Recording Business Transactions
Horngren'S Financial And Managerial Accounting ยท 123 exercises
Q39PGB
Correcting errors in a trial balance
The trial balance of Love to Learn Child Care does not balance.
Account Title Debit Credit
Office Supplies 1,000
Cash 8,060
Accounts Receivable 8,700
Prepaid Insurance 1,700
Equipment 90,400
Accounts Payable 3,000
Notes Payable 45,000
Common Stock 54,000
Dividends 3,740
Service Revenue 16,300
Rent Expense 400
Salaries Expense 4,350
Total Balance \( 118,350 \) 118,300
The following errors are detected:
a. Cash is understated by \(1,800.
b. A \)3,800 debit to Accounts Receivable was posted as a credit.
c. A \(1,000 purchase of office supplies on account was neither journalized nor posted.
d. Equipment was incorrectly transferred from the ledger as \)90,400. It should have been transferred as \(82,500.
e. Salaries Expense is overstated by \)350.
f. A \(300 cash payment for advertising expense was neither journalized nor posted.
g. A \)160 cash dividend was incorrectly journalized as \(1,600.
h. Service Revenue was understated by \)4,000.
i. A 12-month insurance policy was posted as a $1,400 credit to Prepaid Insurance. Cash was posted correctly.
Prepare the corrected trial balance as of May 31, 2018. Journal entries are not required.
3 step solution
40PGB_4
Question: Preparing financial statements from the trial balance and calculating the debt ratio
Preparing financial statements from the trial balance and calculating the debt ratio
Account Title Debit Credit
Office Supplies 1,400
Cash 32,000
Accounts Receivable 9,100
Prepaid Insurance 2,600
Equipment 24,000
Accounts Payable 3,400
Unearned Revenue 1,296
Notes Payable 34,000
Common Stock 20,000
Dividends 3,000
Salaries Expense 1,600
Rent Expense 700
Utilities Expense 100
Service Revenue 15,804
Total Balance \( 74,500 \) 74,500
Requirements 4. Calculate the debt ratio as of July 31, 2018.
2 step solution
40PGB_3
Question: Preparing financial statements from the trial balance and calculating the debt ratio
Preparing financial statements from the trial balance and calculating the debt ratio
Account Title Debit Credit
Office Supplies 1,400
Cash 32,000
Accounts Receivable 9,100
Prepaid Insurance 2,600
Equipment 24,000
Accounts Payable 3,400
Unearned Revenue 1,296
Notes Payable 34,000
Common Stock 20,000
Dividends 3,000
Salaries Expense 1,600
Rent Expense 700
Utilities Expense 100
Service Revenue 15,804
Total Balance \( 74,500 \) 74,500
Requirements Prepare the balance sheet as of July 31, 2018.
2 step solution
40PGB_2
Question: Preparing financial statements from the trial balance and calculating the debt ratio
Preparing financial statements from the trial balance and calculating the debt ratio
Account Title Debit Credit
Office Supplies 1,400
Cash 32,000
Accounts Receivable 9,100
Prepaid Insurance 2,600
Equipment 24,000
Accounts Payable 3,400
Unearned Revenue 1,296
Notes Payable 34,000
Common Stock 20,000
Dividends 3,000
Salaries Expense 1,600
Rent Expense 700
Utilities Expense 100
Service Revenue 15,804
Total Balance \( 74,500 \) 74,500
Requirements 2. Prepare the statement of retained earnings for the month ended July 31, 2018. The beginning balance of retained earnings was $0.
2 step solution
40PGB_1
Question: Preparing financial statements from the trial balance and calculating the debt ratio
Preparing financial statements from the trial balance and calculating the debt ratio
Account Title Debit Credit
Office Supplies 1,400
Cash 32,000
Accounts Receivable 9,100
Prepaid Insurance 2,600
Equipment 24,000
Accounts Payable 3,400
Unearned Revenue 1,296
Notes Payable 34,000
Common Stock 20,000
Dividends 3,000
Salaries Expense 1,600
Rent Expense 700
Utilities Expense 100
Service Revenue 15,804
Total Balance \( 74,500 \) 74,500
Requirements 1. Prepare the income statement for the month ended July 31, 2018
2 step solution
Q42CP
Journalizing transactions, posting to T-accounts, and preparing a trial balance
Problem P2-42 continues with the company introduced in Chapter 1, Canyon Canoe Company. Here you will account for Canyon Canoe Company’s transactions as it is actually done in practice. Begin by reviewing the transactions from Chapter 1. The transactions have been reprinted below.
Nov. 1 Received \(16,000 cash to begin the company and issued common stock to Amber and Zach.
2 Signed a lease for a building and paid \)1,200 for the first month’s rent.
3 Purchased canoes for \(4,800 on account.
4 Purchased office supplies on account, \)750.
7 Earned \(1,400 cash for rental of canoes.
13 Paid \)1,500 cash for wages.
15 Paid \(50 dividends to stockholders.
16 Received a bill for \)150 for utilities. (Use separate payable account.)
20 Received a bill for \(175 for cell phone expenses. (Use separate payable account.)
22 Rented canoes to Early Start Daycare on account, \)3,000.
26 Paid \(1,000 on account related to the November 3 purchase.
28 Received \)750 from Early Start Daycare for canoe rental on November 22.
30 Paid \(100 dividends to stockholders
In addition, Canyon Canoe Company completed the following transactions for December.
Dec. 1 Amber and Zack contributed land on the river (worth \)85,000) and a small building to use as a rental office (worth \(35,000) in exchange for common stock.
1 Prepaid \)3,000 for three months’ rent on the warehouse where the company stores the canoes.
2 Purchased canoes signing a note payable for \(7,200
4 Purchased office supplies on account for \)500.
9 Received \(4,500 cash for canoe rentals to customers.
15 Rented canoes to customers for \)3,500, but will be paid next month.
16 Received a \(750 deposit from a canoe rental group that will use the canoes next month.
18 Paid the utilities and telephone bills from last month.
19 Paid various accounts payable, \)2,000.
20 Received bills for the telephone (\(325) and utilities (\)295) which will be paid later.
31 Paid wages of \(1,800. 31 Paid cash dividend to stockholders, \)300.
Requirements
1. Journalize the transactions for both November and December, using the following accounts: Cash; Accounts Receivable; Office Supplies; Prepaid Rent; Land; Building; Canoes; Accounts Payable; Utilities Payable; Telephone Payable; Unearned Revenue; Notes Payable; Common Stock; Dividends; Canoe Rental Revenue; Rent Expense; Utilities Expense; Wages Expense; and Telephone Expense. Explanations are not required. (Hint: For November transactions, refer to your answer for Chapter 1.)
2. Open a T-account for each of the accounts.
3. Post the journal entries to the T-accounts, and calculate account balances. Formal posting references are not required.
4. Prepare a trial balance as of December 31, 2018.
5. Prepare the income statement of Canyon Canoe Company for the two months ended December 31, 2018.
6. Prepare the statement of retained earnings for the two months ended December 31, 2018.
7. Prepare the balance sheet as of December 31, 2018.
8. Calculate the debt ratio for Canyon Canoe Company at December 31, 2018
7 step solution
43PS
Journalizing transactions, posting to T-accounts, and preparing a trial balance
Consider the following transactional data for the first month of operations for Crystal Clear Cleaning.
Nov. 1 Stockholders contributed \(15,000 and a truck, with a market value of \)3,000, to the business in exchange for common stock.
2 The business paid \(4,000 to Pleasant Properties for November through February rent. (Debit Prepaid Rent)
3 Paid \)4,800 for a business insurance policy for the term November 1, 2018 through October 31, 2019. (Debit Prepaid Insurance)
4 Purchased cleaning supplies on account, \(320.
5 Purchased on account an industrial vacuum cleaner costing \)1,500. The invoice is payable November 25.
7 Paid \(3,900 for a computer and printer.
9 Performed cleaning services on account in the amount of \)4,700.
10 Received \(200 for services rendered on November 9. 15 Paid employees, \)400.
16 Received \(15,000 for a 1-year contract beginning November
16 for cleaning services to be provided. Contract begins November 16, 2018, and ends November 15, 2019. (Credit Unearned Revenue)
17 Provided cleaning services and received \)400 cash.
18 Received a utility bill for \(175 with a due date of December 4, 2018. (Use Accounts Payable)
20 Borrowed \)36,000 from bank with interest rate of 6% per year.
21 Received \(500 on account for services performed on November 9.
25 Paid \)750 on account for vacuum cleaner purchased on November 5.
29 Paid \(200 for advertising.
30 Cash dividends of \)1,400 were paid to stockholders
3. Post the journal entries to the T-accounts, and calculate account balances
2 step solution
43PS-1
Journalizing transactions, posting to T-accounts, and preparing a trial balance
Consider the following transactional data for the first month of operations for Crystal Clear Cleaning.
Nov. 1 Stockholders contributed \(15,000 and a truck, with a market value of \)3,000, to the business in exchange for common stock.
2 The business paid \(4,000 to Pleasant Properties for November through February rent. (Debit Prepaid Rent)
3 Paid \)4,800 for a business insurance policy for the term November 1, 2018 through October 31, 2019. (Debit Prepaid Insurance)
4 Purchased cleaning supplies on account, \(320.
5 Purchased on account an industrial vacuum cleaner costing \)1,500. The invoice is payable November 25.
7 Paid \(3,900 for a computer and printer.
9 Performed cleaning services on account in the amount of \)4,700.
10 Received \(200 for services rendered on November 9. 15 Paid employees, \)400.
16 Received \(15,000 for a 1-year contract beginning November
16 for cleaning services to be provided. Contract begins November 16, 2018, and ends November 15, 2019. (Credit Unearned Revenue)
17 Provided cleaning services and received \)400 cash.
18 Received a utility bill for \(175 with a due date of December 4, 2018. (Use Accounts Payable)
20 Borrowed \)36,000 from bank with interest rate of 6% per year.
21 Received \(500 on account for services performed on November 9.
25 Paid \)750 on account for vacuum cleaner purchased on November 5.
29 Paid \(200 for advertising.
30 Cash dividends of \)1,400 were paid to stockholders
Requirements 1. Journalize the transactions, using the following accounts: 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; and Utilities Expense. Explanations are not required.
2 step solution
43PS-2
Journalizing transactions, posting to T-accounts, and preparing a trial balance
Consider the following transactional data for the first month of operations for Crystal Clear Cleaning.
Nov. 1 Stockholders contributed \(15,000 and a truck, with a market value of \)3,000, to the business in exchange for common stock.
2 The business paid \(4,000 to Pleasant Properties for November through February rent. (Debit Prepaid Rent)
3 Paid \)4,800 for a business insurance policy for the term November 1, 2018 through October 31, 2019. (Debit Prepaid Insurance)
4 Purchased cleaning supplies on account, \(320.
5 Purchased on account an industrial vacuum cleaner costing \)1,500. The invoice is payable November 25.
7 Paid \(3,900 for a computer and printer.
9 Performed cleaning services on account in the amount of \)4,700.
10 Received \(200 for services rendered on November 9. 15 Paid employees, \)400.
16 Received \(15,000 for a 1-year contract beginning November
16 for cleaning services to be provided. Contract begins November 16, 2018, and ends November 15, 2019. (Credit Unearned Revenue)
17 Provided cleaning services and received \)400 cash.
18 Received a utility bill for \(175 with a due date of December 4, 2018. (Use Accounts Payable)
20 Borrowed \)36,000 from bank with interest rate of 6% per year.
21 Received \(500 on account for services performed on November 9.
25 Paid \)750 on account for vacuum cleaner purchased on November 5.
29 Paid \(200 for advertising.
30 Cash dividends of \)1,400 were paid to stockholders
2. Open a T-account for each account
2 step solution
Q43PS-4
Journalizing transactions, posting to T-accounts, and preparing a trial balance
Consider the following transactional data for the first month of operations for Crystal Clear Cleaning.
Nov. 1 Stockholders contributed \(15,000 and a truck, with a market value of \)3,000, to the business in exchange for common stock.
2 The business paid \(4,000 to Pleasant Properties for November through February rent. (Debit Prepaid Rent)
3 Paid \)4,800 for a business insurance policy for the term November 1, 2018 through October 31, 2019. (Debit Prepaid Insurance)
4 Purchased cleaning supplies on account, \(320.
5 Purchased on account an industrial vacuum cleaner costing \)1,500. The invoice is payable November 25.
7 Paid \(3,900 for a computer and printer.
9 Performed cleaning services on account in the amount of \)4,700.
10 Received \(200 for services rendered on November 9. 15 Paid employees, \)400.
16 Received \(15,000 for a 1-year contract beginning November
16 for cleaning services to be provided. Contract begins November 16, 2018, and ends November 15, 2019. (Credit Unearned Revenue)
17 Provided cleaning services and received \)400 cash.
18 Received a utility bill for \(175 with a due date of December 4, 2018. (Use Accounts Payable)
20 Borrowed \)36,000 from bank with interest rate of 6% per year.
21 Received \(500 on account for services performed on November 9.
25 Paid \)750 on account for vacuum cleaner purchased on November 5.
29 Paid \(200 for advertising.
30 Cash dividends of \)1,400 were paid to stockholders
3. Post the journal entries to the T-accounts, and calculate account balances
2 step solution
Q43PS-3
Journalizing transactions, posting to T-accounts, and preparing a trial balance
Consider the following transactional data for the first month of operations for Crystal Clear Cleaning.
Nov. 1 Stockholders contributed \(15,000 and a truck, with a market value of \)3,000, to the business in exchange for common stock.
2 The business paid \(4,000 to Pleasant Properties for November through February rent. (Debit Prepaid Rent)
3 Paid \)4,800 for a business insurance policy for the term November 1, 2018 through October 31, 2019. (Debit Prepaid Insurance)
4 Purchased cleaning supplies on account, \(320.
5 Purchased on account an industrial vacuum cleaner costing \)1,500. The invoice is payable November 25.
7 Paid \(3,900 for a computer and printer.
9 Performed cleaning services on account in the amount of \)4,700.
10 Received \(200 for services rendered on November 9. 15 Paid employees, \)400.
16 Received \(15,000 for a 1-year contract beginning November
16 for cleaning services to be provided. Contract begins November 16, 2018, and ends November 15, 2019. (Credit Unearned Revenue)
17 Provided cleaning services and received \)400 cash.
18 Received a utility bill for \(175 with a due date of December 4, 2018. (Use Accounts Payable)
20 Borrowed \)36,000 from bank with interest rate of 6% per year.
21 Received \(500 on account for services performed on November 9.
25 Paid \)750 on account for vacuum cleaner purchased on November 5.
29 Paid \(200 for advertising.
30 Cash dividends of \)1,400 were paid to stockholders
3. Post the journal entries to the T-accounts, and calculate account balances
2 step solution
Q43PS-3
Question: Journalizing transactions, posting to T-accounts, and preparing a trial balance
Consider the following transactional data for the first month of operations for Crystal Clear Cleaning.
Nov. 1 Stockholders contributed \(15,000 and a truck, with a market value of \)3,000, to the business in exchange for common stock.
2 The business paid \(4,000 to Pleasant Properties for November through February rent. (Debit Prepaid Rent)
3 Paid \)4,800 for a business insurance policy for the term November 1, 2018 through October 31, 2019. (Debit Prepaid Insurance)
4 Purchased cleaning supplies on account, \(320.
5 Purchased on account an industrial vacuum cleaner costing \)1,500. The invoice is payable November 25.
7 Paid \(3,900 for a computer and printer.
9 Performed cleaning services on account in the amount of \)4,700.
10 Received \(200 for services rendered on November 9. 15 Paid employees, \)400.
16 Received \(15,000 for a 1-year contract beginning November
16 for cleaning services to be provided. Contract begins November 16, 2018, and ends November 15, 2019. (Credit Unearned Revenue)
17 Provided cleaning services and received \)400 cash.
18 Received a utility bill for \(175 with a due date of December 4, 2018. (Use Accounts Payable)
20 Borrowed \)36,000 from bank with interest rate of 6% per year.
21 Received \(500 on account for services performed on November 9.
25 Paid \)750 on account for vacuum cleaner purchased on November 5.
29 Paid \(200 for advertising.
30 Cash dividends of \)1,400 were paid to stockholders
3. Post the journal entries to the T-accounts, and calculate account balances
2 step solution
Q1TIAT_2
Before you begin this assignment, review the Tying It All Together feature in the chapter. Part of the Fry’s Electronics, Inc.’s experience involves providing technical support to its customers. This includes in-home installations of electronics and also computer support at their retail store locations.
Requirements
2. Assume Fry’s Electronics, Inc.’s Modesto, California, location received $24,000 for an annual contract to provide computer support to the local city government. How would Fry’s Electronics record this transaction? What financial statement(s) would this transaction affect?
2 step solution
Q1DC_2
Your friend, Dean McChesney, requested that you advise him on the effects that certain transactions will have on his business, A-Plus Travel Planners. Time is short, so you cannot journalize the transactions. Instead, you must analyze the transactions without a journal. McChesney will continue the business only if he can expect to earn a monthly net income of \(6,000. The business completed the following transactions during June:
a. McChesney deposited \)10,000 cash in a business bank account to start the company. The company issued common stock to McChesney.
b. Paid \(300 cash for office supplies.
c. Incurred advertising expense on account, \)700.
d. Paid the following cash expenses: administrative assistant’s salary, \(1,400; office rent, \)1,000.
e. Earned service revenue on account, \(8,800.
f. Collected cash from customers on account, \)1,200.
Requirements
2. Post the transactions directly to the accounts without using a journal. Record each transaction by letter. Calculate account balances.
2 step solution
Q1DC_3
Your friend, Dean McChesney, requested that you advise him on the effects that certain transactions will have on his business, A-Plus Travel Planners. Time is short, so you cannot journalize the transactions. Instead, you must analyze the transactions without a journal. McChesney will continue the business only if he can expect to earn a monthly net income of \(6,000. The business completed the following transactions during June:
a. McChesney deposited \)10,000 cash in a business bank account to start the company. The company issued common stock to McChesney.
b. Paid \(300 cash for office supplies.
c. Incurred advertising expense on account, \)700.
d. Paid the following cash expenses: administrative assistant’s salary, \(1,400; office rent, \)1,000.
e. Earned service revenue on account, \(8,800.
f. Collected cash from customers on account, \)1,200.
Requirements
3. Prepare a trial balance at June 30, 2018
2 step solution
Q1DC_4
Your friend, Dean McChesney, requested that you advise him on the effects that certain transactions will have on his business, A-Plus Travel Planners. Time is short, so you cannot journalize the transactions. Instead, you must analyze the transactions without a journal. McChesney will continue the business only if he can expect to earn a monthly net income of \(6,000. The business completed the following transactions during June:
a. McChesney deposited \)10,000 cash in a business bank account to start the company. The company issued common stock to McChesney.
b. Paid \(300 cash for office supplies.
c. Incurred advertising expense on account, \)700.
d. Paid the following cash expenses: administrative assistant’s salary, \(1,400; office rent, \)1,000.
e. Earned service revenue on account, \(8,800.
f. Collected cash from customers on account, \)1,200.
Requirements
4. Compute the amount of net income or net loss for this first month of operations. Would you recommend that McChesney continue in business?
2 step solution
Q1TIAT_1
Before you begin this assignment, review the Tying It All Together feature in the chapter. Part of the Fry’s Electronics, Inc.’s experience involves providing technical support to its customers. This includes in-home installations of electronics and also computer support at their retail store locations.
Requirements
- Suppose Fry’s Electronics, Inc. provides $10,500 of computer support at the Dallas-Fort Worth store during the month of November. How would Fry’s Electronics record this transaction? Assume all customers paid in cash. What financial statement(s) would this transaction affect?
2 step solution
Q1TIAT_3
Before you begin this assignment, review the Tying It All Together feature in the chapter. Part of the Fry’s Electronics, Inc.’s experience involves providing technical support to its customers. This includes in-home installations of electronics and also computer support at their retail store locations.
Requirements
3. What is the difference in how revenue is recorded in requirements 1 and 2? Clearly state when revenue is recorded in each requirement.
2 step solution
Q1DC
Your friend, Dean McChesney, requested that you advise him on the effects that certain transactions will have on his business, A-Plus Travel Planners. Time is short, so you cannot journalize the transactions. Instead, you must analyze the transactions without a journal. McChesney will continue the business only if he can expect to earn a monthly net income of \(6,000. The business completed the following transactions during June:
a. McChesney deposited \)10,000 cash in a business bank account to start the company. The company issued common stock to McChesney.
b. Paid \(300 cash for office supplies.
c. Incurred advertising expense on account, \)700.
d. Paid the following cash expenses: administrative assistant’s salary, \(1,400; office rent, \)1,000.
e. Earned service revenue on account, \(8,800.
f. Collected cash from customers on account, \)1,200.
Requirements
1. Open the following T-accounts: Cash; Accounts Receivable; Office Supplies; Accounts Payable; Common Stock; Service Revenue; Salaries Expense; Rent Expense; and Advertising Expense.
2 step solution
Q1EI
Better Days Ahead, a charitable organization, has a standing agreement with First National Bank. The agreement allows Better Days Ahead to overdraw its cash balance at the bank when donations are running low. In the past, Better Days Ahead managed funds wisely and rarely used this privilege. Jacob Henson has recently become the president of Better Days Ahead. To expand operations, Henson acquired office equipment and spent large amounts on fundraising. During Henson’s presidency, Better Days Ahead has maintained a negative bank balance of approximately $10,000.
What is the ethical issue in this situation, if any?
State why you approve or disapprove of Henson’s management of Better Days Ahead’s funds.
2 step solution
Q 1FC-1
Roy Akins was the accounting manager at Zelco, a tire manufacturer, and he played golf with Hugh Stallings, the CEO, who was something of a celebrity in the community. The CEO stood to earn a substantial bonus if Zelco increased net income by year-end. Roy was eager to get into Hugh’s elite social circle; he boasted to Hugh that he knew some accounting tricks that could increase company income by simply revising a few journal entries for rental payments on storage units. At the end of the year, Roy changed the debits from “rent expense” to “prepaid rent” on several entries. Later, Hugh got his bonus, and the deviations were never discovered.
Requirements 1. How did the change in the journal entries affect the net income of the company at year-end?
2 step solution
2-1FC-2
Question: Roy Akins was the accounting manager at Zelco, a tire manufacturer, and he played golf with Hugh Stallings, the CEO, who was something of a celebrity in the community. The CEO stood to earn a substantial bonus if Zelco increased net income by year-end. Roy was eager to get into Hugh’s elite social circle; he boasted to Hugh that he knew some accounting tricks that could increase company income by simply revising a few journal entries for rental payments on storage units. At the end of the year, Roy changed the debits from “rent expense” to “prepaid rent” on several entries. Later, Hugh got his bonus, and the deviations were never discovered.
Requirements 2. Who gained and who lost as a result of these actions?
2 step solution
Q1CA
In 35 words or fewer, explain the difference between a debit and a credit, and explain what the normal balance of the six account types is.
2 step solution