CHAPTER 2 The Recording Process ASSIGNMENT CLASSIFICATION TABLE Brief Exercises
Learning Objectives
Questions
Do It!
1.
Explain what an account is and how it helps in the recording process.
1
2.
Define debits and credits and explain their use in recording business transactions.
2, 3, 4, 5, 6, 7, 8, 9, 14, 21
1, 2, 5
3.
Identify the basic steps in the recording process.
10, 19
4
4.
Explain what a journal is and how it helps in the recording process.
11, 12, 13, 14, 16
3, 6
5.
Explain what a ledger is and how it helps in the recording process.
17
6.
Explain what posting is and how it helps in the recording process.
15, 17
7, 8
3
7.
Prepare a trial balance and explain its purposes.
18, 20
9, 10
4
A Exercises Problems
B Problems
1
1
2, 4, 6, 7, 14
1A, 2A, 3A, 5A
1B, 2B, 3B, 5B
1A, 2A, 3A, 5A
1B, 2B, 3B, 5B
9, 12
2A, 3A, 5A
2B, 3B, 5B
9, 10, 11, 13, 14, 15
2A, 3A, 4A, 5A
2B, 3B, 4B, 5B
6, 7
2
3, 5, 6, 7 10, 11, 12
8
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2-1
ASSIGNMENT CHARACTERISTICS TABLE Problem Number
2-2
Description
Difficulty Level
Time Allotted (min.)
1A
Journalize a series of transactions.
Simple
20–30
2A
Journalize transactions, post, and prepare a trial balance.
Simple
30–40
3A
Journalize and post transactions and prepare a trial balance.
Moderate
40–50
4A
Prepare a correct trial balance.
Moderate
30–40
5A
Journalize transactions, post, and prepare a trial balance.
Moderate
40–50
1B
Journalize a series of transactions.
Simple
20–30
2B
Journalize transactions, post, and prepare a trial balance.
Simple
30–40
3B
Journalize transactions, post, and prepare a trial balance.
Moderate
40–50
4B
Prepare a correct trial balance.
Moderate
30–40
5B
Journalize transactions, post, and prepare a trial balance.
Moderate
40–50
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WEYGANDT FINANCIAL ACCOUNTING 8E CHAPTER 2 THE RECORDING PROCESS Number
LO
BT
Difficulty
Time (min.)
BE1
2
C
Simple
6–8
BE2
2
C
Simple
4–6
BE3
4
AP
Simple
4–6
BE4
3
C
Moderate
4–6
BE5
2
C
Simple
6–8
BE6
4
AP
Simple
4–6
BE7
6
AP
Simple
4–6
BE8
6
AP
Simple
4–6
BE9
7
AP
Simple
4–6
BE10
7
AN
Moderate
6–8
DI1
2
C
Simple
3–5
DI2
4
AP
Simple
3–5
DI3
6
AP
Simple
2–4
DI4
7
AP
Simple
6–8
EX1
1
K
Simple
2–4
EX2
2
C
Simple
10–15
EX3
4
AP
Simple
8–10
EX4
2
C
Simple
6–8
EX5
4
AP
Simple
6–8
EX6
2–4
AP
Simple
6–8
EX7
2–4
AP
Simple
8–10
EX8
5
K
Simple
2–4
EX9
6, 7
AP
Simple
10–12
EX10
4, 7
AP
Moderate
10–12
EX11
4, 7
AP
Moderate
12–15
EX12
4, 6
AP
Moderate
12–15
EX13
7
AN
Moderate
6–8
EX14
2, 7
AP
Simple
8–10
EX15
7
C
Simple
4–6
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2-3
THE RECORDING PROCESS (Continued) Number
LO
BT
Difficulty
Time (min.)
P1A
2, 4
AP
Simple
20–30
P2A
2, 4, 6, 7
AP
Simple
30–40
P3A
2, 4, 6, 7
AP
Moderate
40–50
P4A
7
AN
Moderate
30–40
P5A
2, 4, 6, 7
AP
Moderate
40–50
P1B
2, 4
AP
Simple
20–30
P2B
2, 4, 6, 7
AP
Simple
30–40
P3B
2, 4, 6, 7
AP
Moderate
40–50
P4B
7
AN
Moderate
30–40
P5B
2, 4, 6, 7
AP
Moderate
40–50
BYP1
2
C
Simple
8–10
BYP2
2, 6
AN
Simple
8–10
BYP3
—
AP
Simple
15–20
BYP4
6, 7
AP, S
Moderate
20–30
BYP5
3, 6
S
Simple
10–15
BYP6
7
AN, E
Moderate
10–15
BYP7
—
E
Moderate
15–20
BYP8
—
E
Moderate
10–15
2-4
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Explain what a journal is and how it helps in the recording process.
Explain what a ledger is and how it helps in the recording process.
Explain what posting is and how it helps in the recording process.
Prepare a trial balance and explain its purposes.
4.
5.
6.
7.
Broadening Your Perspective
Identify the basic steps in the recording process.
3.
E2-8
Q2-12
Q2-10
Define debits and credits and Q2–21 explain their use in recording business transactions.
2.
Q2-1 E2-1
Explain what an account is and how it helps in the recording process.
Knowledge
1.
Learning Objective
Q2-7 Q2-8 Q2-9 Q2-14 BE2-1
BE2-9 DI2-4 E2-9 E2-10
BE2-7 BE2-8 DI2-3 E2-9
Q2-16 BE2-3 BE2-6 DI2-2 E2-3 E2-5 E2-6
E2-6 E2-7
BE2-2 E2-6 BE2-5 E2-7 DI2-1 E2-14 E2-2 P2-1A E2-4 P2-2A
P2-5A P2-1B P2-2B P2-3B P2-5B
E2-11 E2-14 P2-2A P2-3A
P2-5A P2-2B P2-3B P2-5B
E2-12 P2-2B P2-2A P2-3B P2-3A P2-5B P2-5A
E2-7 E2-10 E2-11 E2-12 P2-1A P2-2A P2-3A
P2-3A P2-5B P2-5A P2-1B P2-2B P2-3B
Application
Financial Reporting Decision–Making Across the Organization Real–World Focus
Q2-18 E2-15
Q2-15 Q2-17
Q2-17
Q2-11 Q2-13 Q2-14
Q2-19 BE2-4
Q2-2 Q2-3 Q2-4 Q2-5 Q2-6
Comprehension
P2-4B
Synthesis
Evaluation
Comparative Analysis Communication All About You Ethics Case Decision Making Ethics Case Across the Organization
Q2-20 BE2-10 E2-13 P2-4A
Analysis
Correlation Chart between Bloom’s Taxonomy, Learning Objectives and End-of-Chapter Exercises and Problems
BLOOM’S TAXONOMY TABLE
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2-5
ANSWERS TO QUESTIONS 1.
A T account has the following parts: (a) the title, (b) the left or debit side, and (c) the right or credit side.
2.
Disagree. The terms debit and credit mean left and right respectively.
3.
Jason is incorrect. The double-entry system merely records the dual effect of a transaction on the accounting equation. A transaction is not recorded twice; it is recorded once, with a dual effect.
4.
Sandra is incorrect. A debit balance only means that debit amounts exceed credit amounts in an account. Conversely, a credit balance only means that credit amounts are greater than debit amounts in an account. Thus, a debit or credit balance is neither favorable nor unfavorable.
5.
(a) Asset accounts are increased by debits and decreased by credits. (b) Liability accounts are decreased by debits and increased by credits. (c) Revenues, common stock, and retained earnings are increased by credits and decreased by debits. Expenses and dividends are increased by debits and decreased by credits.
6.
(a) (b) (c) (d) (e) (f) (g)
Accounts Receivable—debit balance. Cash—debit balance. Dividends—debit balance. Accounts Payable—credit balance. Service Revenue—credit balance. Salaries and Wages Expense—debit balance. Common Stock—credit balance.
7.
(a) (b) (c) (d) (e)
Accounts Receivable—asset—debit balance. Accounts Payable—liability—credit balance Equipment—asset—debit balance. Dividends—stockholders’ equity—debit balance. Supplies—asset—debit balance.
8.
(a) Debit Supplies and credit Accounts Payable. (b) Debit Cash and credit Notes Payable. (c) Debit Salaries and Wages Expense and credit Cash.
9.
(1) (2) (3) (4) (5) (6)
10.
2-6
Cash—both debit and credit entries. Accounts Receivable—both debit and credit entries. Dividends—debit entries only. Accounts Payable—both debit and credit entries. Salaries and Wages Expense—debit entries only. Service Revenue—credit entries only.
The basic steps in the recording process are: 1. Analyze each transaction for its effect on the accounts. 2. Enter the transaction information in a journal. 3. Transfer the journal information to the appropriate accounts in the ledger.
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Questions Chapter 2 (Continued) 11.
The advantages of using the journal in the recording process are: (a) It discloses in one place the complete effects of a transaction. (b) It provides a chronological record of all transactions. (c) It helps to prevent or locate errors because the debit and credit amounts for each entry can be easily compared.
12.
(a) The debit should be entered first. (b) The credit should be indented.
13.
When three or more accounts are required in one journal entry, the entry is referred to as a compound entry. An example of a compound entry is the purchase of equipment, part of which is paid for with cash and the remainder is on account.
14.
(a) No, business transaction debits and credits should not be recorded directly in the ledger. (b) The advantages of using the journal are: 1. It discloses in one place the complete effects of a transaction. 2. It provides a chronological record of all transactions. 3. It helps to prevent or locate errors because the debit and credit amounts for each entry can be easily compared.
15.
The advantage of the last step in the posting process is to indicate that the item has been posted.
16.
(a) Cash .............................................................................................. Common Stock ..................................................................... (Issued shares of stock for cash)
9,000
(b) Prepaid Insurance ......................................................................... Cash ..................................................................................... (Paid one-year insurance policy)
800
(c)
17.
9,000
800
Supplies......................................................................................... Accounts Payable ................................................................. (Purchased supplies on account)
2,000
(d) Cash .............................................................................................. Service Revenue .................................................................. (Received cash for services rendered)
7,500
2,000
7,500
(a) The entire group of accounts maintained by a company, including all the asset, liability, and stockholders’ equity accounts, is referred to collectively as the ledger. (b) A chart of accounts is a list of accounts and the account numbers that identify their location in the ledger. The chart of accounts is important, particularly for a company that has a large number of accounts, because it helps organize the accounts and define the level of detail that a company desires in its accounting system.
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2-7
Questions Chapter 2 (Continued) 18.
A trial balance is a list of accounts and their balances at a given time. The primary purpose of a trial balance is to prove (check) that the debits equal the credits after posting. A trial balance also facilitates the discovery of errors in journalizing and posting. In addition, it is useful in preparing financial statements.
19.
No, Joe is not correct. The proper sequence is as follows: (b) Business transaction occurs. (c) Information entered in the journal. (a) Debits and credits posted to the ledger. (e) Trial balance is prepared. (d) Financial statements are prepared.
20.
(a) The trial balance would balance. (b) The trial balance would not balance.
21.
The normal balances are Cash debit, Accounts Payable credit, and Interest Expense debit.
2-8
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SOLUTIONS TO BRIEF EXERCISES BRIEF EXERCISE 2-1
1. 2. 3. 4. 5. 6.
Accounts Payable Advertising Expense Service Revenue Accounts Receivable Common Stock Dividends
(a) Debit Effect Decrease Increase Decrease Increase Decrease Increase
(b) Credit Effect Increase Decrease Increase Decrease Increase Decrease
(c) Normal Balance Credit Debit Credit Debit Credit Debit
BRIEF EXERCISE 2-2
June 1 2 3 12
Account Debited Cash Equipment Rent Expense Accounts Receivable
Account Credited Common Stock Accounts Payable Cash Service Revenue
BRIEF EXERCISE 2-3 June 1
2
3
12
Cash ...................................................................... Common Stock.............................................
4,000
Equipment ............................................................ Accounts Payable ........................................
900
Rent Expense ....................................................... Cash ..............................................................
800
Accounts Receivable .......................................... Service Revenue ..........................................
300
4,000
900
800
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300
2-9
BRIEF EXERCISE 2-4 The basic steps in the recording process are: 1.
Analyze each transaction. In this step, business documents are examined to determine the effects of the transaction on the accounts.
2.
Enter each transaction in a journal. This step is called journalizing and it results in making a chronological record of the transactions.
3.
Transfer journal information to ledger accounts. This step is called posting. Posting makes it possible to accumulate the effects of journalized transactions on individual accounts.
BRIEF EXERCISE 2-5 (a) Aug.
2-10
Effect on Accounting Equation
(b)
Debit-Credit Analysis
1 The asset Cash is increased; the stockholders’ equity account Common Stock is increased.
Debits increase assets: debit Cash $8,000. Credits increase stockholders’ equity: credit Common Stock $8,000.
4 The asset Prepaid Insurance is increased; the asset Cash is decreased.
Debits increase assets: debit Prepaid Insurance $1,800. Credits decrease assets: credit Cash $1,800.
16 The asset Cash is increased; the revenue Service Revenue is increased.
Debits increase assets: debit Cash $1,100. Credits increase revenues: credit Service Revenue $1,100.
27 The expense Salaries and Wages Expense is increased; the asset Cash is decreased.
Debits increase expenses: debit Salaries and Wages Expense $1,000. Credits decrease assets: credit Cash $1,000.
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BRIEF EXERCISE 2-6 Aug. 1
4
16
27
Cash ...................................................................... Common Stock .............................................
5,000
Prepaid Insurance ................................................ Cash ...............................................................
1,800
Cash ...................................................................... Service Revenue ...........................................
1,100
Salaries and Wages Expense .............................. Cash ...............................................................
1,000
5,000
1,800
1,100
1,000
BRIEF EXERCISE 2-7 Cash 5/12 2,100 5/15 3,000 Ending Bal. 5,100
5/5
Accounts Receivable 5,000 5/12
Service Revenue 5/5 5,000 5/15 3,000 Ending Bal. 8,000
2,100
Ending Bal. 2,900
BRIEF EXERCISE 2-8 Cash Date May 12 15
Explanation
Ref. J1 J1
Debit 2,100 3,000
Credit
Balance 2,100 5,100
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2-11
BRIEF EXERCISE 2-8 (Continued) Accounts Receivable Date Explanation May 5 12
Ref. J1 J1
Debit 5,000
Service Revenue Date Explanation May 5 15
Ref. J1 J1
Debit
Credit 2,100
Balance 5,000 2,900
Credit 5,000 3,000
Balance 5,000 8,000
BRIEF EXERCISE 2-9 STARR COMPANY Trial Balance June 30, 2014 Cash ............................................................................. Accounts Receivable .................................................. Equipment ................................................................... Accounts Payable ....................................................... Common Stock............................................................ Dividends ..................................................................... Service Revenue ......................................................... Salaries and Wages Expense .................................... Rent Expense ..............................................................
2-12
Debit $ 6,800 3,000 17,000
Credit
$ 9,000 20,000 1,200 6,000 6,000 1,000 $35,000
$35,000
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BRIEF EXERCISE 2-10 CHENG COMPANY Trial Balance December 31, 2014 Cash ............................................................................. Prepaid Insurance ....................................................... Accounts Payable ....................................................... Unearned Service Revenue ........................................ Common Stock ............................................................ Dividends ..................................................................... Service Revenue ......................................................... Salaries and Wages Expense..................................... Rent Expense ..............................................................
Debit $16,800 3,500
Credit
$ 3,000 4,200 13,000 4,500 25,600 18,600 2,400 $45,800
$45,800
SOLUTIONS FOR DO IT! REVIEW EXERCISES DO IT! 2-1 Graham would likely need the following accounts in which to record the transactions necessary to ready his photography studio for opening day: Cash (debit balance) Supplies (debit balance) Equipment (debit balance)
Notes Payable (credit balance) Accounts Payable (credit balance) Common Stock (credit balance) Rent Expense (debit balance)
DO IT! 2-2 Each transaction that is recorded is entered in the general journal. The three activities would be recorded as follows: 1. 2.
3.
Cash .............................................................. Common Stock ....................................
8,000
Supplies ........................................................ Cash ..................................................... Accounts Payable ...............................
1,600
8,000 400 1,200
No entry because no transaction has occurred.
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2-13
DO IT! 2-3 Cash 4/1 1,600 4/16 600 4/3 3,700 4/20 500 4/30 4,200
DO IT! 2-4 CHILLIN’ COMPANY Trial Balance December 31, 2014 Debit Cash ............................................................................. $ 6,000 Accounts Receivable .................................................. 8,000 Supplies ....................................................................... 5,000 Equipment ................................................................... 76,000 Notes Payable ............................................................. Accounts Payable ....................................................... Salaries Wages Payable ............................................. Common Stock............................................................ Dividends ..................................................................... 8,000 Service Revenue ......................................................... Rent Expense .............................................................. 2,000 Salaries and Wages Expense .................................... 38,000 $143,000
2-14
Credit
$ 20,000 9,000 3,000 25,000 86,000
$143,000
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SOLUTIONS TO EXERCISES EXERCISE 2-1 1.
False. An account is an accounting record of a specific asset, liability, or stockholders’ equity item.
2.
False. An account shows increases and decreases in the item it relates to.
3.
False. Each asset, liability, and stockholders’ equity item has a separate account.
4.
False. An account has a left, or debit side, and a right, or credit side.
5.
True.
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2-15
2-16 (a) Basic Type Asset
Asset Asset
Asset
Stockholders’ Equity Asset
Liability
Stockholders’ Equity
Transaction
2
3
9
11
16
20
23
28
Jan.
Dividends
Accounts Payable
Cash
Advertising Expense
Accounts Receivable
Supplies
Equipment
Cash
(b) Specific Account
(c)
Increase
Decrease
Increase
Increase
Increase
Increase
Increase
Increase
Effect
Account Debited
Debit
Credit
Debit
Debit
Debit
Debit
Debit
Debit
(d) Normal Balance
Asset
Asset
Asset
Asset
Stockholders’ Equity
Liability
Asset
Stockholders’ Equity
(a) Basic Type
Cash
Cash
Accounts Receivable
Cash
Service Revenue
Accounts Payable
Cash
Common Stock
(b) Specific Account Effect
(c)
Decrease
Decrease
Decrease
Decrease
Increase
Increase
Decrease
Increase
Account Credited
Debit
Debit
Debit
Debit
Credit
Credit
Debit
Credit
(d) Normal Balance
EXERCISE 2-2
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EXERCISE 2-3 General Journal Account Titles and Explanation
Date Jan. 2
3
9
11
16
20
23
28
Ref.
Debit
Cash ................................................... Common Stock .........................
15,000
Equipment ......................................... Cash ...........................................
7,000
Supplies............................................. Accounts Payable .....................
500
Accounts Receivable ....................... Service Revenue .......................
1,800
Advertising Expense ........................ Cash ...........................................
200
Cash ................................................... Accounts Receivable................
700
Accounts Payable............................. Cash ...........................................
300
Dividends .......................................... Cash ...........................................
1,000
J1 Credit 15,000
7,000
500
1,800
200
700
300
1,000
EXERCISE 2-4 Oct. 1
Debits increase assets: debit Cash $20,000. Credits increase stockholders’ equity: credit Common Stock $20,000.
2
No transaction.
3
Debits increase assets: debit Equipment $1,900. Credits increase liabilities: credit Accounts Payable $1,900.
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2-17
EXERCISE 2-4 (Continued) Oct. 6
Debits increase assets: debit Accounts Receivable $3,200. Credits increase revenues: credit Service Revenue $3,200.
27
Debits decrease liabilities: debit Accounts Payable $850. Credits decrease assets: credit Cash $850.
30
Debits increase expenses: debit Salaries and Wages Expense $2,500. Credits decrease assets: credit Cash $2,500.
EXERCISE 2-5
Date Oct. 1
Debits 20,000
No entry.
3
Equipment ......................................... Accounts Payable ....................
1,900
Accounts Receivable ........................ Service Revenue .......................
3,200
Accounts Payable ............................. Cash...........................................
850
Salaries and Wages Expense ........... Cash...........................................
2,500
27
30
Credit 20,000
2
6
2-18
General Journal Account Titles and Explanation Ref. Cash.................................................... Common Stock .........................
1,900
3,200
850
2,500
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EXERCISE 2-6 (a)
1. 2. 3.
Increase the asset Cash, increase the liability Notes Payable. Increase the asset Equipment, decrease the asset Cash. Increase the asset Supplies, increase the liability Accounts Payable.
(b)
1.
Cash .................................................................. Notes Payable ........................................... Equipment ....................................................... Cash ........................................................... Supplies ............................................................ Accounts Payable .....................................
2. 3.
5,000 5,000 2,500 2,500 450 450
EXERCISE 2-7 (a)
Assets = Liabilities + Stockholders’ Equity 1. + + (Issue stock) 2. – – (Expense) 3. + + (Revenue) 4. – – (Dividends)
(b)
1. 2. 3. 4.
Cash .................................................................. Common Stock .......................................... Rent Expense ................................................... Cash ........................................................... Accounts Receivable ....................................... Service Revenue ....................................... Dividends .......................................................... Cash ...........................................................
5,000 5,000 1,100 1,100 4,700 4,700 700 700
EXERCISE 2-8 1. 2. 3.
4. 5.
False. The general ledger contains all the asset, liability, and stockholders’ equity accounts. True. False. The accounts in the general ledger are arranged in financial statement order: first the assets, then the liabilities, common stock, retained earnings, dividends, revenues, and expenses. True. False. The general ledger is not a book of original entry; transactions are first recorded in the general journal, then in the general ledger.
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2-19
EXERCISE 2-9 (a)
Aug. 1 10 31 Bal.
Cash 5,000 Aug. 12 2,700 850 7,550
Accounts Receivable Aug. 25 1,600 Aug. 31 Bal. 750
Aug. 12
(b)
Equipment 5,000
1,000
850
Notes Payable Aug. 12
4,000
Common Stock Aug. 1
5,000
Service Revenue Aug. 10 25 Bal.
2,700 1,600 4,300
ROBERTA MENDEZ, INVESTMENT BROKER Trial Balance August 31, 2014 Cash ......................................................................... Accounts Receivable .............................................. Equipment ................................................................ Notes Payable .......................................................... Common Stock ........................................................ Service Revenue .....................................................
Debit $ 7,550 750 5,000
$13,300
2-20
Credit
$ 4,000 5,000 4,300 $13,300
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EXERCISE 2-10 (a) Date Apr. 1
12
15
25
29
30
General Journal Account Titles and Explanation Ref. Cash ..................................................... Common Stock ............................... (Issued shares of stock for cash)
Debit 10,000
Credit 10,000
Cash ..................................................... Service Revenue ............................. (Received cash for services provided)
900
Salaries and Wages Expense............. Cash ................................................. (Paid salaries to date)
600
Accounts Payable ............................... Cash ................................................. (Paid creditors on account)
1,500
Cash ..................................................... Accounts Receivable...................... (Received cash in payment of account)
400
Cash ..................................................... Unearned Service Revenue ........... (Received cash for future services)
1,000
900
720
1,500
400
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1,000
2-21
EXERCISE 2-10 (Continued) (b)
PADRE LANDSCAPING COMPANY Trial Balance April 30, 2014 Cash .......................................................................... Accounts Receivable ............................................... Supplies .................................................................... Accounts Payable .................................................... Unearned Service Revenue ..................................... Common Stock ......................................................... Service Revenue ...................................................... Salaries and Wages Expense ..................................
Credit
Debit $10,080 2,800 1,800 $
720 $15,400
300 1,000 10,000 4,100
$15,400
EXERCISE 2-11 (a) Oct. 1 Cash ............................................................. Common Stock ..................................... (Issued shares of stock for cash)
5,000
10 Cash ............................................................. Service Revenue .................................. (Received cash for services provided)
650
10 Cash ............................................................. Notes Payable ....................................... (Obtained loan from bank)
3,000
20 Cash ............................................................. Accounts Receivable ........................... (Received cash in payment of account)
500
20 Accounts Receivable .................................. Service Revenue .................................. (Billed clients for services provided)
940
2-22
5,000
650
3,000
500
940
Copyright © 2012 John Wiley & Sons, Inc. Weygandt, Financial Accounting, 8/e, Solutions Manual (For Instructor Use Only)
EXERCISE 2-11 (Continued) (b)
SPARKS CO. Trial Balance October 31, 2014 Cash...................................................................... Accounts Receivable .......................................... Supplies ............................................................... Equipment ........................................................... Notes Payable ...................................................... Accounts Payable ............................................... Common Stock .................................................... Dividends ............................................................. Service Revenue .................................................. Salaries and Wages Expense ............................. Rent Expense ......................................................
Debit $ 8,170 1,240 400 2,000
Credit
$ 3,000 500 7,000 300 2,390 500 280 $12,890
$12,890
EXERCISE 2-12 (a) Date Sept. 1
5
25
30
General Journal Account Titles and Explanation Cash................................................... Common Stock .........................
Ref. 101 311
Debit 10,000
Equipment ......................................... Cash ........................................... Accounts Payable.....................
157 101 201
12,000
Accounts Payable ............................ Cash ...........................................
201 101
2,400
Dividends .......................................... Cash ...........................................
332 101
500
J1 Credit 10,000
4,000 8,000
2,400
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500
2-23
EXERCISE 2-12 (Continued) (b) Cash Date Sept. 1 5 25 30
Explanation
Equipment Date Explanation Sept. 5
Accounts Payable Date Explanation Sept. 5 25
Common Stock Date Explanation Sept. 1
Dividends Date Explanation Sept. 30
2-24
Ref. J1 J1 J1 J1
Ref. J1
Ref. J1 J1
Ref. J1
Ref. J1
Debit 10,000
Credit 4,000 2,400 500
Debit 12,000
Debit
Credit
No. 157 Balance 12,000
Credit 8,000
No. 201 Balance 8,000 5,600
2,400
Debit
Debit 500
No. 101 Balance 10,000 6,000 3,600 3,100
Credit 10,000
Credit
No. 311 Balance 10,000
No. 332 Balance 500
Copyright © 2012 John Wiley & Sons, Inc. Weygandt, Financial Accounting, 8/e, Solutions Manual (For Instructor Use Only)
EXERCISE 2-13
Error 1. 2. 3. 4. 5. 6.
(a) In Balance No Yes Yes No Yes No
(b) Difference $400 — — 300 — 36
(c) Larger Column Debit — — Credit — Credit
EXERCISE 2-14 TEMPUS FUGIT DELIVERY SERVICE Trial Balance July 31, 2014 Credit
Debit Cash ($90,907 – Debit total without Cash $69,340) .................................................................... Accounts Receivable .................................................. Prepaid Insurance ....................................................... Equipment.................................................................... Notes Payable.............................................................. Accounts Payable ....................................................... Salaries and Wages Payable ...................................... Common Stock ............................................................ Retained Earnings....................................................... Dividends ..................................................................... Service Revenue ......................................................... Salaries and Wages Expense..................................... Maintenance and Repairs Expense ........................... Gasoline Expense ....................................................... Utilities Expense .........................................................
$21,567 10,642 1,968 49,360 $26,450 8,396 815 40,000 4,636 700 10,610 4,428 961 758 523 $90,907
$90,907
EXERCISE 2-15 Transactions 4, 5, and 7 are operating activities Transaction 3 is an investing activity Transactions 1, 2 and 6 are financing activities. Copyright © 2012 John Wiley & Sons, Inc. Weygandt, Financial Accounting, 8/e, Solutions Manual (For Instructor Use Only)
2-25
SOLUTIONS TO PROBLEMS PROBLEM 2-1A
Date
Account Titles and Explanation
Apr. 1
Cash ........................................................ Common Stock .............................. (Issued shares of stock for cash)
50,000
Land ........................................................ Cash ................................................ (Purchased land for cash)
30,000
Advertising Expense ............................. Accounts Payable .......................... (Incurred advertising expense on account)
1,800
Salaries and Wages Expense ............... Cash ................................................ (Paid salaries)
1,500
4
8
11
Debit
50,000
30,000
1,800
1,500
12
No entry—Not a transaction.
13
Prepaid Insurance .................................. Cash ................................................ (Paid for one-year insurance policy)
1,500
Dividends ................................................ Cash ................................................ (Declared and paid cash dividends)
1,400
Cash ........................................................ Service Revenue ............................ (Received cash for services provided)
5,700
17
20
2-26
Ref.
J1 Credit
1,500
1,400
5,700
Copyright © 2012 John Wiley & Sons, Inc. Weygandt, Financial Accounting, 8/e, Solutions Manual (For Instructor Use Only)
PROBLEM 2-1A (Continued) Date
Account Titles and Explanation
Apr. 25
Cash ...................................................... Unearned Service Revenue ............. (Received cash for future services)
3,000
Cash ...................................................... Service Revenue ........................... (Received cash for services provided)
8,900
Accounts Payable ................................ Cash ............................................... (Paid creditor on account)
900
30
30
Ref.
Debit
Credit 3,000
8,900
Copyright © 2012 John Wiley & Sons, Inc. Weygandt, Financial Accounting, 8/e, Solutions Manual (For Instructor Use Only)
900
2-27
PROBLEM 2-2A
(a) Date
Account Titles and Explanation
Ref.
Debit
May 1
Cash ........................................................ Common Stock .............................. (Issued shares of stock for cash)
101 311
20,000
No entry—not a transaction.
3
Supplies .................................................. Accounts Payable .......................... (Purchased supplies on account)
126 201
1,500
Rent Expense ......................................... Cash ................................................ (Paid office rent)
729 101
900
Accounts Receivable ............................. Service Revenue ............................ (Billed client for services provided)
112 400
2,800
Cash ........................................................ Unearned Service Revenue .......... (Received cash for future services)
101 209
3,500
Cash ........................................................ Service Revenue ............................ (Received cash for services provided)
101 400
1,200
Salaries and Wages Expense ............... Cash ................................................ (Paid salaries)
726 101
2,000
11
12
17
31
2-28
20,000
2
7
J1 Credit
1,500
900
2,800
3,500
1,200
2,000
Copyright © 2012 John Wiley & Sons, Inc. Weygandt, Financial Accounting, 8/e, Solutions Manual (For Instructor Use Only)
PROBLEM 2-2A (Continued) Date
Account Titles and Explanation
Ref.
Debit
May 31
Accounts Payable ($1,500 X 40%) ......... Cash .............................................. (Paid creditor on account)
201 101
600
Credit 600
(b) Cash Date May 1 7 12 17 31 31
Explanation
Accounts Receivable Date Explanation May 11
Supplies Date Explanation May 3
Accounts Payable Date Explanation May 3 31
Unearned Service Revenue Date Explanation May 12
Ref. J1 J1 J1 J1 J1 J1
Ref. J1
Ref. J1
Ref. J1 J1
Ref. J1
Debit 20,000
Credit 900
3,500 1,200 2,000 600
Debit 2,800
Debit 1,500
Debit
No. 101 Balance 20,000 19,100 22,600 23,800 21,800 21,200
Credit
No. 112 Balance 2,800
Credit
No. 126 Balance 1,500
Credit 1,500
No. 201 Balance
600
900
Debit
No. 209 Balance 3,500
Credit 3,500
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2-29
PROBLEM 2-2A (Continued) Common Stock Date Explanation May 1
Service Revenue Date Explanation May 11 17
Salaries and Wages Expense Date Explanation May 31
Rent Expense Date Explanation May 7
(c)
Ref. J1
Ref. J1 J1
Ref. J1
Ref. J1
Debit
Debit
Debit 2,000
Debit 900
Credit 20,000
No. 311 Balance 20,000
Credit 2,800 1,200
No. 400 Balance 2,800 4,000
Credit
No. 726 Balance 2,000
Credit
No. 729 Balance 900
KARA SHIN, INC. Trial Balance May 31, 2014 Debit Cash ..................................................................... $21,200 Accounts Receivable .......................................... 2,800 Supplies ............................................................... 1,500 Accounts Payable ............................................... Unearned Service Revenue ................................ Common Stock .................................................... Service Revenue ................................................. Salaries and Wages Expense ............................. 2,000 Rent Expense ...................................................... 900 $28,400
2-30
Credit
$ 900 3,500 20,000 4,000
$28,400
Copyright © 2012 John Wiley & Sons, Inc. Weygandt, Financial Accounting, 8/e, Solutions Manual (For Instructor Use Only)
PROBLEM 2-3A
(a) & (c) Balance
(4) (6)
Cash 8,000 (1) (3) 13,000 (5) 5,000 (7) (8) 3,300
Common Stock Balance 1,000 1,700 Retained Earnings Balance
15,000 3,000 2,000 (8)
Accounts Receivable Balance 15,000 (4) 13,000 (6) 9,000 11,000
Balance (2)
Balance
Balance
(5)
Supplies 13,000 4,000 17,000 Prepaid Rent 3,000 3,000 Equipment 21,000 21,000 Accounts Payable Balance (2) 15,000
30,000 30,000
11,000 11,000
Dividends 2,000 2,000
Service Revenue (6)
(1)
Advertising Expense 1,000 1,000
(3)
Miscellaneous Expense 1,700 1,700
14,000 14,000
Salaries and Wages Expense (7) 3,000 3,000 19,000 4,000 8,000
Copyright © 2012 John Wiley & Sons, Inc. Weygandt, Financial Accounting, 8/e, Solutions Manual (For Instructor Use Only)
2-31
PROBLEM 2-3A (Continued) (b) Trans. 1.
2.
3.
4.
5.
6.
7.
8.
2-32
Account Titles and Explanation
Debit
Advertising Expense .............................. Cash ................................................
1,000
Supplies ................................................... Accounts Payable .........................
4,000
Miscellaneous Expense ......................... Cash ................................................
1,700
Cash ......................................................... Accounts Receivable ....................
13,000
Accounts Payable ................................... Cash ................................................
15,000
Cash ......................................................... Accounts Receivable ............................. Service Revenue ............................
5,000 9,000
Salaries and Wages Expense ................ Cash ................................................
3,000
Dividends ................................................ Cash ................................................
2,000
Credit 1,000
4,000
1,700
13,000
15,000
14,000
3,000
2,000
Copyright © 2012 John Wiley & Sons, Inc. Weygandt, Financial Accounting, 8/e, Solutions Manual (For Instructor Use Only)
PROBLEM 2-3A (Continued) (d)
BYTE REPAIR SERVICE, INC. Trial Balance January 31, 2014 Cash...................................................................... Accounts Receivable .......................................... Supplies ............................................................... Prepaid Rent ........................................................ Equipment ............................................................ Accounts Payable ............................................... Common Stock .................................................... Retained Earnings ............................................... Dividends ............................................................. Service Revenue .................................................. Advertising Expense ........................................... Miscellaneous Expense ...................................... Salaries and Wages Expense .............................
Credit
Debit $ 3,300 11,000 17,000 3,000 21,000
$ 8,000 30,000 11,000 2,000 14,000 1,000 1,700 3,000 $63,000
$63,000
Copyright © 2012 John Wiley & Sons, Inc. Weygandt, Financial Accounting, 8/e, Solutions Manual (For Instructor Use Only)
2-33
PROBLEM 2-4A
GARLAND COMPANY Trial Balance May 31, 2014 Cash ($3,850 + $520 – $405) ......................................... Accounts Receivable ($2,570 – $420) ......................... Prepaid Insurance ($700 + $100) ................................. Supplies ($0 + $520) ..................................................... Equipment ($12,000 – $520) ......................................... Accounts Payable ($4,500 – $100 + $520 – $420)....... Unearned Service Revenue .......................................... Common Stock ($11,700 + $1,000) .............................. Dividends ($0 + $1,000) ................................................ Service Revenue ........................................................... Salaries and Wages Expense ($4,200 + $200) ............ Advertising Expense ($1,100 + $405) .......................... Utilities Expense ($800 + $100) ....................................
2-34
Debit $ 3,965 2,150 800 520 11,480
Credit
$ 4,500 560 12,700 1,000 8,960 4,400 1,505 900 $26,720
$26,720
Copyright © 2012 John Wiley & Sons, Inc. Weygandt, Financial Accounting, 8/e, Solutions Manual (For Instructor Use Only)
PROBLEM 2-5A
(a) & (c) Cash Date Apr. 1 2 9 10 12 25 29 30 30
Explanation Balance
J1 J1 J1 J1 J1 J1 J1 J1
Accounts Receivable Date Explanation Apr. 30
Prepaid Rent Date Explanation Apr. 30
Land Date Apr. 1
Ref.
Explanation Balance
Buildings Date Explanation Apr. 1 Balance
Ref. J1
Ref. J1
Ref.
Ref.
Debit
Credit 800
1,800 3,000 300 5,200 1,600 90 900
Debit 90
Debit 900
Debit
Debit
No. 101 Balance 6,000 5,200 7,000 4,000 3,700 8,900 7,300 7,390 6,490
Credit
No. 112 Balance 90
Credit
No. 136 Balance 900
Credit
No. 140 Balance 10,000
Credit
No. 145 Balance 8,000
Copyright © 2012 John Wiley & Sons, Inc. Weygandt, Financial Accounting, 8/e, Solutions Manual (For Instructor Use Only)
2-35
PROBLEM 2-5A (Continued) Equipment Date Explanation Apr. 1 Balance
Accounts Payable Date Explanation Apr. 1 Balance 10 20
Mortgage Payable Date Explanation Apr. 1 Balance 10
Common Stock Date Explanation Apr. 1 Balance
Service Revenue Date Explanation Apr. 9 25
Rent Revenue Date Explanation Apr. 30
2-36
Ref.
Debit
Ref.
Debit
J1 J1
1,000
Debit
J1
2,000
Ref. J1 J1
Ref. J1
Credit
1,000
Ref.
Ref.
Credit
Debit
Debit
Debit
No. 157 Balance 6,000
No. 201 Balance 2,000 1,000 2,000
Credit
No. 275 Balance 8,000 6,000
Credit
No. 311 Balance 20,000
Credit 1,800 5,200
No. 400 Balance 1,800 7,000
Credit 180
No. 429 Balance 180
Copyright © 2012 John Wiley & Sons, Inc. Weygandt, Financial Accounting, 8/e, Solutions Manual (For Instructor Use Only)
PROBLEM 2-5A (Continued) Advertising Expense Date Explanation Apr. 12 Rent Expense Date Explanation Apr. 2 20 Salaries and Wages Expense Date Explanation Apr. 29
Ref. J1
Ref. J1 J1
Ref. J1
Debit 300
Debit 800 1,000
Debit 1,600
Credit
No. 610 Balance 300
Credit
No. 729 Balance 800 1,800
Credit
No. 726 Balance 1,600
(b) Date Apr. 2
Account Titles and Explanation Rent Expense ..................................... Cash ........................................... (Paid film rental)
Ref. 729 101
Debit 800
800
3
No entry—not a transaction.
9
Cash .................................................... Service Revenue ....................... (Received cash for services provided)
101 400
1,800
Mortgage Payable .............................. Accounts Payable .............................. Cash ........................................... (Made payments on mortgage and accounts payable)
275 201 101
2,000 1,000
10
J1 Credit
1,800
Copyright © 2012 John Wiley & Sons, Inc. Weygandt, Financial Accounting, 8/e, Solutions Manual (For Instructor Use Only)
3,000
2-37
PROBLEM 2-5A (Continued) Date
Account Titles and Explanation
Apr. 11
No entry—not a transaction.
12
20
25
29
30
30
2-38
Ref.
Debit
Advertising Expense ............................ Cash .............................................. (Paid advertising expenses)
610 101
300
Rent Expense ........................................ Accounts Payable........................ (Rented film on account)
729 201
1,000
Cash ....................................................... Service Revenue .......................... (Received cash for services provided)
101 400
5,200
Salaries and Wages Expense .............. Cash .............................................. (Paid salaries expense)
726 101
1,600
Cash ....................................................... Accounts Receivable ........................... Rent Revenue............................... (18% X $1,000) (Received cash and balance on account for concession revenue)
101 112 429
90 90
Prepaid Rent ......................................... Cash .............................................. (Paid cash for future film rentals)
136 101
900
Credit
300
1,000
5,200
1,600
180
900
Copyright © 2012 John Wiley & Sons, Inc. Weygandt, Financial Accounting, 8/e, Solutions Manual (For Instructor Use Only)
PROBLEM 2-5A (Continued) (d)
CLASSIC THEATER Trial Balance April 30, 2014
Cash...................................................................... Accounts Receivable .......................................... Prepaid Rent ........................................................ Land ...................................................................... Buildings .............................................................. Equipment ............................................................ Accounts Payable ............................................... Mortgage Payable ................................................ Common Stock .................................................... Service Revenue .................................................. Rent Revenue ...................................................... Advertising Expense ........................................... Rent Expense ....................................................... Salaries and Wages Expense .............................
Debit $ 6,490 90 900 10,000 8,000 6,000
Credit
$ 2,000 6,000 20,000 7,000 180 300 1,800 1,600 $35,180
$35,180
Copyright © 2012 John Wiley & Sons, Inc. Weygandt, Financial Accounting, 8/e, Solutions Manual (For Instructor Use Only)
2-39
PROBLEM 2-1B
Date Mar. 1
3
5
6
10
18
19
2-40
Account Titles and Explanation Cash ......................................................... Common Stock ............................... (Issued shares of stock for cash)
Ref.
Debit 60,000
J1 Credit 60,000
Land ......................................................... Buildings .................................................. Equipment ............................................... Cash ................................................. (Purchased Lee's Golf Land)
23,000 9,000 6,000
Advertising Expense .............................. Cash ................................................. (Paid for advertising)
1,600
Prepaid Insurance ................................... Cash ................................................. (Paid for one-year insurance policy)
2,400
Equipment ............................................... Accounts Payable ........................... (Purchased equipment on account)
1,050
Cash ......................................................... Service Revenue ............................. (Received cash for services provided)
340
Cash ......................................................... Unearned Service Revenue ........... (Received cash for coupon books sold)
1,800
38,000
1,600
2,400
1,050
340
1,800
Copyright © 2012 John Wiley & Sons, Inc. Weygandt, Financial Accounting, 8/e, Solutions Manual (For Instructor Use Only)
PROBLEM 2-1B (Continued) Date Mar. 25
30
30
31
Account Titles and Explanation Dividends ............................................ Cash ............................................. (Declared and paid cash dividend)
Ref.
Debit 800
Credit 800
Salaries and Wages Expense ............ Cash ............................................. (Paid salaries)
250
Accounts Payable .............................. Cash ............................................. (Paid creditor on account)
1,050
Cash..................................................... Service Revenue ......................... (Received cash for services provided)
200
250
1,050
Copyright © 2012 John Wiley & Sons, Inc. Weygandt, Financial Accounting, 8/e, Solutions Manual (For Instructor Use Only)
200
2-41
PROBLEM 2-2B (a) Date
Account Titles and Explanation
Ref.
Debit
Apr. 1
Cash ........................................................ Common Stock .............................. (Issued shares of stock for cash)
101 311
40,000
No entry—not a transaction.
2
Rent Expense ......................................... Cash ................................................ (Paid monthly office rent)
729 101
1,400
Supplies .................................................. Accounts Payable .......................... (Purchased supplies on account from Halo Company)
126 201
5,200
Accounts Receivable ............................. Service Revenue ............................ (Billed clients for services provided)
112 400
6,600
Cash ........................................................ Unearned Service Revenue .......... (Received cash for future service)
101 209
1,000
Cash ........................................................ Service Revenue ............................ (Received cash for services provided)
101 400
2,100
Salaries and Wages Expense................ Cash ................................................ (Paid monthly salary)
726 101
2,400
10
11
20
30
2-42
40,000
1
3
J1 Credit
1,400
5,200
6,600
1,000
2,100
2,400
Copyright © 2012 John Wiley & Sons, Inc. Weygandt, Financial Accounting, 8/e, Solutions Manual (For Instructor Use Only)
PROBLEM 2-2B (Continued) Date
Account Titles and Explanation
Ref.
Debits
Apr. 30
Accounts Payable ............................... Cash ............................................. (Paid Halo Company on account)
201 101
1,900
Credit 1,900
(b) Cash Date Apr. 1 2 11 20 30 30
Explanation
Accounts Receivable Date Explanation Apr. 10 Supplies Date Explanation Apr. 3 Accounts Payable Date Explanation Apr. 3 30 Unearned Service Revenue Date Explanation Apr. 11
Ref. J1 J1 J1 J1 J1 J1
Ref. J1
Ref. J1
Ref. J1 J1
Ref. J1
Debit 40,000
Credit 1,400
1,000 2,100 2,400 1,900
Debit 6,600
Debit 5,200
Debit
Credit
No. 112 Balance 6,600
Credit
No. 126 Balance 5,200
Credit 5,200
No. 201 Balance 5,200 3,300
1,900
Debit
No. 101 Balance 40,000 38,600 39,600 41,700 39,300 37,400
Credit 1,000
No. 209 Balance 1,000
Copyright © 2012 John Wiley & Sons, Inc. Weygandt, Financial Accounting, 8/e, Solutions Manual (For Instructor Use Only)
2-43
PROBLEM 2-2B (Continued) Common Stock Date Explanation Apr. 1
Ref. J1
Service Revenue Date Explanation Apr. 10 20
Ref. J1 J1
Salaries and Wages Expense Date Explanation Apr. 30
Rent Expense Date Explanation Apr. 2
(c)
Ref. J1
Ref. J1
Debit
Debit
Debit 2,400
Debit 1,400
Credit 6,600 2,100
No. 400 Balance 6,600 8,700
Credit
No. 726 Balance 2,400
Credit
No. 729 Balance 1,400
JUDI DENCH, DENTIST Trial Balance April 30, 2014 Cash ..................................................................... Accounts Receivable .......................................... Supplies ............................................................... Accounts Payable ............................................... Unearned Service Revenue ................................ Common Stock .................................................... Service Revenue ................................................. Salaries and Wages Expense ............................. Rent Expense ......................................................
2-44
Credit 40,000
No. 311 Balance 40,000
Debit $37,400 6,600 5,200
Credit
$ 3,300 1,000 40,000 8,700 2,400 1,400 $53,000
$53,000
Copyright © 2012 John Wiley & Sons, Inc. Weygandt, Financial Accounting, 8/e, Solutions Manual (For Instructor Use Only)
PROBLEM 2-3B (a) Trans. 1.
Account Titles and Explanation
Debit
Cash ................................................... Common Stock ........................
50,000 50,000
2.
No entry—Not a transaction.
3.
Prepaid Rent...................................... Cash ..........................................
24,000
Equipment ......................................... Cash .......................................... Accounts Payable ....................
30,000
Prepaid Insurance ............................. Cash ..........................................
1,800
Supplies ............................................. Cash ..........................................
750
Supplies ............................................. Accounts Payable ....................
1,300
Cash ................................................... Accounts Receivable ........................ Service Revenue ......................
8,000 12,000
Accounts Payable ............................. Cash ..........................................
400
Cash ................................................... Accounts Receivable...............
3,000
Utilities Expense ............................... Accounts Payable ....................
260
4.
5.
6.
7.
8.
9.
10.
11.
Credit
24,000
8,000 22,000
1,800
750
1,300
20,000
400
3,000
Copyright © 2012 John Wiley & Sons, Inc. Weygandt, Financial Accounting, 8/e, Solutions Manual (For Instructor Use Only)
260 2-45
PROBLEM 2-3B (Continued) Trans. 12.
Account Titles and Explanation Salaries and Wages Expense ......... Cash ..........................................
Debit
Credit
5,600 5,600
(b) (1)
(8) (10)
(8)
(6) (7)
(5)
(3)
2-46
Cash 50,000 (3) (4) (5) (6) 8,000 (9) 3,000 (12) 20,450
(4) 24,000 8,000 1,800 750 400 (9) 5,600
Accounts Receivable 12,000 (10) 3,000 9,000
Prepaid Rent 24,000 24,000
Accounts Payable (4) 22,000 (7) 1,300 400 (11) 260 23,160
Common Stock (1)
50,000 50,000
Service Revenue (8) 20,000 20,000
Supplies 750 1,300 2,050
Prepaid Insurance 1,800 1,800
Equipment 30,000 30,000
Salaries and Wages Expense (12) 5,600 5,600
(11)
Utilities Expense 260 260
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PROBLEM 2-3B (Continued) (c)
CHAMBERLAIN SERVICES Trial Balance May 31, 2014 Cash.................................................................. Accounts Receivable ...................................... Supplies ........................................................... Prepaid Insurance ........................................... Prepaid Rent .................................................... Equipment ........................................................ Accounts Payable ........................................... Common Stock ................................................ Service Revenue .............................................. Salaries and Wages Expense ......................... Utilities Expense ..............................................
Debit $20,450 9,000 2,050 1,800 24,000 30,000
Credit
$23,160 50,000 20,000 5,600 260 $93,160
$93,160
Copyright © 2012 John Wiley & Sons, Inc. Weygandt, Financial Accounting, 8/e, Solutions Manual (For Instructor Use Only)
2-47
PROBLEM 2-4B
RON SALEM CO. Trial Balance June 30, 2014 Cash ($3,840 + $180) ................................................... Accounts Receivable ($2,898 – $180) ....................... Supplies ($800 – $620)................................................ Equipment ($3,000 + $620) ......................................... Accounts Payable ($2,666 – $309 – $390) ................. Unearned Service Revenue........................................ Common Stock............................................................ Dividends ($800 + $600) ............................................. Service Revenue ($2,380 + $801) ............................... Salaries and Wages Expense ($3,400 + $700 – $600) Utilities Expense .........................................................
2-48
Debit $ 4,020 2,718 180 3,620
Credit
$ 1,967 2,200 9,000 1,400 3,181 3,500 910 $16,348
$16,348
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PROBLEM 2-5B (a) & (c) Cash Date Mar. 1 2 9 10 12 20 20 31 31 31
Explanation Balance
J1 J1 J1 J1 J1 J1 J1 J1 J1
Accounts Receivable Explanation Date Mar. 31
Land Date Mar. 1
Ref.
Explanation Balance
Buildings Date Explanation Mar. 1 Balance
Equipment Date Explanation Mar. 1 Balance
Ref. J1
Ref.
Ref.
Ref.
375 9,000
No. 101 Balance 8,000 7,000 11,000 6,900 6,450 11,450 9,050 6,550 6,925 15,925
Debit 375
Credit
No. 112 Balance 375
Credit
No. 140 Balance 21,000
Credit
No. 145 Balance 10,000
Credit
No. 157 Balance 8,000
Debit
Credit 1,000
4,000 4,100 450 5,000 2,400 2,500
Debit
Debit
Debit
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PROBLEM 2-5B (Continued) Accounts Payable Date Explanation Mar. 1 Balance 2 10
Common Stock Date Explanation Mar. 1 Balance
Service Revenue Date Explanation Mar. 9 20 31
Rent Revenue Date Explanation Mar. 31
Advertising Expense Date Explanation Mar. 12
2-50
Ref. J1 J1
Ref.
Ref. J1 J1 J1
Ref. J1
Ref. J1
Debit
Credit 2,500
4,100
Debit
Debit
Debit
Debit 450
Credit
No. 201 Balance 7,000 9,500 5,400
No. 311 Balance 40,000
Credit 4,000 5,000 9,000
No. 400 Balance 4,000 9,000 18,000
Credit 750
No. 429 Balance 750
Credit
No. 610 Balance 450
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PROBLEM 2-5B (Continued) Salaries and Wages Expense Date Explanation Mar. 31 Rent Expense Date Explanation Mar. 2 20
Ref. J1
Ref. J1 J1
Debit 2,500
Debit 3,500 2,400
Credit
No. 726 Balance 2,500
Credit
No. 729 Balance 3,500 5,900
(b) J1 Date
Account Titles and Explanation
Ref.
Debit
Mar. 2
Rent Expense ........................................ Accounts Payable ........................ Cash .............................................. (Rented films for cash and on account)
729 201 101
3,500 2,500 1,000
3
No entry.
9
Cash ....................................................... Service Revenue .......................... (Received cash for services provided)
101 400
4,000
Accounts Payable ($2,500 + $1,600) ...... Cash .............................................. (Paid creditors on account)
201 101
4,100
610 101
450
10
11
No entry.
12
Advertising Expense ............................ Cash .............................................. (Paid advertising expense)
Credit
4,000
4,100
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450
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PROBLEM 2-5B (Continued) Date 20
20
Mar. 31
31
31
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Account Titles and Explanation Cash ....................................................... Service Revenue .......................... (Received cash for services provided)
Ref. 101 400
Debit 5,000
Rent Expense ........................................ Cash .............................................. (Paid film rental)
729 101
2,400
Salaries and Wages Expense............... Cash .............................................. (Paid salaries expense)
726 101
2,500
Cash ....................................................... Accounts Receivable ............................ Rent Revenue ............................... (15% X $5,000) (Received cash and balance on account for concession revenue)
101 112 429
375 375
Cash ....................................................... Service Revenue .......................... (Received cash for services provided)
101 400
9,000
Credit 5,000
2,400
2,500
750
9,000
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PROBLEM 2-5B (Continued) (d)
RUSSO THEATER Trial Balance March 31, 2014 Cash .................................................................. Accounts Receivable ....................................... Land .................................................................. Buildings ........................................................... Equipment ........................................................ Accounts Payable ............................................ Common Stock ................................................. Service Revenue .............................................. Rent Revenue ................................................... Advertising Expense........................................ Rent Expense ................................................... Salaries and Wages Expense.........................
Debit $15,925 375 21,000 10,000 8,000
Credit
$ 5,400 40,000 18,000 750 450 5,900 2,500 $64,150
$64,150
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CCC2
(a)
Nov.
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CONTINUING COOKIE CHRONICLE
GENERAL JOURNAL Account Titles and Explanation
Debit
J1 Credit
8 No entry required for cashing U.S. Savings Bonds—this is a personal transaction. 8 Cash ........................................................... Common Stock .....................................
500
11 Advertising Expense ................................ Cash ......................................................
65
13 Supplies ..................................................... Cash ......................................................
125
14 Equipment ................................................. Common Stock .....................................
300
16 Cash ........................................................... Notes Payable ......................................
2,000
17 Equipment ................................................. Cash ......................................................
900
20 Cash ........................................................... Service Revenue ..................................
125
25 Cash ........................................................... Unearned Service Revenue .................
30
30 Prepaid Insurance .................................... Cash ......................................................
1,320
500
65
125
300
2,000
900
125
30
1,320
Copyright © 2012 John Wiley & Sons, Inc. Weygandt, Financial Accounting, 8/e, Solutions Manual (For Instructor Use Only)
CCC2 (Continued) (b)
Date Nov.
Explanation 8 11 13 16 17 20 25 30
Date
J1 J1 J1 J1 J1 J1 J1 J1
Explanation
Nov. 13
Date
Explanation
Explanation
Nov. 14 17
Date Nov. 25
Explanation
900 125 30 1,320
Credits
Balance
125
125
Credits
Balance
1,320
1,320
Credits
Balance
300 900
300 1,200
Unearned Service Revenue Ref. Debits Credits J1
500 435 310 2,310 1,410 1,535 1,565 245
2,000
Equipment Ref. Debits J1 J1
Balance
65 125
Prepaid Insurance Ref. Debits J1
Credits
500
Supplies Ref. Debits J1
Nov. 30
Date
Cash Ref. Debits
Balance
30
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30
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CCC2 (Continued) (b) (Continued)
Date
Explanation
Nov. 16
Date Nov.
J1
Explanation 8 14
Date
Explanation
Nov. 11
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Common Stock Ref. Debits
Credits 500 300
Service Revenue Ref. Debits J1
Explanation
Credits 2,000
J1 J1
Nov. 20
Date
Notes Payable Ref. Debits
Credits 125
Advertising Expense Ref. Debits Credits J1
65
Balance 2,000
Balance 500 800
Balance 125
Balance 65
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CCC2 (Continued) (c) COOKIE CREATIONS Trial Balance November 30, 2014 Cash ............................................................................ Supplies ...................................................................... Prepaid Insurance ...................................................... Equipment .................................................................. Unearned Service Revenue ....................................... Notes Payable ............................................................ Common Stock ........................................................... Advertising Expense ................................................. Service Revenue ........................................................
Debit $ 245 125 1,320 1,200
Credit
$
30 2,000 800
65 $2,955
125 $2,955
Note to instructors: Because the notes payable is not due for 24 months, it follows Unearned Service Revenue in the accounts and the trial balance.
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BYP 2-1
FINANCIAL REPORTING PROBLEM
(a) Account Accounts Payable
(1) Increase Side Credit
(1) Decrease Side Debit
Accounts Receivable
Debit
Credit
Debit
Property, Plant, and Equipment
Debit
Credit
Debit
Income Taxes Payable
Credit
Debit
Credit
Interest Expense
Debit
Credit
Debit
Inventory
Debit
Credit
Debit
(2) Normal Balance Credit
(b) 1. 2. 3.
Cash is increased. Cash is decreased. Cash is decreased or Accounts Payable is increased.
(c) 1. 2.
Cash is decreased. Cash is decreased or Notes or Mortgage Payable is increased.
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Copyright © 2012 John Wiley & Sons, Inc. Weygandt, Financial Accounting, 8/e, Solutions Manual (For Instructor Use Only)
BYP 2-2
(a) 1.
COMPARATIVE ANALYSIS PROBLEM
PepsiCo Inventory:
debit
Coca-Cola 1. Accounts Receivable:
debit
2. Property, Plant, and Equipment:
debit
2. Cash and Cash Equivalents:
debit
3.
Accounts Payable:
credit
3. Cost of Goods Sold:
debit
4.
Interest Expense:
debit
4. Sales (revenue)
credit
(b) The following other accounts are ordinarily involved: 1.
Increase in Accounts Receivable: Service Revenue or Sales Revenue is increased (credited).
2.
Decrease in Salaries and Wages Payable: Cash is decreased (credited).
3.
Increase in Property, Plant, and Equipment: Notes Payable is increased (credited) or Cash is decreased (credited).
4.
Increase in Interest Expense: Cash is decreased (credited).
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BYP 2-3
REAL–WORLD FOCUS
The answer is dependent upon the company selected by the student.
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BYP 2-4
DECISION–MAKING ACROSS THE ORGANIZATION
(a) May 1 Correct. 5 7 14 15 20
Cash ......................................................... Lesson Revenue ..............................
250
Cash ......................................................... Unearned Boarding Revenue .........
500
Office Equipment .................................... Cash ..................................................
800
Dividends................................................. Cash ..................................................
440
Cash ......................................................... Riding Revenue ................................
184
30
Correct.
31
Hay and Feed Supplies .......................... Accounts Payable ............................
250 500 800 440 184
1,500 1,500
(b) The errors in the entries of May 14 and 20 would prevent the trial balance from balancing. (c) Net income as reported Add: 5/15, Salaries expense (Dividends paid) ..... 5/31, Hay and feed expense (still on hand) ...
$4,600 $ 440 1,500
Less: 5/7, Boarding revenue unearned.................. Correct net income ................................................... (d) Cash as reported Add: 5/20, Transposition error .............................. 5/31, Purchase on account ...........................
1,940 6,540 500 $6,040 $12,475
$
36 1,500
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1,536 $14,011
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BYP 2-5
Date: To:
COMMUNICATION ACTIVITY
May 25, 2014 Accounting Instructor
From: Student
In the first transaction, bills totaling $6,000 were sent to customers for services rendered. Therefore, the asset Accounts Receivable is increased $6,000 and the revenue Service Revenue is increased $6,000. Debits increase assets and credits increase revenues, so the journal entry is: Accounts Receivable 6,000 Service Revenue ............................................................. (Bill customers for services provided)
6,000
The $6,000 amount is then posted to the debit side of the general ledger account Accounts Receivable and to the credit side of the general ledger account Service Revenue. In the second transaction, $2,000 was paid in salaries to employees. Therefore, the expense Salaries and Wages Expense is increased $2,000 and the asset Cash is decreased $2,000. Debits increase expenses and credits decrease assets, so the journal entry is: Salaries and Wages Expense 2,000 Cash ................................................................................. (Salaries paid)
2,000
The $2,000 amount is then posted to the debit side of the general ledger account Salaries and Wages Expense and to the credit side of the general ledger account Cash.
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Copyright © 2012 John Wiley & Sons, Inc. Weygandt, Financial Accounting, 8/e, Solutions Manual (For Instructor Use Only)
BYP 2-6
ETHICS CASE
(a) The stakeholders in this situation are: f Sara Rankin, assistant chief accountant. f Users of the company’s financial statements. f The Hokey Company.
(b) By adding $1,000 to the Equipment account, that account total is intentionally misstated. By not locating the error causing the imbalance, some other account may also be misstated by $1,000. If the amount of $1,000 is determined to be immaterial, and the intent is not to commit fraud (cover up an embezzlement or other misappropriation of assets), Sara’s action might not be considered unethical in the preparation of interim financial statements. However, if Sara is violating a company accounting policy by her action, then she is acting unethically. (c) Sara’s alternatives are: 1. Miss the deadline but find the error causing the imbalance. 2. Tell her supervisor of the imbalance and suffer the consequences. 3. Do as she did and locate the error later, making the adjustment in the next quarter.
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BYP 2-7
ALL ABOUT YOU
(a) Students’ responses to this question will vary. It is important that the steps that they identify be as specific as possible, and clearly directed toward achieving their goal. You may wish to ask a follow-up question asking them to explain how each step will assist them in achieving their goal. (b) There are many sites on the Internet that provide information about preparing a résumé. For example, you can find extensive resources at: http://www.rileyguide.com/resprep.html. Many schools also have resources in their placement centers or writing labs. The Writing Center at Rensselaer Polytechnic Institute provides useful, concise information on its website at http://www.rpi.edu/web/writingcenter/resume.html. A wide variety of sample résumés can be found. For example, Monster.com provides samples for a wide variety of professions and situations at http://content.monster.com/experts/resume/library/. (c) As noted in the All About You feature in the chapter, overstating accomplishments on a résumé can result in many problems. It is important to provide accurate and complete documentation of all relevant training, education, and employment experiences so as to provide assurance to the potential employer, and also to enable that employer to do follow-up work. If you say you have certain skills, such as computer skills, try to substantiate the claim with recognized proof of proficiency. Make sure that all addresses and phone numbers are accurate and up-to-date. Also, ensure that the people you use as references have a copy of your résumé and cover letter, and that they are informed that you are interviewing so they know to expect a call. (d) See the sample résumés provided in the websites above for various format options. You might also mention to students that there are electronic résumé templates available on the Internet.
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BYP 2-8
ALL ABOUT YOU
The decision whether to fire Mr. Edmondson was the responsibility of Radio Shack’s board of directors, which is elected by the company’s shareholders to oversee management. The board initially announced its support for the CEO. After further investigation, the board encouraged Mr. Edmondson to resign, which he did. In contrast, when Bausch & Lomb’s CEO offered to resign in a similar situation, the company’s board refused to accept his resignation. Board members stated that they felt he was still the best person for the position. Radio Shack says that although it did a reference check at the time of Mr. Edmondson’s hiring, it did not check his educational credentials. Under the Sarbanes-Oxley Act, companies must now perform thorough background checks as part of a check of internal controls. The bottom line: Your ré sumé must be a fair and accurate depiction of your past.
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IFRS EXERCISE
IFRS 2-1 In deciding whether the U.S. should adopt IFRS, the SEC should consider the following. • • • • • •
Whether IFRS is sufficiently developed and consistent in application Whether the IASB is sufficiently independent Whether IFRS is established for the benefit to investors The issues involved in educating investors about IFRS The impact of a switch to IFRS on U.S. laws and regulations The impact on companies including changes to their accounting systems, contractual arrangements, corporate governance, and litigation • The issues involved in educating accountants, so they can prepare statements under IFRS
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IFRS 2-2
INTERNATIONAL FINANCIAL REPORTING PROBLEM
Account
Financial Statement
Other administrative expenses Cash at bank
Consolidated Income statement
Borrowings and overdrafts Finance costs
Consolidated Balance Sheet Consolidated Balance Sheet Consolidated Income Statement
Position in Financial Statement After gross profit and before operating profit Current assets Current and Non-current liabilities After Operating profit and before Profit from continuing operations before taxations.
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