FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
P2-66B
(45-60 min.)
Requirements
Solution:
Req. 1
Bal. 2,100 3,400 12,400 7,500 5,600 4,800
a) 3,900 3,900 Issued stock
+
Type of Stockholders’
Equity Transaction
Common
Stock
+
1. Analyze the effects of the preceding transactions on the accounting equation of Willis Computing, Inc.
2. Prepare the income statement of Willis Computing, Inc., for the month ended November 30, 2016. List expenses in
decreasing order by amount.
3. Prepare the statement of retained earnings of Willis Computing, Inc., for the month ended November 30, 2016.
4. Prepare the balance sheet of Willis Computing, Inc., at November 30, 2016.
Analysis of Transactions
ASSETS = LIABILITIES + STOCKHOLDERS’ EQUITY
+
Cash
Retained
Earnings
Equipment
=
+
Accounts
Receivable
+
Supplies
+
Chapter 2: Transaction Analysis Page 61 of 90
b) 6,000 6,000 Service revenue
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
Req. 2
Revenues:
Service revenue ($6,000 + $4,500) 10,500$
Req. 3
4,800$
7,500
12,300
10,000$
Less: Dividends declared
Retained earnings, November 30, 2016
Income Statement
Month Ended November 30, 2016
Willis Computing, Inc.
Willis Computing, Inc.
Statement of Retained Earnings
For the Month Ended November 30, 2016
Retained earnings, October 31, 2016
Add: Net income
Subtotal
Chapter 2: Transaction Analysis Page 62 of 90
Expenses:
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
Req. 4
Cash 3,000$ Accounts payable 3,600$
Accounts receivable 6,800
ASSETS
LIABILITIES
Willis Computing, Inc.
Balance Sheet
November 30, 2016
Chapter 2: Transaction Analysis Page 63 of 90
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
P2-67B
(30-40 min.)
Requirements
Solution:
Req. 1
DEBIT CREDIT
a. 3,900
3,900
b. 6,000
6,000
1. Journalize the transactions of Willis Computing, Inc. Explanations
are not required.
2. Prepare T-accounts for each account. Insert in each T-account its
October 31 balance as given (example: Cash $2,100). Then, post the
November transactions to the T-accounts.
3. Compute the balance in each account.
ACCOUNT
Cash
Common Stock
Cash
Service Revenue
Journal
Chapter 2: Transaction Analysis Page 64 of 90
4,800
e. 1,100
1,100
4,500
3,000
2,300
Supplies
Accounts Payable
Cash
Accounts Payable
Accounts Receivable
Accounts Receivable
Service Revenue
Cash
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
Reqs. 2 and 3
2,100 4,800 3,400 1,100 900
3,900 3,000 4,500
12,400 4,800 7,500 5,600
4,800 2,300 6,000
1,700 1,300
1,700 1,300
Supplies
Equipment
Accounts
Payable
Common Stock
Retained
Earnings
Dividends
Service
Revenue
Rent Expense
Advertising
Expense
Accounts
Receivable
Cash
Chapter 2: Transaction Analysis Page 65 of 90
6,000 2,300
3,000 6,800 900
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
P2-68B
(50-60 min.)
Requirements
Solution:
Req. 1
DEBIT CREDIT
July 2 Cash 62,000
Common Stock
62,000
7 Land 39,000
Cash 39,000
Journal
DATE
ACCOUNT TITLES
1. Record each transaction in the journal. Be sure to record the date in each entry.
Explanations are not required.
2. Post the transactions to the T-accounts, using transaction dates as posting references.
3. Prepare the trial balance of Gagne Services, Inc., at July 31 of the current year.
4. John Gagne, the manager, asks you how much in total resources the business has to
work with, how much it owes, and whether July was profitable (and by how much).
Chapter 2: Transaction Analysis Page 66 of 90
3 Supplies 800
4 Cash 5,600
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
22 Utilities Expense 420
Cash 420
Chapter 2: Transaction Analysis Page 67 of 90
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
Req. 2
July 2 62,000 July 7 39,000 July 11 2,900 July 18 800
4 5,600 16 12,100 Bal. 2,100
18 800 17 590
July 16 12,100 July 3 12,900
Bal. 800
July 2 63,000
Bal. 63,000
July 30 2,000
July 4 5,600
July 30 2,500 Bal. 10,800
July 17 590
Cash
Accounts Receivable
Accounts Payable
Common Stock
Dividends
Chapter 2: Transaction Analysis Page 68 of 90
July 3 12,100
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
Req. 3
DEBIT CREDIT
Cash 14,090$
Accounts receivable 2,100
Supplies 800
Req. 4
Total resources (assets) = $68,090 ($14,090 + $2,100 + $800 +
$39,000 + $12,100)
Gagne Services, Inc.
Trial Balance
July 31, 20XX
ACCOUNT
Chapter 2: Transaction Analysis Page 69 of 90
Accounts payable $800
Common stock 62,000
Service revenue 10,800
Salary expense 2,500
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
P2-69B
(40-50 min.)
Requirements
Solution:
(a) 50,000 (c) 44,000 (g) 13,100 (j) 1,700
(b) 63,000 (e) 5,900 Bal. 11,400
(d) 210
Bal.
210 (h) 200 (d) 210
(i) 600
Bal.
Bal.
Bal.
Service Revenue
Cash
Accounts Receivable
Supplies
Accounts Payable
1. Record each transaction directly in the T-accounts without using a journal. Use the
letters to identify the transactions.
2. Prepare the trial balance of Spahr Music Corporation at May 31, 2016.
Chapter 2: Transaction Analysis Page 70 of 90
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
Req. 3
DEBIT CREDIT
Cash $66,800
Accounts receivable 11,400
Supplies 210
May 31, 2016
ACCOUNT
Spahr Music Corporation
Trial Balance
Chapter 2: Transaction Analysis Page 71 of 90
Common stock 156,000
Service revenue 16,800
Salary expense 5,900
Advertising expense 600
Utilities expense 300
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
E2-70
(20-40 min.)
Requirement
Solution:
a.
Nov. 30 Bal. 16,500
b.
Nov 30 Bal. 23,000
Dec. sales
c.
Nov. 30 Bal. 11,500
Dec. note payments 23,000
Cash
Cash collections from customers during December:
Accounts Receivable
1. Prepare a T-account to compute each amount, a through c.
Cash paid on notes payable during December:
Total cash paid during December:
Notes Payable
Chapter 2: Transaction Analysis Page 72 of 90
Dec. receipts 91,000 Dec. payments 99,250
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
E2-71
(20-30 min.)
Requirements
Solution:
Req. 1
Cash…………………………… 3,900
Accounts receivable……….. 7,100
Land…………………………… 30,100
Accounts payable………….. 6,200$
Req. 2
a. =
b. =
Total liabilities
Net income
$12,100 ($6,200 + $5,900)
1. Prepare a trial balance for the ledger accounts of 4AC, Inc., as of October 31,
2016.
2. Determine the out-of-balance amount. The error lies in the Accounts Receivable
account. Add the out-of-balance amount to, or subtract it from, Accounts
Receivable to determine the correct balance of Accounts Receivable. After
correcting Accounts Receivable, advise the top management of 4AC, Inc., on the
company’s
a. total assets.
b. total liabilities.
c. net income or net loss for October.
4AC, Inc.
Trial Balance
December 31, 2016
Total assets
$43,000 ($3,900 + $9,000* + $30,100)
Chapter 2: Transaction Analysis Page 73 of 90
Note payable………………… 5,900
Common stock……………… 24,100
Retained earnings………….. 1,700
Service revenue…………….. 9,400
Salary expense……………… 2,900
Advertising expense………. 1,400
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
E2-72
(10-15 min.)
Requirements
Solution:
Req. 1
Henderson Co.:
Income statement
Employee medical exp. 38,000$ $ -0-
Balance sheet Nov. 30 Dec. 31
Cash 57,000$ 30,000$ *
Req. 2
Explanation:
1. For this situation, show everything that both Henderson and Goodland will
report on their November and December income statements and on their
balance sheets at November 30 and December 31.
2. After showing what each company should report, briefly explain how the
Henderson and Goodland data relate to each other.
December
November
Henderson’s $27,000 cash payment is Goodland’s cash receipt.
Henderson’s $11,000 account payable is Goodland’s account receivable.
Henderson’s $38,000 expense is Goodland’s revenue.
Chapter 2: Transaction Analysis Page 74 of 90
Accounts payable 38,000 11,000 **
Goodland Hospital:
Service revenue 38,000$ $ -0-
Balance sheet Nov. 30 Dec. 31
Cash $ -0- 27,000$
Accounts receivable 38,000 11,000 **
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
P2-73
(20 min.)
Requirements
Solution:
Req. 1
May
1
2
Req. 2
Req. 3
Req. 4
Correct total assets, $43,300 ($28,000 + $18,000 – $5,400 + $2,800 – $100)
Correct net income, $23,100 ($8,000 – $100 + $2,800 – $5,600 + $18,000)
Date
Understated $100
Understated $18,000
Effect on Total
Assets
Income
Effect
on Cash
Overstated $100
Understated $18,000
Correct cash balance, $24,500 ($6,400 + $100 + $18,000)
1. For each of the preceding entries, indicate the effect of the error on cash,
total assets, and net income. The answer for the first transaction has been
provided as an example.
2. What is the correct balance of cash if the balance of cash on the books
before correcting the preceding transactions was $6,400?
3. What is the correct amount of total assets if the total assets on the books
before correcting the preceding transactions was $28,000?
4. What is the correct net income for May if the reported income before
correcting the preceding transactions was $8,000?
Date Effect on Cash Effect on Total Assets Effect on Net
May 1 Understated $100 Overstated $100 Overstated $100
Overstated $100
Understated $18,000
Chapter 2: Transaction Analysis Page 75 of 90
5
Overstated $5,400