Accounting Chapter 2 Homework These steps would be followed by preparation of a trial balance

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

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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

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Quick Study 2-4 (10 minutes)

Credit

Debit

Credit

Debit

e.

Debit

i.

Credit

Quick Study 2-5 (10 minutes)

a.

Debit

e.

Debit

i.

Credit

Debit

Credit

j.

Debit

Credit

Debit

l.

Credit

Quick Study 2-6 (15 minutes)

a.

1) Analyze:

Assets

=

Liabilities

+

Equity

=

+

2) Record:

Date

Account Titles and Explanation

PR

Debit

Credit

Cash

101

167

301

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:

Assets

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

Cash

101

3) Post

Quick Study 2-7 (10 minutes)

a.

Debit

e.

Debit

i.

Credit

j.

Debit

c.

Credit

Debit

Credit

Quick Study 2-8 (10 minutes)

The correct answer is a.

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Quick Study 2-9 (10 minutes)

a.

I

e.

B

i.

E

B

j.

B

I

l.

I

Quick Study 2-10 (10 minutes)

a. b. c.

Cash

Accounts Payable

Supplies

100

50

2,000

8,000

10,000

3,800

2,700

Bal.

310

Bal.

600

150

700

150

Bal.

50

Bal.

100

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

Balance

(Dr. or Cr.)

a.

Land ……………………………………..

asset

debit

b.

Cash ……………………………………..

c.

d.

Accounts Receivable ……………..

License Fee Revenue …………….

Unearned Revenue ………………..

Fees Earned …………………………..

Notes Payable ……………………….

Exercise 2-5 (15 minutes)

Of the items listed, the following effects should be included:

a. $28,000 increase in a liability account.

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Exercise 2-6 (15 minutes)

a.

Beginning accounts payable (credit) ………………………………………

$152,000

Purchases on account in October (credits) …………………………..

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) ……………………………………..

Collections on account in October (credits) …………………………..

Ending accounts receivable (debit) ………………………………………..

$ 89,000

Sales on account in October (debits) ……………………………………..

$ 89,390

c.

Beginning cash balance (debit) ………………………………………………

$ ?

Cash received in October (debits) ………………………………………….

Cash disbursed in October (credits) …………………………..…………..

Ending cash balance (debit) …………………………………………………..

$ 18,600

Beginning cash balance (debit) ………………………………………………

$ 19,250

Exercise 2-7 (25 minutes)

Aug. 1 Cash ………………………………………………………… 6,500

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Exercise 2-8 (30 minutes)

Part 1

Cash

Photography Equipment

Aug. 1

6,500

Aug. 2

2,100

Aug. 1

33,500

20

3,331

5

Balance

6,176

Aug. 1

Aug. 5

Aug. 20

Aug. 2

2,100

Aug. 31

Part 2

POSE-FOR-PICS

Trial Balance

August 31

Debit

Credit

Cash …………………………………………..

$ 6,176

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Exercise 2-9 (30 minutes)

a. Cash ………………………………………………………………… 100,750

K. Spade, Capital ……………………………………….. 100,750

Owner invested in the business.

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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

(h)

(g)

1,225

(i)

10,000

Balance

94,850

(a)

100,750

Balance

(h)

1,125

(i)

10,000

Balance

10,000

(b)

(d)

Balance

(c)

10,050

(g)

Balance

10,050

Balance

Exercise 2-10 (15 minutes)

SPADE COMPANY

Trial Balance

May 31, 2017

Debit

Credit

Cash ………………………………………

$ 94,850

Accounts receivable ……………….

Office equipment …………………….

Accounts payable ……………………

K. Spade, Withdrawals …………………………..

Fees earned …………………………...

Rent expense …………………………..

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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:

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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.

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Exercise 2-14 (30 minutes)

a. Cash ………………………………………………………………… 6,000

Equipment ……………………………………………………….. 7,600

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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

Plus owner investments ………………………………

Plus owner investment ………………………………..

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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

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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: