Identifying effects of transactions using accounting equation—Revenues and Expenses LO P1 The following transactions were completed by the company: The company completed consulting work for a client and immediately collected $7,100 cash. The company completed commission work for a client and sent a bill for $5,600 to be received within 30 days. The company paid an assistant $2,200 cash as wages for the period. The company collected $2,800 cash as a partial payment for the amount owed by the client in transaction b. The company paid $1,020 cash for this period's cleaning services.
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Identifying effects of transactions using accounting equation —Revenues and Expenses LO P1
The following transactions were completed by the company:
- The company completed consulting work for a client and immediately collected $7,100 cash.
- The company completed commission work for a client and sent a bill for $5,600 to be received within 30 days.
- The company paid an assistant $2,200 cash as wages for the period.
- The company collected $2,800 cash as a partial payment for the amount owed by the client in transaction b.
- The company paid $1,020 cash for this period's cleaning services.
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- Transactions; financial statements 2. Net income: 10,850 On April 1, 20Y8, Maria Adams established Custom Realty. Maria completed the following transactions during the month of April: a. Opened a business bank account with a deposit of 24,000 in exchange for common stock. b. Paid rent on office and equipment for the month, 3,600. c. Paid automobile expenses for month, 1,350, and miscellaneous expenses, 600. d. Purchased supplies on account, 1,200. e. Earned sales commissions, receiving cash, 19,800. f. Paid creditor on account, 750. g. Paid office salaries, 2,500. h. Paid dividends, 3,500. i. Determined that the cost of supplies on hand was 300; therefore, the cost of supplies used was 900. Instructions 1. Indicate the effect of each transaction and the balances after each transaction, using the following tabular headings: 2. Prepare an income statement for April, a statement of stockholders equity for April, and a balance sheet as of April 30.Kelly Pitney began her consulting business, Kelly Consulting, on April 1, 2016. The accounting cycle for Kelly Consulting for April, including financial statements, was illustrated in this chapter. During May, Kelly Consulting entered into the following transactions: May 3. Received cash from clients as an advance payment for services to be provided and recorded it as unearned fees, 4,500. 5. Received cash from clients on account, 2,450. 9. Paid cash for a newspaper advertisement, 225. 13. Paid Office Station Co. for part of the debt incurred on April 5, 640. 15. Recorded services provided on account for the period May 115, 9,180. 16. Paid part-time receptionist for two weeks' salary including the amount owed on April 30, 750. 17. Recorded cash from cash clients for fees earned during the period May 116, 8,360. Record the following transactions on Page 6 of the journal: 20. Purchased supplies on account, 735. 21. Recorded services provided on account for the period May 1620, 4,820. 25. Recorded cash from cash clients for fees earned for the period May 1723, 7,900. 27. Received cash from clients on account, 9,520. 28. Paid part-time receptionist for two weeks' salary, 750. 30. Paid telephone bill for May, 260. 31. Paid electricity bill for May, 810. 31. Recorded cash from cash clients for fees earned for the period May 2631, 3,300. 31. Recorded services provided on account for the remainder of May, 2,650. 31. Kelly withdrew 10,500 for personal use. Instructions 1. The chart of accounts for Kelly Consulting is shown in Exhibit 9, and the post-closing trial balance as of April 30, 2016, is shown in Exhibit 17. For each account in the post-closing trial balance, enter the balance in the appropriate Balance column of a four-column account. Date the balances May 1, 2016, and place a check mark () in the Posting Reference column. Journalize each of the May transactions in a two-column journal starting on Page 5 of the journal and using Kelly Consultings chart of accounts. (Do not insert the account numbers in the journal at this time.) 2. Post the journal to a ledger of four-column accounts. 3. Prepare an unadjusted trial balance. 4. At the end of May, the following adjustment data were assembled. Analyze and use these data to complete parts (5) and (6). a. Insurance expired during May is 275. b. Supplies on hand on May 31 are 715. c. Depreciation of office equipment for May is 330. d. Accrued receptionist salary on May 31 is 325. e. Rent expired during May is 1,600. f. Unearned fees on May 31 are 3,210. 5. (Optional) Enter the unadjusted trial balance on an end-of-period spreadsheet and complete the spreadsheet. 6. Journalize and post the adjusting entries. Record the adjusting entries on Page 7 of the journal. 7. Prepare an adjusted trial balance. 8. Prepare an income statement, a statement of owners equity, and a balance sheet. 9. Prepare and post the closing entries. Record the closing entries on Page 8 of the journal. (Income Summary is account #33 in the chart of accounts.) Indicate closed accounts by inserting a line in both the Balance columns opposite the closing entry. 10. Prepare a post-closing trial balance.Comprehensive problem 1 Kelly Pitney began her consulting business, Kelly Consulting, on April 1, 2016. The accounting cycle for Kelly Consulting for April, including financial statements, was illustrated in this chapter. During May, Kelly Consulting entered into the following transactions: May 3. Received cash from clients as an advance payment for services to be provided and recorded it as unearned fees, 4,500. 5. Received cash from clients on account, 2,450. 9. Paid cash for a newspaper advertisement. 225. 13. Paid Office Station Co. for part of the debt incurred on April 5, 640. 15. Recorded services provided on account for the period May 1-15; 9,180. 16. Paid part-time receptionist for two weeks salary including the amount owed on April 30, 750. 17. Recorded cash from cash clients for fees earned during the period May 1-16, 8,360. Record the following transactions on Page 6 of the journal: 20. Purchased supplies on account, 735. 21. Recorded services provided on account for the period May 16-20, 4,820. 25. Recorded cash from cash clients for fees earned for the period May 17-23, 7,900. 27. Received cash from clients on account, 9,520. 28. Paid part-time receptionist for two weeks salary, 750. 30. Paid telephone bill for May, 260. 31. Paid electricity bill for May, 810. 31. Recorded cash from cash clients for fees earned for the period May 26-31, 3,300. 31. Recorded services provided on account for the remainder of May, 2,650. 31. Paid dividends, 10,500. Instructions 1. The chart of accounts for Kelly Consulting is shown in Exhibit 9, and the post-closing trial balance as of April 30, 2016, is shown in Exhibit 17. For each account in the post-closing trial balance, enter the balance in the appropriate Balance column of a four-column account. Date the balances May 1, 2016, and place a check mark () in the Posting Reference column. Journalize each of the May transactions in a two- column journal starting on Page 5 of the journal and using Kelly Consultings chart of accounts. (Do not insert the account numbers in the journal at this time.) 2. Post the journal to a ledger of four-column accounts. 3. Prepare an unadjusted trial balance. 4. At the end of May, the following adjustment data were assembled. Analyze and use these data to complete parts (5) and (6). a. Insurance expired during May is 275. b. Supplies on hand on May 31 are 715. c. Depreciation of office equipment for May is 330. d. Accrued receptionist salary on May 31 is 325. e. Rent expired during May is 1,600. f. Unearned fees on May 31 are 3,210. 5. (Optional) Enter the unadjusted trial balance on an end-of-period spreadsheet and complete the spreadsheet. 6. Journalize and post the adjusting entries. Record the adjusting entries on Page 7 of the journal. 7. Prepare an adjusted trial balance. 8. Prepare an income statement, a retained earnings statement, and a balance sheet. 9. Prepare and post the closing entries. Record the closing entries on Page 8 of the journal. (Income Summary is account 34 in the chart of accounts.) Indicate closed accounts by inserting a line in both the Balance columns opposite the closing entry. 10. Prepare a post-closing trial balance.
- The transactions completed by PS Music during June 2016 were described at the end of Chapter 1. The following transactions were completed during July, the second month of the businesss operations: July 1. Peyton Smith made an additional investment in PS Music by depositing 5,000 in PS Musics checking account. 1. Instead of continuing to share office space with a local real estate agency, Peyton decided to rent office space near a local music store. Paid rent for July, 1,750. 1. Paid a premium of 2,700 for a comprehensive insurance policy covering liability, theft, and fire. The policy covers a one-year period. 2. Received 1,000 on account. 3. On behalf of PS Music, Peyton signed a contract with a local radio station, KXMD, to provide guest spots for the next three months. The contract requires PS Music to provide a guest disc jockey for 80 hours per month for a monthly fee of 3,600. Any additional hours beyond 80 will be billed to KXMD at 40 per hour. In accordance with the contract, Peyton received 7,200 from KXMD as an advance payment for the first two months. 3. Paid 250 on account. 4. Paid an attorney 900 for reviewing the July 3 contract with KXMD. (Record as Miscellaneous Expense.) 5. Purchased office equipment on account from Office Mart, 7,500. 8. Paid for a newspaper advertisement, 200. 11. Received 1,000 for serving as a disc jockey for a party. 13. Paid 700 to a local audio electronics store for rental of digital recording equipment. 14. Paid wages of 1,200 to receptionist and part-time assistant. Enter the following transactions on Page 2 of the two-column journal: July 16. Received 2,000 for serving as a disc jockey for a wedding reception. 18. Purchased supplies on account, 850. 21. Paid 620 to Upload Music for use of its current music demos in making various music sets. 22. Paid 800 to a local radio station to advertise the services of PS Music twice daily for the remainder of July. 23. Served as disc jockey for a party for 2,500. Received 750, with the remainder due August 4, 2016. 27. Paid electric bill, 915. 28. Paid wages of 1,200 to receptionist and part-time assistant. 29. Paid miscellaneous expenses, 540. 30. Served as a disc jockey for a charity ball for 1,500. Received 500, with the remainder due on August 9, 2016. 31. Received 3,000 for serving as a disc jockey for a party. 31. Paid 1,400 royalties (music expense) to National Music Clearing for use of various artists music during July. 31. Withdrew 1,250 cash from PS Music for personal use. PS Musics chart of accounts and the balance of accounts as of July 1, 2016 (all normal balances), are as follows: Instructions 1. Enter the July 1, 2016, account balances in the appropriate balance column of a four-column account. Write Balance in the Item column, and place a check mark () in the Posting Reference column. (Hint: Verify the equality of the debit and credit balances in the ledger before proceeding with the next instruction.) 2. Analyze and journalize each transaction in a two-column journal beginning on Page 1, omitting journal entry explanations. 3. Post the journal to the ledger, extending the account balance to the appropriate balance column after each posting. 4. Prepare an unadjusted trial balance as of July 31, 2016.Exercise 3-42 Revenue and Expense Recognition Omega Transportation Inc., headquartered in Atlanta, Georgia, uses accrual-basis accounting and engaged in the following transactions: • billed customers $3,580,000 for transportation services • collected cash from customers in the amount of $2,479,000 • purchased fuel supplies for $1,655.000 cash • used fuel supplies that cost $1,598,240 • employees earned salaries of $425,160 • paid employees $413,380 cash for salaries Required: Determine the amount of sales revenue and total expenses for Omegas income statement.Exercise 1-35 Accounting Concepts OBJECTIVE 06° A list of accounting concepts and related definitions is presented below. Concept Definition 1. Revenue a. Owners claim on the resources of a company 2, Expense b. The difference between revenues and expenses 3. Net income (1055) c. Increase in assets from the sale of goods or services 4, Dividend d. Economic resumes of a company 5. Asset e. Cost of assets consumed in the operation of a business 6, Liability f. Creditors' claims on the resources of a company 7. Stock holders, equity g. Distribution of earnings to stockholders Required: Match each of the concepts with its corresponding definition
- Continuing Problem 4.Total of Debit column: 40,750 The transactions completed by PS Music during June 20Y5 were described .it the end of Chapter 1. The following transactions were completed during July, the second month of businesss operations: July 1. Peyton Smith made an additional investment k PS Music in exchange for common stock by depositing 5,000 in PS Mu wet checking account. 1.Instead of continuing to share office space with a local real estate agency. Peyton decided to rent office space near a local musk store, Paid rent for July, 1,750. 1.Paid a premium of 2,700 for a comprehensive insurance policy covering liability, theft and fire. The policy covers a one year period. 2.Received 1,000 on account 3. On behalf of PS Musk, Peyton signed a contract with a local radio station. KXMD, to provide guest spots for the next three months. The contract requires PS Musk to provide a guest disc jockey for 80 hours per month for a monthly fee of 3,600. Any additional hours beyond 80 will be billed to KXMD at 40 per hour. In accordance with the contract Peyton received 7,200 from KXMD as an advance payment for the first two months. 3.Paid 2SO on account 4.Paid an attorney 900 for reviewing the July 3 contract with KXMD. (Record as Miscellaneous Expense.) 5.Purchased office equipment on account from Office Mart. 7,500. 8.Paid for a newspaper advertisement 200. 11.Received 1.000 for serving as a disc jockey for a party. 13.Paid 700 to a local audio electronics store for rental of digital recording equipment 14.Paid wages of 1,200 to receptionist and part-time assistant. Enter the following transactions on Pane 2 of the two-column journal: 16.Received 2,000 for serving as a disc jockey for a wedding reception. 18.Purchased supplies on account 850 21.Paid 620 to Upload Musk for use of its current musk demos in making various musk sets. 22.Paid 800 to a local radio station to advertise the services of PS Music twice daily for the remainder of July. 23.Served as disc jockey for a party for 2,500 Received 750, with the remainder due August 4.20YS. 27.Paid electric Ml 915. 28.Paid wages of 1,200 to receptionist and part-time assistant. 29.Paid miscellaneous expenses, 540. 30.Served as a disc jockey for a charity ball for 1,500, Received S00 with the remainder due on August 9. 20Y5. 31.Received 3,000 for serving as a disc jockey for a party. 31.Paid 1.400 royalties (musk expense) to National Musk Clearing for use of various artists music during July. 31. Paid dividends, 1,250. PS Musics chart of accounts and the balance of accounts as of July 1, 20Y5 (all normal balances), are as follows: 11 Cash 3,920 12 Accounts Receivable 1,000 14 Supplies 170 15 Prepaid Insurance 17 Office Equipment 21 Accounts Payable 250 23 Unearned Revenue 31 Common Stock 4.000 33 Dividends 500 41 Fees Earned 6,200 50 Wages Expense 400 51 Office Rent Expense 800 52 Equipment Rent Expense 67S 53 Utilities Expense 300 54 Music Expense 1.590 55 Advertising Expense 500 56 Supplies Expense 180 59 Miscellaneous Expense 415 Instructions 1. Enter the July 1, 20Y5, account balances in the appropriate balance column of a four-column account. Write Balance in the Item column, and place a check mark () in the Posting Reference column. (Hint: Verify the equality of the debit and credit balances in the ledger before proceeding with the next instruction.) 2. Analyze and journalize each transaction in a two-column journal beginning on Page 1, omitting journal entry explanations. 3. Post the journal to the ledger, extending the account balance to the appropriate balance column after each posting. 4. Prepare an unadjusted trial balance as of July 31, 20Y5.Financial statements 1. Net income: 10,900 Jose Loder established Bronco Consulting on August 1, 20Y1. The effect of each transaction and the balances after each transaction for August follow: Instructions 1. Prepare an income statement for the month ended August 31, 20Y1. 2. Prepare a statement of stockholders equity for the month ended August 31, 20Y1. 3. Prepare a balance sheet as of August 31, 20Y1. 4. (Optional) Prepare a statement of cash flows for the month ending August 31, 20Y1.Brief Exercise 2-30 Transaction Analysis Galle Inc. entered into the following transactions during January. Borrowed $50,000 from First Street Bank by signing a new payable. Purchased $25,000 of equipment for cash. (Continued) Paid $500 to landlord for rent for January. Performed services for customers on account, $10,000. Collected $31000 from customers for services performed in Transaction d. Paid salaries of $2,500 for the current month. Required: Show the effect of each transaction using the following model.
- Exercise 3-38 Accrual- and Cash-Basis Expense Recognition The following information is taken from the accrual accounting records of Kroger Sales Company: During January, Kroger paid $9,150 for supplies to in sales to customers during the next 2 months (February and March). The supplies will be used evenly over the next 2 months. Kroger pays its employees at the end of each month for salaries earned during that month. Salaries paid at the end of February and March amounted to $4,925 and $5,100, respectively. Kroger placed an advertisement in the local newspaper during March at a cost of $850. The ad promoted the pre-spring sale during the last week in March. Kroger did not pay for the newspaper ad until mid-April. Required: Under cash-basis accounting, how much exvxn.se should Kroger report for February and March? Under accrual-basis accounting, how much expense should Kroger report for February and March? CONCEPTUAL CONNECTION Which basis of accounting provides the most useful information for decision-makers? Why?Transactions Interstate Delivery Service is owned and operated by Katie Wyer. The following selected transactions were completed by Interstate Delivery Service during May: 1. Received cash in exchange for common stock, 18,000. 2. Paid advertising expense, 4,850. 3. Purchased supplies on account, 2,100. 4. Billed customers for delivery services on account, 14,700. 5. Received cash from customers on account, 8,200. Indicate the effect of each transaction on the following accounting equation elements: Assets, Liabilities, Common Stock, Dividends, Revenue, and Expense. To illustrate, the answer to (1) follows: (1) Asset (Cash) increases by 18,000: Common Stock increases by 18,000.
