chapter 02 demonstration problems recording business transactions copyright © 2014 pearson...
TRANSCRIPT
Chapter 02
Demonstration Problems
Recording Business
Transactions
Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall 2-1
Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall2-2
The following transactions occurred for Mission Cable Services.
E2-16D
July 2 Received $20,000 contribution from Thomas in exchange for Common Stock
4 Paid utilities expense of $800.
5 Purchased equipment on account, $4,200.
10 Performed services for a client on account, $4,000.
12 Borrowed $14,000 cash, signing a notes payable.
19 Cash dividends of $1,000 were paid to stockholders.
21 Purchased office supplies for $1,600 and paid cash.
27 Paid the liability from July 5.
Requirements
1. Journalize the transactions of Mission Cable Services. Include an explanation.2. Open T-accounts for Mission Cable Services.3. Compute the July 31 balance for each account.
Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall2-3
E2-16D—Req.1 and 2
Date Accounts and Explanation Debit Credit
Jul. 2 Cash 20,000
Common Stock 20,000
Issued common stock in exchange for cash.
Cash
Jul. 2
20,000
Common Stock
20,000 Jul. 2
July 2 Received $20,000 contribution from Thomas in exchange for common stock.
Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall2-4
July 4 Paid utilities expense of $800.
E2-16D—Req.1 and 2
Date Accounts and Explanation Debit Credit
Jul. 4 Utilities Expense 800
Cash 800
Paid utility expense.
Cash
Jul. 2
20,000
800 Jul. 4
Utilities Expense
Jul. 4 800
Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall2-5
July 5 Purchased equipment on account, $4,200.
E2-16D—Req.1 and 2
Date Accounts and Explanation Debit Credit
Jul. 5 Equipment 4,200
Accounts Payable 4,200
Purchased equipment on account.
Equipment
Jul. 5 4,200
Accounts Payable
4,200 Jul. 5
Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall2-6
July 10 Performed services for a client on account, $4,000.
E2-16D—Req.1 and 2
Date Accounts and Explanation Debit Credit
Jul. 10 Accounts Receivable 4,000
Service Revenue 4,000
Performed services for client on account.
Accounts Receivable
Jul. 10
4,000
Service Revenue
4,000 Jul. 10
Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall2-7
July 12 Borrowed $14,000 cash, signing a notes payable.
E2-16D—Req.1 and 2
Date Accounts and Explanation Debit Credit
Jul. 12 Cash 14,000
Notes Payable 14,000
Borrowed cash by signing note.
Cash
Jul. 2 20,000 800 Jul. 4
12 14,000
Notes Payable
14,000 Jul. 12
Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall2-8
July 19 Cash dividends of $1,000 were paid to stockholders.
E2-16D—Req.1 and 2
Date Accounts and Explanation Debit Credit
Jul. 19 Dividends 1,000
Cash 1,000
Paid cash dividends.
Cash
Jul. 2 20,000 800 Jul. 4
12 14,000 1,000 19
Dividends
Jul. 19 1,000
Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall2-9
July 21 Purchased office supplies for $1,600 and paid cash.
E2-16D—Req.1 and 2
Date Accounts and Explanation Debit Credit
Jul. 21 Office Supplies 1,600
Cash 1,600
Purchased office supplies with cash.
Cash
Jul. 2 20,000 800 Jul. 4
12 14,000 1,000 19
1,600 21
Office Supplies
Jul. 21 1,600
Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall2-10
July 27 Paid the liability from July 5.
E2-16D—Req.1 and 2
Date Accounts and Explanation Debit Credit
Jul. 21 Accounts Payable 4,200
Cash 4,200
Paid cash on account.
Cash
Jul. 2 20,000 800 Jul. 4
12 14,000 1,000 19
1,600 21
4,200 27
Accounts Payable
Jul. 27 4,200 4,200 Jul. 5
Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall 2-11
E2-16D—Req.3
Cash
Jul. 2 20,000 800 Jul. 4
12 14,000 1,000 19
1,600 21
4,200 27
Bal. 26,400
Accounts Receivable
Jul. 10
4,000
Bal. 4,000
Office Supplies
Jul. 21 1,600
Bal. 1,600
Equipment
Jul. 5 4,200
Bal. 4,200
Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall 2-12
E2-16D—Req.3
Accounts Payable
Jul. 27 4,200 4,200 Jul. 5
0 Bal.
Notes Payable
14,000 Jul.12
14,000 Bal.
Common Stock
20,000 Jul. 2
20,000 Bal.
Dividends
Jul. 19 1,000
Bal. 1,000
Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall 2-13
E2-16D—Req.3
Service Revenue
4,000 Jul.10
4,000 Bal.
Utilities Expense
Jul. 4 800
Bal. 800
Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall 2-14
The following trial balance of Luxury Tours and Travels Service as of Mar 31, 2014, does not balance.
E2-27D
LUXURY TOURS AND TRAVELS SERVICES Trial Balance March 31, 2014
Balance
Account Title Debit Credit Cash $5,000 Accounts Receivable 3,000 Office Supplies 1,000 Computer Equipment 15,000 Accounts Payable $10,000 Utilities Payable 400 Common Stock 12,000 Dividends 8,000 Service Revenue 9,000 Salaries Expense 1,500 Rent Expenses 500 Utilities Expense 600 Total $34,600 $31,400
Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall 2-15
E2-27D
Investigation of the accounting records reveals that the bookkeeper:
a. Recorded a $200 cash revenue transaction by debiting Accounts Receivable. The credit entry was correct.
b. Posted a $2,250 credit to Accounts Payable as $250.
c. Did not record Utilities Expense or the related Utilities Payable in the amount.
d. Understated Common Stock by $1,000.
Requirement
Prepare the corrected trial balance as of March 31, 2014, complete with a heading; journal entries are not required.
Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall 2-16
E2-27D
LUXURY TOURS AND TRAVELS SERVICES Trial Balance March 31, 2014
Balance Correction Corrected Balance Account Title Debit Credit Debit Credit Debit Credit
Cash $5,000 $200 $5,200 Accounts Receivable 3,000 $200 2,800
a. Recorded a $200 cash revenue transaction by debiting Accounts Receivable. The credit entry was correct.
Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall 2-17
E2-27D
LUXURY TOURS AND TRAVELS SERVICES Trial Balance March 31, 2014
Balance Correction Corrected Balance Account Title Debit Credit Debit Credit Debit Credit
Cash $5,000 $200 $5,200 Accounts Receivable 3,000 $200 2,800
Accounts Payable $10,000 2,000 $12,000
b. Posted a $2,250 credit to Accounts Payable as $250
Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall 2-18
E2-27D
LUXURY TOURS AND TRAVELS SERVICES Trial Balance March 31, 2014
Balance Correction Corrected Balance Account Title Debit Credit Debit Credit Debit Credit
Cash $5,000 $200 $5,200 Accounts Receivable 3,000 $200 2,800
Accounts Payable $10,000 2,000 $12,000 Utilities Payable 400 300 700
Utilities Expense 600 300 900
c. Did not record Utilities Expense or the related Utilities Payable in the amount of $300.
Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall 2-19
E2-27D
LUXURY TOURS AND TRAVELS SERVICES Trial Balance March 31, 2014
Balance Correction Corrected Balance Account Title Debit Credit Debit Credit Debit Credit
Cash $5,000 $200 $5,200 Accounts Receivable 3,000 $200 2,800
Accounts Payable $10,000 2,000 $12,000 Utilities Payable 400 300 700 Common Stock 12,000 1,000 13,000
Utilities Expense 600 300 900
d. Understated Common Stock by $1,000.
Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall 2-20
E2-27D
LUXURY TOURS AND TRAVELS SERVICES Trial Balance March 31, 2014
Balance Correction Corrected Balance Account Title Debit Credit Debit Credit Debit Credit
Cash $5,000 $200 $5,200 Accounts Receivable 3,000 $200 2,800 Office Supplies 800 800 Computer Equipment 15,000 15,000 Accounts Payable $10,000 2,000 $12,000 Utilities Payable 400 300 700 Common Stock 12,000 1,000 13,000 Dividends 8,000 8,000 Service Revenue 9,000 9,000 Salaries Expense 1,500 1,500 Rent Expenses 500 500 Utilities Expense 600 300 900 Total $34,400 $31,400 $34,700 $34,700
Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall 2-21
Peter Scott, M.D. reported the following trial balance as of June 30, 2015.
E2-28D
Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall 2-22
E2-28D PETER SCOTT, M.D.
Trial Balance 30-June-15
Balance Account Title Debit Credit Cash 50,000 Accounts Receivable 10,000 Office Supplies 4,000 Office Equipment 15,000 Building 100,000 Land 30,000 Accounts Payable 4,000 Utilities Payable 1,500 Unearned Revenue 20,000 Notes Payable 80,000 Common Stock 140,000 Dividends 75,000 Service Revenue 70,000 Salaries Expense 30,000 Utilities Expense 1,000 Advertising Expense 500 Total $315,500 $315,500
Calculate the debt equity ratio for Peter Scott, M.D..
Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall 2-23
E2-28DAccounts Payable $4,000 Accounts Receivable $10,000 Utilities Payable 1,500 Office Supplies 4,000 Unearned Revenue 20,000 Office Equipment 15,000 Notes Payable 80,000 Building 100,000
Cash 50,000 Land 30,000
Debt ratio ═ Total liabilities ∕ Total assets
Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall 2-24
E2-28DAccounts Payable $4,000 Accounts Receivable $10,000 Utilities Payable 1,500 Office Supplies 4,000 Unearned Revenue 20,000 Office Equipment 15,000 Notes Payable 80,000 Building 100,000
Cash $50,000 Land 30,000
Liabilities Assets
Accounts Payable $4,000
Utilities Payable 1,500
Unearned Revenue 20,000
Notes Payable 80,000
Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall 2-25
E2-28DAccounts Payable $4,000 Accounts Receivable $10,000 Utilities Payable 1,500 Office Supplies 4,000 Unearned Revenue 20,000 Office Equipment 15,000 Notes Payable 80,000 Building 100,000
Cash $50,000 Land 30,000
Liabilities Assets
Accounts Payable $4,000 Cash $50,000
Utilities Payable 1,500 Accounts Receivable 10,000
Unearned Revenue 20,000 Office Supplies 4,000
Notes Payable 80,000 Office Equipment 15,000
Building 100,000
Land 30,000
Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall 2-26
E2-28DAccounts Payable $4,000 Accounts Receivable $10,000 Utilities Payable 1,500 Office Supplies 4,000 Unearned Revenue 20,000 Office Equipment 15,000 Notes Payable 80,000 Building 100,000
Cash $50,000 Land 30,000
Liabilities Assets
Accounts Payable $4,000 Cash $50,000
Utilities Payable 1,500 Accounts Receivable 10,000
Unearned Revenue 20,000 Office Supplies 4,000
Notes Payable 80,000 Office Equipment 15,000
Building 100,000
Land 30,000
Total liabilities $105,500 Total assets $209,000
Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall 2-27
E2-28D
Debt ratio ═ Total liabilities ∕ Total assets
═ $105,000 ∕ $209,000
Total Assets $209,000
Total Liabilities $105,500
Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall 2-28
E2-28D
Debt ratio ═ Total liabilities ∕ Total assets
═ $105,000 ∕ $209,000
═ 0.50 or 50%
Total Assets $209,000
Total Liabilities $105,500
End of Chapter 2
2-29Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall