Chapter 02 – The Accounting Cycle: During the Period
Chapter 2
The Accounting Cycle: During the Period
EXERCISES
Exercise 2-1
1.
c.
a.
e.
d.
Exercise 2-2
Assets
=
Liabilities
Stockholders’ Equity
1.
Increase
=
No effect
Increase
=
Chapter 02 – The Accounting Cycle: During the Period
Exercise 2-3
Dual Effect
1. Pay for rent in the current
month, $1,500.
Assets decrease
Stockholders’
equity decreases
4. Provide services for $20,000
Stockholders’
6. Receive $15,000 from
customers in (4) above.
Chapter 02 – The Accounting Cycle: During the Period
Exercise 2-4
Dual Effect
1. Pay dividends of $2,000 to
stockholders.
Assets
decrease
Stockholders’
equity decreases
4. Purchase land for $25,000 by issuing
Assets
6. Issue common stock for $50,000.
Assets
Stockholders’
Exercise 2-5
Transaction
Balance
Retained earnings, April 1
$15,200
1. Issue common stock for cash, $12,000
0
Retained earnings, April 30
$21,500
Exercise 2-6
Debit or Credit
Account
1.
Debit
Cash
3.
Salaries Expense
4.
Accounts Payable
6.
Retained Earnings
7.
Utilities Expense
8.
Accounts Receivable
9.
Dividends
Exercise 2-7
Account
Debited
Account
Credited
Example: Purchase equipment in exchange for
cash.
Equipment
Cash
1. Provide services to customers on account.
Accounts
Receivable
Service
Revenue
3. Purchase supplies on account.
8. Issue common stock in exchange for cash.
Exercise 2-8
(1)
Debit
Credit
Prepaid Insurance
1,800
Cash
1,800
(Pay for insurance in advance)
(2)
Buildings
Notes Payable
(Purchase building and issue note payable)
(3)
Utilities Expense
1,200
Cash
1,200
(Pay current month’s utilities)
(4)
Accounts Payable
2,400
Cash
2,400
(Pay cash on account)
(5)
Accounts Receivable
Service Revenue
(Provide services on account)
Exercise 2-9
1. Receive cash by issuing a note payable, $8,600.
Chapter 02 – The Accounting Cycle: During the Period
Exercise 2-10
February 2
Debit
Credit
Accounts Receivable
4,500
Service Revenue
4,500
(Provide services to customers on account)
February 7
Cash
4,200
Accounts Receivable
4,200
(Receive cash on account)
Cash
Common Stock
(Issue common stock for cash)
February 15
Salaries Expense
Cash
February 25
Repairs and Maintenance Expense
2,200
(Pay for repairs and maintenance)
February 28
Equipment
(Purchase equipment with cash)
Exercise 2-11
March 1
Debit
Credit
Cash
21,300
Service Revenue
21,300
(Provide services to customers for cash)
March 5
Common stock
(Issue common stock for cash)
Accounts Receivable
14,600
(Receive cash from customers on account)
March 15
Cash
March 22
(Pay for rent in advance)
March 27
(Pay dividends to stockholders)
March 28
Supplies
Cash
(Purchase office supplies with cash)
Exercise 2-12
Corrections
External Transaction
Account Titles
Debit
Credit
1.
Provider services to customers on
Accounts Receivable
1,300
Exercise 2-13
Corrections
External Transaction
Account Titles
Debit
Credit
1.
Provider services to customers for
Cash
1,300
Exercise 2-14
Cash
(1)
4,000
16,000
9,000
(2)
Exercise 2-15
Cash
Accounts Receivable
3,200
1,100
3,900
Supplies
Accounts Payable
480
1,720
Deferred Revenue
Service Revenue
410
0
Advertising Expense
0
Exercise 2-16
1. Provide services on account.
2. Purchase supplies on account.
Chapter 02 – The Accounting Cycle: During the Period
Exercise 2-17
Sooner Company
Trial Balance
April 30
Accounts
Debit
Credit
Cash
$ 3,100
Accounts receivable
4,500
Prepaid insurance
2,000
Buildings
Accounts payable
$ 2,600
Salaries payable
3,200
Retained earnings
5,400
Service revenue
Salaries expense
7,900
Utilities expense
5,200
Exercise 2-18
Fightin’ Blue Hens Incorporated
Trial Balance
March 31
Accounts
Debit
Credit
Cash
$ 3,200
Accounts Receivable
6,900
Prepaid Rent
4,500
Land
Deferred Revenue
3,800
Common Stock
Retained Earnings
Service Revenue
Salaries Expense
6,700
Exercise 2-19
Requirement 1
(1)
Debit
Credit
Cash
(2)
Land
(3)
Equipment
(4)
No entry
(5)
Cash
(6)
Supplies
(7)
Salaries Expense
6,900
Exercise 2-19 (continued)
Requirement 2
Cash
Common Stock
(1)
0
45,000
11,500
0
45,000
(1)
Land
Notes Payable
0
0
Equipment
Service Revenue
0
0
Supplies
Accounts Payable
0
0
Salaries Expense
(7)
0
6,900
Exercise 2-19 (concluded)
Requirement 3
Green Wave Company
Trial Balance
Accounts
Debit
Credit
Cash
$64,600
Supplies
4,500
Land
27,700
Equipment
11,500
Accounts Payable
$ 4,500
Notes Payable
27,700
Common Stock
Service Revenue
38,000
Salaries Expense
6,900
Totals
Exercise 2-20
Requirement 1
(1)
Debit
Credit
(2)
Equipment
(3)
Supplies
1,200
(4)
Salaries Expense
(5)
(6)
(7)
Cash
(8)
Cash
9,400
Exercise 2-20 (continued)
Requirement 2
Accounts Receivable
Service Revenue
Beg.
(1)
3,000
25,300
22,800
(7)
0
25,300
Beg.
(1)
Equipment
Cash
Beg.
(2)
5,100
12,600
22,800
Beg.
19,000
12,600
3,700
(2)
(4)
Supplies
Accounts Payable
4,800
Beg.
300
3,600
Beg.
Salaries Expense
Advertising Expense
2,050
Beg.
0
Beg.
0
Rent Expense
Deferred Revenue
Beg.
0
0
Beg.
Common Stock
Retained Earnings
15,000
Beg.
8,800
Beg.
Exercise 2-20 (concluded)
Requirement 3
Boilermaker House Painting Company
Trial Balance
Accounts
Debit
Credit
Cash
$28,950
Accounts Receivable
5,500
Supplies
1,500
Equipment
17,700
Accounts Payable
$ 4,800
Deferred Revenue
9,400
Common Stock
15,000
Retained Earnings
8,800
Service Revenue
25,300
Salaries Expense
3,700
Advertising Expense
2,050
Rent Expense
3,900
$63,300
$63,300