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
Date (June) | Particular | PR | Dr. | Cr. |
a. | Cash | 101 | 100,000 | |
Office Equipment | 163 | 5,000 | ||
Drafting equipment | 164 | 60,000 | ||
To Common stock | 165,000 | |||
(Owner’s investment) | ||||
b. | Land | 172 | 49,000 | |
To cash | 101 | 6300 | ||
To note payable | 290 | 42,700 | ||
(Land purchase for cash and note payable ) | ||||
c. | Portable building | 170 | 55000 | |
To cash | 101 | 55000 | ||
(Portable building purchase for cash) | ||||
d. | Insurance paid | 108 | 3000 | |
To cash | 101 | 3000 | ||
(Cash paid for insurance) | ||||
e. | Cash | 101 | 6200 | |
Service revenue | 402 | 6200 | ||
(cash received against service render) | ||||
f. | Drafting Equipment | 164 | 20000 | |
To cash | 101 | 9500 | ||
To note payable | 290 | 10500 | ||
g. | 106 | 14000 | ||
Service revenue | 402 | 14000 | ||
(service render on credit) | ||||
h. | Office equipment | 163 | 1150 | |
To purchase | 201 | 1150 | ||
(Purchase of office equipment on credit) | ||||
i. | Account receivable | 106 | 22000 | |
Service revenue | 402 | 22000 | ||
(Provide service on credit) | ||||
j. | Rent | 602 | 1333 | |
To account payable | 201 | 1333 | ||
(rent to be paid in 30 days) | ||||
k. | Cash | 101 | 7000 | |
To Account receivable | 106 | 7000 | ||
(Received cash) | ||||
l. | Wages | 601 | 1200 | |
To cash | 101 | 1200 | ||
(Wages paid to drafting Assistant) | ||||
m. | Office equipment | 201 | 1150 | |
To cash | 101 | 1150 | ||
n. | Repair equipment | 604 | 925 | |
To cash | 101 | 925 | ||
o. | Dividends | 319 | 9480 | |
Cash | 101 | 9480 | ||
(to record the payment of cash as dividend) | ||||
p. | Drafting assistant | 601 | 1200 | |
Cash | 101 | 1200 | ||
q. | Advertisement | 603 | 2500 | |
Cash | 101 | 2500 | ||
(Paid cash for advertise) |
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 5GLP
Balance of cash ledger is $22945, account receivable $29000, prepaid insurance is $3000, land 49000, Drafting equipment 80000, building 55000,note payable 53200,advertisement 2500, repair expense 925.
Explanation of Solution
Cash Account No.101 | ||||
Date | PR | Debit | Credit | Balance |
a. | G1 | 100000 | 100000 | |
b. | G1 | 6300 | 93700 | |
c. | G1 | 55000 | 38700 | |
d. | G1 | 3000 | 35700 | |
e. | G1 | 6200 | 41900 | |
f. | G1 | 9500 | 32400 | |
k. | G1 | 7000 | 39400 | |
l. | G1 | 1200 | 38200 | |
m. | 1150 | 37050 | ||
n. | 925 | 36125 | ||
o. | 9480 | 26645 | ||
p. | 1200 | 25445 | ||
q. | 2500 | 22945 |
Account receivable | Account no.106 | |||
Date | PR | Debit | Credit | Balance |
g. | G1 | 14000 | 14000 | |
i. | G1 | 22000 | 36000 | |
k. | G1 | 7000 | 29000 | |
Prepaid Insurance | Account no. 128 | |||
Date | PR | Debit | Credit | Balance |
d. | G1 | 3000 | 3000 | |
Office equipment | Account no. 163 | |||
Date | PR | Debit | Credit | Balance |
a. | G1 | 5000 | ||
b. | 1150 | 6150 | ||
Drafting equipment | Account no. 163 | |||
Date | PR | Debit | Credit | Balance |
a. | G1 | 60000 | ||
f. | G1 | 20000 | 80000 |
Building | Account no. 170 | |||
Date | PR | Debit | Credit | Balance |
c. | G1 | 55000 | 55000 | |
Account payable | Account no. 201 | |||
Date | PR | Debit | Credit | Balance |
m. | G1 | 1150 | 1150 | |
h. | G1 | 1150 | 0 | |
j. | G1 | 1333 | 1333 |
Common stock | Account no. 307 | |||
Date | PR | Debit | Credit | Balance |
a. | G1 | 165000 | ||
165000 |
Engineering fees earned | Account no. 402 | |||
Date | PR | Debit | Credit | Balance |
e. | G1 | 6200 | 6200 | |
g. | 14000 | 20200 | ||
i. | 22000 | 42200 |
Rental expense | Account no. 602 | |||
Date | PR | Debit | Credit | Balance |
j. | G1 | 1333 | 1333 |
Repair | Account no. 604 | |||
Date | PR | Debit | Credit | Balance |
n. | G1 | 925 | 925 |
Land | Account no. 172 | |||
Date | PR | Debit | Credit | Balance |
b. | G1 | 49000 | 49000 |
Note payable | Account no. 250 | |||
Date | PR | Debit | Credit | Balance |
b. | G1 | 42700 | 42700 | |
F | 10500 | 53200 |
Dividends | Account no. 319 | |||
Date | PR | Debit | Credit | Balance |
o. | G1 | 9480 |
Wages Expense | Account no. 601 | |||
Date | PR | Debit | Credit | Balance |
l. | G1 | 1200 | ||
p. | G1 | 1200 |
Advertisement Expense | Account no. 601 | |||
Date | PR | Debit | Credit | Balance |
q | G1 | 2500 | 2500 | |
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 5GLP
Total of trail balance is $261733
Explanation of Solution
HTrail balance30thNov. | ||
Particular | Dr. | Cr. |
Cash | 22954 | |
Account receivable | 29000 | |
Prepaid insurance | 3000 | |
Office equipment | 6150 | |
Drafting equipment | 80000 | |
Building | 55000 | |
Land | 49000 | |
Account payable | 133 | |
Notes payable | 5300 | |
Common stock | 165000 | |
Engineering fees | 42200 | |
Dividend | 9480 | |
Wages | 2400 | |
Equipment rental | 1333 | |
Advertisement | 2500 | |
Repair | 925 | |
Total | 261733 | 261733 |
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Chapter 2 Solutions
Connect Access Card for Financial Accounting: Information and Decisions
- During 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_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_forwardFor each of the following situations write the principle, assumption, or concept that justifies or explains what occurred. A. A landscaper received a customers order and cash prepayment to install sod at a house that would not be ready for installation until March of next year. The owner should record the revenue from the customer order in March of next year, not in December of this year. B. A company divides its income statements into four quarters for the year. C. Land is purchased for $205,000 cash; the land is reported on the balance sheet of the purchaser at $205,000. D. Brandys Flower Shop is forecasting its balance sheet for the next five years. E. When preparing financials for a company, the owner makes sure that the expense transactions are kept separate from expenses of the other company that he owns. F. A company records the expenses incurred to generate the revenues reported.arrow_forward
- On 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_forwardIn 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_forwardJournal entries and trial balance On August 1, 20Y7, Rafael Masey established Planet Realty, which completed the following transactions during the month: a. Rafael Masey transferred cash from a personal bank account to an account to be used for the business in exchange for common stock, 17,500. b. Purchased supplies on account, 2,300. c. Earned sales commissions, receiving cash, 13,300. d. Paid rent on office and equipment for the month, 3,000. e. Paid creditor on account, 1,150. f. Paid dividends, 1,800. g. Paid automobile expenses (including rental charge) for month, 1,500, and miscellaneous expenses, 400. h. Paid office salaries, 2,800. i. Determined that the cost of supplies used was 1,050. Instructions 1. Journalize entries for transactions (a) through (i), using the following account titles: Cash, Supplies, Accounts Payable, Common Stock, Dividends, Sales Commissions, Rent Expense, Office Salaries Expense, Automobile Expense, Supplies Expense, Miscellaneous Expense. Journal entry explanations may be omitted. 2. Prepare T accounts, using the account titles in (1). Post the journal entries to these accounts, placing the appropriate letter to the left of each amount to identify the transactions. Determine the account balances, after all posting is complete. Accounts containing only a single entry do not need a balance. 3. Prepare an unadjusted trial balance as of August 31, 20Y7. 4. Determine the following: a. Amount of total revenue recorded in the ledger. b. Amount of total expenses recorded in the ledger. c. Amount of net income for August. 5. Determine the increase or decrease in retained earnings for August.arrow_forward
- The following information is provided for the first month of operations for Legal Services Inc.: A. The business was started by selling $100,000 worth of common stock. B. Six months rent was paid in advance, $4,500. C. Provided services in the amount of $1,000. The customer will pay at a later date. D. An office worker was hired. The worker will be paid $275 per week. E. Received $500 in payment from the customer in C. F. Purchased $250 worth of supplies on credit. G. Received the electricity bill. We will pay the $110 in thirty days. H. Paid the worker hired in D for one weeks work. I. Received $100 from a customer for services we will provide next week. J. Dividends in the amount of $1,500 were distributed. Prepare the necessary journal entries to record these transactions. If an entry is not required for any of these transactions, state this and explain why.arrow_forwardDiscuss how each of the following transactions for Watson, International, will affect assets, liabilities, and stockholders equity, and prove the companys accounts will still be in balance. A. An investor invests an additional $25,000 into a company receiving stock in exchange. B. Services are performed for customers for a total of $4,500. Sixty percent was paid in cash, and the remaining customers asked to be billed. C. An electric bill was received for $35. Payment is due in thirty days. D. Part-time workers earned $750 and were paid. E. The electric bill in C is paid.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
- On 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_forwardAnalyzing Transactions. Using the analytical framework, indicate the effect of the following related transactions of a firm. a. January 1: Issued 10,000 shares of common stock for 50,000. b. January 1: Acquired a building costing 35,000, paying 5,000 in cash and borrowing the remainder from a bank. c. During the year: Acquired inventory costing 40,000 on account from various suppliers. d. During the year: Sold inventory costing 30,000 for 65,000 on account. e. During the year: Paid employees 15,000 as compensation for services rendered during the year. f. During the year: Collected 45,000 from customers related to sales on account. g. During the year: Paid merchandise suppliers 28,000 related to purchases on account. h. December 31: Recognized depreciation on the building of 7,000 for financial reporting. Depreciation expense for income tax purposes was 10,000. i. December 31: Recognized compensation for services rendered during the last week in December but not paid by year-end of 4,000. j. December 31: Recognized and paid interest on the bank loan in Part b of 2,400 for the year. k. Recognized income taxes on the net effect of the preceding transactions at an income tax rate of 40%. Assume that the firm pays cash immediately for any taxes currently due to the government.arrow_forwardOn July 1 of this year, R. Green established the Green Rehab Clinic. The organizations account headings are presented below. Transactions completed during the month of July follow. a. Green deposited 30,000 in a bank account in the name of the business. b. Paid the office rent for the month, 1,800, Ck. No. 2001 (Rent Expense). c. Bought supplies for cash, 362, Ck. No. 2002. d. Bought professional equipment on account from Rehab Equipment Company, 18,000. e. Bought office equipment from Hi-Tech Computers, 2,890, paying 890 in cash and placing the balance on account, Ck. No. 2003. f. Sold professional services for cash, 4,600 (Professional Fees). g. Paid on account to Rehab Equipment Company, 700, Ck. No. 2004. h. Received and paid the bill for utilities, 367, Ck. No. 2005 (Utilities Expense). i. Paid the salary of the assistant, 1,150, Ck. No. 2006 (Salary Expense). j. Sold professional services for cash, 3,868 (Professional Fees). k. Green withdrew cash for personal use, 1,800, Ck. No. 2007. 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_forward
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