FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
S2-1
(5 min.)
Solution:
a. No (no dollars involved)
b. Yes
Indicate whether or not each item would be considered to be a transaction at
Highpoint Lawn.
Chapter 2: Transaction Analysis Page 1 of 90
d. Yes
e. Yes
h. Yes
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
S2-2
(5 min.)
Solution:
a. L
b. E
Identify whether each item is an asset, liability, or equity
account.
Chapter 2: Transaction Analysis Page 2 of 90
d. L
e. E
h. L
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
S2-3
(10 min.)
Solution:
G 1. Debit
A 2. Expense
F 3. Net income
Match the accounting terms with the corresponding
definition.
Chapter 2: Transaction Analysis Page 3 of 90
C 4. Ledger
D 5. Posting
I 6. Normal balance
J 7. Payable
E 8. Journal
H 9. Receivable
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
S2-4
(5 min.)
Solution:
Chapter 2: Transaction Analysis Page 4 of 90
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
S2-5
(5 min.)
Solution:
For each of the following items, give an example of a transaction that has the
described effect on the accounting equation of LeVon Fashions.
Purchase of asset on account
Borrow money
Payment of dividends to owners
Expense transaction (ex: received and paid utility bill)
a.
b.
Chapter 2: Transaction Analysis Page 5 of 90
d.
Pay a liability
Collection of an account receivable
Return an asset purchased on account
Issuance of stock
Revenue transaction (ex: provided services on account or for cash)
Purchase of asset for cash
Sale of asset for cash
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
S2-6
(5 min.)
Requirements
Solution:
Date Incr. Decr. Incr. Decr. Incr. Decr.
Jan. 6 X X
Jan. 4 X X
Assets
Liabilities
Stockholders’ Equity
Fill out the following chart to show the impact on the accounting
equation from each transaction.
Chapter 2: Transaction Analysis Page 6 of 90
Jan. 10 X X
Jan. 15 X X
Jan. 18 X X
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
S2-7
(5 min.)
Solution:
a. How much in total assets does Greene have?
b. How much in liabilities does Greene owe?
Chapter 2: Transaction Analysis Page 7 of 90
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
S2-8
(5-10 min.)
Solution:
Req 1, 2, and 3
250,000 106,000
Computer Equipment
1. Set up the following T-accounts of Seventh Investments, Inc.: Cash, Computer
Equipment, Accounts Payable, and Common Stock.
2. Record the first two transactions of the business directly in the T– accounts without
using a journal.
3. Show that total debits equal total credits.
Cash
Chapter 2: Transaction Analysis Page 8 of 90
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
S2-9
(5-10 min.)
Solution:
29,000 4,000
Cash
After these transactions, how much cash does the business have to work
with? Use a T-account to show your answer.
Chapter 2: Transaction Analysis Page 9 of 90
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
S2-10
(10 min.)
Solution:
DEBIT CREDIT
Jan. 15 Cash 31,000
Note Payable 31,000
Borrowed money from the bank.
22 Accounts Receivable 16,800
Service Revenue 16,800
Journal
ACCOUNT TITLES AND EXPLANATION
DATE
Journalize the following transactions. Include dates and a brief explanation for each
journal entry.
Chapter 2: Transaction Analysis Page 10 of 90
Performed service on account.
28 Cash 12,000
Accounts Receivable 12,000
Received cash on account.
29 Utilities Expense 1,400
Cash 1,400
Paid utility bill.
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
S2-11
(10-15 min.)
Solution:
Req. 1
DATE ACCOUNT TITLES AND EXPLANATION DEBIT CREDIT
Supplies 5,200
Accounts Payable 5,200
Purchased supplies on account.
Journal
1. Journalize the two transactions on the books of Dina Delorme, Consultant.
Include an explanation for each transaction.
2. Open a T-account for Accounts Payable and post to Accounts Payable.
Compute the balance and denote it as Bal.
3. How much does the business owe after both transactions? In which
account does this amount appear?
Chapter 2: Transaction Analysis Page 11 of 90
Paid cash on account.
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
S2-12
(10-15 min.)
Solution:
Req. 1
DATE DEBIT CREDIT
Accounts Receivable 4,900
Service Revenue 4,900
1. Record the two transactions on the books of Borland Consulting. Include
an explanation for each transaction.
2. Post to these T-accounts: Cash, Accounts Receivable, and Service
Revenue. Compute each account balance and denote it as Bal.
Journal
ACCOUNT TITLES AND EXPLANATION
Chapter 2: Transaction Analysis Page 12 of 90
Performed service on account.
Received cash on account.
Req. 2
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
S2-13
(15 – 20 min.)
Solution:
DEBIT CREDIT
July 1 Cash 10,000
Common Stock 10,000
Issued stock to owner.
5 Accounts Receivable 5,000
Service Revenue 5,000
Provided (sold) services on account.
Journalize the following transactions. Include dates and a brief explanation for each
journal entry.
Journal
DATE
ACCOUNT TITLES AND EXPLANATION
Chapter 2: Transaction Analysis Page 13 of 90
9 Office Supplies 500
Accounts Payable 500
Purchased supplies on account.
Service Revenue 2,100
Provided (sold) services for cash.
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
S2-14
(10 min.)
Solution:
DEBIT CREDIT
Cash 4$
Other assets 23
Accounts payable 5$
Prepare the trial balance of Navy Port Company at December 31, 2016. List
the accounts in their proper order. How much was Navy Port Company
Company’s net income or net loss?
Navy Port Company Company
Trial Balance
December 31, 2016
ACCOUNT
Millions
Chapter 2: Transaction Analysis Page 14 of 90
Other liabilities 1
Stockholders’ equity 6
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
S2-15
(10 min.)
Solution:
1. Total assets
Compute these amounts for the business:
1. Total assets
2. Total liabilities
3. Net income or net loss during December
= $94,000 ($4,000 + $14,000 + $1,000 + $48,000 + $27,000)
Chapter 2: Transaction Analysis Page 15 of 90
2.
= $80,000 ($54,000 + $26,000)
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
S2-16
(10 min.)
Solution:
Error 1.
The purpose of this exercise is to help you learn how to correct three
common accounting errors.
Total debits = $ 90,400 ($133,600 + $4,800 − $48,000)
Total credits = $133,600
Chapter 2: Transaction Analysis Page 16 of 90
Error 2.
Error 3.
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
E2-17A
Write a memo to report on purchases. Prepare a balance sheet. Prepare a T-account
to compute the balance for Cash.
TO: Home Office
FROM: Laura Sprague, Store Manager
During the first week, I used the store’s beginning cash to purchase
equipment and supplies. I signed a note payable to buy land and a
(10-15 min.)
Solution:
Chapter 2: Transaction Analysis Page 17 of 90
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
E2-18A
(10-15 min.)
Solution:
a.
b.
State whether each event (1) increased, (2) decreased, or (3) had no effect on the
total assets of the business. Identify any specific asset affected.
No effect on total assets. Increase in cash offsets the decrease in land.
No effect on total assets. Increase in cash offsets the decrease in accounts rece
Chapter 2: Transaction Analysis Page 18 of 90
e.
h.
Increased assets. (Cash)
Increased assets. (Equipment)
Increased assets. (Office supplies)
Increased assets. (Cash)
Decreased assets (cash)
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
E2-19A
(10-20 min.)
Requirements
Solution:
Req. 1
Accounts
Receivable
+
Note
Payable
+
Retained
Earnings
Type of
Stockholders’
Equity Transaction
Land
=
Accounts
payable
+
Medical
Supplies
+
Common
Stock
+
1. Analyze the effects of these events on the accounting equation of the medical practice of
Dr. Kristine Cohen, P.C.
2. After completing the analysis, answer these questions about the business.
a. How much are total assets?
b. How much does the business expect to collect from patients?
c. How much does the business owe in total?
d. How much of the business’s assets does Cohen really own?
e. How much net income or net loss did the business experience during its first month of
operations?
Analysis of Transactions
ASSETS = LIABILITIES + STOCKHOLDERS’ EQUITY
Date
Cash
+
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
Req. 2
a.
b.
188,600$
4,600$
Chapter 2: Transaction Analysis Page 20 of 90
d.
e.