Accounting 9th Horngren Chapter 2 Solution

Chapter 2
Recording Business Transactions
Quick Check
Answers:
1. a
2. c
3. b
4. c
5. d
6. a
7. d
8. a
9. c
10. b
Explanations:
3. b.
Owners equity is $130,000 ($50,000 + $60,000

+ $200,000 $80,000 $100,000).
7. d.
Supplies balance is $1,200 ($500 + $700). The

payment of accounts payable does not affect
supplies.
9. c.
Ending equity is $70,000, computed as follows:

Beginning owners equity..
Add: Net income:
Revenues..
Chapter 2
$ 50,000
$110,000
63
Less: Expenses.
Net income...
Less: Withdrawals,
Ending owners equity
64
Accounting 7/e Solutions Manual
(30,000)
80,000
(60,000)
$ 70,000
Short Exercises
(5 min.)
S 2-1
Debits are increases for the following types of accounts:

Assets
Withdrawals
Expenses
Debits are decreases for these types of accounts:
Liabilities
Capital
Revenues
Credits are increases for these types of accounts:
Liabilities
Capital
Revenues
Credits are decreases for these types of accounts:
Assets
Withdrawals
Expenses
Chapter 2
65
(5 min.)
S 2-2
The basic summary device in accounting is the account. The

left side is calld the debit side, and the right side is called the
credit side. We record transactions first in a journal. Then we
post (copy the data) to the ledger. It is helpful to list all the
accounts with their balances on a trial balance.
66
(10 min.)
S 2-3
1. Capital
A. Record of transactions
2. Debit
B. An asset
3. Expense
C. Left side of an account
4. Net income
D Side of an account where

increases are recorded
5. Ledger
E. Copying data from the journal

to the ledger
6. Posting
F. Using up assets in the course

of operating a business
7. Normal balance G. Always a liability
8. Payable
H. Revenues Expenses
9. Journal
I.
10. Receivable
Book of accounts
J. Owners equity
Chapter 2
67
(5 min.)
S 2-4
Normal Balance
Assets....
68
Debit
Liabilities..
Credit
Owners Equityoverall...
Capital...
Withdrawal
Revenues..
Expenses..
Credit
Credit
Debit
Debit
Credit
(10 min.)
S 2-5
Journal
DATE
POST.
REF.
ACCOUNTS AND EXPLANATIONS
June 1 Cash
Mark Brown, Capital
Received investment from owner.
2 Medical Supplies
Accounts Payable
Purchased supplies on account.
2 Rent Expense
Cash
Paid office rent.
DEBIT
CREDIT
25,000
25,000
10,000
10,000
4,000
4,000
3 Accounts Receivable
Service Revenue
Performed service on account.
Chapter 2
12,000
12,000
69
(10-15 min.)
S 2-6
Req. 1
Journal
DATE
POST.
REF.
Supplies
Accounts Payable
1,000
500
500
Req. 2
Accounts Payable
500
Bal.
CREDIT
1,000
Accounts Payable
Cash ($1,000 )
Paid on account.
70
DEBIT
1,000
500
(10 min.)
S 2-7
Journal
DATE
POST.
REF.
DEBIT
Service Revenue
6,000
30 Cash
Accounts Receivable
Received cash on account.
2,000
CREDIT
6,000
2,000
31 Utilities Expense
Accounts Payable
Received utility bill.
200
31 Salary Expense
Cash
Paid salary expense.
3,000
200
3,000
31 Advertising Expense
Cash
Paid advertising expense.
Chapter 2
900
900
71
(10-15 min.)
S 2-8
Req. 1
Journal
DATE
POST.
REF.
DEBIT
Accounts Receivable
Service Revenue
5,000
Cash
Accounts Receivable
3,500
CREDIT
5,000
3,500
Req. 2
Cash
3,500
Bal. 3,500
Accounts Receivable
5,000
3,500
Bal. 1,500
Service Revenue
5,000
Bal. 5,000
Req. 3
a. Hughes earned
72
$5,000:
Service Revenue
b. Total assets
$5,000:
Cash
Accounts receivable
Total assets
Chapter 2
$3,500
1,500
$5,000
73
S 2-9
(10-15 min.)
Reqs. 1 and 2
Cash
Bal.
Accounts Receivable
25,000
21,000
4,000
Bal.
Medical Supplies
Bal.
10,000
10,000
Bal.
25,000
25,000
Rent Expense
74
Accounts Payable
10,000
10,000
Bal.
Mark Brown, Capital
Bal.
12,000
12,000
4,000
4,000
Service Revenue
Bal.
12,000
12,000
(continued)
S 2-9
Req. 3
Mark Brown, MD
Trial Balance
June 3, 2008
ACCOUNT
DEBIT
$21,000
12,000
10,000
Cash
Accounts receivable
Medical supplies
Accounts payable
Mark Brown, capital
Service revenue
Rent expense
Total
CREDIT
$10,000
25,000
12,000
4,000
$47,000
$47,000
(10 min.)
S 2-10
Redbird Floor Coverings

Trial Balance
December 31, 2007
ACCOUNT
DEBIT
$12,000
40,000
Cash
Equipment
Chapter 2
CREDIT
75
Accounts payable
Other liabilities
Capital
Revenues
Expenses
Total
76
$ 1,000
19,000
25,000
29,000
22,000
$74,000
$74,000
(10 min.)
S 2-11
Incorrect Trial Balance

ACCOUNT
DEBIT
$21,000
1,000
500
11,000
Cash
Accounts receivable
Office supplies
Land
Accounts payable
Cookie Lapp, capital
Cookie Lapp, withdrawals
Service revenue
Rent expense, computer
Rent expense, office
Salary expense
Utilities expense
Total
CREDIT
$ 300
30,000*
2,000
8,500
600
1,000
1,200
500
$68,800
$8,800
__________
*Incorrect; should be listed as a credit.
To correct this error,

1. Take the difference between total debits and total credits:
$68,800 $8,800 = $60,000
2. Divide the error by 2:
$60,000 2 = $30,000
Chapter 2
77
3. Locate $30,000 on the trial balance. Cookie Lapp, capital

should have a credit balance.
78
(10 min.)
S 2-12
Incorrect Trial Balance

ACCOUNT
DEBIT
$21,000
1,000
500
11,000
Cash
Accounts receivable
Office supplies
Land
Accounts payable
Cookie Lapp, capital
Cookie Lapp, withdrawals
Service revenue
Rent expense, computer
Rent expense, office
Salary expense
Utilities expense
Total
CREDIT
300
30,000
200*
8,500
600
1,000
1,200
500
$37,000
$38,800
*Incorrect; should be listed as $2,000.
To correct this error,

1. Take the difference between total debits and total credits:
$38,800 $37,000 = $1,800
2. Divide the error by 9:
$1,800 9 = $200
Chapter 2
79
3. Locate $200 on the trial balance. Withdrawals, at $200, holds

the error. Trace Withdrawals balance back to the ledger
account, which shows the correct amount, $2,000.
80
Exercises
(10 min.)
A
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E 2-13
C
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2
D E B
D
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3
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1
J
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A
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D
G
5
D E
R
6
A
S
S
E
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Chapter 2
C
R
E
D
I
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81
(10-15 min.)
N
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E 2-14
D
E
3
B
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1
82
E
X
P
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E
(10-15 min.)
E 2-15
Req. 1
Debit
ASSETS
Credit
LIABILITIES
Credit
OWNERS EQUITY
$180,000
$100,000
$80,000
Credit
REVENUES
Debit
EXPENSES
Net Credit
NET INCOME
$240,000
$200,000
$40,000
Req. 2
NET INCOME represents a net credit because revenues

(credits) exceed expenses (debits).
NET LOSS represents a net debit because expenses (debits)
exceed revenues (credits).
Chapter 2
83
(10-15 min.)
E 2-16
Journal
DATE
Dec.
2 Utilities Expense
Cash
300
2,000
Service Revenue
1,600
12 Cash
Note Payable
7,000
21 Supplies
Cash
27 Accounts Payable
Cash
CREDIT
300
5 Equipment
Accounts Payable
19 Cash
Land
84
DEBIT
2,000
1,600
7,000
29,000
29,000
600
600
2,000
2,000
(10-15 min.)
Cash
Accounts Receivable
Dec. 1 3,000 Dec. 2

300
12
7,000
21
600
19 29,000
27 2,000
Dec. 31 36,100
Dec. 10
Equipment
Dec. 5
Dec. 1
Supplies
Dec. 27
Notes Payable
2,000 Dec. 5
2,000
Rex Blackwell, Capital

7,000
Dec. 1
Service Revenue
Dec. 10
29,000 Dec. 19 29,000
Accounts Payable
600
Dec. 12
1,600
Land
2,000
Dec. 21
E 2-17
32,000
Utilities Expense
1,600
Dec. 2
Chapter 2
300
85
Total debits
$40,600
86
=
=
Total credits
$40,600
(10-20 min.)
E 2-18
Journal
DATE
Aug.
POST.
REF.
1 Cash
Ron Woodward, Capital
Investment by owner.
DEBIT
CREDIT
60,000
60,000
2 Supplies
Accounts Payable
Purchased supplies on acct.
200
200
4 Building
Cash
Paid cash for a building.
50,000
50,000
6 Cash
Service Revenue
Performed services for cash.
3,000
3,000
9 Accounts Payable
Cash
Paid cash on account.
100
100
Service Revenue
2,100
23 Cash
1,200
Chapter 2
2,100
87
Accounts Receivable
1,200
31 Salary Expense
Rent Expense
Cash
Paid expenses.
1,200
500
1,700
(15-20 min.)
E 2-19
Req. 1
Cash
Accounts Receivable
Aug. 1 60,000 Aug. 4 50,000

6 3,000
9
100
23 1,200
31 1,700
Aug. 31 12,400
Aug. 17
Aug. 31
Supplies
Aug. 2
Aug. 31
Building
200
200
Aug. 4
Aug. 31
Accounts Payable
Aug. 9
88
100 Aug. 2
Aug. 31
2,100 Aug. 23 1,200

900
50,000
50,000
Ron Woodward, Capital

200
100
Aug. 1 60,000
Aug. 31 60,000
Service Revenue
Aug. 6
17
Aug. 31
Salary Expense
3,000
2,100
5,100
Aug. 31
Aug. 31
1,200
1,200
Rent Expense
Aug. 31
Aug. 31
500
500
Chapter 2
89
(continued)
E 2-19
Req. 2
Woodward Technology Solutions
Trial Balance
August 31, 2007
ACCOUNT
Cash
Accounts receivable
Supplies
Building
Accounts payable
Ron Woodward, capital
Service revenue
Salary expense
Rent expense
Total
DEBIT
$12,400
900
200
50,000
CREDIT
1,200
500
$65,200
100
60,000
5,100
$65,200
(20-30 min.)
E 2-20
Req. 1
May
90
2
9
11
14
Investment of cash by the owner

Purchase of supplies on account (on credit)
Revenue on account
Payment of rent expense
22
25
27
31
Payment on account
Payment of advertising expense
Collection on account
Receipt of a fuel bill and recording the expense on
account
(continued)
E 2-20
Reqs. 2 and 3
110
Cash
May 2 J.5 20,000 May 14 J.5
27 J.5
Bal.
1,400
22 J.5
25 J.5
Bal.
300
400
May 11 J.5 2,600 May 27 J.5 1,400

Bal.
1,200
17,500
Supplies
May 9
3,200
120
Accounts Receivable
J.5
130
200
210
Accounts Payable
May 22 J.5
300 May 9 J.5
200
31 J.5
100
-0-
200
Bal.
Betty Sawyer, Capital

May 2 J.5
Bal.
310
410
Service Revenue
20,000
20,000
May 11 J.5
Bal.
Chapter 2
2,600
2,600
91
Rent Expense
May 14 J.5
Bal.
Fuel Expense
May 31 J.5
Bal.
92
100
100
510
3,200
3,200
530
Advertising Expense
May 25 J.5
Bal.
400
400
520
(continued)
E 2-20
Req. 4
Alert Defensive Driving
Trial Balance
May 31, 2006
ACCOUNT
DEBIT
$17,500
1,200
200
Cash
Accounts receivable
Supplies
Accounts payable
Betty Sawyer, capital
Service revenue
Rent expense
Advertising expense
Fuel expense
Total
CREDIT
$
-020,000
2,600
3,200
400
100
$22,600
Chapter 2
$22,600
93
(10 min.)
E 2-21
Journal
DATE
1. Cash
Harry Reid, Capital
Investment by owner.
2. Supplies
Accounts Payable
3. Building
Cash
Paid cash for building.
POST.
REF.
DEBIT
12,000
12,000
400
400
40,000
40,000
4. Cash
37,000
Note Payable
Borrowed money; signed note payable.
5. Equipment
Cash
Paid cash for equipment.
94
CREDIT
37,000
6,000
6,000
(10 min.)
E 2-22
Reeds Home Care

Trial Balance
October 31, 2007
ACCOUNT
DEBIT
$ 3,000
400
6,000
40,000
Cash
Supplies
Equipment
Building
Accounts payable
Note payable
Harry Reed, capital
Total
CREDIT
$49,400
Chapter 2
400
37,000
12,000
$49,400
95
(10 min.)
E 2-23
Mayflower Moving Company

Trial Balance
December 31, 2006
ACCOUNT
Cash
Accounts receivable
Supplies
Trucks
Building
Accounts payable
Note payable
Joe Mayflower, capital
Joe Mayflower, withdrawals
Service revenue
Salary expense
Fuel expense
Insurance expense
Utilities expense
Supplies expense
Total
96
DEBIT
$ 5,000
9,400
200
125,000
44,000
CREDIT
4,300
60,000
48,700
6,000
86,000
6,000
2,000
700
400
300
$199,000
$199,000
(20-25 min.)
ACCOUNT
DATE
ITEM
a.
b.
d.
e.
g.
ACCOUNT
DATE
DATE
DATE
CREDIT
1,500
1,800
400
7,000
ACCOUNTS RECEIVABLE
ITEM
JRNL.
REF.
DEBIT
CREDIT
ITEM
DEBIT
CREDIT
DEBIT
BALANCE
DEBIT
CREDIT
700
OFFICE FURNITURE
ITEM
BALANCE
DEBIT
CREDIT
ACCOUNT NO.
700
JRNL.
REF.
15,000
13,500
11,700
11,300
4,300
5,600
OFFICE SUPPLIES
JRNL.
REF.
BALANCE
DEBIT
CREDIT
ACCOUNT NO.
5,600
c.
ACCOUNT
DEBIT
15,000
f.
ACCOUNT
ACCOUNT NO.
CASH
JRNL.
REF.
E 2-24
ACCOUNT NO.
CREDIT
Chapter 2
BALANCE
DEBIT
CREDIT
97
a.
98
5,400
5,400
(continued)
ACCOUNT
DATE
ITEM
c.
e.
ACCOUNT
DATE
DEBIT
DATE
DATE
f.
700
300
400
LEE BIVONA, CAPITAL

ITEM
JRNL.
REF.
DEBIT
ACCOUNT NO.
CREDIT
BALANCE
DEBIT
CREDIT
20,400
20,400
LEE BIVONA, WITHDRAWALS

ITEM
JRNL.
REF.
g.
ACCOUNT
CREDIT
BALANCE
DEBIT
CREDIT
700
a.
ACCOUNT
ACCOUNT NO.
ACCOUNTS PAYABLE
JRNL.
REF.
DEBIT
CREDIT
7,000
ITEM
DEBIT
ACCOUNT NO.
BALANCE
DEBIT
CREDIT
7,000
SERVICE REVENUE
JRNL.
REF.
E 2-24
ACCOUNT NO.
CREDIT
5,600
Chapter 2
BALANCE
DEBIT
CREDIT
5,600
99
(continued)
ACCOUNT
DATE
ITEM
d.
DEBIT
CREDIT
1,800
ACCOUNT
RENT EXPENSE
DATE
JRNL.
REF.
ITEM
b.
100
ACCOUNT NO.
SALARY EXPENSE
JRNL.
REF.
DEBIT
1,500
E 2-24
BALANCE
DEBIT
CREDIT
1,800
ACCOUNT NO.
CREDIT
BALANCE
DEBIT
CREDIT
1,500
(continued)
E 2-24
Journal
DATE
a.
b.
c.
d.
e.
f.
Cash
Office Furniture
Lee Bivona, Capital
Received investment from owner.
Rent Expense
Cash
Paid monthly rent.
POST.
REF.
DEBIT
CREDIT
15,000
5,400
20,400
1,500
1,500
Office Supplies
Accounts Payable
Salary Expense
Cash
Paid salary expense.
700
700
1,800
1,800
Accounts Payable
Cash
Paid on account.
400
400
Accounts Receivable
Service Revenue
Chapter 2
5,600
5,600
101
g.
102
Lee Bivona, Withdrawals

Cash
Withdrawal by owner.
7,000
7,000
(10 min.)
E 2-25
Lee Bivona, CPA

Trial Balance
December 31, 2007
ACCOUNT
DEBIT
$ 4,300
5,600
700
5,400
Cash
Accounts receivable
Office supplies
Office furniture
Accounts payable
Lee Bivona, capital
Lee Bivona, withdrawals
Service revenue
Salary expense
Rent expense
Total
CREDIT
300
20,400
7,000
5,600
1,800
1,500
$26,300
Chapter 2
$26,300
103
(15-20 min.)
E 2-26
Joy McDowell Tutoring Service

Trial Balance
March 31, 2009
ACCOUNT
Cash
Accounts receivable
Supplies
Computer equipment
Accounts payable
Joy McDowell, capital
Service revenue
Salary expense
Rent expense
Utilities expense
Total
DEBIT
$ 3,400*
1,600*
600
26,000
CREDIT
$12,600*
12,300*
9,700
1,700
800
500*
$34,600
$34,600
__________
*Explanations:
Cash: $3,000 + $400 = $3,400
Accounts Receivable: $2,000 $400 = $1,600
Accounts Payable: $11,500 + $1,000 $100 + $200 = $12,600
Joy McDowell, Capital: $11,600 + $700 = $12,300
Utilities Expense: $300 + $200 = $500
104
(20-30 min.)
Effect on Trial Balance
Account(s) Misstated
E 2-27
Journal Entries (Not Required)
a. Total debits > Total credits Note Payable $5,000 too low,
on the trial balance only
b. Total debits < Total credits Utility Expense $630 too low
($700 $70 = $630)
c. Total debits = Total credits Supplies
$400 too high
Accounts Payable
$400 too high
e. Entry
made:
Correct
entry:
Supplies
Cash
Accounts Payable
Cash
d. Total debits < Total credits Cash

$720 too low
a. Entry
made:
Cash
Service Revenue
Service Revenue
made:
Correct
Cash
entry:
Service Revenue
Entry:
Service Revenue
Chapter 2
400
400
400
400
80
800
800
800
105
e. Total debits = Total credits Supplies

$90 too high
Accounts Payable
$90 too high
($210 $120 = $90)
106
b. Entry
Supplies
made:
Accounts Payable
made:
Accounts Payable
Correct
Supplies
entry:
Accounts Payable
210
210
120
120
(20-30 min.)
E 2-28
a. Net income for July Given as follows:

Owner, Capital
July
withdrawals
June 30 Bal.
9,000
July
= $17,000
4,000 Net income
X
July 31 Bal. 22,000
$9,000 + X $4,000
X
= $22,000
= $17,000
b. Total cash paid during July:

Cash
June 30 Bal.
July receipts
July 31 Bal.
7,000
50,000 July payments
2,000
= $55,000
$7,000 + $50,000 X = $ 2,000

X = $55,000
Chapter 2
107
(continued)
E 2-28
c. Cash collections from customers during July:

Accounts Receivable
June 30 Bal.
July revenues
on account
July 31 Bal.
24,000
75,000 July collections
26,000
$24,000 + $75,000 X
X
= $73,000
= $26,000
= $73,000
c. Payments on account during July:

Accounts Payable
X = 31,000
June 30 Bal.
July
July
Purchases on
Payments on acct. X
acct.
July 31 Bal.
$11,000 + $40,000 X
X
108
= $20,000
= $31,000
11,000
40,000
20,000
(10 min.)
E 2-29
a. Your transaction:
Journal
DATE
POST.
REF.
Repair Expense
Cash
Paid repair bill.
DEBIT
CREDIT
484.02
484.02
b. Advanced Automotives transaction:
Journal
DATE
Cash
Service Revenue
Performed service and received
cash.
Chapter 2
POST.
REF.
DEBIT
CREDIT
484.02
484.02
109
Problems
Group A
(15-30 min.)
P 2-30A
Req. 1
Total assets
$74,000 ($12,000 + $27,000 + $4,000 + $31,000)
Total liabilities $35,000
Net income
$62,000 ($121,000 $26,000 $3,000
$23,000 $7,000)
Req. 2
Journal
DATE
Accounts Receivable
Service Revenue
Accounts Receivable
121,000
110
POST.
REF.
DEBIT
CREDIT
121,000
121,000
Service Revenue
121,000
(continued)
P 2-30A
Req. 3
Shea records transactions in the journal, posts to the accounts
in the ledger, computes each account balance, and lists all the
accounts along with their balances on the trial balance. Cash
has an ending balance of $12,000.
Student responses may vary.
Req. 4
The new business will be a partnership.
Chapter 2
111
(15 min.)
P 2-31A
Journal
DATE
July 1 Cash
Darrel Palusky, Capital
DEBIT
350,000
300,000
5 Cash
Notes Payable
220,000
15 Accounts Payable
Cash
300,000
220,000
1,700
1,700
800
800
15 Property Tax Expense

Cash
1,200
16 Salary Expense
Rent Expense
Cash
2,800
1,800
28 Darrel Palusky, Withdrawals

Cash
6,000
CREDIT
350,000
2 Building
Cash
10 Supplies
Accounts Payable
112
POST.
REF.
1,200
4,600
6,000
31 Cash
Service Revenue
20,000
20,000
Chapter 2
113
(40-50 min.)
P 2-32A
Req. 1
Journal
DATE
Sept. 1 Cash
Doris Higgins, Capital
POST.
REF.
DEBIT
25,000
25,000
4 Supplies
Furniture
Accounts Payable
200
1,800
6 Cash
4,000
2,000
Service Revenue
7 Land
Cash
Service Revenue
14 Accounts Payable
Cash
15 Salary Expense
Cash
114
CREDIT
4,000
20,000
20,000
800
800
1,800
1,800
600
600
17 Cash
Accounts Receivable
500
Service Revenue
800
500
800
Chapter 2
115
(continued)
P 2-32A
Req. 1
Journal
DATE
Sept. 28 Cash
Service Revenue
DEBIT
1,500
600
30 Rent Expense
Cash
500
CREDIT
1,500
30 Salary Expense
Cash
30 Doris Higgins, Withdrawals

Cash
116
POST.
REF.
600
500
2,000
2,000
(continued)
P 2-32A
Req. 2
Cash
Accounts Receivable
Sept. 1 25,000 Sept. 7 20,000 Sept.10

6 4,000
14 1,800
20
17
500
15
600 Bal.
28 1,500
30
600
30
500
30
Bal.
5,500
2,000 Sept. 4
Bal.
Furniture
Sept. 4
Bal.
500
Supplies
200
200
Land
1,800
1,800
Sept. 7
Bal.
Accounts Payable
Sept. 14 1,800 Sept. 4
Bal.
800 Sept. 17
800
1,100
20,000
20,000
Doris Higgins, Capital

2,000
200
Sept. 1
Bal.
Doris Higgins, Withdrawals
25,000
25,000
Service Revenue
Sept. 30 2,000
Bal.
2,000
Sept. 6
10
20
28
Bal.
Salary Expense
4,000
800
800
1,500
7,100
Rent Expense
Chapter 2
117
Sept. 15
600
30
600
Bal.
1,200
118
Sept. 30
Bal.
500
500
(continued)
P 2-32A
Req. 3
Doris Higgins, Designer
Trial Balance
September 30, 20XX
ACCOUNT
DEBIT
$ 5,500
1,100
200
1,800
20,000
Cash
Accounts receivable
Supplies
Furniture
Land
Accounts payable
Doris Higgins, capital
Doris Higgins, withdrawals
Service revenue
Salary expense
Rent expense
Total
CREDIT
200
25,000
2,000
7,100
1,200
500
$32,300
Chapter 2
$32,300
119
(45-60 min.)
P 2-33A
Req. 1
Journal
DATE
Feb.
Page 3
POST.
REF.
DEBIT
4 Cash
Accounts Receivable
Received on account.
11
12
3,500
Service Revenue
12
41
7,000
13 Accounts Payable
Cash
Paid on account.
21
11
1,000
18 Supplies
Accounts Payable
13
21
100
20 John Hilton, Withdrawals

Cash
Withdrew cash for personal use.
32
11
1,200
11
41
5,500
CREDIT
3,500
7,000
1,000
100
1,200
21 Paid for deck for residence;

not a transaction of the business.
22 Cash
Service Revenue
Performed service for cash.
120
5,500
28 Rent Expense
Cash
Paid rent.
52
11
800
28 Salary Expense
Cash
Paid employee salary.
51
11
1,800
Chapter 2
800
1,800
121
(continued)
P 2-33A
Req. 2
ACCOUNT
DATE
CASH
ITEM
Jan. 31 Bal.
Feb. 4
13
20
22
28
28
ACCOUNT
DATE
DATE
122
DEBIT
CREDIT
J.3
J.3
J.3
J.3
J.3
J.3
3,500
1,000
1,200
5,500
800
1,800
ACCOUNTS RECEIVABLE
JRNL.
ITEM
REF.
DEBIT
CREDIT
Jan. 31 Bal.
Feb. 4
8
ACCOUNT
JRNL.
REF.
J.3
J.3
SUPPLIES
JRNL.
ITEM
REF.
3,500
7,000
DEBIT
CREDIT
ACCOUNT NO. 11
BALANCE
DEBIT
CREDIT
2,000
5,500
4,500
3,300
8,800
8,000
6,200
ACCOUNT NO. 12
BALANCE
DEBIT
CREDIT
9,500
6,000
13,000
ACCOUNT NO. 13
BALANCE
DEBIT
CREDIT
Jan. 31 Bal.
Feb. 18
800
900
J.3
100
Chapter 2
123
(continued)
P 2-33A
Req. 2
ACCOUNT
DATE
LAND
ITEM
Jan. 31 Bal.
ACCOUNT
DATE
DATE
DATE
124
CREDIT
18,600
CREDIT
J.3
J.3
1,000
JOHN HILTON, CAPITAL

JRNL.
ITEM
REF.
DEBIT
Jan. 31 Bal.
ACCOUNT
DEBIT
ACCOUNTS PAYABLE
JRNL.
ITEM
REF.
DEBIT
Jan. 31 Bal.
Feb. 13
18
ACCOUNT
JRNL.
REF.
100
CREDIT
JOHN HILTON, WITHDRAWALS

JRNL.
ITEM
REF.
DEBIT
CREDIT
ACCOUNT NO. 14
BALANCE
DEBIT
CREDIT
ACCOUNT NO. 21
BALANCE
DEBIT
CREDIT
3,000
2,000
2,100
ACCOUNT NO. 31
BALANCE
DEBIT
CREDIT
27,900
ACCOUNT NO. 32
BALANCE
DEBIT
CREDIT
Feb.
20
J.3
1,200
Chapter 2
1,200
125
(continued)
P 2-33A
Req. 2
ACCOUNT
DATE
Feb.
8
22
ACCOUNT
SERVICE REVENUE
JRNL.
ITEM
REF.
DEBIT
CREDIT
J.3
J.3
7,000
5,500
DATE
SALARY EXPENSE
JRNL.
ITEM
REF.
DEBIT
Feb. 28
J.3
ACCOUNT
DATE
RENT EXPENSE
JRNL.
ITEM
REF.
DEBIT
Feb. 28
J.3
126
CREDIT
1,800
800
ACCOUNT NO. 41
BALANCE
DEBIT
CREDIT
7,000
12,500
ACCOUNT NO. 51
BALANCE
DEBIT
CREDIT
1,800
CREDIT
ACCOUNT NO. 52
BALANCE
DEBIT
CREDIT
800
(continued)
P 2-33A
Req. 3
John Hilton, CPA
Trial Balance
February 28, 2007
ACCT. NO.
11
12
13
14
21
31
32
41
51
52
ACCOUNT
DEBIT
Cash
Accounts receivable
Supplies
Land
Accounts payable
John Hilton, capital
John Hilton, withdrawals
Service revenue
Salary expense
Rent expense
Total
Chapter 2
CREDIT
$ 6,200
13,000
900
18,600
$ 2,100
27,900
1,200
12,500
1,800
800
$42,500
$42,500
127
(30 min.)
P 2-34A
Reqs. 1 and 3
ACCOUNT
DATE
ACCOUNT NO.
CASH
ITEM
JRNL.
REF.
a.
c.
d.
f.
h.
i.
j.
k.
DEBIT
25,000
18,000
2,200
800
1,600
1,200
1,100
5,000
ACCOUNT
DATE
ACCOUNTS RECEIVABLE
ITEM
JRNL.
REF.
e.
i.
DEBIT
CREDIT
5,100
1,200
ACCOUNT
DATE
ITEM
JRNL.
REF.
DEBIT
2,100
25,000
7,000
4,800
4,000
5,600
6,800
5,700
700
ACCOUNT NO.
BALANCE
DEBIT
CREDIT
5,100
3,900
ACCOUNT NO.
OFFICE SUPPLIES
b.
128
CREDIT
BALANCE
DEBIT
CREDIT
CREDIT
BALANCE
DEBIT
CREDIT
2,100
ACCOUNT
DATE
c.
OFFICE FURNITURE
ITEM
JRNL.
REF.
DEBIT
ACCOUNT NO.
CREDIT
18,000
BALANCE
DEBIT
CREDIT
18,000
Chapter 2
129
(continued)
ACCOUNT
DATE
ACCOUNT NO.
BUILDING
ITEM
JRNL.
REF.
a.
DEBIT
DATE
ITEM
JRNL.
REF.
DEBIT
BALANCE
DEBIT
CREDIT
30,000
ACCOUNTS PAYABLE
b.
f.
g.
ACCOUNT NO.
CREDIT
BALANCE
DEBIT
CREDIT
2,100
2,100
1,300
1,900
800
600
ACCOUNT
DATE
MAURY WILLS, CAPITAL

ITEM
JRNL.
REF.
DEBIT
a.
ACCOUNT
DATE
CREDIT
BALANCE
DEBIT
CREDIT
55,000
55,000
ITEM
JRNL.
REF.
DEBIT
CREDIT
5,000
ACCOUNT
DATE
ACCOUNT NO.
MAURY WILLS, WITHDRAWALS ACCOUNT NO.
k.
130
CREDIT
30,000
ACCOUNT
P 2-34A
5,000
ACCOUNT NO.
SERVICE REVENUE
ITEM
JRNL.
REF.
DEBIT
BALANCE
DEBIT
CREDIT
CREDIT
BALANCE
DEBIT
CREDIT
e.
h.
5,100
1,600
Chapter 2
5,100
6,700
131
(continued)
ACCOUNT
DATE
ITEM
d.
DEBIT
CREDIT
2,200
ACCOUNT
RENT EXPENSE
DATE
JRNL.
REF.
ITEM
j.
DEBIT
ACCOUNT NO.
CREDIT
DATE
ITEM
g.
DEBIT
CREDIT
600
ACCOUNT
DATE
ITEM
j.
DEBIT
400
ACCOUNT NO.
BALANCE
DEBIT
CREDIT
600
UTILITIES EXPENSE
JRNL.
REF.
BALANCE
DEBIT
CREDIT
700
ADVERTISING EXPENSE
JRNL.
REF.
BALANCE
DEBIT
CREDIT
2,200
700
ACCOUNT
132
ACCOUNT NO.
SALARY EXPENSE
JRNL.
REF.
P 2-34A
ACCOUNT NO.
CREDIT
BALANCE
DEBIT
CREDIT
400
(continued)
P 2-34A
Req. 2
Journal
DATE
a.
b.
c.
d.
e.
f.
POST.
REF.
DEBIT
Cash
Building
Maury Wills, Capital
Received investment by owner.
25,000
30,000
Office Supplies
Accounts Payable
2,100
Office Furniture
Cash
Purchased furniture.
CREDIT
55,000
2,100
18,000
18,000
Salary Expense
Cash
Paid salary.
2,200
Accounts Receivable
Service Revenue
5,100
2,200
Accounts Payable
5,100
800
Chapter 2
133
Cash
Paid on account.
g.
800
Advertising Expense
Accounts Payable
Received advertising bill.
600
600
(continued)
P 2-34A
Req. 2 (continued)
Journal
DATE
h.
i.
j.
k.
134
POST.
REF.
DEBIT
Cash
Service Revenue
cash.
1,600
Cash
Accounts Receivable
Collected cash on account.
1,200
Rent Expense
Utilities Expense
Cash
Paid expenses.
Maury Wills, Withdrawals
CREDIT
1,600
1,200
700
400
1,100
5,000
Cash
5,000
Chapter 2
135
(continued)
P 2-34A
Req. 4
Wills Environmental Consulting
Trial Balance
June 30, 2008
ACCOUNT
Cash
Accounts receivable
Office supplies
Office furniture
Building
Accounts payable
Maury Wills, capital
Maury Wills, withdrawals
Service revenue
Salary expense
Rent expense
Advertising expense
Utilities expense
Total
136
DEBIT
$ 700
3,900
2,100
18,000
30,000
CREDIT
$ 1,900
55,000
5,000
6,700
2,200
700
600
400
$63,600
$63,600
(20-30 min.)
P 2-35A
Req. 1
Income Statement
Month Ended June 30, 2008
Revenues:
Service revenue
Expenses:
Salary expense
Rent expense
Advertising expense
Utilities expense
Total expenses
Net income
$6,700
$2,200
700
600
400
3,900
$2,800
Req. 2
Statement of Owners Equity
Month Ended June 30, 2008
Maury Wills, capital, June 1, 2008
Add: Investment by owner
Net income for the month
Chapter 2
-055,000
2,800
57,800
137
Less: Withdrawals by owner

Maury Wills, capital, June 30, 2008
138
(5,000)
$52,800
(continued)
P 2-35A
Req. 3
Balance Sheet
June 30, 2008
ASSETS
LIABILITIES
Cash
$ 700 Accounts payable
$ 1,900
Accounts receivable
3,900 Total liabilities
1,900
Office supplies
2,100
Office furniture
18,000
OWNERS EQUITY
Building
30,000 Maury Wills, capital
52,800
Total liabilities and
Total assets
$54,700 owners equity
$54,700
Chapter 2
139
(15-25 min.)
P 2-36A
DEBIT
$ 4,000*
14,000*
1,900*
75,000
CREDIT
URNO.1 Child Care

Trial Balance
June 30, 20XX
ACCOUNT
Cash
Accounts receivable
Supplies
Equipment
Accounts payable
Mary Hulse, capital
Mary Hulse, withdrawals
Service revenue
Salary expense
Rent expense
Total
$ 56,000*
38,500
2,100
6,500
3,000*
1,000
$101,000
$101,000
*Explanations:
Cash: $3,000 + $1,000 = $4,000
Accounts receivable: $10,000 + $2,000 + $2,000 = $14,000
Supplies: $900 + $1,000 = $1,900
Accounts payable: $55,000 + $1,000 = $56,000
Salary expense: $3,100 $100 = $3,000
140
Problems
Group B
(15-30 min.)
P 2-37B
Req. 1
Total assets
Total liabilities
Net income
$147,000 ($7,000 + $6,000 + $4,000 + $130,000)

$ 76,000 ($31,000 + $45,000)
$ 59,000 ($112,000 $38,000 $8,000 $7,000)
Req. 2
Journal
DATE
Accounts Receivable
Service Revenue
POST.
REF.
DEBIT
CREDIT
112,000
112,000
Accounts Receivable
112,000
Service Revenue
112,000
Chapter 2
141
(continued)
P 2-37B
Req. 3
A+ records transactions in the journal, posts to the accounts in
the ledger, computes each account balance, and lists all the
accounts along with their balances on the trial balance. Cash
has an ending balance of $7,000.
Student responses may vary.
Req. 4
The new business would be a partnership.
142
(15 min.)
P 2-38B
Journal
DATE
June 1 Cash
Dan Bell, Capital
POST.
REF.
DEBIT
CREDIT
70,000
70,000
5 Rent Expense
Cash
700
700
9 Land
Cash
22,000
22,000
10 Supplies
Accounts Payable
1,200
1,200
19 Cash
Notes Payable
20,000
20,000
22 Accounts Payable
Cash
1,000
30 Cash
Accounts Receivable
Service Revenue
6,000
5,000
30 Salary Expense
Rent Expense
2,400
1,500
1,000
11,000
Chapter 2
143
Utilities Expense
Cash
30 Dan Bell, Withdrawals
Cash
144
400
4,300
10,000
10,000
(40-50 min.)
P 2-39B
Req. 1
Journal
DATE
Jan.
2 Cash
Laura Knipper, Capital
POST.
REF.
DEBIT
CREDIT
36,000
36,000
3 Supplies
Furniture
Accounts Payable
500
2,600
4 Cash
1,500
3,100
Service Revenue
1,500
7 Land
Cash
22,000
22,000
Service Revenue
900
15 Salary Expense
Cash
570
900
570
16 Accounts Payable
Cash
2,600
2,600
Chapter 2
145
18 Cash
Service Revenue
Service Revenue
146
1,800
1,800
800
800
(continued)
P 2-39B
Req. 1
Journal
DATE
Jan. 29 Cash
Accounts Receivable
POST.
REF.
DEBIT
CREDIT
400
400
31 Salary Expense
Cash
570
31 Rent Expense
Cash
700
570
700
31 Laura Knipper, Withdrawals

Cash
Chapter 2
2,200
2,200
147
(continued)
P 2-39B
Req. 2
Jan. 2
4
18
29
Bal.
Jan. 3
Bal.
Cash
36,000 Jan. 7 22,000
1,500
15
570
1,800
16 2,600
400
31
570
31
700
31 2,200
11,060
Furniture
2,600
2,600
Accounts Payable
Jan. 16 2,600 Jan. 3 3,100
Bal.
500
Accounts Receivable
Jan. 11
900 Jan. 29
400
19
800
Bal.
1,300
Jan. 3
Bal.
Supplies
500
500
Land
Jan. 7 22,000
Bal.
22,000
Laura Knipper, Capital
Jan. 2 36,000
Bal.
36,000
Laura Knipper, Withdrawals
Jan. 31 2,200
Bal.
2,200
Service Revenue
Jan. 4 1,500
11
900
18 1,800
148
Salary Expense
Jan. 15
570
31
570
Bal.
1,140
19
Bal.
800
5,000
Rent Expense
Jan. 31
700
Bal.
700
Chapter 2
149
(continued)
P 2-39B
Req. 3
Laura Knipper, Attorney
Trial Balance
January 31, 20XX
ACCOUNT
Cash
Accounts receivable
Supplies
Furniture
Land
Accounts payable
Laura Knipper, capital
Laura Knipper, withdrawals
Service revenue
Salary expense
Rent expense
Total
150
DEBIT
$11,060
1,300
500
2,600
22,000
CREDIT
500
36,000
2,200
5,000
1,140
700
$41,500
$41,500
(45-60 min.)
P 2-40B
Req. 1
Journal
DATE
Nov.
Page 6
POST.
REF.
DEBIT
4 Cash
Accounts Receivable
Received on account.
11
12
6,000
Service Revenue
Performed services on account.
12
41
5,700
16 Supplies
Accounts Payable
13
21
800
19 Stephanie Stouse, Withdrawals

Cash
Withdrew for personal use.
32
11
2,100
20 Accounts Payable
Cash
Paid on account.
21
11
2,600
24 Cash
Service Revenue
Performed service for cash.
11
41
1,900
CREDIT
6,000
5,700
12 Paid for residence renovation;

not a transaction of the business.
Chapter 2
800
2,100
2,600
1,900
151
152
30 Rent Expense
Cash
Paid rent.
52
11
700
30 Salary Expense
Cash
Paid employee salary.
51
11
2,000
700
2,000
(continued)
P 2-40B
Req. 2
ACCOUNT
DATE
Oct.
Nov.
DATE
Oct.
Nov.
JRNL.
REF.
DEBIT
CREDIT
J.6
J.6
J.6
J.6
J.6
J.6
6,000
2,100
2,600
1,900
700
2,000
ITEM
JRNL.
REF.
DEBIT
CREDIT
J.6
J.6
6,000
5,700
ITEM
3,000
9,000
6,900
4,300
6,200
5,500
3,500
BALANCE
DEBIT
CREDIT
8,000
2,000
7,700
ACCOUNT NO. 13
SUPPLIES
JRNL.
REF.
BALANCE
DEBIT
CREDIT
ACCOUNT NO. 12
ACCOUNTS RECEIVABLE
31 Bal.
4
7
ACCOUNT
DATE
ITEM
31 Bal.
4
19
20
24
30
30
ACCOUNT
ACCOUNT NO. 11
CASH
DEBIT
CREDIT
Chapter 2
BALANCE
DEBIT
CREDIT
153
Oct. 31 Bal.
Nov. 16
154
J.6
800
600
1,400
(continued)
P 2-40B
Req. 2
ACCOUNT
DATE
ITEM
Oct. 31 Bal.
ACCOUNT
DATE
DATE
JRNL.
REF.
DEBIT
CREDIT
ITEM
JRNL.
REF.
ACCOUNT NO. 21
DEBIT
CREDIT
J.6
J.6
800
2,600
STEPHANIE STOUSE, CAPITAL

ITEM
Oct. 31 Bal.
JRNL.
REF.
BALANCE
DEBIT
CREDIT
15,000
ACCOUNTS PAYABLE
Oct. 31 Bal.
Nov. 16
20
ACCOUNT
ACCOUNT NO. 14
EQUIPMENT
DEBIT
CREDIT
BALANCE
DEBIT
CREDIT
4,600
5,400
2,800
ACCOUNT NO. 31
BALANCE
DEBIT
CREDIT
22,000
ACCOUNT STEPHANIE STOUSE, WITHDRAWALS

JRNL.
Chapter 2
ACCOUNT NO. 32
BALANCE
155
DATE
Nov. 19
156
ITEM
REF.
DEBIT
J.6
2,100
CREDIT
DEBIT
2,100
CREDIT
(continued)
P 2-40B
Req. 2
ACCOUNT
SERVICE REVENUE
DATE
JRNL.
REF.
Nov.
ITEM
7
24
ACCOUNT NO. 41
DEBIT
J.6
J.6
5,700
1,900
SALARY EXPENSE
DATE
JRNL.
REF.
DEBIT
J.6
2,000
Nov. 30
ACCOUNT
DATE
Nov. 30
CREDIT
BALANCE
DEBIT
CREDIT
2,000
ACCOUNT NO. 52
RENT EXPENSE
ITEM
7,600
ACCOUNT NO. 51
ACCOUNT
ITEM
CREDIT
BALANCE
DEBIT
CREDIT
JRNL.
REF.
DEBIT
J.6
700
CREDIT
BALANCE
DEBIT
CREDIT
700
Chapter 2
157
(continued)
P 2-40B
Req. 3
Stephanie Stouse, Registered Dietician
Trial Balance
November 30, 2007
ACCT. NO.
11
12
13
14
21
31
32
41
51
52
158
ACCOUNT
Cash
Accounts receivable
Supplies
Equipment
Accounts payable
Stephanie Stouse, capital
Stephanie Stouse, withdrawals
Service revenue
Salary expense
Rent expense
Total
DEBIT
CREDIT
$ 3,500
7,700
1,400
15,000
$ 2,800
22,000
2,100
7,600
2,000
700
$32,400
$32,400
(30 min.)
P 2-41B
Reqs. 1 and 3
ACCOUNT
DATE
ITEM
JRNL.
REF.
a.
b.
d.
e.
g.
i.
j.
k.
ACCOUNT
DATE
DATE
c.
DEBIT
CREDIT
40,000
32,000
1,300
800
400
1,100
1,600
2,600
ACCOUNTS RECEIVABLE
ITEM
JRNL.
REF.
h.
i.
ACCOUNT
ACCOUNT NO.
CASH
DEBIT
CREDIT
1,100
BALANCE
DEBIT
CREDIT
3,300
2,200
ACCOUNT NO.
SUPPLIES
ITEM
40,000
8,000
6,700
7,500
7,100
8,200
6,600
4,000
ACCOUNT NO.
3,300
JRNL.
REF.
BALANCE
DEBIT
CREDIT
DEBIT
CREDIT
400
BALANCE
DEBIT
CREDIT
400
Chapter 2
159
ACCOUNT
DATE
b.
160
EQUIPMENT
ITEM
ACCOUNT NO.
JRNL.
REF.
DEBIT
32,000
CREDIT
BALANCE
DEBIT
CREDIT
32,000
(continued)
ACCOUNT
DATE
ITEM
a.
ACCOUNT
DATE
DATE
DEBIT
CREDIT
20,000
ITEM
JRNL.
REF.
DEBIT
BALANCE
DEBIT
CREDIT
20,000
ACCOUNTS PAYABLE
c.
f.
g.
ACCOUNT
ACCOUNT NO.
AUTOMOBILE
JRNL.
REF.
P 2-41B
ACCOUNT NO.
CREDIT
BALANCE
DEBIT
CREDIT
400
500
400
900
500
400
ACCOUNT NO.
VINCE SERRANO, CAPITAL

ITEM
JRNL.
REF.
DEBIT
a.
CREDIT
BALANCE
DEBIT
CREDIT
60,000
60,000
ACCOUNT VINCE SERRANO, WITHDRAWALS ACCOUNT NO.

DATE
ITEM
JRNL.
REF.
k.
ACCOUNT
DATE
DEBIT
CREDIT
2,600
2,600
ACCOUNT NO.
SERVICE REVENUE
ITEM
JRNL.
DEBIT
BALANCE
DEBIT
CREDIT
CREDIT
Chapter 2
BALANCE
161
REF.
e.
h.
162
DEBIT
800
3,300
CREDIT
800
4,100
(continued)
ACCOUNT
DATE
ITEM
d.
DEBIT
RENT EXPENSE
DATE
JRNL.
REF.
ITEM
j.
DATE
DATE
f.
DEBIT
ACCOUNT NO.
CREDIT
ITEM
DEBIT
ACCOUNT NO.
CREDIT
600
ITEM
DEBIT
BALANCE
DEBIT
CREDIT
600
ADVERTISING EXPENSE
JRNL.
REF.
BALANCE
DEBIT
CREDIT
1,000
INSURANCE EXPENSE
JRNL.
REF.
BALANCE
DEBIT
CREDIT
1,300
1,000
j.
ACCOUNT
CREDIT
1,300
ACCOUNT
ACCOUNT
ACCOUNT NO.
SALARY EXPENSE
JRNL.
REF.
P 2-41B
ACCOUNT NO.
CREDIT
500
BALANCE
DEBIT
CREDIT
500
Chapter 2
163
(continued)
P 2-41B
Req. 2
Journal
DATE
a.
b.
c.
d.
e.
164
POST.
REF.
DEBIT
Cash
Automobile
Vince Serrano, Capital
Received investment by owner.
40,000
20,000
Equipment
Cash
Purchased equipment.
32,000
Supplies
Accounts Payable
Salary Expense
Cash
Paid salary.
Cash
Service Revenue
cash.
CREDIT
60,000
32,000
400
400
1,300
1,300
800
800
f.
g.
Advertising Expense
Accounts Payable
Received advertising bill.
500
Accounts Payable
Cash
Paid on account.
400
500
400
(continued)
P 2-41B
Req. 2 (continued)
Journal
DATE
h.
Accounts Receivable
Service Revenue
POST.
REF.
DEBIT
CREDIT
3,300
3,300
i.
Cash
Accounts Receivable
1,100
1,100
Collected cash on account.
j.
Rent Expense
Insurance Expense
Cash
1,000
600
1,600
Paid expenses.
k.
Vince Serrano, Withdrawals

Chapter 2
2,600
165
Cash
166
2,600
(continued)
P 2-41B
Req. 4
Serrano Carpet Installers
Trial Balance
January 31, 2007
ACCOUNT
DEBIT
$ 4,000
2,200
400
32,000
20,000
Cash
Accounts receivable
Supplies
Equipment
Automobile
Accounts payable
Vince Serrano, capital
Vince Serrano, withdrawals
Service revenue
Salary expense
Rent expense
Insurance expense
Advertising expense
Total
CREDIT
500
60,000
2,600
4,100
1,300
1,000
600
500
$64,600
Chapter 2
$64,600
167
(20-30 min.)
P 2-42B
Req. 1
Income Statement
Month Ended January 31, 2007
Revenues:
Service revenue
Expenses:
Salary expense
Rent expense
Insurance expense
Advertising expense
Total expenses
Net income
$4,100
$1,300
1,000
600
500
3,400
$ 700

Statement of Owners Equity
Month Ended January 31, 2007
Vince Serrano, capital, January 1, 2007
Add: Investment by owner
Net income for the month
Less: Withdrawals by owner
Vince Serrano, capital, January 31, 2007
168
-060,000
700
60,700
(2,600)
$58,100
Chapter 2
169
(continued)
P 2-42B

Balance Sheet
January 31, 2007
ASSETS
LIABILITIES
Cash
$ 4,000 Accounts payable
$ 500
Accounts receivable
2,200 Total liabilities
500
Supplies
400
Equipment
32,000
OWNERS EQUITY
Automobile
20,000 Vince Serrano, capital 58,100
Total liabilities and
Total assets
$58,600 owners equity
$58,600
170
(15-25 min.)
P 2-43B
Missing Link Exploration Company

Trial Balance
March 31, 2007
ACCOUNT
DEBIT
$ 5,200*
2,540*
600*
21,300
46,000
Cash
Accounts receivable
Supplies
Exploration equipment
Computers
Accounts payable
Note payable
Jack Ballard, capital
Jack Ballard, withdrawals
Service revenue
Salary expense
Rent expense
Advertising expense
Utilities expense
Total
CREDIT
$ 2,800*
18,300
50,800
5,000
11,800*
1,300
1,200*
300
260*
$83,700
$83,700
*Explanations:
Cash: $6,200 $1,000 = $5,200
Accounts receivable: $2,000 $60 + $600 = $2,540
Supplies: $500 + $100 = $600
Accounts payable: $2,700 + $100 = $2,800
Chapter 2
171
Service revenue: $4,900 + $6,900 = $11,800

Rent expense: $500 + $350 + $350 = $1,200
Utilities expense: $200 + $60 = $260
172
Continuing Problem
(20-30 min.)
P 2-44
Reqs. 1 and 3
Cash
Accounts Receivable
Dec. 2 10,000 Dec. 2

18
800
3
12
Bal.
8,100
500
2,000
200
Dec. 9
Bal.
Supplies
Dec. 5
Bal.
Equipment
300
300
Dec. 3
Bal.
Furniture
Dec. 4
Bal.
1,700
1,700
2,000
2,000
Accounts Payable
3,600
3,600
Dec. 4 3,600
5
300
Bal.
3,900
Carl Redmon, Capital

Dec. 2
Bal.
Carl Redmon, Withdrawals
10,000
10,000
Service Revenue
Dec. 9
18
Rent Expense
1,700
800
Dec. 2
Bal.
Chapter 2
500
500
173
Bal.
Utilities Expense
Dec. 12
Bal.
174
200
200
2,500
Salary Expense
(continued)
P 2-44
Req. 2
Journal
DATE
Dec.
2 Cash
Carl Redmon, Capital
2 Rent Expense
Cash
POST.
REF.
DEBIT
CREDIT
10,000
10,000
500
500
3 Equipment
Cash
2,000
4 Furniture
Accounts Payable
3,600
5 Supplies
Accounts Payable
300
2,000
3,600
300
Service Revenue
1,700
1,700
12 Utilities Expense
Cash
200
18 Cash
800
200
Chapter 2
175
Service Revenue
176
800
(continued)
P 2-44
Req. 4
Redmon Consulting
Trial Balance
December 31, 20XX
ACCOUNT
DEBIT
$ 8,100
1,700
300
2,000
3,600
Cash
Accounts receivable
Supplies
Equipment
Furniture
Accounts payable
Carl Redmon, capital
Carl Redmon, withdrawals
Service revenue
Rent expense
Utilities expense
Salary expense
Total
CREDIT
$ 3,900
10,000
2,500
500
200
$16,400
Chapter 2
$16,400
177
Decision Cases
(40-50 min.) Decision Case 1
Reqs. 1 and 2
Cash
(a)
(f)
Bal.
Accounts Receivable
10,000 (b)
1,200 (d)
8,400
300
2,500
(e)
Bal.
8,800 (f)
7,600
1,200
Supplies
(b)
Bal.
Accounts Payable
Dean McChesney, Capital
(c)
700
(a)
Service Revenue
(e)
178
10,000
Salary Expense
8,800
(d)
Rent Expense
(d)
300
300
1,100
1,400
Advertising Expense
(c)
700
(continued) Decision Case 1

Req. 3
A-Plus Travel Planners
Trial Balance
June 30, 2009
ACCOUNT
DEBIT
$ 8,400
7,600
300
Cash
Accounts receivable
Supplies
Accounts payable
Dean McChesney, capital
Service revenue
Salary expense
Rent expense
Advertising expense
Total
CREDIT
1,400
1,100
700
$19,500
Chapter 2
700
10,000
8,800
$19,500
179
(continued) Decision Case 1

Req. 4
A-Plus Travel Planners
Revenues:
Service revenue
Expenses:
Salary expense
Rent expense
Advertising expense
Total expenses
Net income for month
$8,800
$1,400
1,100
700
3,200
$5,600
Recommendation: Discontinue the business, because net

income falls below the target amount.
180
(15-20 min.) Decision Case 2

1. Double-entry bookkeeping has the advantage that it records
both sides (the giving side and the receiving side) of a
business transaction. Single-entry records only one side (the
giving side), which makes it harder to keep track of what is
received. Also it is easier to spot errors in a double-entry
system because total debits should always equal total
credits.
2. The bank is not misusing the term credit. When you deposit
money in the bank, the bank debits Cash (received from you)
and credits a payable (to you). It is this payable, a liability
account, that is the source of the term credit. This is why a
bank credit is good for the depositor. It means you have more
money in the bank.
*Students probably will not be this complete.
Chapter 2
181
Ethical Issue
The ethical issue is whether Better Days Ahead is taking

advantage of the banks generosity.
Students who approve of the Better Days Ahead action can
point out that the bank allows Better Days Ahead to overdraw
its cash balance. In this view, Better Days Ahead is merely
using a privilege the bank has granted. Most banks are civicminded
and
are
relatively
generous
with
charitable
organizations.
Students who disapprove may argue that Better Days Ahead is
using the banks money without adequately compensating the
banka subtle form of stealing. In this view, Better Days Ahead
should curtail its spending until it has the money to cover its
expenditures and maintain a positive balance. Alternatively,
Better Days Ahead could sign a note payable to borrow the
needed
money.
The
compensation.
182
related
interest
is
the
banks
The bank is the key player in this case. Whether the bank
approves or disapproves of the Better Days Ahead overdrafts is
critical to the ethical decision. Approval by the bank turns the
overdrafts into a gift to Better Days Ahead. Disapproval by the
bank would no doubt be communicated to Mr. Henson.
Chapter 2
183
Financial Statement Case
(20-30 min.)
Journal
DATE
Dec.
1 Cash
Sales Revenue
9 Cash
Note Payable
DEBIT
60,000
200,000
200,000
10,000
22 Accounts Payable
Cash ($10,000 )
5,000
28 Administrative Expense
Cash
3,000
CREDIT
60,000
12 Equipment
Accounts Payable
31 Note Payable
Interest Expense
Cash
184
POST.
REF.
10,000
5,000
3,000
100,000
1,000
101,000
Team Project
Suggested Answer
Student answers will very widely, as the various groups use the
charts of accounts of different businesses. The financial
statements that the students prepare should be consistent with
the businesss chart of accounts.
Chapter 2
185

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Chapter 2

Recording Business Transactions

Owners equity is $130,000 ($50,000 + $60,000

Supplies balance is $1,200 ($500 + $700). The

Ending equity is $70,000, computed as follows:

Accounting 7/e Solutions Manual

Debits are increases for the following types of accounts:

Recording Business Transactions

The basic summary device in accounting is the account. The

Accounting 7/e Solutions Manual

C. Left side of an account

D Side of an account where

E. Copying data from the journal

F. Using up assets in the course

7. Normal balance G. Always a liability

Recording Business Transactions

Accounting 7/e Solutions Manual

ACCOUNTS AND EXPLANATIONS

Recording Business Transactions

ACCOUNTS AND EXPLANATIONS

Accounting 7/e Solutions Manual

ACCOUNTS AND EXPLANATIONS

Recording Business Transactions

ACCOUNTS AND EXPLANATIONS

Accounting 7/e Solutions Manual

Recording Business Transactions

Mark Brown, Capital

Accounting 7/e Solutions Manual

Redbird Floor Coverings

Recording Business Transactions

Accounting 7/e Solutions Manual

Incorrect Trial Balance

To correct this error,

Recording Business Transactions

3. Locate $30,000 on the trial balance. Cookie Lapp, capital

Accounting 7/e Solutions Manual

Incorrect Trial Balance

*Incorrect; should be listed as $2,000.

To correct this error,

Recording Business Transactions

3. Locate $200 on the trial balance. Withdrawals, at $200, holds

Accounting 7/e Solutions Manual

Recording Business Transactions

Accounting 7/e Solutions Manual

NET INCOME represents a net credit because revenues

Recording Business Transactions

ACCOUNTS AND EXPLANATIONS

Accounting 7/e Solutions Manual

Dec. 1 3,000 Dec. 2

Rex Blackwell, Capital

29,000 Dec. 19 29,000

Recording Business Transactions

Accounting 7/e Solutions Manual

ACCOUNTS AND EXPLANATIONS

Recording Business Transactions

Aug. 1 60,000 Aug. 4 50,000

Accounting 7/e Solutions Manual

2,100 Aug. 23 1,200

Ron Woodward, Capital