Week One Exercise Assignment
Basic Accounting Equations
Week_One_Exercise_Assignment_B.docx 1. Recognition of normal balances
The following items appeared in the accounting
records of Triguero’s, a retail music store that also sponsors concerts.
Classify each of the items as an asset, liability; revenue; or expense from the
company’s viewpoint. Also indicate the normal account balance of each item.
a. Amounts
paid to a mall for rent.
b. Amounts
to be paid in 10 days to suppliers.
c. A
new fax machine purchased for office use.
d. Land
held as an investment.
e. Amounts
due from customers.
f. Daily
sales of merchandise sold.
g. Promotional
costs to publicize a concert.
h. A
long-term loan owed to Citizens Bank.
i. The
albums, tapes, and CDs held for sale to customers.
2.Basic journal entries
The
following transactions pertain to the Jennifer Royall Company:
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May 1
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Jennifer Royall invested cash of $25,000
and land valued at $15,000 into the business.
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5
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Provided $1,000 of services to Jason
Ratchford, a client, on account.
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9
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Paid $1,250 of salaries to an employee.
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14
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Acquired a new computer for $4,200, on
account.
|
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20
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Collected $800 from Jason Ratchford for
services provided on May 5.
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24
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Borrowed $2,500 from BestBanc by securing a
six-month loan.
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Prepare
journal entries (and explanations) to record the preceding transactions and
events.
3.
Balance sheet preparation. The
following data relate to Preston Company as of December 31, 20XX:
Building $40,000 Accounts
receivable $24,000
Cash 21,000 Loan payable 30,000
J. Preston, Capital 65,000 Land 21,000
Accounts payable ?
Prepare a balance sheet as of December 31, 20XX.
(See Exhibit 1.1 and 1.4)
4. Basic
transaction processing. On November
1 of the current year, Richard Simmons established a sole proprietorship. The
following transactions occurred during the month:
1: Simmons invested
$32,000 into the business for $32,000 in common stock.
2: Paid $5,000 to
acquire a used minivan.
3: Purchased $1,800 of
office furniture on account.
4: Performed $2,100 of
consulting services on account.
5: Paid $300 of repair
expenses.
6: Received $800 from
clients who were previously billed in item 4.
7: Paid $500 on
account to the supplier of office furniture in item 3.
8: Received a $150
electric bill, to be paid next month.
9: Simmons withdrew $800
from the business.
10: Received $250 in
cash from clients for consulting services rendered.
Instructions
a. Arrange the following asset, liability, and
owner’s equity elements of the accounting equation: Cash, Accounts Receivable, Office Furniture, Van,
Accounts Payable, Common Stock/Dividends, and Revenues/Expenses. (See Exhibit
1.5)
b. Record each transaction on a separate line.
After all transactions have been recorded, compute the balance in each of the
preceding items.
c. Answer the following questions for Simmons.
(1) How much does the company owe to its
creditors at month-end? On which financial statement(s) would this information
be found?
(2) Did the company have a “good” month from
an accounting viewpoint? Briefly explain.
5. Transaction analysis and statement preparation. The transactions
that follow
relate to Burton
Enterprises for March 20X1, the company’s first month of activity.
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3/1
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Joanne
Burton, the owner, invested $20,000 cash into the business.
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3/4
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Performed
$2,400 of services on account.
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3/7
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Acquired
a small parcel of land by paying $6,000 cash
|
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3/12
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Received
$500 from a client who was billed previously on March 4.
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3/15
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Paid
$200 to the Journal Herald for advertising expense.
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3/18
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Acquired
9,000 of equipment from Park Central Outfitters by Paying
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$7,000
down and agreeing to remit the balance owed within two weeks (A/P).
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3/22
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Received
$300 cash from clients for services.
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3/24
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Paid
$1,500 on account to Park Central Outfitters in partial settlement of
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the
balance due from the transaction on March 18.
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3/28
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Rented a
car from United Car Rental for use on March 28. Total charges
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amounted
to $125, with United billing Burton for the
amount due.
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3/31
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Paid
$600 for March wages
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3/31
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Processed
a $600 cash withdrawal (dividend) from the business for Joanne Burton
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Instructions
a. Determine the impact of each of
the preceding transactions on Burton’s assets,
liabilities, and owner’s equity. See
exhibit 1.5. Use the following format:
Assets
= Liabilities
+ Owner’s Equity
Cash, Accounts Receivable,
Land, Equipment Accounts
Payable (+)Common Stock (+) Revenues
(-) Dividends (-) Expenses
a. Record each transaction on a
separate line. Calculate balances only after the last transaction has been
recorded.
b. Prepare an income statement, a
statement of retained earnings, and a balance sheet, (See Exhibit 1.2, 1.3 and
1.4)
6. Entry and trial balance preparation.
Lee Adkins is a portrait artist. The following schedule represents Lee’s
combined chart of accounts and trial balance as of May 31.
Account number Account name Debit Credit
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110
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Cash
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$ 2,700
|
|
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120
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Accounts
Receivable
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12,100
|
|
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130
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Equipment and
Supplies
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2,800
|
|
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140
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Studio
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45,000
|
|
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210
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Accounts Payable
|
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$2,600
|
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310
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Lee Adkins,
Capital
|
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57,400
|
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320
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Lee Adkins,
Drawing
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30,000
|
|
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410
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Professional Fee
Revenue
|
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39,000
|
|
510
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Advertising
Expense
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2,300
|
|
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520
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Salaries Expense
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2,100
|
|
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540
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Utilities Expense
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2,000
|
|
|
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$99,000
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$99,000
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The
general ledger also revealed account no. 530, Legal and Accounting Expense. The
following transactions occurred during June:
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6/2
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Collected
$3,000 on account from customers
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6/7
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Sold 25%
of the equipment and supplies to a young artist for $700 cash
|
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6/10
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Received
a $300 invoice from the accountant for preparing last quarter’s financial
Statements.
|
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6/15
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Paid
$1,900 to creditors on account.
|
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6/27
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Adkins
withdrew $2,000 cash for personal use.
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6/30
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Billed a
customer $3,000 for a portrait painted this month.
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|
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a.
Record the necessary journal entries for June on page 2 of the company’s
general journal. (See Exhibit 2.6)
b. Open running balance ledger
“T” accounts by entering account titles, account numbers, and May 31 balances.
(See exhibit 2.3 and 2.4)
c. Post the journal entries to
the “T” accounts.
d.
Prepare a trial balance as of June 30. (See exhibit 2.9)
7.
Journal entry preparation. On January 1 of the current
year, Peter Houston invested $80,000 cash into his company MuniServ. The cash
was obtained from an owner investment by Peter Houston of $50,000 and a $30,000
bank loan. Shortly thereafter, the company acquired selected assets of a
bankrupt competitor. The acquisition included land ($10,000), a building
($40,000), and vehicles ($10,000). MuniServ paid $45,000 at the time of the
transaction and agreed to remit the remaining balance due of $15,000 (an
account payable) by February 15.
During
January, the company had additional cash outlays for the following items:
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Purchases of store equipment
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$4,600
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Note payment
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500
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Salaries expense
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2,300
|
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Advertising expense
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700
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The January utility bill of $200 was received on
January 31 and will be paid next month. MuniServ rendered services to clients
on account amounting to $9,400. All
customers have been billed; by month end, $3,700 had been received in
settlement of account balances.
Instructions
a.
Present journal entries that reflect
MuniServ’s January transactions, including the $80,000 raised from the owner
investment and loan. (See exhibit 2.6)
b.
Compute the total debits, total credits, and
ending balance that would be found in the
company’s Cash account. (Post to “T” Accounts, see exhibit 2.3 and 2.4)
c. Determine the amount that would
be shown on the January 31 trial balance for Accounts
Payable. Is the balance a debit
or a credit?
