Type:
Solution Manual
College Accounting Chapters Resource: 1-12 with Study Guide and Working Papers Edition:
14th Edition
Author(s):
Jeffrey Slater Mike Deschamps
Instructor's Solutions Manual for College Accounting: A practical Approach By: Robert Chamberlain Connie Belden Michael P. Griffin
College Accounting Fourteenth Edition
Jeffrey Slater Mike Deschamps
1 Accounting Concepts and Procedures ANSWERS TO DISCUSSION QUESTIONS AND CRITICAL THINKING/ETHICAL CASE 1.
The functions of accounting are to analyze, record, classify, summarize, report, interpret, and communicate financial information. 2. Sole proprietorship—1 owner; unlimited liability; easy to form; limited life Partnership—2 or more owners; unlimited liability; easy to form; limited life Corporation—Stockholders; limited liability; difficult to form; unlimited life 3. Businesses are classified as service, merchandise, or manufacturing. 4. Computer technology has greatly reduced the time required for performing the bookkeeping function. 5. The three elements of the basic accounting equation are assets, liabilities, and owner's equity. 6. Capital is the owner's current investment or equity in the assets of a business. It is one subdivision of owner's equity. 7. True. The sum of the left side of the equation (assets) must equal the sum of the right side of the equation (liabilities and owner's equity). 8. False. That is the income statement. 9. False. Revenue is a subdivision of owner's equity. 10. Owner's equity is subdivided into Capital, Withdrawals, Revenue, and Expenses. 11. False. It is a subdivision of owner's equity and records payments of the owner’s personal (non-business) expenses or distributions direct to the owner. It is not a business expense. 12. Reject. As expenses increase, owner's equity decreases. 13. Revenue less Expenses; an income statement shows performance over time. 14. False. It calculates ending capital. 15. The question in this case is whether Paul should be allowed to "pad" his expense account with an additional $100 of expenses. This would be unethical. Paul should only expense those items that are business related. Paul's argument that he is entitled to an additional $100 is not a valid assumption. However, he should be reimbursed for any business expenses during the weekend.
.
1-1
SOLUTIONS TO CONCEPT CHECKS
1.
a. A b. A c. L d. A e. OE f. A
2.
a. Liabilities b. Total Assets c. Accounts Payable
3.
a. I b. S
4.
Total assets = Cash $26,000 + Computer equipment $20,000 = $46,000
5.
b. J. Penny, Capital d. J. Penny, Withdrawals f. Advertising Expense g. Taxi Fees Earned
6.
c. Accounts Payable d. Grooming Fees Earned
7.
a, b, d
8.
a. IS b. BS c. BS d. BS e. IS f. IS g. OE h. BS
9.
a. OE b. BS c. BS d. IS
.
1-2
SOLUTIONS TO SET A EXERCISES 1A-1. a. b. c.
$17,500 $65,000 $15,000
= $6,000 + $11,500 = $5,000 + $60,000 = $12,000 + $3,000
1A-2. Assets + Equipment
Cash a. b. c.
+124,000 (1,300)
= =
Liabilities Accounts Payable
+
+ Owner’s Equity Morgan, Capital +124,000
+1,300 +900
+900
1A-3. RABBIT COMPANY CLEANERS BALANCE SHEET SEPTEMBER 30, 201X
Liabilities and Owner’s Equity
Assets Cash Equipment
$67 0 0 0 7 0 0 0
Total Assets
$74 0 0 0
.
Liabilities Accounts Payable Total Liabilities
$13 0 0 0 13 0 0 0
Owner's Equity B. Rabbit, Capital
61 0 0 0
Total Liabilities and Owner's Equity
$74 0 0 0
1-3
EXERCISES (CONTINUED) 1A-4. ASSETS
=
Accounts Cash
a.
+
Rec.
Computer +
Equip.
Accounts =
Payable
+80,000 +4,000
c.
+
B.
B.
Baker,
Baker, –
Capital
Withd.
+125 +13,600
+13,600 +30,000
f. g.
Expenses
+4,000
(125)
e.
+ Revenues –
+80,000
b.
d.
LIABILITIES + OWNER'S EQUITY
+30,000
(4,100) (1,490)
+4,100 +1,490
Remember, as withdrawals or expenses increase, the end result is to reduce owner's equity .
1A-5. (a) FREEMAN REALTY INCOME STATEMENT MONTH ENDED JUNE 30, 201X Revenue: Professional Fees Operating Expenses: Salaries Expense Utilities Expense Rent Expense Total Operating Expenses Net Income
$3 $
1 0 0
4 5 0 1 5 0 4 5 0 1 1 0 5 0 $2 0 5 0
(b) FREEMAN REALTY STATEMENT OF OWNER’S EQUITY MONTH ENDED JUNE 30, 201X S. Freeman, Capital, June 1, 201X
$10 2 4 5
Net Income for June
$2
Less: Withdrawals for June
0 5 0 (2 2 5)
Increase in Capital
1 8 2 5
S. Freeman, Capital, June 30, 201X
.
$12 0 7 0
1-4
EXERCISES (CONTINUED) (c) FREEMAN REALTY BALANCE SHEET JUNE 30, 201X
Liabilities and Owner’s Equity
Assets Cash
$5 2 0 0
Accounts Receivable
1 3 7 0
Office Equipment
11 5 0 0
Liabilities Accounts Payable
$6 0 0 0
Owner's Equity S. Freeman, Capital
12 0 7 0
Total Liabilities and Total Assets
$18 0 7 0
Owner's Equity
$18 0 7 0
SOLUTIONS TO SET B EXERCISES 1B-1. a. b. c.
$19,000 $100,000 $45,000
= $6,000 + $13,000 = $4,000 + $96,000 = $10,000 + $35,000
Cash
Assets + Equipment
1B-2.
a. b. c.
+128,000 (1,650)
= Liabilities = Accounts Payable
+ Owner’s Equity + Melody, Capital +128,000
+1,650 +1,200
+1,200
1B-3. RAUSCHER COMPANY CLEANERS BALANCE SHEET NOVEMBER 30, 201X
LIABILITIES AND OWNER’S EQUITY
ASSETS Cash Equipment
$65 0 0 0 10 0 0 0
Total Assets
$75 0 0 0
.
Liabilities Accounts Payable Total Liabilities Owner's Equity B. Rauscher, Capital Total Liabilities and Owner's Equity
1-5
$29 0 0 0 $29 0 0 0 $46 0 0 0 $75 0 0 0
EXERCISES (CONTINUED) 1B-4. ASSETS
=
Accounts Cash
a.
+
Rec.
Computer +
Equip.
LIABILITIES + OWNER'S EQUITY Accounts
=
Payable
+65,000 +7,500 (225)
d.
+13,500
e.
B. Beadell, –
Capital
Withdr.
Expenses
+7,500 +225 +13,500
+29,600
f. g.
+ Revenues –
+65,000
b. c.
+
B. Beadell,
+29,600
(3,800) (1,530)
+3,800 +1,530
Remember, as withdrawals or expenses increase, the end result is to reduce owner's equity .
1B-5. (a) FAIRMONT REALTY INCOME STATEMENT MONTH ENDED NOVEMBER 30, 201X Revenue: Professional Fees Operating Expenses: Salaries Expense Utilities Expense Rent Expense Total Operating Expenses Net Income
$
$4
0 0 0
$3
8 5 0 1 5 0
3 0 0 2 5 0 3 0 0
(b) FAIRMONT REALTY STATEMENT OF OWNER'S EQUITY MONTH ENDED NOVEMBER 30, 201X S. Fairmont, Capital, November 1, 201X
$10 0 1 5
Net Income for November
$3
Less: Withdrawals for November
1 5 0 (1 7 5)
Increase in Capital
2 9 7 5
S. Fairmont, Capital, November 30, 201X
.
$12 9 9 0
1-6
(c) FAIRMONT REALTY BALANCE SHEET NOVEMBER 30, 201X
ASSETS
LIABILITIES AND OWNER'S EQUITY
Cash
$4 5 0 0
Liabilities
Accounts Receivable
1 4 9 0
Accounts Payable
Office Equipment
13 0 0 0
Owner's Equity S. Fairmont, Capital
$6 0 0 0 12 9 9 0
Total Liabilities and Total Assets
$18 9 9 0
.
Owner's Equity
1-7
$18 9 9 0
SOLUTIONS TO SET A PROBLEMS PROBLEM 1A-1 MELODY'S NAIL SPA
Transaction
Assets = Store Equipment
Cash a. b. c. d. Total
+19,000 (3,400) (1,200) 14,400
+3,400 +6,100
Liabilities + Accounts Payable
+6,100 (1,200) 4,900
9,500
Owner’s Equity M. Abington, Capital +19,000
19,000
PROBLEM 1A-2 SIMON’S INTERNET SERVICE BALANCE SHEET
NOVEMBER 30, 201X ASSETS
LIABILITIES AND OWNER'S EQUITY
Cash
$45 0 0 0
Liabilities
Equipment
24 0 0 0
Accounts Payable
Building
30 0 0 0
$16 5 0 0
Owner's Equity B. Simon, Capital
82 5 0 0
Total Liabilities and Total Assets
$99 0 0 0
.
Owner's Equity
1-8
$99 0 0 0
.
+
+40,000 +
1-9
545 +800 1,345
3,500 3,500 – 3,500 – 3,500 – -
0 + + 0 + + 0 + + 0 + + 300 + 300 +
40,000 40,000 40,000 40,000 40,000 –
6,500 + + 6,500 + + 6,500 + +800 + 7,300 + + 7,300 +
6,500 = = 6,500 = = 6,500 = = 6,500 = = 6,500 =
2,200 + + 2,200 + + 2,200 + + 2,200 + + 2,200 +
41,300 + (325) + 40,975 + (220) + 40,755 + + 40,755 + (300) + +
ENDING BALANCE
h.
BALANCE
g.
BALANCE
f.
BALANCE
e.
BALANCE
49,155
+220
+2,200 + +
=
+2,200 +
+
d.
49,155 =
325
1,300 0 + 40,000 -
6,500 +
6,500 =
0+
41,300 +
BALANCE
3,500 –
+325
+1,300 + -
+
=
+
+1,300 +
c.
40,455
0
0 0 +
40,000 -
6,500 +
6,500 =
0+
40,000 +
BALANCE
1,345
0
0
+
-
+6,500 +
+6,500 =
+
b.
+
0 0 0 +
-
40,000 -
+
0 +
+40,000 -
Expenses
0=
+
Computer Service R. Falco, R. Falco, + Capital – Withd. + Revenue –
OWNER'S EQUITY
0+
Accounts Computer Equipment = Payable
= LIABILITIES +
40,000 +
BALANCE
a.
+
Cash
Accounts Receivable +
ASSETS
FALCO COMPUTER SERVICE
PROBLEM 1A-3
PROBLEM 1A-4 (a) WENGLER HOME DECORATING SERVICE INCOME STATEMENT MONTH ENDED JUNE 30, 201X Revenue: Home Decorating Fees
$2
4 0 0
Operating Expenses: Advertising Expense
$
1 4 5
Repair Expense
5 5
Travel Expense
2 5 0
Supplies Expense
5 5
Rent Expense
3 7 5
Total Operating Expenses
8 8 0
Net Income
$1
5 2 0
$3
8 8 5
(b) WENGLER HOME DECORATING SERVICE STATEMENT OF OWNER'S EQUITY MONTH ENDED JUNE 30, 201X J. Wengler Capital, June 1, 201X Net Income for June
$1
5 2 0
Less: Withdrawals for June
(1
0 0 0)
Increase in Capital
5 2 0
J. Wengler, Capital, June 30, 201X
$4
4 0 5
(c) WENGLER HOME DECORATING SERVICE BALANCE SHEET JUNE 30, 201X ASSETS
LIABILITIES AND OWNER'S EQUITY
Cash
$2
3 0 0
Liabilities
Accounts Receivable
1
2 0 0
Accounts Payable
Decorating Equipment
1
1 5 5
$
2 5 0
4
4 0 5
$4
6 5 5
Owner's Equity J. Wengler, Capital Total Liabilities and Total Assets
$4
.
6 5 5
Owner's Equity
1-10
+ 0 + + 0 + + 0 + + 0 + + 0 + + 0 + +175 + 175 + (120) + 55 + + 55 + + 55 + + 55 + + 55 + + 55 + + 55 +
+33,000 + 33,000 + (1,600) + 31,400 + + 31,400 + (200) + 31,200 + +2,400 + 33,600 + (690) + 32,910 + + 32,910 + +120 + 33,030 + (60) + 32,970 + (90) + 32,880 + +1,900 + 34,780 + + 34,780 + + 34,780 + (550) + 34,230 +
5/25 BALANCE 5/27
BALANCE 5/28 BALANCE 5/29 BALANCE 6/1 BALANCE 6/5 BALANCE 6/8 BALANCE 6/10 BALANCE 6/15 BALANCE 6/17
BALANCE 6/20 BALANCE 6/25 BALANCE 6/28 BALANCE 6/30
END. BAL.
Cash =
.
1-11
$38,785 =
4,500 =
4,500 =
3,700 = +800 4,500 =
3,700 =
3,700 =
3,700 =
3,700 =
3,700 =
3,700 =
3,700 =
1,600 = +2,100 3,700 =
+1,600
$38,785
90 +
1,800
750
750
4,475 – 33,000 – 3,200 +
90 +
90 +
90 +
90 +
690 +60 750
690
0 +690 690
0
0
0
0
750 +500 1,250 +550
33,000 – 33,000 33,000 – 33,000 – 1,900 + + 1,900 + +800 + 2,700 + +500 + 3,200 + +
0 + +90
0 +
0 +
0 +
0 +
0 +
0 +
Expenses
2,575 – +1,900 4,475 – 4,475 – 4,475 – -
0 0 0 +2,400 2,400 2,400 – +175 2,575 – 2,575 – 2,575 – 0 +
33,000 33,000 33,000 33,000 33,000 33,000 33,000 33,000 -
+
0 + +2,100 + 2,100 + (200) + 1,900 + + 1,900 + + 1,900 + + 1,900 + + 1,900 + + 1,900 + +
Accounts Payable + 0 + +
OWNER’ S EQUITY J. J. Catering Truman, Truman, + Revenue – – Withd Capital +33,000 0 0 + 33,000 -
= LIABILITIES +
Accounts + Receivable + Equipment =
ASSETS
TRUMAN’ S CATERING SERVICE
PROBLEM 1A-5
PROBLEM 1A-5 (CONTINUED) (b) TRUMAN'S CATERING SERVICE BALANCE SHEET MAY 31, 201X ASSETS
LIABILITIES AND OWNER'S EQUITY
Cash Equipment
$31 2 0 0 3 7 0 0
Total Assets
$34 9 0 0
Liabilities Accounts Payable
$1 9 0 0
Owner's Equity J. Truman, Capital
33 0 0 0
Total Liabilities and Owner's Equity
$34 9 0 0
(c) TRUMAN'S CATERING SERVICE INCOME STATEMENT MONTH ENDED JUNE 30, 201X Revenue: Catering Revenue
$4
4 7 5
1
8 0 0
$2
6 7 5
Operating Expenses: Salaries Expense
$
Telephone Expense
6 9 0 6 0
Rent Expense
5 0 0
Supplies Expense
5 5 0
Total Operating Expenses Net Income
.
1-12
PROBLEM 1-5A(CONCLUDED) (d) TRUMAN'S CATERING SERVICE STATEMENT OF OWNER'S EQUITY MONTH ENDED JUNE 30, 201X J. Truman, Capital June 1, 201X
$33 0 0 0
Net Income for June
$2 6
Less: Withdrawals for June
7 5 (9 0)
Increase in Capital
2 5 8 5
J. Truman, Capital, June 30, 201X
$35 5 8 5
(e) TRUMAN'S CATERING SERVICE BALANCE SHEET JUNE 30, 201X ASSETS
LIABILITIES AND OWNER'S EQUITY
Cash
$34 2 3 0
Accounts Receivable Equipment
5 5 4 5 0 0
Total Assets
$38 7 8 5
.
Liabilities Accounts Payable Owner's Equity J. Truman, Capital Total Liabilities and Owner's Equity
1-13
$3 2 0 0 35 5 8 5 $38 7 8 5
SOLUTIONS TO SET B PROBLEMS PROBLEM 1B-1 MADELINE’S NAIL SPA Transaction Cash a. b. c. d. Total
+17,000 (3,900) (800) 12,300
Assets = Store Equipment
Liabilities Accounts Payable
+ Owner’s Equity M. Abdul, Capital +17,000
+3,900 +6,200
+6,200 (800) 5,400
10,100
17,000
PROBLEM 1B-2 SAM'S INTERNET SERVICE BALANCE SHEET SEPTEMBER 30, 201X ASSETS
LIABILITIES AND OWNER'S EQUITY
Cash
$ 5 0 0 0
Liabilities
Equipment
34 0 0 0
Accounts Payable
Building
45 0 0 0
$15 5 0 0
Owner's Equity B. Sam, Capital
68 5 0 0
Total Liabilities and Total Assets
$84 0 0 0
.
Owner's Equity
1-14
$84 0 0 0
.
1-15
ENDING BALANCE
h.
BALANCE
g.
BALANCE
f.
BALANCE
e.
BALANCE
d.
BALANCE
c.
BALANCE
b.
BALANCE
a.
OWNER'S EQUITY
$22,620 =
$22,620
1,480
+800 + + = +
(800) +
1,900 –
1,480
1,900 – 0 +
17,000 – 6,000 + 5,000 =
1,200 +
17,220 +
800 +
+1,000 + +1,000 + =
+
+
17,000 –
480
1,900 – 0 + 17,000 5,000 +
5,000 =
1,200 +
17,220 +
6,000 +
+180 + +
=
+
(180) +
5,000 =
300
1,900 – 0 + 17,000 5,000 +
5,000 =
1,200 +
17,400 +
1,200 +
+300 + +
=
+
(300) +
16,420 +
0
1,900 –
+1,200 + -
+
=
+1,200 +
+
0
0 +
700 0 + 17,000 -
5,000 +
5,000 =
0 +
17,700 +
17,000 -
+700 + -
+
=
+
+700 +
0
5,000 +
0 0 +
17,000 -
5,000 +
5,000 =
0 +
17,000 +
5,000 =
+
-
+5,000 +
+5,000 =
+
+
0
1,200 +
0 0 +
17,000 -
0 +
0 =
0 +
17,000 +
Expenses
17,700 +
-
+
+17,000 -
+
=
+
+17,000 +
Cash
= LIABILITIES +
R. R. Computer Fannier Fannier, Accounts Computer Accounts Service RED FUMAN + Capital – Withd. + Revenue – Payable SERVICE = COMPUTER + Receivable + Equipment
ASSETS
FANNIER COMPUTER SERVICE
PROBLEM 1B-3
PROBLEM 1B-4 (a) WADDEN HOME DECORATING SERVICE INCOME STATEMENT MONTH ENDED SEPTEMBER 30, 201X Revenue: Home Decorating Fees
$2
4 0 0
1
4 3 5
$
9 6 5
$2
6 7 5
Operating Expenses: Advertising Expense
$
2 5 0
Repair Expense
4 0
Travel Expense
7 5 0
Supplies Expense
9 5
Rent Expense
3 0 0
Total Operating Expenses Net Income
(b) WADDEN HOME DECORATING SERVICE STATEMENT OF OWNER'S EQUITY MONTH ENDED SEPTEMBER 30, 201X J. Wadden, Capital, September 1, 201X Net income for September
$
Less: Withdrawals for September
9 6 5 (8 0 0)
Increase in Capital
1 6 5
J. Wadden, Capital, September 30, 201X
$2
8 4 0
(c) WADDEN HOME DECORATING SERVICE BALANCE SHEET SEPTEMBER 30, 201X ASSETS
LIABILITIES AND OWNER'S EQUITY
Cash
$2
Accounts Receivable Decorating Equipment
Total Assets
$3
.
5 0 0 5 5 0 7 2 5
7 7 5
Liabilities Accounts Payable
$
9 3 5
Owner's Equity J. Wadden, Capital
2
8 4 0
Total Liabilities and Owner's Equity
$3
7 7 5
1-16
.
1-17
1,550 1,550 +550 2,100 +250 2,350
2,150 – +1,000 3,150 3,150 – 3,150 – 3,150 –
+400 + 400 + + 400 + + 400 + + 400 + + 400 +
22,000 – 22,000 22,000 – 22,000 – 22,000 –
+ 1,300 + + 1,300 + +400 + 1,700 + +550 + 2,250 + + 2,250 + $24,650
= 2,800 = = 2,800 = +400 = 3,200 = = 3,200 = = 3,200 = $24,650 =
+ 50 + + 50 + + 50 + + 50 + + 50 +
(400) + 20,650 + +1,000 + 21,650 + + 21,650 + + 21,650 + (250) + 21,400 +
11/17 BALANCE 11/20 BALANCE
11/25 BALANCE 11/28 BALANCE 11/30 END BAL.
1,550
1,500 +50 1,550
1,500
0 +1,500 1,500
0
0
0
0 = +700 = 700 = +2,100 = 2,800 = = 2,800 = = 2,800 = = 2,800 = = 2,800 = = 2,800 = = 2,800 =
0 + + 0 + + 0 + + 0 + + 0 + + 0 + +150 + 150 + (100) + 50 + + 50 +
22,000 + (700) + 21,300 + + 21,300 + (800) + 20,500 + +2,000 + 22,500 + (1,500) + 21,000 + + 21,000 + +100 + 21,100 + (50) + 21,050 +
BALANCE 10/27 BALANCE 10/28 BALANCE 10/29 BALANCE 11/1 BALANCE 11/5 BALANCE 11/8 BALANCE 11/10 BALANCE 11/15 BALANCE
0
0 0 0 0 +2,000 2,000 2,000 – +150 2,150 – 2,150 – 2,150 0 + + 0 + + 0 + + 0 + + 0 + + 0 + + 0 + + 0 + + 0 + 22,000 22,000 22,000 22,000 22,000 22,000 22,000 22,000 22,000 0 + + 0 + +2,100 + 2,100 + (800) + 1,300 + + 1,300 + + 1,300 + + 1,300 + + 1,300 + + 1,300 +
=
+
Expenses
+22,000 +
J. Catering J. Trickett, Trickett, + Revenue – + Capital – Withd + +22,000 +
OWNER’ S EQUITY
10/25
Cash
Accounts Payable
= LIABILITIES +
Accounts + Receivable + Equipment =
ASSETS
TRICKETT’ S CATERING SERVICE
PROBLEM 1B-5
PROBLEM 1B-5 (CONTINUED) (b) TRICKETT'S CATERING SERVICE BALANCE SHEET OCTOBER 31, 201X ASSETS
LIABILITIES AND OWNER'S EQUITY
Cash
$20 5 0 0
Equipment
2 8 0 0
Liabilities Accounts Payable
$1
3 0 0
22
0 0 0
Owner's Equity J. Trickett, Capital Total Liabilities and Total Assets
$23 3 0 0
Owner's Equity
$23 3 0 0
(c) TRICKETT'S CATERING SERVICE INCOME STATEMENT MONTH ENDED NOVEMBER 30, 201X Revenue: Catering Revenue Operating Expenses: Salaries Expense Telephone Expense Rent Expense Supplies Expense
$1
Total Operating Expenses Net Income
.
1-18
5 0 5 5 5 2 5
$3
1 5 0
2
3 5 0
$
8 0 0
0 0 0 0
PROBLEM 1B-5(CONCLUDED) (d) TRICKETT'S CATERING SERVICE STATEMENT OF OWNER'S EQUITY MONTH ENDED NOVEMBER 30, 201X J. Trickett, Capital, November 1, 201X Net Income for November Less: Withdrawals for November
$22 0 0 0 $
8 0 0 (4 0 0)
Increase in Capital
4 0 0
J. Trickett, Capital, November 30, 201X
$22 4 0 0
(e) TRICKETT'S CATERING SERVICE BALANCE SHEET NOVEMBER 30, 201X ASSETS
LIABILITIES AND OWNER'S EQUITY
Cash
$21 4 0 0
Accounts Receivable
5 0
Equipment
3 2 0 0
Liabilities Accounts Payable
$2 2 5 0
Owner's Equity J. Trickett, Capital
22 4 0 0
Total Liabilities and Total Assets
$24 6 5 0
Owner's Equity
$24 6 5 0
FINANCIAL REPORT PROBLEM SOLUTION—2016 Amazon’s Annual Report YEAR
Cash and Cash Equivalents
2016
$19,334 million
2015
$15,890 million
Increase
$ 3,444 million
Cash and cash equivalents increased $3.4 billion from 2015 to 2016.
.
1-19
. 11,240 –1,500
BALANCE
c.
–800
e.
1-20 12,040 + –1,500
BALANCE
j.
$10,540 +
+1,400
i.
ENDINGBALA NCE
10,640 +
BALANCE
h.
10,640 +
+700
g.
BALANCE
9,940 +
+1,000
BALANCE
f.
8,940 +
9,740 +
BALANCE
=LIABILITIES+
$500 +
500 +
500 +
500 +
500 +
500 +
500 +
+$500
+
+
$1,260 +
1,260 +
1,260 +
1,260 +
1,260 +
1,260 +
1,260 +
1,260 +
1,260
+$1,260
$13,800 =
$1,500 =
1,500 =
1,500 =
1,500 =
1,500 =
1,500 =
1,500 =
1,500 =
+$1,500
=
=
$600 +
600 +
600 +
+100
500 +
500 +
500 +
500 +
+$500
+
+
Accounts Office Computer + Supplies + Shop Equipment + Equipment = Payable
BALANCE
d.
9,740
–1,260
b.
BALANCE
12,500
+$12,500
BALANCE
a.
Cash
ASSETS
SUAREZ COMPUTER CENTER
$13,800
$12,500 –
12,500
12,500
12,500
12,500
12,500
12,500
12,500
12,500
12,500
+$12,500
$1,500 +
+1,500
+
+
+
+
$3,100 –
3,100 –
+1,400
1,700 –
1,700 –
+700
1,000 –
+$1,000
–
Service Falco, Falco, +Capital – Withdrawals + Revenue –
OWNER'S EQUITY
$900
900
900
+100 (Util.)
800
800
800
+$800 (Rent)
Expenses
KEEPING IT REAL--Suarez Computer Center Solution
SUAREZ COMPUTER CENTER INCOME STATEMENT FOR THE MONTH ENDED JULY 31, 201X Revenue: Service Revenue
$3
1 0 0
00
9 0 0
00
$2
2 0 0
00
$ 12
0 5 0 0
00 00
12
5 0 0
00
7 0 0
00
$13 2 0 0
00
Operating Expenses: Rent Expense
$
Utilities Expense
8 0 0
00
1 0 0
00
Total Operating Expenses Net Income
SUAREZ COMPUTER CENTER STATEMENT OF OWNER'S EQUITY FOR MONTH ENDED JULY 31, 201X T. Falco, Capital, July 1, 201X Investment for July Total investment for July Net Income for July
$2
2 0 0
00
Less: Withdrawals for July
(1
5 0 0 00)
Increase in Capital T. Falco, Capital, July 31, 201X
SUAREZ COMPUTER CENTER BALANCE SHEET JULY 31, 201X ASSETS
LIABILITIES AND OWNER'S EQUITY
Cash
$10 5 4 0 00
Supplies
5 0 0 00
Computer Shop Equipment
1 2 6 0 00
Office Equipment
1 5 0 0 00
Liabilities: Accounts Payable
$
6 0 0 00
13
2 0 0 00
Owner’s Equity T. Falco, Capital Total Liabilities and
Total Assets
$13 8 0 0 00
.
Owner's Equity
1-21
$13 8 0 0 00
2 Debits and Credits: Analyzing and Recording Business Transactions ANSWERS TO DISCUSSION QUESTIONS AND CRITICAL THINKING/ETHICAL CASE A ledger is a group of accounts that records in monetary value the data from business transactions. 2. The left-hand side is always the debit side. It is an arbitrary rule. 3. False. Accounts with one entry will not need footings. 4. The financial statements are the end products of the accounting process. 5. The transaction analysis chart is a teaching device that is not used in the regular accounting process. 6. Which accounts are affected? In which categories do the accounts belong? Are the accounts increasing or decreasing? What do the rules of debit and credit say? What does the T-account look like? 7. Disagree. Computers will record debits and credits based on the account type. 8. False. The trial balance is an informal report that does not have the same status as financial statements. The trial balance is used to verify the equality of total debits and credits and prepare the financial statements. 9. The financial statements are prepared from the ending balances of the accounts (debit or credit) in the ledger. The columns on financial statements are used for listing amounts and for subtotaling. 10. It is easier to prepare the reports from the trial balance rather than the expanded accounting equation because the trial balance lists all accounts and their balances. The columns for revenue, expenses, etc., in the expanded accounting equation do not list specific titles and their balances. 11. The question in this case is whether Joshua should be allowed to put fictitious figures into the trial balance. I would not support this type of behavior. His behavior is extremely unprofessional and goes against professional ethical standards. Instead of putting in fictitious figures, Joshua should stay late and correct the trial balance. He could also ask for help. 1.
,
2-1
SOLUTIONS TO CONCEPT CHECKS 1.
The ending balance in Cash is $19,500(debit balance). The ending balance in C. Rice, Capital is $18,000(credit balance). Cash 110 6/24 8,000 6/28 12,000 20,000
500 6/26
500
Bal. 19,500 C. Rice, Capital 311 11,000 6/1 6,000 6/8 1,000 6/22 18,000 Bal.
2. A. B. C. D. E. F. G.
Category Liability Revenue Asset Capital Withdrawal Asset Expense
Incr. Cr. Cr. Dr. Cr. Dr. Dr. Dr.
Decr. Dr. Dr. Cr. Dr. Cr. Cr. Cr.
Normal Bal. Cr. Cr. Dr. Cr. Dr. Dr. Dr.
3. Account
Category
Increase/Decrease
Dr. or Cr.
T Accounts Cash
600 Cash
Asset
↑
Dr. Acc. Rec. 2,900
Accounts Receivable
Asset
↑
Dr. Design Fees Earned 3,500
Design Fees Earned
Revenue
,
↑
Cr.
2-2