Solution manual financial accounting 4e by wild chapter02

To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter Analyzing and Recording Transactions QUESTIONS a Common asset accounts: cash, accounts receivable, notes receivable, prepaid expenses (rent, insurance, etc.), office supplies, store supplies, equipment, building, and land b Common liability accounts: accounts payable, notes payable, and unearned revenue, wages payable, and taxes payable c Common equity accounts: common stock and dividends A note payable is formal promise, usually denoted by signing a promissory note to pay a future amount A note payable can be short-term or long-term, depending on when it is due An account payable also references an amount owed to an entity An account payable can be oral or implied, and often arises from the purchase of inventory, supplies, or services An account payable is usually short-term There are several steps in processing transactions: (1) Identify and analyze the transaction or event, including the source document(s), (2) apply double-entry accounting, (3) record the transaction or event in a journal, and (4) post the journal entry to the ledger These steps would be followed by preparation of a trial balance and then with the reporting of financial statements A general journal can be used to record any business transaction or event Debited accounts are commonly recorded first The credited accounts are commonly indented Expense accounts have debit balances because they are decreases to equity (and equity has a credit balance) A transaction is first recorded in a journal to create a complete record of the transaction in one place (The journal is often referred to as the book of original entry.) This process reduces the likelihood of errors in ledger accounts The recordkeeper prepares a trial balance to summarize the contents of the ledger and to verify the equality of total debits and total credits The trial balance also serves as a helpful internal document for preparing financial statements and other reports ©McGraw-Hill Companies, 2008 Solutions Manual, Chapter 55 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com The error should be corrected with a separate (subsequent) correcting entry The entry’s explanation should describe why the correction is necessary 10 The four financial statements are: income statement, balance sheet, statement of retained earnings, and statement of cash flows 11 The income statement lists the types and amounts of revenues and expenses, and reports whether the business earned a net income (also called profit or earnings) or a net loss 12 An income statement user must know what time period is covered to judge whether the company’s performance is satisfactory For example, a statement user would not be able to assess whether the amounts of revenue and net income are satisfactory without knowing whether they were earned over a week, a month, a quarter, or a year 13 The balance sheet provides information that helps users understand a company’s financial position at a point in time Accordingly, it is often called the statement of financial position The balance sheet lists the types and dollar amounts of assets, liabilities, and equity of the business 14 (a) Assets are probable future economic benefits obtained or controlled by a specific entity as a result of past transactions or events (b) Liabilities are probable future sacrifices of economic benefits arising from present obligations of a particular entity to transfer assets or provide services to other entities in the future as a result of past transactions or events (c) Equity is the residual interest in the assets of an entity that remains after deducting its liabilities (d) Net assets refer to equity 15 The balance sheet is sometimes referred to as the statement of financial position 16 Debit balance accounts on the Best Buy balance sheet include: Cash and cash equivalents; Short-term investments; Receivables; Merchandise inventories; Other current assets; Land and buildings; Leasehold improvements; Fixtures and equipment; Property under master and capital lease; Goodwill, Tradename; LongTerm Investments; Other Assets Credit balance accounts on the Best Buy balance sheet include: Accounts payable; Unredeemed gift card liabilities; Accrued compensation and related expenses; Accrued liabilities; Accrued income taxes; Current portion of long-term debt; LongTerm Liabilities; Long-Term Debt; Preferred Stock; Common Stock; Additional paidin capital; Retained earnings; Accumulated other comprehensive income 17 Assets with receivable in their account title are Accounts receivable, net of allowance for doubtful accounts of $120 and $547 [in thousands], and Retained interests in securitized receivables The liability with payable in its account title is Accounts payable 18 Apple’s revenue account is titled ―Net Sales.‖ ©McGraw-Hill Companies, 2008 56 Financial Accounting, 4th Edition To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com QUICK STUDIES Quick Study 2-1 (5 minutes) The likely source documents include: a Sales ticket d Telephone bill e Invoice from supplier i Bank statement Quick Study 2-2 (10 minutes) a b c d e f g h i E B B B I B B B I Statement of retained earnings Balance sheet Balance sheet Balance sheet Income statement Balance sheet Balance sheet Balance sheet Income statement Quick Study 2-3 (10 minutes) a b c d Debit Debit Credit Credit e f g h Debit Credit Credit Debit i j k l Credit Debit Debit Credit Debit Credit Credit Credit i j Credit Debit Quick Study 2-4 (10 minutes) a b c d Debit Credit Debit Credit e f g h ©McGraw-Hill Companies, 2008 Solutions Manual, Chapter 57 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Quick Study 2-5 (10 minutes) a b c Debit Debit Credit d e f Debit Debit Debit g h i Credit Debit Credit Quick Study 2-6 (15 minutes) Jan.13 Cash Equipment Common Stock 70,000 30,000 100,000 Owner invests cash and equipment 21 Office Supplies Accounts Payable 280 280 Purchased office supplies on credit 29 Cash Landscaping Services Revenue 7,800 7,800 Received cash for landscaping services 30 Cash Unearned Landscaping Services Revenue 1,000 1,000 Received cash in advance for landscaping services Quick Study 2-7 (10 minutes) The correct answer is a Explanation: If a $2,250 debit to Rent Expense is incorrectly posted as a credit, the effect is to understate the Rent Expense debit balance by $4,500 This causes the Debit column total on the trial balance to be $4,500 less than the Credit column total Quick Study 2-8 (10 minutes) a b c d I B B I e f g h B B B I i j E B ©McGraw-Hill Companies, 2008 58 Financial Accounting, 4th Edition To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com EXERCISES Exercise 2-1 (15 minutes) a b c d e f g h i j k l Account Accounts Payable Postage Expense Prepaid Insurance Land Common Stock Accounts Receivable Dividends Cash Equipment Fees Earned Wages Expense Unearned Revenue Type of Account liability expense asset asset equity asset equity asset asset revenue expense liability Increase (Dr or Cr.) credit debit debit debit credit debit debit debit debit credit debit credit Normal Balance credit debit debit debit credit debit debit debit debit credit debit credit Exercise 2-2 (15 minutes) a Beginning cash balance (debit) $ ? Cash received in October (debits) 102,500 Cash disbursed in October (credits) (103,150) Ending cash balance (debit) $ 18,600 Beginning cash balance (debit) $ 19,250 b Beginning accounts receivable (debit) $102,500 Sales on account in October (debits) ? Collections on account in October (credits) (102,890) Ending accounts receivable (debit) $ 89,000 Sales on account in October (debits) $ 89,390 c Beginning accounts payable (credit) $152,000 Purchases on account in October (credits) 281,000 Payments on accounts in October (debits) ( ?) Ending accounts payable (credit) $132,500 Payments on accounts in October (debits) $300,500 ©McGraw-Hill Companies, 2008 Solutions Manual, Chapter 59 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Exercise 2-3 (15 minutes) The company would make the following entry (not required for answer): Cash 10,000 Computer Equipment 80,000 Note Payable 28,000 Services Revenue 62,000 Accepted cash, equipment and note for services Thus, of the a through e items listed, the following effects should be included: a $28,000 increase in a liability account b $10,000 increase in the Cash account e $62,000 increase in a revenue account Explanation: This transaction reflects $62,000 in revenue, which is the value of the service provided Payment is received in the form of a $10,000 increase in cash, an $80,000 increase in computer equipment, and a $28,000 increase in its liabilities The net value received by the company is $62,000 Exercise 2-4 (25 minutes) Aug Cash Photography Equipment Common Stock 6,500 33,500 40,000 Owner investment in business Prepaid Insurance Cash 2,100 2,100 Acquired years of insurance coverage Office Supplies Cash 880 880 Purchased office supplies 20 Cash Photography Fees Earned 3,331 3,331 Collected photography fees 31 Utilities Expense Cash 675 675 Paid for August utilities ©McGraw-Hill Companies, 2008 60 Financial Accounting, 4th Edition To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Exercise 2-5 (30 minutes) Aug 20 Balance Cash 6,500 Aug 3,331 31 6,176 Aug Office Supplies 880 Aug Prepaid Insurance 2,100 2,100 880 675 Photography Equipment Aug 33,500 Common Stock Aug 40,000 Photography Fees Earned Aug 20 3,331 Aug 31 Utilities Expense 675 POSE-FOR-PICS Trial Balance August 31 Debit Credit Cash $ 6,176 Office supplies 880 Prepaid insurance 2,100 Photography equipment 33,500 Common stock $40,000 Photography fees earned 3,331 Utilities expense 675 Totals $43,331 $43,331 ©McGraw-Hill Companies, 2008 Solutions Manual, Chapter 61 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Exercise 2-6 (30 minutes) (a) (d) (h) Balance Cash 13,325 2,000 2,300 (b) (e) (g) (i) 475 6,235 775 800 (e) 9,340 (f) Balance Accounts Receivable 3,300 (h) 1,000 (b) Balance Office Supplies 475 475 (c) Balance Office Equipment 6,235 6,235 2,300 (i) Balance Accounts Payable 6,235 (c) Balance 6,235 Common Stock (a) Balance 13,325 13,325 Dividends 800 800 Fees Earned (d) (f) Balance (g) Balance 2,000 3,300 5,300 Rent Expense 775 775 Exercise 2-7 (15 minutes) AMENA COMPANY Trial Balance May 31, 2008 Debit Cash $ 9,340 Accounts receivable .1,000 Office supplies 475 Office equipment 6,235 Accounts payable Common Stock Dividends 800 Fees earned Rent expense 775 Totals $18,625 Credit $ 13,325 5,300 $18,625 ©McGraw-Hill Companies, 2008 62 Financial Accounting, 4th Edition To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Exercise 2-8 (20 minutes) Transactions that created revenues: b Accounts Receivable Services Revenue 2,300 2,300 Provided services on credit c Cash Services Revenue 875 875 Provided services for cash [Note: Revenues are inflows of assets (or decreases in liabilities) received in exchange for goods or services provided to customers.] Transactions that did not create revenues along with the reasons are: a This transaction brought in cash, but this is an owner investment d This transaction brought in cash, but it created a liability because the services have not yet been provided to the client e This transaction changed the form of the asset from accounts receivable to cash Total assets were not increased (revenue was recognized when the receivable was originally recorded) f This transaction brought in cash and increased assets, but it also increased a liability by the same amount (no goods or services were provided to generate revenue) ©McGraw-Hill Companies, 2008 Solutions Manual, Chapter 63 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Exercise 2-9 (20 minutes) Transactions that created expenses: b Salaries Expense Cash 1,233 1,233 Paid salary of receptionist d Utilities Expense Cash 870 870 Paid utilities for the office [Note: Expenses are outflows or using up of assets (or the creation of liabilities) that occur in the process of providing goods or services to customers.] Transactions a, c, and e are not expenses for the following reasons: a This transaction decreased assets in settlement of a previously existing liability, and equity did not change Cash payment does not mean the same as using up of assets (expense was recorded when the supplies were used) c This transaction involves the purchase of an asset The form of the company’s assets changed, but total assets did not change, and the equity did not decrease e This transaction is a distribution of cash to the owner Even though equity decreased, the decrease did not occur in the process of providing goods or services to customers Exercise 2-10 (15 minutes) ONTECH Income Statement For Month Ended October 31 Revenues Consulting fees earned Expenses Salaries expense Rent expense Telephone expense Miscellaneous expenses Total expenses Net income $14,000 $7,000 3,550 760 580 11,890 $ 2,110 ©McGraw-Hill Companies, 2008 64 Financial Accounting, 4th Edition To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Exercise 2-11 (15 minutes) ONTECH Statement of Retained Earnings For Month Ended October 31 Retained earnings, October Add: Net income (from Exercise 2-10) Less: Dividends Retained earnings, October 31 $ 2,110 2,110 2,000 $ 110 Exercise 2-12 (15 minutes) ONTECH Balance Sheet October 31 Assets Cash $11,360 Accounts receivable 14,000 Office supplies 3,250 Office equipment 18,000 Patents 46,000 Total assets $92,610 * Liabilities Accounts payable $ 8,500 Equity Common stock Retained earnings Total liabilities & equity 84,000 110* $92,610 Computation shown in Exercise 2-11 ©McGraw-Hill Companies, 2008 Solutions Manual, Chapter 65 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Exercise 2-13 (20 minutes) Assets a Beginning of the year $ 60,000 End of the year 105,000 Net increase in equity Net Income Plus owner investments Less dividends Change in equity - Liabilities $20,000 36,000 = Equity = $40,000 = 69,000 $29,000 $ ? (0) $29,000 Therefore, income must equal $29,000 b Net income $ ? Plus owner investments Less dividends ($1,250/mo x 12 mo.) (15,000) Change in equity $29,000 Therefore, net income must equal ($29,000 + $15,000) = $44,000 c Net income $ ? Plus owner investment 55,000 Less dividends (0) Change in equity $29,000 Therefore, the net loss must equal ($29,000 - $55,000) = $(26,000) d Net income $ ? Plus owner investment 35,000 Less dividends ($1,250/mo x 12 mo.) (15,000) Change in equity $29,000 Therefore, income must equal ($29,000+$15,000-$35,000)= $9,000 ©McGraw-Hill Companies, 2008 66 Financial Accounting, 4th Edition To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Exercise 2-14 (15 minutes) (a) Answers (b) $(28,000) Computations: Equity, Dec 31, 2007 $ (c) $42,000 $ (d) $73,000 $(45,000) $ $ 0 Owner's investments 110,000 42,000 87,000 210,000 Dividends (28,000) (47,000) (10,000) (55,000) Net income (loss) 22,000 90,000 (4,000) (45,000) Equity, Dec 31, 2008 $104,000 $85,000 $73,000 $110,000 Exercise 2-15 (25 minutes) a Belle created a new business and invested $6,000 cash, $7,600 of equipment, and $12,000 in automobiles in exchange for common stock b Paid $4,800 cash in advance for insurance coverage c Paid $900 cash for office supplies d Purchased $300 of office supplies and $9,700 of equipment on credit e Received $4,500 cash for delivery services provided f Paid $1,600 cash towards accounts payable g Paid $820 cash for gas and oil expenses ©McGraw-Hill Companies, 2008 Solutions Manual, Chapter 67 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Exercise 2-16 (30 minutes) a b c d e f g Cash Equipment Automobiles Common Stock Owner investment in exchange for stock 6,000 7,600 12,000 Prepaid Insurance Cash Purchased insurance coverage 4,800 25,600 4,800 Office Supplies Cash Purchased supplies with cash 900 Office Supplies Equipment Accounts Payable Purchased supplies and equipment on credit 300 9,700 Cash Delivery Services Revenue Received cash from customer 4,500 Accounts Payable Cash Made payment on payables 1,600 Gas and Oil Expense Cash Paid for gas and oil 900 10,000 4,500 1,600 820 820 ©McGraw-Hill Companies, 2008 68 Financial Accounting, 4th Edition To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Exercise 2-17 (20 minutes) Description (1) (2) Difference between Column Debit and with the Credit Larger Columns Total (3) (4) Identify account(s) incorrectly stated Amount that account(s) is overstated or understated a $3,600 debit to Rent Expense is posted as a $1,340 debit b $6,500 credit to Cash is posted twice as two credits to Cash $2,260 credit Rent Expense Rent Expense is understated by $2,260 $6,500 credit Cash Cash is understated by $6,500 Common Stock Common Stock is understated by $10,900 Dividends Dividends is understated by $10,900 Prepaid Insurance Prepaid Insurance is understated by $2,050 c $10,900 debit to the Dividends account is debited to Common Stock $0 –– d $2,050 debit to Prepaid Insurance is posted as a debit to Insurance Expense $0 –– e $38,000 debit to Machinery is posted as a debit to Accounts Payable $0 –– Insurance Expense Insurance Expense is overstated by $2,050 Machinery Accounts Payable Machinery is understated by $38,000 Accounts Payable is understated by $38,000 $5,850 credit to Services Revenue is posted as a $585 credit $5,265 debit Services Revenue Services Revenue is understated by $5,265 g $1,390 debit to Store $1,390 credit Store Supplies Store Supplies is understated by $1,390 f Supplies is not posted ©McGraw-Hill Companies, 2008 Solutions Manual, Chapter 69 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Exercise 2-18 (15 minutes) a The debit column is correctly stated because the erroneous debit (to Accounts Payable) is deducted from an account with a (larger assumed) credit balance b The credit column is understated by $37,900 because Accounts Payable was debited — it should have been credited c The Office Equipment account balance is correctly stated d The Accounts Payable account balance is understated by $37,900 It should have been increased (credited) by $18,950 but the posting error decreased (debited) it by $18,950 e The credit column is $37,900 less than the debit column, or $322,100 in total ($360,000 - $37,900) Exercise 2-19 (15 minutes) a Co Liabilities / Assets Debt = Ratio Net Income / Average Assets = ROA $12,000 $ 90,500 0.13 $20,000 $100,000 0.200 47,000 64,000 0.73 3,800 40,000 0.095 26,500 32,500 0.82 660 50,000 0.013 56,000 147,000 0.38 21,000 200,000 0.105 31,000 92,000 0.34 7,500 40,000 0.188 51,500 104,500 0.49 12,000 70,000 0.171 b Company relies most heavily on creditor (non-owner) financing with 82% of its assets financed by liabilities c Company relies least on creditor (non-owner) financing at only 13% This implies that 87% of the assets are financed by equity (owners) d The companies with the highest debt ratios indicate the greatest risk The two companies with the highest debt ratios are and e Company yields the highest return on assets at 20%; followed by Company at 18.8% f As an investor, one prefers high returns at low risk Company is the preferred investment since it yields the lowest risk (debt ratio is 13.3%) and highest return on assets (20%) ©McGraw-Hill Companies, 2008 70 Financial Accounting, 4th Edition To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com PROBLEM SET A Problem 2-1A (90 minutes) Part a Cash 101 Office Equipment 163 Drafting Equipment 164 Common Stock 307 100,000 5,000 60,000 165,000 Owner invested cash and equipment b Land .172 Cash .101 Note Payable .250 49,000 6,300 42,700 Purchased land with cash and note payable c Building .170 Cash .101 55,000 55,000 Purchased building d Prepaid Insurance 108 Cash .101 3,000 3,000 Purchased 18-month insurance policy e Cash 101 Engineering Fees Earned 402 6,200 6,200 Collected cash for completed work f Drafting Equipment 164 Cash .101 Note Payable .250 20,000 9,500 10,500 Purchased equipment with cash and note payable g Accounts Receivable 106 Engineering Fees Earned 402 14,000 14,000 Completed services for client h Office Equipment 163 Accounts Payable .201 1,150 1,150 Purchased equipment on credit ©McGraw-Hill Companies, 2008 Solutions Manual, Chapter 71 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Problem 2-1A (Part Continued) i Accounts Receivable 106 Engineering Fees Earned 402 22,000 22,000 Billed client for completed work j Equipment Rental Expense .602 Accounts Payable .201 1,333 1,333 Incurred equipment rental expense k Cash 101 Accounts Receivable 106 7,000 7,000 Collected cash on account l Wages Expense 601 Cash .101 1,200 1,200 Paid assistant’s wages m Accounts Payable 201 Cash 101 1,150 1,150 Paid amount due on account n Repairs Expense 604 Cash 101 925 925 Paid for repair of equipment o Dividends 319 Cash .101 9,480 9,480 Paid cash for dividends p Wages Expense 601 Cash .101 1,200 1,200 Paid assistant’s wages q Advertising Expense 603 Cash .101 2,500 2,500 Paid for advertising expense ©McGraw-Hill Companies, 2008 72 Financial Accounting, 4th Edition To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Problem 2-1A (Continued) Part Cash Date PR (a) (b) (c) (d) (e) (f) (k) (l) (m) (n) (o) (p) (q) Debit 100,000 Credit 6,300 55,000 3,000 6,200 9,500 7,000 1,200 1,150 925 9,480 1,200 2,500 No 101 Balance 100,000 93,700 38,700 35,700 41,900 32,400 39,400 38,200 37,050 36,125 26,645 25,445 22,945 Accounts Receivable No 106 Date PR Debit Credit Balance (g) 14,000 14,000 (i) 22,000 36,000 (k) 7,000 29,000 Prepaid Insurance Date PR Debit (d) 3,000 Debit 5,000 1,150 Debit 60,000 20,000 Debit 55,000 Debit 49,000 Notes Payable Date PR (b) (f) Debit Common Stock Date PR (a) Debit Dividends Date PR Debit (o) 9,480 No 250 Credit Balance 42,700 42,700 10,500 53,200 No 307 Credit Balance 165,000 165,000 Credit No 319 Balance 9,480 Engineering Fees Earned Credit Wages Expense Date PR Debit (l) 1,200 (p) 1,200 Equipment Rental Expense Credit No 164 Balance 60,000 80,000 Date PR (j) Credit No 602 Balance 1,333 Credit No 170 Balance 55,000 Advertising Expense Date PR Debit Credit (q) 2,500 No 603 Balance 2,500 Repairs Expense Credit No 172 Balance 49,000 No 604 Balance 925 Date PR (n) Debit No 402 Credit Balance 6,200 6,200 14,000 20,200 22,000 42,200 No 163 Balance 5,000 6,150 Land Date PR (b) 1,150 Credit Building Date PR (c) Debit Date PR (e) (g) (i) Drafting Equipment Date PR (a) (f) Date PR (h) (j) (m) No 201 Credit Balance 1,150 1,150 1,333 2,483 1,333 No 108 Balance 3,000 Office Equipment Date PR (a) (h) Accounts Payable Debit 1,333 Debit 925 Credit Credit No 601 Balance 1,200 2,400 ©McGraw-Hill Companies, 2008 Solutions Manual, Chapter 73 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Problem 2-1A (Concluded) Part ARACEL ENGINEERING Trial Balance June 30 Debit Cash Accounts receivable Prepaid insurance Office equipment Drafting equipment Building Land Accounts payable Notes payable Common stock Dividends Engineering fees earned Wages expense Equipment rental expense Advertising expense Repairs expense Totals Credit $ 22,945 29,000 3,000 6,150 80,000 55,000 49,000 $ 1,333 53,200 165,000 9,480 42,200 2,400 1,333 2,500 925 $261,733 $261,733 ©McGraw-Hill Companies, 2008 74 Financial Accounting, 4th Edition To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Problem 2-2A (90 minutes) Part Mar Cash 101 Office Equipment 163 Common Stock 307 150,000 22,000 172,000 Owner invested cash and equipment Prepaid Rent .131 Cash .101 6,000 6,000 Prepaid six months’ rent Office Equipment 163 Office Supplies 124 Accounts Payable .201 3,000 1,200 4,200 Purchased equipment and supplies on credit Cash 101 Services Revenue .403 4,000 4,000 Received cash for services Accounts Receivable 106 Services Revenue .403 7,500 7,500 Billed client for completed work 12 Accounts Payable 201 Cash .101 4,200 4,200 Paid balance due on account 19 Prepaid Insurance 128 Cash .101 5,000 5,000 Paid premium for insurance 22 Cash 101 Accounts Receivable 106 3,500 3,500 Collected part of amount owed by client 25 Accounts Receivable 106 Services Revenue .403 3,820 3,820 Billed client for completed work 29 Dividends 319 Cash .101 5,100 5,100 Paid cash for dividends 30 Office Supplies 124 Accounts Payable .201 600 600 Purchased supplies on account 31 Utilities Expense .690 Cash .101 500 500 Paid monthly utility bill ©McGraw-Hill Companies, 2008 Solutions Manual, Chapter 75 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Problem 2-2A (Continued) Part Date Mar Date Mar Date Mar Date Mar Date Mar Date Mar Explanation 12 19 22 29 31 Cash PR G1 G1 G1 G1 G1 G1 G1 G1 Debit 150,000 4,000 3,500 Acct No 101 Credit Balance 150,000 6,000 144,000 148,000 4,200 143,800 5,000 138,800 142,300 5,100 137,200 500 136,700 22 25 Accounts Receivable Explanation PR Debit G1 7,500 G1 G1 3,820 Acct No 106 Credit Balance 7,500 3,500 4,000 7,820 30 Office Supplies Explanation PR G1 G1 Debit 1,200 600 Acct No 124 Credit Balance 1,200 1,800 19 Prepaid Insurance Explanation PR G1 Debit 5,000 Acct No 128 Credit Balance 5,000 Debit 6,000 Acct No 131 Credit Balance 6,000 Debit 22,000 3,000 Acct No 163 Credit Balance 22,000 25,000 Prepaid Rent Explanation PR G1 Office Equipment Explanation PR G1 G1 ©McGraw-Hill Companies, 2008 76 Financial Accounting, 4th Edition To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Problem 2-2A (Continued) Date Mar Date Mar Date Mar Date Mar Date Mar 12 30 Accounts Payable Explanation PR G1 G1 G1 Common Stock Explanation PR G1 29 Dividends Explanation PR G1 25 Services Revenue Explanation PR G1 G1 G1 31 Utilities Expense Explanation PR G1 Debit 4,200 Debit Debit 5,100 Debit Debit 500 Acct No 201 Credit Balance 4,200 4,200 600 600 Acct No 307 Credit Balance 172,000 172,000 Acct No 319 Credit Balance 5,100 Acct No 403 Credit Balance 4,000 4,000 7,500 11,500 3,820 15,320 Acct No 690 Credit Balance 500 ©McGraw-Hill Companies, 2008 Solutions Manual, Chapter 77 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Problem 2-2A (Concluded) Part VENTURE CONSULTANTS Trial Balance March 31 Debit Cash Accounts receivable Office supplies Prepaid insurance Prepaid rent Office equipment Accounts payable Common stock Dividends Services revenue Utilities expense Totals Credit $136,700 7,820 1,800 5,000 6,000 25,000 $ 600 172,000 5,100 15,320 500 $187,920 $187,920 ©McGraw-Hill Companies, 2008 78 Financial Accounting, 4th Edition To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Problem 2-3A (90 minutes) Part April Cash 101 Office Equipment 163 Common Stock 307 80,000 26,000 106,000 Owner invested cash and equipment Prepaid Rent .131 Cash .101 9,000 9,000 Prepaid twelve months’ rent Office Equipment 163 Office Supplies 124 Accounts Payable .201 8,000 3,600 11,600 Purchased equip & supplies on credit Cash 101 Services Revenue .403 4,000 4,000 Received cash for services Accounts Receivable 106 Services Revenue .403 6,000 6,000 Billed client for completed work 13 Accounts Payable 201 Cash .101 11,600 11,600 Paid balance due on account 19 Prepaid Insurance 128 Cash .101 2,400 2,400 Paid premium for insurance 22 Cash 101 Accounts Receivable 106 4,400 4,400 Collected part of amount owed by client 25 Accounts Receivable 106 Services Revenue .403 2,890 2,890 Billed client for completed work 28 Dividends 319 Cash .101 5,500 5,500 Paid cash dividends 29 Office Supplies 124 Accounts Payable .201 600 600 Purchased supplies on account 30 Utilities Expense .690 Cash .101 435 435 Paid monthly utility bill ©McGraw-Hill Companies, 2008 Solutions Manual, Chapter 79 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Problem 2-3A (Continued) Part Date April Explanation 13 19 22 28 30 Cash PR G1 G1 G1 G1 G1 G1 G1 G1 Debit 80,000 4,000 4,400 Acct No 101 Credit Balance 80,000 9,000 71,000 75,000 11,600 63,400 2,400 61,000 65,400 5,500 59,900 435 59,465 22 25 Accounts Receivable Explanation PR Debit G1 6,000 G1 G1 2,890 Acct No 106 Credit Balance 6,000 4,400 1,600 4,490 29 Office Supplies Explanation PR G1 G1 Debit 3,600 600 Acct No 124 Credit Balance 3,600 4,200 Date April 19 Prepaid Insurance Explanation PR Debit G1 2,400 Acct No 128 Credit Balance 2,400 Date April Prepaid Rent Explanation PR G1 Debit 9,000 Acct No 131 Credit Balance 9,000 Office Equipment Explanation PR G1 G1 Debit 26,000 8,000 Acct No 163 Credit Balance 26,000 34,000 Date April Date April Date April ©McGraw-Hill Companies, 2008 80 Financial Accounting, 4th Edition To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Problem 2-3A (Continued) 13 29 Accounts Payable Explanation PR G1 G1 G1 Common Stock Explanation PR G1 Date April 28 Dividends Explanation PR G1 Date April Date April 25 Services Revenue Explanation PR G1 G1 G1 Date April 30 Utilities Expense Explanation PR G1 Date April Debit 11,600 Debit Debit 5,500 Debit Debit 435 Acct No 201 Credit Balance 11,600 11,600 600 600 Acct No 307 Credit Balance 106,000 106,000 Acct No 319 Credit Balance 5,500 Acct No 403 Credit Balance 4,000 4,000 6,000 10,000 2,890 12,890 Acct No 690 Credit Balance 435 ©McGraw-Hill Companies, 2008 Solutions Manual, Chapter 81 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Problem 2-3A (Continued) Part VIVA CONSULTANTS Trial Balance April 30 Debit Cash Accounts receivable Office supplies Prepaid insurance Prepaid rent Office equipment Accounts payable Common stock Dividends Services revenue Utilities expense Total Credit $ 59,465 4,490 4,200 2,400 9,000 34,000 $ 600 106,000 5,500 12,890 435 $119,490 $119,490 ©McGraw-Hill Companies, 2008 82 Financial Accounting, 4th Edition To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Problem 2-4A (60 minutes) Part FAVIANA ADRIANO SHIPPING Balance Sheet December 31, 2007 Assets Liabilities Cash $ 64,300 Accounts payable $ 3,500 Accounts receivable 26,240 Office supplies 3,160 Trucks 148,000 Equity Office equipment 44,000 Total equity 282,200 Total assets $285,700 Total liabilities and equity $285,700 FAVIANA ADRIANO SHIPPING Balance Sheet December 31, 2008 Assets Liabilities Cash $ 15,640 Accounts payable $ 33,500 Accounts receivable 19,390 Note payable 40,000 Office supplies 1,960 Total liabilities 73,500 Trucks 157,000 Office equipment 44,000 Building 80,000 Equity Land 60,000 Total equity 304,490 Total assets $377,990 Total liabilities and equity $377,990 Part Computation of 2008 net income: Equity, December 31, 2007 $282,200 Equity, December 31, 2008 (304,490) Increase in equity during 2008 $ 22,290 Owner investment Add net income 35,000 ? Deduct dividends ($3,000 x 12) (36,000) Increase in equity during 2008 $ 22,290 Therefore, net income must equal ($22,290+$36,000- $35,000) = $ 23,290 Part Debt Ratio = $73,500 / $377,990 = 19.4% ©McGraw-Hill Companies, 2008 Solutions Manual, Chapter 83 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Problem 2-5A (35 minutes) Part MIN ENGINEERING Trial Balance May 31 Cash Office supplies Prepaid insurance Office equipment Accounts payable Common stock Dividends Engineering fees earned Rent expense Totals Debit $37,641 890 4,600 12,900 Credit $12,900 18,000 3,329 7,540 $66,900 36,000 $66,900 Part 2: Likely transactions (following order of trial balance) Purchased $890 of office supplies for cash Paid $4,600 insurance premium in advance Purchased $12,900 of office equipment on credit (with account payable) Yi Min invested $18,000 cash in exchange for stock issued Paid $3,329 cash for dividends Earned $36,000 cash for engineering services, all in cash Paid $7,540 cash for rent expense Part Report of Cash Received and Paid Cash received Owner investment Engineering fees Total cash received Cash paid Office supplies Insurance premium Dividends Rent Total cash paid Ending balance $18,000 36,000 $54,000 890 4,600 3,329 7,540 16,359 $37,641 ©McGraw-Hill Companies, 2008 84 Financial Accounting, 4th Edition To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Problem 2-6A (90 minutes) Part a Cash 101 Office Equipment 163 Common Stock 307 60,000 25,000 85,000 Owner invested cash and equipment b Land .172 Building .170 Cash .101 Notes Payable .250 40,000 160,000 30,000 170,000 Purchased land and building with cash and note payable c Office Supplies 108 Accounts Payable .201 2,000 2,000 Purchased office supplies on account d Automobiles 164 Common Stock 307 16,500 16,500 Owner contributed automobile to business e Office Equipment 163 Accounts Payable .201 5,600 5,600 Purchased office equipment on account f Salaries Expense 601 Cash .101 1,800 1,800 Paid assistant’s salary g Cash 101 Fees Earned 402 8,000 8,000 Provided services for cash h Utilities Expense .602 Cash .101 635 635 Paid cash for utilities ©McGraw-Hill Companies, 2008 Solutions Manual, Chapter 85 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Problem 2-6A (Part Continued) i Accounts Payable 201 Cash .101 2,000 2,000 Paid cash on account j Office Equipment 163 Cash .101 20,300 20,300 Purchased new equipment with cash k Accounts Receivable 106 Fees Earned 402 6,250 6,250 Provided services on account l Salaries Expense 601 Cash .101 1,800 1,800 Paid assistant’s salary m Cash 101 Accounts Receivable 106 4,000 4,000 Received cash due on account n Dividends 319 Cash 101 2,800 2,800 Paid cash for dividends ©McGraw-Hill Companies, 2008 86 Financial Accounting, 4th Edition To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Problem 2-6A (Continued) Part Cash Date PR (a) (b) (f) (g) (h) (i) (j) (l) (m) (n) Debit 60,000 Credit 30,000 1,800 8,000 635 2,000 20,300 1,800 4,000 2,800 No 101 Balance 60,000 30,000 28,200 36,200 35,565 33,565 13,265 11,465 15,465 12,665 Accounts Receivable No 106 Date PR Debit Credit Balance (k) 6,250 6,250 (m) 4,000 2,250 Office Supplies Date PR (c) Debit 2,000 Credit No 108 Balance 2,000 Land Date PR (b) Debit 40,000 Accounts Payable Date PR (c) (e) (i) Debit 2,000 Notes Payable Date PR (b) Debit Common Stock Date PR (a) (d) Debit Credit No 201 Credit Balance 2,000 2,000 5,600 7,600 5,600 No 250 Credit Balance 170,000 170,000 No 307 Credit Balance 85,000 85,000 16,500 101,500 Dividends Office Equipment Date PR (a) (e) (j) Debit 25,000 5,600 20,300 No 163 Balance 25,000 30,600 50,900 Date PR (n) Salaries Expense Credit No 164 Balance 16,500 Credit No 170 Balance 160,000 Credit Automobiles Date PR (d) Debit 16,500 Building Date PR (b) Debit 160,000 Debit 2,800 Fees Earned Date PR (g) (k) Date PR (f) (l) Debit Debit 1,800 1,800 Credit Debit 635 No 319 Balance 2,800 No 402 Credit Balance 8,000 8,000 6,250 14,250 Credit No 601 Balance 1,800 3,600 Credit No 602 Balance 635 Utilities Expense Date PR (h) No 172 Balance 40,000 ©McGraw-Hill Companies, 2008 Solutions Manual, Chapter 87 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Problem 2-6A (Concluded) Part HV CONSULTING Trial Balance September 30 Debit Cash Accounts receivable Office supplies Office equipment Automobiles Building Land Accounts payable Long-term notes payable Common stock Dividends Fees earned Salaries expense Utilities expense Total Credit $ 12,665 2,250 2,000 50,900 16,500 160,000 40,000 $ 5,600 170,000 101,500 2,800 14,250 3,600 635 $291,350 $291,350 ©McGraw-Hill Companies, 2008 88 Financial Accounting, 4th Edition To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com PROBLEM SET B Problem 2-1B (90 minutes) Part a Cash 101 Office Equipment 163 Computer Equipment 164 Common Stock 307 65,000 5,750 30,000 100,750 Owner invested cash and equipment b Land .172 Cash .101 Note Payable .250 22,000 5,000 17,000 Purchased land with cash and note payable c Building .170 Cash .101 34,500 34,500 Purchased building d Prepaid Insurance 108 Cash .101 5,000 5,000 Purchased 24-month insurance policy e Cash 101 Fees Earned 402 4,600 4,600 Collected cash for completed work f Computer Equipment 164 Cash .101 Note Payable .250 4,500 800 3,700 Purchased equipment with cash and note payable g Accounts Receivable 106 Fees Earned 402 4,250 4,250 Completed services for client h Office Equipment 163 Accounts Payable .201 950 950 Purchased equipment on credit ©McGraw-Hill Companies, 2008 Solutions Manual, Chapter 89 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Problem 2-1B (Part Continued) i Accounts Receivable 106 Fees Earned 402 10,200 10,200 Billed client for completed work j Computer Rental Expense .602 Accounts Payable .201 580 580 Incurred computer rental expense k Cash 101 Accounts Receivable 106 5,100 5,100 Collected cash on account l Wages Expense 601 Cash .101 1,800 1,800 Paid assistant’s wages m Accounts Payable 201 Cash 101 950 950 Paid amount due on account n Repairs Expense 604 Cash 101 608 608 Paid for repair of equipment o Dividends 319 Cash .101 6,230 6,230 Paid cash for dividends p Wages Expense 601 Cash .101 1,800 1,800 Paid assistant’s wages q Advertising Expense 603 Cash .101 750 750 Paid for advertising expense ©McGraw-Hill Companies, 2008 90 Financial Accounting, 4th Edition To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Problem 2-1B (Continued) Part Cash Date PR (a) (b) (c) (d) (e) (f) (k) (l) (m) (n) (o) (p) (q) Debit 65,000 Credit 5,000 34,500 5,000 4,600 800 5,100 1,800 950 608 6,230 1,800 750 No 101 Balance 65,000 60,000 25,500 20,500 25,100 24,300 29,400 27,600 26,650 26,042 19,812 18,012 17,262 Accounts Receivable No 106 Date PR Debit Credit Balance (g) 4,250 4,250 (i) 10,200 14,450 (k) 5,100 9,350 Prepaid Insurance Date PR Debit (d) 5,000 Debit 5,750 950 Debit 30,000 4,500 Debit 34,500 Debit 22,000 Notes Payable Date PR (b) (f) Debit Common Stock Date PR (a) Debit Dividends Date PR Debit (o) 6,230 Fees Earned No 307 Credit Balance 100,750 100,750 Credit No 319 Balance 6,230 No 402 Credit Balance 4,600 4,600 4,250 8,850 10,200 19,050 Credit Wages Expense Date PR Debit (l) 1,800 (p) 1,800 Computer Rental Expense Credit No 164 Balance 30,000 34,500 Date PR (j) Credit No 602 Balance 580 Credit No 170 Balance 34,500 Advertising Expense Date PR Debit Credit (q) 750 No 603 Balance 750 Repairs Expense Credit No 172 Balance 22,000 No 604 Balance 608 Date PR (n) Debit No 250 Credit Balance 17,000 17,000 3,700 20,700 No 163 Balance 5,750 6,700 Land Date PR (b) 950 Credit Building Date PR (c) Debit Date PR (e) (g) (i) Computer Equipment Date PR (a) (f) Date PR (h) (j) (m) No 201 Credit Balance 950 950 580 1,530 580 No 108 Balance 5,000 Office Equipment Date PR (a) (h) Accounts Payable Debit 580 Debit 608 Credit Credit No 601 Balance 1,800 3,600 ©McGraw-Hill Companies, 2008 Solutions Manual, Chapter 91 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Problem 2-1B (Concluded) Part SOFTWORKS Trial Balance April 30 Debit Cash $ 17,262 Accounts receivable 9,350 Prepaid insurance 5,000 Office equipment 6,700 Computer equipment 34,500 Building 34,500 Land 22,000 Accounts payable $ Notes payable Common stock Dividends 6,230 Fees earned Wages expense 3,600 Computer rental expense 580 Advertising expense 750 Repairs expense 608 Totals $141,080 Credit 580 20,700 100,750 19,050 $141,080 ©McGraw-Hill Companies, 2008 92 Financial Accounting, 4th Edition To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Problem 2-2B (90 minutes) Part Nov Cash 101 Office Equipment 163 Common Stock 307 30,000 15,000 45,000 Owner invested cash and equipment Prepaid Rent .131 Cash .101 4,500 4,500 Prepaid six months’ rent Office Equipment 163 Office Supplies 124 Accounts Payable .201 2,500 600 3,100 Purchased equipment and supplies on credit Cash 101 Services Revenue .403 3,400 3,400 Received cash for services 12 Accounts Receivable 106 Services Revenue .403 10,200 10,200 Billed client for completed work 13 Accounts Payable 201 Cash .101 3,100 3,100 Paid balance due on account 19 Prepaid Insurance 128 Cash .101 1,800 1,800 Paid premium for 24 months of insurance 22 Cash 101 Accounts Receivable 106 5,200 5,200 Collected part of amount owed by client 24 Accounts Receivable 106 Services Revenue .403 1,750 1,750 Billed client for completed work 28 Dividends 319 Cash .101 5,300 5,300 Paid cash for dividends 29 Office Supplies 124 Accounts Payable .201 249 249 Purchased supplies on account 30 Utilities Expense .690 Cash .101 831 831 Paid monthly utility bill ©McGraw-Hill Companies, 2008 Solutions Manual, Chapter 93 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Problem 2-2B (Continued) Part Date Nov Date Nov Date Nov Date Nov Date Nov Date Nov Date Nov Explanation 13 19 22 28 30 Cash PR G1 G1 G1 G1 G1 G1 G1 G1 Debit 30,000 3,400 5,200 Acct No 101 Credit Balance 30,000 4,500 25,500 28,900 3,100 25,800 1,800 24,000 29,200 5,300 23,900 831 23,069 12 22 24 Accounts Receivable Explanation PR Debit G1 10,200 G1 G1 1,750 Acct No 106 Credit Balance 10,200 5,200 5,000 6,750 29 Office Supplies Explanation PR G1 G1 Debit 600 249 Acct No 124 Credit Balance 600 849 19 Prepaid Insurance Explanation PR Debit G1 1,800 Acct No 128 Credit Balance 1,800 Prepaid Rent Explanation PR G1 Debit 4,500 Acct No 131 Credit Balance 4,500 Office Equipment Explanation PR G1 G1 Debit 15,000 2,500 Acct No 163 Credit Balance 15,000 17,500 13 29 Accounts Payable Explanation PR G1 G1 G1 Debit 3,100 Acct No 201 Credit Balance 3,100 3,100 249 249 ©McGraw-Hill Companies, 2008 94 Financial Accounting, 4th Edition To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Problem 2-2B (Continued) Date Nov Date Nov Date Nov Date Nov Common Stock Explanation PR G1 28 Dividends Explanation PR G1 12 24 Services Revenue Explanation PR G1 G1 G1 30 Utilities Expense Explanation PR G1 Acct No 307 Credit Balance 45,000 45,000 Debit Acct No 319 Credit Balance 5,300 Debit 5,300 Acct No 403 Credit Balance 3,400 3,400 10,200 13,600 1,750 15,350 Debit Acct No 690 Credit Balance 831 Debit 831 Part DIELLA MANAGEMENT SERVICES Trial Balance November 30 Debit Cash Accounts receivable Office supplies Prepaid insurance Prepaid rent Office equipment Accounts payable Common stock Dividends Services revenue Utilities expense Totals Credit $23,069 6,750 849 1,800 4,500 17,500 $ 249 45,000 5,300 15,350 831 $60,599 $60,599 ©McGraw-Hill Companies, 2008 Solutions Manual, Chapter 95 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Problem 2-3B (90 minutes) Part Sept Cash 101 Office Equipment 163 Common Stock 307 38,000 15,000 53,000 Owner invested in the business Prepaid Rent 131 Cash 101 9,000 9,000 Prepaid twelve months’ rent Office Equipment 163 Office Supplies 124 Accounts Payable 201 8,000 2,400 10,400 Purchased equipment and supplies on credit Cash 101 Service Fees Earned 401 3,280 3,280 Received cash for services 12 Accounts Receivable 106 Service Fees Earned 401 15,400 15,400 Billed client for completed work 13 Accounts Payable 201 Cash 101 10,400 10,400 Paid balance due on account 19 Prepaid Insurance 128 Cash 101 1,900 1,900 Paid premium for insurance 22 Cash 101 Accounts Receivable 106 7,700 7,700 Collected part of amount owed by client 24 Accounts Receivable 106 Service Fees Earned 401 2,100 2,100 Billed client for completed work 28 Dividends 319 Cash 101 5,300 5,300 Paid cash dividends 29 Office Supplies 124 Accounts Payable 201 550 550 Purchased supplies on account 30 Utilities Expense 690 Cash 101 860 860 Paid monthly utility bill ©McGraw-Hill Companies, 2008 96 Financial Accounting, 4th Edition To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Problem 2-3B (Continued) Part Date Sept Date Sept Date Sept Date Sept Date Sept Date Sept Explanation 13 19 22 28 30 Cash PR G1 G1 G1 G1 G1 G1 G1 G1 Acct No 101 Credit Balance 38,000 9,000 29,000 32,280 10,400 21,880 1,900 19,980 27,680 5,300 22,380 860 21,520 Debit 38,000 3,280 7,700 12 22 24 Accounts Receivable Explanation PR Debit G1 15,400 G1 G1 2,100 Acct No 106 Credit Balance 15,400 7,700 7,700 9,800 29 Office Supplies Explanation PR Debit G1 2,400 G1 550 Acct No 124 Credit Balance 2,400 2,950 19 Prepaid Insurance Explanation PR G1 Prepaid Rent Explanation PR G1 Office Equipment Explanation PR G1 G1 Debit 1,900 Acct No 128 Credit Balance 1,900 Debit 9,000 Acct No 131 Credit Balance 9,000 Debit 15,000 8,000 Acct No 163 Credit Balance 15,000 23,000 ©McGraw-Hill Companies, 2008 Solutions Manual, Chapter 97 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Problem 2-3B (Continued) Date Sept Date Sept Date Sept Date Sept Date Sept 13 29 Accounts Payable Explanation PR G1 G1 G1 Debit 10,400 Acct No 201 Credit Balance 10,400 10,400 550 550 Common Stock Explanation PR G1 28 Dividends Explanation PR G1 12 24 Service Fees Earned Explanation PR Debit G1 G1 G1 Acct No 401 Credit Balance 3,280 3,280 15,400 18,680 2,100 20,780 30 Utilities Expense Explanation PR G1 Acct No 690 Credit Balance 860 Debit Debit 5,300 Debit 860 Acct No 307 Credit Balance 53,000 53,000 Acct No 319 Credit Balance 5,300 ©McGraw-Hill Companies, 2008 98 Financial Accounting, 4th Edition To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Problem 2-3B (Concluded) Part HUSSEIN MANAGEMENT SERVICES Trial Balance September 30 Debit Cash Accounts receivable Office supplies Prepaid insurance Prepaid rent Office equipment Accounts payable Common stock Dividends Service fees earned Utilities expense Totals Credit $21,520 9,800 2,950 1,900 9,000 23,000 $ 550 53,000 5,300 860 $74,330 20,780 $74,330 ©McGraw-Hill Companies, 2008 Solutions Manual, Chapter 99 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Problem 2-4B (60 minutes) Part TAMA CO Balance Sheet December 31, 2007 Assets Cash $ 20,000 Accounts receivable 35,000 Office supplies 8,000 Office equipment 40,000 Machinery 28,500 Total assets $131,500 Liabilities Accounts payable $ 4,000 Equity Total equity 127,500 Total liabilities & equity $131,500 TAMA CO Balance Sheet December 31, 2008 Assets Cash $ 5,000 Accounts receivable 25,000 Office supplies 13,500 Office equipment 40,000 Machinery 28,500 Building 250,000 Land 50,000 Total assets $412,000 Liabilities Accounts payable $ 12,000 Note payable 250,000 Total liabilities 262,000 Equity Total equity 150,000 Total liabilities & equity $412,000 Part Calculation of 2008 net income: Equity, December 31, 2007 Equity, December 31, 2008 Increase in equity during 2008 $127,500 (150,000) $ 22,500 Owner investment during 2008 2008 Net income $ 15,000 ? Dividends during 2008 ($250 x 12) Increase in equity during 2008 (3,000) $ 22,500 Therefore, 2008 Income must equal ($22,500+ $3,000- $15,000) = $ 10,500 Part Debt ratio = $262,000 / $412,000 = 63.6% ©McGraw-Hill Companies, 2008 100 Financial Accounting, 4th Edition To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Problem 2-5B (35 minutes) Part GOULD SOLUTIONS Trial Balance April 30 Cash Office supplies Prepaid rent Office equipment Accounts payable Common stock Dividends Consulting fees earned Operating expenses Totals Debit Credit $19,982 760 1,800 12,250 $12,250 15,000 5,200 20,400 7,658 $47,650 $47,650 Part 2: Likely transactions (following order of trial balance) Purchased $760 of office supplies for cash Paid $1,800 cash for prepaid rent Purchased $12,250 office equipment on credit Gould invested $15,000 cash in exchange for common stock Paid $5,200 cash for dividends Earned $20,400 cash in consulting fees Paid $7,658 cash for operating expenses Part Report of Cash Received and Paid Cash received Owner investment Consulting fees Total cash received Cash paid Office supplies Prepaid rent Dividends Operating expenses Total cash paid Ending balance $15,000 20,400 $35,400 760 1,800 5,200 7,658 15,418 $19,982 ©McGraw-Hill Companies, 2008 Solutions Manual, Chapter 101 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Problem 2-6B (90 minutes) Part a Cash 101 Office Equipment 163 Common Stock 307 35,000 11,000 46,000 Owner invested cash and equipment b Land .172 Building .170 Cash .101 Notes Payable .250 7,500 40,000 15,000 32,500 Purchased land and building with cash and note payable c Office Supplies 108 Accounts Payable .201 500 500 Purchased office supplies on account d Automobiles 164 Common Stock 307 8,000 8,000 Owner contributed automobile to business e Office Equipment 163 Accounts Payable .201 1,200 1,200 Purchased office equipment on account f Salaries Expense 601 Cash .101 1,000 1,000 Paid assistant’s salary g Cash 101 Fees Earned 402 3,200 3,200 Provided services for cash h Utilities Expense .602 Cash .101 540 540 Paid cash for utilities ©McGraw-Hill Companies, 2008 102 Financial Accounting, 4th Edition To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Problem 2-6B (Part Continued) i Accounts Payable 201 Cash .101 500 500 Paid cash on account j Office Equipment 163 Cash .101 3,400 3,400 Purchased equipment for cash k Accounts Receivable 106 Fees Earned 402 4,200 4,200 Provided services on account l Salaries Expense 601 Cash .101 1,000 1,000 Paid assistant’s salary m Cash 101 Accounts Receivable 106 2,200 2,200 Received cash due on account n Dividends 319 Cash 101 1,100 1,100 Paid cash for dividends ©McGraw-Hill Companies, 2008 Solutions Manual, Chapter 103 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Problem 2-6B (Continued) Part Cash Date PR (a) (b) (f) (g) (h) (i) (j) (l) (m) (n) Debit 35,000 Credit 15,000 1,000 3,200 540 500 3,400 1,000 2,200 1,100 No 101 Balance 35,000 20,000 19,000 22,200 21,660 21,160 17,760 16,760 18,960 17,860 Accounts Receivable No 106 Date PR Debit Credit Balance (k) 4,200 4,200 (m) 2,200 2,000 Office Supplies Date PR (c) Debit 500 Credit No 108 Balance 500 Land Date PR (b) Debit 7,500 Accounts Payable Date PR (c) (e) (i) Debit 500 Notes Payable Date PR (b) Debit Common Stock Date PR (a) (d) Debit Credit No 201 Credit Balance 500 500 1,200 1,700 1,200 No 250 Credit Balance 32,500 32,500 No 307 Credit Balance 46,000 46,000 8,000 54,000 Dividends Office Equipment Date PR (a) (e) (j) Debit 11,000 1,200 3,400 No 163 Balance 11,000 12,200 15,600 Date PR (n) Salaries Expense Credit No 164 Balance 8,000 Credit No 170 Balance 40,000 Credit Automobiles Date PR (d) Debit 8,000 Building Date PR (b) Debit 40,000 Debit 1,100 Fees Earned Date PR (g) (k) Date PR (f) (l) Debit Debit 1,000 1,000 Credit Debit 540 No 319 Balance 1,100 No 402 Credit Balance 3,200 3,200 4,200 7,400 Credit No 601 Balance 1,000 2,000 Credit No 602 Balance 540 Utilities Expense Date PR (h) No 172 Balance 7,500 ©McGraw-Hill Companies, 2008 104 Financial Accounting, 4th Edition To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Problem 2-6B (Concluded) Part NUNCIO CONSULTING Trial Balance June 30 Debit Cash Accounts receivable Office supplies Office equipment Automobiles Building Land Accounts payable Notes payable Common stock Dividends Fees earned Salaries expense Utilities expense Total Credit $17,860 2,000 500 15,600 8,000 40,000 7,500 $ 1,200 32,500 54,000 1,100 7,400 2,000 540 $95,100 $95,100 ©McGraw-Hill Companies, 2008 Solutions Manual, Chapter 105 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Serial Problem — SP Part (120 minutes) 2007 Oct Cash 101 Office Equipment 163 Computer Equipment 167 Common Stock 307 75,000 10,000 25,000 110,000 Owner invests cash and equipment Prepaid Rent 131 Cash 101 3,500 3,500 Paid four months’ rent in advance Computer Supplies 126 Accounts Payable 201 1,600 1,600 Purchased supplies on credit Prepaid Insurance 128 Cash 101 2,400 2,400 Paid 12 months’ premium in advance Accounts Receivable 106 Computer Services Revenue 403 6,200 6,200 Billed customer for services Accounts Payable 201 Cash 101 1,600 1,600 Paid balance due on account payable 10 No entry necessary in the journal 12 Accounts Receivable 106 Computer Services Revenue 403 1,950 1,950 Billed customer for services 15 Cash 101 Accounts Receivable 106 6,200 6,200 Collected accounts receivable 17 Repairs Expense—Computer 684 Cash 101 900 900 Paid for computer repairs 20 Advertising Expense 655 Cash 101 1,790 1,790 Purchased ad in local newspaper 22 Cash 101 Accounts Receivable 106 1,950 1,950 Collected accounts receivable ©McGraw-Hill Companies, 2008 106 Financial Accounting, 4th Edition To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Serial Problem, Success Systems (Continued) 28 Accounts Receivable 106 Computer Services Revenue 403 7,300 7,300 Billed customer for services 31 Wages Expense 623 Cash 101 1,050 1,050 Paid employee for part-time work 31 Dividends 319 Cash 101 4,000 4,000 Paid cash for dividends Nov Mileage Expense 676 Cash 101 384 384 Reimbursed Lopez for mileage Cash 101 Computer Services Revenue 403 3,600 3,600 Collected cash revenue from client Computer Supplies 126 Cash 101 1,750 1,750 Purchased computer supplies for cash Accounts Receivable 106 Computer Services Revenue 403 6,500 6,500 Billed customer for services 13 No entry necessary (No revenue recognized until work is performed.) 18 Cash 101 5,000 Accounts Receivable 106 5,000 Collected accounts receivable 22 Miscellaneous Expenses* 677 Cash 101 300 300 Record donation (Some companies set up a Donations account.) 24 Accounts Receivable 106 Computer Services Revenue 403 7,000 7,000 Billed customer for services 25 No entry necessary 28 Mileage Expense 676 Cash 101 480 480 Reimbursed Lopez for mileage 30 Wages Expense 623 Cash 101 2,100 2,100 Paid employee for part-time work 30 Dividends 319 Cash 101 2,500 2,500 Paid cash for dividends ©McGraw-Hill Companies, 2008 Solutions Manual, Chapter 107 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Serial Problem, Success Systems (Continued) Part General Ledger accounts Cash Date Oct 15 17 20 22 31 31 Nov 18 22 28 30 30 68,996 Date Oct 12 15 22 28 Nov 18 24 Date Oct Nov Explanation PR Accounts Receivable Explanation PR Acct No 101 Debit Credit Balance 75,000 75,000 3,500 71,500 2,400 69,100 1,600 67,500 6,200 73,700 900 72,800 1,790 71,010 1,950 72,960 1,050 71,910 4,000 67,910 384 67,526 3,600 71,126 1,750 69,376 5,000 74,376 300 74,076 480 73,596 2,100 71,496 2,500 Acct No.106 Debit Credit Balance 6,200 6,200 1,950 8,150 6,200 1,950 1,950 7,300 7,300 6,500 13,800 5,000 8,800 7,000 15,800 Computer Supplies Acct No 126 Explanation PR Debit Credit Balance 1,600 1,600 1,750 3,350 ©McGraw-Hill Companies, 2008 108 Financial Accounting, 4th Edition To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Serial Problem, Success Systems (Continued) Date Oct Date Oct Date Oct Date Oct Date Oct Date Oct Date Oct 31 Nov 30 Prepaid Insurance Explanation PR Acct No 128 Debit Credit Balance 2,400 2,400 Prepaid Rent Explanation PR Acct No 131 Debit Credit Balance 3,500 3,500 Office Equipment Explanation PR Acct No 163 Debit Credit Balance 10,000 10,000 Computer Equipment Acct No 167 Explanation PR Debit Credit Balance 25,000 25,000 Accounts Payable Explanation PR Common Stock Explanation PR Dividends Explanation PR Acct No 201 Debit Credit Balance 1,600 1,600 1,600 Debit Acct No 307 Credit Balance 110,000 110,000 Acct No 319 Debit Credit Balance 4,000 4,000 2,500 6,500 ©McGraw-Hill Companies, 2008 Solutions Manual, Chapter 109 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Serial Problem, Success Systems (Concluded) Date Oct 12 28 Nov 24 32,550 Date Oct 31 Nov 30 Date Oct 20 Computer Services Revenue Explanation PR Debit Wages Expense Explanation PR Acct No 403 Credit Balance 6,200 6,200 1,950 8,150 7,300 15,450 3,600 19,050 6,500 25,550 7,000 Acct No 623 Debit Credit Balance 1,050 1,050 2,100 3,150 Advertising Expense Acct No 655 Explanation PR Debit Credit Balance 1,790 1,790 Debit 384 480 Acct No 676 Credit Balance 384 864 Date Nov 22 Miscellaneous Expenses Explanation PR Debit 300 Acct No 677 Credit Balance 300 Date Oct 17 Repairs Expense—Computer Explanation PR Debit 900 Acct No 684 Credit Balance 900 Date Nov 28 Mileage Expense Explanation PR ©McGraw-Hill Companies, 2008 110 Financial Accounting, 4th Edition To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Serial Problem, Success Systems (Continued) Part SUCCESS SYSTEMS Trial Balance November 30 Debit Cash Accounts receivable Computer supplies Prepaid insurance Prepaid rent Office equipment Computer equipment Accounts payable Common stock Dividends Computer services revenue Wages expense Advertising expense Mileage expense Miscellaneous expense Repairs expense—Computer Totals Credit $ 68,996 15,800 3,350 2,400 3,500 10,000 25,000 $ 110,000 6,500 32,550 3,150 1,790 864 300 900 $142,550 $142,550 ©McGraw-Hill Companies, 2008 Solutions Manual, Chapter 111 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Reporting in Action — BTN 2-1 Best Buy reports $5,230,000,000 in liabilities for the fiscal year ended February 28, 2004 and $5,845,000,000 for fiscal year ended February 26, 2005 Best Buy reports $8,652,000,000 in assets for fiscal year ended February 28, 2004 and $10,294,000,000 for fiscal year ended February 26, 2005 Year ended February 28, 2004 Debt Ratio = $5,230 / $8,652 = 60.4% Year ended February 26, 2005 Debt Ratio = $5,845/$10,294 = 56.8% Best Buy employed less financial leverage in fiscal year 2005 In fiscal year 2004, 60.4% of its assets were financed by debt In 2005, only 56.8% of its assets were financed by debt Solution depends on the financial statements accessed Comparative Analysis — BTN 2-2 Best Buy Current year debt ratio: $5,845,000/$10,294,000 = 56.8% Prior year debt ratio: $5,230,000 / $8,652,000 = 60.4% Circuit City Current year debt ratio: $1,701,948 / $3,789,382 = 44.9% Prior year debt ratio: $1,506,565 / $3,730,526 = 40.4% Best Buy has the higher degree of financial leverage Best Buy’s debt ratio is markedly higher (56.8% vs 44.9%) than that of Circuit City This indicates that Best Buy carries more debt financing This also implies that Best Buy is trying to use non-owner financing to make more money for its owners This is fine provided Best Buy’s return does not decline below that of what it pays non-owners for use of their money— this is the main source of risk ©McGraw-Hill Companies, 2008 112 Financial Accounting, 4th Edition To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Ethics Challenge — BTN 2-3 This case involves a conflict between the need for efficiency and the need for control While it makes sense to take and process lunch orders quickly, this efficiency is being accomplished by a shortcut that greatly weakens control over cash receipts Cash could be received and lost or stolen because there would be no initial record of how much was received The assistant manager’s explanation about the head manager not arriving until o’clock suggests that the head manager doesn’t know about the proposed shortcut Thus, the new employee is faced with the dilemma of deciding whether to accept the assistant manager’s instructions, suggest to the assistant manager that the shortcut seems wrong, or to ask the head manager to confirm the instructions Each of these alternatives involves personal risk It is possible that the assistant manager does not understand the potential for fraud and abuse if this shortcut is used If the relationship between you and the assistant manager is such that you feel you can so, you should explain your understanding of how the shortcut could lead to the problems of inaccurate records for tax purposes, gathering inaccurate marketing information, and abuse by other employees who might not be as honest as you and the assistant manager If the assistant manager insists, you may want to work as instructed to get an idea of whether the shortcut is being abused by the assistant manager and perhaps to find out discreetly whether the head manager knows about it (Although, this behavior does involve personal risk of perceived collusion with the assistant manager.) If you conclude that the assistant manager is committing fraud, you should report the situation to the head manager as quickly as possible ©McGraw-Hill Companies, 2008 Solutions Manual, Chapter 113 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Communicating in Practice — BTN 2-4 MEMORANDUM To: From: Subject: Date: Lila Corentine Financial statements explanation The four major financial statements and their purposes are: Income statement describes a company’s revenues and expenses along with the resulting net income or loss over a period of time It helps explain how equity changes during a period due to earnings activities Statement of retained earnings explains changes in retained earnings due to net income (or net loss) and any dividends over a period of time Statement of cash flows identifies cash inflows (receipts) and outflows (payments) over a period of time It also explains how the cash balance on the balance sheet changed from the beginning to the end of a period Balance sheet describes a company’s financial position (assets, liabilities, and equity) at a point in time These financial statements are linked to each other across time Specifically, a balance sheet reports an organization’s financial position at a point in time The income statement, statement of retained earnings, and statement of cash flows report on performance over a period of time These three statements link balance sheets from the beginning to the end of a reporting period That is, they explain how the financial position of an organization changes from one point to another ©McGraw-Hill Companies, 2008 114 Financial Accounting, 4th Edition To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Taking It to the Net — BTN 2-5 The fiscal years’ net income or (loss) for Amazon are: 2004 = $588,451,000 2003 = $35,282,000 2002 = $(149,132,000) In each of the three years net cash is provided by operations as follows: 2004 = $566,560,000 2003 = $392,022,000 2002 = $174,219,000 In 2002, Amazon had a net loss of $149,132,000; and, in that same year, cash increased by $197,972,000 The reason its cash balance increased in 2002 was because operating and financing activities both provided cash for Amazon Its operating activities were positive because of adjustments to income to account for non-cash transactions Its financing cash flows were positive mainly due to the proceeds from exercise of stock options (Note that the investing activities used cash, mainly due to purchases of marketable securities.) Teamwork in Action — BTN 2-6 The following sample solution gives a summary outline of what a minimum report needs to include Assume a team member selects assets: Category: Assets a Increases (decreases) in assets are debits (credits) to asset accounts Debit means left side, credit means right side The normal side of an account refers to the side where increases are recorded For assets, this is the debit, or left, side b Owner investment of $10,000 cash in exchange for common stock c Assets = Liabilities + Common Stock – Dividends + Revenues – Expenses + $10,000 = $0 + $10,000 – $0 + $0 – $0 An owner’s investment has no effect on the income statement, but it does increase the cash flows from financing by $10,000 on the statement of cash flows (this increases its net cash flow) d Paid rent expense with $2,000 cash e Assets - $2,000 = Liabilities + Common Stock – Dividends + Revenues – Expenses = $0 + $0 – $0 + $0 – $2,000 An expense paid in cash will decrease net income on the income statement and decrease operating cash flows on the statement of cash flows ©McGraw-Hill Companies, 2008 Solutions Manual, Chapter 115 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com BusinessWeek Activity — BTN 2-7 XBRL tags allow analysis that can help regulators find possible problems or errors in reported data, and they can allow investors to visit a company’s website and create a spreadsheet with information that is of interest to them They can then analyses that will allow them to compare companies to determine opportunities Many companies not quite understand XBRL and its potential In addition, it has been difficult to create standard XBRL tags across industries Finally, many companies are dealing with other reporting issues – such as Sarbanes-Oxley – and the creation of the XBRL system can be time-consuming and costly Many companies can use XBRL to compare themselves to other companies to see how they measure up to their competitors They can also maintain a watch on key ratios (such as return on assets and the debt ratio) ©McGraw-Hill Companies, 2008 116 Financial Accounting, 4th Edition To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Entrepreneurial Decision — BTN 2-8 MARTIN MUSIC SERVICES Balance Sheet December 31, 2008 Assets Liabilities Cash $ 3,600 Accounts payable $ 2,200 Accounts receivable 9,600 Unearned lesson fees 15,600 Prepaid insurance 1,500 Total liabilities 17,800 Prepaid rent 9,400 Store supplies 6,600 Equity Equipment 50,000 Total equity 62,900 Total assets $80,700 Total liabilities and equity $80,700 Debt ratio = Total liabilities / Total assets = $17,800 / $80,700 = 22% Return on assets = Net income/Average assets = $40,000/$80,700* = 50% *Ending balance is used per instructions The prospects of a bank loan are likely to be good (i) The debt ratio indicates that 78% of the company’s funding is from equity Also, there are no debt obligations requiring periodic payments This implies low risk (ii) The level of return on assets is very high This implies good return Overall, given the information and the assumption that current performance will continue into the future, the prospects of a bank loan are good Note: The loan does carry some risk—fueling this risk are (i) poor recordkeeping, (ii) lack of information on growth potential, and (iii) a much higher pro forma debt ratio—that is, if the loan is granted, the debt ratio will jump to 43%, computed as: ($17,800 + $30,000) / ($80,700 + $30,000) ©McGraw-Hill Companies, 2008 Solutions Manual, Chapter 117 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Entrepreneurial Decision — BTN 2-9 There are several issues that Warren Brown should consider If he chooses to contribute his own funds for the expansion, he will be risking his own savings, but he will not have the expense of interest payments, nor will he have the risk of the inability to repay his loan If he chooses to borrow, he will have interest and loan payments to make, and he will have more risk (as measured by his debt ratio) If he can pay the interest and loan payments, it may be to his advantage to borrow, as long as his return on assets is high enough Hitting the Road — BTN 2-10 Findings will vary It is advisable that the instructor obtains a few classified sections from newspapers that were published over the period of the assignment If student reports lack responses for question 2, it is informative and motivating to bring these (accounting-related job opportunities) sections to class when discussing or returning student reports as many students are not accounting majors Global Decision — BTN 2-11 An analysis of return on assets suggests that Best Buy (9.6%) yields the greatest return on assets, while Circuit City (1.6%) yields the lowest return An analysis of the debt ratio suggests that Dixons (62.1%) presents the greatest risk, while Circuit City (44.9%) presents the least risk Either Dixons or Best Buy would appear to have some consideration for additional investment Best Buy has the highest profitability, and has a risk level between the other two Dixons’ return is close to that of Best Buy, but its risk is the highest Circuit City has the lowest risk of the three companies, but it has a markedly low profitability ratio compared to the other two competitors ©McGraw-Hill Companies, 2008 118 Financial Accounting, 4th Edition ... a liability by the same amount (no goods or services were provided to generate revenue) ©McGraw-Hill Companies, 2008 Solutions Manual, Chapter 63 To download more slides, ebook, solutions and... Expense is understated by $2,260 $6,500 credit Cash Cash is understated by $6,500 Common Stock Common Stock is understated by $10,900 Dividends Dividends is understated by $10,900 Prepaid Insurance... understated by $5,265 g $1,390 debit to Store $1,390 credit Store Supplies Store Supplies is understated by $1,390 f Supplies is not posted ©McGraw-Hill Companies, 2008 Solutions Manual, Chapter