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Chapter 3 Analyzing and Recording

Transactions

Questions

1.The fundamental steps in the accounting process are analyzing economic events and recording their effects on the accounting equation, classifying and summarizing the recorded effects, and reporting useful information in financial statements and other reports.

2.A note receivable is a document that specifies the fixed amount due to a company. An account receivable is also an amount due to a company, but the amount can be increased by the debtor by making additional purchases. An account receivable is not a single document but represents the result of several written, oral, or implied promises to pay the creditor.

3. Fifteen possible expense accounts might be: Utilities Expense, Rent Expense, Telephone Expense, Internet Expense, Office Supplies Expense, Salaries Expense, Wages Expense, Entertainment Expense, Repair Expense, Postage Expense, Taxi Expense, Advertising Expense, Interest Expense, Equipment Rental Expense, and any number of others.

4. Four different asset accounts would include any of the following from Danier’s June 25, 2005 balance sheet: Cash, Accounts receivable, Income taxes recoverable, Inventories, Prepaid expenses, Assets of discontinued operations, Future income taxes asset, Capital assets, or Goodwill. Four different liability accounts would include any of the following: Accounts payable and accrued liabilities, Income taxes payable, Liabilities of discontinued operations, Accrued litigation provision and related expenses, Deferred lease inducements, or Future income tax liabilities.

5.Expense accounts have debit balances because they reflect decreases in owner’s equity. 6.Three debit balance accounts from WestJet’s December 31, 2005 balance sheet might

include any of the following: Cash and cash equivalents, Accounts receivable, Income taxes recoverable, Prepaid expenses and deposits, Inventory, Capital assets, or Other long-term assets. Three credit balance accounts might include any of the following: Accounts payable and accrued liabilities, Income taxes payable, Advance ticket sales, Non-refundable guest credits, Current portion of long-term debit, Current portion of obligations under capital lease, Long-term debit, Obligations under capital lease, Future income tax, Share capital, or Retained earnings.

7.A General Journal can be used to record any transaction. 8.Debited accounts are recorded first. The credited accounts are indented. 9.A transaction should first be recorded in a journal to create a complete record of the

transaction in one place. This arrangement also means that fewer errors will be made in the accounts.

Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved.Solutions Manual for Chapter 3 74

10. The bookkeeper prepares a trial balance to summarize the contents of the ledger and to determine whether equal debits and credits have been recorded. The trial balance also serves as a helpful internal document for preparing the financial statements.

Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved.75 Fundamental Accounting Principles, Twelfth Canadian Edition

QUICK STUDYQuick Study 3-1 A 1. Buildings E 11. Advertising

Fees EarnedL 21. Unearned

Rent RevenueE 2. Building

Repair ExpenseR 12. Interest

EarnedA 22. Prepaid

RentE 3. Wages

ExpenseE 13. Interest

ExpenseL 23. Rent

PayableL 4. Wages

PayableL 14. Interest

PayableR 24. Service

Fees EarnedA 5. Notes

ReceivableR 15. Earned

Subscription FeesW 25. Jan Sted,

WithdrawalsL 6. Notes

PayableL 16. Unearned

Subscription FeesOE

26. Jan Sted, Capital

A 7. Prepaid Advertising

A 17. Prepaid Subscription Fees

E 27. Salaries Expense

E 8. Advertising Expense

A 18. Supplies L 28. Salaries Payable

L 9. Advertising Payable

E 19. Supplies Expense

A 29. Furniture

L 10. Unearned Advertising

R 20. Rent Revenue A 30. Equipment

Quick Study 3-2 Accounts

ReceivableAccounts Payable

Service Revenue

1,000 650 250 250 13,000

400 920 900 1,800

2,500

920 1,500

650 1,400

810

3,000 650 3,500

Bal. 2,250

2,300 Bal.

19,810 Bal.

Utilities Expense Cash Notes Payable610 3,900 2,40

04,000 50,0

00520 17,800 3,90

08,000

390 14,500 21,8 38,000


00 Bal.275 340Bal.

1,795Bal.

8,440


Quick Study 3-3a. Equipment......Deb

itf. Prepaid Rent. Deb

itk.

Al Tait, Capital

Credit

b.

Land...............Debit

g.

Accounts Receivable....

Debit

l. Rent Earned

Credit

c. Al Tait, Withdrawals....

Debit

h. Office Supplies........

Debit

m.

Rent Payable

Credit

d.

Rent Expense. .Debit

i. Notes Receivable....

Debit

n.

Interest Expense

Debit

e. Interest Revenue.........

Credit

j. Notes Payable........

Credit

o.

Interest Payable

Credit

Quick Study 3-4a. Credit f. Credit k. Debitb. Credit g. Debit l. Creditc. Credit h. Credit m. Debitd. Debit i. Debit n. Debite. Credit j. Debit o. DebitQuick Study 3-5a. Credit f. Debit k. Creditb. Debit g. Credit l. Debitc. Credit h. Credit m. Debitd. Debit i. Credit n. Credite. Credit j. Debit o. CreditQuick Study 3-6Note: Students could choose any account number within the specified range.

a. 173 f. 203 k. 629b. 409 g. 106 l. 219c. 302 h. 622 m. 222d. 301 i. 124 n. 170e. 128 j. 403 o. 115


Quick Study 3-71.

Cash 101

Accounts Receivable 106

Furniture 161

(a) 15,000

(d) 1,000

(g) 300

500 (c)500 (f)

(e) 700(h)

400

300 (g)

(b) 2,000

(c) 500

Bal. 15,300

Bal. 800

Bal. 2,500

Accounts Payable

201

Del Martin, Capital

301 Revenue

403(f)

5002,000

(b)15,000 (a)

1,000 (d) 700 (e) 400 (h)

1,500 Bal.

15,000 Bal.

2,100 Bal.

2. The account balance for each T-account is shown above. The accounting equation (Assets = Liabilities + Equity) is proved as follows: $18,600 = $1,500 + 17,100


Quick Study 3-8General Journal Page 1

Date Account Titles and Explanations Debit Credit2011May

1 Equipment............................... 500500

Accounts Payable.............. Purchased equipment on account.

2 Accounts Payable..................... 500 Cash................................. 500 Paid for the equipment purchased May 1.

3 Supplies.................................. 100 Cash................................. 100 Purchased supplies for cash.

4 Wages Expense........................ 2,000 Cash................................. 2,000 Paid wages to employees.

5 Cash........................................ 750 Service Revenue............... 750 Performed services for a client for cash.

6 Accounts Receivable................. 2,500 Service Revenue............... 2,500 Did work for a customer on credit.

7 Cash........................................ 2,500 Accounts Receivable......... 2,500 Collected May 6 customer account.


Quick Study 3-9General Journal Page 1

Date Account Titles and Explanations Debit Credit2011Jan.

3 Cash........................................ 60,000

Equipment............................... 40,000 Stan Adams, Capital............ 100,00

0 Investment by owner.

4 Office Supplies......................... 340 Accounts Payable................ 340 Purchased office supplies on credit.

6 Cash........................................ 5,200 Landscaping Services Revenue..................................

5,200

Received cash for landscaping services.

15

Accounts Payable..................... 200

Cash................................. 200 Paid part of the January 4 credit purchase.

16

Office Supplies......................... 700

Accounts Payable.............. 700 Purchased supplies on account.

30

Accounts Payable..................... 140

Cash................................. 140


Paid the balance owing re January 4 credit purchase.


Quick Study 3-10

CashAccount No.

101

Date Explanation PR DebitCredi

tBalanc

e2011

Jan. 360,00

0 60,0006 5,200 65,20015 200 65,00030 140 64,860

Office SuppliesAccount No.

124


tBalanc

e2011

Jan. 4 340 34016 700 1,040

EquipmentAccount No.

163


tBalanc

e2011

Jan. 340,00

0 40,000

Accounts PayableAccount No.

201


tBalanc

e2011

Jan. 4 340 34015 200 14016 700 8403 140 700


0

Stan Adams, CapitalAccount No.

301


tBalanc

e2011

Jan. 3100,000

100,000

Landscaping Services RevenueAccount No.

403


tBalanc

e2011

Jan. 65,20

0 5,200


Quick Study 3-11

Vahn LandscapingTrial Balance

January 31, 2011Acct

. No.

Account Debit Credit

101 Cash...................................... $7,000163 Equipment............................. 9,000233 Unearned fees....................... $2,000301 Brea Vahn, capital.................. 14,000302 Brea Vahn, withdrawals.......... 1,000401 Fees earned........................... 11,000640 Rent expense......................... 6,000690 Utilities expense.................... 4,000

Totals.................................... $27,000

$27,000

Quick Study 3-12The correct answer is c. If a $2,250 debit to Rent Expense is incorrectly posted as a credit, the effect is to understate the Rent Expense debit balance by $4,500. This causes the Debit column total on the trial balance to be $4,500 less than the Credit column total.

Quick Study 3-131. Subtract total debits in the trial balance from total

credits24,250 - 21,550 = 2,700

2. Divide the difference by 92,700 9 = 300

3. The quotient equals the difference between the two transposed numbers.

The difference between the correct number and the incorrect number is 300.

4. The number of digits in the quotient tells us the location of the transposition

Look for a difference of 3 between the third number from the right and the fourth number from the right.

Through a process of elimination, the incorrect value is Rent Expense for $4,100. The correct value must be $1,400. Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved.85 Fundamental Accounting Principles, Twelfth Canadian Edition

Proof: Recalculate the trial balance replacing $1,400 for the incorrect $4,100 and the trial balance now balances at $21,550.


Quick Study 3-141. Subtract total debits in the trial balance from total

credits728 - 503 = 225

2. Divide the difference by 9225 9 = 25

The quotient equals the incorrect number.

Through a review of the values in the trial balance, the incorrect value is Notes Payable for $25. The correct value must be $250.

Proof: Recalculate the trial balance replacing $250 for the incorrect $25 and the trial balance now balances at $728.


EXERCISES

Exercise 3-1 (30 minutes)

Cash Accounts Payable(a) 25,50

0750 (b) (e) 14,10

014,10

0(c)

(d) 3,000 14,100

(e) 0 Balance

(h) 2,250 1,050

(g)

2,000

(i) Ella Tims, Capital

Balance

12,850

25,500

(a)

25,500

Balance

Accounts Receivable(f) 5,400 2,25

0(h) Ella Tims, Withdrawals

Balance

3,150 (i) 2,000

Balance

2,000

Office Supplies(b) 750 Fees EarnedBalance

750 3,000 (d)

5,400 (f)Office Equipment 8,400 Balan

ce(c) 14,10

0Balance

14,100

Rent Expense

(g) 1,050Balance

1,050


Exercise 3-2 (10 minutes)Cash Neil Simon, Capital

Jan. 31

700 4,000

Feb. 14

800 Jan. 31

Feb. 2

2,800

60 23 800 Bal.

20

2,400

1,000

25

800 26Bal. 40 Neil Simon, Withdrawals

Jan. 31

-0-

Accounts Receivable Feb. 25

1,000

Jan. 31

1,200

2,400

Feb. 20

Bal. 1,000

Feb. 12

15,000

18 1,900

Service Revenue

Bal. 15,700

2,600 Jan. 31

2,800 Feb. 2

Prepaid Insurance 15,000

12

Jan. 31

-0- 1,900 18

Feb. 14

4,000

22,300

Bal.

Bal. 4,000

Wages ExpenseCopyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved.89 Fundamental Accounting Principles, Twelfth Canadian Edition

Computer Equipment Jan. 31

1,080

Jan. 31

480 Feb. 26

800

Feb. 10

7,600

Bal. 1,880

Bal. 8,080

Accounts PayableFeb.

2360 60 Jan.

31

-0- Bal.

Notes Payable-0- Jan.

317,60

0Feb. 10

7,600

Bal.

Analysis component:Revenue recognition requires that when a transaction has occurred, it must be recorded whether cash has been received or not. A transaction has occurred when there has been an economic exchange — when something has been given up or received. On February 12, services were performed and, although cash will not be received until a future date, a revenue must be recorded because an economic exchange has occurred.


NOTE: There is no entry to be recorded

for February 21.


Cash Nels Sigurdsen, WithdrawalsMar.

311,80

0400 Apr.

10Mar. 31

500

Apr. 2

780 300 15 Apr. 29

1,000

19

2,000

1,000

29 Bal. 1,500

Bal. 2,880

Repair RevenueAccounts Receivable 14,00

0Mar.

31Mar.

314,80

02,00

0Apr.

19780 Apr. 2

Apr. 18

1,200

1,200 18

Bal. 4,000

15,980

Bal.

Repair Supplies Rent ExpenseMar.

311,40

0Mar.

31950

Apr. 9

890 Apr. 25

250

Bal. 2,290

Bal. 1,200

EquipmentMar. 31

7,400

Apr. 15

300

Bal. 7,700

Accounts PayableApr.

10400 500 Mar.

31890 Apr.

9250 25

1,240

Bal.


Nels Sigurdsen, Capital2,35

0Mar.

312,35

0Bal.

NOTE: There is no entry to be recorded for April 5.


Exercise 3-4 (45 minutes)2.

GENERAL JOURNAL Page 1Date

Account Titles and Explanations

PR Debit Credit

2011July

1

Cash.............................. 101 5,000

Sue Ware, Capital..... 301 5,000 To record investment by owner.

10

Equipment..................... 150 2,500

Accounts Payable...... 201 2,500 Purchased equipment on credit.

12

Cash.............................. 101 10,000

Revenue................... 401 10,000 Performed services for cash.

14

Expenses....................... 501 3,500

Cash......................... 101 3,500 Paid expenses.

15

Accounts Receivable ...... 106 1,500

Revenue................... 401 1,500Completed services on account.

31

Sue Ware, Withdrawals. . 302 250

Cash......................... 101 250Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved.93 Fundamental Accounting Principles, Twelfth Canadian Edition

Owner withdrew cash.


Exercise 3-4 (continued)*Note: The student could use T-accounts or balance column format accounts as their general ledger. Both are shown in this solution.

1 and 3. Cash

101July 1 5,00

03,50

0July 14

12

10,000

250 31

Balance

11,250

Accts. Receivable

106July 15

1,500

Equipment

150July 10

2,500

Accounts Payable

2012,50

0July 10

Sue Ware,Capital 30

15,00

0July 1

Sue Ware,Withdrawal 30


s 2July 31

250

Revenue

40110,00

0July 12

1,500 15

11,500

Balance

Expenses

501July 14

3,500


Exercise 3-4 (continued)1 and 3.

Cash Account No. 101Date Explanation PR Debit Credit Balance201

1July 1 G1 5,000 5,000

12 G1 10,000 15,00014 G1 3,500 11,50031 G1 250 11,250

Accounts Receivable Account No. 106Date Explanation PR Debit Credit Balance201

1

July15 G1 1,500 1,500

Equipment Account No. 150Date Explanation PR Debit Credit Balance201

1

July10 G1 2,500 2,500

Accounts Payable Account No. 201Date Explanation PR Debit Credit Balance201

1

July10 G1 2,500 2,500

Sue Ware, Capital Account No. 301Date Explanation PR Debit Credit Balance201

1July 1 G1 5,000 5,000

Sue Ware, Withdrawals Account No. 302Date Explanation PR Debit Credit Balance201

1Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved.97 Fundamental Accounting Principles, Twelfth Canadian Edition

July31 G1 250 250

Revenue Account No. 401Date Explanation PR Debit Credit Balance201

1

July12 G1 10,000 10,00015 G1 1,500 11,500

Expenses Account No. 501Date Explanation PR Debit Credit Balance201

1

July14 G1 3,500 3,500

Exercise 3-4 (continued)4.

DelaWareTrial BalanceJuly 31, 2011

Acct. No. Account Title Debit

Credit

101 Cash......................... $11,250

106 Accounts receivable .. 1,500

150 Equipment................ 2,500

201 Accounts payable...... $ 2,50

0 301 Sue Ware, capital...... 5,00

0 302 Sue Ware, withdrawals 250 401 Revenue.................... 11,5

00 501 Expenses.................. 3,

500


Totals........................... $19,000

$19,000

5.DelaWare

Income StatementFor Month Ended July 31, 2011

Revenue................................ $11,500

Expenses............................... 3, 500

Net income............................ $8,000

DelaWareStatement of Owner’s Equity

For Month Ended July 31, 2011Sue Ware, capital, July 1......... $

0Add: ....Investments by owner $5,0

00Net income...................... 8,0

00 13, 000

Total................................... 13,000

Less: Withdrawals by owner... 2 50

Sue Ware, capital, July 31....... $12,750


Exercise 3-4 (concluded)5. (concluded)

DelaWareBalance SheetJuly 31, 2011

Assets Liabilities Cash....................... $11,

250Accounts payable......... $

2,500Accounts receivable 1,50

0Equipment.............. 2,5

00Owner’s Equity

Sue Ware, capital......... 12,7 50

Total liabilities and Total assets............ $15,

250 owner’s equity.......... $15,2

50

Analysis component:Accounts receivable result from credit sales to customers (debit accounts receivable and credit a revenue). Sales, or revenue, is part of equity. As revenues on account are recorded, assets on the one side of the accounting equation increase and equity on the opposite side of the accounting equation also increases. Therefore, accounts receivable are financed by, or created by, an equity transaction.


Note: Students could choose any account number within the specified range.

Account Number

Account Name

110 Cash115 Accounts Receivable160 Office Equipment210 Accounts Payable215 Unearned Revenue310 Wes Bosse, Capital320 Wes Bosse,

Withdrawals410 Consulting Revenues


510 Salaries Expense520 Rent Expense530 Utilities Expense


Exercise 3-6 (30 Minutes)2.

Cash 110

Accounts Receivable

115

Office Equipment 160

Accounts Payable

210

Bal 11,500

2,000

Feb 5

Bal 6,000

Bal 12,500

Feb 5

2,000

3,000

Bal

Feb 1

8,500

500 17 1,000

Bal

10 2,500

10,000

28

Bal 10,000

Unearned Revenue

215

Wes Bosse, Capital

310

Wes Bosse, Withdrawals

320

Consulting Revenues

410

500 Bal 9,500

Bal Bal 2,000

37,500

Bal

2,500

Feb 10

Feb 17

500 8,500

Feb 1

3,000

Bal Bal 2,500

46,000

Bal

Salaries Expense

510

Rent Expense

520

Utilities Expense

530

Bal 10,000

Bal 7,500

Bal 1,000

Feb 28

10,000

Bal 20,000

Copyright © 2005 by M

cGraw

-Hill Ryerson Lim

ited. All rights reserved.Solutions M

anual for Chapter 391

Exercise 3-6 (continued)1. General Journal Page G1Date


PR Debit Credit

2011Feb.

1

Cash............................. 101

8,500

Consulting Revenues 410

8,500

Performed work for cash.

5 Accounts Payable.......... 210

2,000

Cash....................... 101

2,000

Paid account.

10

Cash............................. 101

2,500

Unearned Revenue... 215

2,500

Received cash in advance.

12

No entry.

17

Wes Bosse, Withdrawals 320

500

Cash....................... 101

500


28

Salaries Expense........... 510

10,000

Cash....................... 101

10,000

Paid salaries.

3.Bosse AdvisorsTrial Balance

February 28, 2011


Acct. No. Account Title Debit Credit101 Cash..................................... $

10,000115 Accounts receivable ............. 6,000160 Office equipment.................. 12,500210 Accounts payable.................. $

1,000215 Unearned revenue................ 3,000310 Wes Bosse, capital................ 9,500320 Wes Bosse, withdrawals........ 2,500410 Consulting revenues............. 46,00

0510 Salaries expense................... 20,000520 Rent expense........................ 7,500530 Utilities expense................... 1,00

0

Totals................................... $59,500

$59,500


Exercise 3-6 (concluded)4.

Bosse AdvisersBalance Sheet

February 28, 2011Assets Liabilities

Cash.................... $10,000

Accounts payable.... $ 1,000

Accounts receivable................

6,000 Unearned revenue... 3,00 0

Office equipment. . 12,50 0

Total liabilities........ $ 4,000

Owner’s EquityWes Bosse, capital. . 24,500

1

Total liabilities andTotal assets.......... $28,50

0 owner’s equity..... $28,50

0

1 Capital = 9,500 Opening Balance+ 46,000 Revenues– 28,500 Salaries, Rent and Utilities expenses– 2,500 Withdrawals

= 24,500 Closing Balance

Analysis component:Unearned revenue occurs when cash is received from a customer in advance of the work being done. The collection is not recorded as a revenue because it has not been earned until the work is done. Unearned revenue is therefore a liability because the business owes the customer a service (or work). For example, WestJet receives cash from customers in advance of the customer actually flying. These cash collections are recorded as unearned revenue, a liability, because the cash doesn’t belong to WestJet until they have earned it which occurs when the customer takes their flight.


Exercise 3-7 (30 minutes)a. Cash................................................. 7,000

Equipment........................................ 5,600Automobiles...................................... 11,000

Jerry Steiner, Capital.................... 23,600Owner invested cash, an automobile and equipment in

the business.b. Prepaid Insurance............................. 3,600

Cash............................................ 3,600Purchased insurance coverage in advance.

c. Office Supplies.................................. 600Cash............................................ 600

Purchased supplies with cash.d. Office Supplies.................................. 200

Equipment........................................ 9,400Accounts Payable......................... 9,600

Purchased supplies and equipment on credit.e. Cash................................................. 2,500

Delivery Services Revenue............ 2,500Received cash from customer.

f. Accounts Payable.............................. 2,400Cash............................................ 2,400

Made payment on payables.g. Gas and Oil Expense.......................... 700

Cash............................................ 700Paid for gas and oil.


Exercise 3-8 (20 minutes)2011Apri

l 5Cash.............................................. 1,500

Surgical Revenues.................... 1,500 Performed surgery and collected cash.

8 Supplies........................................ 3,000 Accounts Payable...................... 3,000 Purchased surgical supplies on credit.

15 Salaries Expense............................ 57,000 Cash......................................... 57,000 Paid salaries.

20 Accounts Payable........................... 3,000 Cash......................................... 3,000 Paid for the credit purchase of April 8.

21 No entry.22 Accounts Receivable...................... 9,000

Surgical Revenues.................... 9,000 Performed six surgeries on credit; $1,500 x 6 = $9,000

29 Cash.............................................. 3,000 Accounts Receivable............... 3,000 Collection from credit customers of April 22.

30 Utilities Expense............................ 1,800 Cash......................................... 1,800 Paid the April utilities.


Exercise 3-9 (20 minutes)b. Accounts Receivable........................... 2,700

Services Revenue........................... 2,700Provided services on credit.

c. Cash.................................................. 3,150Services Revenue........................... 3,150

Provided services for cash.

Revenues are inflows of assets (or decreases in liabilities) received in exchange for goods or services provided to customers. The other transactions did not create revenues for the following reasons:a. This transaction brought in cash, but it was an investment

in the company. d. This transaction brought in cash, but it also created a

liability because the services have not yet been provided to the client.

e. This transaction changed the form of the asset from accounts receivable to cash. Total assets were not increased. Revenue was not generated.

f. This transaction brought cash into the company and increased assets, but it also increased a liability by the same amount.

Exercise 3-10 (20 minutes)b. Salaries Expense............................... 1,125

Cash............................................ 1,125Paid the salary of the receptionist.

d. Utilities Expense............................... 930Cash............................................ 930

Paid the utilities for the office.

Expenses are outflows or using up of assets (or the creation of liabilities) that occur in the process of providing goods or services to customers. The transactions labelled a, c, and e were not expenses for the following reasons:a. This transaction decreased assets in settlement of a

previously existing liability. Thus, the using up of assets did not reduce owner’s equity.


c. This transaction was the purchase of an asset. The form of the company’s assets changed, but total assets did not change, and the equity did not decrease.

e. This transaction was a distribution of cash to the owner. Even though owner’s equity decreased, the decrease did not occur in the process of providing goods or services to customers.



Parts a and b:Cash Account No. 101

Date ExplanationPR Debit Credit Balance

2010Dec.

31 Beginning balance 850

2011

Jan. 1G1

3,500 4,350

20

G1 2,000 2,350

31

G1

5,000 7,350

31

G1 3,000 4,350

31

G1 750 3,600

Accounts Receivable Account No. 106


2010Dec.


2011

Jan.12

G1

9,000 9,300

31

G1 5,000 4,300

Equipment Account No. 167


2010Dec 3 Beginning balance 1,500


. 12011

Jan.20

G1

12,000 13,500


201


tBalanc

e2010Dec.


2011

Jan.20 G1

10,000 10,325

Jay Walker, CapitalAccount No.

301


tBalanc

e2010Dec.

31 Beginning balance 2,325

2011

Jan. 1 G13,50

0 5,825


Exercise 3-11 (Parts a and b continued)

Jay Walker, WithdrawalsAccount No.

302


tBalanc

e2010Dec.


2011

Jan.31 G1 750 1,050

Fees EarnedAccount No.

401


tBalanc

e2010Dec.


2011

Jan.12 G1

9,000 10,800

Salaries ExpenseAccount No.

622


tBalanc

e2010Dec.


2011

Jan.31 G1 3,000 4,500


Exercise 3-11 (Parts a and b continued)Note: After posting the journal entries, the PR column in the

General Journal would appear as follows:General Journal Page 1

Date

Account Titles and Explanations PR Debit Credit

2011

Jan. 1

Cash............................................... 101

3,500

Jay Walker, Capital..................... 301

3,500

Additional owner investment.12 Accounts Receivable........................ 10

69,000

Fees Earned............................... 401

9,000

Performed work for a customer on account.

20 Equipment...................................... 167

12,000

Cash.......................................... 101

2,000

Accounts Payable....................... 201

10,000

Purchased equipment paying cash and the balance on credit.

31 Cash............................................... 101

5,000

Accounts Receivable.................. 106

5,000

Collected cash from credit customer.

31 Salaries Expense............................. 622

3,000

Cash.......................................... 101

3,000


Paid month end salaries.31 Jay Walker, Withdrawals.................. 30

2750

Cash.......................................... 101

750

Jay Walker withdrew cash for personal use.

Exercise 3-11 (concluded)Analysis component:All of the details regarding a transaction, such as serial numbers or invoice numbers, form part of the journal entry recorded in the journal. The general ledger does not accommodate these kind of very necessary details. Therefore, we need to journalize to ensure important details are readily available.

The general ledger summarizes by account all of the transactions recorded in the journal. For example, without the ledger, we would not be able to determine the balance in cash without going through the journal and adding/subtracting all of the individual transactions. The ledger allows us to have account balance information.

In summary, although it appears that journalizing and posting are recording the same information twice, the journal and ledger each serve different and important functions in the accounting system.Exercise 3-12 (25 minutes)

General Journal Page G1

Date Account Titles and Explanations

PR

Debit Credit

2011Aug.

1 Cash.................................. 101

15,000

Photography Equipment...... 167

17,000

Tara Harper, Capital...... 301

32,000

Owner invested in the business.


1 Prepaid Rent...................... 131

6,500

Cash............................. 101

6,500

Rented studio space.5 Office Supplies.................... 12

41,800

Cash............................. 101

1,800

Purchased office supplies.20

Cash.................................. 101

9,200

Photography Fees Earned...............................

401

9,200

Collected photography fees.

31

Utilities Expense................. 690

1,100

Cash............................. 101

1,100

Paid for August utilities.

Note: The account numbers in the PR column above would be included only during the posting of these journal entries into the ledger accounts in Exercise 3-13.



CashAccount No.

101

Date ExplanationPR Debit Credit

Balance

2011Aug. 1

G1

15,000 15,000

1G1 6,500 8,500

5G1 1,800 6,700

20

G1 9,200 15,900

31

G1 1,100 14,800

Office SuppliesAccount No.

124


Balance

2011Aug. 5

G1 1,800 1,800

Prepaid RentAccount No.

131


Balance

2011Aug. 1

G1 6,500 6,500

Photography EquipmentAccount No.

167


Balance

2011Aug. 1

G1

17,000 17,000


Tara Harper, CapitalAccount No.

301


Balance

2011

Aug. 1

G1 32,000 32,000

Photography Fees EarnedAccount No.

401


Balance

2011Aug.

20

G1 9,200 9,200

Utilities ExpenseAccount No.

690


Balance

2011Aug.

31

G1 1,100 1,100


Exercise 3-13 (concluded)

THE PIXEL SHOPTrial Balance

August 31, 2011AcctNo. Account Title Debit Credit101Cash.......................$ 14,800124Office supplies........ 1,800131Prepaid rent........... 6,500167Photography equipment 17,000301Tara Harper, capital $32,000401Photography fees earned

9,200690Utilities expense..... 1,100

Totals.....................$41,200 $41,200

Analysis component:The trial balance is an internal working paper used to verify that debits and credits in the general ledger are equal and to review account balances. The trial balance format does not readily communicate information such as financial performance and financial position, information that is desired by external decision makers. Financial statements are used for external reporting because the formats of these communicate information desired by external users. For example, the income statement reports financial performance while the balance sheet reports financial position.


Exercise 3-14 (20 minutes)Cash 101 Office

Supplies124 Prepaid

Rent13

1Aug.

115,00

06,50

0Aug. 1 Aug.

51,80

0Aug. 1

6,500

20

9,200 1,800

5

1,100

31

Bal 14,800

Photography Equipment

167

Tara Harper, Capital

301

Aug. 1

17,000

32,000

Aug. 1

Photography Fees Earned

401

Utilities Expense

690

9,200

Aug. 20

Aug. 31

1,100

THE PIXEL SHOPTrial Balance

August 31, 2011

Acct.No. Account Title Debit Credit101 Cash................................ $ 14,800124 Office supplies................. 1,800131 Prepaid rent..................... 6,500167 Photography equipment... 17,000301 Tara Harper, capital......... $32,000401 Photography fees earned.. 9,200690 Utilities expense.............. 1,100

Totals.............................. $41,200 $41,200


Analysis component:The trial balance is an internal working paper used to verify that debits and credits in the general ledger are equal and to review account balances. The trial balance format does not readily communicate information such as financial performance and financial position, information that is desired by external decision makers. Financial statements are used for external reporting because the formats of these communicate information desired by external users. For example, the income statement reports financial performance while the balance sheet reports financial position.


Exercise 3-15 (20 minutes)Hogan’s ConsultingIncome Statement

For Year Ended December 31, 2011Consulting fees earned........... $46,

000Operating expenses: Wages expense................. $37,

000 Rent expense.................... 14,0

00 Total operating expenses 51,0

00Net loss................................. $

5,000

Hogan’s ConsultingStatement of Owner’s Equity

For Year Ended December 31, 2011Lisa Hogan, capital, January 1. $

0Add: ....Investments by owner 50,0

00 Total................................... $50,

000Less: Withdrawals by owner... $2,0

00 Net loss........................ 5,00

07,00

0Lisa Hogan, capital, December 31.........................................

$43,000

Hogan’s ConsultingBalance Sheet

December 31, 2011Assets Liabilities

Cash....................... $12,000

Accounts payable......... $ 800

Cleaning supplies.... 8,300

Notes payable............. 53,500


Prepaid rent........... 5,000

Total liabilities............. $54,300

Equipment.............. 72, 000

Owner’s Equity

Lisa Hogan, capital...... 43,000

Total liabilities and Total assets............ $97,

300 owner’s equity.......... $97,3

00


Analysis component:Losses cause equity to decrease. If equity decreases, either assets have to decrease and/or liabilities must increase to keep the balance sheet in balance. Therefore, if Hogan’s Consulting continues to experience losses, there are two short-term alternatives available to prevent a decrease in assets. First, the business could borrow which would increase liabilities and temporarily increase assets until payments had to be made. Longer term, the cash to make the payments cannot be borrowed. Second, Lisa Hogan, the owner, could invest additional assets into the business which would increase equity and assets. However,

Exercise 3-16 (20 minutes)JenCo

Income StatementFor Month Ended March 31, 2011

Revenues: Service revenue.................................... $1,9

00Operating expenses: Salaries expense.................................. $

800 Interest expense................................... 1

0 Total operating expenses.................. 81

0Net income............................................... $1,0

90

JenCoStatement of Owner’s Equity

For Month Ended March 31, 2011Marie Jensen, capital, March 1................... $

0Add: Investment by owner........................ $2,0

50 Net income...................................... 1,0

90$3,1

40 Total.................................................... $3,1

40Less: Withdrawal by owner....................... 1,5

00Marie Jensen, capital, March 31.................. $1,6

40

JenCoBalance SheetMarch 31, 2011

Assets LiabilitiesCash...................... $1,0

00Accounts payable........... $

260Accounts receivable..............

950 Unearned service revenues.......................

250

Prepaid insurance. . 300 Notes payable................ 8 00

Equipment............. 7 Total liabilities.......... $1,3Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved.Solutions Manual for Chapter 3 124

00 10

Owner’s Equity

Marie Jensen, capital...... 1,6

40Total assets........... $2,9

50Total liabilities and owner’s equity...............

$2,950


Exercise 3-17 (20 minutes)Bentley Marketing Services

Income StatementFor Month Ended March 31, 2011

Revenues: Fees earned.................................... $170,

000Operating expenses: Wages expense............................... $166,

000 Office supplies expense................... 7,0

00 Total operating expenses............. 173,

000Net loss.............................................. $

3,000

Bentley Marketing ServicesStatement of Owner’s Equity

For Month Ended March 31, 2011Dee Bentley, capital, March 1............... $112,

000*Add: Investment by owner.................. 10,

000 Total............................................. $122,

000Less: Withdrawal by owner................. $

18,000

Net loss.................................... 3,00 0

21,0 00

Dee Bentley, capital, March 31............. $101,000

Bentley Marketing ServicesBalance SheetMarch 31, 2011

Assets LiabilitiesCash............... $

30,000

Accounts payable ........ $ 46,000

Accounts receivable.......

14,000

Notes payable ............. 146, 000

Office supplies. 3,000 Total liabilities.......... $


192,000

Building.......... 80,000

Land............... 116,000

Owner’s Equity

Machinery....... 50, 000

Dee Bentley, capital....... 101, 000

Total assets.... $293,000

Total liabilities and owner’s equity...............

$293,000

*$122,000 March 31/11 Balance - $10,000 invested in March = $112,000 March 1/11 Balance



Description

(1)Difference between Debit and

Credit Columns

(2)Column

with the

Larger

Total

(3)Identify account(

s) incorrec

tly stated

(4)Amount that account(s)

is overstated

or understated

a. A $2,400 debit to Rent Expense was posted as a $1,590 debit.

$810 Credit

Rent Expense

Rent Expense is

understated by $810

b. A $42,000 debit to Machinery was posted as a debit to Accounts Payable.

$0 — Machinery

Accounts

Payable

Machinery is understated by $42,000

and Accounts Payable is

understated by $42,000

c. A $4,950 credit to Services Revenue was posted as a $495 credit.

$4,455 Debit Services Revenue

Services Revenue is


d. A $1,440 debit to Store Supplies was not posted at all.

$1,440 Credit

Store Supplies

Store Supplies is


e. A $2,250 debit to Prepaid Insurance was posted as a debit to Insurance Expense.

$0 — Prepaid Insuranc

e

Insurance

Expense

Prepaid Insurance is understated by $2,250

and Insurance Expense is overstated by $2,250

f. A $4,050 credit to Cash was posted twice as two credits to the Cash account.

$4,050 Credit

Cash Cash is understated by $4,050

g. A $9,900 debit to the owner’s withdrawals

$0 — Owner’s Capital

Owner’s Capital

account is


account was debited to the owner’s capital account. Owner’s

Withdrawals


Owner’s Withdrawals

is understated by $9,900



a. 1. Dr = Cr2. Accounts Receivable is understated (too low) by $3,500

and Revenue is understated by $3,500.

b. 1. Dr = Cr2. Accounts Payable is overstated (too high) by $600 and

Cash is overstated by $600.

c. 1. Dr Cr 2. Cash is overstated by $180.

d. 1. Dr Cr 2. Accounts Receivable is overstated.

e. 1. Dr = Cr 2. Accounts Payable is understated by $2,000 and

Equipment is understated by $2,000.

Exercise 3-20 (15 minutes)Case A:

1. Subtract total debits in the trial balance from total credits

5,010 – 4,290 = 7202. Divide the difference by 9

720 9 = 803. The quotient equals the difference between the two

transposed numbers.The difference between the correct number and the incorrect number is 80.

4. The number of digits in the quotient tells us the location of the transposition.

Look for a difference of 8 between the second number from the right and the third number from the right.

Through a process of elimination, the incorrect value is Accounts Payable of $190. The correct value must be $910.

Proof: Recalculate the trial balance replacing $910 for the incorrect $190 and the trial balance now balances at $5,010.


Exercise 3-20 (concluded)

Case B:


34,400 – 28,100 = 6,3002. Divide the difference by 9 to reveal a slide error

6,300 9 = 7003. The quotient identifies a slide error and equals the

correct value.

Through a process of elimination, the incorrect value is Withdrawals for $7,000. The correct value must be $700.

Proof: Recalculate the trial balance replacing $700 for the incorrect $7,000 and the trial balance now balances at $28,100.

Case C:


942 – 906 = 362. Divide the difference by 9

36 9 = 43. The quotient equals the difference between the two

transposed numbers.The difference between the correct number and the incorrect number is 4.

4. The number of digits in the quotient tells us the location of the transposition.

Look for a difference of 4 between the first number from the right and the second number from the right.

Through a process of elimination, the incorrect value is Cash for $59. The correct value must be $95.

Proof: Recalculate the trial balance replacing $95 for the incorrect $59 and the trial balance now balances at $942.


PROBLEMS

Problem 3-1A (40 minutes) Parts 1 and 2Cash Jeff Bridges, Capital

(a) 40,000

20,000

(b) 55,000

(a)

(g) 3,000 750 (f) 9,000 (d)(n) 1,900 400 (h) 64,00

0Bal.

1,200 (j)9,300 (k) Jeff Bridges, Withdrawals

750 (m) (o) 3,2003,200 (o)

Bal 9,300 Fees Earned3,000 (g)

Accounts Receivable 2,600 (l)(l) 2,600 1,900 (n) 5,600 BalBal 700

Wages ExpenseOffice Supplies (f) 750

(c) 1,200 (m) 750Bal 1,500

Automobiles(d) 9,000 Utilities Expense

(h) 400Office

Equipment(a) 15,00

0700 (k)

(e) 3,000(k) 10,00

0Bal. 27,30

0Land

(b) 15,000

Building(b) 85,00

0


Accounts Payable

Note: There is no entry for (i) since it is not a transaction.(j) 1,200 1,200 (c)

3,000 (e)3,000 Bal

Long-Term Notes Payable80,00

0(b)

Problem 3-2A (30 minutes)General Journal Page 1

Date

Account Titles and Explanations Debit

Credit

2011

May 1

Equipment....................................... 112,500

Cash........................................... 25,000 Notes Payable............................. 87,500 Purchased new equipment paying cash and signing a 90-day note payable.

2 Prepaid Insurance............................ 1,800 Cash........................................... 1,800 Purchased 12 months of insurance to begin May 2.

3 Cash................................................ 6,000 Design Revenue.......................... 6,000 Completed a toy design for a customer and collected cash.

4 Office Supplies................................. 3,750 Accounts Payable........................ 3,750 Purchased office supplies on account.

6 Accounts Payable............................. 500 Office Supplies............................ 500 Returned defective supplies to supplier.


10 Accounts Receivable......................... 11,500 Design Revenue.......................... 11,500 Did work for a client today on account.

15 Accounts Payable............................. 3,250 Cash........................................... 3,250 Paid for the May 4 purchase less the return of May 6.

20 Cash................................................ 11,500 Accounts Receivable................... 11,500 Received payment from the client of May 10.


Problem 3-2A (concluded)May

25Cash................................................ 600

Unearned Revenue...................... 600 Received cash for work to be done in June.

31 Salaries Expense.............................. 47,000 Cash........................................... 47,000 Paid month end salaries.

31 Telephone Expense.......................... 2,250 Cash........................................... 2,250 Paid the May telephone bill.

31 Utilities Expense.............................. 900 Accounts Payable (or Utilities Payable)..........................................

900

May electrical bill to be paid June 15.

Note: Assume that all entries were journalized on Page 1 of the General Journal.


Problem 3-3A (90 minutes)General Journal Page

1Date Account Titles and Explanations PR Debit Credi

t2011Mar.

1 Cash......................................... 101

50,000

Office Equipment....................... 163

12,000

Claude Flynne, Capital.......... 301

62,000

Invested cash and equipment to start the business.

1 Prepaid Rent............................. 131

3,600

Cash.................................... 101

3,600

Prepaid three months’ rent.3 Office Equipment....................... 16

36,00

0Office Supplies.......................... 12

41,20

0 Accounts Payable................. 20

17,20

0 Purchased equipment and supplies on credit.

5 Cash......................................... 101

1,000

Accounting Fees Earned....... 401

1,000

Received cash from client for completed work.

9 Accounts Receivable.................. 106

4,000

Accounting Fees Earned....... 40 4,00Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved.Solutions Manual for Chapter 3 136

1 0 Billed client for completed work.

11

Accounts Payable...................... 201

7,200

Cash.................................... 101

7,200

Paid balance due on accounts payable.

15

Prepaid Insurance..................... 128

3,000

Cash.................................... 101

3,000

Paid annual premium for insurance.

20

Cash......................................... 101

3,200

Accounts Receivable............. 106

3,200

Collected part of the amount owed by a client.


Problem 3-3A (concluded)Mar.

22

No entry.

23

Accounts Receivable.................. 106

1,320

Accounting Fees Earned....... 401

1,320

Billed client for completed work.27

Claude Flynne, Withdrawals....... 302

3,600

Cash.................................... 101

3,600

Owner’s withdrawal of cash.30

Office Supplies.......................... 124

400

Accounts Payable................. 201

400

Purchased supplies.31

Utilities Expense....................... 690

350

Cash.................................... 101

350

Paid monthly utility bill.

Note: The account numbers in the PR column above would be included only when these journal entries are being posted in Problem 3-4A. Assume that all entries were journalized on Page 1 of the General Journal.


Problem 3-4A (45 minutes)Parts 1 and 2

Cash Acct. No. 101

Date Explanation PR

Debit Credit

Balance

2011Mar.

1 G1

50,000

50,000

1 G1

3,600

46,400

5 G1

1,000

47,400

11

G1

7,200

40,200

15

G1

3,000

37,200

20

G1

3,200

40,400

27

G1

3,600

36,800

31

G1

350 36,450

Accounts Receivable Acct. No. 106

Date Explanation PR

Debit Credit

Balance

2011Mar.

9 G1

4,000

4,000

20

G1

3,200

800

23

G1

1,320

2,120

Office Supplies Acct. No. 124

Date Explanation PR

Debit Credit

Balance

2011


Mar.

3 G1

1,200

1,200

30

G1

400 1,600

Prepaid Insurance Acct. No. 128

Date Explanation PR

Debit Credit

Balance

2011Mar.

15

G1

3,000

3,000

Prepaid Rent Acct. No. 131

Date Explanation PR

Debit Credit

Balance

2011Mar.

1 G1

3,600

3,600

Office Equipment Acct. No. 163

Date Explanation PR

Debit Credit

Balance

2011Mar.

1 G1

12,000

12,000

3 G1

6,000

18,000


Problem 3-4A (continued)Accounts Payable Acct. No.

201Date Explanation P

RDebit Credi

tBalanc

e2011Mar.

3 G1

7,200

7,200

11

G1

7,200

0

30

G1

400 400

Claude Flynne, Capital Acct. No. 301

Date Explanation PR

Debit Credit

Balance

2011Mar.

1 G1

62,000

62,000

Claude Flynne, Withdrawals Acct. No. 302

Date Explanation PR

Debit Credit

Balance

2011Mar.

27

G1

3,600

3,600

Accounting Fees Earned Acct. No. 401

Date Explanation PR

Debit Credit

Balance

2011Mar.

5 G1

1,000

1,000

9 G1

4,000

5,000

23

G1

1,320

6,320


Utilities Expense Acct. No. 690

Date Explanation PR

Debit Credit

Balance

2011Mar.

31

G1

350 350


Problem 3-4A (concluded)Part 3

FLYNNE PUBLIC ACCOUNTANTTrial Balance

March 31, 2011

Acct.

No. Account Title Deb

it Cre

dit101 Cash.................................... $36,45

0106 Accounts receivable............. 2,120124 Office supplies..................... 1,600128 Prepaid insurance................ 3,000131 Prepaid rent........................ 3,600163 Office equipment................. 18,000201 Accounts payable................. $

400301 Claude Flynne, capital.......... 62,000302 Claude Flynne, withdrawals.. 3,600401 Accounting fees earned........ 6,320690 Utilities expense.................. 35

0

Totals.................................. $68,720

$68,720


Problem 3-5A (45 minutes)

Parts 1 and 2Cash 101 Accounts

Receivable10

6Office Supplies 12

4 Prepaid Insurance

128

Mar. 1

50,000

3,600

Mar. 1

Mar. 9

4,000

3,200

Mar. 20

Mar. 3

1,200

Mar. 15

3,000

5 1,000

7,200

3

23 1,320

30 400

20 3,200

3,000

15 Bal 2,120

Bal 1,600

3,600

27

350 31Bal 36,4

50

Prepaid Rent

131 Office Equipment

163

Accounts Payable 20

1

Claude Flynne, Capital

301

Mar. 1

3,600

Mar. 1

12,000

Mar. 11

7,200

7,200

Mar. 3

62,000

Mar. 1

3 6,000

400 30

Bal

18,000

400 Bal

Claude Flynne, Withdrawals

302

Accounting Fees Earned

401

Utilities Expense

690

Mar. 27

3,600

1,000

Mar. 5

Mar. 31

350


cGraw

-Hill Ryerson Lim

ited. All rights reserved.118

Fundamental Accounting Principles, Tw

elfth Canadian Edition

4,000

9

1,320

23

6,320

Bal

Note: No entry for March 22 as it is not a transaction.

Problem 3-5A (concluded)

Part 3FLYNNE, PUBLIC ACCOUNTANT

Trial BalanceMarch 31, 2011

Acct.


it Cre

dit101 Cash.................................... $36,45

0106 Accounts receivable............. 2,120124 Office supplies..................... 1,600128 Prepaid insurance................ 3,000131 Prepaid rent........................ 3,600163 Office equipment................. 18,000201 Accounts payable................. $

400301 Claude Flynne, capital.......... 62,000302 Claude Flynne, withdrawals.. 3,600401 Accounting fees earned........ 6,320690 Utilities expense.................. 35

0

Totals.................................. $68,720

$68,720


Problem 3-6A (90 minutes) Part 1

General Journal Page 1 Date Account Titles and ExplanationsPR DebitCredit2011May 1 Cash...................................101 200,000

Office Equipment.................163 48,000Marilyn Og, Capital..........301 248,000

Invested cash and equipment to start the business.1 Prepaid Rent.......................131 14,400

Cash...............................101 14,400Prepaid three months’ rent.

2 Office Equipment.................163 24,000Office Supplies....................124 4,800

Accounts Payable............201 28,800Purchased equipment and supplies on credit.

6 Cash...................................101 4,000Services Revenue............403 4,000

Received cash from client for services performed.9 Accounts Receivable............106 16,000

Services Revenue............403 16,000Billed client for completed work.

10 Accounts Payable................201 28,800Cash...............................101 28,800

Paid balance due on accounts payable.19 Prepaid Insurance................128 12,000

Cash...............................101 12,000Paid annual premium for insurance.

22 Cash...................................101 12,800Accounts Receivable........106 12,800

Collected part of the amount owed by a client.25 Accounts Receivable............106 5,280

Services Revenue............403 5,280 Billed client for completed work.


Problem 3-6A, Part 1 (continued)

May31 Marilyn Og, Withdrawals......302 12,400Cash...............................101 12,400

Owner withdrew cash.31 Office Supplies....................124 1,600

Accounts Payable............201 1,600Purchased supplies on credit.

31 Utilities Expense..................690 1,400Cash...............................101 1,400



Parts 2 and 3Cash Acct. No. 101

Date Explanation PR Debit Credit Balance

2011May

1

G1 200,000

200,000

1

G1 14,400

185,600

6

G1 4,000

189,600

10

G1 28,800

160,800

19

G1 12,000

148,800

22

G1 12,800

161,600

31

G1 12,400

149,200

31

G1 1,400 147,800

Accounts Receivable Acct. No. 106Date Explanation PR Debit Credit Balanc

e201


1May

9 G1 16,000

16,000

22

G1 12,800

3,200

25

G1 5,280

8,480

Office Supplies Acct. No. 124Date Explanation PR Deb

itCredit Balanc

e2011May

2 G1 4,800

4,800

31 G1 1,600

6,400


Problem 3-6A (continued) Parts 2 and 3Prepaid Insurance Acct. No. 128

Date Explanation PR

Debit Credit

Balance

2011May

19

G1

12,000

12,000

Prepaid Rent Acct. No. 131Date Explanation P

RDebit Credi

tBalanc

e2011May

1 G1

14,400

14,400

Office Equipment Acct. No. 163Date Explanation P

RDebit Credi

tBalance

2011May

1 G1

48,000

48,000

2 G1

24,000

72,000

Accounts Payable Acct. No. 201Date Explanation P

RDebit Credi

tBalanc

e2011May

2 G1

28,800

28,800

10

G1

28,800

0

31

G1

1,600

1,600

Marilyn Og, Capital Acct. No. 301Date Explanation P

RDebit Credi

tBalanc

e2011Ma 1 G 248, 248,00


y 1 000 0Marilyn Og, Withdrawals Acct. No. 302

Date Explanation PR

Debit Credit

Balance

2011May

31

G1

12,400

12,400

Services Revenue Acct. No. 403Date Explanation P

RDebit Credi

tBalanc

e2011May

6 G1

4,000

4,000

9 G1

16,000

20,000

25

G1

5,280

25,280

Utilities Expense Acct. No. 690Date Explanation P

RDebit Credi

tBalanc

e2011May

31

G1

1,400

1,400


Problem 3-6A (concluded) Part 4

TECHNO WIZARDSTrial BalanceMay 31, 2011

Acct.

No.

Account Title Debit

Credit

101 Cash............................... $ 147,80

0106 Accounts receivable........ 8,480124 Office supplies................ 6,400128 Prepaid insurance........... 12,000131 Prepaid rent.................... 14,400163 Office equipment............. 72,000201 Accounts payable............ $

1,600301 Marilyn Og, capital.......... 248,00

0302 Marilyn Og, withdrawals. . 12,400403 Services revenue............. 25,280690 Utilities expense............. 1,

400

Totals............................. $274,880

$274,880

Analysis component:


Equity represents how much of Techno Wizards’ assets belong to the owner, Marilyn Og. Services Revenue is an equity account because as revenues are realized, the business’s net worth (assets – liabilities, or equity) increases either through the receipt of an asset (cash or accounts receivable) or satisfying a liability (unearned revenues). Utilities Expense is an equity account because as expenses are realized, net worth (what belongs to the owner) decreases either through the use of an asset (such as prepaid insurance) or increase in a liability (such as rent payable). Marilyn Og, Withdrawals is an equity account because as the owner withdraws assets, the owner’s equity in the business (what belongs to the owner) decreases. The owner’s objective is for the business to generate sufficient revenues to cover all expenses, provide sufficient assets for the purpose of withdrawals, and at the same time maintain or preferably increase equity (because excess revenues remained after deducting expenses and withdrawals).


Problem 3-7APart 1

General Journal Page 1 Date Account Titles and ExplanationsPR DebitCredit2011May 1 Cash...................................101 200,000

Office Equipment.................163 48,000Marilyn Og, Capital..........301 248,000

Invested cash and equipment to start the business.1 Prepaid Rent.......................131 14,400




6 Cash...................................101 4,000Services Revenue............403 4,000

Received cash from client for services performed.9 Accounts Receivable............106 16,000

Services Revenue............403 16,000Billed client for completed work.






Services Revenue............403 5,280 Billed client for completed work.


Problem 3-7A, Part 1 (continued)

May31 Marilyn Og, Withdrawals......302 12,400Cash...............................101 12,400

Owner withdrew cash.31 Office Supplies....................124 1,600






Problem 3-7A (continued)

Parts 2 and 3 Cash 101 Accounts

Receivable106 Office Supplies 124 Prepaid Insurance 12

8May 1 200,0

0014,4

00May

1May

916,0

0012,800

May 22

May 2

4,800

May 19

12,000

6 4,000 28,800

10

25 5,280

31 1,600

22 12,800

12,000

19

Bal 8,480

Bal 6,400

12,400

31

1,400

31

Bal 147,800

Prepaid Rent


163 Accounts Payable

201 Marilyn Og, Capital

301

May 1

14,400

May 1

48,000

May 10

28,800 28,80

0

May 2

248,000

May 1

2 24,000

1,600 31

Bal 72,000

1,600 Bal

Marilyn Og, Withdrawals

302

Services Revenue 403

Utilities Expense 690

May 12,4 May May 1,40


cGraw

-Hill Ryerson Lim




31 00 4,000

6 31 0

16,000

9

5,280

25

25,280

Bal


TECHNO WIZARDSTrial BalanceMay 31, 2011

Acct.

No.

Account Title Debit

Credit

101 Cash............................... $ 147,80

0106 Accounts receivable........ 8,480124 Office supplies................ 6,400128 Prepaid insurance........... 12,000131 Prepaid rent.................... 14,400163 Office equipment............. 72,000201 Accounts payable............ $

1,600301 Marilyn Og, capital.......... 248,00

0302 Marilyn Og, withdrawals. . 12,400403 Services revenue............. 25,280690 Utilities expense............. 1,

400

Totals............................. $274,880

$274,880

Analysis component:


Equity represents how much of Techno Wizards’ assets belong to the owner, Marilyn Og. Services Revenue is an equity account because as revenues are realized, the business’s net worth (assets – liabilities, or equity) increases either through the receipt of an asset (cash or accounts receivable) or satisfying a liability (unearned revenues). Utilities Expense is an equity account because as expenses are realized, net worth (what belongs to the owner) decreases either through the use of an asset (such as prepaid insurance) or increase in a liability (such as rent payable). Marilyn Og, Withdrawals is an equity account because as the owner withdraws assets, the owner’s equity in the business (what belongs to the owner) decreases. The owner’s objective is for the business to generate sufficient revenues to cover all expenses, provide sufficient assets for the purpose of withdrawals, and at the same time maintain or preferably increase equity (because excess revenues remained after deducting expenses and withdrawals).


Problem 3-8A (25 minutes)TECHNO WIZARDSIncome Statement

For Month Ended May 31, 2011

Services revenue................... $25,280

Utilities expense.................... 1, 400

Net income............................ $23,880

TECHNO WIZARDSStatement of Owner’s Equity

For Month Ended May 31, 2011Marilyn Og, capital, May 1...... $

0Add: ....Investments by owner $248,

000Net income...................... 23,8

80 271,8

80 Total................................... 271,8

80Less: Withdrawals by owner... 12,

400Marilyn Og, capital, May 31.... $259,

480

TECHNO WIZARDSBalance SheetMay 31, 2011

Assets Liabilities Cash....................... $

147,800

Accounts payable......... $ 1,600

Accounts receivable...............

8,480

Office supplies........ 6,400Prepaid insurance.. .12,000 Owner’s EquityPrepaid rent...........14,400 Marilyn Og, capital....... 259,

480Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved.Solutions Manual for Chapter 3 160

Office equipment..... 72,0 00

Total liabilities and

Total assets.........$261,080

owner’s equity.......... $261,080

Analysis component:2011May 3

1Utilities Expense.......................... XXX

Cash.................................. XXX Paid the May utilities.

31

Utilities Expense.......................... XXX

Accounts Payable............... XXX Received the May utility bill which will be paid next month.


Problem 3-9A (90 minutes)Part 1

General Journal Page 1Date Account Titles and

ExplanationsPR Debit Credit

2011July 1 Cash.................................. 101 300,0

00Office Equipment................ 163 12,00

0Drafting Equipment............ 167 90,00

0 Bishr Binbutti, Capital. . . 301 402,000 Investment by owner.

2 Land.................................. 183 108,000

Cash............................. 101 10,800 Long-Term Notes Payable 251 97,200 Purchased land.

3 Building............................. 173 150,000

Cash............................. 101 150,000 Purchased a building.

5 Prepaid Insurance............... 128 12,000

Cash............................. 101 12,000 Purchased two one-year insurance policies.

7 Cash.................................. 101 1,400 Engineering Fees Earned 401 1,400 Completed services on credit.

9 Drafting Equipment............ 167 45,000

Cash............................. 101 21,000 Long-Term Notes Payable 251 24,000


Purchased drafting equipment.

10 Accounts Receivable........... 106 4,000 Engineering Fees Earned 401 4,000 Completed services on credit.


Problem 3-9A (continued)July 12 Office Equipment................ 163 4,500

Accounts Payable.......... 201 4,500 Purchased office equipment on credit.


16 Equipment Rental Expense.. 645 13,800

Accounts Payable.......... 201 13,800 Equipment rental to be paid in 30 days.

17 Cash.................................. 101 400 Accounts Receivable...... 106 400 Collection from credit customer.

19 Wages Expense.................. 623 12,000

Cash............................. 101 12,000 Paid drafting assistant.

22 Accounts Payable............... 201 4,500 Cash............................. 101 4,500 Paid July 12 transaction.

25 Repairs Expense................. 684 1,350 Cash............................. 101 1,350 Paid for repairs on drafting equipment.

26 Bishr Binbutti, Withdrawals 302 800 Cash............................. 101 800 Owner withdrawals.

30 Wages Expense.................. 623 12,000



31 Advertising Expense........... 655 6,000 Cash............................. 101 6,000 Paid for advertising in local newspaper.

Note: Assume all entries were journalized on Page 1 of the General Journal.


Problem 3-9A (continued)

Parts 2 and 3Cash Account No. 101

Date Explanation PR Debit Credit Balance2011

June


July 1 G1300,000 326,000

2 G1 10,800 315,200

3 G1150,00

0 165,2005 G1 12,000 153,200

7 G11,40

0 154,6009 G1 21,000 133,60017 G1 400 134,00019 G1 12,000 122,00022 G1 4,500 117,50025 G1 1,350 116,15026 G1 800 115,35030 G1 12,000 103,35031 G1 6,000 97,350

Accounts Receivable Account No. 106Date Explanation PR Debit Credit Balance

2011

June


July10 G1

4,000 7,000

15 G1

7,000 14,000

17 G1 400 13,600


Prepaid Insurance Account No. 128Date Explanation PR Debit Credit Balance

2011

June


July 5 G112,000 12,500

Office Equipment Account No. 163Date Explanation PR Debit Credit Balance

2011

June


July 1 G112,000 13,700

12 G1

4,500 18,200


Problem 3-9A (continued)Parts 2 and 3 (continued)

Drafting Equipment Account No. 167Date Explanation PR Debit Credit Balance

2011June


July 1 G190,000 91,200

9 G145,000 136,200

Building Account No. 173Date Explanation PR Debit Credit Balance

2011June


July 3 G1150,000 192,000

Land Account No. 183Date Explanation PR Debit Credit Balance

2011June


July 2 G1108,000 136,000

Accounts Payable Account No. 201Date Explanation PR Debit Credit Balance

2011June


July12 G1 4,500 6,24016 G1 13,800 20,04022 G1

4,500 15,540


Long-Term Notes Payable Account No. 251Date Explanation PR Debit Credit Balance

2011June


July 2 G1 97,200 121,2009 G1 24,000 145,200

Bishr Binbutti, Capital Account No. 301Date Explanation PR Debit Credit Balance

2011June


July 1 G1402,00

0 456,000


Problem 3-9A (continued)Parts 2 and 3 (continued)

Bishr Binbutti, Withdrawals Account No. 302Date Explanation PR Debit Credit Balance

2011June


July26 G1 800 1,800

Engineering Fees Earned Account No. 401Date Explanation PR Debit Credit Balance

2011June


July 7 G1 1,400 31,00010 G1 4,000 35,00015 G1 7,000 42,000

Wages Expense Account No. 623Date Explanation PR Debit Credit Balance

2011June


July19 G1

12,000 16,000

30 G1

12,000 28,000

Equipment Rental Expense Account No. 645Date Explanation PR Debit Credit Balance

2011June


July16 G1

13,800 14,800

Advertising Expense Account No. 655


Date Explanation PR Debit Credit Balance2011June


July31 G1

6,000 6,640

Repairs Expense Account No. 684Date Explanation PR Debit Credit Balance

2011June


July25 G1

1,350 1,650



BINBUTTI ENGINEERINGTrial BalanceJuly 31, 2011

Acct.

No. Account Title Debit Credit101 Cash...................................... $

97,350

106 Accounts receivable............... 13,600

128 Prepaid insurance.................. 12,500

163 Office equipment.................... 18,200

167 Drafting equipment................ 136,200

173 Building................................. 192,000

183 Land...................................... 136,000

201 Accounts payable................... $ 15,540

251 Long-term notes payable........ 145,200

301 Bishr Binbutti, capital............. 456,000

302 Bishr Binbutti, withdrawals.... 1,800401 Engineering fees earned......... 42,00

0623 Wages expense...................... 28,00

0645 Equipment rental expense...... 14,80

0655 Advertising expense............... 6,640684 Repairs expense.................... 1


,650Totals.................................... $658,

740$658,

740


Problem 3-10A (90 minutes)Part 1

General Journal Page 1Date Account Titles and

ExplanationsPR Debit Credit

2011July 1 Cash.................................. 101 300,0

00Office Equipment................ 163 12,00

0Drafting Equipment............ 167 90,00

0 Bishr Binbutti, Capital. . . 301 402,000 Investment by owner.

2 Land.................................. 183 108,000

Cash............................. 101 10,800 Long-Term Notes Payable 251 97,200 Purchased land.

3 Building............................. 173 150,000

Cash............................. 101 150,000 Purchased a building.

5 Prepaid Insurance............... 128 12,000

Cash............................. 101 12,000 Purchased two one-year insurance policies.

7 Cash.................................. 101 1,400 Engineering Fees Earned 401 1,400 Completed services on credit.

9 Drafting Equipment............ 167 45,000

Cash............................. 101 21,000 Long-Term Notes Payable 251 24,000


Purchased drafting equipment.



Problem 3-10A (continued)July 12 Office Equipment................ 163 4,500

Accounts Payable.......... 201 4,500 Purchased office equipment on credit.


16 Equipment Rental Expense.. 645 13,800

Accounts Payable.......... 201 13,800 Equipment rental to be paid in 30 days.

17 Cash.................................. 101 400 Accounts Receivable...... 106 400 Collection from credit customer.

19 Wages Expense.................. 623 12,000


22 Accounts Payable............... 201 4,500 Cash............................. 101 4,500 Paid July 12 transaction.

25 Repairs Expense................. 684 1,350 Cash............................. 101 1,350 Paid for repairs on drafting equipment.

26 Bishr Binbutti, Withdrawals 302 800 Cash............................. 101 800 Owner withdrawals.

30 Wages Expense.................. 623 12,000



31 Advertising Expense........... 655 6,000 Cash............................. 101 6,000 Paid for advertising in local newspaper.



Problem 3-10A (continued)Parts 2 and 3

Cash 101 Accounts Receivable

106 Prepaid Insurance 128 Office Equipment 163

Bal. 26,000

10,800

Jul 2 Bal. 3,000

400 Jul 17

Bal. 500 Bal. 1,700

Jul 1

300,000

150,000

3

Jul10

4,000

Jul 5 12,000

Jul 1 12,000

7 1,400

12,000

5

15 7,000

Bal. 12,500

12 4,500

17 400 21,000

9

Bal. 13,600

Bal. 18,200

12,000

19

4,500 22

1,350 25

800 26

12,000

30

6,000 31

Bal. 97,350Drafting

Equipment167 Building 173 Land 183 Accounts Payable 20

1Bal. 1,200 Bal. 42,00

0Bal. 28,00

0Jul 22

4,500

1,740

Bal.

Jul1 90,000

Jul3 150,000

Jul 2 108,000

4,500

Jul 12

9 45,00 Bal. 192,0 Bal. 136,0 13,8 1


cGraw

-Hill Ryerson Lim



0 00 00 00 6Bal. 136,2

0015,5

40Bal.

Long-Term Notes Payable

251

Bishr Binbutti, Capital

301

Bishr Binbutti, Withdrawals

302

Engineering Fees Earned

401

24,000

Bal. 54,000

Bal. Bal. 1,000 29,600

Bal.

97,200

Jul. 2

402,000

Jul 1

Jul 26 800 1,400

Jul 7

24,000

9 456,000

Bal. Bal. 1,800 4,000

10

145,200

Bal. 7,000

15

42,000

Bal.

Wages Expense 623 Equipment Rental Expense

645

Advertising Expense

655

Repairs Expense

684

Bal. 4,000 Bal. 1,000

Bal. 640 Bal. 300

Jul19 12,000

Jul16 13,800

Jul 31 6,000 Jul 25

1,350

30 12,000

Bal. 14,800

Bal. 6,640 Bal. 1,650

Bal. 28,000


BINBUTTI ENGINEERINGTrial BalanceJuly 31, 2011

Acct.

No. Account Title Debit Credit101 Cash...................................... $

97,350

106 Accounts receivable............... 13,600

128 Prepaid insurance.................. 12,500

163 Office equipment.................... 18,200

167 Drafting equipment................ 136,200

173 Building................................. 192,000

183 Land...................................... 136,000

201 Accounts payable................... $ 15,540

251 Long-term notes payable........ 145,200

301 Bishr Binbutti, capital............. 456,000

302 Bishr Binbutti, withdrawals.... 1,800401 Engineering fees earned......... 42,000623 Wages expense...................... 28,00

0645 Equipment rental expense...... 14,80

0655 Advertising expense............... 6,640684 Repairs expense.................... 1,

650


Totals.................................... $658,740

$658,740


Problem 3-11A (45 minutes) Part 1General Journal Page 1


PR Debit Credit

2011July 1 Supplies............................. 126 100

Accounts Payable...... 201 100 Purchased supplies on account.

2 Cash.................................. 101 4,000 Unearned Teaching Revenue.............................

233 4,000

Collected teaching fees for August.

3 Cash.................................. 101 2,000 Teaching Revenue..... 401 2,000 Collected teaching fees for July.

4 Rent Expense..................... 640 3,000 Cash............................. 101 3,000 Paid July rent.

5 Accounts Payable............... 201 500 Cash......................... 101 500 Paid for supplies purchased on account.

15 Ted Ng, Withdrawals.......... 302 500 Cash............................. 101 500 The owner withdrew cash..

20 Wages Expense.................. 623 1,300 Cash......................... 101 1,300 Paid wages.

31 Furniture............................ 161 300 Accounts Payable...... 201 300 Purchased a new chair on account.


Problem 3-11A (continued)Parts 2 and 3

Cash 101 Supplies 126

Furniture 161

Accounts Payable

201

Bal. 6,000

Bal. 950 Bal. 8,000 1,500 Bal.

Jul. 2

4,000

3,000 Jul. 4

Jul. 1

100 Jul. 31

300 Jul. 5 500

100 Jul. 1

3 2,000

500 Jul. 5

Bal. 1,050

Bal. 8,300 300 Jul. 31

500 Jul. 15

1,400 Bal.

1,300 Jul. 20

Bal. 6,700

Unearned Teaching Rev

233 Ted Ng, Capital

301

Ted Ng, Withdrawals

302

Teaching Revenue

401

9,800 Bal. 3,000

Bal.

Bal. 13,000

46,000

Bal.

4,000 Jul. 2 Jul. 15

500 2,000 Jul. 3

13,800

Bal. Bal. 13,500

48,000

Bal.

Wages Expense 623

Rent Expense 640

Bal. 26,350

Bal. 6,000



cGraw

-Hill Ryerson Lim




Jul. 20

1,300

Jul. 4 3,000

Bal. 27,650

Bal. 9,000

Problem 3-11A (continued)Part 4

NG’S ENGLISH SCHOOLTrial BalanceJuly 31, 2011

Acct.


it Cre

dit101 Cash.................................... $

6,700126 Supplies.............................. 1,050161 Furniture............................. 8,300201 Accounts payable................. $

1,400233 Unearned teaching revenue.. 13,800301 Ted Ng, capital.................... 3,000302 Ted Ng, withdrawals............ 13,500401 Teaching revenue................ 48,000623 Wages expense.................... 27,650640 Rent expense....................... 9,00

0

Totals.................................. $66,200

$66,200

Part 5NG’S ENGLISH SCHOOL

Income StatementFor Three Months Ended July 31, 2011

Teaching revenue................... $48,000

Operating expenses: Wages expense................... $27,

650 Rent expense...................... 9,

000 Total operating expenses... 36,6

50Net income............................ $11,

350NG’S ENGLISH SCHOOL


Statement of Owner’s EquityFor Three Months Ended July 31, 2011

Ted Ng, capital, May 1............ $ -0-

Add: Owner investment......... Net income...................

$ 3,00011,35

0

14,3 50

Total................................... $14,350

Less: Withdrawals by owner... 13,50 0

Ted Ng, capital, July 31........... $ 850


Problem 3-11A (concluded) Part 5

NG’S ENGLISH SCHOOLBalance SheetJuly 31, 2011


6,700Accounts payable......... $

1,400Supplies................. 1,050 Unearned teaching

revenue.......................13,80

0Furniture................ 8,30

0Total liabilities............. $15,2

00Owner’s Equity

Ted Ng, capital............ 850

Total liabilities and Total assets.........$16,05

0 owner’s equity.......... $

16,050

Problem 3-12A (25 minutes)BINBUTTI ENGINEERING

Income StatementFor Three Months Ended July 31, 2011

Engineering fees earned......... $42,000

Operating expenses: Wages expense................... $28,

000 Equipment rental expense.. . 14,8

00 Advertising expense............ 6,64

0 Repairs expense.................. 1,

650 Total operating expenses.. 51,0

90Net loss................................. $

9,090


BINBUTTI ENGINEERINGStatement of Owner’s Equity

For Three Months Ended July 31, 2011Bishr Binbutti, capital, May 1.. $

0Add: ....Investments by owner 456,0

00 Total................................... 456,0

00Less: Withdrawals by owner... $

1,800 Net loss....................... 9,090 10,

890Bishr Binbutti, capital, July 31. $445,

110


Problem 3-12A (concluded)BINBUTTI ENGINEERING

Balance SheetJuly 31, 2011


97,350Accounts payable......... $

15,540Accounts receivable...............

13,600 Long-term notes payable.......................

145,20

0Prepaid insurance.. .12,500 Total liabilities.......... 160,74

0Office equipment.....18,200Drafting equipment..............

136,200

Owner’s Equity

Building..................192,000

Bishr Binbutti, capital. . 445,1 10

Land....................... 136, 000


Total assets.........$605,850

owner’s equity.......... $605,850

Analysis component:2011July 3

1Cash........................................... XXX

Engineering Fees Earned..... XXX Received cash for completing work for a client.

31

Accounts Receivable.................... XXX

Engineering Fees Earned..... XXX Completed work for a client on account.


Problem 3-13A (15 minutes)Wilm’s Window Washing Services

Trial BalanceJanuary 31, 2011

Debit CreditCash (11,600 + 2,800b – 4,400d)...... $

10,000

Accounts receivable (9,240 – 2,800b + 3,600c).............................

10,040

Prepaid insurance.......................... 2,400Equipment (24,000 + 4,000a).......... 28,00

0Accounts payable (5,400 + 4,000a)..........................................

$ 9,400

Wilm Schmidt, capital.................... 45,000

Wilm Schmidt, withdrawals............ 8,960Service revenues (60,400 + 3,600e)..........................................

64,000

Salaries expense............................ 32,000

Insurance expense......................... 5,200Maintenance expense (13,000 + 3,600e)..........................................

16,600

Utilities expense............................ 5,20 0

Totals............................................ $118,400

$118,400

Note: The superscripts (a) to (e) are references to items (a) to (e) listed in Problem 3-13A.


ALTERNATE PROBLEMS

Problem 3-1B (40 minutes) Parts 1 and 2Cash Land

(a) 23,000

15,000

(b) (b) 8,000

(g) 2,700 800 (f)(m) 1,000 430 (h) Accounts Payable

600 (i) (i) 600 600 (c)2,400 (j) 1,100 (e)

800 (l) 1,100 Balance

1,050 (n)Balance

5,620 Long-Term Notes Payable

26,000

(b)

Accounts Receivable(k) 2,400 1,000 (m) Susan West, CapitalBalance

1,400 35,000

(a)

7,000 (d)Office Supplies 42,00

0Balance

(c) 600Susan West, Withdrawals

Automobiles (n) 1,050(d) 7,000

Fees EarnedOffice Equipment 2,700 (g)

(a) 12,000

1,600 (j) 2,400 (k)

(e) 1,100 5,100 Balance

(j) 4,000Balance

15,500

Salaries Expense

(f) 800Building (l) 800

(b) 33,000

Balance

1,600

Utilities Expense(h) 430


Problem 3-2BGeneral Journal Page

1Date Accounts Titles and Explanations Debit Credit

2011March

1 Building........................................... 750,000

Cash........................................... 250,000

Note Payable.............................. 500,000

Purchased new building paying cash and signing a five-year note payable.

1 Prepaid Insurance............................ 7,200

Cash........................................... 7,200 Purchased six months of insurance to begin March 1.

3 Cash................................................ 5,000

Consulting Revenue.................... 5,000 Provided consulting services and collected cash.

4 Cleaning Supplies............................. 750 Accounts Payable........................ 750 Purchased cleaning supplies on account.

10 Accounts Receivable......................... 55,000

Consulting Revenue.................... 55,000

Performed work for a client on account.

11 No entry.

15 Accounts Payable............................. 750 Cash........................................... 750 Paid for the March 4 purchase.

Problem 3-2B (concluded)March

20 Cash................................................ 10,000

Unearned Revenue...................... 10,000

Collected cash from a customer for work to be done in April.

28 Hotel Expense or Travel Expense...... 180 Cash.......................................... 180 Paid for a hotel regarding a business meeting.

30 Salaries Expense.............................. 49,000

Cash........................................... 49,000

Paid month end salaries.

30 Telephone Expense.......................... 1,300

Accounts Payable ....................... 1,300 March telephone bill to be paid on April 14.

30 Cash................................................ 27,500

Accounts Receivable................... 27,500

Collected half of the amount owed by the customer of March 10.


Problem 3-3B (60 minutes)General Journal Page 1

Date


PR Debit

Credit

2011Sept.

1 Cash.................................. 101

4,200

Office Equipment................ 163

4,800

Adam Uppe, Capital....... 301

9,000

Investment by owner.1 Prepaid Rent...................... 13

11,800

Cash............................. 101

1,800

Paid two months’ rent.2 Office Supplies................... 12

475

Office Equipment................ 163

420

Accounts Payable.......... 210

495

Purchased items on credit.4 Cash.................................. 10

1180

Accounting Fees Earned 401

180

Sold accounting services for cash.

8 Accounts Receivable........... 106

700


700

Sold accounting services on credit.

10

Accounts Payable............... 210

495

Cash............................. 101

495

Paid for credit purchase.14

Prepaid Insurance.............. 128

750

Cash............................ 101

750

Paid insurance premium.15

Professional Development Expense.............................

680

250

Cash........................... 101

250

Paid for seminar.

Problem 3-3B (concluded)

Sept.

18

Cash.................................. 101

700

Accounts Receivable...... 106

700

Received cash from credit customer.

20

No entry.

24

Accounts Receivable........... 106

500


500

Sold accounting services on credit.

28

Adam Uppe, Withdrawals.... 302

300

Cash............................. 101

300

Owner withdrew cash.29

Office Supplies................... 124

45

Accounts Payable.......... 210

45

Purchased supplies on credit.

30

Utilities Expense................ 690

165

Cash............................. 101

165

Paid utilities bill.Note: The account numbers in the PR column above would

be included only when these journal entries are being posted in Problem 3-4B. Assume that all entries were journalized on Page 1 of the General Journal.

Problem 3-4B Parts 1 and 2

Cash Acct. No. 101

Date Explanation PR Debit Credit

Balance

2011Sept.

1 G1 4,200

4,200

1 G1 1,800

2,400

4 G1 180 2,58010 G1 495 2,08514 G1 750 1,33515 G1 250 1,08518 G1 700 1,78528 G1 300 1,48530 G1 165 1,320



Balance

2011Sept.

8 G1 700 700

18

G1 700 0

24

G1 500 500



Balance

2011Sept.

2 G1 75 75

29

G1 45 120



Balance

2011Sept.

14

G1 750 750



Balance

2011Sept.

1 G1 1,800

1,800

Office Equipment Acct. No. 163


Balance

2011Sept.

1 G1 4,800

4,800

2 G1 420 5,220

Problem 3-4B (continued) Parts 1 and 2Accounts Payable Acct. No.

210Date Explanation PR Debit Credi

tBalanc

e2011Sept.

2 G1 495 495

10

G1 495 0

29

G1 45 45

Adam Uppe, Capital Acct. No. 301


Balance

2011Sept.

1 G1 9,000

9,000

Adam Uppe, Withdrawals Acct. No. 302


Balance

2011Sept.

28

G1 300 300

Accounting Fees Earned Acct. No. 401


Balance

2011Sept.

4 G1 180 180

8 G1 700 88024

G1 500 1,380

Professional Development Expense Acct. No. 680


Balance

2011Sept.

15

G1 250 250



Balance

2011Sept.

30

G1 165 165

Problem 3-4B (concluded) Part 3

ADAM UPPE, PUBLIC ACCOUNTANTTrial Balance

September 30, 2011Acct.

No. Account Title De

bit Cre

dit101 Cash........................................ $

1,320106 Accounts receivable................. 500124 Office supplies......................... 120128 Prepaid insurance.................... 750131 Prepaid rent............................ 1,800163 Office equipment...................... 5,220201 Accounts payable..................... $

45301 Adam Uppe, capital.................. 9,000302 Adam Uppe, withdrawals.......... 300401 Accounting fees earned............ 1,380680 Professional development

expense...................................250

690 Utilities expense...................... 165 Totals...................................... $10,42

5$10,4

25

Problem 3-5B (30 minutes)Parts 1 and 2

Cash 101

Accounts Receivable

106 Office Supplies

124 Prepaid Insurance 128

Sept. 1

4,200

1,800

Sept. 1

Sept. 8

700 700 Sept. 18

Sept.2 75 Sept. 14

750

4 180 495 10

24 500 29 45

18 700 750 14

Bal. 500 Bal. 120

250 15

300 28

165 30

Bal. 1,320

Prepaid Rent 131 Office Equipment


201 Adam Uppe, Capital 301

Sept. 1

1,800

Sept. 1

4,800

Sept.10

495 495 Sept. 2

9,000

Sept. 1

2 420 45 29Bal. 5,2

2045 Bal.

Adam Uppe, Withdrawals

302

Accounting Fees Earned

401

Prof. Development Expense

680

Utilities Expense 690

Sept. 28

300 180 Sept. 4

Sept. 15

250 Sept. 30

165

700 8


cGraw

-Hill Ryerson Lim



500 241,380

Bal.

Note: No entry for September 20 as it is not a transaction.

Problem 3-5B (concluded)Part 3

ADAM UPPE, PUBLIC ACCOUNTANTTrial Balance

September 30, 2011Acct.

No. Account Title De

bit Cre

dit101 Cash........................................ $

1,320106 Accounts receivable................. 500124 Office supplies......................... 120128 Prepaid insurance.................... 750131 Prepaid rent............................ 1,800163 Office equipment...................... 5,220201 Accounts payable..................... $

45301 Adam Uppe, capital.................. 9,000302 Adam Uppe, withdrawals.......... 300401 Accounting fees earned............ 1,380680 Professional development

expense...................................250

690 Utilities expense...................... 165 Totals...................................... $10,42

5$10,4

25


Problem 3-6B (90 minutes) Part 1General Journal Page 1

Date Account Titles and Explanations Debit Credit2011Nov. 1 Cash...................................101 48,000

Office Equipment.................163 25,000Arthur Leonard, Capital...301 73,000

Owner invested in the business.2 Prepaid Rent.......................131 10,500




8 Cash...................................101 2,600Service Fees Earned........401 2,600

Received cash from client for completed work.12 Accounts Receivable............106 3,400

Service Fees Earned........401 3,400Billed client for completed work.








Problem 3-6B (continued) Part 1

Nov.28 Arthur Leonard, Withdrawals 302 5,300Cash...............................101 5,300

Owner withdrew cash for personal use.29 Office Supplies....................124 1,700


30 Wages Expense...................680 8,000Cash...............................101 8,000

Paid wages.30 Utilities Expense..................690 1,460

Cash...............................101 1,460Paid monthly utility bill.



Problem 3-6B (continued) Parts 2 and 3

Cash Acct. No. 101

Date Explanation PR Debit

Credit

Balance

2011Nov.

1 G1 48,000

48,000

2 G1 10,500

37,500

8 G1 2,600

40,100

13

G1 10,200

29,900

19

G1 5,200

24,700

22

G1 1,800

26,500

28

G1 5,300

21,200

30

G1 8,000

13,200

30

G1 1,460

11,740



Credit

Balance

2011Nov.

12

G1 3,400

3,400

22

G1 1,800

1,600

24

G1 1,900

3,500




Credit

Balance

2011Nov.

4 G1 1,200

1,200

29

G1 1,700

2,900



Credit

Balance

2011Nov.

19

G1 5,200

5,200



Credit

Balance

2011Nov.

2 G1 10,500

10,500


Problem 3-6B (continued) Parts 2 and 3Office Equipment Acct. No.

163Date Explanation PR Debi

tCredi

tBalan

ce2011Nov.

1 G1 25,000

25,000

4 G1 9,000

34,000

Accounts Payable Acct. No. 201


Credit

Balance

2011Nov.

4

G1 10,200

10,200

13

G1 10,200

0

29

G1 1,700

1,700

Arthur Leonard, Capital Acct. No. 301


Credit

Balance

2011Nov.

1 G1 73,000

73,000

Arthur Leonard, Withdrawals Acct. No. 302


Credit

Balance

2011Nov.

28

G1 5,300

5,300

Service Fees Earned Acct. No. 401



Credit

Balance

2011Nov.

8 G1 2,600

2,600

12

G1 3,400

6,000

24

G1 1,900

7,900

Wages Expense Acct. No. 680


Credit

Balance

2011Nov.

30

G1 8,000

8,000



Credit

Balance

2011Nov.

30

G1 1,460

1,460


Problem 3-6B (concluded) Part 4LEONARD MANAGEMENT SERVICES

Trial BalanceNovember 30, 2011

Acct.

No. Account Title DebitCredi

t101 Cash............................. $

11,740

106 Accounts receivable...... 3,500124 Office supplies.............. 2,900128 Prepaid insurance......... 5,200131 Prepaid rent.................. 10,50

0163 Office equipment........... 34,00

0201 Accounts payable.......... $

1,700301 Arthur Leonard, capital.. 73,00

0302 Arthur Leonard,

withdrawals..................5,300

401 Service fees earned....... 7,900680 Wages expense............. 8,000690 Utilities expense........... 1,4

60

Totals........................... $82,600

$82,600

Analysis component:

The November 29 purchase of office supplies is recorded as a debit to an asset account because they have not yet been used. Assets are economic resources held by the business. The supplies will remain on the books as an asset until they are used. Once used, the supplies will become an expense.


Problem 3-7B (30 minutes)Part 1

General Journal Page 1 Date Account Titles and Explanations Debit Credit2011Nov. 1 Cash...................................101 48,000

Office Equipment.................163 25,000Arthur Leonard, Capital...301 73,000

Owner invested in the business.2 Prepaid Rent.......................131 10,500




8 Cash...................................101 2,600Service Fees Earned........401 2,600

Received cash from client for completed work.12 Accounts Receivable............106 3,400






Collected part of the amount owed by a client.


Problem 3-7B (continued) Part 1

Nov.24 Accounts Receivable............106 1,900Service Fees Earned........401 1,900

Billed client for completed work.28 Arthur Leonard, Withdrawals 302 5,300

Cash...............................101 5,300Owner withdrew cash for personal use.

29 Office Supplies....................124 1,700Accounts Payable............201 1,700

Purchased supplies on credit.30 Wages Expense...................680 8,000

Cash...............................101 8,000Paid wages.







106 Office Supplies

124 Prepaid Insurance

128

Nov. 1

48,000

10,500

Nov. 2

Nov. 12

3,400 1,800

Nov. 22

Nov. 4

1,200 Nov. 19

5,200

8 2,600 10,200

13

24 1,900 29 1,700

22 1,800 5,200 19

Bal. 3,500 Bal. 2,900

5,300 28

8,000 30

1,460 30

Bal. 11,740

Prepaid Rent 131

Office Equipment 163

Accounts Payable 201

Arthur Leonard, Capital

301

Nov.2 10,500

Nov. 1

25,000

Nov. 13

10,200

10,200

Nov. 4

Nov. 1

73,000

4 9,000 1,700

29

Bal. 34,000

1,700

Bal.

Arthur Leonard, Withdrawals

302

Service Fees Earned 401

Wages Expense 680

Utilities Expense

690

Nov. 5,300 2,60 Nov. 8 Nov. 8,000 Nov. 1,46


cGraw

-Hill Ryerson Lim




28 0 30 30 03,400

12

1,900

24

7,900

Bal.


LEONARD MANAGEMENT SERVICESTrial Balance

November 30, 2011Acct

.No. Account Title Debit

Credit

101 Cash............................. $ 11,74

0106 Accounts receivable...... 3,500124 Office supplies.............. 2,900128 Prepaid insurance......... 5,200131 Prepaid rent.................. 10,50

0163 Office equipment........... 34,00

0201 Accounts payable.......... $

1,700301 Arthur Leonard, capital.. 73,00

0302 Arthur Leonard,

withdrawals..................5,300

401 Service fees earned....... 7,900680 Wages expense............. 8,000690 Utilities expense........... 1,4

60

Totals........................... $82,600

$82,600

Analysis component:

The November 29 purchase of office supplies is recorded as a debit to an asset account because they have not yet been used. Assets are economic resources held by the business. The supplies will remain on the books as an asset until they are used. Once used, the supplies will become an expense.


Problem 3-8B (25 minutes)LEONARD MANAGEMENT SERVICES

Income StatementFor Month Ended November 30, 2011

Service fees earned................ $7,900

Operating expenses: Wages expense................... $8,0

00 Utilities expense................. 1,4


60Net loss................................. $

1,560

LEONARD MANAGEMENT SERVICESStatement of Owner’s Equity

For Month Ended November 30, 2011Arthur Leonard, capital, November 1...........................

$ 0

Add: ....Investments by owner 73,00 0

Total................................... 73,000

Less: Withdrawals by owner... $ 5,300

Net loss....................... 1,56 0

6,8 60

Arthur Leonard, capital, July 31.........................................

$66,140

LEONARD MANAGEMENT SERVICESBalance Sheet

November 30, 2011Assets Liabilities

Cash....................... $ Accounts payable......... $


11,740 1,700Accounts receivable...............

3,500

Office supplies........ 2,900Prepaid insurance.. . 5,200 Owner’s EquityPrepaid rent...........10,500 Arthur Leonard, capital 66,1

40Office equipment..... 34,0

00Total liabilities and

Total assets......... $ 67,840

owner’s equity.......... $67,840


Problem 3-8B (concluded)Analysis component:

2011Nov. 3

0Accounts Receivable.................... XXX

Service Fees Earned........... XXX Did work for a customer on account.

30

Cash........................................... XXX

Accounts Receivable........... XXX Collected an amount owing from a credit customer.



General Journal Page 1Date Account Titles and Explanations PR Debit Credit

2011July

1 Office Equipment.................... 163

4,500

Computer Equipment.............. 167

28,000

Accounts Payable.............. 201

32,500

Purchased equipment on credit.

2 Land....................................... 183

24,000

Cash................................. 101

4,800

Long-Term Notes Payable. . 251

19,200

Purchased land.3 Building.................................. 17

321,000

Cash................................. 101

21,000

Purchased a building.5 Prepaid Insurance................... 12

86,600

Cash................................. 101

6,600

Purchased two one-year insurance policies.

9 Cash....................................... 101

3,200

Fees Earned...................... 401

3,200

Performed services for cash.12

Computer equipment.............. 167

3,500

Cash................................. 101

700



2,800

Purchased computer equipment.

15

Accounts Receivable............... 106

3,750

Fees Earned...................... 401

3,750

Performed services on credit.16

Office Equipment.................... 163

750


750

Purchased equipment on credit.20


9,200

Fees Earned...................... 401

9,200

Performed services on credit.


Problem 3-9B (continued)Part 1


2011July

21

Computer Rental Expense....... 645

320


320

Rented computer on credit.22

Cash....................................... 101

4,600

Accounts Receivable.......... 106

4,600


23

Wages Expense....................... 623

1,600

Cash................................. 101

1,600

Paid wages to assistant.24

Accounts Payable.................... 201

750

Cash................................. 101

750

Paid for July 16 purchase.25

Repairs Expense..................... 684

425

Cash................................. 101

425

Paid for computer repairs.26

Avery Wilson, Withdrawals...... 302

3,875

Cash................................. 101

3,875

Owner withdrawal.27

Wages Expense....................... 623

1,600

Cash................................. 10 1,600Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved.223 Fundamental Accounting Principles, Twelfth Canadian Edition

1 Paid wages to assistant.

28

Advertising Expense............... 655

800

Cash................................. 101

800

Paid for advertising in local newspaper.

29

Cash....................................... 101

1,400

Unearned Fees.................. 233

1,400

Received cash for services to be performed in August.


Problem 3-9B (continued)Parts 2 and 3

CashAccount No.

101

Date ExplanationPR

Debit Credit

Balance

2011June

30 Beginning balance

51,175

July 2G1 4,800

46,375

3G1

21,000

25,375

5G1 6,600

18,775

9G1

3,200

21,975

12

G1 700

21,275

22

G2

4,600

25,875

23

G2 1,600

24,275

24

G2 750

23,525

25

G2 425

23,100

26

G2 3,875

19,225

27

G2 1,600

17,625

28

G2 800

16,825

29

G2

1,400

18,225

Accounts ReceivableAccount No.

106

Date ExplanationPR

Debit Credit

Balance

2011Jun 3 Beginning balance 950


e 0

July15

G1

3,750 4,700

20

G1

9,200

13,900

22

G2 4,600 9,300

Prepaid InsuranceAccount No.

128

Date ExplanationPR

Debit Credit

Balance

2011June


July 5G1

6,600 6,875

Office EquipmentAccount No.

163

Date ExplanationPR

Debit Credit

Balance

2011June


July 1G1

4,500 5,700

16

G1 750 6,450



Computer EquipmentAccount No.

167

Date ExplanationPR

Debit Credit

Balance

2011June


July 1G1

28,000

28,800

12

G1

3,500

32,300

BuildingAccount No.

173

Date ExplanationPR

Debit Credit

Balance

2011June


14,000

July 3G1

21,000

35,000

LandAccount No.

183

Date ExplanationPR

Debit Credit

Balance

2011June


July 2G1

24,000

30,000


201

Date ExplanationPR

Debit Credit

Balance

2011Jun 3 Beginning balance 725


e 0

July 1G1

32,500

33,225

16

G1 750

33,975

21

G2 320

34,295

24

G2 750

33,545

Unearned FeesAccount No.

233

Date ExplanationPR

Debit Credit

Balance

2011June


July29

G2 1,400 1,400

Long-Term Notes PayableAccount No.

251

Date ExplanationPR

Debit Credit

Balance

2011June


July 2G1

19,200

26,200

12

G1 2,800

29,000


Avery Wilson, CapitalAccount No.

301

Date ExplanationPR

Debit Credit

Balance

2011June


60,000


Avery Wilson, WithdrawalsAccount No.

302

Date ExplanationPR

Debit Credit

Balance

2011June


July26

G2

3,875 4,475

Fees EarnedAccount No.

401

Date ExplanationPR

Debit Credit

Balance

2011June


July 9G1 3,200

11,600

15

G1 3,750

15,350

20

G1 9,200

24,550

Wages ExpenseAccount No.

623

Date ExplanationPR

Debit Credit

Balance

2011June


July23

G2

1,600 2,380

27

G2

1,600 3,980

Computer Rental ExpenseAccount No.

645

Date ExplanationPR

Debit Credit

Balance


1June


July21

G2 320 550

Advertising ExpenseAccount No.

655

Date ExplanationPR

Debit Credit

Balance

2011June


July28

G2 800 875

Repairs ExpenseAccount No.

684

Date ExplanationPR

Debit Credit

Balance

2011June


July25

G2 425 465



SOFTOUCH CO.Trial BalanceJuly 31, 2011

Acct.

No. Account Title Debit Credit101 Cash.................................. $

18,225

106 Accounts receivable............ 9,300128 Prepaid insurance............... 6,875163 Office equipment................ 6,450167 Computer equipment.......... 32,30

0173 Building............................. 35,00

0183 Land.................................. 30,00

0201 Accounts payable............... $

33,545233 Unearned fees.................... 1,400251 Long-term notes payable.... 29,000301 Avery Wilson, capital.......... 60,000302 Avery Wilson, withdrawals. . 4,475401 Fees earned....................... 24,550623 Wages expense.................. 3,980645 Computer rental expense.... 550655 Advertising expense........... 875684 Repairs expense.................

465 Totals................................ $148,

495$148,4

95




2011July

1 Office Equipment.................... 163

4,500

Computer Equipment.............. 167

28,000


32,500

Purchased equipment on credit.

2 Land....................................... 183

24,000

Cash................................. 101

4,800


19,200

Purchased land.3 Building.................................. 17

321,000

Cash................................. 101

21,000

Purchased a building.5 Prepaid Insurance................... 12

86,600

Cash................................. 101

6,600

Purchased two one-year insurance policies.

9 Cash....................................... 101

3,200

Fees Earned...................... 401

3,200

Performed services for cash.12

Computer equipment.............. 167

3,500

Cash................................. 101

700



2,800

Purchased computer equipment.

15


3,750

Fees Earned...................... 401

3,750

Performed services on credit.16

Office Equipment.................... 163

750


750

Purchased equipment on credit.20


9,200

Fees Earned...................... 401

9,200

Performed services on credit.


Problem 3-10B (continued)Part 1


2011July

21

Computer Rental Expense....... 645

320


320

Rented computer on credit.22

Cash....................................... 101

4,600

Accounts Receivable.......... 106

4,600


23

Wages Expense....................... 623

1,600

Cash................................. 101

1,600

Paid wages to assistant.24

Accounts Payable.................... 201

750

Cash................................. 101

750

Paid for July 16 purchase.25

Repairs Expense..................... 684

425

Cash................................. 101

425

Paid for computer repairs.26

Avery Wilson, Withdrawals...... 302

3,875

Cash................................. 101

3,875

Owner withdrawal.27

Wages Expense....................... 623

1,600

Cash................................. 10 1,600


1 Paid wages to assistant.

28

Advertising Expense............... 655

800

Cash................................. 101

800

Paid for advertising in local newspaper.

29

Cash....................................... 101

1,400

Unearned Fees.................. 233

1,400

Received cash for services to be performed in August.




106

Prepaid Insurance


163

Bal Jun 30

51,175

4,800

Jul 2 Bal Jun 30

950 4,600

Jul 22 Bal Jun 30

275 Bal Jun 30

1,200

Jul 9 3,200

21,000

3 Jul 15 3,750 Jul 5 6,600

Jul 1 4,500

22 4,600

6,600

5 20 9,200 Bal Jul 31

6,875

16 750

29 1,400

700 12 Bal Jul 31

9,300 Bal Jul 31

6,450

1,600

23

750 24425 25

3,875

26

1,600

27

800 28Bal Jul 31

18,225

Computer Equipment

167

Building 173 Land 813 Accounts Payable 201

Bal Jun 30

800 Bal Jun 30

14,000

Bal Jun 30

6,000

Jul 24 750 725 Bal Jun 30

Jul 1 28,000

Jul 3 21,000

Jul 2 24,000

32,500

Jul 1

12 3,500

Bal Jul 31

35,000

Bal Jul 31

30,000

750 16



cGraw

-Hill Ryerson Lim




Bal Jul 31

32,300

320 21

33,545

Bal Jul 31

Unearned Fees

233

Long-Term Notes Payable

251 Avery Wilson, Capital 301

Avery Wilson, Withdrawals

302

-0- Bal Jun 30

7,000

Bal Jun 30

60,000

Bal Jun 30

Bal Jun 30

600

1,400

Jul 29 19,200

Jul 2 60,000

Bal Jul 31

Jul 26 3,875

1,400

Bal Jul 31

2,800

12 Bal Jul 31

4,475

29,000

Bal Jul 31


Fees Earned 401

Wages Expense

623

Computer Rental Expense

645

Advertising Expense

655

8,400

Bal Jun 30

Bal Jun 30

780 Bal Jun 30

230 Bal Jun 30

75

3,200

Jul 9 Jul 23 1,600

Jul 21 320 Jul 28 800

3,750

15 27 1,600

Bal Jul 31

550 Bal Jul 31

875

9,200

20 Bal Jul 31

3,980

24,550

Bal Jul 31

Repairs Expense

684

Bal Jun 30

40

Jul 25 425Bal Jul

31465


cGraw

-Hill Ryerson Lim




SOFTOUCH CO.Trial BalanceJuly 31, 2011

Acct.

No. Account Title Debit Credit101 Cash.................................. $

18,225

106 Accounts receivable............ 9,300128 Prepaid insurance............... 6,875163 Office equipment................ 6,450167 Computer equipment.......... 32,30

0173 Building............................. 35,00

0183 Land.................................. 30,00

0201 Accounts payable............... $

33,545233 Unearned fees.................... 1,400251 Long-term notes payable.... 29,000301 Avery Wilson, capital.......... 60,000302 Avery Wilson, withdrawals. . 4,475401 Fees earned....................... 24,550623 Wages expense.................. 3,980645 Computer rental expense.... 550655 Advertising expense........... 875684 Repairs expense.................

465 Totals................................ $148,

495$148,4

95


Problem 3-11B (45 minutes)

Part 1General Journal Page 1


PR Debit Credit

2011Nov

.1 Accounts Payable............... 201 5,000

Cash 101 5,000 Paid for purchased made on account.

2 Office Equipment................ 163 17,000

Cash......................... 101 3,000 Notes Payable........... 205 14,000 Purchased a photocopier.

3 Office Supplies................... 124 400 Cash......................... 101 400 Purchased supplies for cash.

14 Wages Expense.................. 623 3,000 Cash............................. 101 3,000 Paid wages.

20 Cash.................................. 101 7,000 Travel Revenue......... 401 7,000 Collected cash for November travel.

25 Ivy Tran, Withdrawals......... 302 1,000 Cash............................. 101 1,000 The owner withdrew cash..

30 Interest Expense................ 633 75 Cash......................... 101 75 Paid interest on notes payable.


Note: There is no entry to record for November 4 as this does not represent an economic exchange.



Cash 101 Office Supplies

124

Office Equipment


201

Bal.Nov.

20

13,000

7,000

5,000

3,000

4003,000

1,00075

Nov. 123

142530

Bal.Nov.

3

450400

Bal.Nov. 2

18,000

17,000

Nov. 1 5,000

23,500

Bal.

Bal. 7,525

Bal. 850 Bal. 35,000

18,500

Bal.

Notes Payable

205

Ivy Tran, Capital

301

Ivy Tran, With.

302 Travel Revenue

401

10,000

14,000

Bal.Nov.

2

4,000

Bal. Bal.Nov. 25

4,000

1,000

17,000

7,000

Bal.Nov.

20

24,000

Bal. Bal. 5,000

24,000

Bal.

Wages Expense

623

Interest Expense

633

Bal.Nov.

14

19,000

3,00

Bal.Nov.

30

5075



cGraw

-Hill Ryerson Lim




0Bal. 22,0

00Bal. 125

Problem 3-11B (continued) Part 4TRAVEL-FOR-LESS

Trial BalanceNovember 30, 2011

Acct.


it Cre

dit101 Cash.................................... $

7,525124 Office supplies..................... 850163 Office equipment................. 35,000201 Accounts payable................. $

18,500205 Notes payable..................... 24,000301 Ivy Tran, capital................... 4,000302 Ivy Tran, withdrawals........... 5,000401 Travel revenue..................... 24,000623 Wages expense.................... 22,000633 Interest expense.................. 125

Totals.................................. $70,500

$70,500

Part 5TRAVEL-FOR-LESSIncome Statement

For Two Months Ended November 30, 2011Travel revenue....................... $24,00

0Operating expenses: Wages expense................... $22,00

0 Interest expense................. 12

5 Total operating expenses... 22,125Net income............................ $1,875

TRAVEL-FOR-LESSStatement of Owner’s Equity

For Two Months Ended November 30, 2011Ivy Tran, capital, October 1... . $ -

0-


Add: Owner investment.......... $ 4,000

Net income................... Total...................................

1,875

5,87 5$

5,875Less: Withdrawals by owner... 5,00

0Ivy Tran, capital, November 30 $

875


Problem 3-11B (concluded) Part 5

TRAVEL-FOR-LESSBalance Sheet


Cash....................... $ 7,525

Accounts payable......... $18,500

Office supplies........ 850 Notes payable............. 24,000

Office equipment.....35,000 Total liabilities............. $42,500

Owner’s EquityIvy Tran, capital...........


Total assets............$43,375

owner’s equity.......... $43,375

Analysis component:Proving the accounting equation at October 31, 2011:

ASSETS LIABILITIES EQUITY

CashOffice Suppli

es

Office Equipm

ent

Accounts

Payable

Notes Payabl

e

Ivy Tran, Capita

l

Ivy Tran, Withdraw

als

Travel Revenu

e

Wages Expens

e

Interest

Expense

13,000

450 18,000

23,500

10,000

4,000

4,000 17,000

19,000

50

The $4,000 October 31 balance in Ivy Tran, Capital represents investments made by the owner, Ivy Tran, into the business.


Problem 3-12BSOFTOUCH CO.

Income StatementFor Two Months Ended July 31, 2011

Fees earned........................... $24,550


80 Advertising expense............ 875 Computer rental expense.... 550 Repairs expense.................. 46


70Net income............................ $18,

680

SOFTOUCH CO.Statement of Owner’s Equity

For Two Months Ended July 31, 2011Avery Wilson, capital, June 1. . $

0Add: ....Investments by owner $60,0

00Net income...................... 18,68

0 78,6

80 Total................................... 78,68

0Less: Withdrawals by owner... 4,4

75Avery Wilson, capital, July 31.. $74,2

05

SOFTOUCH CO.Balance SheetJuly 31, 2011

Assets Liabilities Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved.247 Fundamental Accounting Principles, Twelfth Canadian Edition

Cash....................... $ 18,225

Accounts payable......... $ 33,545


9,300 Unearned fees............. 1,400

Prepaid insurance.. . 6,875 Long-term notes payable.......................

29,00 0

Office equipment..... 6,450 Total liabilities.......... $ 63,945

Computer equipment..............

32,300

Building..................35,000 Owner’s EquityLand....................... 30,0

00Avery Wilson, capital. . . 74,20


Total assets............$138,150

owner’s equity..........$138,150

Problem 3-13BTHE PARTY PLACE

Trial BalanceDecember 31, 2011

Account Title Debit CreditCash ($37,175a - $30,540a)............ $ 6,635Accounts receivable ($7,900 - $275b) 7,625Office supplies ($2,650 + 400c)...... 3,050Office equipment.......................... 20,500Accounts payable ($9,465 + 400c).. $ 9,865Jan Taylor, capital (a credit balance account)..........................................16,745Services revenue ($23,250d not $22,350)..........................................23,250Wages expense (a debit balance account) 6,000Rent expense (a debit balance account) 4,800Advertising expense (a debit balance account) 1,250......................................... Totals.......................................... $49,860$49,860

Note: The superscripts (a) to (d) are references to items (a) to (d) listed in Problem 3-13B.


ANALYTICAL AND REVIEW PROBLEMS

A&R Problem 3-1 (35 minutes)

YOUNG ENGINEERINGTrial Balance

March 31, 2011Account Title Debit Credit

Cash............................................... $26,660Office supplies................................ 660Prepaid insurance........................... 3,200Office equipment............................. 16,500Accounts payable............................ $16,500Carlos Young, capital...................... 17,000Carlos Young, withdrawals.............. 3,740Consulting fees earned.................... 24,000Rent expense.................................. 6,740 Totals............................................. $57,500 $57,500

1. Purchased $660 of office supplies for cash.2. Paid $3,200 insurance premium in advance.3. Purchased $16,500 office equipment on credit.4. Carlos Young invested $17,000 cash in the business.5. Carlos Young withdrew $3,740 cash from the business for

personal use.6. Earned $24,000 in consulting services and was paid in

cash.7. Paid $6,740 rent expense with cash.


A&R 3-2 (30 minutes)Nice-n-Fresh Drycleaning

Statement of Owner’s EquityFor Months Ended

April 30,

2011

March 31,

2011Ed Fresh, capital, beginning.. . $

34,400

$ 0

Add: ....Investments by owner 0 10,000Net income...................... 48,50

04 25,40

03

Total................................... $ 82,90

0

$35,400


1,00 0

Ed Fresh, capital, ending........ $57,800

$34,400

Nice-n-Fresh DrycleaningBalance Sheet

AssetsApril 30,

2011

March 31,

2011Liabilities

April 30,

2011

March 31,

2011Cash.......................$

7,000$3,000 Accounts

payable.......................$

700$

500Cleaning supplies..................

3,500 900 Notes payable.......................

40,000

15,000

Prepaid rent...........12,000

16,000 Total liabilities.....................

$40,700

$15,500

Equipment.............. 76,0 00

30,00 0

Owner’s Equity

Ed Fresh, capital.........................

57,8002

34,4001


Total assets............$98,500

$49,900

owner’s equity.........................

$98,500

$49,900


Calculations:1. 49,900 – 15,500 = 34,4002. 98,500 – 40,700 = 57,8003. 34,400 + 1,000 – 10,000 = 25,4004. 57,800 + 25,100 – 34,400 = 48,500

Analysis component:a.b. Liabilities increased because of the $25,000 increase in notes

payable used, most probably, to finance the purchase of equipment (equipment increased by $46,000).

c. Equity increased by a larger amount in March than April because the owner invested $10,000 during March and nothing during April. Also, during April, the owner made a withdrawal of $25,100 and only $1,000 in March. Net income in April was almost twice as much as that reported for March but the large withdrawal and no investments during April caused equity to increase by a smaller amount than in March.


ETHICS CHALLENGE

This problem emphasizes the importance of source documents.

1. There are advantages to the process proposed by the manager. They include improved customer service, less delays, and less work for you. However, you should have serious concerns about the potential for fraud. In particular, there is no control over the possibility of embezzlement by the manager because there are no source documents being prepared at the time of sale. The manager could steal cash and simply prepare sales receipts to match the remaining cash.

This case involves a conflict between the need for efficiency and the need for control in the form of source documents. While it makes sense to take and process sales receipts quickly, this efficiency is being accomplished by a shortcut that greatly weakens control over cash receipts. That is, cash could be received and lost because there would be no source documents to verify the sales and cash received.

2. The manager’s explanation that the owner does not arrive until 3:00 p.m. suggests that the owner does not know about the proposed shortcut. Thus, the new employee is faced with the dilemma of deciding whether to accept the manager’s instructions, to confront the manager with the argument that the shortcut seems wrong, or to ask the owner to confirm the instructions. Each of these alternatives involves personal risk.

Initially, the best thing may be to simply work as instructed for a while in order to get an idea of whether the shortcut is being abused by the manager and perhaps to find out discreetly whether the owner knows about it. The relationship that develops between you and the manager may be of a nature that will allow you to explain your concern and convince the manager that the shortcut should be avoided. Even if the manager is not abusing this shortcut, there are other reasons for doing away with it, such as maintaining accurate records for tax reports and gathering marketing information. Also,


the shortcut may result in fraud by other employees who might not be as honest as you and the manager.

If you conclude that the manager is committing fraud, you should report the situation to the owner as quickly as possible.


FFS 3-1McALLISTER SURVEYING

Income StatementFor Month Ended May 31, 2011

Revenue:Surveying fees earned.................... $18,000

Operating expenses:Advertising expense....................... $3,200Rent expense.................................. 3,100Salaries expense............................. 3,000Insurance expense.......................... 900Telephone expense......................... 600Utilities expense............................. 300 Total operating expenses........... 11,100

Net income........................................ $ 6,900

McALLISTER SURVEYINGStatement of Owner’s Equity

For Month Ended May 31, 2011Travis McAllister, capital, May 1.......... $75,000Add: Investments by owner................ $3,000

Net income................................... 6,900 9,900 Total............................................... $84,900Less: Withdrawals by owner............... 6,000Travis McAllister, capital, May 31........ $78,900


FFS 3-1 (concluded)

McALLISTER SURVEYINGBalance SheetMay 31, 2011

Assets LiabilitiesCash...................... $

3,900Accounts payable............ $

2,400Accounts receivable 2,700 Unearned surveying fees. 6,000Office supplies....... 300 Short-term notes payable 48,000Prepaid insurance. . 1,800 Total liabilities........... $

56,400Prepaid rent.......... 4,200Surveying equipment.............

5,400

Buildings............... 81,000 Owner’s EquityLand...................... 36,0

00Travis McAllister, capital. 78,900

Total assets........... $135,300

Total liabilities and owner’s equity

$135,300

Analysis component:Withdrawals are how an owner takes assets out of the business for personal use. McAllister Surveying realized a $6,900 net income during the year which caused equity to increase. It is reasonable for the owner to benefit from that net income by making a withdrawal even though withdrawals cause equity to decrease.


FFS 3-21(a)(i)

Accounts Receivable.................... XXX Charter and Other Revenues....................................

XXX

Provided services to customers on account.

Cash........................................... XXX Charter and Other Revenues....................................

XXX

Provided services to customers for cash.

1(a)(ii) Revenues cause equity to increase.1(a)(iii) The Time Period (or Periodicity) Principle and Revenue Realization assure us that revenues on the income statement are for the year ended December 31, 2005. 1(b)(i)

Interest Expense......................... XXX Cash.................................. XXX Paid interest expense..

1(b)(ii) Expenses cause equity to decrease.2(a) Advance ticket sales represent airline tickets sold in advance to customers.2(b)

Cash........................................... XXX Advance Ticket Sales.......... XXX


Critical Thinking QuestionCT 3-1Note to instructor: Student responses will vary therefore the answer here is only suggested and not inclusive of all possibilities; it is presented in point form for brevity.

Problem(s):— information that is available does not provide adequate

detail to enable analysis and resulting decision making (from the Western Canadian Division Sales Manager’s perspective; from the perspective of the sales and admin staff, the limited detail would make recording information very straight forward/easy since there are only 2 accounts — 1 revenue and 1 expense)

Goal(s)*:— Sales Division Manager would want to maximize sales,

minimize costs, and at the same time accurately record and report with sufficient detail to assist decision making process

Assumption(s)/Principle(s):— division results have been deteriorating but because of a

lack of detail, appropriate questions were not being asked and consequently inappropriate decisions were likely being made

— the disclosure principle requires that appropriate detail be provided and the materiality principle suggests that anything of significance be disclosed/reported

Facts:— as presented in the sales reports — by converting the dollars to percentages, we see that from July

to September, although net income is increasing in total dollars, expenses are increasing as a percentage of sales causing net income to shrink as a percentage of sales which is unfavourable

Prairie Insurance – Western Canadian DivisionSales ReportMonth Ended

Sept. 30, 2011 %

Aug. 31, 2011 %

July 31, 2011 %

Sales revenue

$680,000 100

$510,000 100

$440,000

100


Expenses 544,000 80 382,500 75 321,200 73Net income

$136,000 20 $127,500 25 $118,800

27


CT 3-1 (concluded)Conclusion(s)/Consequence(s):

— more revenue and expense accounts are required to provide sufficient detail to allow appropriate monitoring/questions and resulting decisions; this will require a restructuring of the accounting including submission of expense reports which requires resources including expertise

*The goal is highly dependent on “perspective.”


Serial Problem, Echo Systems (120 minutes) Part A2.

General Journal Page 1Date Account Titles and Explanations PR Debit

Credit2011Oct. 1 Cash..........................................101 90,000

Office Equipment........................163 18,000Computer Equipment..................167 36,000

Mary Graham, Capital............301 144,000Owner invested in the business.

2 Prepaid Rent..............................131 9,000Cash.....................................101 9,000

Paid four months’ rent in advance.3 Computer Supplies.....................126 2,640

Accounts Payable..................201 2,640Purchased supplies on credit.

5 Prepaid Insurance......................128 4,320Cash.....................................101 4,320

Paid 12 months’ premium in advance.6 Accounts Receivable...................106 6,600

Computer Services Revenue. .403 6,600Billed customer for services.

8 Accounts Payable.......................201 2,640Cash.....................................101 2,640

Paid balance due on account payable.10 No entry recorded in the journal.12 Accounts Receivable...................106 2,400


15 Cash..........................................101 6,600Accounts Receivable..............106 6,600

Collected accounts receivable.17 Repairs Expense, Computer........684 1,410

Cash.....................................101 1,410Paid for computer repairs.

20 Advertising Expense...................655 3,720Cash.....................................101 3,720

Purchased ad in local newspaper.22 Cash..........................................101 2,400

Accounts Receivable..............106 2,400Collected accounts receivable.


Serial Problem, Echo Systems (continued) Part AGeneral Journal Page 2

Date Account Titles and Explanations PR DebitCredit

2011Oct. 28 Accounts Receivable...................106 6,450


31 Wages Expense..........................623 1,400Cash.....................................101 1,400

Paid employee for part-time work.31 Mary Graham, Withdrawals.........302 7,200

Cash.....................................101 7,200Owner withdrew cash.

1 and 3.Cash Acct. No. 101


2011Oct.

1 G1 90,000 90,000

2 G1 9,000 81,000

5 G1 4,320 76,680

8 G1 2,640 74,040

15

G1 6,600 80,640

17

G1 1,410 79,230

20

G1 3,720 75,510

22

G1 2,400 77,910

31

G2 1,400 76,510

31

G2 7,200 69,310




2011Oct.

6 G1 6,600 6,600

12

G1 2,400 9,000

15

G1 6,600 2,400

22

G1 2,400 0

28

G2 6,450 6,450


Serial Problem, Echo Systems (continued) Part AComputer Supplies Acct. No. 126

Date Explanation PR

Debit Credit Balance

2011Oct. 3 G

12,640 2,640

Prepaid Insurance Acct. No. 128Date Explanation P

RDebit Credit Balanc

e2011Oct. 5 G

14,32

04,320



e2011Oct. 2 G

19,00

09,000



e2011Oct. 1 G

118,0

0018,000

Computer Equipment Acct. No. 167Date Explanation P


e2011Oct. 1 G

136,0

0036,000

Accounts Payable Acct. No. 201Date Explanation P


eCopyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved.263 Fundamental Accounting Principles, Twelfth Canadian Edition

2011Oct. 3 G

12,640 2,640

8 G1

2,640

0

Mary Graham, Capital Acct. No. 301Date Explanation P


e2011Oct. 1 G

1144,0

00144,00

0

Mary Graham, Withdrawals Acct. No. 302Date Explanation P


e2011Oct. 31 G

27,20

07,200


Serial Problem, Echo Systems (continued) Part AComputer Services Revenue Acct. No.

403Date Explanation PR Deb

itCredit

Balance

2011Oct.

6 G1 6,600

6,600

12

G1 2,400

9,000

28

G2 6,450

15,450



Credit

Balance

2011Oct.

31

G2 1,400

1,400

Advertising Expense Acct. No. 655


Credit

Balance

2011Oct.

20

G1 3,720

3,720

Mileage Expense Acct. No. 676


Credit

Balance

2011

Repairs Expense, Computer Acct. No. 684


Credit

Balance


11Oct.

17

G1 1,410

1,410

Charitable Donations Expense Acct. No. 699


Credit

Balance

2011


Serial Problem, Echo Systems (continued) Part A4.

ECHO SYSTEMSTrial Balance

October 31, 2011Acct.

No. Account Title Debit Credit101 Cash.................................. $69,3

10106 Accounts receivable............ 6,450126 Computer supplies.............. 2,640128 Prepaid insurance............... 4,320131 Prepaid rent....................... 9,000163 Office equipment................ 18,00

0167 Computer equipment.......... 36,00

0201 Accounts payable............... -0-301 Mary Graham, capital.......... 144,00

0302 Mary Graham, withdrawals.. 7,200403 Computer services revenue. 15,450623 Wages expense.................. 1,400655 Advertising expense........... 3,720676 Mileage expense................. -0-684 Repairs expense, computer. 1,410699 Charitable donations

expense............................. -

0- Totals................................ $159,

450$159,4

50


Serial Problem, Echo Systems (continued) Part A5.

ECHO SYSTEMSIncome Statement

For Month Ended October 31, 2011

Computer services revenue.... $15,450

Operating expenses: Advertising expense............ $3,7

20 Repairs expense, computer.. 1,41

0 Wages expense................... 1,


30Net income............................ $

8,920

ECHO SYSTEMSStatement of Owner’s Equity

For Month Ended October 31, 2011Mary Graham, capital, October 1...........................................

$ 0

Add: ....Investments by owner $144,000

Net income................... 8,92 0

152,9 20

Total................................... $152,920


Mary Graham, capital, October 31.........................................

$145,720

ECHO SYSTEMS


Balance SheetOctober 31, 2011


69,310Accounts payable......... $ -

0-Accounts receivable...............

6,450

Computer supplies. . 2,640Prepaid insurance.. . 4,320 Owner’s EquityPrepaid rent........... 9,000 Mary Graham, capital... 145,

720Office equipment.....18,000Computer equipment..............

36,0 00


Total assets......... $ 145,72

0

owner’s equity.......... $145,720


Serial Problem, Echo Systems (continued) Part B6.2011Nov. 1 Mileage Expense.........................676 1,000

Cash.....................................101 1,000Reimbursed Mary Graham for business usage.

2 Cash..........................................101 9,300Computer Services Revenue. .403 9,300

Collected cash revenue from customer.5 Computer Supplies.....................126 1,920

Cash.....................................101 1,920Purchased computer supplies for cash.

8 Accounts Receivable...................106 8,700Computer Services Revenue. .403 8,700

Billed customer for services.13 No entry recorded in the journal.18 Cash..........................................101 3,750

Accounts Receivable..............106 3,750Collected accounts receivable.

22 Charitable Donations Expense.....699 1,500Cash.....................................101 1,500

Made a donation.24 Accounts Receivable...................106 7,500


25 No entry recorded in the journal.28 Mileage Expense.........................676 1,200

Cash.....................................101 1,200Reimbursed Mary Graham for business usage.

30 Wages Expense..........................623 2,800Cash.....................................101 2,800

Paid employee for part-time work.

30 Mary Graham, Withdrawals.........302 3,600 Cash.....................................101 3,600



Serial Problem, Echo Systems (continued) Part B7.General Ledger accounts:

Cash Acct. No. 101Date Explanation PR Debit Credit Balan

ce2011Oct.

1 G1 90,000 90,000

2 G1 9,000 81,000

5 G1 4,320 76,680

8 G1 2,640 74,040

15

G1 6,600 80,640

17

G1 1,410 79,230

20

G1 3,720 75,510

22

G1 2,400 77,910

31

G2 1,400 76,510

31

G2 7,200 69,310

Nov.

1 G2 1,000 68,310

2 G2 9,300 77,610

5 G2 1,920 75,690

18

G2 3,750 79,440

22

G2 1,500 77,940

28

G2 1,200 76,740

30

G2 2,800 73,940

30

G2 3,600 70,340


Accounts Receivable Acct. No. 106Date Explanation PR Debit Credit Balan

ce2011Oct.

6 G1 6,600 6,600

12

G1 2,400 9,000

15

G1 6,600 2,400

22

G1 2,400 0

28

G2 6,450 6,450

Nov.

8 G2 8,700 15,150

18

G2 3,750 11,400

24

G2 7,500 18,900


Serial Problem, Echo Systems (continued) Part BComputer Supplies Acct. No. 126

Date Explanation PR


2011Oct. 3 G

12,640 2,640

Nov. 5 G2

1,920 4,560

Prepaid Insurance Acct. No. 128Date Explanation P


e2011Oct. 5 G

14,32

04,320



e2011Oct. 2 G

19,00

09,000



e2011Oct. 1 G

118,0

0018,000

Computer Equipment Acct. No. 167Date Explanation P


e2011Oct. 1 G

136,0

0036,000

Accounts Payable Acct. No. 201Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved.273 Fundamental Accounting Principles, Twelfth Canadian Edition

Date Explanation PR


2011Oct. 3 G

12,640 2,640

8 G1

2,640

0

Mary Graham, Capital Acct. No. 301Date Explanation P


e2011Oct. 1 G

1144,0

00144,00

0

Mary Graham, Withdrawals Acct. No. 302Date Explanation P


e2011Oct. 31 G

27,20

07,200

Nov. 30 G3

3,600

10,800


Serial Problem, Echo Systems (continued) Part BComputer Services Revenue Acct. No.

403Date Explanation PR Deb

itCredit

Balance

2011Oct.

6 G1 6,600

6,600

12

G1 2,400

9,000

28

G2 6,450

15,450

Nov.

2 G2 9,300

24,750

8 G2 8,700

33,450

24

G2 7,500

40,950



Credit

Balance

2011Oct.

31

G2 1,400

1,400

Nov.

30

G2 2,800

4,200

Advertising Expense Acct. No. 655


Credit

Balance

2011Oct.

20

G1 3,720

3,720

Mileage Expense Acct. No. 676


Credit

Balance


11Nov.

1 G2 1,000

1,000

28

G2 1,200

2,200

Repairs Expense, Computer Acct. No. 684


Credit

Balance

2011Oct.

17

G1 1,410

1,410

Charitable Donations Expense Acct. No. 699


Credit

Balance

2011Nov.

22

G2 1,500

1,500


Serial Problem, Echo Systems (continued) Part B8.

ECHO SYSTEMSTrial Balance

November 30, 2011Acct.

No. Account Title Debit Credit101 Cash.................................. $70,3

40106 Accounts receivable............ 18,90

0126 Computer supplies.............. 4,560128 Prepaid insurance............... 4,320131 Prepaid rent....................... 9,000163 Office equipment................ 18,00

0167 Computer equipment.......... 36,00

0201 Accounts payable............... -0-301 Mary Graham, capital.......... 144,00

0302 Mary Graham, withdrawals.. 10,80

0403 Computer services revenue. 40,950623 Wages expense.................. 4,200655 Advertising expense........... 3,720676 Mileage expense................. 2,200684 Repairs expense, computer. 1,410699 Charitable donations

expense............................. 1,

500 Totals................................ $184,

950$184,9

50


Serial Problem, Echo Systems (concluded) Part B9.

ECHO SYSTEMSIncome Statement

For Two Months Ended November 30, 2011

Computer services revenue.... $40,950


00 Advertising expense............ 3,72

0 Mileage expense................. 2,20

0 Charitable donations expense 1,50

0 Repairs expense, computer.. 1,


30Net income............................ $27,92

0

ECHO SYSTEMSStatement of Owner’s Equity

For Two Months Ended November 30, 2011Mary Graham, capital, October 1...........................................

$ -0-

Add: ....Investments by owner $144,000

Net income................... 27,92 0

171,9 20

Total................................... $171,920

Less: Withdrawals by owner... 10, 800

Mary Graham, capital, November 30.........................

$161,120


ECHO SYSTEMSBalance Sheet


Cash.......................$70,340

Accounts payable......... $ -0-


18,900

Computer supplies. . 4,560Prepaid insurance.. . 4,320 Owner’s EquityPrepaid rent........... 9,000 Mary Graham, capital... 161,

120Office equipment.....18,000Computer equipment..............

36,00 0


Total assets.........$161,120

owner’s equity.......... $161,120


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