Chapter 2 – The Accounting Cycle: During the Period
2-60 Financial Accounting, 5e
Problem 2-8B (LO 2-4, 2-5, 2-6)
Requirement 1
Entries are numbered for posting.
(1)
Nov. 1
Debit
Credit
Cash
13,000
Common Stock
13,000
(Issue common stock)
(2)
Nov. 2
Equipment
Notes Payable
3,500
(Purchase equipment with note payable)
(3)
Nov. 4
Supplies
Accounts Payable
1,000
(Purchase supplies on account)
(4)
Nov. 10
Accounts Receivable
9,000
Service Revenue
9,000
(Provide services on account)
(5)
Nov. 15
Accounts Payable
1,100
Cash
1,100
(Pay cash on account)
(6)
Nov. 20
Salaries Expense
3,000
Cash
3,000
(Pay current salaries)
(7)
Nov. 22
Cash
Service Revenue
11,000
(Provide services for cash)
(8)
Nov. 24
Notes Payable
1,400
Cash
1,400
(Pay note payable)
(9)
Nov. 26
Cash
7,000
Accounts receivable
7,000
Chapter 2 – The Accounting Cycle: During the Period
Problem 2-8B (continued)
(10)
Nov. 28
Utilities Expense
1,100
(11)
Nov. 30
Rent Expense
2-62 Financial Accounting, 5e
Problem 2-8B (continued)
Requirements 2 and 3
Cash
Accounts Receivable
Supplies
Bal. 3,200
1,100 (5)
Bal. 600
7,000 (9)
Bal. 700
Equipment
Accounts Payable
Notes Payable
Bal. 9,400
(2) 3,500
(5)1,100
2,000 Bal.
1,000 (3)
(8) 1,400
4,000 Bal.
3,500 (2)
12,900
1,900
6,100
20,000
20,000
Salaries Expense
Chapter 2 – The Accounting Cycle: During the Period
Problem 2-8B (continued)
Requirement 4
Buckeye Incorporated
Trial Balance
November 30
Accounts
Debit
Credit
Cash
$22,600
Accounts Receivable
2,600
Supplies
1,700
Equipment
Accounts Payable
Notes Payable
Common Stock
Retained Earnings
Service Revenue
Salaries Expense
Utilities Expense
1,100
Rent Expense
Chapter 2 – The Accounting Cycle: During the Period
Problem 2-9B (LO 2-4, 2-5, 2-6)
Requirement 1
Entries are numbered for posting.
(1)
December 1-31
Debit
Credit
Cash
27,400
Service Revenue
27,400
(Provide services for cash)
(2)
December 4
Supplies
Accounts Payable
2,900
(Purchase supplies on account)
(3)
December 8
Advertising Expense
Cash
(4)
December 9
Accounts Payable
2,900
Cash
2,900
(Pay cash on account)
(5)
December 12
Cash
5,000
Common Stock
5,000
(Issue shares of common stock)
(6)
December 16
Accounts Payable
6,300
Cash
6,300
(Pay cash on account)
(7)
December 19
Equipment
7,700
Cash
7,700
(Purchase equipment)
(8)
December 22
Utilities Expense
4,500
Cash
4,500
(Pay utilities for current month)
(9)
December 24
Cash
2,300
Deferred Revenue
2,300
Chapter 2 – The Accounting Cycle: During the Period
Problem 2-9B (continued)
December 27
No journal entry is required
(10)
December 30
Salaries Expense
Cash
(11)
December 31
Cash
Chapter 2 – The Accounting Cycle: During the Period
Problem 2-9B (continued)
Requirements 2 and 3
Cash
Supplies
Prepaid Rent
4,400
Bal. 19,400
3,200 (3)
Bal. 1,500
Bal. 7,200
Equipment
Buildings
Accounts Payable
Bal. 83,700
(7) 7,700
Bal. 240,000
(4) 2,900
(6) 6,300
9,800 Bal.
2,900 (2)
91,400
240,000
3,500
Deferred Revenue
Common Stock
Retained Earnings
2,000 Bal.
2,300 (9)
125,000 Bal.
75,500 Bal.
4,300
130,000
75,500
Dividends
Service Revenue
Salaries Expense
Bal. 9,000
(11) 3,000
264,000 Bal.
27,400 (1)
Bal. 65,000
(10) 7,000
12,000
291,400
72,000
Utilities Expense
21,400
Problem 2-9B (continued)
Requirement 4
Thunder Cat Services
Trial Balance
December 31, 2021
Accounts
Debit
Credit
Cash
$ 19,500
Supplies
4,400
Prepaid Rent
7,200
Equipment
Buildings
Accounts Payable
$ 3,500
Deferred Revenue
Common Stock
Retained Earnings
Dividends
Service Revenue
Salaries Expense
Advertising Expense
Chapter 2 – The Accounting Cycle: During the Period
2-68 Financial Accounting, 5e
ADDITIONAL PERSPECTIVES
Additional Perspective 2-1
Requirement 1
Entries are numbered for posting.
(1)
July 1, 2021
Debit
Credit
Cash
10,000
Common Stock
10,000
(Issue common stock to Suzie)
(2)
July 1, 2021
Cash
10,000
Common Stock
10,000
(Issue common stock to Tony)
(3)
July 1, 2021
Prepaid Insurance
Cash
4,800
(Purchase one-year insurance policy)
(4)
July 2, 2021
Legal Fees Expense
1,500
Cash
1,500
(Pay legal fees for incorporation)
(5)
July 4, 2021
Supplies (Office)
1,800
Accounts Payable
1,800
(Purchase office supplies on account)
(6)
July 7, 2021
Advertising Expense
Cash
(Pay cash for advertising)
(7)
July 8, 2021
Equipment (Bikes)
Cash
(Pay cash for mountain bikes)
(8)
July 15, 2021
Cash
2,000
Service Revenue
2,000
(Receive cash for mountain bike clinic)
Chapter 2 – The Accounting Cycle: During the Period
Additional Perspective 2-1 (continued)
Requirement 1 (concluded)
(9)
July 22, 2021
Cash
2,300
Service Revenue
2,300
(Receive cash for mountain bike clinic)
(10)
July 24, 2021
(Pay cash for advertising)
(11)
July 30, 2021
(Receive cash in advance for kayak clinic)
Chapter 2 – The Accounting Cycle: During the Period
2-70 Financial Accounting, 5e
Additional Perspective P2-1 (continued)
Requirement 2
Cash
1,800 (5)
1,800
(1) 10,000
4,800 (3)
Prepaid Insurance
(3) 4,800
Supplies
(5) 1,800
Deferred Revenue
4,000 (11)
4,000
Common Stock
10,000 (1)
10,000 (2)
20,000
Service Revenue
2,000 (8)
2,300 (9)
4,300
Chapter 2 – The Accounting Cycle: During the Period
Additional Perspective 2-1 (concluded)
Requirement 3
Great Adventures, Inc.
Trial Balance
July 31, 2021
Accounts
Debit
Credit
Cash
$ 9,000
Prepaid Insurance
4,800
Equipment
Accounts Payable
Deferred Revenue
Common Stock
Advertising Expense
1,000
Legal Fees expense
1,500
Chapter 2 – The Accounting Cycle: During the Period
2-72 Financial Accounting, 5e
Additional Perspective 2-2
($ in thousands)
Requirement 2
Percentage change in net income = ($204,163 − $212,449) / $212,449 = -3.9%
Requirement 3
No. Based on the statement of stockholders’ equity, American Eagle did not issue
accounts, such as common stock and retained earnings, also increase with a credit.
Requirement 5
No. The terms “debit” and “credit” are not shown in the income statement. Expense
Chapter 2 – The Accounting Cycle: During the Period
Additional Perspective 2-3
($ in thousands)
Requirement 1
Percentage change in total assets = ($538,116 − $579,847) / $579,847 = -7.2%
Requirement 3
Yes. Based on the statement of stockholders’ equity, The Buckle did issue a small
amount of common stock in the most recent year.
Requirement 4
No. The terms “debit” and “credit” are not shown in the balance sheet. Asset
Requirement 5
No. The terms “debit” and “credit” are not shown in the income statement. Expense
Chapter 2 – The Accounting Cycle: During the Period
2-74 Financial Accounting, 5e
Additional Perspective 2-4
American Eagle for all three. American Eagle has a larger increase in terms of total
assets, and also showed growth in net sales whereas Buckle’s net sales declined.
Chapter 2 – The Accounting Cycle: During the Period
Additional Perspective 2-5
1. Increases reported profit by $75,000, from a loss of $50,000 to a profit of $25,000
(ignoring any tax effects).
2. Yes.
Robert, the company’s president, benefits from false reporting by maintaining the
3. Yes.
Outside decisions makers, such as investors and creditors, view companies that report
a profit instead of a loss as being more financially stable.
4. No.
As the accountant, Larry should understand that his responsibilities are to accurately
Chapter 2 – The Accounting Cycle: During the Period
2-76 Financial Accounting, 5e
Additional Perspective 2-6
(Note to instructor: Answers are based on items in Apple’s September 30, 2017
annual report. Dollar amounts are in millions)
Requirement 1
Accounts receivable = $17,874. The accounts receivable account represents the
Requirement 4
Common stock (including additional paid-in capital) = $35,867. The common stock
account represents capital contributed to the company by stockholders.
Requirement 5
Assets ($375,319) = Liabilities ($241,272) + Stockholders’ equity ($134,047)
Chapter 2 – The Accounting Cycle: During the Period
Additional Perspective 2-7
For transaction (a):
Step 1. Analyze customer invoice.
For transaction (b):
Step 1. Analyze employee paycheck.
Step 2. Determine assets decrease and stockholders’ equity decreases (and
For transaction (c):
Step 1. Analyze purchase receipt for equipment.
Step 5. All transactions are posted to the general ledger accounts.