Accounting Chapter 5 Homework Usually denoted by signing a promissory note to pay

Chapter 2

Financial Statements and the

Accounting System

QUESTIONS

1. a. Common asset accounts: cash, accounts receivable, notes receivable, prepaid

2. A note payable is formal promise, usually denoted by signing a promissory note to

3. There are several steps in processing transactions: (1) Identify and analyze the

8. The recordkeeper prepares a trial balance to summarize the contents of the ledger

11. The balance sheet provides information that helps users understand a company’s

13. An income statement user must know what time period is covered to judge whether

14. (a) Assets are probable future economic benefits obtained or controlled by a specific

16. Debit balance accounts on the Apple balance sheet include: Cash and cash

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

QUICK STUDIES

Quick Study 2-1 (10 minutes)

The likely source documents include:

a. Sales ticket

Quick Study 2-2 (5 minutes)

Quick Study 2-3 (5 minutes)

Quick Study 2-4 (10 minutes)

Quick Study 2-5 (10 minutes)

Quick Study 2-6 (15 minutes)

a.

1) Analyze:

2) Record:

Date

Account Titles and Explanation

PR

Debit

Credit

3) Post

Cash 101

Common Stock 307

Equipment 167

Quick Study 2-6 (Continued)

b.

1) Analyze:

Assets

=

Liabilities

+

Equity

Office Supplies

Accounts Payable

=

+

2) Record:

Date

Account Titles and Explanation

PR

Debit

Credit

May 21

Office Supplies

3) Post

Office Supplies 124

c.

1) Analyze:

Assets

=

Liabilities

+

Equity

Cash

Landscaping Revenue

=

+

2) Record:

Date

Account Titles and Explanation

PR

Debit

Credit

May 25

3) Post

Cash 101

Accounts Payable 201

Landscaping Revenue 403

Quick Study 2-6 (Continued)

d.

1) Analyze:

Assets

=

Liabilities

+

Equity

Cash

=

+

Unearned Landscaping

2) Record:

Date

Account Titles and Explanation

PR

Debit

Credit

May 30

Cash

101

1,000

3) Post

Cash 101

Quick Study 2-7 (10 minutes)

a.

Debit

e.

Debit

Credit

Debit

c.

Credit

Debit

Credit

Quick Study 2-8 (10 minutes)

Unearned Landscaping Revenue 236

Quick Study 2-9 (10 minutes)

Quick Study 2-10 (10 minutes)

b. The same four basic financial statements are prepared under IFRS and

c. Accounting reports under both IFRS and US GAAP are likely different

Quick Study 2-11 (10 minutes)

EXERCISES

Exercise 2-1 (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.

Legal Expense ……………………….

d.

Dividends ………………………………

License Fee Revenue …………….

Unearned Revenue ………………..

Equipment …………………………….

Notes Payable ……………………….

Common Stock………………………

Exercise 2-5 (15 minutes)

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

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

Exercise 2-7 (25 minutes)

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

Photography Equipment …………………………... 33,500

Common Stock …………………………………… 40,000

Owner investment in business for stock.

Exercise 2-8 (30 minutes)

Cash

Photography Equipment

Aug. 1

6,500

Aug. 2

2,100

Aug. 1

33,500

20

3,331

5

Aug. 5

Aug. 20

Aug. 2

2,100

Aug. 31

POSE-FOR-PICS

Trial Balance

August 31

Debit

Credit

Cash …………………………………………..

$ 6,176

Exercise 2-9 (30 minutes)

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

d. Cash ………………………………………………………………… 15,500

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

(h)

1,125

(g)

1,225

(i)

10,000

Balance

94,850

(a)

100,750

Balance

Accounts Receivable

Dividends

(f)

2,700

(h)

1,125

(i)

10,000

Balance

1,575

Balance

10,000

Office Supplies

Fees Earned

(b)

1,250

(d)

Balance

1,250

(f)

Balance

Office Equipment

Rent Expense

(c)

10,050

(g)

Balance

10,050

Balance

Exercise 2-10 (15 minutes)

SPADE COMPANY

Trial Balance

May 31, 2016

Debit

Credit

Cash ………………………………………

$ 94,850

Accounts receivable ……………….

Office equipment …………………….

Accounts payable ……………………

Dividends …………………………………………………

Fees earned …………………………...

Rent expense …………………………..

Exercise 2-11 (20 minutes)

Transactions that created expenses:

b. Salaries Expense ………………………………….. 1,233

Transactions a, c, and e are not expenses for the following reasons:

a. This transaction decreased assets in settlement of a previously

Exercise 2-12 (20 minutes)

Transactions that created revenues:

b. Accounts Receivable …………………………………… 2,300

Transactions that did not create revenues along with the reasons are:

e. This transaction changed the form of the asset from accounts

Exercise 2-13 (25 minutes)

Exercise 2-14 (30 minutes)

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

b. Prepaid Insurance …………………………………………….. 4,800

Exercise 2-15 (20 minutes)

Calculation of change in equity for part a through part d

Assets

–

Liabilities

=

Equity

Beginning of the year ……….

–

=

–

=

$ ?

Plus owner investments ………………………………

b. Net income ………………………………………………….

$ ?

Plus owner investments ………………………………

Plus owner investment ………………………………..

d. Net income ………………………………………………….

Exercise 2-16 (15 minutes)

HELP TODAY

Income Statement

For Month Ended August 31

Revenues

Consulting fees earned ……………………. $ 27,000

Expenses

Exercise 2-17 (15 minutes)

HELP TODAY

Statement of Retained Earnings

For Month Ended August 31

Retained earnings, July 31 …………………… $ 0

Exercise 2-18 (15 minutes)

HELP TODAY

Balance Sheet

August 31

Assets Liabilities

Cash …………………………. $ 25,360 Accounts payable ……………. $ 10,500

Accounts receivable …. 22,360

Exercise 2-19 (15 minutes)

Answers

$(45,000)

Computations:

Equity, Dec. 31, 2015 …………..

$ 0

Owner’s investments ………….

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

e.

$38,000 debit to

Machinery

Machinery is

Exercise 2-21 (15 minutes)

a. The debit column is correctly stated because the erroneous debit (to

Exercise 2-22 (10 minutes)

HEINEKEN N.V.

Balance Sheet (in Euro millions)

December 31, 2014

Assets Equity and liabilities

Noncurrent assets …….. € 28,744 Total equity …………………….. € 13,452