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Bartleby Sitemap - Textbook Solutions

All Textbook Solutions for College Accounting, Chapters 1-27

What is the purpose of accounting?Identify four user groups normally interested in financial information about a business.Identify the six major steps of the accounting process and explain each step.4RQ 5RQ 6RQ 7RQ 8RQ 9RQ 10RQ 11RQ 12RQ PURPOSE OF ACCOUNTING Match the following users with the information needed. 1. Ownersa. Whether the firm can pay its bills on time 2. Managersb. Detailed, up-to-date information to measure business performance (and plan for future operations) 3. Creditorsc. To determine taxes to be paid and whether other regulations are met 4. Government agenciesd. The firms current financial condition 2SEA PURPOSE OF ACCOUNTING Describe the kind of information needed by the users listed. Owners (present and future) Managers Creditors (present and future) Government agencies ACCOUNTING PROCESS Match the following steps of the accounting process with their definitions. Analyzinga. Telling the results Recordingb. Looking at events that have taken place and thinking about how they affect the business Classifying Summarizingc. Deciding the importance of the various reports Reportingd. Aggregating many similar events to provide information that is easy to understand Interpretinge. Sorting and grouping like items together f. Entering financial information into the accounting system 1MYW 1TF Accounts Payable is an example of an asset account.According to the business entity concept, nonbusiness assets and liabilities are not included in the businesss accounting records.The accounting equation (Assets = Liabilities + Owners Equity) must always be in balance.When an asset increases, a liability must also increase.Expenses represent outflows of assets or increases in liabilities as a result of efforts to produce revenues.When total revenues exceed total expenses, the difference is called net loss.An increase to which of these accounts will increase owners equity? (a) Accounts Payable (b) Drawing (c) Client Fees (d) Rent Expense When delivery revenue is earned in cash, which accounts increase or decrease? (a) Cash increases; Revenue increases. (b) Cash decreases; Revenue increases. (c) Cash decreases; Revenue decreases. (d) Cash does not change; owners equity increases.When delivery revenue is earned on account, which accounts increase or decrease? (a) Cash increases; Revenue increases. (b) Accounts Receivable increases; Revenue increases. (c) Accounts Receivable increases; Revenue decreases. (d) Accounts Receivable decreases; Revenue decreases.When payment is made on an existing debt, which accounts increase or decrease? (a) Cash increases; Accounts Receivable increases. (b) Cash decreases; Accounts Payable increases. (c) Cash increases; Accounts Payable increases. (d) Cash decreases; Accounts Payable decreases.Which of the following accounts does not appear on the income statement? (a) Delivery Fees (b) Wages Expense (c) Drawing (d) Rent Expense Checkpoint Exercises Label each of the following accounts as an asset (A), a liability (L), or owners equity (OE), using the following format:What is missing from the accounting equation below? = Liabilities + Owners Equity What are the effects of the following transactions on the accounting equation? Indicate an increase (+) or decrease () under the affected asset, liability, and owners equity headings.Classify the following accounts as assets (A), liabilities (L), owners equity (OE), revenue (R), or expense (E). Indicate the financial statement on which the account belongsincome statement (IS), statement of owners equity (SOE), or balance sheet (BS).Name and define the six major elements of the accounting equation.Name and define the six major elements of the accounting equation.List the three basic questions that must be answered when analyzing the effects of a business transaction on the accounting equation.4RQ 5RQ 6RQ What are the three basic phases of the accounting process?SERIES A EXERCISES ACCOUNTING ELE MENT S Label each of the following accounts as an asset (A), a liability (L), or owners equity (OE), using the following format:2SEA Assets following (d): 32,200 EFFECTS OF TRANSACTIONS (BALANCE SHEET ACCOUNTS) John Sullivan started a business. During the first month (February 20--), the following transactions occurred. Show the effect of each transaction on the accounting equation: Assets = Liabilities + Owners Equity. After each transaction, show the new totals. (a) Invested cash in the business, 27,000. (b) Bought office equipment on account, 7,500. (c) Bought office equipment for cash, 1,600. (d) Paid cash on account to supplier in transaction (b), 2,300.EFFECTS OF TRANSACTIONS (BALANCE SHEET ACCOUNTS) John Sullivan started a business. During the first month (February 20--), the following transactions occurred. Show the effect of each transaction on the accounting equation: Assets = Liabilities + Owners Equity. After each transaction, show the new totals. (a) Invested cash in the business, 27,000. (b) Bought office equipment on account, 7,500. (c) Bought office equipment for cash, 1,600. (d) Paid cash on account to supplier in transaction (b), 2,300. EFFECTS OF TRANSACTIONS (REVENUE, EXPENSE, WITHDRAWALS) This exercise is an extension of Exercise 2-3A. Lets assume John Sullivan completed the following additional transactions during February. Show the effect of each transaction on the basic elements of the expanded accounting equation: Assets = Liabilities + Owners Equity (Capital Drawing + Revenues Expenses). After transaction (k), report the totals for each element. Demonstrate that the accounting equation has remained in balance. (e) Received cash from a client for professional services, 1,500. (f) Paid office rent for February, 600. (g) Paid February phone bill, 64. (h) Withdrew cash for personal use, 1,000. (i) Performed services for clients on account, 750. (j) Paid wages to part-time employee, 1,200. (k) Received cash for services performed on account in transaction (i), 400.FINANCIAL STATEMENT ACCOUNTS Label each of the following accounts as an asset (A), liability (L), owners equity (OE), revenue (R), or expense (E). Indicate the financial statement on which the account belongsincome statement (IS), statement of owners equity (SOE), or balance sheet (BS)in a format similar to the following.STATEMENT OF OWNERS EQUITY REPORTING NET INCOME Betsy Ray started an accounting service on June 1, 20--, by investing 20,000. Her net income for the month was 10,000, and she withdrew 8,000. Prepare a statement of owners equity for the month of June.STATEMENT OF OWNERS EQUITY REPORTING NET INCOME Betsy Ray started an accounting service on June 1, 20--, by investing 20,000. Her net income for the month was 10,000, and she withdrew 8,000. Prepare a statement of owners equity for the month of June. STATE MENT OF OWNER S EQUITY REPORTING NET LO SS Based on the information provided in Exercise 2-6A, prepare a statement of owners equity assuming Ray had a net loss of 3,000.SERIES A PROBLEMS THE ACCOUNTING EQUATION Dr. John Salvaggi is a chiropractor. As of December 31, he owned the following property that related to his professional practice. REQUIRED 1. From the preceding information, compute the accounting elements and enter them in the accounting equation shown as follows. 2. During January, the assets increase by 8,540, and the liabilities increase by 3,360. Compute the resulting accounting equation. 3. During February, the assets decrease by 3,460, and the liabilities increase by 2,000. Compute the resulting accounting equation.EFFECT OF TRANSACTIONS ON ACCOUNTING EQUATION Jay Pembroke started a business. During the first month (April 20--), the following transactions occurred. (a) Invested cash in business, 18,000. (b) Bought office supplies for 4,600: 2,000 in cash and 2,600 on account. (c) Paid one-year insurance premium, 1,200. (d) Earned revenues totaling 3,300: 1,300 in cash and 2,000 on account. (e) Paid cash on account to the company that supplied the office supplies in transaction (b), 2,300. (f) Paid office rent for the month, 750. (g) Withdrew cash for personal use, 100. REQUIRED Show the effect of each transaction on the individual accounts of the expanded accounting equation: Assets = Liabilities + Owners Equity (Capital Drawing + Revenues Expenses). After transaction (g), report the totals for each element. Demonstrate that the accounting equation has remained in balance.EFFECT OF TRANSACTIONS ON ACCOUNTING EQUATION Jay Pembroke started a business. During the first month (April 20--), the following transactions occurred. (a) Invested cash in business, 18,000. (b) Bought office supplies for 4,600: 2,000 in cash and 2,600 on account. (c) Paid one-year insurance premium, 1,200. (d) Earned revenues totaling 3,300: 1,300 in cash and 2,000 on account. (e) Paid cash on account to the company that supplied the office supplies in transaction (b), 2,300. (f) Paid office rent for the month, 750. (g) Withdrew cash for personal use, 100. REQUIRED Show the effect of each transaction on the individual accounts of the expanded accounting equation: Assets = Liabilities + Owners Equity (Capital Drawing + Revenues Expenses). After transaction (g), report the totals for each element. Demonstrate that the accounting equation has remained in balance. INCOME STATEMENT Based on Problem 2-9A, prepare an income statement for Jay Pembroke for the month of April 20--.EFFECT OF TRANSACTIONS ON ACCOUNTING EQUATION Jay Pembroke started a business. During the first month (April 20--), the following transactions occurred. (a) Invested cash in business, 18,000. (b) Bought office supplies for 4,600: 2,000 in cash and 2,600 on account. (c) Paid one-year insurance premium, 1,200. (d) Earned revenues totaling 3,300: 1,300 in cash and 2,000 on account. (e) Paid cash on account to the company that supplied the office supplies in transaction (b), 2,300. (f) Paid office rent for the month, 750. (g) Withdrew cash for personal use, 100. REQUIRED Show the effect of each transaction on the individual accounts of the expanded accounting equation: Assets = Liabilities + Owners Equity (Capital Drawing + Revenues Expenses). After transaction (g), report the totals for each element. Demonstrate that the accounting equation has remained in balance. STATEMENT OF OWNERS EQUITY Based on Problem 2-9A, prepare a statement of owners equity for Jay Pembroke for the month of April 20--.EFFECT OF TRANSACTIONS ON ACCOUNTING EQUATION Jay Pembroke started a business. During the first month (April 20--), the following transactions occurred. (a) Invested cash in business, 18,000. (b) Bought office supplies for 4,600: 2,000 in cash and 2,600 on account. (c) Paid one-year insurance premium, 1,200. (d) Earned revenues totaling 3,300: 1,300 in cash and 2,000 on account. (e) Paid cash on account to the company that supplied the office supplies in transaction (b), 2,300. (f) Paid office rent for the month, 750. (g) Withdrew cash for personal use, 100. REQUIRED Show the effect of each transaction on the individual accounts of the expanded accounting equation: Assets = Liabilities + Owners Equity (Capital Drawing + Revenues Expenses). After transaction (g), report the totals for each element. Demonstrate that the accounting equation has remained in balance. BALANCE SHEET Based on Problem 2-9A, prepare a balance sheet for Jay Pembroke as of April 30, 20--.ACCOUNTING ELEMENTS Label each of the following accounts as an asset (A), liability (L), or owners equity (OE) using the following format.THE ACCOUNTING EQUATION Using the accounting equation, compute the missing elements.EFFECTS OF TRANSACTIONS (BALANCE SHEET ACCOUNTS) Jon Wallace started a business. During the first month (March 20--), the following transactions occurred. Show the effect of each transaction on the accounting equation: Assets = Liabilities + Owners Equity. After each transaction, show the new account totals. (a) Invested cash in the business, 30,000. (b) Bought office equipment on account, 4,500. (c) Bought office equipment for cash, 1,600. (d) Paid cash on account to supplier in transaction (b), 2,000.EFFECTS OF TRANSACTIONS (BALANCE SHEET ACCOUNTS) Jon Wallace started a business. During the first month (March 20--), the following transactions occurred. Show the effect of each transaction on the accounting equation: Assets= Liabilities + Owners Equity. After each transaction, show the new account totals. (a) Invested cash in the business, 30,000. (b) Bought office equipment on account, 4,500. (c) Bought office equipment for cash, 1,600. (d) Paid cash on account to supplier in transaction (b), 2,000. EFFECTS OF TRANSACTIONS (REVENUE, EXPENSE, WITHDRAWALS) This exercise is an extension of Exercise 2-3B. Lets assume Jon Wallace completed the following additional transactions during March. Show the effect of each transaction on the basic elements of the expanded accounting equation: Assets = Liabilities + Owners Equity (Capital Drawing + Revenues Expenses). After transaction (k), report the totals for each element. Demonstrate that the accounting equation has remained in balance. (e) Performed services and received cash, 3,000. (f) Paid rent for March, 1,000. (g) Paid March phone bill, 68. (h) Jon Wallace withdrew cash for personal use, 800. (i) Performed services for clients on account, 900. (j) Paid wages to part-time employee, 500. (k) Received cash for services performed on account in transaction (i), 500.FINANCIAL STATEMENT ACCOUNTS Label each of the following accounts as an asset (A), liability (L), owners equity (OE), revenue (R), or expense (E). Indicate the financial statement on which the account belongsincome statement (IS), statement of owners equity (SOE), or balance sheet (BS)in a format similar to the following.STATEMENT OF OWNERS EQUITY REPORTING NET INCOME Efran Lopez started a financial consulting service on June 1, 20--, by investing 15,000. His net income for the month was 6,000, and he withdrew 7,000 for personal use. Prepare a statement of owners equity for the month of June.STATEMENT OF OWNERS EQUITY REPORTING NET LOSS Based on the information provided in Exercise 2-6B, prepare a statement of owners equity assuming Lopez had a net loss of 2,000. STATEMENT OF OWNERS EQUITY REPORTING NET INCOME Efran Lopez started a financial consulting service on June 1, 20--, by investing 15,000. His net income for the month was 6,000, and he withdrew 7,000 for personal use. Prepare a statement of owners equity for the month of June.SERIES B PROBLEMS THE ACCOUNTING EQUATION Dr. Patricia Parsons is a dentist. As of January 31, Parsons owned the following property that related to her professional practice: REQUIRED 1. From the preceding information, compute the accounting elements and enter them in the accounting equation as shown below. 2. During February, the assets increase by 4,565, and the liabilities increase by 3,910. Compute the resulting accounting equation. 3. During March, the assets decrease by 2,190, and the liabilities increase by 1,650. Compute the resulting accounting equation.EFFECT OF TRANSACTIONS ON ACCOUNTING EQUATION David Segal started a business. During the first month (October 20--), the following transactions occurred. (a) Invested cash in the business, 15,000. (b) Bought office supplies for 3,800: 1,800 in cash and 2,000 on account. (c) Paid one-year insurance premium, 1,000. (d) Earned revenues amounting to 2,700: 1,700 in cash and 1,000 on account. (e) Paid cash on account to the company that supplied the office supplies in transaction (b), 1,800. (f) Paid office rent for the month, 650. (g) Withdrew cash for personal use, 150.EFFECT OF TRANSACTIONS ON ACCOUNTING EQUATION David Segal started a business. During the first month (October 20--), the following transactions occurred. (a) Invested cash in the business, 15,000. (b) Bought office supplies for 3,800: 1,800 in cash and 2,000 on account. (c) Paid one-year insurance premium, 1,000. (d) Earned revenues amounting to 2,700: 1,700 in cash and 1,000 on account. (e) Paid cash on account to the company that supplied the office supplies in transaction (b), 1,800. (f) Paid office rent for the month, 650. (g) Withdrew cash for personal use, 150. REQUIRED Show the effect of each transaction on the individual accounts of the expanded accounting equation: Assets = Liabilities + Owners Equity (Capital Drawing + Revenues Expenses). After transaction (g), report the totals for each element. Demonstrate that the accounting equation has remained in balance. INCOME STATEMENT Based on Problem 2-9B, prepare an income statement for David Segal for the month of October 20--.STATEMENT OF OWNERS EQUITY Based on Problem 2-9B, prepare a statement of owners equity for David Segal for the month of October 20--.BALANCE SHEET Based on Problem 2-9B, prepare a balance sheet for David Segal as of October 31, 20--.1MYW 1MP CHALLENGE PROBLEM In this chapter, you learned about three important financial statements: the income statement, statement of owners equity, and balance sheet. As mentioned in the margin note on page 34, most firms also prepare a statement of cash flows. Part of this statement reports the cash received from customers and cash paid for goods and services. REQUIRED Take another look at the Demonstration Problem for Kenny Youngs Home and Away Inspections. Note that when revenues are measured based on the amount earned, and expenses are measured based on the amount incurred, net income for the period was 4,165. Now, compute the difference between cash received from customers and cash paid to suppliers of goods and services by completing the form provided below. Are these measures different? Which provides a better measure of profitability?LO3 To debit an account is to enter an amount on the left side of the account.Liability accounts normally have debit balances.LO3 Increases in owners equity are entered as credits.4TF LO3 To credit an account is to enter an amount on the right side of the account.LO3 A debit to an asset account will decrease it.A common example of an asset is (a) Professional Fees. (b) Rent Expense. (c) Accounts Receivable. (d) Accounts Payable.The accounting equation may be expressed as (a) Assets = Liabilities Owners Equity. (b) Assets = Liabilities + Owners Equity. (c) Liabilities = Owners Equity Assets. (d) all of the above.LO3 Liability, owners equity, and revenue accounts normally have (a) debit balances. (b) large balances. (c) negative balances. (d) credit balances.LO4 To record the payment of rent expense, an accountant would (a) debit Cash; credit Rent Expense. (b) debit Rent Expense; debit Cash. (c) debit Rent Expense; credit Cash. (d) credit Rent Expense; credit Cash.5MC Foot and balance the accounts receivable T account shown below.LO3 Complete the following questions using either debit or credit: (a) The asset account Supplies is increased with a ___________. (b) The owners capital account is increased with a ___________. (c) The rent expense account is increased with a ___________.Analyze the following transaction using the T accounts provided below. Robb Todd purchased equipment for 300 cash.The following accounts have normal balances. Prepare a trial balance. Accounts Payable, 20; Accounts Receivable, 90; Capital, 40; Sales, 200; Cash, 100; Rent Expense, 70.What are the three major parts of a T account?2RQ What is a footing?What is the relationship between the revenue and expense accounts and the owners equity account?What is the function of the trial balance?1SEA DEBIT AND CREDIT ANALYSIS Complete the following statements using either debit or credit: (a) The cash account is increased with a __________. (b) The owners capital account is increased with a __________. (c) The delivery equipment account is increased with a __________. (d) The cash account is decreased with a __________. (e) The liability account Accounts Payable is increased with a __________. (f) The revenue account Delivery Fees is increased with a __________. (g) The asset account Accounts Receivable is increased with a __________. (h) The rent expense account is increased with a __________. (i) The owners drawing account is increased with a __________.ANALYSIS OF T ACCOUNTS Richard Gibbs began a business called Richards Shoe Repair. 1. Create T accounts for Cash; Supplies; Richard Gibbs, Capital; and Utilities Expense. Identify the following transactions by letter and place them on the proper side of the T accounts: (a) Invested cash in the business, 6,500. (b) Purchased supplies for cash, 700. (c) Paid utility bill, 2,700. 2. Foot the T account for cash and enter the ending balance.NORMAL BALANCE OF ACCOUNT Indicate the normal balance (debit or credit) for each of the following accounts: 1. Cash 2. Wages Expense 3. Accounts Payable 4. Owners Drawing 5. Supplies 6. Owners Capital 7. Equipment TRANSACTION ANALYSIS Linda Kipp started a business on May 1, 20--. Analyze the following transactions for the first month of business using T accounts. Label each T account with the title of the account affected and then place the transaction letter and the dollar amount on the debit or credit side. (a) Invested cash in the business, 5,000. (b) Bought equipment for cash, 700. (c) Bought equipment on account, 600. (d) Paid cash on account for equipment purchased in transaction (c), 400. (e) Withdrew cash for personal use, 900.TRANSACTION ANALYSIS Linda Kipp starred a business on May 1, 20--. Analyze the following transactions for the first month of business using T accounts. Label each T account with the title of the account affected and then place the transaction letter and the dollar amount on the debit or credit side. (a) Invested cash in the business, 5,000. (b) Bought equipment for cash, 700. (c) Bought equipment on account, 600. (d) Paid cash on account for equipment purchased in transaction (c), 400. (e) Withdrew cash for personal use, 900. FOOT AND BALANCE T ACCOUNTS Foot and balance the T accounts prepared Exercise 3-5A if necessary.ANALYSIS OF TRANSACTIONS Charles Chadwick opened a business called Charlies Detective Service in January 20--. Set up T accounts for the following accounts: Cash; Accounts Receivable; Office Supplies; Computer Equipment; Office Furniture; Accounts Payable; Charles Chadwick, Capital; Charles Chadwick, Drawing; Professional Fees; Rent Expense; and Utilities Expense. The following transactions occurred during the first month of business. Record these transactions in T accounts. After all transactions are recorded, foot and balance the accounts if necessary. (a) Invested cash in the business, 30,000. (b) Bought office supplies for cash, 300. (c) Bought office furniture for cash, 5,000. (d) Purchased computer and printer on account, 8,000. (e) Received cash from clients for services, 3,000. (f) Paid cash on account for computer and printer purchased in transaction (d), 4,000. (g) Earned professional fees on account during the month, 9,000. (h) Paid cash for office rent for January, 1,500. (i) Paid utility bills for the month, 800. (j) Received cash from clients billed in transaction (g), 6,000. (k) Withdrew cash for personal use, 3,000.ANALYSIS OF TRANSACTIONS Charles Chadwick opened a business called Charlies Detective Service in January 20--. Set up T accounts for the following accounts: Cash; Accounts Receivable; Office Supplies; Computer Equipment; Office Furniture; Accounts Payable; Charles Chadwick, Capital; Charles Chadwick, Drawing; Professional Fees; Rent Expense; and Utilities Expense. The following transactions occurred during the first month of business. Record these transactions in T accounts. After all transactions are recorded, foot and balance the accounts if necessary. (a) Invested cash in the business, 30,000. (b) Bought office supplies for cash, 300. (c) Bought office furniture for cash, 5,000. (d) Purchased computer and printer on account, 8,000. (e) Received cash from clients for services, 3,000. (f) Paid cash on account for computer and printer purchased in transaction (d), 4,000. (g) Earned professional fees on account during the month, 9,000. (h) Paid cash for office rent for January, 1,500. (i) Paid utility bills for the month, 800. (j) Received cash from clients billed in transaction (g), 6,000. (k) Withdrew cash for personal use, 3,000. TRIAL BALANCE Based on the transactions recorded in Exercise 3-7A, prepare a trial balance for Charlies Detective Service as of January 31, 20--.TRIAL BALANCE The following accounts have normal balances. Prepare a trial balance for Kennys Lawn Service as of September 30, 20--.Provided below is a trial balance for Juanitas Delivery Service. Use this trial balance for Exercises 3-10A, 3-11A, and 3-12A. INCOME STATEMENT From the information in the trial balance presented above, prepare an income statement for Juanitas Delivery Service for the month ended September 30, 20--.Provided below is a trial balance for Juanitas Delivery Service. Use this trial balance for Exercises 3-10A, 3-11A, and 3-12A. STATEMENT OF OWNERS EQUITY From the information in the trial balance presented above, prepare a statement of owners equity for Juanitas Delivery Service for the month ended September 30, 20--. Assume this is not the first month of operations and the owner did not invest in the business during September.Provided below is a trial balance for Juanitas Delivery Service. Use this trial balance for Exercises 3-10A, 3-11 A, and 3-12A. BALANCE SHEET From the information in the trial balance presented for Juanitas Delivery Service on page 76, prepare a balance sheet for Juanitas Delivery Service as of September 30, 20--.T ACCOUNTS AND TRIAL BALANCE Wilhelm Kohl started a business in May 20-- called Kohls Home Repair. Kohl hired a part-rime college student as an assistant. Kohl has decided to use the following accounts for recording transactions: The following transactions occurred during May: (a) Invested cash in the business, 25,000. (b) Purchased a used van for cash, 6,000. (c) Purchased equipment on account, 4,000. (d) Received cash for services rendered, 7,500. (e) Paid cash on account owed from transaction (c), 2,300. (f) Paid rent for the month, 850. (g) Paid phone bill, 230. (h) Earned revenue on account, 4,500. (i) Purchased office supplies for cash, 160. (j) Paid wages to an assistant, 800. (k) Purchased a one-year insurance policy, 1,100. (l) Received cash from services performed in transaction (h), 3,400). (m) Paid cash for gas and oil expense on the van, 155. (n) Purchased additional equipment for 4,200, paying 1,500 cash and spreading the remaining payments over the next 10 months. (o) Earned service fees for the remainder of the month of 3,500: 1,900 in cash and 1,600 on account. (p) Withdrew cash at the end of the month, 2,900. REQUIRED 1. Enter the transactions in T accounts, identifying each transaction with its corresponding letter. 2. Foot and balance the accounts where necessary. 3. Prepare a trial balance as of May 31, 20--.NET INCOME AND CHANGE IN OWNERS EQUITY Refer to the trial balance of Kohls Home Repair in Problem 3-13A to determine the following information. Use the format provided below.FINANCIAL STATEMENTS Refer to the trial balance in Problem 3-13A and to the analysis of the change in owners equity in Problem 3-14A. REQUIRED 1. Prepare an income statement for Kohls Home Repair for the month ended May 31, 20--. 2. Prepare a statement of owners equity for Kohls Home Repair for the month ended May 31, 20--. 3. Prepare a balance sheet for Kohls Home Repair as of May 31, 20--.FOOT AND BALANCE A T ACCOUNT Foot and balance the accounts payable T account shown below.DEBIT AND CREDIT ANALYSIS Complete the following statements using either debit or credit: (a) The asset account Prepaid Insurance is increased with a ________. (b) The owners drawing account is increased with a ________. (c) The asset account Accounts Receivable is decreased with a ________. (d) The liability account Accounts Payable is decreased with a ________. (e) The owners capital account is increased with a ________. (f) The revenue account Professional Fees is increased with a ________. (g) The expense account Repair Expense is increased with a ________. (h) The asset account Cash is decreased with a ________. (i) The asset account Delivery Equipment is decreased with a ________.ANALYSIS OF T ACCOUNTS Roberto Alvarez began a business called Robertos Fix-It Shop. 1. Create T accounts for Cash; Supplies; Roberto Alvarez, Capital; and Utilities Expense. Identify the following transactions by letter and place them on the proper side of the T accounts: (a) Invested cash in the business, 6,000. (b) Purchased supplies for cash, 51,200. (c) Paid utility bill, 900. 2. Foot the T account for cash and enter the ending balance.NORMAL BALANCE OF ACCOUNT Indicate the normal balance (debit or credit) for each of the following accounts: 1. Cash 2. Rent Expense 3. Notes Payable 4. Owners Drawing 5. Accounts Receivable 6. Owners Capital 7. Tools TRANSACTION ANALYSIS George Atlas started a business on June 1,20--. Analyze the following transactions for the first month of business using T accounts. Label each T account with the title of the account affected and then place the transaction letter and the dollar amount on the debit or credit side. (a) Invested cash in the business, 7,000. (b) Purchased equipment for cash, 900. (c) Purchased equipment on account, 1,500. (d) Paid cash on account for equipment purchased in transaction (c), 800. (e) Withdrew cash for personal use, 1,100.TRANSACTION ANALYSIS George Atlas started a business on June 1,20--. Analyze the following transactions for the first month of business using T accounts. Label each T account with the title of the account affected and then place the transaction letter and the dollar amount on the debit or credit side. (a ) Invested cash in the business, 7,000. (b) Purchased equipment for cash, 900. (c) Purchased equipment on account, 1,500. (d) Paid cash on account for equipment purchased in transaction (c), 800. (e) Withdrew cash for personal use, 1,100. FOOT AND BALANCE T ACCOUNTS Foot and balance the T accounts prepared in Exercise 3-5B if necessary.ANALYSIS OF TRANSACTIONS Nicole Lawrence opened a business called Nickies Neat Ideas in January 20--. Set up T accounts for the following accounts: Cash; Accounts Receivable; Office Supplies; Computer Equipment; Office Furniture; Accounts Payable; Nicole Lawrence, Capital; Nicole Lawrence, Drawing; Professional Fees; Rent Expense; and Utilities Expense. The following transactions occurred during the first month of business. Record these transactions in T accounts. After all transactions have been recorded, foot and balance the accounts if necessary. (a) Invested cash in the business, 18,000. (b) Purchased office supplies for cash, 500. (c) Purchased office furniture for cash, 8,000. (d) Purchased computer and printer on account, 5,000. (e) Received cash from clients for services, 4,000. (f) Paid cash on account for computer and printer purchased in transaction (d), 2,000. (g) Earned professional fees on account during the month, 7,000. (h) Paid office rent for January, 900. (i) Paid utility bills for the month, 600. (j) Received cash from clients that were billed previously in transaction (g), 3,000. (k) Withdrew cash for personal use, 4,000.ANALYSIS OF TRANSACTIONS Nicole Lawrence opened a business called Nickies Neat Ideas in January 20--. Set up T accounts for the following accounts: Cash; Accounts Receivable; Office Supplies; Computer Equipment; Office Furniture; Accounts Payable; Nicole Lawrence, Capital; Nicole Lawrence, Drawing; Professional Fees; Rent Expense; and Utilities Expense. The following transactions occurred during the first month of business. Record these transactions in T accounts. After all transactions have been recorded, foot and balance the accounts if necessary. (a) Invested cash in the business, 8,000. (b) Purchased office supplies for cash, 500. (c) Purchased office furniture for cash, 8,000. (d) Purchased computer and printer on account, 5,000. (e) Received cash from clients for services, 4,000. (f) Paid cash on account for computer and printer purchased in transaction (d), 2,000. (g) Earned professional fees on account during the month, 7,000. (h) Paid office rent for January, 900. (i) Paid utility bills for the month, 600. (j) Received cash from clients that were billed previously in transaction (g), 3,000. (k) Withdrew cash for personal use, 4,000. TRIAL BALANCE Based on the transactions recorded in Exercise 3-7B, prepare a trial balance for Nickies Neat Ideas as of January 31, 20--.TRIAL BALANCE The following accounts have normal balances. Prepare a trial balance for Bettys Cleaning Service as of September 30, 20--.Provided below is a trial balance for Bills Delivery Service. Use this trial balance for Exercises 3-10B, 3-11B, and 3-12B. INCOME STATEMENT From the information in the trial balance presented above, prepare an income statement for Bill's Delivery Service for the month ended September 30, 20--.Provided below is a trial balance for Bills Delivery Service. Use this trial balance for Exercises 3-10B, 3-11B, and 3-12B. STATEMENT OF OWNERS EQUITY From the information in the trial balance presented above, prepare a statement of owners equity for Bills Delivery Service for the month ended September 30, 20--. Assume this is not the first month of operations and the owner did not invest in the business during September.Provided below is a trial balance for Bills Delivery Service. Use this trial balance for Exercises 3-10B, 3-1 IB, and 3-12B. BALANCE SHEET From the information in the trial balance presented for Bills Delivery Service on page 80, prepare a balance sheet for Bills Delivery Service as of September 30, 20--.T ACCOUNTS AND TRIAL BALANCE Sue Jantz started a business in August 20-- called Jantz Plumbing Service. Jantz hired a part-time college student as an administrative assistant. Jantz has decided to use the following accounts: The following transacrions occurred during August: (a) Invested cash in the business, 30,000. (b) Purchased a used van for cash, 8,000. (c) Purchased plumbing equipment on account, 4,000. (d) Received cash for services rendered, 3,000. (e) Paid cash on account owed from transaction (c), 1,000. (f) Paid rent for the month, 700. (g) Paid phone bill, 100. (h) Earned revenue on account, 4,000. (i) Purchased office supplies for cash, 300. (j) Paid wages to student, 500. (k) Purchased a one-year insurance policy, 800. (l) Received cash from services performed in transaction (h), 3,000. (m) Paid cash for advertising expense, 2,000. (n) Purchased additional plumbing equipment for 2,000, paying 500 cash and spreading the remaining payments over the next six months. (o) Earned revenue from services for the remainder of the month of 2,800: 1,100 in cash and 1,700 on account. (p) Withdrew cash at the end of the month, 3,000. REQUIRED 1. Enter the transactions in T accounts, identifying each transaction with its responding letter. 2. Foot and balance the accounts where necessary. 3. Prepare a trial balance as of August 31, 20--.NET INCOME AND CHANGE IN OWNERS EQUITY Refer to the trial balance of Jantz Plumbing Service in Problem 3-13B to determine the following information. Use the format provided below.FINANCIAL STATEMENTS Refer to the trial balance in Problem 3-13B and to the analysis of the change in owners equity in Problem 3-14B. REQUIRED 1. Prepare an income statement for Jantz Plumbing Service for the month ended August 31, 20--. 2. Prepare a statement of owners equity for Jantz Plumbing Service for the month ended August 31, 20--. 3. Prepare a balance sheet for Jantz Plumbing Service as of August 31, 20--.Craig Fisher started a lawn service called Craigs Quick Cut to earn money over the summer months. Fisher has decided to use the following accounts for recording transactions: Transactions for the month of June are listed below. (a) Invested cash in the business, 3,000. (b) Bought mowing equipment for 1,000: paid 200 in cash and promised to pay the balance over the next four months. (c) Paid garage rent for June, 50. (d) Provided lawn services for customers on account, 520. (e) Paid phone bill, 30. (f) Borrowed cash from the bank by signing a note payable, 500. (g) Bought lawn tools, 480. (h) Collected cash from customers for services performed on account in transaction (d), 400. (i) Paid associates for lawn work done during the first half of the month, 350. (j) Paid for gas and oil for the equipment, 60. (k) Paid cash on account for the mowing equipment purchased in transaction (b), 200. (l) Earned lawn fees of 1,320: 600 in cash and 720 on account. (m) Paid associates for last half of month, 700. (n) Reimbursed associates for costs incurred using their own vehicles for transportation, 150. (o) Paid on note payable to bank, 100. (p) Withdrew cash for personal use, 200. REQUIRED 1. Enter the transactions for June in T accounts. Use the accounting equation as a guide for setting up the T accounts. 2. Foot and balance the T accounts where necessary. 3. Prepare a trial balance of the accounts as of June 30, 20--. 4. Prepare an income statement for the month ended June 30, 20--. 5. Prepare a statement of owners equity for the month ended June 30, 20--. 6. Prepare a balance sheet as of June 30, 20--. REQUIRED 1. Enter the transactions in T accounts, identifying each transaction with its corresponding letter. 2. Foot and balance the accounts where necessary. 3. Prepare a trial balance as of August 31, 20--.Your friend Chris Stevick started a part-time business in June and has been keeping her own accounting records. She has been preparing monthly financial statements. At the end of August, she stopped by to show you her performance for the most recent month. She prepared the following income statement and balance sheet: Chris has also heard that there is a statement of owners equity, but she is not familiar with that statement. She asks if you can help her prepare one. After confirming that she has no assets other than cash, no liabilities, and made no additional investments in the business in August, you agree. REQUIRED 1. Prepare the statement of owners equity for your friends most recent month. 2. What suggestions might you give to Chris that would make her income statement more useful?Source documents serve as historical evidence of business transactions.The chart of accounts lists capital accounts first, followed by liabilities, assets, expenses, and revenue.No entries are made in the Posting Reference column at the time of journalizing.When entering the credit item in a general journal, it should be listed after all debits and indented.When an incorrect entry has been journalized and posted to the wrong account, a correcting entry should be made.1MC A revenue account will begin with the number ________ in the chart of accounts. (a) 1 (b) 2 (c) 3 (d) 4 To purchase an asset such as office equipment on account, you would credit which account? (a) Cash (c) Accounts Payable (b) Accounts Receivable (d) Capital When fees are earned and the customer promises to pay later, which account is debited? (a) Cash (b) Accounts Receivable (c) Accounts Payable (d) Capital When the correct numbers are used but are in the wrong order, the error is called a (a) transposition. (b) slide. (c) reversal. (d) correcting entry.1CE 2CE 3CE 4CE Trace the flow of accounting information through the accounting system.Name a source document that provides information about each of the following types of business transactions: a. Cash payment b. Cash receipt c. Sale of goods or services d. Purchase of goods or services 3RQ 4RQ Where is the first formal accounting record of a business transaction usually made?Describe the four steps required to journalize a business transaction in a general journal.In what order are the accounts customarily placed in the ledger?Explain the primary advantage of a general ledger account.Explain the five steps required when posting the journal to the ledger.10RQ Explain why the ledger can still contain errors even though the trial balance is in balance. Give examples of two such types of errors.12RQ What is a transposition error?What is a correcting entry?1SEA GENERAL JOURNAL ENTRIES For each of the following transactions, list the account to be debited and the account to be credited in the general journal. 1. Invested cash in the business, 5,000. 2. Paid office rent, 500. 3. Purchased office supplies on account, 300. 4. Received cash for services rendered (fees), 400. 5. Paid cash on account, 50. 6. Rendered services on account, 300. 7. Received cash for an amount owed by a customer, 100.GENERAL LEDGER ACCOUNTS Set up T accounts for each of the general ledger accounts needed for Exercise 4-2A and post debits and credits to the accounts. Foot the accounts and enter the balances. Prove that total debits equal total credits.GENERAL JOURNAL ENTRIES Diane Bernick has opened Bernicks Consulting. Journalize the following transactions that occurred during January of the current year. Use the following journal pages: January 110, page 1; and January 1129, page 2. Use the following chart of accounts: Jan. 1 Bernick invested cash in the business, 12,000. 2 Paid office rent, 750. 3 Purchased office equipment on account, 1,300. 5 Received cash for services rendered, 950. 8 Paid phone bill, 85. 10 Paid for a magazine subscription (miscellaneous expense), 20. 11 Purchased office supplies on account, 250. 15 Made a payment on account (see Jan. 3 transaction), 200. 18 Paid part-time employee, 600. 21 Received cash for services rendered, 800. 25 Paid utilities bill, 105. 27 Bernick withdrew cash for personal use, 400. 29 Paid part-time employee, 600.GENERAL LEDGER ACCOUNTS; TRIAL BALANCE Set up general ledger accounts using the chart of accounts provided in Exercise 4-4A. Post the transactions from Exercise 4-4A to the general ledger accounts and prepare a trial balance.FINANCIAL STATEMENTS From the information in Exercises 4-4A and 4-5A, Prepare an income statement, a statement of owners equity, and a balance sheet.7SEA FINDING AND CORRECTING ERRORS On May 25, after the transactions had been posted, Joe Adams discovered that the following entry contains an error. The cash received represents a collection on account, rather than new service fees. Correct the error in the general journal using a correcting entry.SERIES A PROBLEMS JOURNALIZING AND POSTING TRANSACTIONS Annette Creighton opened Creighton Consulting. She rented a small office and paid a part-time worker to answer the phone and make deliveries. Her chart of accounts is as follows: Creightons transactions for the first month of business are as follows: Jan. 1 Creighton invested cash in the business, 10,000. 1 Paid rent, 500. 2 Purchased office supplies on account, 300. 4 Purchased office equipment on account, 1,500. 6 Received cash for services rendered, 580. 7 Paid phone bill, 42. 8 Paid utilities bill, 38. 10 Received cash for services rendered, 360. 12 Made payment on account, 50. 13 Paid for car rental while visiting an out-of-town client (transportation expense), 150. 15 Paid part-time worker, 360. 17 Received cash for services rendered, 420. 18 Creighton withdrew cash for personal use, 100. 20 Paid for a newspaper ad, 26. 22 Reimbursed part-time employee for cab fare incurred delivering Materials to clients (transportation expense), 35. 24 Paid for books on consulting practices (miscellaneous expense), 28. 25 Received cash for services rendered, 320. 27 Made payment on account for office equipment purchased, 150. 29 Paid part-time worker, 360. 30 Received cash for services rendered, 180. REQUIRED 1. Set up general ledger accounts from the chart of accounts. 2. Journalize the transactions for January in a two-column general journal. Use the following journal page numbers: January 110, page 1; January 1224, page 2; January 2530, page 3. 3. Post the transactions to the general ledger. 4. Prepare a trial balance. 5. Prepare an income statement and a statement of owners equity for the month of January and a balance sheet as of January 31, 20--.JOURNALIZING AND POSTING TRANSACTIONS Jim Andrews opened a delivery business in March. He rented a small office and has a part-time assistant. His trial balance shows accounts for the first three months of business. Andrews transactions for the month of June are as follows: June 1 Paid rent, 300. 2 Performed delivery services for 300: 100 in cash and 200 on account. 4 Paid for newspaper advertising, 15. 6 Purchased office supplies on account, 180. 7 Received cash for delivery services rendered, 260. 9 Paid cash on account (truck payment), 200. 10 Purchased a copier (office equipment) for 700: paid 100 in cash and put 600 on account. June 11 Made a contribution to the Red Cross (charitable contributions), 20. 12 Received cash for delivery services rendered, 380. 13 Received cash on account for services previously rendered, 100. 15 Paid a part-time worker, 200. 16 Paid electric bill, 36. 18 Paid phone bill, 46. 19 Received cash on account for services previously rendered, 100. 20 Andrews withdrew cash for personal use, 200. 21 Paid for gas and oil, 32. 22 Made payment on account (for office supplies), 40. 24 Received cash for services rendered, 340. 26 Paid for a magazine subscription (miscellaneous expense), 15. 27 Received cash for services rendered, 180. 27 Received cash on account for services previously rendered, 100. 29 Paid for gasoline, 24. 30 Paid a part-time worker, 200. REQUIRED 1. Set up general ledger accounts by entering the balances as of June 1. 2. Journalize the transactions for June in a two-column general journal. Use the following journal pages: June 110, page 7; June 1120, page 8; June 2130, page 9. 3. Post the entries to the general ledger. 4. Prepare a trial balance.CORRECTING ERRORS Assuming that all entries have been posted, prepare correcting entries for each of the following errors. 1. The following entry was made to record the purchase of 700 in supplies on account: 2. The following entry was made to record the payment of 450 in wages: 3. The following entry was made to record a 300 payment to a supplier on account:1SEB GENERAL JOURNAL ENTRIES For each of the following transactions, list the account to be debited and the account to be credited in the general journal. 1. Invested cash in the business, 1,000. 2. Performed services on account, 200. 3. Purchased office equipment on account, 500. 4. Received cash on account for services previously rendered, 200. 5. Made a payment on account, 100.GENERAL LEDGER ACCOUNTS Set up T accounts for each of the general ledger accounts needed for Exercise 4-2B and post debits and credits to the accounts. Foot the accounts and enter the balances. Prove that total debits equal total credits.GENERAL JOURNAL ENTRIES Sengel Moon opened The Bike Doctor. Journalize the following transactions that occurred during the month of October of the current year. Use the following journal pages: October 112, page 1; and October 1429, page 2. Use the following chart of accounts: Oct. 1 Moon invested cash in the business, 15,000. 2 Paid shop rental for the month, 300. 3 Purchased bicycle parts on account, 2,000. 5 Purchased office supplies on account, 250. 8 Paid phone bill, 38. 9 Received cash for services, 140. 11 Paid a sports magazine subscription (miscellaneous expense), 15. Oct. 12 Made payment on account (see Oct. 3 transaction), 100. 14 Paid part-time employee, 300. 15 Received cash for services, 350. 16 Paid utilities bill, 48. 19 Received cash for services, 250. 23 Moon withdrew cash for personal use, 50. 25 Made payment on account (see Oct. 5 transaction), 50. 29 Paid part-time employee, 300.GENERAL LEDGER ACCOUNTS; TRIAL BALANCE Set up general ledger accounts using the chart of accounts provided in Exercise 4-4B. Post the transactions from Exercise 4-4B to the general ledger accounts and prepare a trial balance.FINANCIAL STATEMENTS From the information in Exercises 4-4B and 4-5B, prepare an income statement, a statement of owners equity, and a balance sheet.7SEB FINDING AND CORRECTING ERRORS On April 25, after the transactions had been posted, Mary Smith discovered the following entry contains an error. When her customer received services, Cash was debited, but the service was provided on account. Correct the error in the journal using a correcting entry.JOURNALIZING AND POSTING TRANSACTIONS Benito Mendez opened Mendez Appraisals. He rented office space and has a part-time secretary to answer the phone and make appraisal appointments. His chart of accounts is as follows: Mendezs transactions for the first month of business are as follows: May 1 Mendez invested cash in the business, 5,000. 2 Paid rent, 500. 3 Purchased office supplies, 100. 4 Purchased office equipment on account, 2,000. 5 Received cash for services rendered, 280. 8 Paid phone bill, 38. 9 Paid electric bill, 42. 10 Received cash for services rendered, 310. 13 Paid part-time employee, 500. 14 Paid car rental for out-of-town trip, 200. 15 Paid for newspaper ad, 30. 18 Received cash for services rendered, 620. 19 Paid mileage reimbursement for part-time employees use of personal car for business deliveries (transportation expense), 22. 21 Mendez withdrew cash for personal use, 50. 23 Made payment on account for office equipment purchased earlier, 200. May 24 Earned appraisal fee, which will be paid in a week, 500. 26 Paid for newspaper ad, 30. 27 Paid for local softball team sponsorship (miscellaneous expense), 15. 28 Paid part-time employee, 500. 29 Received cash on account, 250. 30 Received cash for services rendered, 280. 31 Paid cab fare (transportation expense), 13. REQUIRED 1. Set up general ledger accounts from the chart of accounts. 2. Journalize the transactions for May in a two-column general journal. Use the following journal page numbers: May 110, page 1; May 1324, page 2; May 2631, page 3. 3. Post the transactions to the general ledger. 4. Prepare a trial balance. 5. Prepare an income statement and a statement of owners equity for the month of May, and a balance sheet as of May 31, 20--.10SPB CORRECTING ERRORS Assuming that all entries have been posted, prepare correcting entries for each of the following errors. The following entry was made to record the purchase of 400 in equipment on account: The following entry was made to record the payment of 200 for advertising: The following entry was made to record a 600 payment to a supplier on account:MANAGING YOUR WRITING You are a public accountant with many small business clients. During a recent visit to a clients business, the bookkeeper approached you with a problem. The columns of the trial balance were not equal. You helped the bookkeeper find and correct the error, but believe you should go one step further. Write a memo to all of your clients that explains the purpose of the double-entry framework, the importance of maintaining the equality of the accounting equation, the errors that might cause an inequality, and suggestions for finding the errors.MASTERY PROBLEM Barry Bird opened the Barry Bird Basketball Camp for children ages 10 through 18. Campers typically register for one week in June or July, arriving on Sunday and returning home the following Saturday. College players serve as cabin counselors and assist the local college and high school coaches who run the practice sessions. The registration fee includes a room, meals at a nearby restaurant, and basketball instruction. In the off-season, the facilities are used for weekend retreats and coaching clinics. Bird developed the following chart of accounts for his service business: The following transactions took place during the month of June: June 1 Bird invested cash in the business, 10,000. 1 Purchased basketballs and other athletic equipment, 3,000. 2 Paid Hite Advertising for flyers that had been mailed to prospective campers, 5,000. 2 Collected registration fees, 15,000. 2 Rogers Construction completed work on a new basketball court that cost 12,000. Arrangements were made to pay the bill in July. 5 Purchased office supplies on account from Gordon Office Supplies, 300. 6 Received bill from Magics Restaurant for meals served to campers on account, 5,800. 7 Collected registration fees, 16,200. 10 Paid wages to camp counselors, 500. 14 Collected registration fees, 13,500. 14 Received bill from Magics Restaurant for meals served to campers on account, 6,200. 17 Paid wages to camp counselors, 500. 18 Paid postage, 85. 21 Collected registration fees, 15,200. 22 Received bill from Magics Restaurant for meals served to campers on account, 6,500. 24 Paid wages to camp counselors, 500. 28 Collected registration fees, 14,000. 30 Received bill from Magics Restaurant for meals served to campers on account, 7,200. 30 Paid wages to camp counselors, 500. 30 Paid Magics Restaurant on account, 25,700. 30 Paid utility bill, 500. 30 Paid phone bill, 120. 30 Bird withdrew cash for personal use, 2,000. REQUIRED 1. Enter the transactions in a general journal. Use the following journal pages: June 16, page 1; June 722, page 2; June 2430, page 3. 2. Post the entries to the general ledger. 3. Prepare a trial balance.CHALLENGE PROBLEM Journal entries and a trial balance for Fred Phaler Consulting follow. As you will note, the trial balance does not balance, suggesting that there are errors. Recall that the chapter offers tips on identifying individual posting errors. These techniques are not as effective when there are two or more errors. Thus, you will need to first carefully inspect the trial balance to see if you can identify any obvious errors due to amounts that either look out of proportion or are simply reported in the wrong place. Then, you will need to carefully evaluate the other amounts by using the techniques offered in the text, or tracing the journal entries to the amounts reported on the trial balance. (Hint: Four errors were made in the posting process and preparation of the trial balance.) REQUIRED 1. Find the errors. 2. Explain what caused the errors. 3. Prepare a corrected trial balance.The matching principle in accounting requires the matching of debits and credits.2TF LO1 As part of the adjustment of supplies, an expense account is debited and Supplies is credited for the amount of supplies used during the accounting period.LO1 Depreciable cost is the difference between the original cost of the asset and its accumulated depreciation.LO1 The purpose of depreciation is to record the assets market value in the accounting records.LO1 The purpose of depreciation is to (a) spread the cost of an asset over its useful life. (b) show the current market value of an asset. (c) set up a reserve fund to purchase a new asset. (d) expense the asset in the year it was purchased.2MC 3MC 4MC The first step in preparing a work sheet is to (a) prepare the trial balance. (b) prepare the adjustments. (c) prepare the adjusted trial balance. (d) extend the amounts from the Adjusted Trial Balance to the Income Statement and Balance Sheet columns.On December 31, the trial balance indicates that the supplies account has a balance, prior to the adjusting entry, of 100. A physical count of the supplies inventory shows that 70 of supplies remain. What adjustment should be made to the supplies account?LO2 When posting adjusting entries to the general ledger, what is written in the Item column?3CE 4CE LO5 Using the following partial work sheet prepared on December 31, 20--, journalize the adjusting entry.6CE 1RQ 2RQ 3RQ 4RQ 5RQ 6RQ 7RQ 8RQ What is an assets depreciable cost?10RQ 11RQ Identify the five major column headings on a work sheet.List the five steps taken in preparing a work sheet.14RQ Explain when revenues are recorded under the cash basis, modified cash basis, and accrual basis of accounting.16RQ ADJUSTMENT FOR SUPPLIES On December 31, the trial balance indicates that the supplies account has a balance, prior to the adjusting entry, of 320. A physical count of the supplies inventory shows that 90 of supplies remain. Analyze this adjustment for supplies using T accounts, and then formally enter this adjustment in the general journal.2SEA ADJUSTMENT FOR WAGES On December 31, the trial balance shows wages expense of 600. An additional 200 of wages was earned by the employees, but has not yet been paid. Analyze this adjustment for wages using T accounts, and then formally enter this adjustment in the general journal.ADJUSTMENT FOR DEPRECIATION OF ASSET On December 1, delivery equipment was purchased for 7,200. The delivery equipment has an estimated useful life of four years (48 months) and no salvage value. Using the straight-line depreciation method, analyze the necessary adjusting entry as of December 31 (one month) using T accounts, and then formally enter this adjustment in the general journal.CALCULATION OF BOOK VALUE On June 1, 20--, a depreciable asset was acquired for 6,840. The asset has an estimated useful life of six years (72 months) and no salvage value. Using the straight-line depreciation method, calculate the book value as of December 31, 20--.ANALYSIS OF ADJUSTING ENTRY FOR SUPPLIES Analyze each situation and indicate the correct dollar amount for the adjusting entry. (Trial balance is abbreviated as TB.) 1. Ending inventory of supplies is 260. 2. Amount of supplies used is 230.7SEA POSTING ADJUSTING ENTRIES Two adjusting entries are in the following general journal. Post these adjusting entries to the four general ledger accounts. The following account numbers were taken from the chart of accounts: 141, Supplies; 219, Wages Payable; 511, Wages Expense; and 523, Supplies Expense. If you are not using the working papers that accompany this text, enter the following balances before posting the entries: Supplies, 200 Debit; and Wages Expense, 1,200 Debit.WORK SHEET AND ADJUSTING ENTRIES A partial work sheet for Jim Jacobs Furniture Repair is shown as follows. Indicate by letters (a) through (d) the four adjustments in the Adjustments columns of the work sheet, properly matching each debit and credit. Complete the Adjustments columns.JOURNALIZING ADJUSTING ENTRIES From the Adjustments columns in Exercise 5-9A, journalize the four adjusting entries, as of December 31, in proper general journal format.11SEA ANALYSIS OF NET INCOME OR NET LOSS ON THE WORK SHEET Indicate with an X in which columns. Income Statement Debit or Credit or Balance Sheet Debit or Credit, a net income or a net loss would appear on a work sheet.CASH, MODIFIED CASH, AND ACCRUAL BASES OF ACCOUNTING Prepare the entry for each of the following transactions, using the (a) cash basis, (b) modified cash basis, and (c) accrual basis of accounting. 1. Purchase supplies on account. 2. Make payment on asset previously purchased. 3. Purchase supplies for cash. 4. Purchase insurance for cash. 5. Pay cash for wages. 6. Pay cash for phone expense. 7. Pay cash for new equipment. End-of-Period Adjusting Entries: 8. Wages earned but not paid. 9. Prepaid item purchased, partly used. 10. Depreciation on long-term assets.ADJUSTMENTS AND WORK SHEET SHOWING NET INCOME The trial balance after one month of operation for Masons Delivery Service as of September 30, 20--, is shown below. Data to complete the adjustments are as follows: (a) Supplies inventory as of September 30, 90. (b) Insurance expired (used), 650, (c) Depreciation on delivery equipment, 600. (d) Wages earned by employees but not paid as of September 30, 350. REQUIRED 1. Enter the adjustments in the Adjustments columns of the work sheet. 2. Complete the work sheet.ADJUSTMENTS AND WORK SHEET SHOWING A NET LOSS Jason Armstrong started a business called Campus Delivery Service. After the first month of operations, the trial balance as of November 30, 20--, is as shown on the next page. REQUIRED 1. Analyze the following adjustments and enter them on the work sheet. (a) Ending inventory of supplies on November 30, 185. (b) Unexpired (remaining) insurance as of November 30, 800. (c) Depreciation expense on van, 300. (d) Wages earned but not paid as of November 30, 190. 2. Complete the work sheet.JOURNALIZE AND POST ADJUSTING ENTRIES FROM THE WORK SHEET Refer to Problem 5-15A and the following additional information: REQUIRED 1. Journalize the adjusting entries on page 5 of the general journal. 2. Post the adjusting entries to the general ledger. (If you are not using the working papers that accompany this text, enter the balances provided in this problem before posting the adjusting entries.)17SPA ADJUSTMENT FOR SUPPLIES On July 31, the trial balance indicates that the supplies account has a balance, prior to the adjusting entry, of 430. A physical count of the supplies inventory shows that 120 of supplies remain. Analyze the adjustment for supplies using T accounts, and then formally enter this adjustment in the general journal.ADJUSTMENT FOR INSURANCE On July 1, a six-month liability insurance policy was purchased for 750. Analyze the required adjustment as of July 31 using T accounts, and then formally enter this adjustment in the general journal.ADJUSTMENT FOR WAGES On July 31, the trial balance shows wages expense of 800. An additional 150 of wages was earned by the employees but has not yet been paid. Analyze the required adjustment using T accounts, and then formally enter this adjustment in the general journal.ADJUSTMENT FOR DEPRECIATION OF ASSET On July 1, delivery equipment was purchased for 4,320. The delivery equipment has an estimated useful life of three years (36 months) and no salvage value. Using the straight-line depreciation method, analyze the necessary adjusting entry as of July 31 (one month) using T accounts, and then formally enter this adjustment in the general journal.CALCULATION OF BOOK VALUE On January 1, 20--, a depreciable asset was acquired for 5,760. The asset has an estimated useful life of four years (48 months) and no salvage value. Use the straight-line depreciation method to calculate the book value as of July 1, 20--.ANALY SIS OF ADJUSTING ENTRY FOR SUPPLIES Analyze each situation and indicate the correct dollar amount for the adjusting entry. 1. Ending inventory of supplies is 95. 2. Amount of supplies used is 280.ANALY SIS OF ADJUSTING ENTRY FOR INSURANCE Analyze each situation and indicate the correct dollar amount for the adjusting entry. 1. Amount of insurance expired (used) is 830. 2. Amount of unexpired (remaining) insurance is 340.POSTING ADJUSTING ENTRIES Two adjusting entries are shown in the following general journal. Post these adjusting entries to the four general ledger accounts. The following account numbers were taken from the chart of accounts: 145, Prepaid Insurance; 183.1, Accumulated DepreciationCleaning Equipment; 541, Depreciation ExpenseCleaning Equipment; and 535, Insurance Expense. If you are not using the working papers that accompany this text, enter the following balances before posting the entries: Prepaid Insurance, 960 Debit; Accumulated DepreciationCleaning Equipment, 870 Credit.WORK SHEET AND ADJUSTING ENTRIES A partial work sheet for Jasmine Kahs Auto Detailing is shown below. Indicate by letters (a) through (d) the four adjustments in the Adjustments columns of the work sheet, properly matching each debit and credit. Complete the Adjustments columns. JOURNALIZING ADJUSTING ENTRIES From the Adjustments columns in Exercise 5-9B, journalize the four adjusting entries as of June 30, in proper general journal format.JOURNALIZING ADJUSTING ENTRIES From the Adjustments columns in Exercise 5-9B, journalize the four adjusting entries as of June 30, in proper general journal format.EXTENDING ADJUSTED BALANCES TO THE INCOME STATEMENT AND BALANCE SHEET COLUMNS Indicate with an X whether each account total should be extended to the Income Statement Debit or Credit or to the Balance Sheet Debit or Credit columns on the work sheet.12SEB CASH, MODIFIED CASH, AND ACCRUAL BASES OF ACCOUNTING For each journal entry shown below, indicate the accounting method(s) for which the entry would be appropriate. If the journal entry is not appropriate for a particular accounting method, explain the proper accounting treatment for that method. 1. Office Equipment Cash Purchased equipment for cash 2. Office Equipment Accounts Payable Purchased equipment on account 3. Cash Revenue Cash receipts for week 4. Accounts Receivable Revenue Services performed on account 5. Prepaid Insurance Cash Purchased prepaid asset 6. Supplies Accounts Payable Purchased prepaid asset 7. Phone Expense Cash Paid phone bill 8. Wages Expense Cash Paid wages for month 9. Accounts Payable Cash Made payment on account Adjusting Entries: 10. Supplies Expense Supplies 11. Wages Expense Wages Payable 12. Depreciation ExpenseOffice Equipment Accumulated DepreciationOffice Equipment 14SPB 15SPB JOURNALIZE AND POST ADJUSTING ENTRIES FROM THE WORK SHEET Refer to Problem 5-15B and the following additional information: REQUIRED 1. Journalize the adjusting entries on page 3 of the general journal. 2. Post the adjusting entries to the general ledger. (If you are not using the working papers that accompany this text, enter the balances provided in this problem before posting the adjusting entries.)CORRECTING WORK SHEET WITH ERRORS A beginning accounting student tried to complete a work sheet for Dick Adys Bookkeeping Service. The following adjusting entries were to have been analyzed and entered in the work sheet: (a) Ending inventory of supplies on July 31, 130. (b) Unexpired insurance on July 31, 420. (c) Depreciation of office equipment, 325. (d) Wages earned, but not paid as of July 31, 95. REQUIRED Review the work sheet shown on page 174 for addition mistakes, transpositions, and other errors and make all necessary corrections.Delia Alvarez, owner of Delias Lawn Service, wants to borrow money to buy new lawn equipment. A local bank has asked for financial statements. Alvarez has asked you to prepare financial statements for the year ended December 31, 20--. You have been given the unadjusted trial balance on page 175 and suspect that Alvarez expects you to base your statements on this information. You are concerned, however, that some of the account balances may need to be adjusted. Write a memo to Alvarez explaining what additional information you need before you can prepare the financial statements. Alvarez is not familiar with accounting issues. Therefore, explain in your memo why you need this information, the potential impact of this information on the financial statements, and the importance of making these adjustments before approaching the bank for a loan.1MP 1CP List three depreciation methods used for financial reporting.Which depreciation method is used for tax purposes?STRAIGHT-LINE DEPRECIATION A small deliver truck was purchased on January 1 at a cost of 25,000. It has an estimated useful life of four years and an estimated salvage value of 5,000. Prepare a depreciation schedule showing the depreciation expense, accumulated depreciation, and book value for each year under the straight-line method.SUM-OF-THE-YEARS'-DIGITS DEPRECIATION Using the information given in Exercise 5Apx-lA, prepare a depreciation schedule showing the depreciation expense, accumulated depreciation, and book value for each year under the sum-of-the-years-digits method.3SEA MODIFIED ACCELERATED COST RECOVERY SYSTEM Using the information given in Exercise 5Apx-1A and the rates shown in Figure 5A-4, prepare a depreciation schedule showing the depreciation expense, accumulated depreciation, and book value for each year under the Modified Accelerated Cost Recovery System. For tax purposes, assume that the truck has a useful life of five years. (The IRS schedule will spread depreciation over six years.)STRAIGHT-LINE DEPRECIATION A computer was purchased on January 1 at a cost of 5,000. It has an estimated useful life of five years and an estimated salvage value of 500. Prepare a depreciation schedule showing the depreciation expense, accumulated depreciation, and book value for each year under the straight-line method.2SEB DOUBLE-DECLININGBALANCE DEPRECIATION Using the information given in Exercise 5 Apx-1B, prepare a depreciation schedule showing the depreciation expense, accumulated depreciation, and book value for each year under the double-declining-balance method.MODIFIED ACCELERATED COST RECOVERY SYSTEM Using the information given in Exercise 5Apx-1B and the rates shown in Figure 5A-4, prepare a depreciation schedule showing the depreciation expense, accumulated depreciation, and book value for each year under the Modified Accelerated Cost Recovery System. For tax purposes, assume that the computer has a useful life of five years. (The IRS schedule will spread depreciation over six years.)Expenses are listed on the income statement as they appear in the chart of accounts or in descending order (by dollar amount).Additional investments of capital during the month are not reported on the statement of owners equity.3TF 4TF Temporary accounts are closed at the end of each accounting period.Multiple choice Which of these types of accounts is considered a permanent account? (a) Revenue (b) Asset (c) Drawing (d) Expense Which of these accounts is considered a temporary account? (a) Cash (b) Accounts Payable (c) J. Jones, Capital (d) J. Jones, Drawing Which of these is the first step in the closing process? (a) Close revenue account(s). (b) Close expense accounts. (c) Close the Income Summary account. (d) Close the drawing account.The ________ is prepared after closing entries are posted to prove the equality of debit and credit balances. (a) balance sheet (b) income statement (c) post-closing trial balance (d) statement of owners equity Steps that begin with analyzing source documents and conclude with the post-closing trial balance are called the (a) closing process. (b) accounting cycle. (c) adjusting entries. (d) posting process.Joe Fisher operates Fisher Consulting. A partial work sheet for August 20-- is provided below. Fisher made no additional investments during the month. Prepare an income statement, statement of owners equity, and balance sheet.2CE 3CE Identify the source of the information needed to prepare the income statement.Describe two approaches to listing the expenses in the income statement.3RQ If additional investments were made during the year, what information in addition to the work sheet would be needed to prepare the statement of owners equity?Identify the sources of the information needed to prepare the balance sheet.What is a permanent account? On which financial statement are permanent 7RQ 8RQ 9RQ 10RQ List the 10 steps in the accounting cycle.1SEA STATEMENT OF OWNERS EQUITY From the partial work sheet below, prepare a statement of owners equity, assuming no additional investment was made by the owner. (FOR EXERCISES 6-1A, 6-2A, 6-3A, AND 6-4A)BALANCE SHEET From the statement of owners equity prepared in E 6-2A and the partial work sheet below, prepare a balance sheet. (FOR EXERCISES 6-1A, 6-2A, 6-3A, AND 6-4A)CLOSING ENTRIES (NET INCOME) Set up T accounts for Major Advising based on the work sheet in Exercise 6-1A and the chart of accounts provided below. Enter the existing balance for each account. Prepare closing entries in general journal form. Then post the closing entries to the T accounts.CLOSING ENTRIES (NET INCOME) Using the following partial listing of T accounts, prepare closing entries in general journal form dated April 30, 20--. Then post the closing entries to the T accounts.CLOSING ENTRIES (NET LOSS) Using the following partial listing of T accounts, prepare closing entries in general journal form dated January 31, 20--. Then post the closing entries to the T accounts.FINANCIAL STATEMENTS Page 206 shows a work sheet for Megaffins Repairs. No additional investments were made by the owner during the month. REQUIRED 1. Prepare an income statement. 2. Prepare a statement of owners equity. 3. Prepare a balance sheet.PROBLEM 6-7A CLOSING ENTRIES AND POST-CLOSING TRIAL BALANCE Refer to the work sheet in Problem 6-7A for Megaffins Repairs. The trial balance amounts (before adjustments) have been entered in the ledger accounts provided in the working papers. If you are not using the working papers that accompany this book, set up ledger accounts and enter these balances as of January 31, 20--. A chart of accounts is provided below. REQUIRED 1. Journalize (page 10) and post the adjusting entries. 2. Journalize (page 11) and post the closing entries. 3. Prepare a post-closing trial balance.STATEMENT OF OWNERS EQUITY The capital account for Autumn Chou, including an additional investment, and a partial work sheet are shown below and on page 208. REQUIRED Prepare a statement of owners equity.INCOME STATEMENT From the partial work sheet for Major Advising below, prepare an income statement. (FOR EXERCISES 6-1A, 6-2A, 6-3A, AND 6-4A)STATEMENT OF OWNERS EQUITY From the partial work sheet below, prepare a statement of owners equity, assuming no additional investment was made by the owner. (FOR EXERCISES 6-1A, 6-2A, 6-3A, AND 6-4A)BALANCE SHEET From the statement of owners equity prepared in E 6-2A and the partial work sheet below, prepare a balance sheet. (FOR EXERCISES 6-1A, 6-2A, 6-3A, AND 6-4A)CLOSING ENTRIES (NET INCOME) Set up T accounts for Major Advising based on the work sheet in Exercise 6-1A and the chart of accounts provided below. Enter the existing balance for each account. Prepare closing entries in general journal form. Then post the closing entries to the T accounts.CLOSING ENTRIES (NET INCOME) Using the following partial listing of T accounts, prepare closing entries in general journal form dated April 30, 20--. Then post the closing entries to the T accounts.CLOSING ENTRIES (NET LOSS) Using the following partial listing of T accounts, prepare closing entries in general journal form dated January 31, 20--. Then post the closing entries to the T accounts.FINANCIAL STATEMENTS A work sheet for Juanitas Consulting is shown on the following page. There were no additional investments made by the owner during the month. REQUIRED 1. Prepare an income statement. 2. Prepare a statement of owners equity. 3. Prepare a balance sheet.PROBLEM 6-7B CLOSING ENTRIES AND POST-CLOSING TRIAL BALANCE Refer to the work sheet for Juanitas Consulting in Problem 6-7B. The trial balance amounts (before adjustments) have been entered in the ledger accounts provided in the working papers. If you are not using the working papers that accompany this book, set up ledger accounts and enter these balances as of June 30, 20--. A chart of accounts is provided below. REQUIRED 1. Journalize (page 10) and post the adjusting entries. 2. Journalize (page 11) and post the closing entries. 3. Prepare a post-closing trial balance.STATEMENT OF OWNERS EQUITY The capital account for Mintas Editorial Services, including an additional investment, and a partial work sheet are shown below. REQUIRED Prepare a statement of owners equity.MASTERY PROBLEM Elizabeth Soltis owns and operates Aunt Ibbys Styling Salon. A year-end work sheet is provided on the next page. Using this information, prepare adjusting entries, financial statements, and closing entries. Soltis made no additional investments during the year.CHALLENGE PROBLEM This problem challenges you to apply your cumulative accounting knowledge to move a step beyond the material in the chapter. Provided below is a partial work sheet for Ardery Advising. REQUIRED During January, Ardery made an additional investment of 1,200. Prepare an income statement, statement of owners equity, and balance sheet for Ardery Advising.1RQ 2RQ SERIES A EXERCISE CLASSIFYING BUSINESS TRANSACTIONS Dolores Lopez opened a new consulting business. The following transactions occurred during January of the current year. Classify each transaction as an operating, an investing, or a financing activity. (a) Invested cash in the business, 510,000. (b) Paid office rent, 500. (c) Purchased office equipment. Paid 1,500 cash and agreed to pay the balance of 2,000 in four monthly installments. (d) Received cash for services rendered, 900. (e) Paid phone bill, 65. (f) Made payment on loan in transaction (c), 500. (g) Paid wages to part-time employee, 500. (h) Received cash for services rendered, 800. (i) Paid electricity bill, 85. (j) Withdrew cash for personal use, 100. (k) Paid wages to part-time employee, 500.SERIES A EXERCISE CLASSIFYING BUSINESS TRANSACTIONS Dolores Lopez opened a new consulting business. The following transactions occurred during January of the current year. Classify each transaction as an operating, an investing, or a financing activity. (a) Invested cash in the business, 10,000. (b) Paid office rent, 500. (c) Purchased office equipment. Paid 1,500 cash and agreed to pay the balance of 2,000 in four monthly installments. (d) Received cash for services rendered, 900. (e) Paid phone bill, 65. (f) Made payment on loan in transaction (c), 500. (g) Paid wages to part-time employee, 500. (h) Received cash for services rendered, 800. (i) Paid electricity bill, 85. (j) Withdrew cash for personal use, 100. (k) Paid wages to part-time employee, 500. SERIES A PROBLEM PREPARING A STATEMENT OF CASH FLOWS Prepare a statement of cash flows based on the transactions reported in Exercise 6Apx-1A.SERIES B EXERCISE CLASSIFYING BUSINESS TRANSACTIONS Bob Jacobs opened an advertising agency. The following transactions occurred during January of the current year. Classify each transaction as an operating, an investing, or a financing activity. (a) Invested cash in the business, 5,000. (b) Purchased office equipment. Paid 2,500 cash and agreed to pay the balance of 2,000 in four monthly installments. (c) Paid office rent, 400. (d) Received cash for services rendered, 700. (e) Paid phone bill, 95. (f) Received cash for services rendered, 600. (g) Made payment on loan in transaction (b), 500. (h) Paid wages to pan-time employee, 800. (i) Paid electricity bill, 100. (j) Withdrew cash for personal use, 500. (k) Paid wages to pan-time employee, 600.

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