(5 min.) CP 2-1
Hickman’s payment was not an expense.
Hickman acquired an asset, Equipment, because the computer is an economic resource of the business.
(5 min.) CP 2-2
a. $12,800 b. $ 3,000 c. $56,300 d. $ 500
e. $ 5,800 [Service revenue of $8,500 ($5,500 + $3,000) – Total expenses of $2,700 ($1,100 +
$1,200 + $400) = Net income of $5,800] e. $ 500
(5-10 min.) CP 2-3
Cash Accounts Receivable 30,000 4,000 6,000 2,000 Bal. 6,000 Bal. 28,000 (5 min.) CP 2-4
Increased total assets: May 1 (Cash)
May 1 (Medical supplies)
May 3 (Cash, Accounts receivable) Increased total liabilities: May 1 (Accounts payable) Decreased total assets: May 2 (Cash) (10 min.) CP 2-5
Journal
DATE ACCOUNT TITLES AND EXPLANATION DEBIT CREDIT Apr. 15 Cash…………………………………… 50,000 Note Payable……………………… 50,000 Borrowed money from the bank. 22 Accounts Receivable………………. 9,000 Service Revenue…………………. 9,000 Performed service on account. 28 Cash…………………………………… 6,000 Accounts Receivable……………. 6,000 Received cash on account. 29 Utilities Expense……………………. 600 Accounts Payable……………….. 600 Received utility bill. 30 Salary Expense……………………… 3,000 Cash………………………………… 3,000 Paid salary expense.
57 Chapter 2 Transaction Analysis
30 Interest Expense……………………. 300 Cash………………………………… Paid interest expense.
(10-15 min.) CP 2-6
Req. 1
Journal
DATE ACCOUNT TITLES AND EXPLANATION DEBIT Supplies……………………………….. 2,000 Accounts Payable………………… Purchased supplies on account. Accounts Payable…………………… 500 Cash………………………………… Paid cash on account.
Req. 2
Accounts Payable 500 2,000 Bal. 1,500
Req. 3
Biaggi’s business owes $1,500, as shown in the Accounts Payable account. (10-15 min.) CP 2-7
Req. 1
Req. 2
DATE
Journal
ACCOUNT TITLES AND EXPLANATION
Accounts Receivable……………….. Service Revenue………………….. Performed service on account.
Cash……………………………………. Accounts Receivable…………….. Received cash on account.
DEBIT
1,200
500
300
CREDIT
2,000
500
CREDIT
1,200
500
Bal. Req. 3
a. The Center earned b. Total assets
Cash 500 500 Accounts Receivable 1,200 500 Bal. 700 Service Revenue 1,200 Bal. 1,200 $1,200: Service Revenue
$1,200: Cash………………….. $ 500
Accounts receivable. 700 Total assets…………. $1,200 58 Financial Accounting 6/e Solutions Manual
(10 min.) CP 2-8
Old Navy Trial Balance December 31, 20X8
ACCOUNT
Cash……………………….…... Other assets………………….. Accounts payable…………… Other liabilities………………. Stockholders’ equity……….. Revenues……………………... Expenses……………………... Total……………………….……
Old Navy’s net income: $6 million ($30 – $24)
(10 min.) CP 2-9
1. Total assets
= $53,800 ($33,300 + $2,000 + $500 +
$18,000)
2. Total liabilities = $100
3. Total stockholders’ equity = $53,700 ($53,800 – $100) 4. Net income
= $5,800 ($8,500 – $1,100 – $1,200 – $400)
(10 min.) CP 2-10 1. Total debits = $121,600 ($58,600 + $81,000 – $18,000)
Total credits = $ 58,600 Difference
= $ 63,000 ($121,600 – $58,600)
$63,000 / 9 = $7,000 (an integer), which suggests either a transposition or a slide 2. Total debits
Difference
= $76,600 ($58,600 + $20,000 – $2,000)
Total credits = $58,600
= $18,000 ($76,600 – $58,600)
receivable)
3. Total debits
Difference
= $56,600 ($58,600 – $ 2,000)
Total credits = $60,600 ($58,600 + $ 2,000)
= $ 4,000 ($60,600 – $56,600)
$4,000 / 2 = $2,000 (original amount of accounts receivable) $18,000 / 9 = $2,000 (original amount of accounts
DEBIT
CREDIT
$ 1 2 2 30 ___ $35 Millions $ 2 9 24 $35 59 Chapter 2 Transaction Analysis
(5 min.) CP 2-12
Cash 250,000 Accounts Payable
100,000
Computer Equipment 100,000 Common Stock
Total debits = $350,000 ($250,000 + $100,000)
Total credits = $350,000 ($100,000 + $250,000)
Exercises
250,000 (10-15 min.) E 2-1
TO: Home Office
FROM: Store Manager
During the first week, I borrowed $320,000 on a note payable. I used the store’s beginning cash plus the borrowed money to purchase land, a building, copy equipment, and supplies. After all these transactions, the store’s balance sheet appears as follows:
Kinko’s
Oklahoma City Store Balance Sheet
Date
ASSETS
LIABILITIES
Cash $ 80,000* Note payable $320,000 Supplies 10,000 Copy equipment 60,000 STOCKHOLDERS’ EQUITY Land 90,000 Common stock 40,000 Building 120,000 Total liabilities and ________ Total assets $360,000 stockholders’ equity $360,000
_____
*$40,000 + $320,000 – $90,000 – $120,000 – $60,000 – $10,000 = $80,000
(5-10 min.) E 2-2
a. Issuance of stock Revenue transaction
b. Purchase of asset on account Borrow money
c. Purchase of asset for cash Sale of asset for cash
Collection of an account receivable d. Payment of dividends to owners Expense transaction e. Pay a liability
60 Financial Accounting 6/e Solutions Manual
(10-20 min.) E 2-4
Req. 1
Analysis of Transactions
ASSETS = LIABILITIES + STOCKHOLDERS’ EQUITY
Accounts Medical Accounts Note Common Retained
Date Cash + Receivable + Supplies + Land = Payable + Payable + Stock + Earnings Oct. 6 40,000 40,000
9 (30,000) 30,000 12 2,000 2,000 15 Not a transaction of the business. 15-31 4,000 4,000 8,000 15-31 (1,400) (1,400)
(1,000) (1,000) (300) (300) 31 500 (500) 31 10,000 10,000 31 (1,500) (1,500)
Bal. 20,300 4,000 1,500 30,000 500 10,000 40,000 5,300
55,800 55,800
Type of Stockholders’ Equity Transaction Issued stock
Service revenue Salary expense Rent expense Utilities expense
Chapter 2 Transaction Analysis 61
(continued) E 2-4
Req. 2
a. $55,800
b. $4,000
c. $10,500 ($500 + $10,000)
d. $45,300 ($55,800 – $10,500, or $40,000 + $5,300)
e. $5,300 (Revenue, $8,000 minus total expenses of $2,700, equals net income, $5,300.)
62 Financial Accounting 6/e Solutions Manual
(10-15 min.) E 2-5
DATE Oct. 6 9 12 15 15-31 15-31 31 31 31
Journal
ACCOUNT TITLES AND EXPLANATION
Cash……………………………………….. Common Stock………………………. Issued stock to owner.
Land………………………………………... Cash……………………………………. Purchased land.
Medical Supplies………………………… Accounts Payable…………………… Purchased supplies on account.
Not a transaction of the business.
Cash……………………………………….. Accounts Receivable…………………… Service Revenue……………………..
Performed service for cash and on account.
Salary Expense………………………….. Rent Expense…………………………….. Utilities Expense………………………… Cash……………………………………. Paid expenses.
Cash……………………………………….. Medical Supplies…………………….. Sold supplies.
Cash……………………………………….. Note Payable………………………….. Borrowed money.
Accounts Payable………………………. Cash……………………………………. Paid on account.
DEBIT
40,000
30,000
2,000
4,000 4,000
1,400 1,000 300
500
10,000
1,500
CREDIT
40,000
30,000
2,000
8,000
2,700
500
10,000
1,500
(10-15 min.) E 2-6
Req. 1
Total assets = $145 million ($100 + $60 – $55 + $35 + $26 – $21) Req. 2
Company owes $41 million [$60 – $55 + $35 + $22 – $21] Req. 3
Net income = $4 million ($26 – $22)
Chapter 2 Transaction Analysis 63
(10-20 min.) E 2-7
Req. 1 (journal entries)
Journal
DATE
ACCOUNT TITLES AND EXPLANATION
Aug. 1
Cash…………………………………………… Common Stock…………………………... Issued common stock to owner.
2 Office Supplies……………………………… Accounts Payable……………………….. Purchased office supplies on account.
4 Land…………………………………………… Cash……………………………………….. Paid cash for land.
6 Cash…………………………………………… Service Revenue………………………… Performed services for cash.
9 Accounts Payable…………………………... Cash……………………………………….. Paid cash on account.
17 Accounts Receivable………………………. Service Revenue………………………… Performed service on account.
23 Cash…………………………………………… Accounts Receivable…………………… Received cash on account.
31 Salary Expense……………………………… Rent Expense………………………………... Cash………………………………………..
Paid cash expenses.
(continued) E 2-7
Req. 2
Ending cash = $6,800
($19,500 – $14,000 + $2,000 – $100 + $900 – $1,500)
Expects to collect on account = $300 ($1,200 – $900)
Total liabilities = $700 ($800 – $100)
Net income (profit) = $1,700 ($2,000 + $1,200 – $1,000 – $500)
64 Financial Accounting 6/e Solutions Manual
DEBIT CREDIT
19,500
19,500
800
800
14,000
14,000
2,000
2,000
100
100
1,200
1,200
900
900
1,000 500
1,500
(20-30 min.) E 2-8
Req. 1 Aug. 1 6 23 Aug. 31 Aug. 2 Aug. 31 Aug. 9 Accounts Payable 100 Aug. 2 Aug. 31 Service Revenue Aug. 6 17 Aug. 31 Rent Expense 500 500 800 700
2,000 1,200 3,200
Aug. 31 Aug. 31
Common Stock Aug. 1 Aug. 31 Salary Expense 1,000 1,000
19,500 19,500
Office Supplies 800 800
Aug. 4 Aug. 31 Land 14,000 14,000 Cash 19,500 Aug. 4 2,000 9 900 31 6,800
14,000 100 1,500
Aug. 17 Aug. 31
Accounts Receivable 1,200 Aug. 23 300
900
Aug. 31 Aug. 31 (continued) E 2-8 Req. 2
Coaxial Electronic Systems, Inc.
Trial Balance August 31, 20X6
ACCOUNT
Cash…………………………... Accounts receivable……….. Office supplies……………… Land…………………………... Accounts payable………….. Common stock……………… Service revenue…………….. Salary expense……………… Rent expense………………... Total…………………………...
DEBIT $ 6,800 300 800 14,000
1,000 500 $23,400 CREDIT
$ 700 19,500 3,200
$23,400 Req. 3
Total assets ($6,800 + $300 + 800 + $14,000)…….. $21,900 Total liabilities…………………………………………. (700) Total stockholders’ equity ($21,900 – $700)……… $21,200
Chapter 2 Transaction Analysis 65
(10-15 min.) E 2-9
Cash………………………………….. 10,000 Common Stock………………….. Issued common stock. Cash………………………………….. 7,000 Note Payable…………………….. Borrowed money; signed note payable. Land………………………………….. 31,000 Cash……………………………….. Note Payable…………………….. Purchased land by paying cash and signing a note payable. Supplies……………………………… 600 Accounts Payable………………. Purchased supplies on account. Cash………………………………….. 100 Supplies…………………………... Sold supplies for cash. Equipment…………………………… 6,000 Cash……………………………….. Paid cash for equipment. Accounts Payable………………….. 300 Cash……………………………….. Paid cash on account.
Cash balance = $2,800 ($10,000 + $7,000 – $8,000 + $100 – $6,000 – $300) Company owes $30,300 ($7,000 + $23,000 + $600 – $300) (10-20 min.) E 2-10
Req. 1
Whirlpool Appliance Service
Trial Balance June 30, 20X6
ACCOUNT
Cash…………………………... Accounts receivable……….. Building………………………. Land…………………………... Accounts payable………….. Note payable………………… Common stock……………… Retained earnings………….. Dividends…………………….. Service revenue……………..
66 Financial Accounting 6/e Solutions Manual
DATE
1. 2. 3. 4. 5. 6. 7.
Journal
ACCOUNT TITLES AND EXPLANATION
DEBIT CREDIT
10,000
7,000
8,000 23,000
600
100
6,000
300
DEBIT $ 9,000 15,500 40,250 29,000
6,000
CREDIT
$ 4,300 13,000 48,800 21,350*
22,000
Salary expense……………… 8,000 Utilities expense……………. 1,400
Delivery expense…………… 300 Total…………………………...
$109,450 $109,450
*Total debits………………………………………… $109,450 Total credits, excluding retained earnings…… (88,100) Retained earnings………………………………… $ 21,350
(continued) E 2-10
Req. 2
Whirlpool Appliance Service
Income Statement
Month Ended June 30, 20X6
Service revenue………………... $22,000 Salary expense………………… $8,000 Utilities expense……………….. 1,400 Delivery expense………………. 300
Total expenses…………………. 9,700 Net income………………………
$12,300
(15-25 min.) E 2-11
Car Connection, Inc.
Trial Balance December 31, 20X3
ACCOUNT
DEBIT CREDIT
Cash…………………………... $ 4,600* Accounts receivable……….. 12,600* Inventory……………………... 17,000 Supplies……………………… 600 Land…………………………... 55,000
Accounts payable………….. $13,100* Common stock……………… 48,300* Sales revenue………………..
35,700
Cost of goods sold…………. 3,900 Salary expense……………… 1,700 Rent expense……………….. 800
Utilities expense……………. 900* _______ Total…………………………...
$97,100 $97,100
_____
*Explanations:
Cash: $4,200 + $400 = $4,600
Accounts Receivable: $13,000 – $400 = $12,600
Accounts Payable: $12,000 + $1,000 – $100 + $200 = $13,100 Common Stock: $47,900 + $400 = $48,300 Utilities Expense: $700 + $200 = $900
Chapter 2 Transaction Analysis 67
(5-15 min.) E 2-12
(a) Bal. (c) Bal. (e) (g) Bal.
Cash 12,500 (b) (d) (e) (g) 6,800 Office Supplies 800 800 Accounts Payable 400 (c) Bal. Dividends 2,000 2,000 Salary Expense 1,800 1,800 1,500 1,800 400 2,000
(f) Bal.
Accounts Receivable 8,300 8,300 Office Furniture 9,000 9,000 Common Stock (a) Bal. Service Revenue (f) Bal. Rent Expense 1,500 1,500
800 400
(a) Bal. 21,500 21,500 8,300 8,300 (d) Bal. (10-20 min.) E 2-13
Req. 1
(b) Bal. LaVell Oxford, Attorney
Trial Balance July 31, 20X8
ACCOUNT
Cash…………………………... Accounts receivable……….. Office supplies……………… Office furniture……………… Accounts payable………….. Common stock……………… Dividends…………………….. Service revenue…………….. Salary expense……………… Rent expense……………….. Total…………………………...
Req. 2
DEBIT $ 6,800 8,300 800 9,000
2,000
1,800 1,500 $30,200 CREDIT
$ 400 21,500
8,300
$30,200 68 Financial Accounting 6/e Solutions Manual
The business performed well during July. The result of operations was net income of $5,000, as shown by the income statement accounts:
Service revenue…………………. $ 8,300 Salary expense……….. $1,800 Rent expense…………. 1,500 Total expenses……………….. (3,300) Net income……………………….. $ 5,000
(20-30 min.) E 2-14
Reqs. 1 and 3
Cash Accounts Receivable Dec. 2 7,000 Dec. 2 500 Dec. 18 1,700 9 800 3 3,000 12 200 Bal. 4,100 Supplies Equipment Dec. 5 300 Dec. 3 3,000 Furniture Accounts Payable Dec. 4 3,600 Dec. 4 3,600 5 300 Bal. 3,900
Common Stock Dividends Dec. 2 7,000 Service Revenue Rent Expense Dec. 9 800 Dec. 2 500 18 1,700 Bal. 2,500 Utilities Expense Salary Expense Dec. 12 200 (continued) E 2-14
Req. 2
Journal
DATE ACCOUNT TITLES AND EXPLANATION DEBIT CREDIT
Dec. 2 Cash…………………………………….. 7,000 Common Stock…………………….. 7,000 2 Rent Expense…………………………. 500 Cash…………………………………. 500 3 Equipment……………………………... 3,000 Cash…………………………………. 3,000
Chapter 2 Transaction Analysis 69
4 Furniture……………………………….. 3,600
Accounts Payable…………………. 5 Supplies………………………………... 300
Accounts Payable…………………. 9 Cash…………………………………….. 800
Service Revenue…………………... 12 Utilities Expense……………………… 200
Cash…………………………………. 18 Accounts Receivable………………… 1,700
Service Revenue…………………...
(continued) E 2-14
Req. 4
Matthew Rogers, Certified Public Accountant, P.C.
Trial Balance December 18, 20XX
ACCOUNT
DEBIT CREDIT Cash…………………………... $ 4,100 Accounts receivable……….. 1,700 Supplies……………………… 300 Equipment…………………… 3,000 Furniture……………………... 3,600
Accounts payable………….. $ 3,900 Common stock……………… 7,000
Dividends…………………….. — Service revenue…………….. 2,500
Rent expense……………….. 500 Utilities expense……………. 200
Salary expense……………… — Total…………………………...
$13,400 $13,400
(20-40 min.) E 2-15
a. Net income for March – Given as follows:
Retained Earnings
Feb. 28 Bal. 7,000 March March dividends 15,800 net income X = $19,300 Mar. 31 Bal. 10,500
$7,000 + X – $15,800 = $10,500
X = $19,300
b. Total cash paid during March:
Cash
Feb. 28 Bal. 11,600
70 Financial Accounting 6/e Solutions Manual
3,600
300
800
200
1,700
March receipts Mar. 31 Bal.
81,200 March payments 5,000 X = $87,800
$11,600 + $81,200 – X = $ 5,000 X = $87,800
(continued) E 2-15
c. Cash collections from customers during March:
Accounts Receivable
Feb. 28 Bal. 24,300 March sales on account 49,400 March collections X = $47,000 Mar. 31 Bal. 26,700
$24,300 + $49,400 – X = $26,700 X = $47,000
d. Cash paid on a note payable during March:
Note Payable Feb. 28 Bal. 13,900 March March X =17,500 payments on note X new borrowing 25,000 Mar. 31 Bal. 21,400
$13,900 + $25,000 – X = $21,400 X = $17,500
(20-30 min.) E 2-16
Req. 1
Road Runner, Inc. Trial Balance December 31, 20X5
Cash…………………………... Accounts receivable……….. Supplies……………………… Land…………………………... Accounts payable………….. Note payable………………… Common stock……………… Retained earnings………….. Service revenue…………….. Salary expense……………… Advertising expense………. Totals………………………….
Out of balance by $3,300
Chapter 2 Transaction Analysis 71
$ 4,200 7,200 800 34,000
3,400 900 $50,500
$ 5,800 5,000 20,000 7,300 9,100
_______ $47,200
The correct balance of Accounts Receivable is $3,900 ($7,200 – $3,300). After this correction, total debits will be $47,200 ($50,500 – $3,300), the same as total credits. (continued) E 2-16
Req. 2
Road Runner, Inc. Trial Balance December 31, 20X5
Cash ($4,200 – $400)…………………… Accounts receivable
($7,200 – $3,300 + $7,000)………….. Supplies………………………………….. Land ($34,000 + $80,000)……………… Accounts payable ($5,800 + $2,000)… Note payable ($5,000 + $80,000)……... Common stock………………………….. Retained earnings……………………… Service revenue ($9,100 + $7,000)…… Salary expense ($3,400 + $400)……… Advertising expense ($900 + $2,000). Totals……………………………………...
Req. 3
a. Total assets = $129,500 ($3,800 + $10,900 + $800 + $114,000).
b. Road Runner is profitable, as indicated by the excess of revenue ($16,100) over total
expenses ($6,700 = $3,800 + $2,900).
(10-15 min.) E 2-17
San Francisco:
Income statement
Medical expense…………..
Balance sheet
Cash………………………… Accounts payable…………
Bay Area:
Income statement
Service revenue…………..
Balance sheet
Cash………………………… Accounts receivable……..
72 Financial Accounting 6/e Solutions Manual
$ 3,800
10,900 800 114,000
$ 7,800 85,000 20,000 7,300 16,100 3,800 2,900 $136,200 $136,200
June
$40,000
June 30 $55,000 40,000
June $40,000
June 30 $ -0-
40,000
July
$ -0-
July 31 $23,000* 8,000**
July
$ -0-
July 31 $32,000 8,000**
Explanation:
San Francisco’s expense is Bay Area’s revenue.
San Francisco’s cash payment is Bay Area’s cash receipt.
San Francisco’s account payable is Bay Area’s account receivable. __________
*$55,000 – $32,000 = $23,000 **$40,000 – $32,000 = $ 8,000
Chapter 2 Transaction Analysis 73
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