AR = asset - AP > UA iHy- % ¥ eh Sipe, Seed Eton 2S NGS voles ABE. cae Covered, Problem 1-2 Identify how each of the folldwitg separate transactions affects financial statements. For the ae . ‘ balance see, identify bow each ansaction affect tl tat, otal inbiie and tot ex Re owrmew B bverreee — Porthe income satrent, ieniy how each transaction affects te rot or he pod Fre eC statement of cash flows, identify how each tanaction effects cash flows from operating spree Neget ils cash os rom Sasi sis, en eh Nove tm mesg cies. Fr SG ‘8 inet, poe 44" inte colo e column. or eres, pce "=" in elu o % - columns. If both an increase and a decrease occur, place a‘+/—" in the column or columns. The’ first transaction is completed as an example. = c D enecia! | Beaty, | sre eros | Ativan 10. Owner Ines ah ip busines i 2, | Receies ash of sevens prove 3. | Parggsh for tnplyes Wages ath, Ke ters leh coves oh zat Fp Eo] Bosra cae by sine lone ree | tena Owner wits Gish By signing note payable { | erica ea "Bais ofc equrare Kerk L ‘Collects cash on reeehable fin hi J.D, Simpson started ‘The Simpson Co., a new business that began operations on 1 May. Simpson Problem 1-3 Co. completed the following transactions during that first month: May 1 J.D. Simpson, the owner, invested $60,000 cash in the business. 1 Rented a furnished office and paid $3.200 cash for May's rent. 3. Purchased $1,680 of office equipment on credit. 5. Paid $800 cash for this month's cleaning services. 8 Provided consulting services for a client and immediately collected $4,600 cash. 12 Provided $3,000 of consulting services for a client on credit. 15. Paid $850 cash for an assistant’ salary for the frst half of this month, 20 Received $3,000 cash payment for the services provided on 12. May. 22. Provided $2,800 of consulting services on credit 25. Received $2,800 cash payment for the services provided on 22 May. 26 Paid $1,680 cash for the office equipment purchased on 3 May. 27 Purchased $60 of advertising in this month’s (May) local paper on credit; cash payment is due 1 Jane. 28 Paid $850 cash for an assistant's salary for the second half of this month, 30 Paid $200 cash for this month's telephone bill. 30. Paid $480 cash for this month's utilities. . 31 J.D. Simpson withdrew $1,200 cash for personal use. Required 1. Arrange the following asset, ability, and equity ties ina table like Exhibit 1.8: Cash; Accounts Receivable; Office Equipment; Accounts Payable; J. D. Simpson, Capital J. D. Simpson Withdrawals; Revenues; and Expenses.1 The following are the major balance sheet classifications. Current assets (CA) Current iabiities (CL) Property, plant and equipment (PPE) ‘Long-term liabilities (CTU) Long-term investments (CTI) ‘Owners equity (OE) Intangible Assets (1A) Required: Classify each of the following accounts: Ace Accounts payable ‘Accounts receivable Baten ‘Owner's capital inventor Salaries payable i Accumulated depreciation a Bulgings Long-term debt ‘Supplies Equipment [Prepaid expense 2) The adjusted trial balance for ‘Wootwoot Shop at Dec 31, 2012 contains the following accounts: Debits Credits Buildings 428,800 | Owner's capital 115,000 ‘Accounts receivable 14,520 | Acc depreciation- Buildings 42,600 Prepaid insurance 4,680 | Accounts payable 12,300 Cash 78,040 | Notes payable 97,780 Equipment, 62,400 | Acc depreciation- Equipment 48,720 Land 67,000 | Interest payable 2,600 Insurance expense 780 | Service revenue 17,180 Depreciation expense 7,360. expense 2,600 Interest exp mate 306,160 Required: Prepare a classified balance sh 2013. eet, assume that $22,000 of the note payable will be paid ina ‘The financial statement items are for RajaBomoh Associates at year-end July, 2012. ‘Salaries payable 7080 | Notes payable (long-term) 4,800, Salaries expense 51,700 | Cash 14,200. Utlities expense 22,600 | Accounts receivable 8,780 Equipment 20,400 | Accumulated depreciation ‘equipment 8,000 ‘Accounts payable, 4.100 | Owner's drawings 3,000 ‘Service revenue 2.000 | Depreciation expense 4,000. Rent revenio %.500 | Owner's capital (beginning of the year) 51,200 ) Prepare an income statement and an owner's equity statement for the year. No new investments were made during the year. b) Prepare a classified balance sheet at July 31. 4 cose Company owns equipment that cost $50,000 when purchased on January 4, 2009. It n depreciated using the straightine method based on estimated salvage value of $5,000 and an estimated useful life of 5 years. Required: Prepare Cosmo's journal entries to record the sale of the equipment in these four independent situations. a) Sold for $28,000 on January 1, 2012. b) Sold for $28,000 on May 4, 2012. ¢) Sold for $11,000 on January 1, 2012. d) Sold for $11,000 on October 1, 2012 5. Presented below are selected transactions at Kirk Co. for 2012. ‘of machinery that was purchased on Jan 1, 2002. The machine cost Jan1 Retired a piece fe. Ithad a useful life of 10 years with no salvage value. $62,000 on that dat was purchased on January 4, 2009. The computer cost $40,000. uter was sold for June 30 Sold a computer that It had a useful life $14,000. of 5 years with no salvage value. The comp(uw A \ a) Discuss ethics and the cost Principle. 603) eo Use accounting concepts (504, 5) ‘ilies, and owner's eqity. (506) OEE Analyze the effect of (06,7) s oe "wt ‘Accounting in Action Instructions de i ar ‘the users as being either external users or internal users. following questions could be asked by an internal user or an external user. ——Can we atford to give our enn a Wve our employees a pay ai Dia the company eta asssfasoryindowe? ——Do we need to borrow in the near future? ——How does the company’s profitability compare to other companies? What does it cost us to manufacture each tnit produced? ———Which product should we emphasize? ——Will the company be able to pay its short-term debts? Instructions Identify each of the qigstions as being more likely asked by an internal user or an external E1-3 Lovie Smith, president of Smith Company, has instructed Michelle Martz, the head of the accounting department for Smiths Company, to report the company's land in the company’s ac- | counting reports at its fair value of $170,000 instead ofits cost of $100,000. Smith says, “Showing the land at $170,000 will make our company look like a better investment when we try to attract, ew investors next month.” Instructions . Explain the ethical situation involved for Michelle Martz, identifying the stakeholders and the alternatives. E14 The following situations involve accounting principles and assumptions. 1. Rex Company owns buildings that are worth substantially more than they originally cost. In {an effort to provide more relevant information, Rex reports the buildings at fair value in its accounting reports. 2, Levi Company includes in its accounting records only transaction data that can be expressed in terms of money. 3 Josh Borke, owner of Josh's Photography, records his personal living costs as expenses of the business. Instructions. For each of the three situations, say if the accounting method used is cofrect or incorrect. If cortect, identify which principle or assumption supports the method used. If incorrect, identify ‘which principle or assumption has been violated. E15. Garcia Cleaners has the following balance sheet items. Accounts payable Accounts receivable Cash ‘Notes payable Equipment Salaries and wages payable ‘Supplies (Owner's capital Instructions Classify each item as an asset, liability, or owner's equity. E1-6 Selected transactions for Linebrink Lawn Care Company are listed below. ‘Made cash investment to start business. Paid monthly rent. Purchased equipment on account. Billed customers for services performed. Withdrew cash for owner's personal use. Received cash from customers billed in (4). Incurred advertising expense on account. Purchased additional equipment for cash. Received cash from customers when service was performed. Peravaepe Instructions {List the numbers of the above transactions and describe the effect of each transaction on assets, Tiabilities and owner's equity. For example, the first answer is: (1) Increase in assets and increase in owner's equity.r- tows Exercises! 3, 1-7. Thornton Computer Timeshare Company entered into the following transactions during, neve He es of rane, May 2012. ‘owner’sequiy. 1. Purchased computer terminals for $20,000 from Digital Equipment on account. eoen 2. Paid $4,000 cash for May rent on storage space. ‘3. Received $17,000 cash from customers for contracts billed in April. 4. Provided computer services to Fisher Construction Company for $3,000 cash. 5. Paid Norther States Power Co. $11,000 cash for energy usage in May. 6. Thornton invested an additional $29,000 in the business. 7 Paid Digital Equipment for the terminals purchased in (1) above. & Incurred advertising expense for May of $1,200 on account. Instructions Indicate with the appropriate letter whether each of the transactions above results in: (2) An increase in assets and a decrease in assets. * ' (®) An increase in assets and an increase in owner's eduity. (©) An increase in assets and an increase in liabilities (@ A decrease in assets and a decrease in owner's equity. - (©) A decrease in assets and a decrease in liabilities. © An increase in liabilities and a decrease in owner’s equity. (G) An increase in owner's equity and a decrease in liabilities. € E1-8 An analysis ofthe transactions made by Mark Kotsay & Co,,a certified public accounting Analyze transactions and firm, for the month of August is shown below. The expenses were $650 for rent, $4,800 for salaries compute net income, and wages, and $500 for utilities. son Accounts Accounts Owner's Owner's Cash _ + Receivable + Supplies + Equipment = Payable + Capital ~ Drawings + Revenues ~ Expenses 1L+$15,000 815,000 2. =2,000 +8500 +83,000 3. -750 +8750 4. +4600 +$3,900 +$8,500 5. -1,500 1,500 6 -2,000 82,000 a) $650 & +450 450 9. -4800 4800 10. +500 500 Instructions (a) Ge Describe each transaction that occurred for the month. (b) Determine how much owner's equity increased for the month. (© Compute the amount of net income for the month. 1-9 An analysis of transactions for Mark Kotsay & Co. was presented in E1-8. Prépare financial statements. Instructions sod Prepare an income statement and an owner's equity statement for August and a balance sheet at August 31, 2012. 1-10 Andruw Company had the following assets and liabilities on the dates indicated. Determine net income (or loss). December 31 Total Assets Total Liabilities son) 2011 ‘$400,000 $250,000 : 2012 $460,000 $300,000 2013, $590,000 $400,000 ‘Andruw began business on January 1,2011, with an investment of $100,000. Instructions . : From an analysis of the change in owner's equity during the year, compute the net income (ot toss) for: (@) 2011, assuming Andruw’s drawings were $15,000 for the year. oe (b) 2012, assuming Andruw made an additional investment of $45,000 and had no drawings ii 2012. (© 2013, assuming Andruw made én additional investment of $15,000"and:had drawings: of - {$25,000 in 2013.5 Presented below is financial : Problems:SetA 33 Prepare an income statement. Maintenance and rey ee Supplies expense TAPES $ 95000 Salaries and wages expense 142,000, Wvertising expense 24,500 Ticket revenue 410,000 Instructions Prepare the 2012 income statement for J.J. Putz Cruise Company. E1-16 Presented below is : eee information related to the sole proprietorship of Sergio Santos Prepare an owners equity Legal service revenue—3012 $335,000 Gee? Total expenses—2012 * 211,000 : Assets, January 1, 2012 196,000 Liabilities, January 1,2012 62,000 Assets, December 31, 2012, 168,000 @ Liabilities, December 31, 2012 100,000. Drawings 2012 i Instructions Prepare the 2012 owner's equity statement for Sergio Santos legal practice Problems: Set A P1-1A Threet’s Repair Shop was started on May 1 by Erica Threet. A summary of May transac- Analyze mansactions and tions is presented below. compute net income. L. Invested $10,000 cash to start the repair shop. 606.7) 2, Purchased equipment for $5,000 cash. 3, Paid $400 cash for May office rent. = 4, Paid $500 cash for supplies. 5, Incurred $250 of advertising costs in the Beacon News on account. 6. Received $6,100 in cash from customers for repair service. 7. Withdrew $1,000 cash for personal use. 5 & Paid part-time employee salaries $2,000. ). Paid utility bills $170. = Provided repair service on account to customers $750. LL, Collected cash of $120 for services billed in transaction (10). Instructions (a) Prepare a tabular analysis of the transactions, using the following column headings: Cash, (3) Total assets $13,280 ‘Accounts Receivable, Supplies, Equipment, Accounts Payable, Owner's Capital, Owner's Drawings, Revenues, and Expenses. (&) From an analysis of the owner's equity columns, compute the net income or net loss for _(b) Net income $4,030 May. P1-2A Ramona Castro opened a veterinary business in Nashville,Tennessee, on August 1.On Analyze tansactions and “August 31 the balance sheet showed Cash $9,000, Accounts Receivable $1,700, Supplies $600, prepare Income samen Equipment $6,000, Accounts Payable $3,600, and Owner's Capital $13,700. During September, owner erly slemens the following transactions occurred. tnd balance sheet. 1. Paid $2,900 cash on accounts payable. (506, 7,8) 2. Collected $1,300 of accounts receivable. 3. Purchased additional office equipment for $2,100, paying $800 in cash and the balance on ‘account. 7 A. Eamed revenue of $7,800, of which $2,500 is received in cash and the balance is due in October, . ~ - 5, Withdrew $1,100 cash for personal use. 6. Paid salaries $1,700, rent for September $900, and advertising expense $450. 7, Incurred utilities expense for month on account $170. & Received $10,000 from Capital Bank (money borrowed on a note payable)..34 4 Accounting in Action . (2) Total assets $29,350, (b) Net income $4,580 Ending capital $17,180, Prepare income statement, 2wners equity statement and balance sheet, soa) nl {) Net income $3,000 Owner's equity $41,500 Total assets $72,300 (©) Net income $2,400 ‘Owner's equity $40,900 Analyze transactions and repare financial statements (506,7,8) (2) Total assets $23,100 Cee, tabular analysis of the September asactons ein ih ANB 3 Ele aes ug hold be a follows Cash + Acrouns Receivable + Sop Bis column adi spr acoounts Payable + Owners Capital ~ Owners Drawings + Popee eal Ss ent for tember, (v) Prepare tn inctce statement for September, an owner's equity statement for Sept ra chdanen tant eguoabec 5 —T P1-3A On May 1, A. J. Pierzynski started AJ Flying School, a company that eu lessons, by investing $40,000 cash in the business. Following are the assets and liabilities company on May 31,2012, and the revenues and expenses for the month of May. con $3400 Notes Pie seoano Acsounis Receivable, 4900 Rent Expense 200 Esupment ino Naintcosoes nd Reps Expense Service Revenue 8100 Gasoline Expense 2,500 Advertising Expense 600 Insurance Expense al Accounts Payable 00 ‘AL Peyns mad no aldol inves n May bath widow 1,50 in cash for pe ‘ale , Instructions (a) Prepare an income statement and owner's equity statement for the month of May and a bal- ance sheet at May 31. (©) Prepare an income statement and owner's equity statement for May assuming the following data are not included above: (1) $900 of revenue was eared and billed but not collected at May 31, and (2) $1,500 of gasoline expense was incurred but not paid. PI-4A Gordon Beckham started his own detivery service, Beckham Deliveries, on Jue 1,2012, ‘The following transactions occurred during the month of June. June 1 Gordon invested $10,000 cash in the business. é Purchased a used van for deliveries for $12,000. Gordon paid $2,000 cash and ‘signed ‘a note payable forthe remaining balance, Paid $500 for office rent for the month. Performed $4,400 of services on account. ‘Withdrew $200 cash for personal use, Cc Purchased supplies for $150 on account. Received a cash payment of $1,250 for services provided on June 5. Purchased gasoline for $200 on account. Received a cash payment of $1,300 for services provided. ( ‘Made a cash payment of $600 on the note payable, Paid $250 for utilities. Paid for the gasoline purchased on account on June 12 Paid $1,000 for employee salaries. SSRBRsG oun Instructions (2) Show the effects ofthe previous transactions on the accounting equation using the following format. Assets Liabilities Ovmer's Equity “Accounts Notes Accounts Owner's Owner's Date Cash + Receivable + Supplies + Equipment = Payable + Payable + Capital ~ Drawings + Revenues - Expenses (b) Net income $3,750 (© Cash $7,800 (b) Prepare an income statement for the month of June. (© Prepare a balance sheet at June 30,2012.Chapter 1 ~ Accounting in Business ‘Prepare an income statement for May, § & statement of owner's equity for May, 31 May balance sheet, and a statement of cashflows for May ES ea for May. 31 May bla {Curis Hamilton started a new business and completed these transactions during December: Problem I= Curtis Hamilton transferred $56,000 cash from a personal savings account to a check ing account in the name of Hamilton Electric as its intial capital, Rented office space and paid $800 cash for the December rent. Purchased $14,000 of electrical equipment by paying $3,200 cash and agreeing to pay the $10,800 balance in 30 days, Purchased office supplies by paying $900 cash. Completed electrical work and immediately céllected $1,000 cash for the work. Purchased $3,800 of office equipment on credit. Completed electrical work on credit in the amount of $4,000. Purchased $500 of office supplies on credit. Paid $3,800 cash for the office equipment purchased on 8 December. Billed a client $600 for electrical work completed; the balance is due in 30 days. - ; 28 Received $4,000 cash for the work completed on 15 December. 29° Paid the assistants sslary of $1,200 cash for this month, 30 Paid $440 cash for this month's utility bill. 31 C. Hamilton withdrew $700 cash for personal use. 7 Required Asrange the following asset, liability, and equity titles in a table like Exhibit 1.8: Cash; Accounts Receivable; Office Supplies; Office Equipment; Electrical Equipment; Accounts Payable; C. Hamilton, Capital; C. Hamilton, Withdrawals; Revenues; and Expenses. 2. Use additions and subtractions to show the effects of each transaction on the accounts in the accounting equation. Show new balances after each transaction. 3+ Use the increases and decreases in the columns of the table from part 2 to prepare an income statement, a statement of owner's equity, and a statement of cash flows for the month, Also ‘Prepare a balance sheet as of the end of the month, ‘4. Assume that the owner investment transaction on I December was $40,000 cash instead of $56,000 and that Hamilton Electric obtained the $16,000 difference by borrowing it from a ‘bank. Explain the effect of this change on total assets, total abilities, and total equity. ‘ronda Right started Right Consulting, a new business, and completed the following tansac- Problem 1-5 tions during its first year of operations: > . M, Right invests $60,000 cash and office equipment valued at $30,000 in the business, 1. Purchased a $300,000 building to use as an office. Right paid $50,000 in cash and signed @ note payable promising to pay the $250,000 balance over the next ten years. Purchased office equipment for $6,000 cash. ‘4. Purchased $4,000 of office supplies and $1,000 of office equipment on credit, ‘+ Paid s local newspaper $1,000 cash for printing an announcement of the office's opening. $ Completed a financial plan for a client and billed that client $4,000 for the service. & Designed a financial plan for another client and immediately collected an $8,000 cash fee. ‘A. M. Right withdrew $1,800 cash from the company bank account for personal use. Received a $3,000 partial cash payment from the client described in transaction {+ Made a $500 cash payment on the equipment purchased in transaction d. . Paid $2,500 cash forthe office secretary's wages.re Accounting Principles, Second Edition Required ‘+ Greate a table like the one in Exhibit 1.8, using the following headings for the coy, Cash; Accounts Receivable; Office Supplies; Office Equipment; Building: Accounts Payatie Notes Payable; M. Right, Capital; M. Right, Withdrawals; Revenues; and Expenses 2° § Use additions and subtractions to show the effects ofthese transactions on individual items 4 of the accounting equation. Show new balances after each transaction, ; 3+ Once you have completed the table, determine the company's profit forthe period. Problem ‘The following financial statement information is fom five separate companies: Lo wba eich withdavals Required 4. Answer the following questions about Company V: ‘8+ What is the amount of equity on 31 December 2005? 'b. What is the amount of equity on 31 December 2006? ‘€+ What is the profit for the year 2006? 2. Answer the following questions about Company W; ‘8. What is the amount of equity on 31 December 2005? bs What is the amount of equity on 31 December 2006? ‘+ What is the amount of liabilities on 31 December 20062 3. Calculate the amount of owner investments for Company X during 2006, 4. Calculate the amount of assets for Company ¥ on 31 December 2006, 5+ Calculate the amount of liabilities for Company Z on 31 December 2005. Problem 1-7 [dentify how each of the following separate transactions affects financial statements. For the | balance sheet, identify how each transaction affects total assets, total lisbilities, and total | quit. For the income statement, identify how each transaction affets profit forthe period. For the statement of cash flows, identity how each transaction affects cath flows from operating | activities, cash flows from financing activities, and cash flows from investing activities. For increases, place a "-+” in the column or columns. For decreases, place a "—" in the column ot columns. If both an increase and a decrease occur, place “+/—" in the column or columns. The ; first transaction is completed as an example. 2 HeChapter 2 - Analyzing and Recording Transactions < essed 51.00 cash on the receivable ereated in transaction & nn. Piburn withdrew $1,050 cash from the business for ‘Personal ose. Required Prepare general journal entries to ain) Tecord these transactions (use the account titles listed 2 their account numbers are in parentheses (use ue Cash (LOD); Accounts Receivable (106); ‘fice Supplies {ute Oftce Noter Payable 50, emabies (164), Building (170); Land (172); Accounts Payable (201) HOD: Sapaies EOE. Pibur, Capital 301); E. Piburm, Withdrawals (302); Fees Eamed (40ay, ‘pense (601); and Utilities Expense (602). Post the journal entries from part to the accounts and enter the balance after each posting, 3. Prepare a trial balance as of the end of this month's operations, Lummus Management Services opens for business and completes these transactions in September: Sept. 1 Rhonda Lummus, the owner, invests $28,000 cash along with office equipment val- vved at $25,000 in the business, 2 Prepaid $10,500 cash for twelve months’ rent for office space. (Debit Prepaid Rent for $10,500.) 4 Made credit purchases for $9,000 in office equipment and $1,200 in office supplies. Payment is due within 10 days. 8 Completed work for a client and immediately received $2,600 cash. 12. Completed a $13,400 project for a client, who must pay within 20 days. 13 Paid $10,200 casa to settle the account payable created on 4 September. 19 Paid $5,200 cash for the premium on an 18-month insurance policy. ( Debit Prepaid 3 Insurance for $5,200.) 22. Received $7,800 cash as partial payment for the work completed on 12 September, 24 Completed work for another client for $1,900 on credit. 28 Lummus withdrew $5,300 cash for personal use. 29. Purchased $1,700 of additional office supplies on credit. 30. Paid $460 cash for this month’s utility bil. Required 1. Prepare general journal entries fo record these transactions (use account titles listed in part 2). 2. Open the following ledger accounts—their account nusnbers are in parentheses (use the ‘balance column format): Cash (101); Accounts Receivable (106); Office Supplies (124); & _ Preps Insurance (128) Prepaid Rent (131): Office Equipment (163); Accounts Payable (201); R. Lummus, Capital (301); R. Lummus, Withdrawals (302); Service Fees Earned 401); and Utilities Expense (690). Post journal entries from part I to the ledger accounts ‘and enter the balance after each posting. 3. Prepare a trial balance as of the end of this month's operations. [At the beginning of April, Brooke Grechus launched a custom computer programing company Problem 2-7 called Softways. The company had the following transactions during April: ‘a. Brooke Grechus invested $45,000 cash, office equipment witha value of $4,500, and $28,000 of computer equipment in the company. 'b, Purchased land worth $24,000 for an office by paying $4,800 cash and signing a long-term note payable for $19,200. €. Purchased a portable building with $21,000 cash and moved it onto the land acquired in b, 4. Paid $6,600 cash for the premium on a two-year insurance policy.ESSE Rests ABS hig Priples Second Hetion rs ce. Provided services to a client and collected $3,200 cash. f. Purchased $3,500 of additional computer equipment by paying $700 cash and Signing, long-term note payable for $2,800. ‘%, Completed $3,750 of services for a client. This amount is to be received within 30 day, h. Purchased $750 of additional office equipment on credit. 1. Completed elient services for $9,200 on credit. J+ Received a bill for rent of a computer testing device that was used on a recently completed job. The $320 rent must be paid within 30 days. Ik. Collected $4,600 cash from the client described in transaction i. 1. Paid $1,600 cash for wages to an assistant, i 'm, Paid $750 cash to settle the account payable created in transaction . 1, Paid $425 cash for minor Tepairs to the computer equipment. ‘©. Grechus withdrew $3,875 cash for personal use. P+ Paid $1,600 cash for wages to an assistant. 4: Paid $800 cash for advertisements in the local newspaper during April Required 1+ Prepare general journal entries to record these fansactions (use the account titles Tg in part 2), 2, Open the following accounts—their account numbers are in parentheses (use the balance column format): Cash (101); Accounts Receivable (106); Prepaid Insurance (108); Office Equipment (163); Computer Equipment (164); Building (170); Land (172); Accounts Payable (201); Notes Payable (250); B. Grechus, Capital (301); B. Grechus, Withdrawals (302); Fees Eamed (402); Wages Expense (601); Computer Reatal Expense (602); Advertising Expense (603); and Repairs Expense (604). Post the journal entries from part 1 to the accounts and = center the balance after each posting, Prepare a trial balance as of the end of this month's operations. Problem 2-8 ‘Shaw Management Services opens for business and compietes these transactions in November: 3 Nov. 1 Kita Shaw, the owner, invested $30,000 cash along with $15,000 of office equipment in the business. 2. Prepaid $4,500 cash for six months’ rent for an office. (Debit Prepaid Rent for $4,500.) 4 Made credit purchases of office equipment for $2,500 and of office supplies for $600. = Payment is due within 10 days. 8 Completed work for a client and immediately received $3,400 cash. 12 Completed a $10,200 project for a client, who must pay within 30 days, 13 Paid $3,100 cash to settle the account payable created on 4 November. 19 Paid $1,800 cash for the premium on # 24-month insurance policy. 22. Received $5,200 cash as partial payment for the work completed on 12 November. 24 Completed work for another client for $1,750 on credit. 28 Shaw withdrew $5,300 cash for personal use 29° Purchased $249 of additional office supplies on credit. 30 Paid $531 cash for this month's utility bil. Required 1, Prepare general journal entries to record these transactions (use account titles listed in part 2). 2. Open the following accounts—their account numbers are in parentheses (use the balance column format): Cash (101); Ancouats Receivable (106); Office Supplies (124); Prepaid Insurance (128); Prepaid Rent (131); Office Equipment (163); Accounts Payable (201); K-Chapter 2 - Analy ervices Revenue (403); and Usilities the accounts and enter the balance af. Prepare a trial balance as ofthe end ofthis month's operat 's operations. ter each posting, “Ecaekai Consulting completed the follo wing is a. Chris Czekai, the sole pro ane rietor, ‘ ved at $3000 fn he eae avesed $80,000 cash long with ofice equipment al- Personal automobile in the business. The automobile has a value of $18,000 and is to be used exclusively in the business. “ oe Purchased $6,000 of additional office equipment on credit 4, Paid $1,500 cash salary to an assistant, hh, Paid $800 cash for this month's utilities. | Paid $2,400 cash to settle the account payable created in transaction ¢, s+ Purchased $20,000 of new office equipment by paying $18,600 cash and trading in old guint with a recorded net cost and value of $1,400. (Credit Office Equipment (old) for 'k. Completed $5,200 of services for a client, who must pay within 30 days, + Paid $1,500 cash salary to an assistant. £5. Received $3,800 cash on the receivable created in transaction k. BE. Czekai withdrew $6,400 cash from the business for personal use. ExRequired |» Prepare general journal entries to record these transactions (use the account tiles listed in part 2). Open the following accounts—their account numbers are in parentheses (use the balance ccolumn format): Cash (101); Accounts Receivable (106); Office Supplies (108); Office Equipment (163); Automobiles (164); Building (170): Land (172); Accounts Payable (201); Notes Payable (250); C. Czekai, Capital (301); C. Czekai, Withdrawals (302); Fees Earned (402); Salaries Expense (601); and Utilities Expense (602). Post the journal entries from part 1 to the accounts and enter the balance after each posting. Ie Prepare a trial balance as of the end of this month's operations. ‘On 1 October 2006, Kay Breeze launched a computer services company called Success Systems, E which is organized as a sole proprietorship and provides consulting services, computer system F installations, and custom program development. Breeze adopts the calendar year for reporting ‘purposes and expects to prepare the company's first set of financial statements on 31 December i 2006. The company's initial chart of accounts follows: and Recording Transactions Problem 2°, \ Problem 2-10nape 2 anyusnng « 2-8 Shon, ws lem 3-! * The adjusted trial balance for Callahay Company as of 31 December 2006, follows: Pro! 5 the information inthe adjusted wal balance to prepare ihe income statement forthe year ended 31 Deceber 200; © zthe statement of owner's equity for the year ended 31 December 2006; and the balance sheet as of 31 December 2006. Paid $1,500 cash for future newspaper advertising, aid $2,160 cash for 12 months of insurance through 31 October of the next year, Received $3,300 cash for future services to be provided to a customer, Paid $2,700 cash for a consultant's services to be received over the next three months, Received $7,650 cash for future services to be provided to a customer, Of the advertising paid for on 1 November $900 worth is not yet used. A portion of the insurance paid for on 1 November has expired, No adjustment’ was made in November to Prepaid Insurance. Ey-31_ Services worth $1,200 are not yet provided to the customer who paid on 30 November. © 31 One-third of the consulting services paid for on 1 December have been received. 31 The company has performed $3,000 of services that the customer paid for on = 15 December. @ 123,eng Principles, Setohd Edition | \\ Required 1 Feehan a | tse transactions under the method that records prepaid expenses as ssseg year ds uncamed revenves as lables. Also prepare adjusting enties atthe end of | year 2 Prepare entries for these transactions under the method that records prepaid expenses ag chptases and records unearned revenues as revenues. Also prepare adjusting entries atthe end ofthe year 3+ Explain why the altemative sets of enres in requirements 1 and 2 do not result in different financial statement amounts, Problem 3-7 For each ofthe following entries, enter the letter of the explanation that most closely describes, itin the space beside each entry. (You can use letters more than once.) ‘As To record payment of a prepaid expense. 'B. To record this period's use ofa prepaid expense. . To record this peris's depreciation expense. 'D. To record receipt of unearned revenue. , To record this period's earning of prior unearned revenue. F. To record an accrued expense. . To record payment of an accrued expense. 1H. To record an accrued revenue. I. To record receipt of accrued revenue, lesacaanasinst Sate ‘Unearned Professional Fees Professional Fees Earned Depreclon Expense 2... ‘Accumulated Depreciation Bo Cath ceeeeaee . ‘Unearned Professional Fees . 5. Insurance Expense . Prepaid Insurance Incoret Expense Incerese Payable Bo Sith assersizee : ‘Accounts Recelvable (rom services) —— % Saries Expense sas ices omonsastand bas Salaries Payable ah ‘ Incarest Receivable 11 Prepaid Rene Cah. 12, Rene Expense: Propald Renti a Col ee eyo eus en 31 Oat 206, Te fobowng Bee je cut arn esr of nt bE Sree. cet a ‘The Office Supplies account started the fiscal year with a $500 balance. During the fiscal ‘year, the company purchased supplies for $3,650, which was added to the Office Supplies GH. account. The supplies available at 31 October 2006, totaled $700. HEED. ‘An analysis ofthe company’s insurance policies provided these facts 52.5 The total premium for each policy was paid in full or all months) atthe purchase dete, and $B © the Prepaid Insurance account was debited forthe full cost. (Note that yearend adjusting entries for Prepaid Insurance were properly recorded in ll prior fiscal years.) {=.&> The company has four employees, who ear a total of $800 for each workday. They ar paid Hach Monday for their work nthe five-day workweek ending onthe previous Friday. Assume that 31 October 2006, is a Monday, and all five employees worked the first day of that week. Trey wil be pald salaries for five full days on Monday, 7 November 2006 I. The company purchased a building on 1 November 2005, that cost $155,000 and is expected to have a $20,000 salvage value at the end ofits predicted 25-year life. Since the company does not occupy the entre building it owns, it rented space to a tenant at $600 per month, stating on 1 Sepiember 2006, The rent was paid on time on 1 September and the amount received was credited tothe Rent Eamed account. However, the October reat has not been paid. The company has worked out an agreement with the tenant, who has =. promised to pay both October and November rent in fll on 15 November, The tenant has ~ agreed not to fall behind again, Tf. On 1 September the company rented space to another tenant for $525 per month. The tenant paid five months’ rent in advance on that date. The payment was recorded with a credit tothe Unearned Rent account. 1 Use the information to prepare adjusting entries as of 31 October 2006. { 2+ Prepare journal entries to record the first subsequent cash transaction in 2007 for parts ¢ Sande. Following is the unadjusted tial balance for Aleom Institute as of 31 December 2006, which © jnitally records prepaid expenses end uneamed revenues in balance sheet accounts. The Institute provides one-on-one training to individuals who pay tuition directly to the business and offers __ extension training to groups in off-site locations. Shown after the tral balance ae items a through ‘i that require adjusting entries as of 31 December 2006. Additional Information a. An analysis of the Institutes insurance policies shows that $6,400 of coverage has expired, 'b, An inventory count shows that teaching supplies costing $2,500 are available at year-end 2006. ‘¢. Annual depreciation on the equipment is $4,000. . Annual depreciation on the professional library is $2,000. On 1 November the Institute agreed to do a special four-month course (starting immediately) for a client. The contract calls for a $4,600 monthly fee, and the client paid the first two ‘months’ fees in advance. When the cash was received, the Uneamed Training Fees account was credited. The last two months’ fees will be recorded when collected in 2007. Chapler 3 ~ Adjusting Accounts and Preparing Francis. me wwes in balance Problem 3-8 Problem 3-8 @Problem AP3-2 Prepare ani income ssemein balance sheet as at 31 May ao O¥ 8 equity statement for the month of May and a Additional information ‘a. Supplies on hand as at 31 May 2006 is $7,540. 'b. Professional services performed but unbilled and uncollected at the year end amounted to $6,400, ‘c. The equipment has an estimated life of 13 years, no scrap valve at the end of its useful life, and the company is using a straight-line depreciation method. 4. Thirty percent of the revenue received in advance has been earned by 31 May. fe. Salary due amounted to $2,400 has not yet been paid and recorded, fi Prepaid insurance represents the annual premivm on a policy providing coverage starting 1 January 2006. + Prepaid rent is for a half year period, beginning 1 March 2006. thu Mortgage interest rate is 10% per year. The mortgage was signed on 1 November 2005. Required Prepare an unadjusted trial balance for Arief Consultant & Co. a8 at 31 May 2006 12, Prepare the adjusting entries forthe additional information. 13. Prepare an adjusted til balance for Arief Consultant & Co. as at 31 May 2006 B, Name FOUR (4) types of accounts that need for adjustments.Chaper 3 Adusng Acouts and Preparing Fnencat Pater Naya Stina Resor opened fr sine op 1 May 200 and doe i Piensa cch st mona Te adda place se a Soe . ~SeBeets accaunts at Problem Ap: as follows: \dditional information Insurance policy was purchased on 1 May 2006 and expired at the rate of $1,350 per month. A physical count of supplies at 31 October 2006 shows $1,300 on hand, ‘Annual depreciation is $9,200 on buildings and $3,800 on furniture. ‘Unearned rent of $12,000 was eared at 31 October 2006. Salaries of $1,200 were unpaid at 31 October 2006. Rentals of $2,500 were due from tenants at 31 October 2006, ‘The mortgage interest rate is 10% per year. The mortgage was signed on 1 July 2006, ‘Required “1. Journalize the adjusting entries as at 31 October 2006. 5 Prepare an adjusted tral balance as at 31 October 2006. ve 7