Exercise 2-16 (15 minutes)
HELP TODAY
Income Statement
For Month Ended August 31
Revenues
Consulting fees earned ……………………. $ 27,000
Expenses
Rent expense ………………………………….. $ 9,550
Exercise 2-17 (15 minutes)
HELP TODAY
Statement of Retained Earnings
For Month Ended August 31
Retained earnings, August 1 ………………… $ 0
Add: Net income (from Exercise 2-16) …….. 10,470
10,470
Exercise 2-18 (15 minutes)
HELP TODAY
Balance Sheet
August 31
Assets Liabilities
Cash …………………………. $ 25,360 Accounts payable ……………. $ 10,500
Accounts receivable …. 22,360 Equity
* Amount from Exercise 2-17.
Exercise 2-19 (15 minutes)
CBS
ABC
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NBC
Answers
$(28,000)
$42,000
$73,000
$(45,000)
Computations:
Equity, beginning of year ……….
$ 0
$ 0
$ 0
$ 0
Owner’s investments …………….
110,000
42,000
87,000
210,000
Dividends …………………………..
Net income (loss) ………………….
Equity, end of year ………………..
$104,000
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.
$0
––
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.
$38,000 debit to
Machinery is posted
as a debit to Accounts
Payable.
$0
––
Machinery
Accounts
Payable
Machinery is
understated by $38,000
Accounts Payable is
understated by $38,000
posted as a $585
credit.
$1,390 debit to Store
posted.
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
Correctly-stated. The Automobiles account balance is correctly
stated.
e.
The credit column is $37,900 less than the debit column, or
$162,100 in total ($200,000 – $37,900).
Exercise 2-22 (15 minutes)
a.
Company
Liabilities
/
Assets
=
Debt Ratio
Dreamworks
$ 30,000
$ 40,000
0.75
Pixar
147,000
150,000
0.98
Exercise 2-23 (25 minutes)
June 1 Cash ………………………………………………………… 11,000
Common Stock …………………………………… 11,000
Owner investment in exchange for stock.
2 Furniture ………………………………………………….. 4,000
Accounts Payable ……………………………….. 4,000
Purchased furniture on credit.
20 Cash ………………………………………………………… 3,000
Accounts Receivable ………………………….. 3,000
Received cash toward account receivable.
21 Cash ………………………………………………………… 10,000
Common Stock …………………………………… 10,000
Owner investment in exchange for stock.
Wild, Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 2
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.
13 Accounts Payable …………………………..…… 201 11,600
Cash …………………………………………….. 101 11,600
Paid balance due on account.
29 Office Supplies ……………………………………. 124 600
Accounts Payable …………………………. 201 600
Purchased supplies on account.
30 Utilities Expense ………………………………….. 690 435
Cash …………………………………………….. 101 435
Paid monthly utility bill.
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
435
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
600
4,200
Acct. No. 128
Date
Explanation
PR
Debit
Credit
Balance
April
19
G1
2,400
2,400
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
Problem 2-1A (Continued)
Accounts Payable
Acct. No. 201
Date
Explanation
PR
Debit
Credit
Balance
April
3
G1
13
G1
29
G1
600
600
Common Stock
Acct. No. 307
Date
Explanation
PR
Debit
Credit
Balance
April
1
G1
106,000
106,000
Acct. No. 319
Date
Explanation
PR
Debit
Credit
Balance
April
28
G1
Acct. No. 403
Date
Explanation
PR
Debit
Credit
Balance
April
6
G1
9
G1
25
G1
Utilities Expense
Acct. No. 690
Date
Explanation
PR
Debit
Credit
Balance
April
30
G1
435
435
Problem 2-1A (Continued)
Part 3
LINKWORKS
Trial Balance
April 30
Debit Credit
Cash …………………………………………………………….. $ 59,465
Accounts receivable …………………………………….. 4,490
Office equipment ………………………………………….. 34,000
Accounts payable …………………………………………. $ 600
Common stock …………………………………………….. 106,000
Dividends …………………………………………………….. 5,500
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.
e. Cash……………………………………………………. 101 6,200
Engineering Fees Earned ……………… 402 6,200
Collected cash for completed work.
Problem 2-2A (Part 1 Continued)
i. Accounts Receivable …………………………... 106 22,000
Engineering Fees Earned ……………… 402 22,000
Billed client for completed work.
j. Equipment Rental Expense ………………….. 602 1,333
Accounts Payable …………………………. 201 1,333
Incurred equipment rental expense.
m. Accounts Payable ……………………………….. 201 1,150
Cash …………………………..……………… 101 1,150
Paid amount due on account.
n. Repairs Expense …………………………………. 604 925
Cash …………………………..……………… 101 925
Paid for repair of equipment.
Problem 2-2A (Continued)
Part 2
Cash No. 101
Accounts Payable No. 201
Date
PR
Debit
Credit
Balance
Date
PR
Debit
Credit
Balance
(a)
(h)
1,150
(b)
6,300
93,700
(j)
2,483
(c)
55,000
38,700
(m)
1,150
1,333
(d)
3,000
35,700
41,900
Notes Payable No. 250
Date
PR
Debit
Credit
Balance
(k)
7,000
39,400
(b)
42,700
42,700
(l)
1,200
38,200
(f)
10,500
53,200
(m)
1,150
37,050
(n)
925
36,125
(o)
9,480
26,645
Common Stock No. 307
(p)
1,200
25,445
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
Prepaid Insurance No. 108
(e)
6,200
6,200
Date
PR
Debit
Credit
Balance
(g)
14,000
20,200
(d)
3,000
3,000
(i)
22,000
42,200
Office Equipment No. 163
Wages Expense No. 601
Date
PR
Debit
Credit
Balance
Date
PR
Debit
Credit
Balance
(a)
5,000
5,000
(l)
1,200
1,200
(h)
1,150
6,150
(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
Advertising Expense No. 603
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
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
Office equipment …………………………………. 6,150
Drafting equipment ……………………………… 80,000
Building ………………………………………………. 55,000
Land ……………………………………………………. 49,000
Accounts payable ………………………………… $ 1,333
Notes payable ……………………………………… 53,200
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.
2 Prepaid Rent ……………………………………….. 131 6,000
Cash …………………………………………….. 101 6,000
Prepaid six months’ rent.
3 Office Equipment …………………………………. 163 3,000
Office Supplies ……………………………………. 124 1,200
Accounts Payable …………………………. 201 4,200
Purchased equipment and supplies on credit.
6 Cash……………………………………………………. 101 4,000
Services Revenue …………………………. 403 4,000
Received cash for services.
22 Cash……………………………………………………. 101 3,500
Accounts Receivable ……………………. 106 3,500
Collected part of amount owed by client.
25 Accounts Receivable …………………………... 106 3,820
Services Revenue …………………………. 403 3,820
Billed client for completed work.
29 Dividends ……………………………………………. 319 5,100
Cash …………………………………………….. 101 5,100
Paid cash dividends.
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
31
G1
136,700
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
1,800
Prepaid Insurance
Acct. No. 128
Date
Explanation
PR
Debit
Credit
Balance
Mar.
19
G1
5,000
5,000
Prepaid Rent
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
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
12
G1
4,200
0
30
G1
600
600
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.
29
G1
5,100
5,100
Acct. No. 403
Date
Explanation
PR
Debit
Credit
Balance
Mar.
6
G1
4,000
4,000
9
G1
7,500
25
G1
3,820
Acct. No. 690
Date
Explanation
PR
Debit
Credit
Balance
Mar.
31
G1
500
500
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
Accounts payable …………………………………………. $ 600
Common stock …………………………………………….. 172,000
Dividends …………………………………………………….. 5,100
Services revenue …………………………..……………… 15,320
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.
c. Office Supplies …………………………………. 108 2,000
Accounts Payable ………………………. 201 2,000
Purchased office supplies on account.
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.
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.
m. Cash …………………………………………………. 101 4,000
Accounts Receivable ………………….. 106 4,000
Received cash due on account.
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
(g)
8,000
36,200
Date
PR
Debit
Credit
Balance
(h)
35,565
(c)
2,000
2,000
(e)
7,600
(j)
20,300
13,265
(i)
2,000
5,600
(l)
11,465
(m)
4,000
15,465
Notes Payable No. 250
(n)
2,800
12,665
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
85,000
Office Supplies No. 108
(d)
16,500
101,500
Date
PR
Debit
Credit
Balance
(c)
2,000
2,000
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
Fees Earned No. 402
Date
PR
Debit
Credit
Balance
(g)
8,000
(k)
14,250
Automobiles No. 164
Salaries Expense No. 601
Date
PR
Debit
Credit
Balance
Date
PR
Debit
Credit
Balance
(d)
16,500
16,500
(f)
1,800
1,800
(l)
1,800
3,600
Building No. 170
Date
PR
Debit
Credit
Balance
Utilities Expense No. 602
(b)
160,000
160,000
Date
PR
Debit
Credit
Balance
(h)
635
635