Concept explainers
1.
Introduction: Cash Flow Analysis is a technique used by the company to know the overall worth of the company as well as its subsidiary or branches. Cash flow analysis helps in analyzing the company’s
To prepare: The general
1.
Explanation of Solution
September | Particular | PR | Dr. | Cr. |
a. | Cash | 101 | 60,000 | |
Office Equipment | 163 | 25,000 | ||
To capital | 301 | 85,000 | ||
(Owner’s investment) | ||||
b. | Land | 172 | 40000 | |
Building | 170 | 16000 | ||
Cash | 101 | 30000 | ||
Notes payable | 250 | 170000 | ||
(To record the purchase of land building with cash and notes payable) | ||||
c. | Office supplies | 108 | 2000 | |
To account payable | 201 | 2000 | ||
(Purchased office equipment and office supplies) | ||||
d. | Automobile | 164 | 16,500 | |
Capital | 301 | 16,500 | ||
(to record the owner’s investment | ||||
e. | Office equipment | 163 | 5600 | |
Account payable | 201 | 5600 | ||
(to record the purchased office equipment on credit) | ||||
f. | Salaries expense | 601 | 1800 | |
To cash | 101 | 1800 | ||
(to record the cash paid for salary) | ||||
g | Cash | 101 | 8000 | |
Fees earned | 402 | 8000 | ||
h. | Utilities expense | 602 | 635 | |
To Cash | 101 | 635 | ||
(Paid cash for utilities) | ||||
i. | Account payable | 201 | 2000 | |
Cash | 101 | 2000 | ||
(to record the cash paid that was due) | ||||
j. | Office equipment | 163 | 20300 | |
Cash | 101 | 20300 | ||
(to record the purchase of office equipment by paying cash) | ||||
K | 106 | 6250 | ||
Fees earn | 406 | 6250 | ||
(to record the service provided on credit) | ||||
l. | Salaries expenses | 601 | 1800 | |
Cash | 101 | 1800 | ||
m. | Cash | 101 | 4000 | |
Account receivable | 106 | 4000 | ||
N | Withdrawals | 302 | 2800 | |
Cash | 101 | 2800 | ||
(being cash withdrawals ) | ||||
2.
Introduction: Cash Flow Analysis is a technique used by the company to know the overall worth of the company as well as its subsidiary or branches. Cash flow analysis helps in analyzing the company’s cash outflow and inflow through different activities like financing activities, investing activities, operating activities. This analysis shows how the company generates money or revenue for its working.
To prepare: Ledger for the following transactions.
2.
Answer to Problem 4PSA
Balance of cash ledger is $12665, account receivable $2250, office supplies $2000, office equipment $50900, salary $3600
Explanation of Solution
Cash Account No.101 | ||||
Date | PR | Debit | Credit | Balance |
a. | G1 | 60000 | 60000 | |
b. | G1 | 30000 | 30000 | |
f. | G1 | 1800 | 28200 | |
g. | G1 | 8000 | 36200 | |
h. | G1 | 635 | 35565 | |
i. | G1 | 2000 | 33565 | |
j. | G1 | 2030 | 13265 | |
l. | G1 | 1800 | 11465 | |
m. | 4000 | 15465 | ||
n. | 2800 | 12665 |
Account receivable | Account no.106 | |||
Date | PR | Debit | Credit | Balance |
k. | G1 | 6250 | 6250 | |
M | G1 | 4000 | 2250 | |
Office supplies | Account no. 108 | |||
Date | PR | Debit | Credit | Balance |
c. | G1 | 2000 | 2000 |
Office equipment | Account no. 163 | |||
Date | PR | Debit | Credit | Balance |
a. | G1 | 25000 | 25000 | |
e. | G1 | 5600 | 30600 | |
j. | G1 | 20300 | 50900 |
Automobile | Account no. 164 | |||
Date | PR | Debit | Credit | Balance |
d. | G1 | 16500 | 16500 | |
Building | Account no. 170 | |||
Date | PR | Debit | Credit | Balance |
b. | G1 | 160,000 | 160,000 | |
Land | Account no. 172 | |||
Date | PR | Debit | Credit | Balance |
b. | G1 | 40000 | 40000 | |
Account payable | Account no. 201 | |||
Date | PR | Debit | Credit | Balance |
c. | G1 | 2000 | 2000 | |
e. | 5600 | 7600 | ||
I | 2000 | 5600 |
Note payable | Account no. 250 | |||
Date | PR | Debit | Credit | Balance |
b. | G1 | 170000 | 170000 |
Capital | Account no. 301 | |||
Date | PR | Debit | Credit | Balance |
a. | G1 | 85000 | 85000 | |
d. | G1 | 16500 | 101500 | |
G1 | ||||
Withdrawals | Account no. 302 | |||
Date | PR | Debit | Credit | Balance |
n. | G1 | 2800 | 2800 |
Fees earn | Account no. 402 | |||
Date | PR | Debit | Credit | Balance |
g. | G1 | 8000 | 8000 | |
k. | G1 | 6250 | 14250 |
Utilities Expense | Account no. 602 | |||
Date | PR | Debit | Credit | Balance |
h. | G1 | 635 | 635 |
Salaries | Account no. 601 | |||
Date | PR | Debit | Credit | Balance |
f. | G1 | 1800 | 1800 | |
l. | G1 | 1800 | 3600 |
3.
Introduction: Cash Flow Analysis is a technique used by the company to know the overall worth of the company as well as its subsidiary or branches. Cash flow analysis helps in analyzing the company’s cash outflow and inflow through different activities like financing activities, investing activities, operating activities. This analysis shows how the company generates money or revenue for its working.
To prepare: Trail balance.
3.
Answer to Problem 4PSA
Total of trail balance is $291,350
Explanation of Solution
Trail balance | ||
Particular | Dr. | Cr. |
Cash | 12665 | |
Account receivable | 2250 | |
Office supplies | 2000 | |
Land | 40,000 | |
Automobile | 16,500 | |
Office equipment | 50,900 | |
Account payable | 5600 | |
Note Payable | 170,000 | |
Capital | 101,500 | |
Withdrawals | 2800 | |
Fees earn | 14,250 | |
Utilities | 635 | |
Salaries expense | 3600 | |
Total | 291,350 | 291350 |
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Chapter 2 Solutions
Loose Leaf for Financial Accounting: Information for Decisions
- In July of this year, M. Wallace established a business called Wallace Realty. The account headings are presented below. Transactions completed during the month follow. a. Wallace deposited 24,000 in a bank account in the name of the business. b. Paid the office rent for the current month, 650, Ck. No. 1000. c. Bought office supplies for cash, 375, Ck. No. 1001. d. Bought office equipment on account from Dellos Computers, 6,300. e. Received a bill from the City Crier for advertising, 455. f. Sold services for cash, 3,944. g. Paid on account to Dellos Computers, 1,500, Ck. No. 1002. h. Received and paid the bill for utilities, 340, Ck. No. 1003. i. Paid on account to the City Crier, 455, Ck. No. 1004. j. Paid truck expenses, 435, Ck. No. 1005. k. Wallace withdrew cash for personal use, 1,500, Ck. No. 1006. Required 1. Record the transactions and the balance after each transaction. 2. Total the left side of the accounting equation (left side of the equal sign), then total the right side of the accounting equation (right side of the equal sign). If the two totals are not equal, check the addition and subtraction. If you still cannot find the error, re-analyze each transaction.arrow_forwardOn March 1 of this year, B. Gervais established Gervais Catering Service. The account headings are presented below. Transactions completed during the month follow. a. Gervais deposited 25,000 in a bank account in the name of the business. b. Bought a truck from Kelly Motors for 26,329, paying 8,000 in cash and placing the balance on account, Ck. No. 500. c. Bought catering equipment on account from Luigis Equipment, 3,795. d. Paid the rent for the month, 1,255, Ck. No. 501. e. Bought insurance for the truck for one year, 400, Ck. No. 502. f. Sold catering services for cash for the first half of the month, 3,012. g. Bought supplies for cash, 185, Ck. No. 503. h. Sold catering services on account, 4,307. i. Received and paid the heating bill, 248, Ck. No. 504. j. Received a bill from GC Gas and Lube for gas and oil for the truck, 128. k. Sold catering services for cash for the remainder of the month, 2,649. l. Gervais withdrew cash for personal use, 1,550, Ck. No. 505. m. Paid the salary of the assistant, 1,150, Ck. No. 506. Required 1. Record the transactions and the balance after each transaction. 2. Total the left side of the accounting equation (left side of the equal sign), then total the right side of the accounting equation (right side of the equal sign). If the two totals are not equal, check the addition and subtraction. If you still cannot find the error, re-analyze each transaction.arrow_forwardDuring February of this year, H. Rose established Rose Shoe Hospital. The following asset, liability, and owners equity accounts are included in the chart of accounts: The following transactions occurred during the month of February: a. Rose deposited 25,000 cash in a bank account in the name of the business. b. Bought shop equipment for cash, 1,525, Ck. No. 1000. c. Bought advertising on account from Milland Company, 325. d. Bought store shelving on account from Inger Hardware, 750. e. Bought office equipment from Sharas Office Supply, 625, paying 225 in cash and placing the balance on account, Ck. No. 1001. f. Paid on account to Inger Hardware, 750, Ck. No. 1002. g. Rose invested his personal leather working tools with a fair market value of 800 in the business h. Sold services for the month of February for cash, 250. PART 1: The Accounting Cycle for a Service Business: Analyzing Business Transactions Required 1. Write the account classifications (Assets, Liabilities, Capital, Drawing, Revenue, Expense) in the fundamental accounting equation, as well as the plus and minus signs and Debit and Credit. 2. Write the account names on the T accounts under the classifications, place the plus and minus signs for each T account, and label the debit and credit sides of the T accounts. 3. Record the amounts in the proper positions in the T accounts. Write the letter next to each entry to identify the transaction. 4. Foot and balance the accounts.arrow_forward
- On October 1, 2019, Jay Pryor established an interior decorating business, Pioneer Designs. During the month, Jay completed the following transactions related to the business: Oct. 1. Jay transferred cash from a personal bank account to an account to be used for the business, 18,000. 4.Paid rent for period of October 4 to end of month, 3,000. 10.Purchased a used truck for 23,750, paying 3,750 cash and giving a note payable for the remainder. 13.Purchased equipment on account, 10,500. 14.Purchased supplies for cash, 2,100. 15.Paid annual premiums on property and casualty insurance, 3,600. 15.Received cash for job completed, 8,950. Enter the following transactions on Page 2 of the two-column journal: 21.Paid creditor a portion of the amount owed for equipment purchased on October 13, 2,000. 24.Recorded jobs completed on account and sent invoices to customers, 14,150. 26.Received an invoice for truck expenses, to be paid in November, 700. 27.Paid utilities expense, 2,240. 27.Paid miscellaneous expenses, 1,100. Oct. 29. Received cash from customers on account, 7,600. 30.Paid wages of employees, 4,800. 31.Withdrew cash for personal use, 3,500. Instructions 1. Journalize each transaction in a two-column journal beginning on Page 1, referring to the following chart of accounts in selecting the accounts to be debited and credited. (Do not insert the account numbers in the journal at this time.) Journal entry explanations may be omitted. 2. Post the journal to a ledger of four-column accounts, inserting appropriate posting references as each item is posted. Extend the balances to the appropriate balance columns after each transaction is posted. 3. Prepare an unadjusted trial balance for Pioneer Designs as of October 31, 2019. 4. Determine the excess of revenues over expenses for October. 5. Can you think of any reason why the amount determined in (4) might not be the net income for October?arrow_forwardDuring December of this year, G. Elden established Ginnys Gym. The following asset, liability, and owners equity accounts are included in the chart of accounts: During December, the following transactions occurred: a. Elden deposited 35,000 in a bank account in the name of the business. b. Bought exercise equipment for cash, 8,150, Ck. No. 1001. c. Bought advertising on account from Hazel Company, 105. d. Bought a display rack on account from Cyber Core, 790. e. Bought office equipment on account from Office Aids, 185. f. Elden invested her exercise equipment with a fair market value of 1,200 in the business. g. Made a payment to Cyber Core, 200, Ck. No. 1002. h. Sold services for the month of December for cash, 800. Required 1. Write the account classifications (Assets, Liabilities, Capital, Drawing, Revenue, Expense) in the fundamental accounting equation, as well as the plus and minus signs and Debit and Credit. 2. Write the account names on the T accounts under the classifications, place the plus and minus signs for each T account, and label the debit and credit sides of the T accounts 3. Record the amounts in the proper positions in the T accounts. Write the letter next to each entry to identify the transaction. 4. Foot and balance the accounts.arrow_forwardA business has the following transactions: The business is started by receiving cash from an investor in exchange for common stock $20,000 The business purchases supplies on account $500 The business purchases furniture on account $2,000 The business renders services to various clients on account totaling $9,000 The business pays salaries $2,000 The business pays this months rent $3,000 The business pays for the supplies purchased on account. The business collects from one of its clients for services rendered earlier in the month $1,500. What is total income for the month?arrow_forward
- P. Schwartz, Attorney at Law, opened his office on October 1. The account headings are presented below. Transactions completed during the month follow. a. Schwartz deposited 25,000 in a bank account in the name of the business. b. Bought office equipment on account from QuipCo, 9,670. c. Schwartz invested his personal law library, which cost 2,800. d. Paid the office rent for the month, 1,700, Ck. No. 2000. e. Bought office supplies for cash, 418, Ck. No. 2001. f. Bought insurance for two years, 944, Ck. No. 2002. g. Sold legal services for cash, 8,518. h. Paid the salary of the part-time receptionist, 1,820, Ck. No. 2003. i. Received and paid the telephone bill, 388, Ck. No. 2004. j. Received and paid the bill for utilities, 368, Ck. No. 2005. k. Sold legal services for cash, 9,260. l. Paid on account to QuipCo, 2,670, Ck. No. 2006. m. Schwartz withdrew cash for personal use, 2,500, Ck. No. 2007. Required 1. Record the transactions and the balance after each transaction. 2. Total the left side of the accounting equation (left side of the equal sign), then total the right side of the accounting equation (right side of the equal sign). If the two totals are not equal, check the addition and subtraction. If you still cannot find the error, re-analyze each transaction.arrow_forwardOn March 1 of this year, B. Gervais established Gervais Catering Service. The account headings are presented below. Transactions completed during the month follow. a. Gervais deposited 25,000 in a bank account in the name of the business. b. Bought a truck from Kelly Motors for 26,329, paying 8,000 in cash and placing the balance on account, Ck. No. 500. c. Bought catering equipment on account from Luigis Equipment, 3,795. d. Paid the rent for the month, 1,255, Ck. No. 501 (Rent Expense). e. Bought insurance for the truck for one year, 400, Ck. No. 502. f. Sold catering services for cash for the first half of the month, 3,012 (Catering Income). g. Bought supplies for cash, 185, Ck. No. 503. h. Sold catering services on account, 4,307 (Catering Income). i. Received and paid the heating bill, 248, Ck. No. 504 (Utilities Expense). j. Received a bill from GC Gas and Lube for gas and oil for the truck, 128 (Gas and Oil Expense). k. Sold catering services for cash for the remainder of the month, 2,649 (Catering Income). l. Gervais withdrew cash for personal use, 1,550, Ck. No. 505. m. Paid the salary of the assistant, 1,150, Ck. No. 506 (Salary Expense). Required 1. In the equation, write the owners name above the terms Capital and Drawing. 2. Record the transactions and the balance after each transaction. Identify the account affected when the transaction involves revenues or expenses. 3. Write the account totals from the left side of the equals sign and add them. Write the account totals from the right side of the equals sign and add them. If the two totals are not equal, check the addition and subtraction. If you still cannot find the error, re-analyze each transaction.arrow_forwardIn March, T. Carter established Carter Delivery Service. The account headings are presented below. Transactions completed during the month of March follow. a. Carter deposited 25,000 in a bank account in the name of the business. b. Bought a used truck from Degroot Motors for 15,140, paying 5,140 in cash and placing the remainder on account. c. Bought equipment on account from Flemming Company, 3,450. d. Paid the rent for the month, 1,000, Ck. No. 3001. e. Sold services for cash for the first half of the month, 6,927. f. Bought supplies for cash, 301, Ck. No. 3002. g. Bought insurance for the truck for the year, 1,200, Ck. No. 3003. h. Received and paid the bill for utilities, 349, Ck. No. 3004. i. Received a bill for gas and oil for the truck, 218. j. Sold services on account, 3,603. k. Sold services for cash for the remainder of the month, 4,612. l. Paid wages to the employees, 3,958, Ck. Nos. 30053007. m. Carter withdrew cash for personal use, 1,250, Ck. No. 3008. Required 1. Record the transactions and the balance after each transaction 2. Total the left side of the accounting equation (left side of the equal sign), then total the right side of the accounting equation (right side of the equal sign). If the two totals are not equal, check the addition and subtraction. If you still cannot find the error, re-analyze each transaction.arrow_forward
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