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Wild, Shaw, Chiappetta, FAP 23e Solutions Manual: Chapter 2
59
Chapter 2
Analyzing and Recording Transactions
QUESTIONS
1. a. Common asset accounts: cash, accounts receivable, notes receivable, prepaid
expenses (rent, insurance, etc.), office supplies, store supplies, equipment,
2. A note payable is formal promise, usually denoted by signing a promissory note to
pay a future amount. A note payable can be short-term or long-term, depending on
3. There are several steps in processing transactions: (1) Identify and analyze the
transaction or event, including the source document(s), (2) apply double-entry
6. A transaction is first recorded in a journal to create a complete record of the
7. Expense accounts have debit balances because they are decreases to equity (and
60
11. The balance sheet provides information that helps users understand a company’s
12. The income statement lists the types and amounts of revenues and expenses, and
13. An income statement user must know what time period is covered to judge whether
the company’s performance is satisfactory. For example, a statement user would
14. (a) Assets are probable future economic benefits obtained or controlled by a specific
entity as a result of past transactions or events. (b) Liabilities are probable future
16. Debit balance accounts on the Apple balance sheet include: Cash and cash
equivalents; Short-term marketable securities; Accounts receivable; Inventories;
Deferred tax assets; Vendor non-trade receivables; Other current assets; Long-term
17. The asset accounts with receivable in its account title are: Accounts receivable, net;
18. Samsung’s balance sheet lists the following current liabilities: Trade and other
payables; Short-term borrowings; Other payables; Advances received;
Wild, Shaw, Chiappetta, FAP 23e Solutions Manual: Chapter 2
QUICK STUDIES
Quick Study 2-1 (10 minutes)
The likely source documents include:
Quick Study 2-2 (5 minutes)
a. A Asset
b. A Asset
Quick Study 2-3 (5 minutes)
a. E Expense 655
b. R Revenue 406
62
Quick Study 2-4 (10 minutes)
Quick Study 2-5 (10 minutes)
a.
Debit
e.
Debit
i.
Credit
Quick Study 2-6 (15 minutes)
a.
1) Analyze:
Assets
=
Liabilities
+
Equity
2) Record:
Date
Account Titles and Explanation
PR
Debit
Credit
3) Post
Cash 101
D. Tyler, Capital 301
Equipment 167
Quick Study 2-6 (Continued)
b.
1) Analyze:
Assets
=
Liabilities
+
Equity
2) Record:
Date
Account Titles and Explanation
PR
Debit
Credit
3) Post
c.
1) Analyze:
2) Record:
Date
Account Titles and Explanation
PR
Debit
Credit
3) Post
Quick Study 2-6 (Continued)
d.
1) Analyze:
Assets
=
Liabilities
+
Equity
2) Record:
Date
Account Titles and Explanation
PR
Debit
Credit
3) Post
Quick Study 2-7 (10 minutes)
a.
Debit
e.
Debit
i.
Credit
Quick Study 2-8 (10 minutes)
The correct answer is a.
65
Quick Study 2-9 (10 minutes)
a.
I
e.
B
i.
E
Quick Study 2-10 (10 minutes)
a. b. c.
Cash
Accounts Payable
Supplies
100
50
2,000
8,000
10,000
3,800
66
Quick Study 2-11 (15 minutes)
Quick Study 2-12 (10 minutes)
Wild, Shaw, Chiappetta, FAP 23e Solutions Manual: Chapter 2
67
EXERCISES
Exercise 2-1 (10 minutes)
Exercise 2-2 (10 minutes)
Exercise 2-3 (5 minutes)
Exercise 2-4 (15 minutes)
Type of
Normal
Increase
Account
Account
Balance
(Dr. or Cr.)
a.
Land ............................................
asset
debit
debit
Exercise 2-5 (15 minutes)
Of the items listed, the following effects should be included:
a. $28,000 increase in a liability account.
69
Exercise 2-6 (15 minutes)
a.
Beginning accounts payable (credit) .............................................
$152,000
b.
Beginning accounts receivable (debit) ..........................................
$102,500
c.
Beginning cash balance (debit) ......................................................
$ ?
Exercise 2-7 (25 minutes)
Aug. 1 Cash .................................................................. 6,500
70
Exercise 2-8 (30 minutes)
Part 1
Cash
Photography Equipment
Aug. 1
6,500
Aug. 2
2,100
Aug. 1
33,500
Part 2
POSE-FOR-PICS
Trial Balance
August 31
Debit
Credit
Cash ..................................................
$ 6,176
71
Exercise 2-9 (30 minutes)
a. Cash ........................................................................... 100,750
K. Spade, Capital ............................................... 100,750
Owner invested in the business.
72
Exercise 2-9 (concluded)
Cash
Accounts Payable
(a)
100,750
(b)
1,250
(e)
10,050
(c)
10,050
(d)
15,500
(e)
10,050
Balance
0
Exercise 2-10 (15 minutes)
SPADE COMPANY
Trial Balance
May 31, 2017
Debit
Credit
Cash .............................................
$ 94,850
73
Exercise 2-11 (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:
74
Exercise 2-12 (20 minutes)
1.
a. Cash ..................................................................... 20,000
B. Valdez, Capital .......................................... 20,000
Cash received from owner investment.
2. Transactions a, c, d, and e 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
Exercise 2-13 (25 minutes)
b 1. The company paid $4,800 cash in advance for prepaid insurance coverage.
75
Exercise 2-14 (30 minutes)
a. Cash ........................................................................... 6,000
Equipment ................................................................. 7,600
76
Exercise 2-15 (20 minutes)
Calculation of change in equity for part a through part d
Assets
-
Liabilities
=
Equity
Beginning of the year ..........
$ 60,000
-
$20,000
=
$40,000
End of the year .....................
105,000
-
36,000
=
69,000
77
Exercise 2-16 (15 minutes)
HELP TODAY
Income Statement
For Month Ended August 31
Revenues
Consulting fees earned ......................... $ 27,000
Exercise 2-17 (15 minutes)
HELP TODAY
Statement of Owner’s Equity
For Month Ended August 31
C. Camry, Capital, July 31 ......................... $ 0
78
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)
(a)
(b)
(c)
(d)
Answers
$(28,000)
$42,000
$73,000
$(45,000)
Computations:
