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Chapter 2 Recording Business Transactions Review Questions 1. The three categories of the accounting equation are assets, liabilities, and equity. Assets include Cash, Accounts Receivable, Notes Receivable, Prepaid Expenses, Land, Building, Equipment, Furniture, and Fixtures. Liabilities include Accounts Payable, Notes Payable, Accrued Liability, and Unearned Revenue. Equity includes Common Stock, Dividends, Revenue, and Expenses. 2. Companies need a way to organize their accounts so they use a chart of accounts. Accounts starting with 1 are usually Assets, 2 – Liabilities, 3 – Equity, 4 – Revenues, and 5 – Expenses. The second and third digits in account number indicate where the account fits within the category. 3. A chart of accounts and a ledger are similar in that they both list the account names and account numbers of the business. A ledger, though, provides more detail. It includes the increases and decreases of each account for a specific period and the balance of each account at a specific point in time. 4. With a double-entry you need to record the dual effects of each transaction. Every transaction affects at least two accounts. 5. A T-account is a shortened form of each account in the ledger. The debit is on the left side, credit on the right side, and the account name is shown on top. 6. Debits are increases for assets, dividends, and expenses. Debits are decreases for liabilities, common stock, and revenue. 7. Credits are increases for liabilities, common stock, and revenue. Credits are decreases for assets, dividends, and expenses. 8. Assets, dividends, and expenses have a normal debit balance. Liabilities, common stock, and revenue have a normal credit balance. 9. Source documents provide the evidence and data for accounting transactions. Examples of source documents a business would have are: bank deposit slips, purchase invoices, bank checks, and sales invoices 10. Transactions are first recorded in a journal, which is the record of transactions in date order.

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11. Step 1: Identify the accounts and the account type. You need this information before you can complete the next step. Step 2: Decide if each account increases or decreases using the rules of debits and credits. Reviewing the rules of debits and credits, we use the accounting equation to help determine debits and credits for each account. Step 3: Record transactions in the journal using journal entries. Step 4: Post the journal entry to the ledger. When journal entries are posted from the journal to the ledger, the dollar amount is transferred from the debit and credit columns to the specific accounts in the ledger. The date on the journal entry should also be transferred to the accounts in the ledger. Step 5: Determine whether the accounting equation is in balance. After each entry the accounting equation should always be in balance. 12. Part 1: Date of the transaction. Part 2: Debit account name and dollar amount. Part 3: Credit account name and dollar amount. The credit account name is indented. Part 4: Brief explanation. 13. When transactions are posted from the journal to the ledger, the dollar amount is transferred from the debit and credit columns to the specific accounts in the ledger. The date of the journal entry is also transferred to the accounts in the ledger. The posting reference columns in the journal and ledger are also completed. In a computerized system, this step is completed automatically when the transaction is recorded in the journal. 14. The trial balance is used to prove the equality of total debits and total credits of all accounts in the ledger; it is also used to prepare the financial statements. 15. A trial balance verifies the equality of total debits and total credits of all accounts on the trial balance and is an internal document used only by employees of the company. The balance sheet, on the other hand, presents the business’s accounting equation and is a financial statement that can be used by both internal and external users. 16. If total debits equal total credits on the trial balance, it does not mean that the trial balance is error-free. An incorrect amount could have been used, an entry could have been completely missed, or the wrong account title could have been debited or credited . 17. The debt ratio is calculated by dividing total liabilities by total assets and shows the proportion of assets financed with debt. It can be used to evaluate a business’s ability to pay its debts.

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Short Exercises S2-1 a. Notes Receivable (A) b. Common Stock (E) c. Prepaid Insurance (A) d. Notes Payable (L) e. Rent Revenue (E)

f. Taxes Payable (L) g. Rent Expense (E) h. Furniture (A) i. Dividends (E) j. Unearned Revenue (L)

S2-2 a. Increase to Accounts Receivable (DR) b. Decrease to Unearned Revenue (DR) c. Decrease to Cash (CR) d. Increase to Interest Expense (DR) e. Increase to Salaries Payable (CR)

f. Decrease to Prepaid Rent (CR) g. Increase to Common Stock (CR) h. Increase to Notes Receivable (DR) i. Decrease to Accounts Payable (DR) j. Increase to Interest Revenue (CR)

S2-3 a. Notes Payable (CR) b. Dividends (DR) c. Service Revenue (CR) d. Land (DR) e. Unearned Revenue (CR)

f. Common Stock (CR) g. Utilities Expense (DR) h. Office Supplies (DR) i. Advertising Expense (DR) j. Interest Payable (CR)

S2-4 Date Accounts and Explanation Jan. 1 Cash Common Stock Received cash from Brown in exchange for common stock. 2 Medical Supplies Accounts Payable Purchased medical supplies on account. 4 Cash Service Revenue Performed services for patients.

2-3

Debit 29,000

Credit 29,000

14,000 14,000 1,400 1,400

12 Rent Expense Cash Paid rent with cash.

2,600

15 Accounts Receivable Service Revenue Performed services for patients on account.

8,000

2,600

8,000

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S2-5 Date Accounts and Explanation Jan. 22 Accounts Receivable Service Revenue Performed services for customers on account. 30 Cash Accounts Receivable Received cash on account from customers. 31 Utilities Expense Utilities Payable Received a utility bill due in February.

Debit 8,000

Credit 8,000

7,000 7,000 180 180

31 Salaries Expense Cash Paid monthly salary to salesman.

2,000

31 Cash Unearned Revenue Received 3 months consulting services in advance.

1,500

31 Dividends Cash Payment of cash dividends.

1,000

2,000

1,500

1,000

S2-6 Accounts Payable May 2 6,000 14,000 May 1 May 22 12,000 1,000 May 5 7,000 May 15 500 May 23 4,500 Bal.

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S2-7 Requirement 1 Date Accounts and Explanation Mar. 15 Office Supplies Accounts Payable Purchased office supplies on account.

Debit 3,400

Credit 3,400

28 Accounts Payable Cash Paid cash on account.

1,200 1,200

Requirement 2 Cash Bal. 14,000 1,200 Bal. 12,800 Mar. 15 Bal.

Mar. 28

Mar. 28

Accounts Payable 1,200 3,400 2,200

Mar. 15 Bal.

Office Supplies 3,400 3,400

S2-8 OAKLAND FLOOR COVERINGS Trial Balance December 31, 2014 Account Title Cash Accounts Receivable Equipment Accounts Payable Salaries Payable Interest Payable Common Stock Dividends Service Revenue Rent Expense Salaries Expense Utilities Expense Total 2-5

Balance Debit $ 8,000 4,000 45,000

Credit

$ 2,000 12,000 6,000 22,000 1,800 34,000 14,000 2,000 1,200 $ 76,000

$ 76,000

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S2-9 Debt ratio = Total liabilities / Total assets = $69,000 / $230,000 = 0.30 = 30%

Exercises E2-10 1. g 2. a 3. e 4. d 5. j 6. i 7. f 8. b 9. h 10. c E2-11 Assets 100 – Cash 110 – Automotive Supplies 120 – Equipment Liabilities 200 – Accounts Payable 210 – Unearned Revenue

2-6

Equity 300 – Common Stock 310 – Dividends Revenues 400 – Service Revenue Expenses 500 – Utilities Expense 510 – Advertising Expense

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E2-12

Account Name a. b. c. d. e. f. g. h. i. j.

2-7

Interest Revenue Accounts Payable Common Stock Office Supplies Advertising Expense Unearned Revenue Prepaid Rent Utilities Expense Dividends Service Revenue

Requirement 1

Requirement 2

Type of Account

Increase with Debit/Credit

E L E A E L A E E E

CR CR CR DR DR CR DR DR DR CR

Requirement 3 Normal Balance Debit/Credit CR CR CR DR DR CR DR DR DR CR

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E2-13 (a) Assets

=

Liabilities

+

(c) Assets (e) Incr. Decr. Debit

(n) Credit

=

(d) Liabilities Decr. (f) Incr. (o) Debit

Credit

(b) Equity

Contributed Capital Common + Stock (g) Decr. (h) Incr. (p) Debit

Credit

+

Retained Earnings

– (d) Dividends + Revenues (i) Incr. (j) Decr. (k) Decr. (l) Incr. (q) Debit

Credit

Debit

(a) Assets (b) Equity (c) Liabilities (d) Dividends (e) Incr. (f) Incr. (g) Decr. (h) Incr. (i) Incr. (j) Decr. (k) Decr. (l) Incr. (m)Decr. (n) Credit (o) Debit (p) Debit (q) Debit (r) Debit

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Credit

– Incr.

Expenses (m) Decr.

(r) Debit

Credit


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E2-14 a. Bank deposit slip b. Purchase invoice c. Sales invoice E2-15 a. b. c. d. e. f. g.

Purchased equipment with cash. Paid cash dividends to stockholders. Paid wages owed to employees, previously recorded. Received equipment for the business in exchange for common stock. Received cash from customer for work to be completed in the future. Paid for advertising with cash. Performed services that were paid by the customer.

E2-16 Date Accounts and Explanation Jul. 2 Cash Common Stock Issued common stock in exchange for cash. 4 Utilities Expense Cash Paid utility expense. 5 Equipment Accounts Payable Purchased equipment on account.

400 400 2,100 2,100

10 Accounts Receivable Service Revenue Performed services for client on account.

2,000

12 Cash Notes Payable Borrowed cash by signing note.

7,000

19 Dividends Cash Paid cash dividends.

2-9

Debit Credit 10,000 10,000

2,000

7,000 500

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E2-16, cont. 21 Office Supplies Cash Purchased office supplies with cash.

800 800

27 Accounts Payable Cash Paid cash on account.

2,100 2,100

E2-17 Requirements 1, 2, and 3 Cash 10,000 400 7,000 500 800 2,100 Balance 13,200

Jul. 2 Jul. 12

Jul. 4 Jul. 19 Jul. 21 Jul. 27

Jul. 27

Accounts Payable 2,100 2,100 Jul. 5 0 Balance

Accounts Receivable Jul. 10 2,000 Balance 2,000

Notes Payable 7,000 Jul. 12 7,000 Balance

Office Supplies Jul. 21 800 Balance 800

Common Stock 10,000 10,000

Jul. 5 Balance

Equipment 2,100 2,100

Jul. 19 Balance

Jul. 2 Balance

Dividends 500 500 Service Revenue 2,000 Jul. 10 2,000 Balance

Jul. 4 Balance

2-10

Utilities Expense 400 400

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E2-18 Date Accounts and Explanation May 1 Cash Common Stock. Issued common stock in exchange for cash.

Debit 75,000

500

4 Building Land Cash Purchased building and land for cash.

45,000 8,000

6 Cash Service Revenue Performed services for customers for cash.

2,600

17 Accounts Receivable Service Revenue Performed services for customers on account. 19 Rent Expense Cash Paid rent for the month. 20 Cash Unearned Revenue Received cash from customers for services to be performed next month. 21 Prepaid Advertising Cash Paid for next month’s advertising.

Credit 75,000

2 Office Supplies Accounts Payable Purchased office supplies on account.

9 Accounts Payable Cash Paid cash on account.

2-11

Post. Ref.

500

53,000

2,600

400 400 2,500 2,500

900 900 1,200 1,200

500

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E2-18, cont. 23 Cash Accounts Receivable Received cash on account from customer.

1,900

31 Salaries Expense Cash Paid salaries.

1,100

1,900

1,100

E2-19 Requirement 2 Date Accounts and Explanation May 1 Cash Common Stock Issued common stock in exchange for cash.

Debit 75,000

Credit 75,000

2 Office Supplies Accounts Payable Purchased office supplies on account.

130 210

500

4 Building Land Cash Purchased building and land for cash.

150 160 110

45,000 8,000

6 Cash Service Revenue Performed services for customers for cash.

110 410

2,600

9 Accounts Payable Cash Paid cash on account.

210 110

400

120 410

2,500

17 Accounts Receivable Service Revenue Performed services for customers on account.

2-12

Post. Ref. 110 310

500

53,000

2,600

400

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E2-19, cont. 19 Rent Expense Cash Paid rent for the month.

510 110

900

20 Cash Unearned Revenue Received cash from customers for services to be performed next month.

110 220

1,200

21 Prepaid Advertising Cash Paid for next month’s advertising.

140 110

500

23 Cash Accounts Receivable Received cash on account from customer.

110 120

1,900

31 Salaries Expense Cash Paid salaries.

520 110

1,100

900

1,200

500

1,900

1,100

Requirements 1 and 2 CASH Date May 1 May 4 May 6 May 9 May 19 May 20 May 21 May 23 May 31

Item

Post Ref. J10 J10 J10 J10 J10 J10 J10 J10 J10

Debit 75,000

Credit 53,000

2,600 400 900 1,200 500 1,900 1,100

ACCOUNTS RECEIVABLE Date May 17 2-13

Item

Post Ref. J10

Debit 2,500

Credit

Account No. 110 Balance Debit Credit 75,000 22,000 24,600 24,200 23,300 24,500 24,000 25,900 24,800 Account No. 120 Balance Debit Credit 2,500

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May 23 E2-19, cont.

J10

1,900

OFFICE SUPPLIES Date May 2

Item

Post Ref. J10

Debit 500

Credit

PREPAID ADVERTISING Date May 21

Item

Post Ref. J10

Debit 500

Credit

BUILDING Date May 4

Item

Post Ref. J10

Debit 45,000

Credit

LAND Date May 4

Item

Post Ref. J10

Debit 8,000

Credit

ACCOUNTS PAYABLE Date May 2 May 9

Item

Post Ref. J10 J10

Debit

Credit 500

400

UNEARNED REVENUE Date May 20

Item

Post Ref. J10

Debit

2-14

Item

Post Ref. J10

Debit

Account No. 130 Balance Debit Credit 500 Account No. 140 Balance Debit Credit 500 Account No. 150 Balance Debit Credit 45,000 Account No. 160 Balance Debit Credit 8,000 Account No. 210 Balance Debit Credit 500 100

Credit 1,200

Account No. 220 Balance Debit Credit 1,200

Credit 75,000

Account No. 310 Balance Debit Credit 75,000

COMMON STOCK Date May 1

600

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E2-19, cont. SERVICE REVENUE Date May 6 May 17

Item

Post Ref. J10 J10

Debit

Credit 2,600 2,500

RENT EXPENSE Date May 19

Item

Post Ref. J10

Debit 900

Credit

SALARIES EXPENSE Date May 31

Item

Post Ref. J10

Debit 1,100

Credit

Account No. 410 Balance Debit Credit 2,600 5,100 Account No. 510 Balance Debit Credit 900 Account No. 520 Balance Debit Credit 1,100

E2-20 1. The business received cash of $370,000 and issued common stock. 2. Paid $360,000 cash for a building. 3. Borrowed $260,000 cash, signing a notes payable. 4. Purchased office supplies on account, $1,500. 5. Paid $1,200 on accounts payable. 6. Paid property tax expense, $1,500. 7. Paid rent $1,400 and salaries $2,500. 8. Cash dividends of $7,000 paid to stockholders. 9. Performed services for customers and received cash, $21,000.

2-15

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E2-21 Date 1.

2.

3.

4.

5.

2-16

Accounts and Explanation Cash Common Stock Issued common stock in exchange for cash. Office Supplies Accounts Payable Purchased office supplies on account.

Posting Ref.

Debit Credit 53,000 53,000

700 700

Building Cash Purchased building for cash.

40,000

Cash Notes Payable Borrowed money signing a note payable.

50,000

Equipment Cash Purchased equipment for cash.

40,000

50,000 4,700

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E2-22 ATKINS MOVING COMPANY Trial Balance August 31, 2015 Account Title Cash Accounts Receivable Office Supplies Trucks Building Accounts Payable Notes Payable Common Stock Dividends Service Revenue Salaries Expense Fuel Expense Insurance Expense Utilities Expense Advertising Expense Total

2-17

Balance 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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E2-23 MCDONALD FARM EQUIPMENT REPAIR Trial Balance May 31, 2015 Account Title Cash Accounts Receivable Equipment Building Land Accounts Payable Notes Payable Common Stock Dividends Service Revenue Salaries Expense Property Tax Expense Advertising Expense Total

Balance Debit $ 2,400 3,700 14,000 35,000 10,000

Credit

$ 4,000 30,000 34,000 1,800 6,500 6,500 800 300 $ 74,500

$ 74,500

E2-24 Requirement 2

Date Accounts and Explanation June 1 Cash Office Furniture Common Stock

2-18

Post Ref. 110 140 310

Debit 14,000 5,200

Credit

19,200

5 Rent Expense Cash

520 110

1,500

9 Office Supplies Accounts Payable

130 210

900

14 Salaries Expense Cash

510 110

1,700

18 Utilities Expense Utilities Payable

530 220

250

1,500

900

1,700

250

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E2-24, cont. 21 Accounts Payable Cash

210 110

700

25 Accounts Receivable Service Revenue

120 410

5,900

28 Dividends Cash

320 110

6,700

700

5,900

6,700

Requirements 1 & 2 CASH Date June 1 June 5 June 14 June 21 June 28

Item

Post Ref. J10 J10 J10 J10 J10

Debit 14,000

Credit 1,500 1,700 700 6,700

ACCOUNTS RECEIVABLE Date June 25

Item

Post Ref. J10

Debit 5,900

Credit

OFFICE SUPPLIES Date June 9

Item

Post Ref. J10

Debit 900

Credit

OFFICE FURNITURE Date June 1

2-19

Item

Post Ref. J10

Debit 5,200

Credit

Account No. 110 Balance Debit Credit 14,000 12,500 10,800 10,100 3,400 Account No. 120 Balance Debit Credit 5,900 Account No. 130 Balance Debit Credit 900 Account No. 140 Balance Debit Credit 5,200

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E2-24, cont. ACCOUNTS PAYABLE Date June 9 June 21

Item

Post Ref. J10 J10

Debit

Credit 900

700

UTILITIES PAYABLE Date June 18

Item

Post Ref. J10

Debit

Credit 250

Account No. 220 Balance Debit Credit 250

Credit 19,200

Account No. 310 Balance Debit Credit 19,200

COMMON STOCK Date June 1

Item

Post Ref. J10

Debit

DIVIDENDS Date June 28

Item

Post Ref. J10

Debit 6,700

Credit

SERVICE REVENUE Date June 25

Item

Post Ref. J10

Debit

Credit 5,900

SALARIES EXPENSE Date June 14

2-20

Item

Post Ref. J10

Debit 1,700

Account No. 210 Balance Debit Credit 900 200

Credit

Account No. 320 Balance Debit Credit 6,700 Account No. 410 Balance Debit Credit 5,900 Account No. 510 Balance Debit Credit 1,700

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E2-24, cont. Account No. 520

RENT EXPENSE Date June 5

Item

Post Ref. J10

Debit 1,500

Balance Debit Credit 1,500

Credit

UTILITIES EXPENSE Date June 18

Item

Post Ref. J10

Debit 250

Account No. 530 Balance Debit Credit 250

Credit

Requirement 3 TERESA PARKER, CPA Trial Balance June 30, 2015 Acct. No. 110 120 130 140 210 220 310 320 410 510 520 530

2-21

Account Title Cash Accounts Receivable Office Supplies Office Furniture Accounts Payable Utilities Payable Common Stock Dividends Service Revenue Salaries Expense Rent Expense Utilities Expense Total

Balance Debit $ 3,400 5,900 900 5,200

Credit

$

200 250 19,200

6,700 5,900 1,700 1,500 250 $ 25,550

$ 25,550

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E2-25 Requirements 1 and 2

a. b. c.

Debits equal Credits, Yes or No No No Yes

d. e.

No Yes

Accounts Notes Payable Utilities Expense Furniture Accounts Payable Cash Office Supplies Accounts Payable

Amount High or Low $7,000 Low 810 High 800 High 800 High 1,080 High 90 Low 90 Low

E2-26 METRO PAINTING SPECIALISTS Trial Balance November 30, 2015 Account Title Cash Accounts Receivable Office Supplies Painting Equipment Accounts Payable Unearned Revenue Common Stock Dividends Service Revenue Advertising Expense Rent Expense Salaries Expense Utilities Expense Total

2-22

Balance Debit $ 12,600 1,200 200 14,500

Credit

$ 3,500 2,000 15,000 7,000 19,750 550 1,800 2,100 300 $ 40,250

$ 40,250

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E2-27 JOY MCDOWELL TUTORING SERVICE Trial Balance May 31, 2015 Account Title Cash Accounts Receivable Office Supplies Computer Equipment Accounts Payable Utilities Payable Common Stock Dividends Service Revenue Salaries Expense Rent Expense Utilities Expense Total

Balance Debit $ 3,500 1,500 600 15,800

Credit

$ 12,000 700 12,200 10,000 9,800 1,700 700 900 $ 34,700

$ 34,700

Explanation: a. Increase Cash by $500, decrease Accounts Receivable by $500. b. Increase Accounts Payable by $900 ($1,000 – $100). c. Increase Utilities Expense and Utilities Payable by $400 each. d. Increase Common Stock by $600.

2-23

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E2-28 Liabilities: Accounts Payable Utilities Payable Unearned Revenue Notes Payable Total liabilities Assets: Cash Accounts Receivable Office Supplies Office Equipment Building Land Total assets

$

2,000 935 14,000 75,000 $ 91,935 $ 35,000 7,250 3,000 25,000 80,000 20,000 $ 170,250

Debt ratio = Total liabilities / Total assets = $91,935 / $170,250 = 0.54 = 54%

2-24

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Problems (Group A) P2-29A Requirement 1 Date Accounts and Explanation July 1 Cash Common Stock 5 Rent Expense Cash 9 Land Cash 10 Office Supplies Accounts Payable

Debit 68,000

Credit 68,000

560 560 16,000 16,000 1,600 1,600

19 Cash Notes Payable

23,000

22 Accounts Payable Cash

1,300

28 Advertising Expense Advertising Payable

2-25

Post Ref.

23,000

1,300 240 240

31 Cash Accounts Receivable Service Revenue

6,500 5,800

31 Salaries Expense Rent Expense Utilities Expense Cash

2,500 1,000 400

31 Cash Unearned Revenue

1,140

31 Dividends

7,000

12,300

3,900

1,140

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Cash P2-29A, cont. Requirement 2

2-26

Horngren’s Financial & Managerial Accounting   4/e    Solutions Manual

7,000


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P2Jul. 1 Jul. 19 Jul. 31 Jul. 31 Bal.

Cash 68,000 560 23,000 16,000 6,500 1,300 1,140 3,900 7,000 69,880

Jul. 5 Jul. 9 Jul. 22 Jul. 31 Jul. 31

Jul. 22

Accounts Payable 1,300 1,600 300

Advertising Payable 240 Jul. 28 240 Bal.

Accounts Receivable Jul. 31 5,800 Bal. 5,800

Unearned Revenue 1,140 1,140

Jul. 31 Bal.

Jul. 10 Bal.

Office Supplies 1,600 1,600

Notes Payable 23,000 23,000

Jul. 19 Bal.

Jul. 9 Bal.

Land 16,000 16,000

Common Stock 68,000 68,000

Jul. 1 Bal.

Jul. 31 Bal.

Dividends 7,000 7,000 Service Revenue 12,300 12,300

Jul. 31 Bal.

Salaries Expense 2,500 2,500

Jul. 5 Jul. 31 Bal.

Rent Expense 560 1,000 1,560

Utilities Expense Jul. 31 400 Bal. 400 Advertising Expense Jul. 28 240 Bal. 240 29A, cont. Requirement 3 2-27

Jul. 10 Bal.

Horngren’s Financial & Managerial Accounting   4/e    Solutions Manual

Jul. 31 Bal.


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VERNON YUNG, MD Trial Balance July 31, 2015 Account Title

Balance

Cash Accounts Receivable Office Supplies Land Accounts Payable Advertising Payable Unearned Revenue Notes Payable Common Stock Dividends Service Revenue Salaries Expense Rent Expense Utilities Expense Advertising Expense Total

2-28

Debit $ 69,880 5,800 1,600 16,000

Credit

$

300 240 1,140 23,000 68,000

7,000 12,300 2,500 1,560 400 240 $ 104,980

$ 104,980

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P2-30A Requirement 1 Date Accounts and Explanation Sep. 1 Cash Common Stock

Debit Credit 42,000 42,000

4 Office Supplies Furniture Accounts Payable

700 1,900

6 Cash Service Revenue

1,400

7 Land Cash

2,600 1,400 24,000 24,000

10 Accounts Receivable Service Revenue

1,000

14 Accounts Payable Cash

1,900

15 Salaries Expense Cash

1,490

1,000 1,900 1,490

17 Cash Accounts Receivable

400

20 Accounts Receivable Service Revenue

700

400 700

25 Cash Unearned Revenue

1,800

28 Cash Service Revenue

2,100

29 Prepaid Insurance Cash

1,200

30 Salaries Expense Cash

1,490

30 Rent Expense 2-29

Posting Ref.

1,800 2,100 1,200 1,490 650

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Cash

650

P2-30A, cont. 30 30

Utilities Expense Utilities Payable

350 350

Dividends Cash

3,000 3,000

Requirements 2 and 3

Sep. 1 Sep. 6 Sep. 17 Sep. 25 Sep. 28 Bal.

2-30

Cash 42,000 24,000 1,400 1,900 400 1,490 1,800 1,200 2,100 1,490 650 3,000 13,970

Sep. 7 Sep. 14 Sep. 15 Sep. 29 Sep. 30 Sep. 30 Sep. 30

Sep. 14

Accounts Payable 1,900 2,600 Sep. 4 700 Bal. Utilities Payable 350 Sep. 30 350 Bal.

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Sep. 10 Sep. 20 Bal.

Accounts Receivable 1,000 400 Sep. 17 700 1,300

Sep. 4 Bal.

Office Supplies 700 700

Sep. 29 Bal.

Prepaid Insurance 1,200 1,200

Sep. 4 Bal. Sep. 7 Bal.

Unearned Revenue 1,800 Sep. 25 1,800 Bal.

Sep. 15 Sep. 30 Bal. 30 Sep. Bal. Sep. 30 Bal.

Furniture 1,900 1,900

Sep. 30 Bal.

Land 24,000 24,000

Common Stock 42,000 Sep. 1 Salaries Expense 42,000 Bal. 1,490 1,490 Dividends 2,980 3,000 3,000 Rent Expense 650 Revenue Service 650 1,400 Sep. 6 1,000 Sep. 10 Utilities Expense 700 Sep. 20 350 2,100 Sep. 28 350 5,200 Bal.

Requirement 4 DORIS STEWART, DESIGNER Trial Balance September 30, 2015 Account Title

Balance

Cash Accounts Receivable Office Supplies Prepaid Insurance Furniture Land Accounts Payable Utilities Payable Unearned Revenue Common Stock Dividends Service Revenue Salaries Expense Rent Expense Utilities Expense 2-31

Debit $ 13,970 1,300 700 1,200 1,900 24,000

Credit

$

700 350 1,800 42,000

3,000 5,200 2,980 650 350

Horngren’s Financial & Managerial Accounting   4/e    Solutions Manual

P230A, cont.


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Total

$ 50,050

$ 50,050

P2-31A Requirements 1 and 3 Date Accounts and Explanation Jan. 1 Cash Common Stock

2-32

Posting Ref. 101 301

Debit 59,000

Credit 59,000

3 Office Supplies Furniture Accounts Payable

121 141 201

600 2,000

4 Cash Service Revenue

101 411

1,300

7 Building Land Cash Notes Payable

151 161 101 221

100,000 20,000

11 Accounts Receivable Service Revenue

111 411

700

15 Salaries Expense Cash

511 101

1,180

16 Accounts Payable Cash

201 101

600

18 Cash Service Revenue

101 411

2,400

19 Accounts Receivable Service Revenue

111 411

800

25 Utilities Expense Utilities Payable

531 211

400

29 Cash Accounts Receivable

101 111

700

30 Prepaid Insurance Cash

131 101

2,400

2,600 1,300

40,000 80,000 700 1,180 600 2,400 800 400 700

Horngren’s Financial & Managerial Accounting   4/e    Solutions Manual

2,400


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30 Salaries Expense Cash

511 101

1,180

31 Rent Expense Cash

521 101

1,500

31 Dividends Cash

311 101

2,400

1,180

P2-31A, cont. 1,500 2,400

Requirements 2 and 3 CASH Date Jan. 1 Jan. 4 Jan. 7 Jan. 15 Jan. 16 Jan. 18 Jan. 29 Jan. 30 Jan. 30 Jan. 31 Jan. 31

Item

Post Ref. J1 J1 J1 J1 J1 J1 J1 J1 J1 J1 J1

Debit 59,000 1,300

Credit 40,000 1,180 600

2,400 700 2,400 1,180 1,500 2,400

ACCOUNTS RECEIVABLE Date Jan. 11 Jan. 19 Jan. 29

Item

Post Ref. J1 J1 J1

Debit 700 800

Credit 700

OFFICE SUPPLIES Date Jan. 3 2-33

Item

Post Ref. J1

Debit 600

Credit

Account No. 101 Balance Debit Credit 59,000 60,300 20,300 19,120 18,520 20,920 21,620 19,220 18,040 16,540 14,140 Account No. 111 Balance Debit Credit 700 1,500 800 Account No. 121 Balance Debit Credit 600

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P2-31A, cont. PREPAID INSURANCE Date Jan. 30

Item

Post Ref. J1

Debit 2,400

Credit

Account No. 141

FURNITURE Date Jan. 3

Item

Post Ref. J1

Debit 2,000

Credit

BUILDING Date Jan. 7

Item

Post Ref. J1

Debit 100,000

Credit

LAND Date Jan. 7

Item

Post Ref. J1

Debit 20,000

Credit

ACCOUNTS PAYABLE Date Jan. 3 Jan. 16

Item

Post Ref. J1 J1

Debit

Credit 2,600

600

UTILITIES PAYABLE Date Jan. 25

Item

Post Ref. J1

Debit

2-34

Item

Post Ref. J1

Debit

Balance Debit Credit 2,000 Account No. 151 Balance Debit Credit 100,000 Account No. 161 Balance Debit Credit 20,000 Account No. 201 Balance Debit Credit 2,600 2,000

Credit 400

Account No. 211 Balance Debit Credit 400

Credit 80,000

Account No. 221 Balance Debit Credit 80,000

NOTES PAYABLE Date Jan. 7

Account No. 131 Balance Debit Credit 2,400

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P2-31A, cont. COMMON STOCK Date Jan. 1

Item

Post Ref. J1

Debit

Credit 59,000

DIVIDENDS Date Jan. 31

Item

Post Ref. J1

Debit 2,400

Credit

SERVICE REVENUE Date Jan. 4 Jan. 11 Jan. 18 Jan. 19

Item

Post Ref. J1 J1 J1 J1

Debit

Credit 1,300 700 2,400 800

SALARIES EXPENSE Date Jan. 15 Jan. 30

Item

Post Ref. J1 J1

Debit 1,180 1,180

Credit

RENT EXPENSE Date Jan. 31

Item

Post Ref. J1

Debit 1,500

Credit

UTILITIES EXPENSE Date Jan. 25

2-35

Item

Post Ref. J1

Debit 400

Credit

Account No. 301 Balance Debit Credit 59,000 Account No. 311 Balance Debit Credit 2,400 Account No. 411 Balance Debit Credit 1,300 2,000 4,400 5,200 Account No. 511 Balance Debit Credit 1,180 2,360 Account No. 521 Balance Debit Credit 1,500 Account No. 531 Balance Debit Credit 400

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P2-31A, cont. Requirement 4 TREVOR MOORE, ATTORNEY Trial Balance January 31, 2015 Account Title

Balance

Cash Accounts Receivable Office Supplies Prepaid Insurance Furniture Building Land Accounts Payable Utilities Payable Notes Payable Common Stock Dividends Service Revenue Salaries Expense Rent Expense Utilities Expense Total

Debit $ 14,140 800 600 2,400 2,000 100,000 20,000

Credit

$ 2,000 400 80,000 59,000 2,400 5,200 2,360 1,500 400 $ 146,600

$ 146,600

P2-32A Requirement 1 Date Accounts and Explanation Feb. 4 Cash Accounts Receivable Received cash from client on account. 8 Accounts Receivable Service Revenue Performed tax services for client on account. 13 Accounts Payable Cash 2-36

Post. Ref. 11 12

Debit Credit 4,000 4,000

12 41

4,600

21 11

2,400

4,600

Horngren’s Financial & Managerial Accounting   4/e    Solutions Manual

2,400


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Paid cash on account.

P2-32A, cont. Feb. 14 Furniture Accounts Payable Purchased furniture on account.

2-37

14 21

3,000

15 Automobile Common Stock Issued common stock in exchange for automobile.

15 31

8,500

18 Office Supplies Accounts Payable Purchased office supplies on account.

13 21

900

19 Cash Accounts Receivable Received cash on account.

11 12

2,300

20 Dividends Cash Paid cash dividends.

33 11

2,200

21 Cash Service Revenue Received cash for consulting work.

11 41

2,300

24 Cash Unearned Revenue Received payment for services to be performed next month.

11 22

1,000

27 Rent Expense Cash Paid office rent.

52 11

500

28 Salaries Expense Cash Paid employee salary.

51 11

1,600

3,000

8,500

900

2,300

2,200

2,300

1,000

500

Horngren’s Financial & Managerial Accounting   4/e    Solutions Manual

1,600


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P2-32A, cont. Requirements 2 and 3 CASH Date Jan. 31 Feb. 4 Feb. 13 Feb. 19 Feb. 20 Feb. 21 Feb. 24 Feb. 27 Feb. 28

Item Balance

Post Ref. J5 J5 J5 J5 J5 J5 J5 J5

Debit

Credit

4,000 2,400 2,300 2,200 2,300 1,000 500 1,600

ACCOUNTS RECEIVABLE Date Jan. 31 Feb. 4 Feb. 8 Feb. 19

Item Balance

Post Ref. J5 J5 J5

Debit

Credit 4,000

4,600 2,300

OFFICE SUPPLIES Date Jan. 31 Feb. 18

Item Balance

Post Ref. J5

Item

Post Ref. J5

900

Debit 3,000

Account No. 14 Balance Debit Credit 3,000

Debit

Credit

Credit

AUTOMOBILE Date Feb. 15 2-38

Item

Post Ref. J5

Account No. 12 Balance Debit Credit 10,500 6,500 11,100 8,800 Account No. 13 Balance Debit Credit 600 1,500

FURNITURE Date Feb. 14

Account No. 11 Balance Debit Credit 7,000 11,000 8,600 10,900 8,700 11,000 12,000 11,500 9,900

Debit 8,500

Credit

Account No. 15 Balance Debit Credit 8,500

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P2-32A, cont. LAND Date Jan. 31

Item Balance

Post Ref.

Debit

Credit

ACCOUNTS PAYABLE Date Jan. 31 Feb. 13 Feb. 14 Feb. 18

Item Balance

Post Ref. J5 J5 J5

Debit

3,000 900

Account No. 21 Balance Debit Credit 4,700 2,300 5,300 6,200

Credit 1,000

Account No. 22 Balance Debit Credit 1,000

Credit

2,400

UNEARNED REVENUE Date Feb. 24

Item

Post Ref. J5

Debit

COMMON STOCK Date Jan. 31 Feb. 15

Item Balance

Post Ref.

Debit

J5

Credit 8,500

DIVIDENDS Date Feb. 20

Item

Post Ref. J5

Debit 2,200

Credit

SERVICE REVENUE Date Feb. 8 Feb. 21

2-39

Item

Post Ref. J5 J5

Debit

Account No. 16 Balance Debit Credit 17,000

Credit 4,600 2,300

Account No. 31 Balance Debit Credit 30,400 38,900 Account No. 33 Balance Debit Credit 2,200 Account No. 41 Balance Debit Credit 4,600 6,900

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P2-32A, cont. SALARIES EXPENSE Date Feb. 28

Item

Post Ref. J5

Debit 1,600

Credit

RENT EXPENSE Date Feb. 27

Item

Post Ref. J5

Debit 500

Credit

Account No. 51 Balance Debit Credit 1,600 Account No. 52 Balance Debit Credit 500

Requirement 4 SAM MITCHELL, CPA Trial Balance February 28, 2015 Acct. No. 11 12 13 14 15 16 21 22 31 33 41 51 52

2-40

Account Title Cash Accounts Receivable Office Supplies Furniture Automobile Land Accounts Payable Unearned Revenue Common Stock Dividends Service Revenue Salaries Expense Rent Expense Total

Balance Debit $ 9,900 8,800 1,500 3,000 8,500 17,000

Credit

$ 6,200 1,000 38,900 2,200 6,900 1,600 500 $ 53,000

$ 53,000

Horngren’s Financial & Managerial Accounting   4/e    Solutions Manual


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P2-33A SMART TOTS CHILD CARE Trial Balance August 31, 2015 Account Title

Balance

Cash Accounts Receivable Office Supplies Prepaid Insurance Equipment Accounts Payable Notes Payable Common Stock Dividends Service Revenue Salaries Expense Rent Expense Advertising Expense Total

Debit $ 10,100 15,000 1,700 3,200 78,500

Credit

$ 4,000 50,000 51,700 2,600 9,700 3,400 500 400 $ 115,400

$ 115,400

Explanations: a. Increase Cash by $1,000. b. Increase Accounts Receivable by $8,000 ($4,000 × 2). c. Increase Office Supplies and Accounts Payable by $1,000 each. d. Decrease Equipment by $8,500 ($87,000 − $78,500). e. Decrease Salaries Expense by $200. f. Advertising Expense should have a debit balance of $400. Decrease Cash by $400. g. Dividends should decrease by $1,800 and Cash should increase by $1,800 ($2,000 − $200). h. Service Revenue should increase by $5,000. i. Prepaid Insurance should increase by $2,400 ($1,200 × 2).

2-41

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P2-34A TREASURE HUNT EXPLORATION COMPANY Trial Balance February 28, 2015 Account Title

Balance

Cash Accounts Receivable Office Supplies Computers Exploration Equipment Accounts Payable Notes Payable Common Stock Dividends Service Revenue Salaries Expense Rent Expense Advertising Expense Utilities 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

Explanations: a. Decrease cash by $5,000. b. Increase Rent Expense by $680 ($340 × 2). c. Increase Service Revenue by $6,800. d. Increase Accounts Receivable by $360 ($400 − $40). e. Increase Utilities Expense by $70. f. Increase Office Supplies and Accounts Payable by $900 each.

2-42

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g. Decrease Computers by $5,810 ($22,300 − $16,490). P2-35A Requirement 1 SHARON SILVER, REGISTERED DIETICIAN Income Statement Month Ended July 31, 2015 Revenues: Service Revenue Expenses: Salaries Expense Rent Expense Utilities Expense Total Expenses Net Income

$ 8,800 $ 1,700 500 150 2,350 $ 6,450

Requirement 2 SHARON SILVER, REGISTERED DIETICIAN Statement of Retained Earnings Month Ended July 31, 2015 Retained Earnings, July 1, 2015 $ 0 Net income for the month 6,450 6,450 Dividends (2,300) $ 4,150 Retained Earnings, July 31, 2015

2-43

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P2-35A, cont. Requirements 3 SHARON SILVER, REGISTERED DIETICIAN Balance Sheet July 31, 2015 Assets Cash Accounts Receivable Office Supplies Prepaid Insurance Equipment

Total Assets

Liabilities $ 36,200 9,100 1,800 2,000 13,000

$ 62,100

Accounts Payable Unearned Revenue Notes Payable Total Liabilities Stockholders’ Equity Common Stock Retained Earnings Total Stockholders’ Equity Total Liabilities and Stockholders' Equity

Requirement 4 Debt ratio = Total liabilities / Total assets = $34,800 / $62,100 = 0.56* = 56% *rounded

2-44

Horngren’s Financial & Managerial Accounting   4/e    Solutions Manual

$

3,300 1,500 30,000 34,800 23,150 4,150 27,300

$ 62,100


Full file at http://testbank360.eu/solution-manual-horngrens-financial-managerial-accountingthe-financial-chapters-4th-edition-nobles

Problems (Group B) P2-36B Requirement 1 Date Accounts and Explanation Mar. 1 Cash Common Stock 5 Rent Expense Cash 9 Land Cash 10 Office Supplies Accounts Payable 19 Cash Notes Payable

2-45

Posting Ref.

Debit 74,000

74,000 560 560 24,000 24,000 1,300 1,300 19,000 19,000

22 Accounts Payable Cash

900

28

120

Advertising Expense Advertising Payable

Credit

900 120

31 Cash Accounts Receivable Service Revenue

7,100 4,700

31 Salaries Expense Rent Expense Utilities Expense Cash

2,000 1,600 320

31 Cash Unearned Revenue

1,400

31 Dividends Cash

8,000

11,800

3,920 1,400

Horngren’s Financial & Managerial Accounting   4/e    Solutions Manual

8,000


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P2-36B, cont. Requirement 2

2-46

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P236B, cont.

Mar. 1 Mar. 19 Mar. 31 Mar. 31 Bal.

Cash 74,000 560 19,000 24,000 7,100 900 1,400 3,920 8,000 64,120

Mar. 5 Mar. 9 Mar. 22 Mar. 31 Mar. 31

Accounts Payable Mar. 22 900 1,300 Mar. 10 400 Bal. Advertising Payable 120 Mar. 28 120 Bal.

Accounts Receivable Mar. 31 4,700 Bal. 4,700

Unearned Revenue 1,400 Mar. 31 1,400 Bal.

Mar. 10 Bal.

Office Supplies 1,300 1,300

Notes Payable 19,000 19,000

Mar. 19 Bal.

Mar. 9 Bal.

Land 24,000 24,000

Common Stock 74,000 74,000

Mar. 1 Bal.

Mar. 31 Bal.

Dividends 8,000 8,000 Service Revenue 11,800 11,800

Mar. 31 Bal.

Salaries Expense 2,000 2,000

Mar. 5 Mar. 31 Bal.

Rent Expense 560 1,600 2,160

Mar. 31 Bal.

Utilities Expense 320 320

Advertising Expense Mar. 28 120 Bal. 120 Requirement 3 2-47

Horngren’s Financial & Managerial Accounting   4/e    Solutions Manual

Mar. 31 Bal.


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VINCE ROCKFORD, MD Trial Balance March 31, 2015 Account Title

Balance

Cash Accounts Receivable Office Supplies Land Accounts Payable Advertising Payable Unearned Revenue Notes Payable Common Stock Dividends Service Revenue Salaries Expense Rent Expense Utilities Expense Advertising Expense Total

2-48

Debit $ 64,120 4,700 1,300 24,000

Credit

$

400 120 1,400 19,000 74,000

8,000 11,800 2,000 2,160 320 120 $ 106,720

$ 106,720

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P2-37B Requirement 1 Date Accounts and Explanation Nov. 1 Cash Common Stock

Debit 34,000

Credit 34,000

4 Office Supplies Furniture Accounts Payable

500 1,900

6 Cash Service Revenue

1,200

7 Land Cash

2-49

Posting Ref.

2,400 1,200 25,000 25,000

10 Accounts Receivable Service Revenue

1,200

14 Accounts Payable Cash

1,900

15 Salaries Expense Cash

1,080

1,200 1,900 1,080

17 Cash Accounts Receivable

500

20 Accounts Receivable Service Revenue

800

500 800

25 Cash Unearned Revenue

1,800

28 Cash Service Revenue

2,200

29 Prepaid Insurance Cash

2,400

30 Salaries Expense Cash

1,080

1,800 2,200 2,400

Horngren’s Financial & Managerial Accounting   4/e    Solutions Manual

1,080


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30 Rent Expense Cash

830 830

P2-37B, cont. Nov. 30 Utilities Expense Utilities Payable

250 250

30 Dividends Cash

2,700 2,700

Requirements 2 and 3

Nov. 1 Nov. 6 Nov. 17 Nov. 25 Nov. 28 Bal.

Cash 34,000 25,000 1,200 1,900 500 1,080 1,800 2,400 2,200 1,080 830 2,700 4,710

Nov. 7 Nov. 14 Nov. 15 Nov. 29 Nov. 30 Nov. 30 Nov. 30

Accounts Payable Nov. 14 1,900 2,400 Nov. 4 500 Bal. Utilities Payable 250 Nov. 30 250 Bal.

Accounts Receivable Nov. 10 1,200 500 Nov. 17 Nov. 20 800 Bal. 1,500 Nov. 4 Bal.

Office Supplies 500 500

Prepaid Insurance Nov. 29 2,400 Bal. 2,400 Nov. 4 Bal. Nov. 7 Bal.

2-50

Unearned Revenue 1,800 Nov. 25 1,800 Bal.

Furniture 1,900 1,900 Land 25,000 25,000

Common Stock 34,000 34,000 Nov. 30 Bal.

Nov. 1 Bal.

Dividends 2,700 2,700 Service Revenue 1,200 1,200 800 2,200 5,400

Salaries Expense Nov. 15 1,080 Horngren’s Financial & Managerial Accounting   4/e    Solutions Manual Nov. 30 1,080 Bal. 2,160

Nov. 6 Nov. 10 Nov. 20 Nov. 28 Bal.


Full file at http://testbank360.eu/solution-manual-horngrens-financial-managerial-accountingthe-financial-chapters-4th-edition-nobles

P2-37B, cont.

Nov. 30 Bal.

Rent Expense 830 830

Nov. 30 Bal.

Utilities Expense 250 250

Requirement 4 BETH NELSON, DESIGNER Trial Balance November 30, 2015 Account Title

Balance

Cash Accounts Receivable Office Supplies Prepaid Insurance Furniture Land Accounts Payable Utilities Payable Unearned Revenue Common Stock Dividends Service Revenue Salaries Expense Rent Expense Utilities Expense Total

2-51

Debit $ 4,710 1,500 500 2,400 1,900 25,000

Credit

$

500 250 1,800 34,000

2,700 5,400 2,160 830 250 $ 41,950

$ 41,950

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P2-38B Requirement 1 Date Accounts and Explanation Apr. 1 Cash Common Stock

2-52

Posting Ref. 101 301

Debit 62,000

Credit 62,000

3 Office Supplies Furniture Accounts Payable

121 141 201

500 2,000

4 Cash Service Revenue

101 411

1,900

7 Building Land Cash Notes Payable

151 161 101 221

120,000 30,000

11 Accounts Receivable Service Revenue

111 411

1,100

15 Salaries Expense Cash

511 101

920

16 Accounts Payable Cash

201 101

500

18 Cash Service Revenue

101 411

1,700

19 Accounts Receivable Service Revenue

111 411

700

25 Utilities Expense Utilities Payable

531 211

300

28 Cash Accounts Receivable

101 111

800

29 Prepaid Insurance Cash

131 101

1,200

29 Salaries Expense

511

920

2,500 1,900

50,000 100,000 1,100 920 500 1,700 700 300 800 1,200

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Cash

101

920

P2-38B, cont. Apr. 30 Rent Expense Cash

521 101

730

30 Dividends Cash

311 101

2,700

730 2,700

Requirements 2 and 3 CASH Date Apr. 1 Apr. 4 Apr. 7 Apr. 15 Apr. 16 Apr. 18 Apr. 28 Apr. 29 Apr. 29 Apr. 30 Apr. 30

Item

Post Ref. J1 J1 J1 J1 J1 J1 J1 J1 J1 J1 J1

Debit 62,000 1,900

Credit 50,000 920 500

1,700 800 1,200 920 730 2,700

ACCOUNTS RECEIVABLE Date Apr. 11 Apr. 19 Apr. 28

Item

Post Ref. J1 J1 J1

Debit 1,100 700

Credit 800

OFFICE SUPPLIES Date Apr. 3

Item

PREPAID INSURANCE 2-53

Post Ref. J1

Debit 500

Credit

Account No. 101 Balance Debit Credit 62,000 63,900 13,900 12,980 12,480 14,180 14,980 13,780 12,860 12,130 9,430 Account No. 111 Balance Debit Credit 1,100 1,800 1,000 Account No. 121 Balance Debit Credit 500 Account No. 131

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Date Apr. 29

Item

Post Ref. J1

Debit 1,200

Credit

Balance Debit Credit 1,200

P2-38B, cont. FURNITURE Date Apr. 3

Item

Post Ref. J1

Debit 2,000

Credit

BUILDING Date Apr. 7

Item

Post Ref. J1

Debit 120,000

Credit

LAND Date Apr. 7

Item

Post Ref. J1

Debit 30,000

Credit

ACCOUNTS PAYABLE Date Apr. 3 Apr. 16

Item

Post Ref. J1 J1

Debit

Credit 2,500

500

UTILITIES PAYABLE Date Apr. 25

Item

Post Ref. J1

Debit

Item

COMMON STOCK 2-54

Post Ref. J1

Debit

Account No. 151 Balance Debit Credit 120,000 Account No. 161 Balance Debit Credit 30,000 Account No. 201 Balance Debit Credit 2,500 2,000

Credit 300

Account No. 211 Balance Debit Credit 300

Credit 100,000

Account No. 221 Balance Debit Credit 100,000

NOTES PAYABLE Date Apr. 7

Account No. 141 Balance Debit Credit 2,000

Account No. 301

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Date Apr. 1

Item

Post Ref. J1

Debit

Credit 62,000

Balance Debit Credit 62,000

P2-38B, cont. DIVIDENDS Date Apr. 30

Item

Post Ref. J1

Debit 2,700

Credit

SERVICE REVENUE Date Apr. 4 Apr. 11 Apr. 18 Apr. 19

Item

Post Ref. J1 J1 J1 J1

Debit

Credit 1,900 1,100 1,700 700

SALARIES EXPENSE Date Apr. 15 Apr. 29

Item

Post Ref. J1 J1

Debit 920 920

Credit

RENT EXPENSE Date Apr. 30

Item

Post Ref. J1

Debit 730

Credit

UTILITIES EXPENSE Date Apr. 25

2-55

Item

Post Ref. J1

Debit 300

Credit

Account No. 311 Balance Debit Credit 2,700 Account No. 411 Balance Debit Credit 1,900 3,000 4,700 5,400 Account No. 511 Balance Debit Credit 920 1,840 Account No. 521 Balance Debit Credit 730 Account No. 531 Balance Debit Credit 300

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P2-38B, cont. Requirement 4 VINCE PEREZ, ATTORNEY Trial Balance April 30, 2015 Account Title

Balance

Cash Accounts Receivable Office Supplies Prepaid Insurance Furniture Building Land Accounts Payable Utilities Payable Notes Payable Common Stock Dividends Service Revenue Salaries Expense Rent Expense Utilities Expense Total

2-56

Debit $ 9,430 1,000 500 1,200 2,000 120,000 30,000

Credit

$

2,000 300 100,000 62,000

2,700 5,400 1,840 730 300 $ 169,700

$ 169,700

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P2-39B Requirement 1 Date

Accounts and Explanation

Posting Ref. 11 12

Debit

12 41

5,000

13 Accounts Payable Cash Paid cash on account.

21 11

2,500

14 Furniture Accounts Payable Purchased furniture on account.

14 21

4,000

15 Automobile Common Stock Issued common stock in exchange for automobile.

15 31

10,500

18 Office Supplies Accounts Payable Purchased office supplies on account.

13 21

600

19 Cash Accounts Receivable Received cash on account.

11 12

2,100

20 Dividends Cash Cash dividends were paid to stockholders.

33 11

2,300

21 Cash Service Revenue Received cash for consulting work.

11 41

2,100

24 Cash Unearned Revenue

11 22

3,000

Apr. 4 Cash Accounts Receivable Received cash from client on account. 8 Accounts Receivable Service Revenue Performed tax services for client on account.

2-57

Credit

7,000 7,000

5,000

2,500

4,000

10,500

600

2,100

2,300

2,100

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3,000


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Received payment for services to be performed next month. P2-39B, cont. Apr. 27 Rent Expense Cash Paid office rent. 28 Salaries Expense Cash Paid employee salary.

52 11

300

51 11

1,300

300

1,300

Requirements 2 and 3 CASH Date Mar. 31 Apr. 4 Apr. 13 Apr. 19 Apr. 20 Apr. 21 Apr. 24 Apr. 27 Apr. 28

Item Balance

Post Ref. J5 J5 J5 J5 J5 J5 J5 J5

Debit

Credit

7,000 2,500 2,100 2,300 2,100 3,000 300 1,300

ACCOUNTS RECEIVABLE Date Mar. 31 Apr. 4 Apr. 8 Apr. 19

Item Balance

Post Ref. J5 J5 J5

Debit

Credit 7,000

5,000 2,100

OFFICE SUPPLIES Date Mar. 31 Apr. 18 2-58

Item Balance

Post Ref. J5

Debit 600

Credit

Account No. 11 Balance Debit Credit 5,000 12,000 9,500 11,600 9,300 11,400 14,400 14,100 12,800 Account No. 12 Balance Debit Credit 8,100 1,100 6,100 4,000 Account No. 13 Balance Debit Credit 800 1,400

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P2-39B, cont. FURNITURE Date Apr. 14

Item

Post Ref. J5

Debit 4,000

Credit

AUTOMOBILE Date Apr. 15

Item

Post Ref. J5

Debit 10,500

Credit

LAND Date Mar. 31

Item Balance

Post Ref.

Debit

Credit

ACCOUNTS PAYABLE Date Mar. 31 Apr. 13 Apr. 14 Apr. 18

Item Balance

Post Ref. J5 J5 J5

Debit

Item

Post Ref. J5

Credit 3,000

Account No. 22 Balance Debit Credit 3,000

COMMON STOCK Date Mar. 31 Apr. 15

Item Balance

DIVIDENDS Date 2-59

Post Ref.

Debit

J5

Item

Post Ref.

Credit 10,500

Debit

Account No. 16 Balance Debit Credit 14,000

4,000 600

Credit

2,500

Debit

Account No. 15 Balance Debit Credit 10,500

Account No. 21 Balance Debit Credit 4,200 1,700 5,700 6,300

UNEARNED REVENUE Date Apr. 24

Account No. 14 Balance Debit Credit 4,000

Credit

Account No. 31 Balance Debit Credit 23,700 34,200 Account No. 33 Balance

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Apr. 20 P2-39B, cont.

J5

Debit 2,300

2,300

SERVICE REVENUE Date Apr. 8 Apr. 21

Item

Post Ref. J5 J5

Debit

Credit 5,000 2,100

SALARIES EXPENSE Date Apr. 28

Item

Post Ref. J5

Debit 1,300

Credit

RENT EXPENSE Date Apr. 27

Item

Post Ref. J5

Debit 300

Credit

Account No. 41 Balance Debit Credit 5,000 7,100 Account No. 51 Balance Debit Credit 1,300 Account No. 52 Balance Debit Credit 300

Requirement 4 JOHN HILTON, CPA Trial Balance April 30, 2015 Acct. No. 11 12 13 14 15 16 21 22 31 33 41 51 52

2-60

Account Title Cash Accounts Receivable Office Supplies Furniture Automobile Land Accounts Payable Unearned Revenue Common Stock Dividends Service Revenue Salaries Expense Rent Expense Total

Balance Debit $ 12,800 4,000 1,400 4,000 10,500 14,000

Credit

$ 6,300 3,000 34,200 2,300 7,100 1,300 300 $ 50,600

Credit

$ 50,600

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P2-40B BUILDING BLOCKS CHILD CARE Trial Balance May 31, 2015 Account Title

Balance

Cash Accounts Receivable Office Supplies Prepaid Insurance Equipment Accounts Payable Notes Payable Common Stock Dividends Service Revenue Salaries Expense Rent Expense Advertising Expense Total

Debit $ 10,900 7,000 1,900 4,400 87,700

Credit

$

8,200 50,000 50,800

1,700 8,700 3,100 700 300 $ 117,700

$ 117,700

Explanations: a. Increase Cash by $4,000. b. Increase Accounts Receivable by $4,000 ($2,000 × 2). c. Increase Office Supplies and Accounts Payable by $1,200 each. d. Decrease Equipment by $300 ($88,000 − $87,700). e. Decrease Salaries Expense by $100. f. Advertising Expense should have a debit balance of $300. Decrease Cash by $300. g. Dividends should decrease by $900 and Cash should increase by $900 ($1,000 − $100). h. Service Revenue should increase by $4,000. i. Prepaid Insurance should increase by $4,000 ($2,000 × 2). 2-61

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P2-41B OCEAN DIVERS EXPLORATION COMPANY Trial Balance July 31, 2015 Account Title

Balance

Cash Accounts Receivable Office Supplies Computers Exploration Equipment Accounts Payable Notes Payable Common Stock Dividends Service Revenue Salaries Expense Rent Expense Advertising Expense Utilities Expense Total

Debit $ 5,600 9,450 800 17,160 46,000

Credit

$

3,500 18,900 50,100

1,000 10,900 1,800 700 100 790 $ 83,400

$ 83,400

Explanations: a. Decrease cash by $1,000. b. Increase Rent Expense by $600 ($300 × 2). c. Increase Service Revenue by $6,000. d. Increase Accounts Receivable by $450 ($500 − $50). e. Increase Utilities Expense by $90. f. Increase Office Supplies and Accounts Payable by $600 each. g. Decrease Computers by $5,440 ($22,600 −$17,160).

2-62

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P2-42B Requirement 1 SHERMANA PETERS, REGISTERED DIETICIAN Income Statement Month Ended July 31, 2015 Revenues: Service Revenue Expenses: Salaries Expense Rent Expense Utilities Expense Total Expenses Net Income

$ 7,000 $ 1,500 300 200 2,000 $ 5,000

Requirement 2 SHERMANA PETERS, REGISTERED DIETICIAN Statement of Retained Earnings Month Ended July 31, 2015 Retained Earnings, July 1, 2015 $ 0 Net income for the month 5,000 5,000 Dividends (2,200) $ 2,800 Retained Earnings, July 31, 2015

2-63

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P2-42B, cont. Requirement 3 SHERMANA PETERS, REGISTERED DIETICIAN Balance Sheet July 31, 2015 Assets Cash Accounts Receivable Office Supplies Prepaid Insurance Equipment

Total Assets

Liabilities $ 36,800 5,500 1,400 1,000 16,000

$ 60,700

Accounts Payable Unearned Revenue Notes Payable Total Liabilities Stockholders’ Equity Common Stock Retained Earnings Total Stockholders’ Equity Total Liabilities and Stockholders’ Equity

Requirement 4 Debt ratio = Total liabilities / Total assets = $36,200 / $60,700 = 0.60* = 60% * rounded

2-64

Horngren’s Financial & Managerial Accounting   4/e    Solutions Manual

$

3,700 2,500 30,000 $ 36,200 21,700 2,800 24,500 $ 60,700


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Continuing Problem P2-43 Requirement 1 Date Accounts and Explanation Dec. 2 Cash Common Stock 2 Rent Expense Cash

Posting Ref.

Debit 18,000

18,000 550 550

3 Equipment Cash

1,800

4 Furniture Accounts Payable

4,200

5 Office Supplies Accounts Payable

900

9 Accounts Receivable Service Revenue 12 Utilities Expense Cash

Credit

1,800 4,200 900 1,500 1,500 250 250

18 Cash Service Revenue

1,100

21 Cash Unearned Revenue

1,400

1,100 1,400

21 No entry needed 26 Accounts Payable Cash

400

28 Cash Accounts Receivable

300

30 Dividends Cash 2-65

400 300 1,400

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1,400


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2-66

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P2-43, cont. Requirements 2 and 3

2-67

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Dec. 2 Dec. 18 Dec. 21 Dec. 28 Balance

Cash 18,000 550 1,100 1,800 1,400 250 300 400 1,400 16,400

Accounts Payable Dec. 26 400 4,200 900 4,700

Dec. 2 Dec. 3 Dec. 12 Dec. 26 Dec. 30

Accounts Receivable Dec. 9 1,500 300 Dec. 28 Balance 1,200 Dec. 5 Balance

Office Supplies 900 900

Dec. 3 Balance

Equipment 1,800 1,800

Dec. 4 Balance

Furniture 4,200 4,200

Unearned Revenue 1,400 Dec. 21 1,400 Balance Common Stock 18,000 18,000

Service Revenue 1,500 1,100 2,600 Dec. 2 Balance

Rent Expense 550 550

Dec. 12 Balance

Utilities Expense 250 250

DAVIS CONSULTING Trial Balance December 31, 2014 Balance

Cash Accounts Receivable Office Supplies Equipment Furniture 2-68

Dec. 2 Balance

Dividends Dec. 30 1,400 Balance 1,400

Requirement 4

Account Title

Dec. 4 Dec. 5 Balance

Debit $ 16,400 1,200 900 1,800 4,200

Credit

Horngren’s Financial & Managerial Accounting   4/e    Solutions Manual

Dec. 9 Dec. 18 Balance

P2-43, cont.


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Accounts Payable Unearned Revenue Common Stock Dividends Service Revenue Rent Expense Utilities Expense Total

$ 4,700 1,400 18,000 1,400 2,600 550 250 $ 26,700

$ 26,700

Requirement 5 DAVIS CONSULTING Income Statement Month Ended December 31, 2014 Revenues: Service Revenue Expenses: Rent Expense Utilities Expense Total Expenses Net Income

$ 2,600 $ 550 250 800 $ 1,800

P2-43, cont. Requirement 6 DAVIS CONSULTING Statement of Retained Earnings Month Ended December 31, 2014 Retained Earnings, December 1, 2014 Net income for the month Dividends Retained Earnings, December 31, 2014 2-69

$

0 1,800 1,800 (1,400) $ 400

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Requirement 7 DAVIS CONSULTING Balance Sheet December 31, 2014 Assets Cash Accounts Receivable Office Supplies Equipment Furniture

Total Assets

Liabilities $ 16,400 1,200 900 1,800 4,200

$ 24,500

Accounts Payable Unearned Revenue Total Liabilities Stockholders’ Equity Common Stock Retained Earnings Total Stockholders’ Equity Total Liabilities and Stockholders’ Equity

Requirement 8 Debt ratio = Total liabilities / Total assets = $6,100 / $24,500 = 0.25* = 25% * rounded

2-70

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$

4,700 1,400 $ 6,100

18,000 400 18,400 $ 24,500


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Practice Set P2-44 Requirement 1 Date Accounts and Explanation Nov. 1 Cash Truck Common Stock

Debit 35,000 8,000 2,000

3 Prepaid Insurance Cash

2,400

2,000 2,400

4 Cleaning Supplies Accounts Payable

270

5 Equipment Accounts Payable

1,000

7 Equipment Cash

1,200

9 Accounts Receivable Service Revenue

3,000

270 1,000 1,200 3,000

10 Cash Accounts Receivable

100

15 Salaries Expense Cash

500

100 500 3,600 3,600

17 Cash Service Revenue

800

18 Utilities Expense Accounts Payable

175

20 Cash Notes Payable

Credit 43,000

2 Prepaid Rent Cash

16 Cash Unearned Revenue

2-71

Posting Ref.

800 175 40,000

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40,000


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P2-44, cont. Nov. 21 Cash Accounts Receivable

900 900

25 Accounts Payable Cash

500

29 Advertising Expense Cash

100

30 Dividends Cash

600

500 100

P2-44, cont. Requirements 2 and 3

2-72

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600


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Nov. 1 Nov. 10 Nov. 16 Nov. 17 Nov. 20 Nov. 21 Balance

Cash 35,000 2,000 100 2,400 3,600 1,200 800 500 40,000 500 900 100 600 73,100

Nov. 2 Nov. 3 Nov. 7 Nov. 15 Nov. 25 Nov. 29 Nov. 30

Accounts Payable Nov. 25 500 270 Nov. 4 1,000 Nov. 5 175 Nov. 18 945 Balance

Accounts Receivable Nov. 9 3,000 100 Nov. 10 900 Nov. 21 Balance 2,000

Unearned Revenue 3,600 Nov. 16 3,600 Balance

Cleaning Supplies Nov. 4 270 Balance 270

Notes Payable 40,000 40,000

Nov. 20 Balance

Nov. 2 Balance

Prepaid Rent 2,000 2,000

Common Stock 43,000 43,000

Nov. 1 Balance

Nov. 3 Balance

Prepaid Insurance 2,400 2,400

Dividends 600 600

Nov. 30 Balance

P2-44, cont. Requirements 2 and 3

2-73

Nov. 5 Nov. 7 Balance

Equipment 1,000 1,200 2,200

Nov. 1 Balance

Truck 8,000 8,000

Service Revenue 3,000 Nov. 9 800 Nov. 17 3,800 Balance Nov. 15 Balance

Salaries Expense 500 500

Nov. 29 Balance

Advertising Expense 100 100

Utilities Expense Nov. 18 175 Horngren’s Financial & Managerial Accounting   4/e    Solutions Manual Balance 175


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Requirement 4 SHINE KING CLEANING Trial Balance November 30, 2015 Account Title

Balance

Cash Accounts Receivable Cleaning Supplies Prepaid Rent Prepaid Insurance Equipment Truck Accounts Payable Unearned Revenue Notes Payable Common Stock Dividends Service Revenue Salaries Expense Advertising Expense Utilities Expense Total

Debit $ 73,100 2,000 270 2,000 2,400 2,200 8,000

Credit

$

945 3,600 40,000 43,000

600 3,800 500 100 175 $ 91,345

$ 91,345

Critical Thinking Decision Case 2-1 Requirements 1 and 2

2-74

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Cash a. 10,000 300 b. f. 1,200 2,400 d. Bal. 8,500

Accounts Payable 700 c. 700 Bal.

Accounts Receivable e. 8,800 1,200 f. Bal. 7,600

Common Stock 10,000 a. 10,000 Bal.

Office Supplies b. 300 Bal. 300

Service Revenue 8,800 e. 8,800 Bal. Salaries Expense d. 1,400 Bal. 1,400 Rent Expense d. 1,000 Bal. 1,000 Advertising Expense c. 700 Bal. 700

2-75

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Decision Case 2-1, cont. Requirement 3 A-PLUS TRAVEL PLANNERS Trial Balance June 30, 2016 Account Title

Balance

Cash Accounts Receivable Office Supplies Accounts Payable Common Stock Service Revenue Salaries Expense Rent Expense Advertising Expense Total

Debit $ 8,500 7,600 300

Credit

$ 1,400 1,000 700 $ 19,500

700 10,000 8,800

$ 19,500

Requirement 4 Revenues: Service Revenue Expenses: Salaries Expense Rent Expense Advertising Expense Total Expenses Net Income

2-76

$ 8,800 $ 1,400 1,000 700 3,100 $ 5,700

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McChesney should discontinue the business because net income falls below the target amount.

Decision Case 2-2 Requirement 1 The advantage of double-entry bookkeeping it that it provides an arithmetic check on the accounting transactions; the total debits and total credits have to equal, and something is wrong if they don’t. Double-entry bookkeeping can also handle a higher number of transactions than using the accounting equation. Requirement 2 The bank uses the term “credit your account” when you deposit money, because it is crediting a liability on their books. They owe you the funds that you just deposited.

Ethical Issue 2-1 The bank has a standing agreement with Better Days Ahead for overdrafts, so as long as transactions are compliant with terms of the agreement, there is no ethical issue. The exercise refers to Better Days Ahead managing funds “wisely.” However, whether funds are managed wisely or not is a matter of prudent business management and not an ethical issue. Presumably if Better Days Ahead was exceeding the terms of the agreement, the bank would cancel the arrangement. Some students may point out that the agreement was for times when donations were running low, whereas the reasons given for the overdraft are for expansion and fundraising. If this is interpreted to mean that Better Days Ahead is abusing the privilege according to the terms of the agreement, then there may be an ethical issue involved, but that is not made clear by the information given. Students may approve of Henson’s cash management if the arrangement is beneficial to Better Days Ahead, and thus helps them accomplish their charitable mission more effectively. Students may disapprove of Henson’s cash management if (a) they feel it is “unwise” (poor business management), or (b) if they believe he is exceeding the terms of the agreement. Fraud Case 2-1 Requirement 1 By changing an expense to an asset, the total expenses will decrease and net income will increase. Requirement 2 The CEO gained by earning a bonus, and the accounting manager may have gained by getting favorable treatment from the CEO. The shareholders of the company lost, because the company paid out the bonus under fraudulent conditions.

2-77

Horngren’s Financial & Managerial Accounting   4/e    Solutions Manual


Full file at http://testbank360.eu/solution-manual-horngrens-financial-managerial-accountingthe-financial-chapters-4th-edition-nobles

Financial Statement Case 2-1 Requirement 1 Debt ratio = Total liabilities / Total assets = $2,973.1 (in millions) / $7,360.4 (in millions) = 0.403* = 40.3% * rounded Requirement 2 Starbucks has approximately the same debt ratio than Green Mountain (40.0%). Team Project 2-1 Requirements 1 and 2 Student answers will vary widely, as the various groups use the charts of accounts of different businesses. The financial statements that the students prepare should be consistent with the business’s chart of accounts. Communication Activity 2-1 Debits are on the left, credits are on the right. Normal balance for assets, expenses, and dividends is a debit. For liability, common stock, and revenue accounts, the normal balance is a credit.

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Horngren’s Financial & Managerial Accounting   4/e    Solutions Manual

Solution manual horngrens financial managerial accounting the financial chapters 4th edition nobles  

solution manual horngrens financial managerial accounting the financial chapters 4th edition nobles. Full file at http://testbank360.eu...

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