financial accounting 7th edition harrison solutions manual

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Chapter 2 Recording Business Transactions Quick Check Answers: 1. a 2. d 3. b 4. b 5. b 6. d 7. a 8. b 9. a 10. d

Copyright © 2013 Pearson Australia (a division of Pearson Australia Group Pty Ltd) – 9781442551923/Horngren/Accounting/7th edition

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Starters (10 min.) S2-1 Req. 1 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

G C E D A I F B H J (5 min.) S2-2

Req. 1 Debits are increases for the following types of accounts:  Assets  Owners’ drawings  Expenses (because these accounts are on the debit side of the accounting equation) Debits are decreases for these types of accounts:  Liabilities  Owners’ capital  Revenues (because these accounts are on the credit side of the accounting equation) Req. 2 Credits are increases for these types of accounts:  Liabilities  Owners’ capital  Revenues (because these accounts are on the credit side of the accounting equation) Credits are decreases for these types of accounts:  Assets  Owners’ drawings  Expenses (because these accounts are on the debit side of the accounting equation) Copyright © 2013 Pearson Australia (a division of Pearson Australia Group Pty Ltd) – 9781442551923/Horngren/Accounting/7th edition

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(5 min.) S2-3 Req. 1 Normal Balance Debit or Credit Assets Liabilities Owners’ equity overall Capital Drawings Revenues Expenses

Debit Credit Credit Credit Debit Credit Debit

(5 min.) S2-4 Req. 1 Step 1: Identify each account affected and its type. Step 2: Determine whether each account is increased or decreased. Step 3: Record the transaction in the journal. Account 5 28

Accounts receivable Service revenue Cash Accounts receivable

Increase/ Decrease Increase Increase Increase Decrease

Type Asset Owners’ equity Asset Asset

(continued) S2-4 Req. 1 Journal DATE Jan 5

28

ACCOUNTS AND EXPLANATIONS Accounts receivable Service revenue Performed service on account.

POST. REF.

Cash Accounts receivable Received cash on account.

DEBIT 1 000

CREDIT 1 000

600 600

Copyright © 2013 Pearson Australia (a division of Pearson Australia Group Pty Ltd) – 9781442551923/Horngren/Accounting/7th edition

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(10 min.) S2-5 Req. 1 Journal DATE Jan 1

2

2

3

ACCOUNTS AND EXPLANATIONS

POST. REF.

Cash Brown, capital Owner investment Medical supplies Accounts payable Purchased supplies on account.

DEBIT 29 000

CREDIT 29 000

14 000 14 000

Rent expense Cash Paid office rent.

2 600

Accounts receivable Service revenue Performed service on account.

8 000

2 600

8 000

Copyright © 2013 Pearson Australia (a division of Pearson Australia Group Pty Ltd) – 9781442551923/Horngren/Accounting/7th edition

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(10min.) S2-6 Req. 1 Journal DATE Jan 22

30

31

31

31

ACCOUNTS AND EXPLANATIONS Accounts receivable Service revenue Performed service on account.

POST. REF.

Cash Accounts receivable Received cash on account. Electricity and gas expense Accounts payable Received electricity and gas bill. Salary expense Cash Paid salary expense. Advertising expense Cash Paid advertising expense.

DEBIT 8 000

CREDIT 8 000

7 000 7 000

180 180

2 000 2 000

700 700

Copyright © 2013 Pearson Australia (a division of Pearson Australia Group Pty Ltd) – 9781442551923/Horngren/Accounting/7th edition

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(10-15 min.) S2-7 Req. 1 Journal DATE 1.

2.

POST. REF.

ACCOUNTS AND EXPLANATIONS Supplies Accounts payable Purchased supplies on account.

DEBIT 3 400

CREDIT 3 400

Accounts payable Cash ($3 400  ½) Paid on account.

1 700 1 700

Req. 2

2.

Accounts payable 1 700 Bal

1.

3 400 1 700

(10-15 min.) S2-8 Req. 1 Journal DATE

ACCOUNTS AND EXPLANATIONS Accounts receivable Service revenue Performed service on account.

POST. REF.

Cash Accounts receivable Received cash on account.

DEBIT 16 000

CREDIT 16 000

9 600 9 600

Req. 2

Bal

Cash 9 600 9 600

Bal

Accounts receivable 16 000 9 600 6 400

Service revenue 16 000 Bal 16 000

Copyright © 2013 Pearson Australia (a division of Pearson Australia Group Pty Ltd) – 9781442551923/Horngren/Accounting/7th edition

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Req. 3 a.

Walja Creek earned:

b.

Cash Accounts receivable Total assets

$16 000

as Service revenue

$9 600 6 400 $16 000

(10-15 min.) S2-9 Req. 1

Bal

Bal

Cash 29 000 26 400

Bal

Medical supplies 14 000 14 000

Accounts payable

Brown, capital

Service revenue

Bal

Bal

2 600

Accounts receivable 8 000 8 000

14 000 14 000

Bal

29 000 29 000

8 000 8 000

Bal

Rent expense 2 600 2 600

Copyright © 2013 Pearson Australia (a division of Pearson Australia Group Pty Ltd) – 9781442551923/Horngren/Accounting/7th edition

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(continued) S2-9 Req. 2 Neville Brown, GP Trial Balance 3 January 2012 ACCOUNT Cash Accounts receivable Medical supplies Accounts payable Brown, capital Service revenue Rent expense Total

DEBIT $26 400 8 000 14 000

CREDIT

$14 000 29 000 8 000 2 600 $51 000

$51 000

(10 min.) S2-10 Req. 1 Oakland Floor Coverings Trial Balance 31 December 2013 ACCOUNT Cash Equipment Accounts payable Other liabilities Oakland, capital Revenues Expenses Total

DEBIT $12 000 45 000

CREDIT

$ 2 000 18 000 22 000 34 000 19 000 $76 000

$76 000

Copyright © 2013 Pearson Australia (a division of Pearson Australia Group Pty Ltd) – 9781442551923/Horngren/Accounting/7th edition

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(10 min.) S2-11 Req. 1 Brenda Longval Travel Design Incorrect Trial Balance 30 April 2013 Balance ACCOUNT Cash Accounts receivable Office supplies Land Accounts payable Longval, capital Longval, drawings Service revenue Rent expense, computer Rent expense, office Salary expense Electricity and gas expense Total __________ *Incorrect; should be listed as a credit.

DEBIT $18 000 1 000 500 14 000

CREDIT

$ 400 30 600* 3 000 8 800 700 900 1 100 600 $70 400

$9 200

To correct this error, 1. Take the difference between total debits and total credits: $70 400 – $9 200 = $61 200 2. Divide the error by 2: $61 200 / 2 = $30 600 3. Locate $30 600 on the trial balance. The Longval, capital account should have a credit balance.

Copyright © 2013 Pearson Australia (a division of Pearson Australia Group Pty Ltd) – 9781442551923/Horngren/Accounting/7th edition

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(10 min.) S2-12 Req. 1 Francis Nangle Travel Design Incorrect Trial Balance 31 January 2013 Balance ACCOUNT Cash Accounts receivable Office supplies Land Accounts payable Nangle, capital Nangle, drawings Service revenue Rent expense, computer Rent expense, office Salary expense Electricity and gas expense Total

DEBIT $20 000 1 000 500 12 000

CREDIT

$

100 31 000

300* 8 700 700 1 200 1 200 200 $37 100

$39 800

*Incorrect; should be listed as $3 000. To correct this error, 1. Take the difference between total debits and total credits: $37 100 − $39 800 = $2 700 2. Divide the error by 9: $2 700 ÷ 9 = $300 3. Locate $300 on the trial balance. The Nangle, drawings account holds the error. Trace the Nangle, drawings balance back to the ledger account, which shows the correct amount, $3 000.

Copyright © 2013 Pearson Australia (a division of Pearson Australia Group Pty Ltd) – 9781442551923/Horngren/Accounting/7th edition

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Exercises (10 min.) E2-1 4

1

C R 2 D E B D I 3 T R

I

I

A C C O U N T

A

5

D

8

6

L E D G E R

B

B

7

A S S E T

L

A

J O U R N C A L

9

C R E D I T

Copyright © 2013 Pearson Australia (a division of Pearson Australia Group Pty Ltd) – 9781442551923/Horngren/Accounting/7th edition

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(10-15 min.) E2-2 4P 5P 2R

E

C

E

1D

E 3B I T

A

L

A

N

R O F I T C

S

T

V

A

E

S

B

L

H

E

6C

R

7E

X P E N S E

T

D

I

T

(10-15 min.) E2-3 Req. 1 ASSETS Debit $390 000

LIABILITIES Credit

+

OWNERS’ EQUITY Credit

=

$260 000

+

$130 000

– –

EXPENSES $350 000 Debit

= =

PROFIT (loss) $130 000 Credit

=

Req. 2 REVENUES $480 000 Credit

PROFIT represents a net credit because revenues (credits) exceed expenses (debits). LOSS would be a net debit because expenses (debits) would exceed revenues (credits).

Copyright © 2013 Pearson Australia (a division of Pearson Australia Group Pty Ltd) – 9781442551923/Horngren/Accounting/7th edition

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(10-15 min.) E2-4 Req. 1 Journal DATE Jul

2

5

10

12

19

21

27

ACCOUNTS AND EXPLANATIONS Electricity and gas expense Cash

DEBIT 400

400

Equipment Accounts payable

2 100

Accounts receivable Service revenue

2 000

Cash Note payable

7 000

2 100

2 000

7 000

Cash Land

29 000

Supplies Cash

800

Accounts payable Cash

CREDIT

29 000

800 2 100 2 100

Copyright © 2013 Pearson Australia (a division of Pearson Australia Group Pty Ltd) – 9781442551923/Horngren/Accounting/7th edition

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(20-30 min.) E2-5 Req. 1 May

1 2 4 6 9 17 23 31

Owners’ investment Purchased supplies on account (on credit) Paid cash for building Performed services for cash Payment on account Performed services on account Received payment on account Payment of expenses

Reqs. 2 and 3

May

1 6 23 May 31

May 2 May 31

May 9

Cash 110 75 000 May 4 2 600 9 1 900 31 24 100

Supplies 500 500

53 000 400 2 000

Accounts receivable May 17 2 500 May 23 May 31 600

130

Accounts payable 400 May 2 May 31

May 4 May 31

210 500 100

Building 53 000 53 000

120 1 900

140

Ward, capital May 1 May 31

310 75 000 75 000

Copyright © 2013 Pearson Australia (a division of Pearson Australia Group Pty Ltd) – 9781442551923/Horngren/Accounting/7th edition

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(continued) E2-5 Reqs. 2 and 3

May 31 May 31

Service revenue May 6 17 May 31

410

Salary expense 1 100 1 100

520

2 600 2 500 5 100

May 31 May 31

Rent expense 900 900

510

Req. 4 Ward Technology Solutions Trial Balance 31 May 2013 ACCOUNT Cash Accounts receivable Supplies Building Accounts payable Ward, capital Service revenue Rent expense Salary expense Total

DEBIT $24 100 600 500 53 000

CREDIT

$

900 1 100 $80 200

100 75 000 5 100

$80 200

Copyright © 2013 Pearson Australia (a division of Pearson Australia Group Pty Ltd) – 9781442551923/Horngren/Accounting/7th edition

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(20-30 min.) E2-6 Req. 1

Req. 2

Effect on Trial Balance

Account

Amount

Direction of Error

a.

Total debits > Total credits

Bill payable

$7 000

Too low

b.

Total debits > Total credits

Electricity and gas expense

810

Too high

c.

Total debits = Total credits

Furniture Accounts payable

800 800

Too high Too high

d.

Total debits > Total credits

Cash

1 080

Too high

e.

Total debits = Total credits

Supplies Accounts payable

90 90

Too low Too low

Copyright © 2013 Pearson Australia (a division of Pearson Australia Group Pty Ltd) – 9781442551923/Horngren/Accounting/7th edition

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(15-25 min.) E2-7 Reqs. 1 and 2

Jul

1 12 19 Jul 31

Cash 4 000 7 000 29 000 36 700

Jul 2 21 27

Jul 21 Jul 31

Supplies 800 800

Jul 1 Jul 31

Land 29 000 Jul 19 0

Bills payable Jul 12 Jul 31

Service revenue Jul 10 Jul 31

400 800 2,100

29 000

7 000 7 000

2 000 2 000

Jul 10 Jul 31

Accounts receivable 2 000 2 000

Jul 5 Jul 31

Equipment 2 100 2 100

Jul 27

Accounts payable 2 100 Jul 5 Jul 31

London, capital Jul 1 Jul 31

Electricity and gas expense Jul 2 400 Jul 31 400

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2 100 0

33 000 33 000

(continued) E2-7 Req. 3 London Engineering Trial Balance 31 July 2013 ACCOUNT Cash Accounts receivable Supplies Equipment Bills payable London, capital Service revenue Electricity and gas expense Total

DEBIT $36 700 2 000 800 2 100

CREDIT

$ 7 000 33 000 2 000 400 $42 000

$42 000

(10 min.) E2-8 Req. 1 Journal DATE ACCOUNTS AND EXPLANATIONS 1. Cash Adams, capital Owners’ investment.

POST. REF.

2. Supplies Accounts payable Purchased supplies on account.

DEBIT 53 000

53 000

700 700

3. Building Cash Paid cash for building.

40 000

4. Cash Bill payable Borrowed money; signed bill payable.

50 000

5. Equipment Cash Paid cash for equipment.

CREDIT

40 000

50 000

4 700 4 700

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(continued) E2-8 Req. 2 Adams’ Lawn Care Trial Balance 30 June 2013 ACCOUNT

DEBIT $ 58 300 700 4 700 40 000

Cash Supplies Equipment Building Accounts payable Bill payable Adams, capital Total

CREDIT

$

700 50 000 53 000 $103 700

$103 700

(10 min.) E2-9 Req. 1

Thomas Sell’s transaction: Journal

DATE

Req. 2

ACCOUNTS AND EXPLANATIONS Repair expense Cash Paid repair bill.

POST. REF.

DEBIT 573.41

CREDIT 573.41

Advanced Automotive’s transaction: Journal

DATE

ACCOUNTS AND EXPLANATIONS

POST. REF.

Cash Service revenue Performed service and received cash.

DEBIT 573.41

CREDIT 573.41

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(20-25 min.) E2-10 Req. 2 Journal DATE ACCOUNTS AND EXPLANATIONS a. Cash Office furniture Parker, capital b.

c.

d.

e.

f.

g.

POST. REF.

Rent expense Cash

Office supplies Accounts payable

Salary expense Cash

Accounts payable Cash

DEBIT 14 100 5 200

CREDIT

19 300 1 500 1 500

900 900

1 700 1 700

700 700

Accounts receivable Service revenue

5 900

Parker, drawings Cash

6 700

5 900

6 700

Copyright © 2013 Pearson Australia (a division of Pearson Australia Group Pty Ltd) – 9781442551923/Horngren/Accounting/7th edition

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(continued) E2-10 Reqs. 1 and 2 ACCOUNT DATE a. b. d. e. g.

ACCOUNT DATE f.

ACCOUNT DATE c.

ACCOUNT DATE a.

Cash ITEM

JRNL. REF.

ACCOUNT NO. BALANCE DEBIT 14 100

CREDIT

DEBIT 14 100 12 600 10 900 10 200 3 500

1 500 1 700 700 6 700

Accounts receivable ITEM

JRNL. REF.

DEBIT 5 900

ACCOUNT NO. BALANCE CREDIT

Office supplies ITEM

JRNL. REF.

ITEM

DEBIT 5 900

CREDIT

ACCOUNT NO. BALANCE DEBIT 900

CREDIT

Office furniture JRNL. REF.

CREDIT

DEBIT 900

CREDIT

ACCOUNT NO. BALANCE DEBIT 5 200

CREDIT

DEBIT 5 200

CREDIT

Copyright © 2013 Pearson Australia (a division of Pearson Australia Group Pty Ltd) – 9781442551923/Horngren/Accounting/7th edition

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(continued) E2-10 Reqs. 1 and 2 ACCOUNT DATE c. e.

ACCOUNT DATE a.

ACCOUNT DATE g.

ACCOUNT DATE f.

Accounts payable ITEM

JRNL. REF.

ACCOUNT NO. BALANCE DEBIT

CREDIT 900

DEBIT

700

Parker, capital ITEM

JRNL. REF.

ACCOUNT NO. BALANCE DEBIT

CREDIT 19 300

Parker, drawings ITEM

JRNL. REF.

ITEM

DEBIT

CREDIT 19 300

ACCOUNT NO. BALANCE DEBIT 6 700

CREDIT

Service revenue JRNL. REF.

CREDIT 900 200

DEBIT 6 700

CREDIT

ACCOUNT NO. BALANCE DEBIT

CREDIT 5 900

DEBIT

CREDIT 5 900

Copyright © 2013 Pearson Australia (a division of Pearson Australia Group Pty Ltd) – 9781442551923/Horngren/Accounting/7th edition

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(continued) E2-10 Reqs. 1 and 2 ACCOUNT DATE d.

ACCOUNT DATE b.

Salary expense ITEM

JRNL. REF.

ACCOUNT NO. BALANCE DEBIT 1 700

CREDIT

Rent expense ITEM

JRNL. REF.

DEBIT 1 700

CREDIT

ACCOUNT NO. BALANCE DEBIT 1 500

CREDIT

DEBIT 1 500

CREDIT

Req. 3 Teresa Parker, Accountant Trial Balance 30 June 2013 ACCOUNT Cash Accounts receivable Office supplies Office furniture Accounts payable Parker, capital Parker, drawings Service revenue Salary expense Rent expense Total

DEBIT $ 3 500 5 900 900 5 200

CREDIT

$

200 19 300

6 700 5 900 1 700 1 500 $25 400

$25 400

Copyright © 2013 Pearson Australia (a division of Pearson Australia Group Pty Ltd) – 9781442551923/Horngren/Accounting/7th edition

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(10-20 min.) E2-11 Req. 1 Journal DATE ACCOUNTS AND EXPLANATIONS Aug 1 Cash Principe, capital Owner investment

POST. REF.

2 Supplies Accounts payable Purchased supplies on account. 4 Building Cash Paid cash for a building. 6 Cash Service revenue Performed service for cash. 9 Accounts payable Cash Paid cash on account.

DEBIT 48 000

CREDIT 48 000

500 500

47 000 47 000

4 400 4 400

200 200

17 Accounts receivable Service revenue Performed service on account.

2 200

23 Cash Accounts receivable Received cash on account.

1 600

31 Salary expense Rent expense Cash Paid expenses.

1 900 700

2 200

1 600

2 600

Copyright © 2013 Pearson Australia (a division of Pearson Australia Group Pty Ltd) – 9781442551923/Horngren/Accounting/7th edition

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(15-20 min.) E2-12 Req. 1

Aug

1 6 23 Aug 31

Aug 2 Aug 31

Aug 9

Cash 48 000 Aug 4 4 400 9 1 600 31 4 200

Supplies 500 500

Accounts payable 200 Aug 2 Aug 31

Service revenue Aug 6 17 Aug 31

Aug 31 Aug 31

47 000 200 2 600

Aug 17 Aug 31

Aug 4 Aug 31

Aug 31 Aug 31

1 600

Building 47 000 47 000

Principe, capital Aug 1 Aug 31

500 300

4 400 2 200 6 600

Accounts receivable 2 200 Aug 23 600

48 000 48 000

Salary expense 1 900 1 900

Rent expense 700 700

Copyright © 2013 Pearson Australia (a division of Pearson Australia Group Pty Ltd) – 9781442551923/Horngren/Accounting/7th edition

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(continued) E2-12 Req. 2 Principe Technology Solutions Trial Balance 31 August 2013 ACCOUNT

DEBIT $4 200 600 500 47 000

Cash Accounts receivable Supplies Building Accounts payable Principe, capital Service revenue Salary expense Rent expense Total

CREDIT

$ 300 48 000 6 600 1 900 700 $54 900

$54 900

(10 min.) E2-13 Req. 1 Atkins Moving Trial Balance 30 June 2013 ACCOUNT Cash Accounts receivable Supplies Trucks Building Accounts payable Bill payable Atkins, capital Atkins, drawings Service revenue Salary expense Fuel expense Insurance expense Electricity and gas expense Supplies expense Total

DEBIT $ 4 000 8 800 300 132 000 48 000

CREDIT

$ 4 000 54 000 72 000 5 400 80 000 7 000 3 000 600 500 400 $210 000

$210 000

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(15-20 min.) E2-14 Req. 1 Joy McDowell Tutoring Service Trial Balance 31 May 2013 ACCOUNT Cash Accounts receivable Supplies Computer equipment Accounts payable McDowell, capital Service revenue Salary expense Rent expense Electricity and gas expense Total __________ *Calculations: Cash: Accounts receivable: Accounts payable: McDowell, capital: Electricity and gas expense:

DEBIT $ 3 500* 1 500* 600 25 800

CREDIT

$12 700* 12 200* 9 800 1 700 700 900* $34 700

$34 700

$3 000 + $500 = $3 500 $2 000 – $500 = $1 500 $11 400 + $900 + $400 = $12 700 $11 600 + $600 = $12 200 $500 + $400 = $900

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Problems (10-15 min.) P2-1 Req. 1

Req. 2 Account

Cash Supplies Building Accounts payable Bills payable Cowra, capital Cowra, drawings Service revenue Salary expense Rent expense Rates expense

Account Type Asset Asset Asset Liability Liability Equity Equity Revenue Expense Expense Expense

Normal Balance Debit Debit Debit Credit Credit Credit Debit Credit Debit Debit Debit

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(40-50 min.) P2-2 Req. 1 Journal DATE ACCOUNTS AND EXPLANATIONS Sep 1 Cash Cowra, capital

POST. REF.

DEBIT 370 000

370 000

2 Building Cash

360 000

5 Cash Bill payable

260 000

360 000

260 000

10 Supplies Accounts payable

1 400

15 Accounts payable Cash

1 200

15 Rates expense Cash

1 500

16 Salary expense Rent expense Cash

2 500 1 400

28 Cowra, drawing Cash

7 000

30 Cash Service revenue

CREDIT

1 400

1 200

1 500

3 900

7 000 21 000 21 000

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(continued) P2-2 Req. 2

Sep 1 5 30

Bal

Sep 10 Bal

Sep 2 Bal

Cash 370 000 Sep 2 260 000 15 21 000 15 16 28 277 400

360 000 1 200 1 500 3 900 7 000

Sep 15

Accounts payable 1 200 Sep 10 Bal

Bills Payable Sep 5 Bal

Supplies 1 400 1 400

Cowra, drawing 7 000 7 000

Sep 15 Bal

Rates expense 1 500 1 500

260 000 260 000

Cowra, capital Sep 1 370 000 Bal 370 000

Building 360 000 360 000

Sep 28 Bal

1 400 200

Service revenue Sep 30 Bal

Sep 6 Bal

Salary expense 2 500 2 500

Sep 16 Bal

Rent expense 1 400 1 400

Copyright © 2013 Pearson Australia (a division of Pearson Australia Group Pty Ltd) – 9781442551923/Horngren/Accounting/7th edition

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21 000 21 000

(45-60 min.) P2-3 Req. 1 Journal DATE Jul

ACCOUNTS AND EXPLANATIONS 1 Cash

POST. REF.

DEBIT 68 000

CREDIT

Yung, capital

5 Rent expense—equipment

68 000

560

Cash 9 Land Cash 10 Supplies Accounts payable 19 Cash Bill payable

560 16 000 16 000 1 600 1 600 23 000 23 000

22 Accounts payable Cash

1 300

31 Cash Accounts receivable Service revenue

6 500 5 800

31 Salary expense Rent expense—office Electricity and gas expense Cash

2 500 1 100 400

31 Yung, drawings Cash

7 000

1 300

12 300

4 000

7 000

Copyright © 2013 Pearson Australia (a division of Pearson Australia Group Pty Ltd) – 9781442551923/Horngren/Accounting/7th edition

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(continued) P2-3 Req. 2

Bal

Cash 68 000 Jul 5 23 000 9 6 500 22 31 31 68 640

Jul 9 Bal

Land 16 000 16 000

Jul

1 19 31

Bills payable Jul 19 Bal

Jul 31 Bal

Jul 31 Bal

Jul 10 Bal

Supplies 1 600 1 600

Jul 22

23 000 23 000

Yung, drawings 7 000 7 000

Rent expense—equipment Jul 5 560 Bal 560

Jul 31 Bal

560 16 000 1 300 4 000 7 000

Accounts receivable 5 800 5 800

Salary expense 2 500 2 500

Jul 31 Bal

Accounts payable 1 300 July 10 Bal

1 600 300

Yung, capital Jul 1 Bal

68 000 68 000

Service revenue Jul 31 Bal

12 300 12 300

Rent expense—office 1 100 1 100

Electricity and gas expense Jul 31 400 Bal 400

Copyright © 2013 Pearson Australia (a division of Pearson Australia Group Pty Ltd) – 9781442551923/Horngren/Accounting/7th edition

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(continued) P2-3 Req. 3 Vernon Yung, GP Trial Balance 31 July 2013 ACCOUNT Cash Accounts receivable Supplies Land Accounts payable Bill payable Yung, capital Yung, drawings Service revenue Salary expense Rent expense—office Rent expense—equipment Electricity and gas expense Total

DEBIT $ 68 640 5 800 1 600 16 000

CREDIT

$

300 23 000 68 000

7 000 12 300 2 500 1 100 560 400 $103 600

$103 600

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(45-60 min.) P2-4 Req. 2 Journal DATE Sep 1

4

6

7

10

14

15

17

20

28

ACCOUNTS AND EXPLANATIONS Cash Stewart, capital

POST. REF.

DEBIT 42 000

42 000

Supplies Furniture Accounts payable

700 1 900

Cash Service revenue

1 400

Land Cash

2 600

1 400 24 000 24 000

Accounts receivable Service revenue

1 000

Accounts payable Cash

1 900

1 000

1 900

Salary expense Cash

490

Cash Accounts receivable

400

Accounts receivable Service revenue

700

Cash Service revenue

CREDIT

490

400

700 2 100 2 100

Copyright © 2013 Pearson Australia (a division of Pearson Australia Group Pty Ltd) – 9781442551923/Horngren/Accounting/7th edition

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(continued) P2-4 30

30

30

Salary expense Cash

490

Rent expense Cash

650

490

650

Stewart, drawings Cash

3 000 3 000

Reqs. 1 and 3

Sep 1 6 17 28

Bal

Sep 4 Bal

Sep 14

Cash 42 000 Sep. 1 400 400 2 100

7 14 15 30 30 30

24 000 1 900 490 490 650 3 000

15 370 Furniture 1 900 1 900 Accounts payable 1 900 Sep 4 Bal

Sep 10 Sep 20 Bal

Accounts receivable 1 000 Sep. 17 700 1 300

Sep 4 Bal

Supplies 700 700

Sep 7 Bal

2 600 700

400

Land 24 000 24 000 Stewart, capital Sep 1 Bal

42 000 42 000

Copyright © 2013 Pearson Australia (a division of Pearson Australia Group Pty Ltd) – 9781442551923/Horngren/Accounting/7th edition

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(continued) P2-4 Reqs. 1 and 3

Sep 30 Bal

Stewart, drawings 3 000 3 000

Service revenue Sep 6 10 20 28 Bal

Sep 15 30 Bal

Salary expense 490 490 980

Rent expense 650 650

Sep 30 Bal

1 400 1 000 700 2 100 5 200

Req. 4 Doris Stewart, Designer Trial Balance 30 September 2013 ACCOUNT Cash Accounts receivable Supplies Furniture Land Accounts payable Stewart, capital Stewart, drawings Service revenue Salary expense Rent expense Total

DEBIT $ 15 370 1 300 700 1 900 24 000

CREDIT

$

700 42 000

3 000 5 200 980 650 $47 900

$47 900

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(45-60 min.) P2-5 Req. 2 DATE Sep 2

3

4

7

11

15

16

18

19

29

30

30

30

Journal ACCOUNTS AND EXPLANATIONS Cash Moore, capital

POST. REF.

DEBIT 39 000

CREDIT 39 000

Supplies Furniture Accounts payable

600 2 000

Cash Service revenue

1 300

Land Cash

2 600

1 300 26 000 26 000

Accounts receivable Service revenue

700

Salary expense Cash

590

Accounts payable Cash

600

Cash Service revenue

700

590

600 2 400 2 400

Accounts receivable Service revenue

800

Cash Accounts receivable

700

Salary expense Cash

590

Rent expense Cash

670

Moore, drawings Cash

800

700

590

670 2 400 2 400

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37

(continued) P2-5 Reqs. 1 and 3

Sep 2 4 18 29

Bal

Sep 3 Bal

Cash 39 000 Sep 7 1 300 15 2 400 16 700 30 30 30 12 550

26 000 590 600 590 670 2 400

Furniture 2 000 2 000

Supplies 600 600

Sep 3 Bal

Sep 7 Bal

700

Land 26 000 26 000 Moore, capital Sep 2 Bal

39 000 39 000

Sep 30 Bal

Moore, drawings 2 400 2 400

Service revenue Sep 4 11 18 19 Bal

1 300 700 2 400 800 5 200

Sep 15 30 Bal

Salary expense 590 590 1 180

Rent expense 670 670

Sep 16

Accounts payable 600 Sep 3 Bal

Sep 11 19 Bal

Accounts receivable 700 Sep 29 800 800

2 600 2 000

Sep 30 Bal

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(continued) P2-5 Req. 4 Trevor Moore, Solicitor Trial Balance 30 September 2013 ACCOUNT Cash Accounts receivable Supplies Furniture Land Accounts payable Moore, capital Moore, drawings Service revenue Salary expense Rent expense Total

DEBIT $ 12 550 800 600 2 000 26 000

CREDIT

$

2 000 39 000

2 400 5 200 1 180 670 $46 200

$46 200

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(45-60 min.) P2-6 Req. 1 Journal DATE Feb 4

8

13

18

20

ACCOUNTS AND EXPLANATIONS Cash Accounts receivable Received cash on account.

POST. REF. 11 12

DEBIT 4 000

4 000

Accounts receivable Service revenue Performed services on account.

12 41

4 600

Accounts payable Cash Paid on account.

21 11

2 400

Supplies Accounts payable Purchased supplies on account.

13 21

900

Mitchell, drawings Cash Owner drawings

32 11

2 200

4 600

2 400

900

2 200

21

Paid for deck for residence; not a transaction of the business.

22

Cash Service revenue Performed service for cash.

11 41

2 300

Rent expense Cash Paid rent.

52 11

500

Salary expense Cash Paid employee salary.

51 11

1 600

27

29

CREDIT

2 300

500

1 600

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(continued) P2-6 Req. 2 ACCOUNT

Cash

DATE ITEM Jan 31 Bal Feb 4 13 20 22 27 29

JRNL. REF.

DEBIT

CREDIT

4 000 2 400 2 200 2 300 500 1 600

ACCOUNT

Accounts receivable JRNL. DATE ITEM REF. Jan 31 Bal Feb 4 8

ACCOUNT

DEBIT

CREDIT 4 000

4 600

Supplies

DATE ITEM Jan 31 Bal Feb 18

JRNL. REF.

DEBIT

CREDIT

900

ACCOUNT NO. 11 BALANCE DEBIT CREDIT 7 000 11 000 8 600 6 400 8 700 8 200 6 600

ACCOUNT NO. 12 BALANCE DEBIT CREDIT 10 500 6 500 11 100

ACCOUNT NO. 13 BALANCE DEBIT CREDIT 600 1 500

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(continued) P2-6 Req. 2 ACCOUNT

Land

DATE ITEM Jan 31 Bal

JRNL. REF.

Accounts payable JRNL. DATE ITEM REF. Jan 31 Bal Feb 13 18

DEBIT

CREDIT

ACCOUNT

Mitchell, capital JRNL. DATE ITEM REF. Jan 31 Bal

DEBIT

CREDIT

2 400 900

ACCOUNT

ACCOUNT DATE Feb 20

Mitchell, drawings JRNL. ITEM REF.

DEBIT

DEBIT 2 200

CREDIT

CREDIT

ACCOUNT NO. 14 BALANCE DEBIT CREDIT 17 000

ACCOUNT NO. 21 BALANCE DEBIT CREDIT 4 700 2 300 3 200

ACCOUNT NO. 31 BALANCE DEBIT CREDIT 30 400

ACCOUNT NO. 32 BALANCE DEBIT CREDIT 2 200

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(continued) P2-6 Req. 2 ACCOUNT DATE Feb 8 22

ACCOUNT DATE Feb 29

ACCOUNT DATE Feb 27

Service revenue JRNL. ITEM REF.

Salary expense JRNL. ITEM REF.

DEBIT

DEBIT 1 600

ACCOUNT NO. 41 BALANCE DEBIT CREDIT 4 600 6 900

CREDIT 4 600 2 300

ACCOUNT NO. 51 BALANCE DEBIT CREDIT 1 600

CREDIT

Rent expense ITEM

JRNL. REF.

DEBIT 500

ACCOUNT NO. 52 BALANCE DEBIT CREDIT 500

CREDIT

(continued) P2-6 Req. 3 Sam Mitchell, Accountant Trial Balance 28 February 2013 ACCT. NO. 11 12 13 14 21 31 32 41 51 52

ACCOUNT Cash Accounts receivable Supplies Land Accounts payable Mitchell, capital Mitchell, drawings Service revenue Salary expense Rent expense Total

DEBIT $ 6 600 11 100 1 500 17 000

CREDIT

$ 3 200 30 400 2 200 6 900 1 600 500 $ 40 500

$ 40 500

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(45-60 min.) P2-7 Req. 1 Journal DATE Jul

4

7

16

19

20

24

25

31

ACCOUNTS AND EXPLANATIONS Cash Accounts receivable Received cash on account.

POST. REF.

DEBIT 6 000

6 000

Accounts receivable Service revenue Performed services on account.

6 600

Supplies Accounts payable Purchased supplies on account.

1 000

Silver, drawings Cash Owner drawings

2 300

Accounts payable Cash Paid on account.

2 500

Cash Service revenue Performed service for cash.

2 200

Rent expense Cash Paid rent. Salary expense Cash Paid employee salary.

CREDIT

6 600

1 000

2 300

2 500

2 200

500 500

1 700 1 700

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(continued) P2-7 Req. 2 ACCOUNT

Cash

DATE ITEM Jun 30 Bal Jul 4 19 20 24 25 31

JRNL. REF.

DEBIT

CREDIT

6 000 2 300 2 500 2 200 500 1 700

ACCOUNT

Accounts receivable JRNL. DATE ITEM REF. Jun 30 Bal Jul 4 7

ACCOUNT

DEBIT

CREDIT 6 000

6 600

Supplies

DATE ITEM Jun 30 Bal Jul 16

JRNL. REF.

DEBIT

CREDIT

1 000

ACCOUNT NO. 11 BALANCE DEBIT CREDIT 7 000 13 000 10 700 8 200 10 400 9 900 8 200

ACCOUNT NO. 12 BALANCE DEBIT CREDIT 8 500 2 500 9 100

ACCOUNT NO. 13 BALANCE DEBIT CREDIT 800 1 800

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(continued) P2-7 Req. 2 ACCOUNT

Equipment

DATE ITEM Jun 30 Bal

JRNL. REF.

Accounts payable JRNL. DATE ITEM REF. Jun 30 Bal Jul 16 20

DEBIT

CREDIT

ACCOUNT

ACCOUNT

DATE Jul

19

CREDIT 1 000

2 500

Silver, capital

DATE ITEM Jun 30 Bal

ACCOUNT

DEBIT

JRNL. REF.

Silver, drawings JRNL. ITEM REF.

DEBIT

DEBIT 2 300

CREDIT

CREDIT

ACCOUNT NO. 14 BALANCE DEBIT CREDIT 13 000

ACCOUNT NO. 21 BALANCE DEBIT CREDIT 4 800 5 800 3 300

ACCOUNT NO. 31 BALANCE DEBIT CREDIT 24 500

ACCOUNT NO. 32 BALANCE DEBIT CREDIT 2 300

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(continued) P2-7 Req. 2 ACCOUNT DATE Jul

Service revenue JRNL. ITEM REF.

DEBIT

7 24

ACCOUNT DATE Jul

Salary expense JRNL. ITEM REF.

31

ACCOUNT DATE Jul

DEBIT 1 700

ACCOUNT NO. 41 BALANCE DEBIT CREDIT 6 600 8 800

CREDIT 6 600 2 200

ACCOUNT NO. 51 BALANCE DEBIT CREDIT 1 700

CREDIT

Rent expense ITEM

JRNL. REF.

25

DEBIT 500

ACCOUNT NO. 52 BALANCE DEBIT CREDIT 500

CREDIT

Req. 3 Sharon Silver, Dietician Trial Balance 31 July 2013 ACCT. NO. 11 12 13 14 21 31 32 41 51 52

ACCOUNT Cash Accounts receivable Supplies Equipment Accounts payable Silver, capital Silver, drawings Service revenue Salary expense Rent expense Total

DEBIT $ 8 200 9 100 1 800 13 000

CREDIT

$ 3 300 24 500 2 300 8 800 1 700 500 $36 600

$36 600

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(45-60 min.) P2-8 Req. 2 Journal DATE a.

b.

c.

d.

e.

f.

g.

ACCOUNTS AND EXPLANATIONS

POST. REF.

Cash Building Wills, capital Owner investment. Office supplies Accounts payable Purchased supplies on account. Office furniture Cash Purchased furniture.

DEBIT 48 000 30 000

CREDIT

78 000

2 000 2 000

14 000 14 000

Salary expense Cash Paid salary.

2 200

Accounts receivable Service revenue Performed service on account.

3 700

2 200

3 700

Accounts payable Cash Paid on account.

900

Advertising expense Accounts payable Received advertising bill.

600

900

600

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(continued) P2-8 Req. 2 Journal DATE h.

i.

j.

k.

POST. REF.

ACCOUNTS AND EXPLANATIONS Cash Service revenue Performed service and received cash.

DEBIT 1 100

CREDIT 1 100

Cash Accounts receivable Collected cash on account.

1 100

Rent expense Electricity and gas expense Cash Paid expenses.

1 000 900

Wills, drawings Cash Owner withdrawal

2 300

1 100

1 900

2 300

Reqs. 1 and 3 ACCOUNT DATE a. c. d. f. h. i. j. k.

Cash ITEM

JRNL. REF.

ACCOUNT NO. BALANCE DEBIT 48 000

CREDIT 14 000 2 200 900

1 100 1 100 1 900 2 300

DEBIT 48 000 34 000 31 800 30 900 32 000 33 100 31 200 28 900

CREDIT

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(continued) P2-8 Reqs. 1 and 3 ACCOUNT DATE e. i.

ACCOUNT DATE b.

ACCOUNT DATE c.

ACCOUNT DATE a.

ACCOUNT DATE b. f. g.

ACCOUNT DATE a.

Accounts receivable ITEM

JRNL. REF.

ACCOUNT NO. BALANCE

DEBIT 3 700

CREDIT

DEBIT 3 700 2 600

1 100

Office supplies ITEM

JRNL. REF.

ACCOUNT NO. BALANCE DEBIT 2 000

CREDIT

Office furniture ITEM

JRNL. REF.

JRNL. REF.

DEBIT 14 000

CREDIT

ITEM

DEBIT 14 000

DEBIT 30 000

CREDIT

DEBIT 30 000

DEBIT

CREDIT 2 000

DEBIT

600

Wills, capital JRNL. REF.

CREDIT

CREDIT

ACCOUNT NO. BALANCE

900

ITEM

CREDIT

ACCOUNT NO. BALANCE

Accounts payable JRNL. REF.

DEBIT 2 000

ACCOUNT NO. BALANCE

Building ITEM

CREDIT

CREDIT 2 000 1 100 1 700

ACCOUNT NO. BALANCE DEBIT

CREDIT 78 000

DEBIT

CREDIT 78 000

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(continued) P2-8 Reqs. 1 and 3 ACCOUNT DATE k.

ACCOUNT DATE e. h.

ACCOUNT DATE d.

ACCOUNT DATE j.

ACCOUNT DATE g.

ACCOUNT DATE j.

Wills, drawings ITEM

JRNL. REF.

ACCOUNT NO. BALANCE DEBIT 2 300

CREDIT

Service revenue ITEM

JRNL. REF.

ITEM

DEBIT

CREDIT 3 700 1 100

JRNL. REF.

DEBIT 2 200

CREDIT

JRNL. REF.

DEBIT 1 000

JRNL. REF.

DEBIT 2 200

CREDIT

CREDIT

DEBIT 600

DEBIT 900

DEBIT 1 000

CREDIT

ACCOUNT NO. BALANCE CREDIT

Electricity and gas expense ITEM

CREDIT 3 700 4 800

ACCOUNT NO. BALANCE

Advertising expense ITEM

DEBIT

ACCOUNT NO. BALANCE

Rent expense ITEM

CREDIT

ACCOUNT NO. BALANCE

Salary expense JRNL. REF.

DEBIT 2 300

DEBIT 600

CREDIT

ACCOUNT NO. BALANCE CREDIT

DEBIT 900

CREDIT

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(continued) P2-8 Req. 4 Wills Environmental Consulting Trial Balance 28 February 2013 ACCOUNT Cash Accounts receivable Supplies Furniture Building Accounts payable Wills, capital Wills, drawings Service revenue Salary expense Rent expense Advertising expense Electricity and gas expense Total

DEBIT $ 28 900 2 600 2 000 14 000 30 000

CREDIT

$ 1 700 78 000 2 300 4 800 2 200 1 000 600 900 $84 500

$84 500

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(15-25 min.) P2-9 Req. 1 Smart Tots Child Care Trial Balance 31 August 2013 ACCOUNT Cash Accounts receivable Supplies Equipment Accounts payable Tilley, capital Tilley, drawings Service revenue Salary expense Rent expense Total *Calculations: a. Cash: b. Accounts receivable: c. Supplies: Accounts payable: d. Equipment: e. Salary expense:

DEBIT $ 7 700* 15 000* 1 700* 78 500*

CREDIT

$ 54 000* 50 500 2 400 4 700 3 400* 500 $109 200

$109 200

$6 700 + $1 000 = $7 700 $7 000 + $4 000 + $4 000 = $15 000 $700 + $1 000 = $1 700 $53 000 + $1 000 = $54 000 $87 000 – $8 500 = $78 500 $3 600 – $200 = $3 400

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(15-25 min.) P2-10 Req. 1 Treasure Hunt Exploration Trial Balance 30 June 2013 ACCOUNT Cash Accounts receivable Supplies Exploration equipment Computers Accounts payable Bill payable Jones, capital Jones, drawing Service revenue Salary expense Rent expense Advertising expense Electricity and gas expense Total

DEBIT $ 1 300* 6 360* 1 300* 16 490* 49 000

CREDIT

$ 3 700* 18 500 50 000 4 000 10 900* 1 400 1 480* 900 870* $83 100

$83 100

*Calculations: a. Cash: $6 300 – $5 000 = $1 300 b. Rent expense: $800 + $340 + $340 = $1 480 c. Service revenue: $4 100 + $6 800 = $10 900 d. Accounts receivable: $6 000 + (400 – 40 = $360) = $6 360 e. Electricity and gas expense: $800 + $70 = $870 f. Supplies: $400 + $900 = $1 300 Accounts payable: $2 800 + $900 = $3 700 g. Exploration equipment: $22 300 – $5 810 = $16 490

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(20-30 min.) P2-11 Req. 1 Showtime Amusements Income Statement Month Ended 30 September 2013 Revenue: Service revenue Expenses: Salary expense Rates expense Rent expense Total expenses Profit

$21 000 $2 500 1 500 1 400 5 400 $15 600

Req. 2 Showtime Amusements Statement of Changes in Equity Month Ended 30 September 2013 Cougliato, capital, 1 September 2013 Owner investment Profit Drawings Cougliato, capital, 30 September 2013

$ 0 370 000 15 600 385 600 (7 000) $378 600

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(continued) P2-11 Req. 3 Showtime Amusements Balance Sheet 30 September 2013 ASSETS Cash Supplies Building

Total assets

$277 400 1 400 360 000

_______ $638 800

LIABILITIES Accounts payable Bill payable Total liabilities OWNERS’ EQUITY Cowra, capital Total liabilities and Owners’ equity

$ 200 260 000 260 200 378 600 $638 800

(20-30 min.) P2-12 Req. 1 Vernon Yung, GP Income Statement Month Ended 31 July 2013 Revenue: Service revenue Expenses: Salary expense Rent expense—office Rent expense—equipment Electricity and gas expense Total expenses Profit

$12 300 $2 500 1 100 560 400 4 560 $7 740

Req. 2 Vernon Yung, GP Statement of Changes in Equity Month Ended 31 July 2013 Yung, capital, 1 July 2013 Owner investment Profit

$

0 68 000 7 740 75 740

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Drawings Yung, capital, 31 July 2013

(7 000) $68 740

(continued) P2-12 Req. 3 Vernon Yung, GP Balance Sheet 31 July 2013 ASSETS Cash Accounts receivable Supplies Land

Total assets

$ 68 640 5 800 1 600 16 000 _______ $ 92 040

LIABILITIES Accounts payable Bill payable Total liabilities OWNERS’ EQUITY Yung, capital Total liabilities and Owners’ equity

$ 300 23 000 23 300 68 740 $ 92 040

(20-30 min.) P2-13 Req. 1 Doris Stewart, Designer Income Statement Month Ended 30 September 2013 Revenue: Service revenue Expenses: Salary expense Rent expense Total expenses Profit

$ 5 200 $ 980 650 1 630 $3 570

Req. 2 Doris Stewart, Designer Statement of Changes in Equity Month Ended 30 September 2013 Stewart, capital, 30 September 2012

$

0

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Owner investment Profit

42 000 3 570 45 570 (3 000) $42 570

Drawings Stewart, capital, 30 September 2013

(continued) P2-13 Req. 3 Doris Stewart, Designer Balance Sheet 30 September 2013 ASSETS Cash Accounts receivable Supplies Furniture Land Total assets

$ 15 370 1 300 700 1 900 24 000 _______ $ 43 270

LIABILITIES Accounts payable

$

700

OWNERS’ EQUITY Stewart, capital Total liabilities and Owners’ equity

42 570 $43 270

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(20-30 min.) P2-14 Req. 1 Trevor Moore, Solicitor Income Statement Month Ended 30 September 2013 Revenue: Service revenue Expenses: Salary expense Rent expense Total expenses Profit

$ 5 200 $1 180 670 1 850 $ 3 350

Req. 2 Trevor Moore, Solicitor Statement of Changes in Equity Month Ended 30 September 2013 Moore, capital, 1 September 2013 Owner investment Profit Drawings Moore, capital, 30 September 2013

$ 0 39 000 3 350 42 350 (2 400) $39 950

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(continued) P2-14 Req. 3 Trevor Moore, Solicitor Balance Sheet 30 September 2013 ASSETS Cash Accounts receivable Supplies Furniture Land Total assets

$ 12 550

LIABILITIES Accounts payable

800 600 2 000 26 000 _______ $ 41 950

$ 2 000

OWNERS’ EQUITY Moore, capital Total liabilities and Owners’ equity

39 950 $ 41 950

(20-30 min.) P2-15 Req. 1 Sam Mitchell, Accountant Income Statement Month Ended 28 February 2013 Revenue: Service revenue Expenses: Salary expense Rent expense Total expenses Profit

$ 6 900 $1 600 500 2 100 $ 4 800

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(continued) P2-15 Req. 2 Sam Mitchell, Accountant Statement of Changes in Equity Month Ended 28 February 2013 Mitchell, capital, 1 February 2013 Owner investment Profit

$

0 30 400 4 800 35 200 (2 200) $ 33 000

Drawings Mitchell, capital, 28 February 2013

Req. 3 Sam Mitchell, Accountant Balance Sheet 28 February 2013 ASSETS Cash Accounts receivable Supplies Land

Total assets

$ 6 600 11 100 1 500 17 000 _______ $ 36 200

LIABILITIES Accounts payable

$ 3 200

OWNERS’ EQUITY Mitchell, capital Total liabilities and Owners’ equity

33 000 $ 36 200

(20-30 min.) P2-16 Req. 1 Sharon Silver, Dietician Income Statement Month Ended 31 July 2013 Revenue: Service revenue Expenses: Salary expense Rent expense Total expenses Profit

$ 8 800 $1 700 500 2 200 $ 6 600

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Req. 2 Sharon Silver, Dietician Statement of Changes in Equity Month Ended 31 July 2013 Silver, capital, 1 July 2013 Owner investment Profit

$ 0 24 500 6 600 31 100 (2 300) $28 800

Drawings Silver, capital, 31 July 2013

Req. 3 Sharon Silver, Dietician Balance Sheet 31 July 2013 ASSETS Cash Accounts receivable Supplies Equipment Total assets

LIABILITIES $ 8 200 Accounts payable 9 100 1 800 OWNERS’ EQUITY 13 000 Silver, capital Total liabilities and Owners’ equity $ 32 100

$ 3 300

28 800 $ 32 100

(20-30 min.) P 2-17 Req. 1 Wills Environmental Consulting Income Statement Month Ended 28 February 2013 Revenue: Service revenue Expenses: Salary expense Rent expense Electricity and gas expense Advertising expense Total expenses Profit

$ 4 800 $ 2 200 1 000 900 _600 4 700 $ 100

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(continued) P2-17 Req. 2 Wills Environmental Consulting Statement of Changes in Equity Month Ended 28 February 2013 Wills, capital, 1 February 2013 Owner investment Profit Drawings Wills, capital, 28 February 2013

$

0 78 000 100 78 100 (2 300) $ 75 800

Req. 3 Wills Environmental Consulting Balance Sheet 28 February 2013 ASSETS Cash Accounts receivable Office supplies Office furniture Building Total assets

LIABILITIES $28 900 Accounts payable 2 600 2 000 OWNERS’ EQUITY 14 000 30 000 Wills, capital Total liabilities and $77 500 Owners’ equity

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63

$ 1 700

75 800 $ 77 500

Continuing Exercise (30-45 min.) E2-15 Req. 2 Journal DATE May 1

3

5

6

8

17

31

ACCOUNTS AND EXPLANATIONS Cash Lawlor, capital

POST. REF.

Equipment Accounts payable Fuel expense Cash

DEBIT 1 700

CREDIT 1 700

1 440 1 440 30 30

Accounts receivable Service revenue

150

Lawn supplies Cash

150

Cash Service revenue

800

Cash Accounts receivable

100

150

150

800

100

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(continued) E2-15 Reqs. 1 and 3

May 1 17 31 Bal

May 3 Bal

Cash 1 700 May 5 800 8 100 2 420

30 150

May 6 Bal

Accounts receivable 150 May 31 50

May 8 Bal

Lawn supplies 150 150

100

Equipment 1 440 1 440 Accounts payable May 3 Bal Service revenue May 6 17 Bal

Lawlor, capital May 1 Bal

1 440 1 440

150 800 950

May 5 Bal

1 700 1 700

Fuel expense 30 30

Req. 4 Lawlor Lawn Service Trial Balance May 31 2012 ACCOUNT Cash Accounts receivable Lawn supplies Equipment Accounts payable Lawlor, capital Service revenue Fuel expense Total

DEBIT $ 2 420 50 150 1 440

CREDIT

$1 440 1 700 950 30 $ 4 090

$4 090

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Continuing Problem (40-50 min.) P2-18 Req. 2 Journal DATE ACCOUNTS AND EXPLANATIONS Dec 2 Cash Draper, capital

POST. REF.

2 Rent expense Cash

DEBIT 18 000

18 000 550 550

3 Equipment Cash

1 800

4 Furniture Accounts payable

4 200

5 Supplies Accounts payable

900

9 Accounts receivable Service revenue

1 500

12 Electricity and gas expense Cash 18 Cash Service revenue

CREDIT

1 800

4 200

900

1 500 250 250 1 100 1 100

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(continued) P2-18 Reqs. 1 and 3

Dec 2 18 Bal

Cash 18 000 Dec 2 1 100 3 12 16 500

Dec 5 Bal

Supplies 900 900

Dec 4 Bal

Furniture 4 200 4 200

Draper, capital Dec 2 Bal Service revenue Dec 9 18 Bal

550 1 800 250

Dec 9 Bal

Accounts receivable 1 500 1 500

Dec 3 Bal

Equipment 1 800 1 800 Accounts payable Dec 4 5 Bal

18 000 18 000

1 500 1 100 2 600

Electricity and gas expense Dec 12 250 Bal 250

Dec 2 Bal

Rent expense 550 550

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4 200 900 5 100

(continued) P2-18 Req. 4 Draper Consulting Trial Balance 18 December 2012 ACCOUNT Cash Accounts receivable Supplies Equipment Furniture Accounts payable Draper, capital Service revenue Rent expense Electricity and gas expense Total

DEBIT $16 500 1 500 900 1 800 4 200

CREDIT

$ 5 100 18 000 2 600 550 250 $25 700

$25 700

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68

Apply Your Knowledge Decision Cases Decision Case 2-1 Reqs. 1 and 2

(a) (f) Bal

Cash 10 000 (b) 1 200 (d) 8 400

Accounts payable (c)

Service revenue (e)

(d)

Rent expense 1 100

300 2 500

(e) Bal

Accounts receivable 8 800 (f) 7 600

(b) Bal

Supplies 300 300

Shee Boon capital (a)

700

8 800

(d)

(c)

Salary expense 1 400

Advertising expense 700

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1 200

10 000

(continued) Decision Case 2-1 Req. 3 Travel Planners Trial Balance 30 June 2014 ACCOUNT Cash Accounts receivable Supplies Accounts payable Shee Boon, capital Service revenue Salary expense Rent expense Advertising expense Total

DEBIT $ 8 400 7 600 300

CREDIT

$

1 400 1 100 700 $19 500

700 10 000 8 800

$19 500

Req. 4 Travel Planners Revenues: Service revenue Expenses: Salary expense Rent expense Advertising expense Total expenses Profit for month

Recommendation:

$8 800 $1 400 1 100 700 3 200 $5 600

Discontinue the business, because profit falls below the target amount.

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Decision Case 2-2 Req. 1 Double-entry bookkeeping has the advantage that it records both sides (the ‘giving’ side and the ‘receiving’ side) of a business transaction in the precise language of accounting, i.e. ‘debits’ and ‘credits’. This allows for the exact description of balances in all accounts, and helps ensure that the entire system is always in balance. Req. 2 The bank is not misusing the term credit. From the perspective of the bank’s ledger, when you deposit money in the bank, the bank debits Cash (received from you) and credits a payable (payable to you on demand). It is this payable, a liability account, that is the source of the term credit. This is why a bank credit is good for the depositor. It means you have more money in the bank.

Focus on Ethics Listing Dingo Downs on the ASX will mean greater public accountability and, in particular, greater levels of disclosure of financial and other information about the firm. It also requires attention to what is good corporate governance. Listing on the ASX provides the benefit of greater access to potentially cheaper sources of long-term equity finance compared to debt finance. However, there are considerable costs of compliance to ASX listing rules. The ASX requires compliance with IFRS and much additional detailed, continuous disclosure of events that may reflect on the interpretation of information contained in reports filed with the ASX. There are requirements for the disclosure of information about the remuneration of directors and other officers and many detailed rules concerning the periodic filing of financial information. There are additional requirements regarding the audit of annual reports and the certification of statements made concerning the business. The ASX has issued detailed guidance on ethics and the governance of listed entities. Among the matters on which recommendations are given are disclosure of the functions of the Board, how performance of management is monitored and assessed, how management remuneration is determined, the code of conduct of the Board, company policy on continuous disclosure and financial risk management. Listing therefore carries with it a considerable overhead. Copyright © 2013 Pearson Australia (a division of Pearson Australia Group Pty Ltd) – 9781442551923/Horngren/Accounting/7th edition

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Fraud Case Req. 1 By changing an expense to an asset, the total expenses will decrease and profit will increase. Req. 2 The CEO gained by earning a bonus, and the accounting manager may have gained by getting favourable treatment from the CEO. The shareholders of the firm lost, because the business paid out the bonus under fraudulent conditions.

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Financial Statement Case Req. 1 Journal DATE ACCOUNTS AND EXPLANATIONS Dec. 1 Cash & cash equivalents Revenue

POST. REF.

9 Cash & cash equivalents Borrowings

DEBIT 60 000

CREDIT 60 000

200 000 200 000

12 Inventories Trade and other payables

10 000

22 Trade and other payables Cash & cash equivalents ($10 000 × ½)

5 000

28 Administrative expenses Cash & cash equivalents

3 000

31 Borrowings Finance costs Cash & cash equivalents

100 000 1 000

10 000

5 000

3 000

101 000

Note: Some of the terms used in JB Hi-Fi financial statements appear as being slightly different to those used in your book: ‘cash and cash equivalents’ instead of ‘cash’, ‘revenues’ instead of ‘sales revenue’, ‘borrowings’ instead of ‘loans payable’ or ‘bills payable’, and ‘finance costs’ instead of ‘interest expense’. The above terms are based on the JB Hi-Fi financial statements to 30 June 2011 and they may change over time.

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