Solutions Manual For College Accounting, Chapters 1-27, 21st Edition. James Heintz Robert Parry by digitaldownload87

CHAPTER 1

Exercise 1-1A 1.

Owners

a. Whether the firm can pay its bills on time

Managers

b. Detailed, up-to-date information to measure business performance (and plan for future operations)

Creditors

c. To determine taxes to be paid and whether other regulations are met

Government agencies

d. The firm's current financial condition

Exercise 1-2A Order 2

Accounting Process Recording

Definition entering financial information into the accounting system

Summarizing

aggregating many similar events to provide information that is easy to understand

Reporting

telling the results

Analyzing

looking to see what events have taken place and thinking about how these affect the business

Interpreting

deciding the importance of information on the various reports

Classifying

sorting and grouping like items together

CHAPTER 1

Exercise 1-1B Users

Information

Owners (present and future):

firm's profitability and current financial condition

Managers:

detailed, up-to-date information about the business to measure performance

Creditors (present and future):

firm’s profitability, debt outstanding, and assets that could b be used to secure debt

Government agencies:

firm’s profitability, cash flows, and overall financial condition

Exercise 1-2B Letter

Accounting Process

Definition

Analyzing

a. Telling the results

Recording

Classifying

b. Looking at events that have taken place and thinking about how they affect the business

Summarizing

c. Deciding the importance of the various reports

Reporting

Interpreting

d. Aggregating many similar events to provide information that is easy to understand e. Sorting and grouping like items together f.

Entering financial information into the accounting system

MANAGING YOUR WRITING The purpose of this writing assignment is to give the students an opportunity to dream about the type of business they might enjoy. In the current economy, most opportunities are with smaller, start-up companies. The student should demonstrate an understanding of the different forms of ownership and describe the advantages and disadvantages of each form. Further, they should demonstrate an understanding of the different types of businesses: service, merchandising, and manufacturing.

CHAPTER 2 ANALYZING TRANSACTIONS: THE ACCOUNTING EQUATION REVIEW QUESTIONS 1. It is necessary to distinguish between business assets and liabilities and nonbusiness assets and liabilities of a single proprietor because, according to the business entity concept, nonbusiness assets and liabilities are not included in the business entity’s accounting records. These distinctions allow the owner to make decisions based on the financial condition and results of the business apart from nonbusiness activities. 2. The six major elements of the accounting equation are listed below. a. Assets are items owned by a business that will provide future benefits. b. Liabilities are items owed to another business. c. Owner’s equity is the amount by which the business assets exceed the business liabilities. Other terms used for owner’s equity include net worth and capital. d. Revenues represent the amount a business charges customers for products sold or services performed. e. Expenses represent the decrease in assets (or increase in liabilities) as a result of efforts made to produce revenues. f. Withdrawals, or drawing, reduce owner’s equity as a result of the owner taking cash or other assets out of the business for personal use. 3. The three basic questions that must be answered when analyzing the effects of a business transaction on the accounting equation are as follows: a. What happened? b. Which accounts are affected? c. How is the accounting equation affected? 4. The function of an income statement is to report the profitability of business operations for a specific period of time. 5. The function of a statement of owner’s equity is to report the investments and withdrawals by the owner and the profits and losses generated through operating activities for a specific period of time. 6. The function of a balance sheet is to report the assets, liabilities, and owner’s equity on a specific date. It is called a balance sheet because it confirms that the accounting equation is in balance. 7. The three basic phases of the accounting process are listed below. Input—Business transactions are used as input to the accounting process. Processing—The transactions are processed by recognizing their effects on assets, liabilities, owner’s equity, revenues, and expenses. Output—Output from the accounting process is provided in the form of financial statements.

CHAPTER 2

Exercise 2-1A Item

Account

Classification

Money in bank

Cash

Office supplies

Supplies

Money owed

Accounts Payable

Office chairs

Office Furniture

Net worth of owner

John Smith, Capital

Money withdrawn by owner

John Smith, Drawing

Money owed by customers

Accounts Receivable

Exercise 2-2A Assets

Liabilities

Owner’s Equity

$44,000

$27,000

$17,000

$32,000

$18,000

$14,000

$27,000

$ 7,000

$20,000

Exercise 2-3A Assets

Liabilities

Owner’s Equity

(a)

27,000

Bal.

27,000

(b)

7,500

Bal.

34,500

7,500

27,000

(c)

(1,600)

27,000

1,600 Bal.

34,500

7,500

(d)

(2,300)

Bal.

32,200

5,200

27,000

31,586)

Total Assets

Bal.

(400)

$31,586

5,200

(1,000)

Total Liabilities Capital Drawing Revenues Expenses Total Liabilities and Owner’s Equity

27,000

400)

(k)

$ 5,200 27,000 (1,000) 2,250 (1,864) $31,586

2,250

(1,864)

(1,200)

(j)

750

750)

(i)

(1,000)

(h)

Expenses

(64)

–

(64)

1,500

Revenues

(600)

Drawing

(600)

–

(f)

27,000

Capital

1,500)

(e)

5,200

Liabilities

32,200)

Owner’s Equity

Bal. from E 2-3A (d)

Assets

Exercise 2-4A

Wages expense

Service fees

Telephone exp.

Rent expense

Service fees

Description

CHAPTER 2 7

CHAPTER 2

Exercise 2-5A Account

Classification

Financial Statement

Cash

Rent Expense

Accounts Payable

Service Fees

Supplies

Wages Expense

Ramon Martinez, Drawing

SOE

Ramon Martinez, Capital

SOE, BS

Prepaid Insurance

Accounts Receivable

Exercise 2-6A Betsy Ray’s Accounting Service Statement of Owner’s Equity For Month Ended June 30, 20-Betsy Ray, capital, June 1, 20--

$20,000

Investment during June

20,000

Total investment

$20,000

Net income for June Less withdrawals for June Increase in capital Betsy Ray, capital, June 30, 20--

$10,000 8,000 2,000 $22,000

CHAPTER 2

Exercise 2-7A Betsy Ray’s Accounting Service Statement of Owner’s Equity For Month Ended June 30, 20-Betsy Ray, capital, June 1, 20--

$20,000)

Investment during June

20,000)

Total investment

$20,000)

Less: Net loss for June

$3,000

Withdrawals for June

8,000

Decrease in capital

(11,000)

Betsy Ray, capital, June 30, 20--

$ 9,000)

Problem 2-8A Assets

Liabilities

Owner’s Equity

$26,960

$ 7,550

$19,410

$35,500

$10,910

$24,590

$32,040

$12,910

$19,130

Problem 2-9A: See page 10 Problem 2-10A Jay Pembroke Income Statement For Month Ended April 30, 20-Revenues: Service fees

$3,300

Expenses: Rent expense Net income

750 $2,550

300

18,000

Cash Accounts Receivable Office Supplies Prepaid Insurance Total Assets

$12,950 2,000 4,600 1,200 $20,750

Accounts Payable Jay Pembroke, Capital Jay Pembroke, Drawing Service Fees Rent Expense Total Liabilities and Owner’s Equity

3,300

750

– Expenses

(Earnings) + Revenues

$ 300 18,000 (100) 3,300 (750) $20,750

100

1,200

100 4,600

(2,300)

2,600

18,000

(100)

2,000

1,200

(Owner’s Investment) J. Pembroke, J. Pembroke, + Capital – Drawing

(Amts. Owed) Accounts Payable

Owner’s Equity

Liabilities

12,950

(750)

(f)

Prepaid Insurance

(g)

(2,300)

(e)

2,000

4,600

(Items Owned) Accounts Office + Receivable + Supplies

Assets

Bal.

1,300

(d)

(2,000)

(b)

(1,200)

18,000

(a)

Cash

Problem 2-9A

Rent exp.

Service fees

Description

10 CHAPTER 2

CHAPTER 2

Problem 2-11A Jay Pembroke Statement of Owner’s Equity For Month Ended April 30, 20-Jay Pembroke, capital, April 1, 20--

$20,000

Investment during April

18,000

Total investment

$18,000

Net income for April

$2,550

Less withdrawals for April

100

Increase in capital

2,450

Jay Pembroke, capital, April 30, 20--

$20,450

Problem 2-12A Jay Pembroke Balance Sheet April 30, 20-Assets Cash

Liabilities $12,950

Accounts payable

300

Accounts receivable

2,000

Office supplies

4,600

Owner’s Equity

Prepaid insurance

1,200

Jay Pembroke, capital

20,450

Total liab. & owner’s equity

$20,750

Total assets

$20,750

CHAPTER 2

Exercise 2-1B Account

Classification

Cash

Accounts Payable

Supplies

Bill Jones, Drawing

Prepaid Insurance

Accounts Receivable

Bill Jones, Capital

Exercise 2-2B Assets

Liabilities

Owner’s Equity

$25,000

$20,000

$ 5,000

$30,000

$15,000

$20,000

$10,000

Exercise 2-3B Assets

Liabilities

Owner’s Equity

(a)

30,000

Bal.

30,000

(b)

4,500

Bal.

34,500

4,500

30,000

(c)

1,600

30,000

(1,600) Bal.

34,500

4,500

(d)

(2,000)

Bal.

32,500

2,500

30,000

Total Assets

Bal.

34,032)

$34,032

2,500

800

Total Liabilities Capital Drawing Revenues Expenses Total Liabilities and Owner’s Equity

30,000

500)

(k)

(500)

(j)

$ 2,500 30,000 (800) 3,900 (1,568) $34,032

3,900

1,568

500

900)

(i)

900

(800)

(h)

800

(68)

Expenses

1,000

3,000

Revenues

(1,000)

Owner’s Equity Drawing

(f)

30,000

Capital

3,000)

(e)

2,500

Liabilities

32,500)

Bal. from E 2-3B (d)

Assets

Exercise 2-4B

Wages expense

Service fees

Telephone exp.

Rent expense

Service fees

Description

CHAPTER 2 13

CHAPTER 2

Exercise 2-5B Account

Classification

Financial Statement

Cash

Rent Expense

Accounts Payable

Service Fees

Supplies

Wages Expense

Amanda Wong, Drawing

SOE

Amanda Wong, Capital

SOE, BS

Prepaid Insurance

Accounts Receivable

Exercise 2-6B Lopez Financial Consulting Statement of Owner’s Equity For Month Ended June 30, 20-Efran Lopez, capital, June 1, 20--

$15,000)

Investment during June

15,000)

Total investment

$15,000)

Net income for June

$6,000

Less withdrawals for June

7,000

Decrease in capital Efran Lopez, capital, June 30, 20--

(1,000) $14,000)

Cash Accounts Receivable Office Supplies Prepaid Insurance Total Assets

$11,300 1,000 3,800 1,000 $17,100

Accounts Payable David Segal, Capital David Segal, Drawing Service Fees Rent Expense Total Liabilities and Owner’s Equity

200

15,000

150

1,000

11,300

Bal.

3,800

(150)

(g)

1,000

150

(650)

(f)

(1,800)

(e)

1,000

1,700

(d)

1,000

(1,000)

2,000

15,000

(Owner’s Investment) D. Segal, D. Segal, Capital – Drawing

2,700

650

– Expenses

(Earnings) Revenues

$ 200 15,000 (150) 2,700 (650) $17,100

Owner’s Equity

3,800

(1,800)

Liabilities (Amts. Owed) Accounts Payable

(b)

Prepaid Insurance

15,000

(Items Owned) Accounts Office + Receivable + Supplies

Assets

(a)

Cash

Problem 2-9B

Rent expense

Service fees

Description

16 CHAPTER 2

CHAPTER 2

Problem 2-11B David Segal Statement of Owner’s Equity For Month Ended October 31, 20-David Segal, capital, October 1, 20--

$15,000

Investment during October

15,000

Total investment

$15,000

Net income for October

$2,050

Less withdrawals for October

150

Increase in capital

1,900

David Segal, capital, October 31, 20--

$16,900

Problem 2-12B David Segal Balance Sheet October 31, 20-Assets Cash

Liabilities $11,300

Accounts receivable

1,000

Office supplies

3,800

Prepaid insurance

1,000

Total assets

$17,100

Accounts payable

200

Owner’s Equity David Segal, capital

16,900

Total liab. & owner’s equity

$17,100

CHAPTER 2

MANAGING YOUR WRITING The students should focus on the following differences: 1. An expense is an outflow of assets or increase in liabilities as a result of the efforts made to earn revenues. A withdrawal is an outflow of assets for the owner’s personal use. The withdrawal is not related to the earning process. 2. A withdrawal that increases a liability would be unusual. Expenses often increase liabilities. The student should focus on the following similarity: 1. Expenses and withdrawals reduce owner’s equity.

(150)

(5,000)

(b)

(100)

(75)

(480)

800

(f)

(g)

(h)

(i)

(150)

(200)

600

(100)

(m)

(o)

(p)

Bal.

3,105

200

(l)

(40)

(k)

(j)

(200)

(e)

(d)

8,000

Cash

(a)

500

200

(200)

500

Accts. + Rec.

Mastery Problem

300

480

(Items Owned) SupPrepaid + plies + Ins.

Assets

600

Tools

5,000

Van

500

(200)

100

600

= Liabilities (Amts. Owed) Accts. = Payable +

8,000

100

(Owner’s Investment) L. Vozniak, L. Vozniak, Capital – Drawing +

Owner’s Equity

2,100

800

500

800

Rev.

515

150

100

150

– Exp.

(Earnings)

Cleaning fees

Wages exp.

Telephone exp.

Cleaning fees

Adver. exp.

Wages exp.

Rent exp.

Description

CHAPTER 2 19

CHAPTER 2

Mastery Problem (Continued) 3.

We Do Windows Income Statement For Month Ended July 31, 20-Revenues: Cleaning fees

$2,100

Expenses: Wages expense

$250

Rent expense

150

Advertising expense

Telephone expense

Total expenses

515

Net income

$1,585

We Do Windows Statement of Owner’s Equity For Month Ended July 31, 20-Lisa Vozniak, capital, July 1, 20--

$8,000

Investment in July

8,000

Total investment

$8,000

Net income for July Less withdrawals for July

$1,585 100

Increase in capital

1,485

Lisa Vozniak, capital, July 31, 20--

$9,485

CHAPTER 2

Mastery Problem (Concluded) 5.

We Do Windows Balance Sheet July 31, 20-Assets Cash

Liabilities $3,105

Accounts payable

$ 500

Accounts receivable

500

Supplies

300

Prepaid insurance

480

Tools

600

Van

5,000

Lisa Vozniak, capital

9,485

Total assets

$9,985

Total liab. & owner’s equity

$9,985

Owner’s Equity

CHAPTER 2

Challenge Problem

Cash from customers

$3,700

Cash paid for wages

$450

Cash paid for rent

300

Cash paid for utilities

Cash paid for insurance

600

Cash paid for supplies

100

Cash paid for telephone

Total cash paid for operating items

1,535

Difference between cash received from customers and cash paid for goods and services

$2,165

Yes, there is a difference of $2,000. Net income does a better job of measuring profits because it offers a better matching of revenues and expenses. However, cash flows are important. If you don’t have enough cash to pay your bills, you will go out of business.

CHAPTER 3 THE DOUBLE-ENTRY FRAMEWORK REVIEW QUESTIONS 1. The three major parts of the T account are: a. the title. b. the debit or left side. c. the credit or right side. 2. The left side of the T account is called the debit side. The right side of the T account is called the credit side. 3. The totals on the debit side and the credit side of the T account are called footings. 4. The relationship between revenues and expenses and owner’s equity is: a. revenues increase owner’s equity. Revenues could be recorded directly on the credit side of the owner’s capital account; however, specific revenue accounts are maintained because readers of financial statements want to see the specific types of revenues. b. expenses decrease owner’s equity. Expenses could be recorded directly on the debit side of the owner’s capital account; however, specific expense accounts are maintained because readers of financial statements want to see the specific types of expenses. 5. The function of the trial balance is to list all account titles and balances and show that the debits and credits are equal.

CHAPTER 3

Exercise 3-1A Cash 500 400 600

100 200 300

1,500

Bal.

1,200

Exercise 3-2A a.

The cash account is increased with a ........................................................................

debit

The owner’s capital account is increased with a ........................................................

credit

The delivery equipment account is increased with a ..................................................

debit

The cash account is decreased with a .......................................................................

credit

The liability account Accounts Payable is increased with a ........................................

credit

The revenue account Delivery Fees is increased with a.............................................

credit

The asset account Accounts Receivable is increased with a .....................................

debit

The rent expense account is increased with a ...........................................................

debit

The owner’s drawing account is increased with a ......................................................

debit

Exercise 3-3A 1. and 2.

(a)

Cash 6,500 (b) (c)

Bal.

3,100

(b)

Supplies 700

Richard Gibbs, Capital (a)

700 2,700 3,400

(c)

6,500

Utilities Expense 2,700

CHAPTER 2

Exercise 3-4A Account

Debit or Credit

1. Cash

debit

2. Wages Expense

debit

3. Accounts Payable

credit

4. Owner’s Drawing

debit

5. Supplies

debit

6. Owner’s Capital

credit

7. Equipment

debit

Exercises 3-5A and 3-6A: See page 26.

Assets

700 400 900 2,000

Cr.

Equipment (b) 700 (c) 600 Bal. 1,300

Bal. 3,000

Cash (a) 5,000 (b) (d) (e)

Dr. +

Exercises 3-5A and 3-6A

Accounts Payable (d) 400 (c) 600 Bal. 200

Liabilities Dr. Cr. +

Linda Kipp, Drawing (e) 900

Drawing Dr. Cr. +

Dr.

Expenses Dr. Cr. +

Linda Kipp, Capital (a)

Owner’s Equity Cr. +

Revenues Dr. Cr. +

5,000

26 CHAPTER 3

800 3,000

(h)

(i) (k)

39,000

300

Office Supplies

3,000

(c)

(d)

5,000

Office Furniture

8,000

Computer Equipment

(b)

Bal.

Accounts Receivable 6,000 (g) 9,000 (j)

14,600

1,500

(b) (c) (f)

300 5,000 4,000

Cr.

30,000 3,000 6,000

Cash

Assets

Bal. 24,400

(a) (e) (j)

Dr. +

Exercise 3-7A =

(f)

4,000

(d) 8,000 Bal. 4,000

Accounts Payable

Liabilities Dr. Cr. +

Drawing Cr.

(k) 3,000

C. Chadwick, Drawing

Dr. +

Dr.

(i)

(h)

800

Utilities Expense

1,500

Rent Expense

Expenses Dr. Cr. +

(a)

Charles Chadwick, Capital

Owner’s Equity Cr. +

9,000

(g)

Bal. 12,000

3,000

(e)

Professional Fees

Revenues Dr. Cr. +

30,000

CHAPTER 3 27

CHAPTER 3

Exercise 3-8A Charlie’s Detective Service Trial Balance January 31, 20-ACCOUNT

DEBIT BALANCE

Cash

24 4 0 0 00

Accounts Receivable

3 0 0 0 00

Office Supplies

CREDIT BALANCE

3 0 0 00

Computer Equipment

8 0 0 0 00

Office Furniture

5 0 0 0 00

Accounts Payable

4 0 0 0 00

Charles Chadwick, Capital

30 0 0 0 00

Charles Chadwick, Drawing

3 0 0 0 00

Professional Fees Rent Expense Utilities Expense

12 0 0 0 00 1 5 0 0 00 8 0 0 00 46 0 0 0 00

46 0 0 0 00

CHAPTER 3

Exercise 3-9A Kenny’s Lawn Service Trial Balance September 30, 20-DEBIT BALANCE

ACCOUNT

Cash

10 0 0 0 00

Accounts Receivable

6 0 0 0 00

Supplies

1 6 0 0 00

Prepaid Insurance

1 2 0 0 00

Delivery Equipment

16 0 0 0 00

CREDIT BALANCE

Accounts Payable

4 0 0 0 00

Kenny Young, Capital

20 0 0 0 00

Kenny Young, Drawing

2 0 0 0 00

Delivery Fees

18 8 0 0 00

Wages Expense

4 2 0 0 00

Rent Expense

1 8 0 0 00 42 8 0 0 00

42 8 0 0 00

Exercise 3-10A Juanita’s Delivery Service Income Statement For Month Ended September 30, 20-Revenue: Delivery fees

$9,400

Expenses: Wages expense

$2,100

Rent expense

900

Total expenses Net income

3,000 $6,400

CHAPTER 3

Exercise 3-11A Juanita’s Delivery Service Statement of Owner’s Equity For Month Ended September 30, 20-Juanita Raye, capital, September 1, 20--

$10,000

Net income for September

$6,400

Less withdrawals for September

1,000

Increase in capital

5,400

Juanita Raye, capital, September 30, 20--

$15,400

Exercise 3-12A Juanita’s Delivery Service Balance Sheet September 30, 20-Assets Cash Accounts receivable

Liabilities $15,000

Accounts payable

$12,000

3,000

Supplies

800

Owner’s Equity

Prepaid insurance

600

Juanita Raye, capital

15,400

Delivery equipment

8,000 Total liab. & owner’s equity

$17,400

Total assets

$17,400

1,100

155

1,500 2,900

(k)

(m)

(n) (p)

15,995

4,500 1,600 6,100

3,400

160

Office Supplies

(l)

4,200

(b)

6,000

Van

Bal. 8,200

4,000

(n)

Equipment

1,100

(c)

(k)

Prepaid Insurance

(i)

Bal. 2,700

(h) (o)

Accts. Receivable

Bal. 21,805

160 800

(i) (j)

37,800

230

(g)

1,900

(o)

6,000 2,300 850

Cr.

(b) (e) (f)

Cash

Assets

(a) 25,000 (d) 7,500 (l) 3,400

Dr. +

Problem 3-13A 1. and 2. =

(e)

2,300

4,000 2,700 6,700

Bal. 4,400

Accounts Payable

Liabilities Dr. Cr. +

Drawing Cr.

(p) 2,900

W. Kohl, Drawing

Dr. +

Dr.

800

Wages Expense

850

Rent Expense

230

(m)

155

Gas and Oil Expense

(g)

Telephone Expense

(j)

(f)

Expenses Dr. Cr. +

Wilhelm Kohl, Capital (a)

Owner’s Equity Cr. +

3,500

7,500 4,500

Bal. 15,500

(o)

(d) (h)

Service Fees

Revenues Dr. Cr. +

25,000

CHAPTER 3 31

CHAPTER 3

Problem 3-13A (Concluded) 3.

Kohl’s Home Repair Trial Balance May 31, 20-ACCOUNT

DEBIT BALANCE

Cash

21 8 0 5 00

Accounts Receivable

2 7 0 0 00

Office Supplies

1 6 0 00

Prepaid Insurance

1 1 0 0 00

Equipment

8 2 0 0 00

Van

6 0 0 0 00

CREDIT BALANCE

Accounts Payable

4 4 0 0 00

Wilhelm Kohl, Capital

25 0 0 0 00

Wilhelm Kohl, Drawing

2 9 0 0 00

Service Fees

15 5 0 0 00

Rent Expense

8 5 0 00

Wages Expense

8 0 0 00

Telephone Expense

2 3 0 00

Gas and Oil Expense

1 5 5 00 44 9 0 0 00

44 9 0 0 00

CHAPTER 3

Problem 3-14A 1.

a. Total revenue for the month .............................................................................

$15,500

b. Total expenses for the month ...........................................................................

$ 2,035

c. Net income for the month .................................................................................

$13,465

a. Wilhelm Kohl’s original investment in the business ....

$25,000

+ Net income for the month .......................................

$13,465

Owner’s drawing .....................................................

$ 2,900

Increase in capital ......................................................

$10,565

= Ending owner’s equity.............................................

$35,565

b. End-of-month accounting equation: Assets $39,965

Liabilities

Owner’s Equity

$4,400

$35,565

Problem 3-15A 1.

Kohl’s Home Repair Income Statement For Month Ended May 31, 20-Revenue: Service fees

$15,500

Expenses: Rent expense

$850

Wages expense

800

Telephone expense

230

Gas and oil expense

155

Total expenses Net income

2,035 $13,465

CHAPTER 3

Problem 3-15A (Concluded) 2.

Kohl’s Home Repair Statement of Owner’s Equity For Month Ended May 31, 20-Wilhelm Kohl, capital, May 1, 20--

$25,000

Investments during May

25,000

Total investment

$25,000

Net income for May

$13,465

Less withdrawals for May

2,900

Increase in capital

10,565

Wilhelm Kohl, capital, May 31, 20--

$35,565

Kohl’s Home Repair Balance Sheet May 31, 20-Assets Cash Accounts receivable Office supplies

Liabilities $21,805

Accounts payable

$34,400

2,700 160

Owner’s Equity

Prepaid insurance

1,100

Wilhelm Kohl, capital

35,565

Equipment

8,200

Van

6,000 Total liab. & owner’s equity

$39,965

Total assets

$39,965

CHAPTER 3

Exercise 3-1B Accounts Payable 300 250 550

Bal.

450 350 150 950 400

Exercise 3-2B a.

The asset account Prepaid Insurance is increased with a .................................

debit

The owner’s drawing account is increased with a ..............................................

debit

The asset account Accounts Receivable is decreased with a ............................

credit

The liability account Accounts Payable is decreased with a ...............................

debit

The owner’s capital account is increased with a ................................................

credit

The revenue account Professional Fees is increased with a .............................

credit

The expense account Repair Expense is increased with a ................................

debit

The asset account Cash is decreased with a .....................................................

credit

The asset account Delivery Equipment is decreased with a ..............................

credit

Exercise 3-3B 1. and 2.

(a)

Cash 6,000 (b) (c)

Bal.

3,900

(b)

Supplies 1,200

Roberto Alvarez, Capital (a)

1,200 900 2,100

(c)

6,000

Utilities Expense 900

CHAPTER 3

Exercise 3-4B Account

Debit or Credit

Cash

debit

Rent Expense

debit

Notes Payable

credit

Owner’s Drawing

debit

Accounts Receivable

debit

Owner’s Capital

credit

Tools

debit

Exercises 3-5B and 3-6B: See page 37.

2,800

1,500

(c)

Bal. 2,400

900

(b)

Equipment

Bal. 4,200

800

(d)

(e) 1,100

900

Cash

Cr.

(a) 7,000 (b)

Dr. +

Assets

Exercises 3-5B and 3-6B

(d)

800 Bal. 700

Accounts Payable

Liabilities Dr. Cr. +

(e) 1,100

G. Atlas, Drawing

Drawing Dr. Cr. +

Dr.

Expenses Dr. Cr. +

(a)

George Atlas, Capital

Owner’s Equity Cr. +

Revenues Dr. Cr. +

7,000

CHAPTER 3 37

500

Office Supplies

(j) 3,000

Office Furniture

(d) 5,000

Computer Equip.

(b)

Bal. 4,000

(g) 7,000

Accts. Receivable

Bal. 9,000

16,000

(h) 900 (i) 600 (k) 4,000

25,000

Cr.

(b) 500 (c) 8,000 (f) 2,000

Cash

Assets

(a) 18,000 (e) 4,000 (j 3,000

Dr. +

Exercise 3-7B =

(f) 2,000 Bal. 3,000

(d) 5,000

Accounts Payable

Liabilities Dr. Cr. +

Drawing Cr.

(k) 4,000

N. Lawrence, Drawing

Dr. +

Dr.

(i)

900

600

Utilities Expense

(h)

Rent Expense

Expenses Dr. Cr. +

Nicole Lawrence, Capital (a)

Owner’s Equity

18,000

4,000 7,000 Bal. 11,000

(e) (g)

Professional Fees

Revenues Dr. Cr. +

Cr. +

38 CHAPTER 3

CHAPTER 3

Exercise 3-8B Nickie’s Neat Ideas Trial Balance January 31, 20-ACCOUNT

DEBIT BALANCE

Cash

9 0 0 0 00

Accounts Receivable

4 0 0 0 00

Office Supplies

CREDIT BALANCE

5 0 0 00

Computer Equipment

5 0 0 0 00

Office Furniture

8 0 0 0 00

Accounts Payable

3 0 0 0 00

Nicole Lawrence, Capital

18 0 0 0 00

Nicole Lawrence, Drawing

4 0 0 0 00

Professional Fees

11 0 0 0 00

Rent Expense

9 0 0 00

Utilities Expense

6 0 0 00 32 0 0 0 00

32 0 0 0 00

CHAPTER 3

Exercise 3-9B Betty’s Cleaning Service Trial Balance September 30, 20-DEBIT BALANCE

ACCOUNT

Cash

14 0 0 0 00

Accounts Receivable

8 0 0 0 00

Supplies

1 2 0 0 00

Prepaid Insurance

1 8 0 0 00

Delivery Equipment

18 0 0 0 00

CREDIT BALANCE

Accounts Payable

6 0 0 0 00

Betty Par, Capital

24 0 0 0 00

Betty Par, Drawing

4 0 0 0 00

Delivery Fees

25 0 0 0 00

Wages Expense

6 0 0 0 00

Rent Expense

2 0 0 0 00 55 0 0 0 00

55 0 0 0 00

Exercise 3-10B Bill’s Delivery Service Income Statement For Month Ended September 30, 20-Revenue: Delivery fees

$12,500

Expenses: Wages expense

$3,000

Rent expense

1,000

Total expenses Net income

4,000 $ 8,500

CHAPTER 3

Exercise 3-11B Bill’s Delivery Service Statement of Owner’s Equity For Month Ended September 30, 20-Bill Swift, capital, September 1, 20--

$12,000

Net income for September

$8,500

Less withdrawals for September

2,000

Increase in capital

6,500

Bill Swift, capital, September 30, 20--

$18,500

Exercise 3-12B Bill’s Delivery Service Balance Sheet September 30, 20-Assets Cash Accounts receivable

Liabilities $07,000

$03,000

4,000

Supplies

600

Prepaid insurance

900

Delivery equipment

9,000

Total assets

Accounts payable

$21,500

Owner’s Equity Bill Swift, capital

18,500

Total liab. & owner’s equity

$21,500

800

(k)

16,900

3,000

300

800

(b)

8,000

Van

Plumbing Equip.

(k)

Prepaid Insurance

(i)

(l)

Office Supplies

2,700

5,700

Bal.

4,000 1,700

(h) (o)

Accts. Receivable

Bal. 20,200

300 500

(i) (j)

37,100

(m) 2,000 (n) 500 (p) 3,000

100

(g)

1,100

(o)

8,000 1,000 700

Cr.

(b) (e) (f)

Cash

Assets

(a) 30,000 (d) 3,000 (l) 3,000

Dr. +

1. and 2.

Problem 3-13B =

(e)

1,000 5,500

4,000 1,500

Bal. 4,500

Accounts Payable

Liabilities Dr. Cr. +

Drawing Cr.

(p) 3,000

Sue Jantz, Drawing

Dr. +

Dr.

500

Wages Expense

700

Rent Expense

100

(m) 2,000

Advertising Expense

(g)

Telephone Expense

(j)

(f)

Expenses Dr. Cr. +

Sue Jantz, Capital (a)

Owner’s Equity Cr. +

3,000 4,000 2,800 Bal. 9,800

(d) (h) (o)

Service Fees

Revenues Dr. Cr. +

30,000

42 CHAPTER 3

CHAPTER 3

Problem 3-13B (Concluded) 3.

Jantz Plumbing Service Trial Balance August 31, 20-ACCOUNT

DEBIT BALANCE

Cash

20 2 0 0 00

Accounts Receivable

2 7 0 0 00

Office Supplies

3 0 0 00

Prepaid Insurance

8 0 0 00

Plumbing Equipment

6 0 0 0 00

Van

8 0 0 0 00

CREDIT BALANCE

Accounts Payable

4 5 0 0 00

Sue Jantz, Capital

30 0 0 0 00

Sue Jantz, Drawing

3 0 0 0 00

Service Fees

9 8 0 0 00

Rent Expense

7 0 0 00

Wages Expense

5 0 0 00

Telephone Expense

1 0 0 00

Advertising Expense

2 0 0 0 00 44 3 0 0 00

44 3 0 0 00

CHAPTER 3

Problem 3-14B 1.

a. Total revenue for the month ...........................................................................

$ 9,800

b. Total expenses for the month.........................................................................

$ 3,300

c. Net income for the month...............................................................................

$ 6,500

2. a. Sue Jantz’s original investment in the business ...........

$30,000

+ Net income for the month..........................................

$6,500

Owner’s drawing .......................................................

$3,000

Increase in capital ........................................................

$ 3,500

= Ending owner’s equity ...............................................

$33,500

b. End-of-month accounting equation: Assets

$38,000

Liabilities

$4,500

Owner’s Equity $33,500

Problem 3-15B 1.

Jantz Plumbing Service Income Statement For Month Ended August 31, 20-Revenue: Service fees

$9,800

Expenses: Advertising expense

$2,000

Rent expense

700

Wages expense

500

Telephone expense

100

Total expenses Net income

3,300 $6,500

CHAPTER 3

Problem 3-15B (Concluded) 2.

Jantz Plumbing Service Statement of Owner’s Equity For Month Ended August 31, 20-Sue Jantz, capital, August 1, 20--

$00,000

Investments during August

30,000

Total investment

$30,000

Net income for August

$6,500

Less withdrawals for August

3,000

Increase in capital

3,500

Sue Jantz, capital, August 31, 20--

$33,500

Jantz Plumbing Service Balance Sheet August 31, 20-Assets Cash Accounts receivable

Liabilities $20,200

$04,500

2,700

Office supplies

300

Prepaid insurance

800

Plumbing equipment

6,000

Van

8,000

Total assets

Accounts payable

$38,000

Owner’s Equity Sue Jantz, capital

33,500

Total liab. & owner’s equity

$38,000

CHAPTER 3

MANAGING YOUR WRITING This writing assignment will give students a chance to think about how they might apply the accounting techniques learned in the first three chapters to their personal lives. They will have various types of assets: cash, clothing, automobiles, books, stereos, etc. They may wonder whether cash on hand, in the checking account, and in the savings account should be one account, or three. Some students may have liabilities: car loans, student loans, and amounts owed on credit cards. Wages from part-time or full-time jobs represent revenue. Cash received from family members may be viewed as revenue or a liability, depending on whether the student is expected to repay the family member. Expenses include all types of spending on food, rent, tuition, and entertainment.

2,520

(c)

Wages Expense (i) 350 (m) 700 Bal. 1,050

(n)

480

150

Trans. Expense

Gas & Oil Expense

Lawn Tools

840

(j)

(g)

(e)

(p) 200

(d) 520 (l) 1,320 Bal. 1,840

Lawn Fees

Rent Expense

C. Fisher, Drawing

3,000

Revenuesnnn Dr. Cr. +

Cr. +

Expenses Dr. Cr. +

Craig Fisher, Capital (a)

Owner’s Equity

Drawing Dr. Cr. +

Dr.

Telephone Expense

(f) 500 Bal. 400

1,240

(h) 400

(o) 100

Notes Payable

Accounts Payable (k) 200 (b) 800 Bal. 600

Liabilities Dr. Cr. +

520 720

Mowing Equipment (b) 1,000

Bal.

(d) (l)

Accts. Receivable

Bal. 1,980

(o) 100 (p) 200

(j) 60 (k) 200 (m) 700 (n) 150

Cash (a) 3,000 (b) 200 (f) 500 (c) 50 (h) 400 (e) 30 (l) 600 (g) 480 4,500 (i) 350

Assets Dr. Cr. +

1. and 2.

Mastery Problem

CHAPTER 3 47

CHAPTER 3

Mastery Problem (Continued) 3.

Craig’s Quick Cut Trial Balance June 30, 20-DEBIT BALANCE

ACCOUNT

Cash

CREDIT BALANCE

1 9 8 0 00

Accounts Receivable

8 4 0 00

Mowing Equipment

1 0 0 0 00

Lawn Tools

4 8 0 00

Accounts Payable

6 0 0 00

Notes Payable

4 0 0 00

Craig Fisher, Capital

3 0 0 0 00

Craig Fisher, Drawing

2 0 0 00

Lawn Fees

1 8 4 0 00

Rent Expense

5 0 00

Wages Expense

1 0 5 0 00

Telephone Expense

3 0 00

Gas and Oil Expense

6 0 00

Transportation Expense

1 5 0 00 5 8 4 0 00

5 8 4 0 00

Craig’s Quick Cut Income Statement For Month Ended June 30, 20-Revenue: Lawn fees

$1,840

Expenses: Wages expense

$1,050

Transportation expense

150

Gas and oil expense

Rent expense

Telephone expense

Total expenses Net income

1,340 $0,500

CHAPTER 3

Mastery Problem (Concluded) 5.

Craig’s Quick Cut Statement of Owner’s Equity For Month Ended June 30, 20-Craig Fisher, capital, June 1, 20--

$3,000

Investments during June

3,000

Total investment

$3,000

Net income for June

$500

Less withdrawals for June

200

Increase in capital

300

Craig Fisher, capital, June 30, 20--

$3,300

Craig’s Quick Cut Balance Sheet June 30, 20-Assets Cash

Liabilities $1,980

Accounts payable

$0,600

Accounts receivable

840

Notes payable

400

Mowing equipment

1,000

Total liabilities

$1,000

Lawn tools

480 Owner’s Equity

Total assets

$4,300

Craig Fisher, capital

3,300

Total liab. & owner’s equity

$4,300

CHAPTER 3

Challenge Problem 1. Chris Stevick’s Business Statement of Owner’s Equity For Month Ended August 31, 20-Chris Stevick, capital, August 1, 20--

$400

Net income for August

$300

Less withdrawals for August

100

Increase in capital

200

Chris Stevick, capital, August 31, 20--

$600

2. Improvements that students might suggest for the income statement: 1.

Categorize the types of revenues that Chris generates if she provides more than one type of service.

Categorize the types of expenses that Chris incurred.

CHAPTER 4 JOURNALIZING AND POSTING TRANSACTIONS REVIEW QUESTIONS 1.

The flow of accounting information from source documents to trial balance includes the following steps: a. Analyze what has happened by using the chart of accounts and information from the source documents. b. Enter the business transactions in the general journal. c. Post entries to the accounts in the general ledger. d. Prepare a trial balance.

Examples of source documents are as follows (students are required to list only one): a. Cash payment—check stub or carbon copies of checks. b. Cash receipt—receipt stubs, carbon copies of receipts, cash register tapes, or memos of cash register totals. c. Sale of goods or services—copies of sales tickets or sales invoices issued to customers or clients. d. Purchase of goods or services—purchase invoices received from suppliers.

The purpose of a chart of accounts is to list and classify all the accounts used by a business.

The five types of financial statement items for which it is ordinarily desirable to keep separate accounts are assets, liabilities, owner’s equity, revenues, and expenses.

The first formal accounting record of a business transaction is usually made in the journal, which is called a book of original entry.

The four steps required to journalize a business transaction in a general journal are as follows: Step 1: Enter the date. Step 2: Enter the debit. Step 3: Enter the credit. Step 4: Enter the explanation.

The accounts are placed in the ledger in the same order as in the chart of accounts, in numeric order grouped by classification.

The primary advantage of a general ledger account is that it maintains a running balance.

The five steps required when posting the journal to the ledger are as follows: In the ledger account: Step 1: Enter the date of each transaction in the Date column. Step 2: Enter the amount of each transaction in the Debit or Credit column. Step 3: Enter the new balance in the Balance columns under Debit or Credit. If the balance of the account is zero, draw a line through the Debit and Credit columns. Step 4: Enter the page number of the journal from which each transaction is posted in the Posting Reference column. In the journal: Step 5: Enter the account number in the Posting Reference column of the journal for each transaction that is posted. 51 © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

CHAPTER 4

10. As an amount is posted to the proper account in the ledger, the appropriate account number is entered in the Posting Reference column of the journal. 11. If a journal entry was debited or credited to the wrong account(s), or if an item was posted to the wrong account, the ledger will still be in balance. 12. A slide occurs when debit or credit amounts “slide” a digit or two to the left or right when entered. An example of a slide is if $250 was entered as $25. 13. A transposition error occurs when two digits are reversed (for example, if $520 was entered as $250). 14. The ruling method of correcting an error is to draw a line through the incorrect account title or amount and write the correct information directly above the line. The correction is then initialed so the source and reason for the correction can be traced. 15. If an incorrect entry has been journalized and posted to the wrong account, a correcting entry must be made. This is called the correcting entry method.

CHAPTER 4

Exercise 4-1A 1.

Check stubs or check register

a. A good or service has been sold.

Purchase invoice from suppliers (vendors)

b. Cash has been received by the business.

Sales tickets or invoices to customers

Receipts or cash register tapes

c. Cash has been paid by the business. d. Goods or services have been purchased by the business.

Exercise 4-2A Transaction

Debit

Credit

1. Invested cash in the business, $5,000.

Cash

Owner’s Capital

2. Paid office rent, $500.

Rent Expense

Cash

3. Purchased office supplies on account, $300.

Office Supplies

Accounts Payable

4. Received cash for services rendered (fees), $400.

Cash

Fees

Accounts Payable

Cash

Accounts Receivable

Fees

Cash

Accounts Receivable

5. Paid cash on account, $50. 6. Rendered services on account, $300. 7. Received cash for an amount owed by a customer, $100.

Exercise 4-3A

1. 4. 7.

Cash 5,000 2. 400 5. 100

500 50

6. Bal.

Accounts Receivable 300 7. 200

100

550

5,500

Bal.

4,950

Office Supplies 300

Accounts Payable 50 3. Bal.

300 250

CHAPTER 4

Exercise 4-3A (Concluded) Owner’s Capital 1.

Total Debits: Cash 4,950 Accts. Rec. 200 Off. Sup. 300 Rent Exp. 500 5,950

Rent Expense 500

Fees 4. 6. Bal.

5,000

400 300 700

Total Credits: Accts. Pay. 250 Owner’s Cap. 5,000 Fees 700 5,950

Exercise 4-4A GENERAL JOURNAL DATE 20-1 2

Jan.

DESCRIPTION

1 Cash Diane Bernick, Capital

PAGE POST. REF.

DEBIT

101

12 0 0 0 00

311

CREDIT 1

12 0 0 0 00

Owner’s original investment

2 Rent Expense

521

Cash

101

7 5 0 00

Paid office rent for January

8 9 10

3 Office Equipment Accounts Payable

181

1 3 0 0 00

202

1 3 0 0 00 10

Purchased office equipment on account

12 13 14 15

5 Cash

101

Consulting Fees

9 5 0 00

401

18 19

Received cash for consulting services

15 16

8 Telephone Expense Cash

525

8 5 00

101

22 23 24

8 5 00 18

Paid telephone bill

20 21

9 5 0 00 14

16 17

10 Miscellaneous Expense Cash Purchased magazine subscription

549 101

2 0 00

2 0 00 22 23 24

CHAPTER 4

Exercise 4-4A (Concluded) GENERAL JOURNAL DATE 20-1 2

Jan. 11

DESCRIPTION

Office Supplies Accounts Payable

PAGE POST. REF.

DEBIT

142

2 5 0 00

202

CREDIT 1

2 5 0 00

Purchased office supplies on account

4 5 6

15 Accounts Payable Cash

202

2 0 0 00

101

2 0 0 00

Made partial payment on office equipment

18 Wages Expense

511

Cash

101

6 0 0 00

6 0 0 00 10

Paid employee

12 13 14 15

21 Cash

101

Consulting Fees

8 0 0 00

401

18 19

Received cash for consulting services

15 16

25 Utilities Expense

533

Cash

101

1 0 5 00

22 23

Paid utilities bill

19 20

27 Diane Bernick, Drawing Cash

312

4 0 0 00

101

4 0 0 00 22

Owner’s withdrawal

29 Wages Expense

511

Cash

101

1 0 5 00 18

20 21

8 0 0 00 14

16 17

Paid employee

6 0 0 00

6 0 0 00 26 27

CHAPTER 4

Exercise 4-5A GENERAL LEDGER Cash

ACCOUNT

ACCOUNT NO. DEBIT

12 0 0 0 00

8 5 00

12 1 1 5 00

2 0 00

12 0 9 5 00

2 0 0 00

11 8 9 5 00

6 0 0 00

11 2 9 5 00

1 0 5 00

11 9 9 0 00

4 0 0 00

11 5 9 0 00

6 0 0 00

10 9 9 0 00

Jan.

ITEM

DATE 20--

ITEM

Jan. 11

DEBIT

7 5 0 00 9 5 0 00

11 2 5 0 00 12 2 0 0 00

8 0 0 00

12 0 9 5 00

ACCOUNT NO. POST. REF.

ITEM

CREDIT

12 0 0 0 00

CREDIT

2 5 0 00

DEBIT

CREDIT

2 5 0 00

ACCOUNT NO. POST. REF.

142

BALANCE DEBIT

Office Equipment

ACCOUNT

DATE 20--

CREDIT

Office Supplies

ACCOUNT

Jan.

BALANCE

POST. REF.

DATE 20--

101

181

BALANCE DEBIT

1 3 0 0 00

CREDIT

DEBIT

CREDIT

1 3 0 0 00

CHAPTER 4

Exercise 4-5A (Continued) Accounts Payable

ACCOUNT

DATE 20--

ITEM

POST. REF.

202

BALANCE DEBIT

CREDIT

DEBIT

CREDIT

1 3 0 0 00

2 5 0 00

1 5 5 0 00

Jan.

2 0 0 00

1 3 5 0 00

Diane Bernick, Capital

ACCOUNT

DATE 20--

Jan.

ITEM

POST. REF.

ACCOUNT NO.

DATE 20--

ITEM

Jan. 27

POST. REF.

CREDIT

DEBIT

DATE 20--

ITEM

CREDIT

12 0 0 0 00

ACCOUNT NO.

CREDIT

4 0 0 00

DEBIT

CREDIT

4 0 0 00

ACCOUNT NO. POST. REF.

312

BALANCE DEBIT

Consulting Fees

ACCOUNT

311

BALANCE DEBIT

Diane Bernick, Drawing

ACCOUNT

Jan.

ACCOUNT NO.

401

BALANCE DEBIT

CREDIT

DEBIT

CREDIT

9 5 0 00

8 0 0 00

1 7 5 0 00

CHAPTER 4

Exercise 4-5A (Continued) Wages Expense

ACCOUNT

DATE 20--

ITEM

POST. REF.

BALANCE DEBIT

CREDIT

DEBIT

CREDIT

Jan. 18

6 0 0 00

1 2 0 0 00

ACCOUNT

DATE 20--

Jan.

ACCOUNT

DATE 20--

Jan.

ACCOUNT

Rent Expense ITEM

POST. REF.

CREDIT

7 5 0 00

DEBIT

BALANCE DEBIT

CREDIT

8 5 00

DEBIT

CREDIT

8 5 00

POST. REF.

533

BALANCE DEBIT

CREDIT

1 0 5 00

DEBIT

CREDIT

1 0 5 00

Miscellaneous Expense

Jan. 10

525

ACCOUNT NO.

ITEM

CREDIT

7 5 0 00

Utilities Expense ITEM

521

BALANCE DEBIT

ACCOUNT NO.

Jan. 25

DATE 20--

POST. REF.

Telephone Expense

DATE 20--

ACCOUNT

ACCOUNT NO.

ITEM

511

ACCOUNT NO.

549

BALANCE DEBIT

2 0 00

CREDIT

DEBIT

CREDIT

2 0 00

CHAPTER 4

Exercise 4-5A (Concluded) Bernick’s Consulting Trial Balance January 31, 20-ACCT. NO.

DEBIT BALANCE

Cash

101

10 9 9 0 00

Office Supplies

142

2 5 0 00

Office Equipment

181

1 3 0 0 00

Accounts Payable

202

1 3 5 0 00

Diane Bernick, Capital

311

12 0 0 0 00

Diane Bernick, Drawing

312

Consulting Fees

401

Wages Expense

511

1 2 0 0 00

Rent Expense

521

7 5 0 00

Telephone Expense

525

8 5 00

Utilities Expense

533

1 0 5 00

Miscellaneous Expense

549

2 0 00

ACCOUNT TITLE

CREDIT BALANCE

4 0 0 00 1 7 5 0 00

15 1 0 0 00

Exercise 4-6A Bernick’s Consulting Income Statement For Month Ended January 31, 20-Revenue: Consulting fees

$1,750)

Expenses: Wages expense

$1,200

Rent expense

750

Telephone expense

Utilities expense

105

Miscellaneous expense

Total expenses Net loss

2,160) $0(410)

CHAPTER 4

Exercise 4-6A (Concluded) Bernick’s Consulting Statement of Owner’s Equity For Month Ended January 31, 20-Diane Bernick, capital, January 1, 20--

$00,000)

Investments during January

12,000)

Total investment

$12,000)

Less: Net loss for January

$410

Withdrawals for January

400

Decrease in capital

(810)

Diane Bernick, capital, January 31, 20--

$11,190)

Bernick’s Consulting Balance Sheet January 31, 20-Assets Cash

Liabilities $10,990

Office supplies

250

Office equipment

1,300

Total assets

$12,540

Accounts payable

$01,350

Owner’s Equity Diane Bernick, capital

11,190

Total liab. & owner’s equity

$12,540

CHAPTER 4

Exercise 4-7A TJ’s Paint Service Income Statement For Month Ended July 31, 20-Revenue: Painting fees

$3,600

Expenses: Wages expense

$900

Rent expense

250

Telephone expense

Transportation expense

Utilities expense

Miscellaneous expense

Total expenses

1,355

Net income

$2,245

TJ’s Paint Service Statement of Owner’s Equity For Month Ended July 31, 20-TJ Ulza, capital, July 1, 20--

$0,000

Investments during July

3,205

Total investment

$3,205

Net income for July Less withdrawals for July

$2,245 500

Increase in capital

1,745

TJ Ulza, capital, July 31, 20--

$4,950

CHAPTER 4

Exercise 4-7A (Concluded) TJ’s Paint Service Balance Sheet July 31, 20-Assets

Liabilities

Cash

$4,300

Accounts receivable

1,100

Supplies

800

Paint equipment

900

Total assets

$7,100

Accounts payable

$2,150

Owner’s Equity TJ Ulza, capital

4,950

Total liab. & owner’s equity

$7,100

Exercise 4-8A GENERAL JOURNAL DATE

DESCRIPTION

PAGE POST. REF.

Supplies

May 17 Office Equipment

DEBIT

5 0 0 00

24 25

Accounts Payable

5 0 0 00

4 0 0 00 16

Cash Purchased copy paper on account

17 18

23 Cash

101

Service Fees

1 0 0 0 00

401

28 29

1 0 0 0 00 24

Received cash for services previously earned

26 27

4 0 0 00

Student Initials

CREDIT

25 Service Fees Accounts Receivable To correct entry of May 23

1 0 0 0 00

1 0 0 0 00 28 29

CHAPTER 4

Problem 4-9A 2. (For 1. and 3., see page 66.)

GENERAL JOURNAL DATE 20-1 2

Jan.

DESCRIPTION

1 Cash Annette Creighton, Capital

PAGE POST. REF.

DEBIT

101

10 0 0 0 00

311

CREDIT 1

10 0 0 0 00

Original investment in the business

1 Rent Expense

521

Cash

101

5 0 0 00

Paid rent

8 9 10

2 Office Supplies Accounts Payable

142

3 0 0 00

202

3 0 0 00 10

Purchased office supplies

12 13 14

4 Office Equipment Accounts Payable

181

1 5 0 0 00

202

6 Cash

101

Consulting Fees

5 8 0 00

401

7 Telephone Expense Cash

525

4 2 00

101

8 Utilities Expense Cash

533

3 8 00

101

30 31

3 8 00 26

Paid utilities bill

4 2 00 22

Paid telephone bill

5 8 0 00 18

Earned consulting fees

1 5 0 0 00 14

Purchased office equipment

10 Cash

101

Consulting Fees Earned consulting fees

401

3 6 0 00

3 6 0 00 30 31

CHAPTER 4

Problem 4-9A (Continued) GENERAL JOURNAL DATE 20-1 2

Jan. 12

DESCRIPTION

Accounts Payable Cash

PAGE POST. REF.

202

DEBIT

CREDIT

5 0 00

101

5 0 00

Paid cash on account

4 5 6

13 Transportation Expense Cash

526

1 5 0 00

101

1 5 0 00

Paid for car rental

15 Wages Expense

511

Cash

101

3 6 0 00

3 6 0 00 10

Paid employee

12 13 14 15

17 Cash

101

Consulting Fees

4 2 0 00

401

18 19

Earned consulting fees

15 16

18 Annette Creighton, Drawing Cash

312

1 0 0 00

101

22 23

Owner’s withdrawal

19 20

20 Advertising Expense Cash

512

2 6 00

101

26 27

Paid for newspaper ad

23 24

22 Transportation Expense Cash

526

3 5 00

101

30 31

3 5 00 26

Paid cab fare

28 29

2 6 00 22

24 25

1 0 0 00 18

20 21

4 2 0 00 14

16 17

24 Miscellaneous Expense Cash Purchased books

549 101

2 8 00

2 8 00 30 31

CHAPTER 4

Problem 4-9A (Continued) GENERAL JOURNAL DATE 20-1 2

Jan. 25

DESCRIPTION

Cash Consulting Fees

PAGE POST. REF.

DEBIT

101

3 2 0 00

401

CREDIT 1

3 2 0 00

Earned consulting fees

4 5 6

27 Accounts Payable Cash

202

1 5 0 00

101

1 5 0 00

Paid cash on account

29 Wages Expense

511

Cash

101

3 6 0 00

3 6 0 00 10

Paid employee

12 13 14 15

30 Cash

101

Consulting Fees Earned consulting fees

401

1 8 0 00

1 8 0 00 14 15

CHAPTER 4

Problem 4-9A (Continued) 1. and 3.

GENERAL LEDGER ACCOUNT

ACCOUNT NO.

DEBIT

10 0 0 0 00

4 2 00

10 0 3 8 00

3 8 00

10 0 0 0 00

5 0 00

10 3 1 0 00

1 5 0 00

10 1 6 0 00

3 6 0 00

9 8 0 0 00

1 0 0 00

10 1 2 0 00

2 6 00

10 0 9 4 00

3 5 00

10 0 5 9 00

2 8 00

10 0 3 1 00

1 5 0 00

10 2 0 1 00

3 6 0 00

9 8 4 1 00

Jan.

ACCOUNT

DATE 20--

ITEM

CREDIT

DEBIT

CREDIT

10 0 0 0 00 5 0 0 00

5 8 0 00

9 5 0 0 00 10 0 8 0 00

3 6 0 00

10 3 6 0 00

4 2 0 00

10 2 2 0 00

3 2 0 00

10 3 5 1 00

1 8 0 00

10 0 2 1 00

Office Supplies ITEM

ACCOUNT NO. POST. REF.

101

BALANCE

POST. REF.

DATE 20--

Jan.

Cash

142

BALANCE DEBIT

3 0 0 00

CREDIT

DEBIT

CREDIT

3 0 0 00

CHAPTER 4

Problem 4-9A (Continued) ACCOUNT

DATE 20--

Jan.

ACCOUNT

DATE 20--

Office Equipment ITEM

ACCOUNT NO. POST. REF.

BALANCE DEBIT

CREDIT

1 5 0 0 00

DEBIT

CREDIT

1 5 0 0 00

Accounts Payable ITEM

ACCOUNT NO. POST. REF.

181

202

BALANCE DEBIT

CREDIT

DEBIT

CREDIT

3 0 0 00

1 5 0 0 00

1 8 0 0 00

5 0 00

1 7 5 0 00

1 5 0 00

1 6 0 0 00

Jan.

ACCOUNT

DATE 20--

Jan.

ACCOUNT

DATE 20--

Annette Creighton, Capital ITEM

POST. REF.

ACCOUNT NO. BALANCE DEBIT

CREDIT

DEBIT

10 0 0 0 00

Annette Creighton, Drawing

Jan. 18

POST. REF.

CREDIT

10 0 0 0 00

ITEM

311

ACCOUNT NO.

312

BALANCE DEBIT

1 0 0 00

CREDIT

DEBIT

CREDIT

1 0 0 00

CHAPTER 4

Problem 4-9A (Continued) ACCOUNT

DATE 20--

Consulting Fees ITEM

ACCOUNT NO. POST. REF.

BALANCE DEBIT

CREDIT

DEBIT

CREDIT

5 8 0 00

3 6 0 00

9 4 0 00

4 2 0 00

1 3 6 0 00

3 2 0 00

1 6 8 0 00

1 8 0 00

1 8 6 0 00

Jan.

ACCOUNT

Wages Expense

DATE 20--

ITEM

ACCOUNT NO. POST. REF.

CREDIT

DEBIT

CREDIT

3 6 0 00

7 2 0 00

ACCOUNT

Advertising Expense

DATE 20--

ITEM

Jan. 20

ACCOUNT

DATE 20--

ACCOUNT NO.

POST. REF.

CREDIT

2 6 00

DEBIT

CREDIT

2 6 00

ACCOUNT NO. POST. REF.

512

BALANCE DEBIT

Rent Expense ITEM

511

BALANCE DEBIT

Jan. 15

Jan.

401

521

BALANCE DEBIT

5 0 0 00

CREDIT

DEBIT

CREDIT

5 0 0 00

CHAPTER 4

Problem 4-9A (Continued) Telephone Expense

ACCOUNT

DATE 20--

Jan.

ITEM

ACCOUNT NO.

POST. REF.

BALANCE DEBIT

CREDIT

4 2 00

DEBIT

DATE 20--

ITEM

POST. REF.

CREDIT

4 2 00

Transportation Expense

ACCOUNT

ACCOUNT NO

CREDIT

DEBIT

CREDIT

1 5 0 00

3 5 00

1 8 5 00

DATE 20--

Jan.

ACCOUNT

DATE 20--

Utilities Expense ITEM

ACCOUNT NO. POST. REF.

Jan. 24

POST. REF.

533

BALANCE DEBIT

CREDIT

3 8 00

DEBIT

CREDIT

3 8 00

Miscellaneous Expense ITEM

526

BALANCE DEBIT

Jan. 13

ACCOUNT

525

ACCOUNT NO.

549

BALANCE DEBIT

2 8 00

CREDIT

DEBIT

CREDIT

2 8 00

CHAPTER 4

Problem 4-9A (Continued) 4.

Creighton Consulting Trial Balance January 31, 20-ACCT. NO.

DEBIT BALANCE

Cash

101

10 0 2 1 00

Office Supplies

142

3 0 0 00

Office Equipment

181

1 5 0 0 00

Accounts Payable

202

1 6 0 0 00

Annette Creighton, Capital

311

10 0 0 0 00

Annette Creighton, Drawing

312

Consulting Fees

401

Wages Expense

511

7 2 0 00

Advertising Expense

512

2 6 00

Rent Expense

521

5 0 0 00

Telephone Expense

525

4 2 00

Transportation Expense

526

1 8 5 00

Utilities Expense

533

3 8 00

Miscellaneous Expense

549

2 8 00

ACCOUNT TITLE

CREDIT BALANCE

1 0 0 00 1 8 6 0 00

13 4 6 0 00

CHAPTER 4

Problem 4-9A (Continued) 5.

Creighton Consulting Income Statement For Month Ended January 31, 20-Revenue: Consulting fees

$1,860

Expenses: Wages expense

$720

Advertising expense

Rent expense

500

Telephone expense

Transportation expense

185

Utilities expense

Miscellaneous expense

Total expenses Net income

1,539 $0,321

CHAPTER 4

Problem 4-9A (Concluded) Creighton Consulting Statement of Owner’s Equity For Month Ended January 31, 20-Annette Creighton, capital, January 1, 20--

$00,000

Investments during January

10,000

Total investment

$10,000

Net income for January

$321

Less withdrawals for January

100

Increase in capital

221

Annette Creighton, capital, January 31, 20--

$10,221

Creighton Consulting Balance Sheet January 31, 20-Assets Cash

Liabilities $10,021

Office supplies

300

Office equipment

1,500

Total assets

$11,821

Accounts payable

$01,600

Owner’s Equity Annette Creighton, capital

10,221

Total liab. & owner’s equity

$11,821

CHAPTER 4

Problem 4-10A 2. (For 1. and 3., see page 76.)

GENERAL JOURNAL POST. REF.

DEBIT

1 Rent Expense

521

3 0 0 00

Cash

101

DATE 20-1 2

June

PAGE

DESCRIPTION

CREDIT 1

3 0 0 00

Paid rent for June

4 5 6 7

2 Cash

101

1 0 0 00

Accounts Receivable

122

2 0 0 00

Delivery Fees

401

3 0 0 00

Deliveries made for cash and on account

9 10 11

4 Advertising Expense Cash

512

1 5 00

101

1 5 00 11

Paid advertising expense

13 14 15

6 Office Supplies Accounts Payable

142

1 8 0 00

202

19 20

7 Cash

101

Delivery Fees

2 6 0 00

401

23 24

2 6 0 00 19

Received cash for delivery services

21 22

1 8 0 00 15

Purchased office supplies

9 Accounts Payable Cash

202

2 0 0 00

101

2 0 0 00 23

Made partial payment on truck

10 Office Equipment

181

Cash

101

1 0 0 00 27

Accounts Payable

202

6 0 0 00 28

Purchased copier

7 0 0 00

CHAPTER 4

Problem 4-10A (Continued) GENERAL JOURNAL DATE 20-1 2

June 11

DESCRIPTION

Charitable Contributions Expense Cash

PAGE POST. REF.

534

DEBIT

CREDIT

2 0 00

101

2 0 00

Made contribution to Red Cross

4 5 6

12 Cash

101

Delivery Fees

3 8 0 00

401

3 8 0 00

Received cash for delivery services

8 9 10

13 Cash

101

Accounts Receivable

1 0 0 00

122

1 0 0 00 10

Received cash on account

15 Wages Expense

511

Cash

101

2 0 0 00

16 Electricity Expense Cash

533

3 6 00

101

18 Telephone Expense Cash

525

4 6 00

101

26 27

19 Cash

101

Accounts Receivable

1 0 0 00

122

30 31

1 0 0 00 26

Received cash on account

28 29

4 6 00 22

Paid telephone bill

3 6 00 18

Paid electric bill

2 0 0 00 14

Paid employee

20 Jim Andrews, Drawing Cash Owner’s withdrawal

312 101

2 0 0 00

2 0 0 00 30 31

CHAPTER 4

Problem 4-10A (Continued) GENERAL JOURNAL DATE

DESCRIPTION

20--

PAGE POST. REF.

June 21 Gas and Oil Expense

538

Cash

101

DEBIT

CREDIT

3 2 00

Purchased gas and oil

4 5 6

22 Accounts Payable Cash

202

4 0 00

101

4 0 00

Paid cash on account

8 9 10

24 Cash

101

Delivery Fees

3 4 0 00

401

3 4 0 00 10

Received cash for delivery services

12 13 14

26 Miscellaneous Expense Cash

549

1 5 00

101

27 Cash

101

Delivery Fees

1 8 0 00

401

22 23

27 Cash

101

Accounts Receivable

1 0 0 00

122

26 27

Received cash on account

23 24

29 Gas and Oil Expense Cash

538

2 4 00

101

2 4 00 26

Purchased gasoline

30 Wages Expense

511

Cash

101

1 0 0 00 22

24 25

1 8 0 00 18

Received cash for delivery services

1 5 00 14

Paid for magazine subscription

Paid employee

2 0 0 00

2 0 0 00 30 31

CHAPTER 4

Problem 4-10A (Continued) 1. and 3. ACCOUNT

DATE 20--

June

Cash

GENERAL LEDGER ITEM

Balance

POST. REF.

ACCOUNT NO. 101 BALANCE

DEBIT

CREDIT



DEBIT

CREDIT

3 8 2 6 00

3 0 0 00

2 0 0 00

3 6 7 1 00

1 0 0 00

3 5 7 1 00

2 0 00

3 5 5 1 00

3 8 0 00

3 9 3 1 00

1 0 0 00

4 0 3 1 00

2 0 0 00

3 8 3 1 00

3 6 00

3 7 9 5 00

4 6 00

3 7 4 9 00

2 0 0 00

3 6 4 9 00

3 2 00

3 6 1 7 00

4 0 00

3 5 7 7 00

1 8 0 00

4 0 8 2 00

1 0 0 00

4 1 8 2 00

2 4 00

4 1 5 8 00

2 0 0 00

3 9 5 8 00

1 0 0 00

3 5 2 6 00 3 6 2 6 00

1 5 00 2 6 0 00

3 6 1 1 00 3 8 7 1 00

1 0 0 00

3 8 4 9 00

3 4 0 00

3 9 1 7 00 1 5 00

3 9 0 2 00

CHAPTER 4

Problem 4-10A (Continued) ACCOUNT

DATE 20--

June

Accounts Receivable ITEM

Balance

ACCOUNT NO.

POST. REF.

BALANCE DEBIT

CREDIT



DEBIT

1 2 1 2 00

1 0 0 00

1 3 1 2 00

1 0 0 00

1 2 1 2 00

1 0 0 00

1 1 1 2 00

DATE 20--

June

2 0 0 00

1 4 1 2 00

Office Supplies ITEM

Balance

ACCOUNT NO. POST. REF.

CREDIT

 J7

DATE 20--

June

ITEM

Balance

ACCOUNT

DATE 20--

DEBIT

6 4 8 00 1 8 0 00

8 2 8 00

POST. REF.

BALANCE DEBIT

CREDIT



DEBIT

Balance

CREDIT

2 1 0 0 00 7 0 0 00

2 8 0 0 00

Delivery Truck

CREDIT

ACCOUNT NO. 181

ITEM

142

BALANCE DEBIT

ACCOUNT Office Equipment

June

CREDIT

ACCOUNT

122

ACCOUNT NO. 185 POST. REF.



BALANCE DEBIT

CREDIT

DEBIT

CREDIT

8 0 0 0 00

CHAPTER 4

Problem 4-10A (Continued) ACCOUNT

DATE 20--

June

Accounts Payable ITEM

Balance

POST. REF.

DATE 20--

June

ACCOUNT

DATE 20--

June

Balance

DATE 20--

DEBIT

ITEM

Balance

POST. REF.

1 8 0 00

6 1 8 0 00

2 0 0 00

5 9 8 0 00 6 0 0 00

6 5 8 0 00

4 0 00

6 5 4 0 00 ACCOUNT NO.

POST. REF.

CREDIT

DEBIT

ACCOUNT NO.

Balance

312

BALANCE DEBIT

CREDIT

DEBIT

CREDIT

1 8 0 0 00 2 0 0 00

2 0 0 0 00

Delivery Fees

CREDIT

4 4 7 8 00



ACCOUNT NO. POST. REF.

311

BALANCE DEBIT



ITEM

CREDIT

6 0 0 0 00

Jim Andrews, Drawing

ACCOUNT

CREDIT

Jim Andrews, Capital ITEM

202

BALANCE DEBIT



ACCOUNT

June

ACCOUNT NO.

401

BALANCE DEBIT

CREDIT



DEBIT

CREDIT

9 8 8 0 00

3 0 0 00

10 1 8 0 00

2 6 0 00

10 4 4 0 00

3 8 0 00

10 8 2 0 00

3 4 0 00

11 1 6 0 00

1 8 0 00

11 3 4 0 00

CHAPTER 4

Problem 4-10A (Continued) ACCOUNT

DATE 20--

June

Wages Expense ITEM

ACCOUNT NO. POST. REF.

CREDIT

DEBIT

CREDIT

1 2 0 0 00

2 0 0 00

1 4 0 0 00

2 0 0 00

1 6 0 0 00

ACCOUNT

DATE 20--

June

Advertising Expense ITEM

ACCOUNT

DATE 20--

June

DATE 20--

CREDIT

DEBIT

1 5 00

1 0 5 00

ACCOUNT NO. POST. REF.

CREDIT

DEBIT

Balance

CREDIT

9 0 0 00 3 0 0 00

1 2 0 0 00

Telephone Expense

ACCOUNT NO.

POST. REF.

525

BALANCE DEBIT

 J8

521

BALANCE DEBIT



Balance

ITEM

CREDIT

9 0 00

Rent Expense ITEM

512

BALANCE DEBIT



Balance

ACCOUNT

ACCOUNT NO.

POST. REF.

June

BALANCE DEBIT



Balance

511

CREDIT

DEBIT

CREDIT

1 2 6 00 4 6 00

1 7 2 00

CHAPTER 4

Problem 4-10A (Continued) ACCOUNT

DATE 20--

June

Electricity Expense ITEM

Balance

ACCOUNT

DATE 20--

June

DATE 20--

June

CREDIT



DEBIT

Balance

POST. REF.

3 6 00

1 3 4 00

ACCOUNT NO.

CREDIT

DEBIT

Balance

POST. REF.

CREDIT

6 0 00 2 0 00

8 0 00

Gas and Oil Expense ITEM

ACCOUNT NO.

CREDIT



DEBIT

CREDIT

1 8 6 00 3 2 00

2 1 8 00

2 4 00

2 4 2 00

Miscellaneous Expense ITEM

Balance

POST. REF.

ACCOUNT NO.

549

BALANCE DEBIT

 J9

538

BALANCE DEBIT

DATE 20--

534

BALANCE DEBIT

 J8

CREDIT

9 8 00

Charitable Contributions Expense ITEM

533

BALANCE DEBIT

ACCOUNT

June

POST. REF.

ACCOUNT

ACCOUNT NO.

CREDIT

DEBIT

CREDIT

1 1 2 00 1 5 00

1 2 7 00

CHAPTER 4

Problem 4-10A (Concluded) 4.

Jim’s Quick Delivery Trial Balance June 30, 20-ACCT. NO.

DEBIT BALANCE

Cash

101

3 9 5 8 00

Accounts Receivable

122

1 1 1 2 00

Office Supplies

142

8 2 8 00

Office Equipment

181

2 8 0 0 00

Delivery Truck

185

8 0 0 0 00

Accounts Payable

202

6 5 4 0 00

Jim Andrews, Capital

311

4 4 7 8 00

Jim Andrews, Drawing

312

Delivery Fees

401

Wages Expense

511

1 6 0 0 00

Advertising Expense

512

1 0 5 00

Rent Expense

521

1 2 0 0 00

Telephone Expense

525

1 7 2 00

Electricity Expense

533

1 3 4 00

Charitable Contributions Expense

534

8 0 00

Gas and Oil Expense

538

2 4 2 00

Miscellaneous Expense

549

1 2 7 00

ACCOUNT TITLE

CREDIT BALANCE

2 0 0 0 00 11 3 4 0 00

22 3 5 8 00

CHAPTER 4

Problem 4-11A GENERAL JOURNAL DATE 1

DESCRIPTION

PAGE POST. REF.

(1) Cash

DEBIT

CREDIT

7 0 0 00

Accounts Payable

7 0 0 00

To correct error in which a purchase of

supplies on account was credited to Cash

(2) Wages Expense

Rent Expense

4 5 0 00

To correct error in which a payment of

wages was debited to Rent Expense

(3) Accounts Payable

3 0 0 00

Supplies

1 0 0 00 12

Cash

2 0 0 00 13

To correct error in which a $300 payment

on account was recorded as a $100 cash

purchase of supplies

Exercise 4-1B 1. Cash register tape

The cash register tape is evidence of cash receipts.

2. Sales ticket (issued to customer)

The sales ticket is evidence of sales of goods or services (for cash or on account).

3. Purchase invoice (received from supplier or vendor) 4. Check stub

The purchase invoice is evidence of purchases (accounts payable) of goods or services. A check stub is evidence of a cash payment.

CHAPTER 4

Exercise 4-2B Transaction

Debit

Credit

1. Invested cash in the business, $1,000.

Cash

Owner’s Capital

2. Performed services on account, $200.

Accounts Receivable

Fees

Office Equipment

Accounts Payable

Cash

Accounts Receivable

Accounts Payable

Cash

3. Purchased office equipment on account, $500. 4. Received cash on account for services previously rendered, $200. 5. Made a payment on account, $100.

Exercise 4-3B

1. 4.

Cash 1,000 5. 200

100

1,200

Bal.

2. Bal.

Accounts Receivable 200 4.

200



1,100

Office Equipment 500

Accounts Payable 100 3. Bal.

Owner’s Capital 1.

1,000

Fees 2.

Total Debits: Cash 1,100 Off. Equip. 500 1,600

500 400

200

Total Credits: Accts. Pay. 400 Owner’s Cap. 1,000 Fees 200 1,600

CHAPTER 4

Exercise 4-4B GENERAL JOURNAL DATE 20-1 2

Oct.

DESCRIPTION

1 Cash Sengel Moon, Capital

PAGE POST. REF.

DEBIT

101

15 0 0 0 00

311

CREDIT 1

15 0 0 0 00

Investment by owner

2 Rent Expense

521

Cash

101

3 0 0 00

Paid rent for October

8 9 10

3 Bicycle Parts Accounts Payable

141

2 0 0 0 00

202

2 0 0 0 00 10

Purchased bicycle parts on account

12 13 14

5 Office Supplies Accounts Payable

142

2 5 0 00

202

8 Telephone Expense Cash

525

3 8 00

101

22 23

9 Cash

101

Repair Fees

1 4 0 00

401

26 27

Received cash for repair services

23 24

11 Miscellaneous Expense Cash

549

1 5 00

101

30 31

1 5 00 26

Paid for magazine subscription

28 29

1 4 0 00 22

24 25

3 8 00 18

Paid telephone bill

2 5 0 00 14

Purchased office supplies on account

12 Accounts Payable Cash Made payment on account

202 101

1 0 0 00

1 0 0 00 30 31

CHAPTER 4

Exercise 4-4B (Concluded) GENERAL JOURNAL DATE 20-1 2

Oct. 14

DESCRIPTION

Wages Expense Cash

PAGE POST. REF.

DEBIT

511

3 0 0 00

101

CREDIT 1

3 0 0 00

Paid employee

4 5 6

15 Cash

101

Repair Fees

3 5 0 00

401

3 5 0 00

Received cash for repair services

8 9 10

16 Utilities Expense

533

Cash

101

4 8 00

4 8 00 10

Paid utilities bill

12 13 14 15

19 Cash

101

Repair Fees

2 5 0 00

401

18 19

Received cash for repair services

15 16

23 Sengel Moon, Drawing Cash

312

5 0 00

101

22 23

Owner’s withdrawal

19 20

25 Accounts Payable Cash

202

5 0 00

101

5 0 00 22

Made payment on account

29 Wages Expense

511

Cash

101

5 0 00 18

20 21

2 5 0 00 14

16 17

Paid employee

3 0 0 00

3 0 0 00 26 27

CHAPTER 4

Exercise 4-5B GENERAL LEDGER Cash

ACCOUNT

POST. REF.

DEBIT

15 0 0 0 00

3 0 0 00

14 7 0 0 00

3 8 00

14 6 6 2 00

1 5 00

14 7 8 7 00

1 0 0 00

14 6 8 7 00

3 0 0 00

14 3 8 7 00

5 0 00

14 8 8 9 00

5 0 00

14 8 3 9 00

3 0 0 00

14 5 3 9 00

DATE 20--

Oct.

ITEM

DATE 20--

Oct.

ITEM

CREDIT

15 0 0 0 00

1 4 0 00

14 8 0 2 00

3 5 0 00

14 7 3 7 00 4 8 00

2 5 0 00

14 6 8 9 00 14 9 3 9 00

CREDIT

2 0 0 0 00

DEBIT

CREDIT

2 0 0 0 00

ACCOUNT NO. POST. REF.

141

BALANCE DEBIT

Office Supplies

ACCOUNT

DATE 20--

DEBIT

ACCOUNT NO. POST. REF.

101

BALANCE CREDIT

Bicycle Parts

ACCOUNT

Oct.

ACCOUNT NO.

142

BALANCE DEBIT

2 5 0 00

CREDIT

DEBIT

CREDIT

2 5 0 00

CHAPTER 4

Exercise 4-5B (Continued) Accounts Payable

ACCOUNT

DATE 20--

ITEM

POST. REF.

202

BALANCE DEBIT

CREDIT

DEBIT

CREDIT

2 0 0 0 00

2 5 0 00

2 2 5 0 00

1 0 0 00

2 1 5 0 00

5 0 00

2 1 0 0 00

Oct.

Sengel Moon, Capital

ACCOUNT

DATE 20--

Oct.

ITEM

POST. REF.

ACCOUNT NO.

DATE 20--

ITEM

Oct. 23

POST. REF.

CREDIT

DEBIT

DATE 20--

ITEM

CREDIT

15 0 0 0 00

ACCOUNT NO.

CREDIT

5 0 00

DEBIT

CREDIT

5 0 00

ACCOUNT NO. POST. REF.

312

BALANCE DEBIT

Repair Fees

ACCOUNT

311

BALANCE DEBIT

Sengel Moon, Drawing

ACCOUNT

Oct.

ACCOUNT NO.

401

BALANCE DEBIT

CREDIT

DEBIT

CREDIT

1 4 0 00

3 5 0 00

4 9 0 00

2 5 0 00

7 4 0 00

940

CHAPTER 23

Problem 23-12A T Accounts for Indirect Method Statement of Cash Flows McDowell Company Accrued Interest Receivable BB 610 (2) 110 EB 720

Notes Payable 102,000 BB 16,000 (17) 118,000 EB

Common Stock 800,000 BB 100,000 (15) 900,000 EB

Accounts Receivable BB 325,800 15,100 (3) EB 310,700

Accounts Payable 195,000 BB 85,000 110,000 EB

Paid-In Capital in Excess of Par—Common Stock 390,000 BB 40,000 (15) 430,000 EB

Income Tax Payable 25,000 BB (7) 5,000 20,000 EB

Retained Earnings 360,000 BB (16) 60,000 232,710 (1) 532,710 EB

Merchandise Inventory BB 540,200 (4) 145,200 EB 685,400

Supplies and Prepayments BB 39,000 12,000 (5) EB 27,000 Store Equipment BB 460,000 (12) 64,000 70,000 (10) (17) 16,000 EB 470,000

(6)

Accrued and Withheld Payroll Taxes 14,900 BB 1,500 (8) 16,400 EB Accrued Interest Payable 1,035 BB (9) 160 875 EB

Accumulated Depreciation— Store Equipment 150,000 BB (10) 30,000 60,000 (11) 180,000 EB

Office Equipment BB 400,000 (14) 30,000 EB 430,000

Delivery Equipment BB 390,000 (13) 140,000 EB 530,000

Accumulated Depreciation— Delivery Equipment 100,000 BB 40,000 (11) 140,000 EB

Accumulated Depreciation— Office Equipment 76,000 BB 12,000 (11) 88,000 EB

BB: Beginning Balance EB: Ending Balance

CHAPTER 23

941

Problem 23-12A (Continued) Major entries of interest: Cash Accum. Depr.—Store Equipment Loss on Sale of Store Equipment Store Equipment

(10) (10) (10) (10)

25,000 30,000 15,000

Depreciation Expense Accum. Depr.—Store Equip. Accum. Depr.—Delivery Equip. Accum. Depr.—Office Equip.

(11) (11) (11) (11)

112,000

Cash and cash equivalents Cash Government notes Cash and cash equivalents Net increase in cash and cash equivalents

70,000

60,000 40,000 12,000 20-2 $75,365 6,800 $82,165 $23,840

20-1 $40,325 18,000 $58,325 (18)

942

CHAPTER 23

Problem 23-12A (Concluded) McDowell Company Statement of Cash Flows For Year Ended December 31, 20-2 Cash flows from operating activities: Net income $ 232,710 Adjustments for changes in current assets and liabilities related to operating activities: Increase in accrued interest receivable (110) Decrease in accounts receivable (net) 15,100 Increase in merchandise inventory (145,200) Decrease in supplies and prepayments 12,000 Decrease in accounts payable (85,000) Decrease in income tax payable (5,000) Increase in accrued and withheld payroll taxes 1,500 Decrease in accrued interest payable (160) Noncash expenses and other adjustments: Loss on sale of store equipment 15,000 Depreciation expense 112,000 Net cash provided by operating activities Cash flows from investing activities: Sold store equipment $ 25,000 Purchased store equipment (64,000) Purchased delivery equipment (140,000) Purchased office equipment (30,000) Net cash used by investing activities Cash flows from financing activities: Issued common stock $ 140,000 Paid cash dividends (60,000) Net cash provided by financing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents, January 1, 20-2 Cash and cash equivalents, December 31, 20-2

(1)

(2) (3) (4) (5) (6) (7) (8) (9) (10) (11) $ 152,840 (10) (12) (13) (14) (209,000) (15) (16) (18)

$ $

80,000 23,840 58,325 82,165

Schedule of Noncash Investing and Financing Activities: Acquired store equipment by issuing a note payable

(17)

$16,000

Supplemental Disclosures of Cash Flow Information: Cash paid for interest Cash paid for income taxes

(19) (19)

$ 1,050 138,000

To compute cash paid for interest and taxes, prepare the following entries: Interest Expense (see income statement) 890 Accrued Interest Payable (decrease in Acc. Int. Pay.) 160 Cash (plug) (19)

1,050

Income Tax Expense (see income statement) Income Tax Payable (decrease in Income Tax Payable) Cash (plug)

133,000 5,000 (19)

138,000

CHAPTER 23

943

Exercise 23-1B a.

– I

– F

+ F

– I

+ O

– O

+ I

+ O

– F

– O

Exercise 23-2B 20-2

20-1

$90,000

$60,000

4,000

8,000

Total cash and cash equivalents

$94,000

$68,000

Increase in cash and cash equivalents

$26,000

Cash Government notes

Exercise 23-3B Cash flows from operating activities: Net income

$ 50,000)

Adjustments for changes in current assets and current liabilities related to operating activities: Decrease in accounts receivable

4,000)

Increase in merchandise inventory

(10,000)

Decrease in accounts payable

(4,000)

Increase in wages payable

8,000)

Net cash provided by operating activities

$48,000

Exercise 23-4B Cash flows from operating activities after adjusting for changes in current assets and current liabilities:

$60,000

Adjustments for noncash expenses: Patent amortization Net cash provided by operating activities

5,000 $65,000

944

CHAPTER 23

Exercise 23-5B Leadbetter’s Golf Camp Statement of Cash Flows For Year Ended December 31, 20-2 Cash flows from operating activities: Net income

$1,800

Plus loss on sale of land

200

Total cash provided by operating activities

$2,000

Investing activities: Sold land

600

Net increase in cash

$2,600

Cash, January 1, 20-2

1,000

Cash, December 31, 20-2

$3,600

Exercise 23-6B Hansen Company Statement of Cash Flows (Partial) For Year Ended December 31, 20-2 Cash flows from investing activities: Purchased building

$(160,000)

Purchased equipment

(70,000)

Total cash used by investing activities

$(230,000)

Cash flows from financing activities: Decrease in note payable

$ (10,000)

Issuance of common stock

80,000)

Paid cash dividends

(20,000)

Net cash provided by financing activities

50,000)

CHAPTER 23

945

Exercise 23-7B This is a noncash investing and financing activity and is reported as a note to the statement of cash flows as follows: Schedule of noncash investing and financing activities: Acquired office furniture by issuing a two-year note payable

$5,000

Exercise 23-8B Interest expense in 20-2

$2,190

Add decrease in accrued interest payable

Amount of cash paid for interest in 20-2 Cash

(3)

$2,260

Accrued Interest Payable 410 BB 2,260*

(2)

Interest Expense

(1) 340

2,190

BB: Beginning Balance EB: Ending Balance *Cash paid for interest in 20-2

Problem 23-9B Kennington Company Statement of Cash Flows (Partial) For Year Ended December 31, 20-2 Cash flows from operating activities: Net income

$115,000)

Adjustments for changes in current assets and liabilities related to operating activities: Decrease in accounts receivable

25,000)

Decrease in merchandise inventory

40,000)

Decrease in accounts payable

(25,000)

Net cash provided by operating activities

$155,000

946

CHAPTER 23

Problem 23-10B Kennington Company Statement of Cash Flows For Year Ended December 31, 20-2 Cash flows from operating activities: Net income

$115,000)

Adjustments for changes in current assets and liabilities related to operating activities: Decrease in accounts receivable

25,000)

Decrease in merchandise inventory

40,000)

Decrease in accounts payable

(25,000)

Net cash provided by operating activities

$ 155,000)

Cash flows from investing activities: Purchased warehouse Purchased warehouse equipment

$ (90,000) (60,000)

Total cash used by investing activities

(150,000)

Cash flows from financing activities: Issued note payable

30,000)

Issued common stock

40,000)

Paid cash dividends

(20,000)

Net cash provided by financing activities Net increase (decrease) in cash Cash, January 1, 20-2 Cash, December 31, 20-2

50,000) $ 55,000) 20,000) $ 75,000)

CHAPTER 23

947

Problem 23-11B Powell Company Statement of Cash Flows (Partial) For Year Ended December 31, 20-2 Cash flows from operating activities: Net income

$159,360)

Adjustments for changes in current assets and liabilities related to operating activities: Increase in accounts receivable

(4,500)

Decrease in merchandise inventory

22,500)

Decrease in accounts payable

(15,900)

Decrease in income tax payable

(5,000)

Increase in supplies and prepayments

(5,700)

Decrease in accrued and withheld payroll taxes

(530)

Decrease in accrued interest receivable

45)

Increase in accrued interest payable

120)

Noncash expenses: Depreciation expense Net cash provided by operating activities

29,000) $179,395

948

CHAPTER 23

Problem 23-12B T Accounts for Indirect Method Statement of Cash Flows McGinnis Company Accrued Interest Receivable BB 580 (2) 250 EB 830

Notes Payable 109,000 BB 8,000 (17) 117,000 EB

Common Stock 700,000 BB 100,000 (15) 800,000 EB

Accounts Receivable BB 309,200 8,600 (3) EB 300,600

Accounts Payable 185,000 BB 50,000 135,000 EB

Paid-In Capital in Excess of Par—Common Stock 380,000 BB 120,000 (15) 500,000 EB

Merchandise Inventory BB 495,800 (4) 84,500 EB 580,300

Income Tax Payable 15,000 BB 10,000 (7) 25,000 EB

Retained Earnings 320,000 BB (16) 40,000 191,350 (1) 471,350 EB

Supplies and Prepayments BB 32,000 (5) 33,000 EB 65,000

Accrued and Withheld Payroll Taxes 13,400 BB 2,400 (8) 15,800 EB

Store Equipment BB 420,000 (12) 140,000 EB 560,000 Accumulated Depreciation— Store Equipment 90,000 BB 30,000 (11) 120,000 EB

Delivery Equipment BB 330,000 (13) 100,000 EB 430,000

(6)

Accrued Interest Payable 1,200 BB (9) 300 900 EB

Office Equipment BB 380,000 (14) 32,000 100,000 (10) (17) 8,000 EB 320,000

Accumulated Depreciation— Office Equipment 100,500 BB (10) 80,000 10,000 (11) 30,500 EB

Accumulated Depreciation— Delivery Equipment 120,000 BB 30,000 (11) 150,000 EB

CHAPTER 23

949

Problem 23-12B (Continued) Major entries of interest: Cash Accum. Depr.—Office Equipment Gain on Sale of Office Equip. Office Equipment

(10) (10) (10) (10)

35,000 80,000

Depreciation Expense Accum. Depr.—Store Equip. Accum. Depr.—Delivery Equip. Accum. Depr.—Office Equip.

(11) (11) (11) (11)

70,000

Cash and cash equivalents Cash Government notes Cash and cash equivalents Net increase in cash and cash equivalents

20-2 $103,420 5,400 $108,820 $ 42,300

15,000 100,000

30,000 30,000 10,000

20-1 $50,520 16,000 $66,520 (18)

950

CHAPTER 23

Problem 23-12B (Concluded) McGinnis Company Statement of Cash Flows For Year Ended December 31, 20-2 Cash flows from operating activities: Net income $ 191,350 Adjustments for changes in current assets and liabilities related to operating activities: Increase in accrued interest receivable (250) Decrease in accounts receivable (net) 8,600 Increase in merchandise inventory (84,500) Increase in supplies and prepayments (33,000) Decrease in accounts payable (50,000) Increase in income tax payable 10,000 Increase in accrued and withheld payroll taxes 2,400 Decrease in accrued interest payable (300) Noncash expenses and other adjustments: Gain on sale of office equipment (15,000) Depreciation expense 70,000 Net cash provided by operating activities Cash flows from investing activities: Sold office equipment $ 35,000 Purchased store equipment (140,000) Purchased delivery equipment (100,000) Purchased office equipment (32,000) Net cash used by investing activities Cash flows from financing activities: Issued common stock $ 220,000 Paid cash dividends (40,000) Net cash provided by financing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents, January 1, 20-2 Cash and cash equivalents, December 31, 20-2

(1)

(2) (3) (4) (5) (6) (7) (8) (9) (10) (11) $ 99,300 (10) (12) (13) (14) (237,000) (15) (16) (18)

180,000 $ 42,300 66,520 $ 108,820

Schedule of Noncash Investing and Financing Activities: Acquired store equipment by issuing a note payable

(17)

$ 8,000

Supplemental Disclosures of Cash Flow Information: Cash paid for interest Cash paid for income taxes

(19) (19)

$ 1,050 85,000

To compute cash paid for interest and taxes, prepare the following entries: Interest Expense 750 Accrued Interest Payable 300 Cash (plug) (19)

1,050

Income Tax Expense Income Tax Payable Cash (plug)

95,000 (19)

10,000 85,000

CHAPTER 23

951

MANAGING YOUR WRITING Direct Method When preparing the schedule for the calculation of cash generated from operating activities, the goal is to deduct the amount of cash paid for operating expenses from the cash received from customers. Since depreciation expense is included in operating expenses, but did not require the use of cash, it is deducted from the operating expenses when computing the total cash paid for operating expenses. Indirect Method The student’s memo should point out the following: 1. The adjusting entry to recognize depreciation is as follows: Depreciation Expense XXX Accumulated Depreciation XXX 2. Depreciation expense requires no outflow of cash (see above entry). 3. Depreciation expense is subtracted on the income statement when computing net income. 4. Therefore, when net income is used as the primary source of cash from operating activities on the statement of cash flows, depreciation expense must be added back.

ETHICS CASE 1. Answers will vary. It is possible. In some companies, especially small ones, accountants aren’t aware of all the generally accepted accounting principles that apply to their business. In other cases, they are aware, and choose to ignore proper accounting procedures. In either case, it should be resolved and corrected. 2. Answers will vary. Students might suggest not doing anything or explaining to Lyle the importance of noncash investing and financing activities. 3. Answers will vary. Students should mention that the purpose of the statement of cash flows is to show management and outside users of the financial statements where cash came from and where it went. The statement of cash flows is divided into three sections: cash flows from operating activities, cash flows from investing activities, and cash flows from financing activities. The cash flows from operating activities section is prepared using either the direct method or indirect method. Under the direct method, revenues and expenses reported on the income statement are adjusted to reflect the amount of cash received or paid for each item. Under the indirect method, net income is adjusted for transactions impacting net income and/or cash flows from operating activities, but by different amounts. 4. Answers will vary. Typically, the direct method is thought to be easier to understand but more costly to prepare than the indirect method.

952

CHAPTER 23

Mastery Problem T Accounts for Indirect Method Statement of Cash Flows Peachfield Corporation Accrued Interest Receivable BB 250 (2) 70 EB 320

Notes Payable 54,780 10,700 65,480

BB (3) EB

Accounts Receivable 140,905 12,040 152,945

BB (4) EB

Merchandise Inventory 295,400 60,090 355,490

Income Tax Payable 5,000 2,000 7,000

BB (7) EB

Supplies and Prepayments BB 21,500 7,000 (5) EB 14,500

Accrued and Withheld Payroll Taxes 7,644 1,116 8,760

BB (8) EB

BB (12) (18) EB

Store Equipment 232,800 55,200 20,000 308,000

BB (13) EB

Delivery Equipment 192,000 78,000 270,000

(6)

Accounts Payable 125,473 71,973 53,500

Common Stock 388,000 112,000 500,000

BB (17) EB

Paid-In Capital in Excess of Par—Common Stock 234,000 BB 6,000 (16) 240,000 EB

BB EB

(15)

Retained Earnings 141,973 20,000 116,764 238,737

Accrued Interest Payable 525 (9) 75 450

Accumulated Depreciation—Store Equipment 84,000 BB 24,000 108,000

(11) EB

20,000 20,000

(10) (10) (10) (10)

75,000 10,000

Accumulated Depreciation— Delivery Equipment 48,000 BB 27,000 (11) 75,000 EB

Depreciation Expense Accum. Depr.—Store Equip. Accum. Depr.—Delivery Equip. Accum. Depr.—Office Equip.

(11) (11) (11) (11)

62,400

Office Equipment 203,940 24,060 80,000 148,000

Accumulated Depreciation— Office Equipment 36,600 BB (10) 10,000 11,400 (11) 38,000 EB

BB: Beginning Balance EB: Ending Balance

(10)

Cash and cash equivalents Cash Government notes Cash and cash equivalents Net increase in cash and cash equivalents

BB (1) EB

BB EB

Long-Term Notes Payable — BB

Major entries of interest: Cash Accum. Depr.—Office Equipment Gain on Sale of Office Equipment Office Equipment

BB (14) EB

BB (16) EB

(18) EB

5,000 80,000

24,000 27,000 11,400

20-2 $102,072 3,600 $105,672 $ 66,472

20-1 $27,200 12,000 $39,200 (19)

CHAPTER 23

953

Mastery Problem (Concluded) Peachfield Corporation Statement of Cash Flows For Year Ended December 31, 20-2 Cash flows from operating activities: Net income $116,764 Adjustments for changes in current assets and liabilities related to operating activities: Increase in accrued interest receivable (70) Increase in accounts receivable (net) (12,040) Increase in merchandise inventory (60,090) Decrease in supplies and prepayments 7,000 Decrease in accounts payable (71,973) Increase in income tax payable 2,000 Increase in accrued and withheld payroll taxes 1,116 Decrease in accrued interest payable (75) Noncash expenses and other adjustments: Gain on sale of office equipment (5,000) Depreciation expense 62,400 Net cash provided by operating activities Cash flows from investing activities: Sold office equipment $ 75,000 Purchased store equipment (55,200) Purchased delivery equipment (78,000) Purchased office equipment (24,060) Net cash used by investing activities Cash flows from financing activities: Paid cash dividends $ (20,000) Issued common stock 118,000 Issued short-term note payable 10,700 Net cash provided by financing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents, January 1, 20-2 Cash and cash equivalents, December 31, 20-2

(1)

(2) (3) (4) (5) (6) (7) (8) (9) (10) (11) $ 40,032 (10) (12) (13) (14) (82,260) (15) (16) (17) (19)

108,700 $ 66,472 39,200 $105,672

Schedule of Noncash Investing and Financing Activities: Purchased store equipment by issuing long-term note payable

(18)

$20,000

Supplemental Disclosures of Cash Flow Information: Cash paid during the year for: Interest Income taxes

(20) (20)

$ 511 58,500

To compute cash paid for interest and taxes, prepare the following entries: Interest Expense (see income statement) 436 Accrued Interest Payable (decrease in Acc. Int. Pay.) 75 Cash (plug) (20)

511

Income Tax Expense (see income statement) Income Tax Payable (increase in Income Tax Payable) Cash (plug)

60,500 2,000 (20)

58,500

954

CHAPTER 23

Challenge Problem This problem must be solved in three steps. 1. Prepare the entry for interest expense for 20-1. 44,767(a)

Interest Expense Discount on Bonds Payable

4,767(c)

Cash

40,000(b)

(a) Carrying value of bonds on 1/1 times the effective rate. ($895,349  5% = $44,767, or provided in the hint) (b) Cash paid for interest: Face value times the coupon rate. ($1,000,000  4% = $40,000) (c) Difference between interest expense and interest paid. 2. Use the discount on bonds payable account to compute the amount of discount on the bonds issued on December 31, 20-1.

1/1/20-1 Balance Balance after amortization

Discount on Bonds Payable 104,651 4,767 99,884

Plug: Discount on bonds issued on 12/31/20-1 12/31/20-1 Balance

Amortization for 20-1

102,577 202,461

Plug = Discount on $900,000 bond issuance on 12/31/20-1 3. Face value of bonds

$900,000

Less discount

102,577

Cash received from bond issuance

$797,423

CHAPTER 23

955

APPENDIX: STATEMENT OF CASH FLOWS: THE DIRECT METHOD REVIEW QUESTIONS 1.

Under the direct method, revenues and expenses reported on the income statement are adjusted to reflect the amount of cash received or paid for each item.

An increase in accounts receivable reduces the amount of cash collected from customers. Thus, the increase in accounts receivable is subtracted from sales to compute cash collected from customers.

Under the direct method, cost of goods sold must be adjusted to reflect cash paid to suppliers. A decrease in merchandise inventory indicates that the firm sold more inventory than it purchased. Thus, to compute purchases for the year, we deduct the decrease in merchandise inventory from cost of goods sold. An increase in accounts payable indicates that the firm didn’t pay cash for all of the purchases. Thus, the increase is subtracted from the amount purchased to compute cash paid to suppliers of inventory.

Depreciation expense is a noncash expense. If listed separately on the income statement, we simply adjust it to zero when computing cash from operating activities. If depreciation expense is included in operating expenses, it is deducted from operating expenses to compute cash paid for operating expenses.

Gains and losses on the sale of plant and equipment are related to investing, not operating activities. Thus, these gains and losses are excluded when computing cash from operating activities.

Exercise 23Apx-1A Sales

$800,000

Add decrease in accounts receivable

15,000

Cash received from customers in 20-2

$815,000

Cash BB

Accounts Receivable 90,000

(3) 815,000*

15,000 EB

Sales

(2)

800,000

(1)

75,000

BB: Beginning Balance EB: Ending Balance *Cash received from customers in 20-2

956

CHAPTER 23

Exercise 23Apx-2A Cost of goods sold

$400,000

Less decrease in merchandise inventory

(20,000)

Cost of merchandise purchased

$380,000

Add decrease in accounts payable

40,000

Cash paid for merchandise in 20-2

$420,000

Merchandise Inventory

Cash BB 420,000 (3)*

(2)** 380,000 EB

Accounts Payable

80,000

Cost of Goods Sold

70,000 BB 400,000

(1)

(3) 420,000

60,000

380,000

(2)

(1)

400,000

30,000 EB

BB: Beginning Balance EB: Ending Balance

*Cash paid for merchandise in 20-2

**Cost of merchandise purchased

Exercise 23Apx-3A Operating expenses for 20-2

$350,400

Less depreciation expense

(22,000)

Add increase in supplies and prepayments

2,900

Add decrease in accrued and withheld payroll taxes

900

Amount of cash paid for operating expenses in 20-2

$332,200

Or, consider the following entry: Operating Expenses Supplies and Prepayments Accrued and Withheld Payroll Taxes

350,400 2,900 900

Accumulated Depreciation

22,000

Cash

332,200

CHAPTER 23

957

Exercise 23Apx-4A Interest revenue in 20-2

$430

Add decrease in accrued interest receivable

Amount of cash received for interest in 20-2

$470

Or, consider the following entry: Cash

470

Accrued Interest Receivable

Interest Revenue

430