,050
Balance
1,225
Exercise 2-14 (15 minutes)
SPADE COMPANY
Trial Balance
May 31
Debit
Credit
Cash ………………………………………
$ 94,850
Accounts receivable ……………….
1,575
Supplies …………………………………
1,250
Equipment ………………………………
Accounts payable ……………………
Common stock ……………………….
Dividends …………………………………………………
Services revenue …………………….
Rent expense …………………………..
Wild and Shaw, Financial and Managerial Accounting 9e Solutions Manual: Chapter 2
Exercise 2-15 (20 minutes)
1.
a. Account Payable ………………………………….. 2,000
Cash ………………………………………………. 2,000
Paid amount owed.
2. Transactions a, c, and e did not yield an expense for the following reasons:
e This transaction is a distribution of cash to the owner (shareholder).
Even though equity decreased, that decrease did not occur in the
Wild and Shaw, Financial and Managerial Accounting 9e Solutions Manual: Chapter 2
Exercise 2-16 (20 minutes)
1.
a. Cash …………………………………………………………… 20,000
Common Stock………………………………………. 20,000
Owner investment in exchange for stock.
2. Transactions a, c, and d did not yield revenue for the following reasons:
d This transaction changed the form of an asset from receivable to cash.
Total assets were not increased (revenue was recognized when the
Wild and Shaw, Financial and Managerial Accounting 9e Solutions Manual: Chapter 2
Exercise 2-17 (25 minutes)
Cash
Supplies
Prepaid Insurance
(1)
6,000
4,800
(3)
900
(2)
4,800
(5)
4,500
800
900
3,400
Equipment
Web Servers
Accounts Payable
(1)
7,600
(1)
12,000
(6)
900
(3)
900
(7)
3,400
Services Revenue
Selling Expenses
25,600
4,500
(4)
800
Wild and Shaw, Financial and Managerial Accounting 9e Solutions Manual: Chapter 2
Exercise 2-18 (30 minutes)
1. Cash ………………………………………………………………… 6,000
Equipment ……………………………………………………….. 7,600
2. Prepaid Insurance …………………………………………….. 4,800
3. Supplies …………………………………………………………… 900
4. Selling Expenses ……………………………………………… 800
5. Cash ………………………………………………………………… 4,500
6. Accounts Payable …………………………………………….. 900
7. Equipment ……………………………………………………….. 3,400