Accounting Principles 12th Edition Weygandt Solution Manual

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CHAPTER 2

LEARNING OBJECTIVES

1. DESCRIBE HOW ACCOUNTS, DEBITS, AND CREDITS

ARE USED TO RECORD BUSINESS TRANSACTIONS.

2. INDICATE HOW A JOURNAL IS USED IN THE

RECORDING PROCESS.

3. EXPLAIN HOW A LEDGER AND POSTING HELP IN

THE RECORDING PROCESS.

4. PREPARE A TRIAL BALANCE.

CHAPTER REVIEW

The Account

1. (L.O. 1) An account is an individual accounting record of increases and decreases in a specific

asset, liability, or owner’s equity item.

2. In its simplest form, an account consists of (a) the title of the account, (b) a left or debit side, and

account form is called a T-account.

Debits and Credits

3. The terms debit and credit mean left and right, respectively.

a. The act of entering an amount on the left side of an account is called debiting the account

and making an entry on the right side is crediting the account.

b. When the debit amounts exceed the credits, an account has a debit balance; when the

reverse is true, the account has a credit balance.

4. In a double-entry system, equal debits and credits are made in the accounts for each transaction.

Thus, the total debits will always equal the total credits.

5. The effects of debits and credits on assets and liabilities and the normal balances are:

Accounts Debits Credits Normal Balance

Assets Increase Decrease Debit

Liabilities Decrease Increase Credit

6. Accounts are kept for each of the four subdivisions of owner’s equity: capital, drawings, revenues,

and expenses.

7. The effects of debits and credits on the owner’s equity accounts and the normal balances are:

Accounts Debits Credits Normal Balance

Owner’s Capital Decrease Increase Credit

Owner’s Drawings Increase Decrease Debit

Revenues Decrease Increase Credit

Expenses Increase Decrease Debit

8. The expanded accounting equation is:

Assets = Liabilities + Owner’s Capital – Owner’s Drawings + Revenues – Expenses

The Journal

9. (L.O. 2) The basic steps in the recording process are:

a. Analyze each transaction for its effect on the accounts.

b. Enter the transaction information in a journal.

c. Transfer the journal information to the appropriate accounts in the ledger.

10. Transactions are initially recorded in a journal.

a. A journal is referred to as a book of original entry.

b. A general journal is the most basic form of journal.

11. The journal makes several significant contributions to the recording process:

a. It discloses in one place the complete effect of a transaction.

b. It provides a chronological record of transactions.

c. It helps to prevent or locate errors because the debit and credit amounts for each entry can

be easily compared.

12. Entering transaction data in the journal is known as journalizing. When three or more accounts

are required in one journal entry, the entry is known as a compound entry.

The Ledger

13. (L.O. 3) The ledger is the entire group of accounts maintained by a company. It keeps in one

place all the information about changes in account balances and it is a source of useful data for

management.

14. The standard form of a ledger account has three columns and the balance in the account is

determined after each transaction.

15. Posting is the procedure of transferring journal entries to the ledger accounts. The following steps

are used in posting:

a. In the ledger, enter in the appropriate columns of the account(s) debited the date, journal

page, and debit amount.

b. In the reference column of the journal, write the account number to which the debit amount

was posted.

c. Perform the same steps in a. and b. for the credit amount.

The Chart of Accounts

16. A chart of accounts is a listing of the accounts and the account numbers which identify their

location in the ledger. The numbering system usually starts with the balance sheet accounts and

follows with the income statement accounts.

The Basic Steps

17. The basic steps in the recording process are illustrated as follows:

Transaction On September 4, Fesmire Inc. pays $3,000 cash to a creditor in full payment of

the balance due.

Basic analysis The liability Accounts Payable is decreased $3,000, and the asset Cash is

decreased $3,000.

Debit-credit Debits decrease liabilities: debit Accounts Payable $3,000.

analysis Credits decrease assets: credit Cash $3,000.

The Trial Balance

18. (L.O. 4) A trial balance is a list of accounts and their balances at a given time. The trial balance

proves the mathematical equality of debits and credits after posting.

19. A trial balance does not prove that the company has recorded all transactions or that the ledger is

correct because the trial balance may balance even when

a. a transaction is not journalized.

b. a correct journal entry is not posted.

c. a journal entry is posted twice.

d. incorrect accounts are used in journalizing or posting.

e. offsetting errors are made in recording the amount of a transaction.

LECTURE OUTLINE

A. The Account.

An account is an individual accounting record of increases and decreases in

a specific asset, liability, or owner’s equity item.

An account consists of three parts:

1. A title.

2. A left or debit side.

3. A right or credit side.

B. Debits and Credits.

The terms debit and credit are directional signals: Debit indicates left, and credit

indicates right.

1. Assets, drawings, and expenses are increased by debits and decreased

by credits.

2. Liabilities, owner’s capital, and revenues are increased by credits and

decreased by debits.

C. Steps in the Recording Process.

There are three basic steps in the recording process:

1. Analyze each transaction for its effects on the accounts.

2. Enter the transaction information in a journal.

3. Transfer the journal information to the appropriate accounts in the ledger.

D. The General Journal/Journalizing.

Entering transaction data in the general journal is called journalizing.

The general journal:

1. Discloses in one place the complete effects of a transaction.

2. Provides a chronological record of transactions.

3. Helps to prevent or locate errors because the debit and credit amounts

for each entry can be easily compared.

4. A simple journal entry involves only two accounts (one debit and one credit)

whereas a compound journal entry involves three or more accounts.

E. The Ledger.

The ledger is the entire group of accounts maintained by a company. A gen-

eral ledger contains all the assets, liabilities, and owner’s equity accounts.

1. The ledger provides the balance in each of the accounts as well as

keeps track of changes in these balances.

2. Companies arrange the ledger in the sequence in which they present

the accounts in the financial statements, beginning with the balance sheet

accounts.

F. Posting/Chart of Accounts.

1. Posting is transferring journal entries to the ledger accounts.

2. Posting involves the following steps:

a. In the ledger, in the appropriate columns of the account(s) debited,

enter the date, journal page, and debit amount shown in the journal.

b. In the reference column of the journal, write the account number to

which the debit amount was posted.

c. In the ledger, in the appropriate columns of the account(s) credited,

enter the date, journal page, and credit amount shown in the journal.

d. In the reference column of the journal, write the account number to

which the credit amount was posted.

3. A chart of accounts lists the accounts and the account numbers that

identify their location in the ledger. Accounts are usually numbered starting

with the balance sheet accounts followed by income statement accounts.

G. Trial Balance.

A trial balance is a list of accounts and their balances at a given time.

1. It proves the mathematical equity of debits and credits after posting.

2. It may also uncover errors in journalizing and posting.

3. It is useful the preparation of financial statements.

INVESTOR INSIGHT

Bank regulators fined Bank One Corporation (Now Chase) $1.8 million because

they felt the reliability of the bank’s accounting system caused it to violate

regulatory requirements. The financial records of Waste Management Inc. were

in such disarray that 10,000 employees were receiving pay slips that were in

error.

In order for these companies to prepare and issue financial statements, their

accounting equations must have been in balance at year-end. How could these

errors or misstatements have occurred?

Answer: A company’s accounting equation (its books) can be in balance yet its

financial statements have errors or misstatements because of the

following: entire transactions were not recorded, transactions were

recorded at wrong amounts; transactions were recorded in the wrong

accounts; transactions were recorded in the wrong accounting period.

Audits of financial statements uncover some, but not all, errors or

misstatements.

IFRS

A Look At IFRS

International companies use the same set of procedures and records to keep track of

transaction data. Thus, the material in Chapter 2 dealing with the account, general rules

of debit and credit, and steps in the recording process—the journal, ledger, and chart of

accounts—is the same under both GAAP and IFRS.

KEY POINTS

Following are the key similarities and differences between GAAP and IFRS as related to the

recording process:

Transaction analysis is the same under IFRS and GAAP.

Both the IASB and FASB go beyond the basic definitions provided in the textbook for

the key elements of financial statements, that is, assets, liabilities, equity, revenue, and

expenses.

A trial balance under IFRS follows the same format as shown in the textbook.

As shown in the textbook, dollar signs are typically used only in the trial balance and the

financial statements. The same practice is followed under IFRS, using the currency of

the country where the reporting company is headquartered.

A trial balance under IFRS follows the same format as shown in the textbook.

IFRS relies less on historical cost and more on fair value than do FASB standards.

Internal controls are a system of checks and balances designed to prevent and detect

fraud and errors. While most public U. S. companies have these systems in place, many

non-U.S. companies have never completely documented the controls nor had an

independent auditor attest to their effectiveness.

LOOKING TO THE FUTURE

The basic recording process shown in this textbook is followed by companies across the globe.

It is unlikely to change in the future. The definitional structure of assets, liabilities, equity,

revenues, and expenses may change over time as the IASB and FASB evaluate their overall

conceptual framework for establishing accounting standards.

20 MINUTE QUIZ

Circle the correct answer.

True/False

1. Assets are increased by debits and liabilities are decreased by credits.

True False

2. The owner’s capital account is increased by credits.

True False

3. An account will have a credit balance if the total debit amounts exceed the total credit

amounts.

True False

4. The ledger is the entire group of accounts maintained by a company.

True False

5. The basic steps in the recording process are (1) to analyze each transaction, (2) to enter

the transaction in a journal, and (3) to transfer the journal entry to the appropriate ledger

accounts.

True False

6. Transferring journal entries to the ledger accounts is called posting and should be per-

formed in chronological order.

True False

7. Assets = liabilities + owner’s capital – drawings + revenues – expenses is a correct form

of the expanded basic accounting equation.

True False

8. In posting, one should enter “J2” in the Post. Ref. Column on page two of the journal.

True False

9. When the columns of the trial balance equal each other, it proves no errors occurred in

recording and posting.

True False

10. The double-entry system helps ensure the accuracy of the recorded amounts and helps to

detect errors.

True False

Multiple Choice

1. Transactions are initially recorded in the

a. general ledger.

b. general journal.

c. trial balance.

d. balance sheet.

2. The right side of an account is referred to as the

a. footing.

b. chart side.

c. debit side.

d. credit side.

3. A purchase of equipment for cash requires a credit to

a. Equipment.

b. Cash.

c. Accounts Payable.

d. Owner’s Capital.

4. The equality of the accounting equation can be proven by preparing a

a. trial balance.

b. journal.

c. general ledger.

d. T-account.

5. Which of the following accounts would be increased with a debit?

a. Rent Payable

b. Owner’s Capital

c. Service Revenue

d. Owner’s Drawings

ANSWERS TO QUIZ

True/False

1. False 6. True

2. True 7. True

3. False 8. False

4. True 9. False

5. True 10. True

Multiple Choice

1. b.

2. d.

3. b.

4. a.

5. d.

CHAPTER 2

SOLUTIONS TO PROBLEMS: SET B

PROBLEM 2-1B

Date

Account Titles and Explanation

Ref.

Debit

Credit

Apr. 1

Cash .......................................................

35,000

Owner’s Capital .............................

35,000

(Owner’s investment of cash

in business)

Land .......................................................

27,000

Cash ...............................................

27,000

(Purchased land for cash)

Advertising Expense.............................

1,800

Accounts Payable .........................

1,800

(Incurred advertising

expense on account)

Salaries and Wages Expense ...............

1,500

Cash ...............................................

1,500

(Paid salaries)

No entry—Not a transaction.

Prepaid Insurance .................................

1,650

Cash ...............................................

1,650

(Paid for one-year

insurance policy)

Owner’s Drawings .................................

1,000

Cash ...............................................

1,000

(Withdrew cash for personal

use)

Cash .......................................................

6,800

Service Revenue............................

6,800

(Received cash for services

performed)

PROBLEM 2-1B (Continued)

Date

Account Titles and Explanation

Ref.

Debit

Credit

Apr. 25

Cash ......................................................

Unearned Service Revenue.............

(Received cash for future

services)

2,500

Cash ......................................................

Service Revenue............................

(Received cash for services

performed)

8,900

Accounts Payable.................................

Cash ...............................................

(Paid creditor on account)

900

PROBLEM 2-2B

(a) J1

Date

Account Titles and Explanation

Ref.

Debit

Credit

May 1

Cash .......................................................

101

20,000

Owner’s Capital .............................

301

20,000

(Owner’s investment of cash

in business)

No entry—not a transaction.

Supplies .................................................

126

2,500

Accounts Payable .........................

201

2,500

(Purchased supplies on

account)

Rent Expense ........................................

729

900

Cash ...............................................

101

900

(Paid office rent)

Accounts Receivable ............................

112

3,200

Service Revenue............................

400

3,200

(Billed client for services

performed)

Cash .......................................................

101

3,500

Unearned Service Revenue ..........

209

3,500

(Received cash for future

services)

Cash .......................................................

101

1,200

Service Revenue............................

400

1,200

(Received cash for services

performed)

Salaries and Wages Expense ...............

726

2,000

Cash ...............................................

101

2,000

(Paid salaries)

PROBLEM 2-2B (Continued)

Date

Account Titles and Explanation

Ref.

Debit

Credit

May 31

Accounts Payable ($2,500 X 60%)..........

Cash ..............................................

(Paid creditor on account)

201

101

1,500

(b)

Cash No. 101

Date

Explanation

Ref.

Debit

Credit

Balance

May 1

20,000

900

19,100

3,500

22,600

1,200

23,800

2,000

21,800

1,500

20,300

Accounts Receivable No. 112

Date

Explanation

Ref.

Debit

Credit

Balance

May11

3,200

Supplies No. 126

Date

Explanation

Ref.

Debit

Credit

Balance

May 3

2,500

Accounts Payable No. 201

Date

Explanation

Ref.

Debit

Credit

Balance

May 3

2,500

1,500

1,000

Unearned Service Revenue No. 209

Date

Explanation

Ref.

Debit

Credit

Balance

May 12

3,500

PROBLEM 2-2B (Continued)

Owner’s Capital No. 301

Date

Explanation

Ref.

Debit

Credit

Balance

May 1

20,000

Service Revenue No. 400

Date

Explanation

Ref.

Debit

Credit

Balance

May11

3,200

1,200

3,200

4,400

Salaries and Wages Expense No. 726

Date

Explanation

Ref.

Debit

Credit

Balance

May31

2,000

Rent Expense No. 729

Date

Explanation

Ref.

Debit

Credit

Balance

May 7

900

Trial Balance

May 31, 2017

Debit Credit

Cash..................................................................... $20,300

Accounts Receivable.......................................... 3,200

Supplies .............................................................. 2,500

Accounts Payable............................................... $ 1,000

Unearned Service Revenue................................ 3,500

Owner’s Capital .................................................. 20,000

Service Revenue................................................. 4,400

Salaries and Wages Expense ............................ 2,000

Rent Expense...................................................... 900

$28,900 $28,900

PROBLEM 2-3B

(a) & (c)

Cash

Balance 8,000

(1) 1,000

(3) 2,000

(4) 14,000

(5) 15,000

6) 6,000

(7) 3,500

(8) 3,000

3,500

Accounts Receivable

Balance 15,000

(4) 14,000

(7) 9,000

10,000

Supplies

Balance 13,000

(2) 4,200

17,200

Prepaid Rent

Balance 3,000

3,000

Equipment

Balance 20,000

20,000

Accounts Payable

Balance 19,000

Owner’s Capital

Balance 40,000

40,000

Owner’s Drawings

(8) 3,000

3,000

Service Revenue

(7) 15,000

15,000

Advertising Expense

(1) 1,000

1,000

Miscellaneous Expense

(3) 2,000

2,000

Salaries and Wages Expense

(7) 3,500

3,500

(5) 15,000

(2) 4,200

8,200

PROBLEM 2-3B (Continued)

(b)

Trans.

Account Titles and Explanation

Debit

Credit

Advertising Expense..............................

1,000

Cash...............................................

1,000

Supplies..................................................

4,200

Accounts Payable .........................

4,200

Miscellaneous Expense .........................

2,000

Cash...............................................

2,000

Cash ........................................................

14,000

Accounts Receivable ....................

14,000

Accounts Payable ..................................

15,000

Cash...............................................

15,000

Cash ........................................................

6,000

Accounts Receivable .............................

9,000

Service Revenue ...........................

15,000

Salaries and Wages Expense ................

3,500

Cash...............................................

3,500

Owner’s Drawings..................................

3,000

Cash...............................................

3,000

PROBLEM 2-3B (Continued)

(d) VIAN REPAIR SERVICE

Trial Balance

January 31, 2017

Debit Credit

Cash.................................................................... $ 3,500

Accounts Receivable......................................... 10,000

Supplies.............................................................. 17,200

Prepaid Rent....................................................... 3,000

Equipment .......................................................... 20,000

Accounts Payable.............................................. $ 8,200

Owner’s Capital.................................................. 40,000

Owner’s Drawings.............................................. 3,000

Service Revenue ................................................ 15,000

Advertising Expense ......................................... 1,000

Miscellaneous Expense..................................... 2,000

Salaries and Wages Expense............................ 3,500

$63,200 $63,200

PROBLEM 2-4B

SEAN DEVINE COMPANY

Trial Balance

May 31, 2014

Debit Credit

Cash ($5,850 + $520 – $486) ........................................ $ 5,884

Accounts Receivable ($2,570 – $210) ......................... 2,360

Prepaid Insurance ($700 + $100) ................................. 800

Supplies ($0 + $520)..................................................... 520

Equipment ($8,000 – $520)........................................... 7,480

Accounts Payable ($4,500 – $100 + $520 – $210)....... $ 4,710

Unearned Service Revenue ......................................... 650

Owner’s Capital ($11,700 + $1,000) ............................. 12,700

Owner’s Drawings ($0 + $1,000).................................. 1,000

Service Revenue .......................................................... 6,960

Salaries and Wages Expense ($4,200 + $200) ............ 4,400

Advertising Expense ($1,100 + $486).......................... 1,586

Utilities Expense ($890 + $100) ................................... 990

$25,020 $25,020

PROBLEM 2-5B

(a) & (c)

Cash No. 101

Date

Explanation

Ref.

Debit

Credit

Balance

Apr. 1

Balance

4,000

1,100

2,900

2,800

5,700

3,000

2,700

500

2,200

5,200

7,400

2,000

5,400

5,485

1,200

4,285

Accounts Receivable No. 112

Date

Explanation

Ref.

Debit

Credit

Balance

Apr. 30

Prepaid Rent No. 136

Date

Explanation

Ref.

Debit

Credit

Balance

Apr. 30

1,200

Land No. 140

Date

Explanation

Ref.

Debit

Credit

Balance

Apr. 1

Balance

10,000

Buildings No. 145

Date

Explanation

Ref.

Debit

Credit

Balance

Apr. 1

Balance

8,000

PROBLEM 2-5B (Continued)

Equipment No. 157

Date

Explanation

Ref.

Debit

Credit

Balance

Apr. 1

Balance

6,000

Accounts Payable No. 201

Date

Explanation

Ref.

Debit

Credit

Balance

Apr. 1

Balance

2,000

1,000

2,000

Mortgage Payable No. 275

Date

Explanation

Ref.

Debit

Credit

Balance

Apr. 1

Balance

8,000

2,000

6,000

Owner’s Capital No. 301

Date

Explanation

Ref.

Debit

Credit

Balance

Apr. 1

Balance

18,000

Service Revenue No. 400

Date

Explanation

Ref.

Debit

Credit

Balance

Apr. 9

2,800

5,200

8,000

Rent Revenue No. 429

Date

Explanation

Ref.

Debit

Credit

Balance

Apr.30

170

PROBLEM 2-5B (Continued)

Advertising Expense No. 610

Date

Explanation

Ref.

Debit

Credit

Balance

Apr. 12

500

Salaries and Wages Expense No. 726

Date

Explanation

Ref.

Debit

Credit

Balance

Apr. 29

2,000

Rent Expense No. 729

Date

Explanation

Ref.

Debit

Credit

Balance

Apr. 2

1,100

1,000

2,100

(b) J1

Date

Account Titles and Explanation

Ref.

Debit

Credit

Apr. 2

Rent Expense.....................................

Cash...........................................

(Paid film rental)

729

101

1,100

No entry—not a transaction.

Cash....................................................

Service Revenue.......................

(Received cash for services

performed)

101

400

2,800

Mortgage Payable ..............................

Accounts Payable..............................

Cash...........................................

(Made payments on

mortgage and accounts

payable)

275

201

101

2,000

1,000

3,000

PROBLEM 2-5B (Continued)

Date

Account Titles and Explanation

Ref.

Debit

Credit

Apr. 11

No entry—not a transaction.

Advertising Expense.............................

Cash ..............................................

(Paid advertising expenses)

610

101

500

Rent Expense ........................................

Accounts Payable ........................

(Rented film on account)

729

201

1,000

Cash .......................................................

Service Revenue...........................

(Received cash for services

performed)

101

400

5,200

Salaries and Wages Expense ...............

Cash ..............................................

(Paid salaries expense)

726

101

2,000

Cash .......................................................

Accounts Receivable ............................

Rent Revenue ...............................

(17% X $1,000)

(Received cash and

balance on account for

rent revenue)

101

112

429

170

Prepaid Rent..........................................

Cash ..............................................

(Paid cash for future film

rentals)

136

101

1,200

PROBLEM 2-5B (Continued)

(d) CLASSIC THEATER

Trial Balance

April 30, 2017

Debit

Credit

Cash.................................................................... $ 4,285

Accounts Receivable......................................... 85

Prepaid Rent....................................................... 1,200

Land.................................................................... 10,000

Buildings ............................................................ 8,000

Equipment .......................................................... 6,000

Accounts Payable.............................................. $ 2,000

Mortgage Payable .............................................. 6,000

Owner’s Capital.................................................. 18,000

Service Revenue ................................................ 8,000

Rent Revenue..................................................... 170

Advertising Expense ......................................... 500

Salaries and Wages Expense............................ 2,000

Rent Expense..................................................... 2,100

$34,170 $34,170

Weygandt Accounting Principles, 12e

Chapter Two

Solutions to Challenge Exercises

Challenge Exercise 2-1 – Solution

Cash………….. ...........................................................

25,000

Owner’s Capital ..............................................

25,000

No entry, not a transaction

Equipment..................................................................

2,900

Cash……………………………………………………

700

Accounts Payable ..................................................

2,200

Cash........................................................................

Accounts Receivable ................................................

600

3,000

Service Revenue.............................................

3,600

Accounts Payable .....................................................

900

Cash.................................................................

900

Salaries and Wages Expense...................................

2,300

Cash.................................................................

2,300

Cash…. .......................................................................

1,200

Accounts Receivable .....................................

1,200

2. The October 31 balance of Accounts Payable is $1,300 ($2,200 - $900), and would be reported in the

liabilities section of the balance sheet.

3. The October 31 balance of Accounts Receivable is $1,800 ($3,000 - $1,200), and would be reported in

the assets section of the balance sheet.

Challenge Exercise 2-2 – Solution

(a)

General Journal J1

Date

Account Titles

Ref.

Debit

Credit

Sept. 1

Cash….........................................................................

Owner’s Capital...............................................

101

301

20,000

Equipment ..................................................................

Cash .................................................................

Accounts Payable...........................................

157

101

201

17,000

6,000

11,000

Cash….........................................................................

Accounts Receivable.................................................

Service Revenue .............................................

101

112

400

1,000

2,900

3,900

Accounts Payable......................................................

Cash .................................................................

201

101

7,000

Owner’s Drawings .....................................................

Cash .................................................................

306

101

600

Cash….........................................................................

Accounts Receivable......................................

101

112

1,500

(b)

Cash No. 101

Date

Explanation

Ref.

Debit

Credit

Balance

Sept. 1

20,000

1,000

6,000

14,000

15,000

7,000

8,000

1,500

600

7,400

8,900

Accounts Receivable No. 112

Date

Explanation

Ref.

Debit

Credit

Balance

Sept. 11

2,900

1,500

1,400

Challenge Exercise 2-2 – Solution (Continued)

Equipment No. 157

Date

Explanation

Ref.

Debit

Credit

Balance

Sept. 5

17,000

Accounts Payable No. 201

Date

Explanation

Ref.

Debit

Credit

Balance

Sept. 5

11,000

7,000

4,000

Owner’s Capital No. 301

Date

Explanation

Ref.

Debit

Credit

Balance

Sept. 1

20,000

Owner’s Drawings No. 306

Date

Explanation

Ref.

Debit

Credit

Balance

Sept.29

600

Service Revenue No. 400

Date

Explanation

Ref.

Debit

Credit

Balance

Sept. 11

3,900

(d) Total liabilities would be $4,000 (just accounts payable).

19-1

SOLUTION

Chapter 19 Waterways Continuing Problem

19-2

(b)

Waterways Corporation

Cost of Goods Manufactured Schedule

For the Month of November

Work in process 11/1

$ 52,900

Direct materials

Raw materials inventory 11/1

$ 38,000

Raw material purchases

185,400

Total raw materials available for use

223,400

Less: Raw materials inventory 11/30

52,700

Direct materials used

$170,700

Direct labor

22,000

Manufacturing overhead

Depreciation--factory equipment

16,800

Factory supplies used

16,850

Factory utilities

10,200

Indirect labor

48,000

Rent--factory equipment

47,000

Repairs--factory equipment

4,200

Total factory overhead

143,050

Total manufacturing costs

335,750

Total cost of work in process

388,650

Less: Work in process 11/30

42,000

Cost of goods manufactured

$346,650

19-3

Waterways Corporation

Income Statement

For the Month of November

Sales

$1,350,000

Cost of goods sold

Finished goods inventory 11/1

$ 72,550

Cost of goods manufactured

346,650

Cost of goods available for sale

419,200

Less: Finished goods inventory 11/30

68,300

Cost of goods sold

350,900

Gross profit

999,100

Operating expenses

Selling expenses

Advertising expenses

54,000

Sales commissions

40,500

Total selling expenses

94,500

Administrative expenses

Depreciation--office equipment

$ 2,500

Office supplies expense

1,400

Other administrative expenses

72,000

Salaries

325,000

Total administrative expenses

400,900

Total operating expenses

495,400

Net income

$ 503,700

19-4

Waterways Corporation

Balance Sheet (partial)

November 30

Current assets

Cash

$260,000

Accounts receivable

295,000

Inventories

Raw materials inventory

$52,700

Work in process inventory

42,000

Finished goods inventory

68,300

163,000

Prepaid expenses

41,250

Total current assets

$759,250

CHAPTER 2

The Recording Process

ASSIGNMENT CLASSIFICATION TABLE

Learning Objectives

Questions

Brief

Exercises

Do It!

Exercises

Problems

1. Indicate how accounts,

debits, and credits are used

to record business

transactions.

1, 2, 3, 4, 5,

6, 7, 8, 9, 19,

1, 2, 5

1, 2, 4, 6, 7,

1A, 2A, 3A,

2. Indicate how a journal is

used in the recording

process.

10, 11, 12,

13, 14, 16

3, 4, 6

3, 5, 6, 7, 10,

11, 12

1A, 2A, 3A,

3. Explain how a ledger and

posting help in the recording

process.

15, 17

7, 8

8, 9, 12

2A, 3A, 5A

4. Prepare a trial balance.

18, 20

9, 10

9, 10, 11, 13,

2A, 3A, 4A,

ASSIGNMENT CHARACTERISTICS TABLE

Problem

Number

Description

Difficulty

Level

Time Allotted

(min.)

Journalize a series of transactions.

Simple

20–30

Journalize transactions, post, and prepare a trial balance.

Simple

30–40

Journalize transactions, post, and prepare a trial balance.

Moderate

40–50

Prepare a correct trial balance.

Moderate

30–40

Journalize transactions, post, and prepare a trial balance.

Moderate

40–50

WEYGANDT ACCOUNTING PRINCIPLES 12E

CHAPTER 2

THE RECORDING PROCESS

Number

Difficulty

Time (min.)

BE1

Simple

6–8

BE2

Simple

4–6

BE3

Simple

4–6

BE4

Moderate

4–6

BE5

Simple

6–8

BE6

Simple

4–6

BE7

Simple

4–6

BE8

Simple

4–6

BE9

Simple

4–6

BE10

Moderate

6–8

DI1

Simple

3–5

DI2

Simple

3–5

DI3

Simple

2–4

DI4

Simple

6–8

EX1

Simple

2–4

EX2

Simple

10–15

EX3

Simple

8–10

EX4

Simple

6–8

EX5

Simple

6–8

EX6

1, 2

Simple

6–8

EX7

1, 2

Simple

8–10

EX8

Simple

2–4

EX9

3, 4

Simple

10–12

EX10

2, 4

Moderate

10–12

EX11

2, 4

Moderate

12–15

EX12

2, 3

Moderate

12–15

EX13

Moderate

6–8

EX14

1, 4

Simple

8–10

THE RECORDING PROCESS (Continued)

Number

Difficulty

Time (min.)

P1A

1, 2

Simple

20–30

P2A

1, 2, 3, 4

Simple

30–40

P3A

1, 2, 3, 4

Moderate

40–50

P4A

Moderate

30–40

P5A

1, 2, 3, 4

Moderate

40–50

BYP1

Simple

8–10

BYP2

1, 2

Simple

8–10

BYP3

BYP4

—

AP, S

Simple

15–20

BYP5

3, 4

AP, S

Moderate

20–30

BYP6

AN, E

Moderate

10–15

BYP7

BYP8

BYP9

—

Moderate

10–15

15–20

BYP10

—

Moderate

20–30

BLOOM’S TAXONOMY TABLE

Correlation Chart between Bloom’s Taxonomy, Learning Objectives and End-of-Chapter Exercises and Problems

Learning Objective

Knowledge

Comprehension

Application

Analysis

Synthesis

Evaluation

1. Describe how accounts,

debits, and credits are used to

record business transactions.

Q2-1

Q2-21

E2-1

Q2-2

Q2-3

Q2-4

Q2-5

Q2-6

Q2-7

Q2-8

Q2-9

Q2-19

BE2-1

BE2-2

BE2-5

DI2-1

E2-2

E2-4

E2-6

E2-7

E2-14

P2-1A

P2-2A

P2-3A

P2-5A

2. Indicate how a journal is used

in the recording process.

Q2-10

Q2-12

Q2-11

Q2-13

Q2-14

BE2-4

Q2-16

BE2-3

BE2-6

DI2-2

E2-3

E2-5

E2-6

E2-7

E2-10

E2-11

E2-12

P2-1A

P2-2A

P2-3A

P2-5A

3. Explain how a ledger and

posting help in the recording

process.

E2-8

Q2-15

Q2-17

BE2-7

BE2-8

DI2-3

E2-9

E2-12

P2-2A

P2-3A

P2-5A

4. Prepare a trial balance.

Q2-18

Q2-20

BE2-9

DI2-4

E2-9

E2-10

E2-11

E2-14

P2-2A

P2-3A

P2-5A

BE2-10

E2-13

P2-4A

Broadening Your Perspective

Financial Reporting

Real-World Focus

Comparative Analysis

Ethics Case

Communication

Decision Making

Across the

Organization

Real-World

Focus

All About You

Ethics Case

Considering

P, P, and P

ANSWERS TO QUESTIONS

1. A T account has the following parts: (a) the title, (b) the left or debit side, and (c) the right or credit side.

2. Disagree. The terms debit and credit mean left and right respectively.

3. Heath is incorrect. The double-entry system merely records the dual effect of a transaction on the

accounting equation. A transaction is not recorded twice; it is recorded once, with a dual effect.

4. Erica is incorrect. A debit balance only means that debit amounts exceed credit amounts in an

account. Conversely, a credit balance only means that credit amounts are greater than debit

amounts in an account. Thus, a debit or credit balance is neither favorable nor unfavorable.

5. (a) Asset accounts are increased by debits and decreased by credits.

(b) Liability accounts are decreased by debits and increased by credits.

and owner’s drawing are increased by debits and decreased by credits.

6. (a) Accounts Receivable—debit balance.

(b) Cash—debit balance.

(d) Accounts Payable—credit balance.

(e) Service Revenue—credit balance.

(f) Salaries and Wages Expense—debit balance.

(g) Owner’s Capital—credit balance.

7. (a) Accounts Receivable—asset—debit balance.

(b) Accounts Payable—liability—credit balance

(d) Owner’s Drawings—owner’s equity—debit balance.

(e) Supplies—asset—debit balance.

8. (a) Debit Supplies and credit Accounts Payable.

(b) Debit Cash and credit Notes Payable.

9. (1) Cash—both debit and credit entries.

(2) Accounts Receivable—both debit and credit entries.

(3) Owner’s Drawings—debit entries only.

(4) Accounts Payable—both debit and credit entries.

(5) Salaries and Wages Expense—debit entries only.

(6) Service Revenue—credit entries only.

10. The basic steps in the recording process are:

(1) Analyze each transaction for its effect on the accounts.

(2) Enter the transaction information in a journal.

(3) Transfer the journal information to the appropriate accounts in the ledger.

Questions Chapter 2 (Continued)

11. The advantages of using the journal in the recording process are:

(1) It discloses in one place the complete effects of a transaction.

(2) It provides a chronological record of all transactions.

(3) It helps to prevent or locate errors because the debit and credit amounts for each entry can

be easily compared.

12. (a) The debit should be entered first.

(b) The credit should be indented.

13. When three or more accounts are required in one journal entry, the entry is referred to as a

compound entry. An example of a compound entry is the purchase of equipment, part of which is

paid for with cash and the remainder is on account.

14. (a) No, debits and credits should not be recorded directly in the ledger.

(b) The advantages of using the journal are:

1. It discloses in one place the complete effects of a transaction.

2. It provides a chronological record of all transactions.

3. It helps to prevent or locate errors because the debit and credit amounts for each entry

can be easily compared.

15. The advantage of the last step in the posting process is to indicate that the item has been posted.

16. (a) Cash ............................................................................................ 9,000

Owner’s Capital................................................................... 9,000

(Invested cash in the business)

(b) Prepaid Insurance........................................................................ 800

Cash ................................................................................... 800

(Paid one-year insurance policy)

Accounts Payable ............................................................... 2,000

(Purchased supplies on account)

(d) Cash ............................................................................................ 7,500

Service Revenue................................................................. 7,500

(Received cash for services performed)

17. (a) The entire group of accounts maintained by a company, including all the asset, liability, and

owner’s equity accounts, is referred to collectively as the ledger.

(b) A chart of accounts is a list of accounts and the account numbers that identify their location

in the ledger. The chart of accounts is important, particularly for a company that has a large

number of accounts, because it helps organize the accounts and define the level of detail that

a company desires in its accounting system.

Questions Chapter 2 (Continued)

18. A trial balance is a list of accounts and their balances at a given time. The primary purpose of a

trial balance is to prove (check) that the debits equal the credits after posting. A trial balance also

facilitates the discovery of errors in journalizing and posting. In addition, it is useful in preparing

financial statements.

19. No, Victor is not correct. The proper sequence is as follows:

(b) Business transaction occurs.

(a) Debits and credits posted to the ledger.

(e) Trial balance is prepared.

(d) Financial statements are prepared.

20. (a) The trial balance would balance.

(b) The trial balance would not balance.

21. The normal balances are Cash debit, Accounts Payable credit, and Interest Expense debit.

SOLUTIONS TO BRIEF EXERCISES

BRIEF EXERCISE 2-1

(a)

Debit

Effect

(b)

Credit

Effect

(c)

Normal

Balance

Accounts Payable

Decrease

Increase

Credit

Advertising Expense

Increase

Decrease

Debit

Service Revenue

Decrease

Increase

Credit

Accounts Receivable

Increase

Decrease

Debit

Owner’s Capital

Decrease

Increase

Credit

Owner’s Drawings

Increase

Decrease

Debit

BRIEF EXERCISE 2-2

Account Debited

Account Credited

June 1

Cash

Owner’s Capital

Equipment

Accounts Payable

Rent Expense

Cash

Accounts Receivable

Service Revenue

BRIEF EXERCISE 2-3

June 1 Cash..................................................................... 5,000

Owner’s Capital ........................................... 5,000

2 Equipment ........................................................... 2,400

Accounts Payable........................................ 2,400

3 Rent Expense ...................................................... 800

Cash ............................................................. 800

12 Accounts Receivable .......................................... 300

Service Revenue.......................................... 300

BRIEF EXERCISE 2-4

The basic steps in the recording process are:

1. Analyze each transaction. In this step, business documents are examined

to determine the effects of the transaction on the accounts.

2. Enter each transaction in a journal. This step is called journalizing and

it results in making a chronological record of the transactions.

3. Transfer journal information to ledger accounts. This step is called

posting. Posting makes it possible to accumulate the effects of

journalized transactions on individual accounts.

BRIEF EXERCISE 2-5

(a)

Effect on Accounting Equation

(b)

Debit-Credit Analysis

Aug. 1

The asset Cash is increased; the

owner’s equity account

Owner’s Capital is increased.

Debits increase assets:

debit Cash $8,000.

Credits increase owner’s equity:

credit Owner’s Capital $8,000.

The asset Prepaid Insurance is

increased; the asset Cash is

decreased.

Debits increase assets:

debit Prepaid Insurance $1,800.

Credits decrease assets:

credit Cash $1,800.

The asset Cash is increased; the

revenue Service Revenue is

increased.

Debits increase assets:

debit Cash $3,600.

Credits increase revenues:

credit Service Revenue $3,600.

The expense Salaries and Wages

Expense is increased; the asset

Cash is decreased.

Debits increase expenses:

debit Salaries and Wages Expense

$1,000.

Credits decrease assets:

credit Cash $1,000.

BRIEF EXERCISE 2-6

Aug. 1 Cash...................................................................... 8,000

Owner’s Capital............................................ 8,000

4 Prepaid Insurance................................................ 1,800

Cash.............................................................. 1,800

16 Cash...................................................................... 3,600

Service Revenue .......................................... 3,600

27 Salaries and Wages Expense.............................. 1,000

Cash.............................................................. 1,000

BRIEF EXERCISE 2-7

Cash

Service Revenue

5/12 2,400

5/5 4,400

5/15 3,000

Ending Bal. 5,400

Ending Bal. 7,400

Accounts Receivable

5/5 4,400

5/12 2,400

Ending Bal. 2,000

BRIEF EXERCISE 2-8

Cash

Date

Explanation

Ref.

Debit

Credit

Balance

May 12

2,400

3,000

5,400

BRIEF EXERCISE 2-8 (Continued)

Accounts Receivable

Date

Explanation

Ref.

Debit

Credit

Balance

May 5

4,400

2,400

2,000

Service Revenue

Date

Explanation

Ref.

Debit

Credit

Balance

May 5

4,400

3,000

7,400

BRIEF EXERCISE 2-9

AMARO COMPANY

Trial Balance

June 30, 2017

Debit Credit

Cash ........................................................................... $ 5,800

Accounts Receivable ................................................ 3,000

Equipment.................................................................. 17,000

Accounts Payable...................................................... $ 8,100

Owner’s Capital ......................................................... 15,000

Owner’s Drawings ..................................................... 1,200

Service Revenue........................................................ 10,000

Salaries and Wages Expense ................................... 5,100

Rent Expense............................................................. 1,000

$33,100 $33,100

BRIEF EXERCISE 2-10

CAPPSHAW COMPANY

Trial Balance

December 31, 2017

Debit Credit

Cash ............................................................................ $10,800

Prepaid Insurance ...................................................... 3,500

Accounts Payable ...................................................... $ 3,000

Unearned Service Revenue ....................................... 2,200

Owner’s Capital.......................................................... 9,000

Owner’s Drawings...................................................... 4,500

Service Revenue ........................................................ 25,600

Salaries and Wages Expense .................................... 18,600

Rent Expense ............................................................. 2,400

$39,800 $39,800

SOLUTIONS FOR DO IT! REVIEW EXERCISES

DO IT! 2-1

Tom would likely need the following accounts in which to record the

transactions necessary to ready his photography studio for opening day:

Cash (debit balance) Equipment (debit balance)

Supplies (debit balance) Accounts Payable (credit balance)

Notes Payable (credit balance) Owner’s Capital (credit balance)

DO IT! 2-2

Each transaction that is recorded is entered in the general journal. The

three activities would be recorded as follows:

Cash..............................................................

6,300

Owner’s Capital...................................

6,300

Supplies .......................................................

1,100

Cash.....................................................

400

Accounts Payable...............................

700

No entry because no transaction has occurred.

DO IT! 2-3

Cash

4/1 1,600

4/16 700

4/3 3,400

4/20 250

4/30 4,050

DO IT! 2-4

CARLAND COMPANY

Trial Balance

December 31, 2017

Debit Credit

Cash ........................................................................... $ 6,000

Accounts Receivable ................................................ 8,000

Supplies ..................................................................... 6,000

Equipment.................................................................. 80,000

Notes Payable............................................................ $ 20,000

Accounts Payable...................................................... 11,000

Salaries and Wages Payable .................................... 3,000

Owner’s Capital ......................................................... 28,000

Owner’s Drawings ..................................................... 8,000

Service Revenue........................................................ 88,000

Rent Expense............................................................. 4,000

Salaries and Wages Expense ................................... 38,000

$150,000 $150,000

SOLUTIONS TO EXERCISES

EXERCISE 2-1

1. False. An account is an accounting record of a specific asset, liability,

or owner’s equity item.

2. False. An account shows increases and decreases in the item it relates to.

3. False. Each asset, liability, and owner’s equity item has a separate

account.

4. False. An account has a left, or debit side, and a right, or credit side.

5. True.

EXERCISE 2-2

Account Debited

Account Credited

Transaction

(a)

Basic

Type

(b)

Specific

Account

(c)

Effect

(d)

Normal

Balance

(a)

Basic

Type

(b)

Specific

Account

(c)

Effect

(d)

Normal

Balance

Jan. 2

Asset

Cash

Increase

Debit

Owner’s

Equity

Owner’s

Capital

Increase

Credit

Asset

Equipment

Increase

Debit

Asset

Cash

Decrease

Debit

Asset

Supplies

Increase

Debit

Liability

Accounts

Payable

Increase

Credit

Asset

Accounts

Receivable

Increase

Debit

Owner’s

Equity

Service

Revenue

Increase

Credit

Owner’s

Equity

Advertising

Expense

Increase

Debit

Asset

Cash

Decrease

Debit

Asset

Cash

Increase

Debit

Asset

Accounts

Receivable

Decrease

Debit

Liability

Accounts

Payable

Decrease

Credit

Asset

Cash

Decrease

Debit

Owner’s

Equity

Owner’s

Drawings

Increase

Debit

Asset

Cash

Decrease

Debit

EXERCISE 2-3

General Journal J1

Date

Account Titles and Explanation

Ref.

Debit

Credit

Jan. 2

Cash...................................................

10,000

Owner’s Capital .........................

10,000

Equipment .........................................

3,000

Cash ...........................................

3,000

Supplies.............................................

500

Accounts Payable .....................

500

Accounts Receivable........................

2,400

Service Revenue........................

2,400

Advertising Expense.........................

350

Cash ...........................................

350

Cash...................................................

700

Accounts Receivable ................

700

Accounts Payable .............................

300

Cash ...........................................

300

Owner’s Drawings.............................

1,000

Cash ...........................................

1,000

EXERCISE 2-4

Oct. 1 Debits increase assets: debit Cash $15,000.

Credits increase owner’s equity: credit Owner’s Capital $15,000.

2 No transaction.

3 Debits increase assets: debit Equipment $1,900.

Credits increase liabilities: credit Accounts Payable $1,900.

EXERCISE 2-4 (Continued)

Oct. 6 Debits increase assets: debit Accounts Receivable $3,800.

Credits increase revenues: credit Service Revenue $3,800.

27 Debits decrease liabilities: debit Accounts Payable $1,100.

Credits decrease assets: credit Cash $1,100.

30 Debits increase expenses: debit Salaries and Wages Expense

$2,500.

Credits decrease assets: credit Cash $2,500.

EXERCISE 2-5

General Journal

Date

Account Titles and Explanation

Ref.

Debits

Credit

Oct. 1

Cash..................................................

15,000

Owner’s Capital.......................

15,000

No entry.

Equipment ........................................

1,900

Accounts Payable ...................

1,900

Accounts Receivable .......................

3,800

Service Revenue......................

3,800

Accounts Payable ............................

1,100

Cash .........................................

1,100

Salaries and Wages Expense..........

2,500

Cash .........................................

2,500

EXERCISE 2-6

(a) 1. Increase the asset Cash, increase the liability Notes Payable.

2. Increase the asset Equipment, decrease the asset Cash.

3. Increase the asset Supplies, increase the liability Accounts Payable.

(b) 1. Cash ................................................................. 5,000

Notes Payable........................................... 5,000

2. Equipment........................................................ 3,100

Cash .......................................................... 3,100

3. Supplies ........................................................... 850

Accounts Payable..................................... 850

EXERCISE 2-7

(a) Assets = Liabilities + Owner’s Equity

1. + + (Investment)

2. – – (Expense)

3. + + (Revenue)

4. – – (Drawings)

(b) 1. Cash ................................................................. 4,000

Owner’s Capital ........................................ 4,000

2. Rent Expense .................................................. 840

Cash .......................................................... 840

3. Accounts Receivable ...................................... 5,200

Service Revenue....................................... 5,200

4. Owner’s Drawings........................................... 750

Cash .......................................................... 750

EXERCISE 2-8

1. False. The general ledger contains all the asset, liability, and owner’s

equity accounts.

2. True.

3. False. The accounts in the general ledger are arranged in financial

statement order: first the assets, then the liabilities, owner’s capital,

owner’s drawings, revenues, and expenses.

4. True.

5. False. The general ledger is not a book of original entry; transactions

are first recorded in the general journal, then in the general ledger.

EXERCISE 2-9

(a)

Cash

Aug. 1 5,000

Aug. 12 2,300

10 2,600

31 900

Bal. 6,200

Accounts Receivable

Aug. 25 1,700

Aug. 31 900

Bal. 800

Equipment

Aug. 12 5,000

Notes Payable

Aug. 12 2,700

Owner’s Capital

Aug. 1 5,000

Service Revenue

Aug. 10 2,600

25 1,700

Bal. 4,300

(b) JUNE FELDMAN, INVESTMENT BROKER

Trial Balance

August 31, 2017

Debit Credit

Cash........................................................................ $ 6,200

Accounts Receivable............................................. 800

Equipment .............................................................. 5,000

Notes Payable ........................................................ $ 2,700

Owner’s Capital...................................................... 5,000

Service Revenue .................................................... 4,300

$12,000 $12,000

EXERCISE 2-10

(a) General Journal

Date

Account Titles and Explanation

Ref.

Debit

Credit

Apr. 1

Cash ....................................................

Owner’s Capital..............................

(Owner’s investment of

cash in business)

12,000

Cash ....................................................

Service Revenue ............................

(Received cash for

services performed)

900

Salaries and Wages Expense ............

Cash ................................................

(Paid salaries to date)

1,300

Accounts Payable...............................

Cash ................................................

(Paid creditors on account)

1,500

Cash ....................................................

Accounts Receivable .....................

(Received cash in payment

of account)

400

Cash ....................................................

Unearned Service Revenue ...........

(Received cash for future

services)

1,000

EXERCISE 2-10 (Continued)

(b) DAGGETT LANDSCAPING COMPANY

Trial Balance

April 30, 2017

Debit Credit

Cash.......................................................................... $11,500

Accounts Receivable............................................... 2,800

Supplies.................................................................... 1,800

Accounts Payable.................................................... $ 300

Unearned Service Revenue..................................... 1,000

Owner’s Capital........................................................ 12,000

Service Revenue ...................................................... 4,100

Salaries and Wages Expense.................................. 1,300

$17,400 $17,400

EXERCISE 2-11

(a) Oct. 1 Cash............................................................. 3,000

Owner’s Capital.................................... 3,000

(Owner’s investment of cash in

business)

10 Cash............................................................. 750

Service Revenue .................................. 750

(Received cash for services

performed)

10 Cash............................................................. 4,000

Notes Payable....................................... 4,000

(Obtained loan from bank)

20 Cash............................................................. 500

Accounts Receivable ........................... 500

(Received cash in payment of

account)

20 Accounts Receivable.................................. 940

Service Revenue .................................. 940

(Billed clients for services

performed)

EXERCISE 2-11 (Continued)

(b) SHUMWAY CO.

Trial Balance

October 31, 2017

Debit Credit

Cash..................................................................... $ 7,200

Accounts Receivable.......................................... 1,240

Supplies .............................................................. 400

Equipment........................................................... 2,000

Notes Payable ..................................................... $ 4,000

Accounts Payable............................................... 500

Owner’s Capital .................................................. 5,000

Owner’s Drawings .............................................. 300

Service Revenue................................................. 2,490

Salaries and Wages Expense ............................ 500

Rent Expense ..................................................... 350

$11,990 $11,990

EXERCISE 2-12

(a) General Journal J1

Date

Account Titles and Explanation

Ref.

Debit

Credit

Sept. 1

Cash...................................................

Owner’s Capital.........................

101

301

10,000

Equipment .........................................

Cash...........................................

Accounts Payable .....................

157

101

201

12,000

4,000

8,000

Accounts Payable.............................

Cash...........................................

201

101

3,000

Owner’s Drawings.............................

Cash...........................................

306

101

700

EXERCISE 2-12 (Continued)

(b)

Cash No. 101

Date

Explanation

Ref.

Debit

Credit

Balance

Sept. 1

10,000

4,000

6,000

3,000

700

2,300

Equipment No. 157

Date

Explanation

Ref.

Debit

Credit

Balance

Sept. 5

12,000

Accounts Payable No. 201

Date

Explanation

Ref.

Debit

Credit

Balance

Sept. 5

8,000

3,000

5,000

Owner’s Capital No. 301

Date

Explanation

Ref.

Debit

Credit

Balance

Sept. 1

10,000

Owner’s Drawings No. 306

Date

Explanation

Ref.

Debit

Credit

Balance

Sept. 30

700

EXERCISE 2-13

Error

(a)

In Balance

(b)

Difference

(c)

Larger Column

$525

Debit

Yes

—

Yes

—

415

Credit

Yes

—

Debit

EXERCISE 2-14

OVERNITE DELIVERY SERVICE

Trial Balance

July 31, 2017

Debit Credit

Cash ($78,821 – Debit total without Cash

$66,340)................................................................... $12,481

Accounts Receivable ................................................. 7,642

Prepaid Insurance ...................................................... 1,968

Equipment................................................................... 49,360

Notes Payable............................................................. $17,000

Accounts Payable ...................................................... 8,396

Salaries and Wages Payable ..................................... 815

Owner’s Capital.......................................................... 42,000

Owner’s Drawings...................................................... 700

Service Revenue ........................................................ 10,610

Salaries and Wages Expense .................................... 4,428

Maintenance and Repairs Expense........................... 961

Gasoline Expense ...................................................... 758

Utilities Expense ........................................................ 523

$78,821 $78,821

SOLUTIONS TO PROBLEMS

PROBLEM 2-1A

Date

Account Titles and Explanation

Ref.

Debit

Credit

Mar. 1

Cash ........................................................

20,000

Owner’s Capital..............................

20,000

(Owner’s investment of cash

in business)

Land.........................................................

12,000

Buildings.................................................

2,000

Equipment...............................................

1,000

Cash ................................................

15,000

(Purchased Rainbow’s Golf Land)

Advertising Expense ..............................

900

Cash ................................................

900

(Paid for advertising)

Prepaid Insurance ..................................

600

Cash ................................................

600

(Paid for one-year insurance

policy)

Equipment...............................................

1,050

Accounts Payable ..........................

1,050

(Purchased equipment on

account)

Cash ........................................................

1,100

Service Revenue ............................

1,100

(Received cash for services

performed)

Cash ........................................................

1,500

Unearned Service Revenue ...........

1,500

(Received cash for coupon

books sold)

PROBLEM 2-1A (Continued)

Date

Account Titles and Explanation

Ref.

Debit

Credit

Mar. 25

Owner’s Drawings...............................

Cash.............................................

(Withdrew cash for personal

use)

800

Salaries and Wages Expense.............

Cash.............................................

(Paid salaries)

250

Accounts Payable...............................

Cash.............................................

(Paid creditor on account)

1,050

Cash.....................................................

Service Revenue .........................

(Received cash for services

performed)

2,700

PROBLEM 2-2A

(a) J1

Date

Account Titles and Explanation

Ref.

Debit

Credit

Apr. 1

Cash........................................................

101

20,000

Owner’s Capital .............................

301

20,000

(Owner’s investment of cash

in business)

No entry—not a transaction.

Rent Expense.........................................

729

1,100

Cash ...............................................

101

1,100

(Paid monthly office rent)

Supplies..................................................

126

4,000

Accounts Payable..........................

201

4,000

(Purchased supplies on

account from Dazzle Company)

Accounts Receivable.............................

112

5,100

Service Revenue............................

400

5,100

(Billed clients for services

performed)

Cash........................................................

101

1,000

Unearned Service Revenue...........

209

1,000

(Received cash for future

service)

Cash........................................................

101

2,100

Service Revenue............................

400

2,100

(Received cash for services

performed)

Salaries and Wages Expense................

726

2,800

Cash ...............................................

101

2,800

(Paid monthly salary)

PROBLEM 2-2A (Continued)

Date

Account Titles and Explanation

Ref.

Debits

Credit

Apr. 30

Accounts Payable ..............................

201

2,400

Cash............................................

101

2,400

(Paid Dazzle Company on

account)

(b)

Cash No. 101

Date

Explanation

Ref.

Debit

Credit

Balance

Apr. 1

20,000

1,100

18,900

1,000

19,900

2,100

22,000

2,800

19,200

2,400

16,800

Accounts Receivable No. 112

Date

Explanation

Ref.

Debit

Credit

Balance

Apr. 10

5,100

Supplies No. 126

Date

Explanation

Ref.

Debit

Credit

Balance

Apr. 3

4,000

Accounts Payable No. 201

Date

Explanation

Ref.

Debit

Credit

Balance

Apr. 3

4,000

2,400

1,600

Unearned Service Revenue No. 209

Date

Explanation

Ref.

Debit

Credit

Balance

Apr. 11

1,000

PROBLEM 2-2A (Continued)

Owner’s Capital No. 301

Date

Explanation

Ref.

Debit

Credit

Balance

Apr. 1

20,000

Service Revenue No. 400

Date

Explanation

Ref.

Debit

Credit

Balance

Apr. 10

5,100

2,100

7,200

Salaries and Wages Expense No. 726

Date

Explanation

Ref.

Debit

Credit

Balance

Apr. 30

2,800

Rent Expense No. 729

Date

Explanation

Ref.

Debit

Credit

Balance

Apr. 2

1,100

Trial Balance

April 30, 2017

Debit

Credit

Cash.................................................................... $16,800

Accounts Receivable......................................... 5,100

Supplies.............................................................. 4,000

Accounts Payable.............................................. $ 1,600

Unearned Service Revenue............................... 1,000

Owner’s Capital.................................................. 20,000

Service Revenue ................................................ 7,200

Salaries and Wages Expense............................ 2,800

Rent Expense..................................................... 1,100

$29,800 $29,800

PROBLEM 2-3A

(a)

Trans.

Account Titles and Explanation

Debit

Credit

Cash ....................................................

40,000

Owner’s Capital.........................

40,000

No entry—Not a transaction.

Prepaid Rent.......................................

24,000

Cash ...........................................

24,000

Equipment ..........................................

30,000

Cash ...........................................

10,000

Accounts Payable .....................

20,000

Prepaid Insurance ..............................

1,800

Cash ...........................................

1,800

Supplies..............................................

420

Cash ...........................................

420

Supplies..............................................

1,500

Accounts Payable .....................

1,500

Cash ....................................................

8,000

Accounts Receivable .........................

12,000

Service Revenue .......................

20,000

Accounts Payable ..............................

400

Cash ...........................................

400

10.

Cash ....................................................

3,000

Accounts Receivable ................

3,000

11.

Utilities Expense ................................

380

Accounts Payable .....................

380

PROBLEM 2-3A (Continued)

Trans.

Account Titles and Explanation

Debit

Credit

12.

Salaries and Wages Expense..........

6,100

Cash ..........................................

6,100

(b)

Cash

(1) 40,000

(3) 24,000

(4) 10,000

(5) 1,800

(6) 420

(8) 8,000

(9) 400

(10) 3,000

(12) 6,100

8,280

Accounts Receivable

(8) 12,000

(10) 3,000

9,000

Supplies

(6) 420

(7) 1,500

1,920

Prepaid Insurance

(5) 1,800

1,800

Prepaid Rent

(3) 24,000

24,000

Equipment

(4) 30,000

30,000

Accounts Payable

(4) 20,000

(7) 1,500

(9) 400

(11) 380

21,480

Owner’s Capital

(1) 40,000

40,000

Service Revenue

(8) 20,000

20,000

Salaries and Wages Expense

(12) 6,100

6,100

Utilities Expense

(11) 380

380

PROBLEM 2-3A (Continued)

Trial Balance

May 31, 2017

Debit

Credit

Cash................................................................. $ 8,280

Accounts Receivable...................................... 9,000

Supplies .......................................................... 1,920

Prepaid Insurance........................................... 1,800

Prepaid Rent ................................................... 24,000

Equipment....................................................... 30,000

Accounts Payable........................................... $21,480

Owner’s Capital .............................................. 40,000

Service Revenue............................................. 20,000

Salaries and Wages Expense ........................ 6,100

Utilities Expense............................................. 380

$81,480 $81,480

PROBLEM 2-4A

AVTAR SANDHU CO.

Trial Balance

June 30, 2017

Debit

Credit

Cash ($3,340 + $270) ................................................. $ 3,610

Accounts Receivable ($2,812 – $270) ...................... 2,542

Supplies ($1,200 – $710) ........................................... 490

Equipment ($2,600 + $710)........................................ 3,310

Accounts Payable ($3,666 – $306 – $360)................ $ 3,000

Unearned Service Revenue ...................................... 1,100

Owner’s Capital ......................................................... 8,000

Owner’s Drawings ($800 + $600).............................. 1,400

Service Revenue ($2,480 + $882).............................. 3,362

Salaries and Wages Expense

($3,200 + $700 – $600) ............................................ 3,300

Utilities Expense........................................................ 810

$15,462 $15,462

PROBLEM 2-5A

(a) & (c)

Cash No. 101

Date

Explanation

Ref.

Debit

Credit

Balance

Mar. 1

Balance



3,000

1,500

4,300

5,800

4,100

1,700

900

800

5,000

5,800

2,000

3,800

3,100

700

450

1,150

9,000

10,150

Accounts Receivable No. 112

Date

Explanation

Ref.

Debit

Credit

Balance

Mar. 31

450

Land No. 140

Date

Explanation

Ref.

Debit

Credit

Balance

Mar. 1

Balance



24,000

Buildings No. 145

Date

Explanation

Ref.

Debit

Credit

Balance

Mar. 1

Balance



10,000

Equipment No. 157

Date

Explanation

Ref.

Debit

Credit

Balance

Mar. 1

Balance



10,000

PROBLEM 2-5A (Continued)

Accounts Payable No. 201

Date

Explanation

Ref.

Debit

Credit

Balance

Mar. 1

Balance



7,000

J1

2,000

9,000

J1

4,100

4,900

Owner’s Capital No. 301

Date

Explanation

Ref.

Debit

Credit

Balance

Mar. 1

Balance



40,000

Service Revenue No. 400

Date

Explanation

Ref.

Debit

Credit

Balance

Mar. 9

4,300

5,000

9,300

9,000

18,300

Rent Revenue No. 429

Date

Explanation

Ref.

Debit

Credit

Balance

Mar.31

900

Advertising Expense No. 610

Date

Explanation

Ref.

Debit

Credit

Balance

Mar.12

900

Salaries and Wages Expense No. 726

Date

Explanation

Ref.

Debit

Credit

Balance

Mar. 31

3,100

PROBLEM 2-5A (Continued)

Rent Expense No. 729

Date

Explanation

Ref.

Debit

Credit

Balance

Mar. 2

3,500

2,000

5,500

(b) J1

Date

Account Titles and Explanation

Ref.

Debit

Credit

Mar. 2

Rent Expense .......................................

729

3,500

Accounts Payable .......................

201

2,000

Cash .............................................

101

1,500

(Rented films for cash and

on account)

No entry.

Cash ......................................................

101

4,300

Service Revenue..........................

400

4,300

(Received cash for services

performed)

Accounts Payable ($2,000 + $2,100) ......

201

4,100

Cash .............................................

101

4,100

(Paid creditors on account)

No entry.

Advertising Expense............................

610

900

Cash .............................................

101

900

(Paid advertising expense)

Cash ......................................................

101

5,000

Service Revenue..........................

400

5,000

(Received cash for services

performed)

Rent Expense .......................................

729

2,000

Cash .............................................

101

2,000

(Paid film rental)

PROBLEM 2-5A (Continued)

Date

Account Titles and Explanation

Ref.

Debit

Credit

Mar. 31

Salaries and Wages Expense...............

726

3,100

Cash .............................................

101

3,100

(Paid salaries expense)

Cash.......................................................

101

450

Accounts Receivable............................

112

450

Rent Revenue...............................

429

900

(15% X $6,000)

(Received cash and balance

on account for rent

revenue)

Cash.......................................................

101

9,000

Service Revenue..........................

400

9,000

(Received cash for services

performed)

(d) STARR THEATER

Trial Balance

March 31, 2017

Debit

Credit

Cash .................................................................

$10,150

Accounts Receivable ......................................

450

Land..................................................................

24,000

Buildings..........................................................

10,000

Equipment........................................................

10,000

Accounts Payable............................................

$ 4,900

Owner’s Capital ...............................................

40,000

Service Revenue..............................................

18,300

Rent Revenue ..................................................

900

Advertising Expense.......................................

900

Salaries and Wages Expense .........................

3,100

Rent Expense..................................................

5,500

$64,100

CC2 COOKIE CREATIONS

(a)

GENERAL JOURNAL

Account Titles and Explanation

Debit

Credit

Nov. 8 No entry required for cashing U.S.

Savings Bonds—this is a personal

transaction.

8 Cash ......................................................... 500

Owner’s Capital .................................. 500

11 Advertising Expense............................... 65

Cash..................................................... 65

13 Supplies................................................... 125

Cash..................................................... 125

14 Equipment ............................................... 300

Owner’s Capital .................................. 300

16 Cash ......................................................... 2,000

Notes Payable ..................................... 2,000

17 Equipment ............................................... 900

Cash..................................................... 900

20 Cash ......................................................... 125

Service Revenue................................. 125

25 Cash ......................................................... 30

Unearned Service Revenue................ 30

30 Prepaid Insurance................................... 1,320

Cash..................................................... 1,320

CC2 (Continued)

(b)

Cash

Date

Explanation

Ref.

Debits

Credits

Balance

Nov. 8 J1 500 500

11 J1 65 435

13 J1 125 310

16 J1 2,000 2,310

17 J1 900 1,410

20 J1 125 1,535

25 J1 30 1,565

30 J1 1,320 245

Supplies

Date

Explanation

Ref.

Debits

Credits

Balance

Nov. 13 J1 125 125

Prepaid Insurance

Date

Explanation

Ref.

Debits

Credits

Balance

Nov. 30 J1 1,320 1,320

Equipment

Date

Explanation

Ref.

Debits

Credits

Balance

Nov. 14 J1 300 300

17 J1 900 1,200

Unearned Service Revenue

Date

Explanation

Ref.

Debits

Credits

Balance

Nov. 25 J1 30 30

CC2 (Continued)

(b) (Continued)

Notes Payable

Date

Explanation

Ref.

Debits

Credits

Balance

Nov. 16 J1 2,000 2,000

Owner’s Capital

Date

Explanation

Ref.

Debits

Credits

Balance

Nov. 8 J1 500 500

14 J1 300 800

Service Revenue

Date

Explanation

Ref.

Debits

Credits

Balance

Nov. 20 J1 125 125

Advertising Expense

Date

Explanation

Ref.

Debits

Credits

Balance

Nov. 11 J1 65 65

CC2 (Continued)

Trial Balance

November 30, 2016

Debit Credit

Cash ........................................................................... $ 245

Supplies ..................................................................... 125

Prepaid Insurance ..................................................... 1,320

Equipment.................................................................. 1,200

Unearned Service Revenue ...................................... $ 30

Notes Payable............................................................ 2,000

Owner’s Capital ......................................................... 800

Service Revenue........................................................ 125

Advertising Expense................................................. 65

$2,955 $2,955

Note to instructors: Because the notes payable is not due for 24 months, it

follows Unearned Service Revenue in the accounts and the trial balance.

BYP 2-1 FINANCIAL REPORTING PROBLEM

(a)

Account

(1)

Increase

Side

(1)

Decrease

Side

(2)

Normal

Balance

Accounts Payable

Credit

Debit

Credit

Accounts Receivable

Debit

Credit

Debit

Property, Plant, and Equipment

Debit

Credit

Debit

Cash and Cash Equivalents

Debit

Credit

Debit

Research and Development

Expense

Debit

Credit

Debit

Inventories

Debit

Credit

Debit

(b) 1. Cash is increased.

2. Cash is decreased.

3. Cash is decreased or Accounts Payable is increased.

2. Cash is decreased or Notes or Mortgage Payable is increased.

BYP 2-2 COMPARATIVE ANALYSIS PROBLEM

PepsiCo Coca-Cola

(a)

Inventory:

debit

Accounts Receivable:

debit

Property, Plant &

Equipment:

debit

Cash and Cash Equivalents:

debit

Accounts Payable:

credit

Cost of Goods

Sold(expense):

debit

Interest Expense:

debit

Sales (revenue)

credit

(b)

1. Increase in Accounts Receivable: Service Revenue or Sales

Revenue is increased (credited).

2. Decrease in Salaries and Wages Payable: Cash is decreased

(credited).

3. Increase in Property, Plant and Equipment: Cash is decreased

(credited) and Accounts Payable or Notes payable is increased

(credited).

4. Increase in Interest Expense: Cash is decreased (credited).

BYP 2-3 COMPARATIVE ANALYSIS PROBLEM

Amazon Wal-Mart

(a)

Interest Expense:

debit

Net Product Revenues:

credit

Cash and Cash

Equivalents:

debit

Inventories:

debit

Accounts Payable:

credit

Cost of Sales:

debit

(b) The following other accounts are ordinarily involved:

1. Increase in Accounts Receivable: Service Revenue or Sales

Revenue is increased (credited).

2. Increase in Interest Expense: Cash is decreased (credited).

3. Decrease in Salaries and Wages Payable: Cash is decreased

(credited).

4. Increase in Service Revenue: Cash or Accounts Receivable is

increased (debited).

BYP 2-4 REAL-WORLD FOCUS

The answer is dependent upon the company selected by the student.

BYP 2-5 REAL-WORLD FOCUS

(a) The reason the Green Bay Packers’ issue an annual report is because

they are a publicly owned, nonprofit company. They issue the report to

the more than 100,000 shareholders who hold shares. None of the

other teams are publicly owned, so they have no obligation to make

their financial information available except to their small group of

owners.

(b) At the time that the article was written the owners of the NFL teams

and the players’ labor union were negotiating a new contract. Knowing

how profitable the NFL teams are would be useful information for the

players to know so that they would have a better sense of how much

the teams could afford to pay. The Packers are obviously a “small

market” team, they are not necessarily representative of teams in

general. However, the Packers’ annual report does give the players

some sense of the profitability of other teams.

covered by taxpayers, the county and state government has an interest

in the team’s finances.

(d) The Packers’ revenues increased during recent years. However,

because the cost of players’ salaries increased at a faster rate than

revenues, the Packers’ operating profit actually declined.

BYP 2-6 COMMUNICATION ACTIVITY

Date: May 25, 2017

To: Accounting Instructor

From: Student

In the first transaction, bills totaling $6,000 were sent to customers for

services performed. Therefore, the asset Accounts Receivable is increased

$6,000 and the revenue Service Revenue is increased $6,000. Debits increase

assets and credits increase revenues, so the journal entry is:

Accounts Receivable ............................................................ 6,000

Service Revenue ............................................................ 6,000

(Billed customers for services performed)

The $6,000 amount is then posted to the debit side of the general ledger

account Accounts Receivable and to the credit side of the general ledger

account Service Revenue.

In the second transaction, $2,000 was paid in salaries to employees. Therefore,

the expense Salaries and Wages Expense is increased $2,000 and the asset

Cash is decreased $2,000. Debits increase expenses and credits decrease

assets, so the journal entry is:

Salaries and Wages Expense ............................................... 2,000

Cash................................................................................ 2,000

(Salaries and wages paid)

The $2,000 amount is then posted to the debit side of the general ledger

account Salaries and Wages Expense and to the credit side of the general

ledger account Cash.

BYP 2-7 ETHICS CASE

(a) The stakeholders in this situation are:

Ellynn Kole, assistant chief accountant.

Users of the company’s financial statements.

The Doman Company.

(b) By adding $1,000 to the Equipment account, that account total is inten-

tionally misstated. By not locating the error causing the imbalance,

some other account may also be misstated by $1,000. If the amount of

$1,000 is determined to be immaterial, and the intent is not to commit

fraud (cover up an embezzlement or other misappropriation of assets),

Ellynn’s action might not be considered unethical in the preparation of

interim financial statements. However, if Ellynn is violating a company

accounting policy by her action, then she is acting unethically.

1. Miss the deadline but find the error causing the imbalance.

2. Tell her supervisor of the imbalance and suffer the consequences.

3. Do as she did and locate the error later, making the adjustment in

the next quarter.

BYP 2-8 ETHICS CASE

The decision whether to fire Mr. Edmondson was the responsibility of

Radio Shack’s board of directors, which is elected by the company’s

shareholders to oversee management. The board initially announced its

support for the CEO. After further investigation, the board encouraged

Mr. Edmondson to resign, which he did. In contrast, when Bausch &

Lomb’s CEO offered to resign in a similar situation, the company’s

board refused to accept his resignation. Board members stated that they

felt he was still the best person for the position.

Radio Shack says that although it did a reference check at the time of

Mr. Edmondson’s hiring, it did not check his educational credentials.

Under the Sarbanes-Oxley Act, companies must now perform thorough

background checks as part of a check of internal controls. The bottom

line: Your résumé must be a fair and accurate depiction of your past.

BYP 2-9 ALL ABOUT YOU

(a) Students’ responses to this question will vary. It is important that the

steps that they identify be as specific as possible, and clearly directed

toward achieving their goal. You may wish to ask a follow-up question

asking them to explain how each step will assist them in achieving

their goal.

(b) There are many sites on the Internet that provide information about

preparing a résumé. For example, you can find extensive resources at:

http://www.rileyguide.com/resprep.html. Many schools also have re-

sources in their placement centers or writing labs. The Writing Center

at Rensselaer Polytechnic Institute provides useful, concise

information on its website at http://www.ccp.rpi.edu/resources/careers-

and-graduate-school/resumes. A wide variety of sample résumés can

be found. For example, Monster.com provides samples for a wide

variety of professions and situations at http://www.career-

advice.monster.com/resumes-cover-letters/careers.aspx.

relevant training, education, and employment experiences so as to

provide assurance to the potential employer, and also to enable that

employer to do follow-up work. If you say you have certain skills, such

as computer skills, try to substantiate the claim with recognized proof

of proficiency. Make sure that all addresses and phone numbers are

accurate and up-to-date. Also, ensure that the people you use as

references have a copy of your résumé and cover letter, and that they

are informed that you are interviewing so they know to expect a call.

(d) See the sample résumés provided in the websites above for various

format options. You might also mention to students that there are

electronic résumé templates available on the Internet.

BYP 2-10 CONSIDERING PEOPLE, PLANET AND PROFIT

(a) The existence of three different forms of certification would most

likely create confusion for coffee purchasers. It would be difficult to

know what aspects of the coffee growing process each certification

covered. Similarly, if there were multiple groups that certified financial

statements, each with different criteria, it would be difficult for

financial statement users to know what each certification promised.

(b) The Starbucks certification appears to be the most common in that

area. It has the advantage of having a direct link to the Starbucks

coffee market. Although it does not guarantee that Starbucks will buy

its coffee, it is a requirement that must be met before Starbucks will

buy somebody’s coffee. Note that the article states that the Starbucks

certification “incorporates elements of social responsibility and

environmental leadership, but quality of coffee is the first criteria.”

The Smithsonian Bird Friendly is considered to have the strictest

requirements and, as a result, appears to be the least common.

as a means to protect bird species, biodiversity and wildlife habitat.

Some included requirements are to improve workers’ living

conditions, such as providing running water in worker housing, child

labor regulations and education requirements. As mentioned above,

the Starbucks certification has the potential financial benefit of

making Starbucks a potential customer, which can stabilize farmers’

earnings. Certifications can also be financially beneficial because

companies can benefit from the positive public relations effects of

either producing or buying coffee produced using sustainable

practices.

IFRS 2-1 INTERNATIONAL FINANCIAL REPORTING PROBLEM

Account

Financial Statement

Position in Financial

Statement

Other operating

income and

expense

Consolidated Income

Statement

After gross profit and

before operating profit

Cash and cash

equivalents

Consolidated Balance

Sheet

Current assets

Trade accounts

payable

Consolidated Balance

Sheet

Current liabilities

Cost of net

financial debt

Consolidated Income

Statement

After operating profit and

before profit from

continuing operations

before taxes.

CC2 COOKIE CREATIONS

(a)

GENERAL JOURNAL

Account Titles and Explanation

Debit

Credit

Nov. 8 No entry required for cashing U.S.

Savings Bonds—this is a personal

transaction.

8 Cash ......................................................... 500

Owner’s Capital .................................. 500

11 Advertising Expense............................... 65

Cash..................................................... 65

13 Supplies................................................... 125

Cash..................................................... 125

14 Equipment ............................................... 300

Owner’s Capital .................................. 300

16 Cash ......................................................... 2,000

Notes Payable ..................................... 2,000

17 Equipment ............................................... 900

Cash..................................................... 900

20 Cash ......................................................... 125

Service Revenue................................. 125

25 Cash ......................................................... 30

Unearned Service Revenue................ 30

30 Prepaid Insurance................................... 1,320

Cash..................................................... 1,320

CC2 (Continued)

(b)

Cash

Date

Explanation

Ref.

Debits

Credits

Balance

Nov. 8 J1 500 500

11 J1 65 435

13 J1 125 310

16 J1 2,000 2,310

17 J1 900 1,410

20 J1 125 1,535

25 J1 30 1,565

30 J1 1,320 245

Supplies

Date

Explanation

Ref.

Debits

Credits

Balance

Nov. 13 J1 125 125

Prepaid Insurance

Date

Explanation

Ref.

Debits

Credits

Balance

Nov. 30 J1 1,320 1,320

Equipment

Date

Explanation

Ref.

Debits

Credits

Balance

Nov. 14 J1 300 300

17 J1 900 1,200

Unearned Service Revenue

Date

Explanation

Ref.

Debits

Credits

Balance

Nov. 25 J1 30 30

CC2 (Continued)

(b) (Continued)

Notes Payable

Date

Explanation

Ref.

Debits

Credits

Balance

Nov. 16 J1 2,000 2,000

Owner’s Capital

Date

Explanation

Ref.

Debits

Credits

Balance

Nov. 8 J1 500 500

14 J1 300 800

Service Revenue

Date

Explanation

Ref.

Debits

Credits

Balance

Nov. 20 J1 125 125

Advertising Expense

Date

Explanation

Ref.

Debits

Credits

Balance

Nov. 11 J1 65 65

CC2 (Continued)

Trial Balance

November 30, 2016

Debit Credit

Cash........................................................................... $ 245

Supplies..................................................................... 125

Prepaid Insurance..................................................... 1,320

Equipment ................................................................. 1,200

Unearned Service Revenue ...................................... $ 30

Notes Payable ........................................................... 2,000

Owner’s Capital......................................................... 800

Service Revenue ....................................................... 125

Advertising Expense................................................. 65

$2,955 $2,955

Note to instructors: Because the notes payable is not due for 24 months, it

follows Unearned Service Revenue in the accounts and the trial balance.

CHAPTER 2

SOLUTIONS TO EXERCISES—SET B

EXERCISE 2-1B

1. False. An account is an accounting record of a specific asset, liability,

or owner’s equity item.

2. True.

3. False. Each asset, liability, and owner’s equity item has a separate

account.

4. True.

5. False. A simple form of an account consisting of the account title, the

left side, and the right side, is called a t-account.

EXERCISE 2-2B

Account Debited

Account Credited

Transaction

(a)

Basic

Type

(b)

Specific

Account

(c)

Effect

(d)

Normal

Balance

(a)

Basic

Type

(b)

Specific

Account

(c)

Effect

(d)

Normal

Balance

Jan. 2

Asset

Cash

Increase

Debit

Owner’s

Equity

Owner’s

Capital

Increase

Credit

Owner’s

Equity

Advertising

Expense

Increase

Debit

Asset

Cash

Decrease

Debit

Asset

Equipment

Increase

Debit

Asset

Cash

Decrease

Debit

Asset

Accounts

Receivable

Increase

Debit

Owner’s

Equity

Service

Revenue

Increase

Credit

Asset

Supplies

Increase

Debit

Liability

Accounts

Payable

Increase

Credit

Asset

Cash

Increase

Debit

Asset

Accounts

Receivable

Decrease

Debit

Liability

Accounts

Payable

Decrease

Credit

Asset

Cash

Decrease

Debit

Owner’s

Equity

Owner’s

Drawings

Increase

Debit

Asset

Cash

Decrease

Debit

EXERCISE 2-3B

General Journal J1

Date

Account Titles and Explanation

Ref.

Debit

Credit

Jan. 2

Cash...................................................

20,000

Owner’s Capital .........................

20,000

Advertising Expense.........................

500

Cash ...........................................

500

Equipment .........................................

7,000

Cash ...........................................

7,000

Accounts Receivable........................

2,300

Service Revenue........................

2,300

Supplies.............................................

700

Accounts Payable .....................

700

Cash...................................................

1,100

Accounts Receivable ................

1,100

Accounts Payable .............................

400

Cash ...........................................

400

Owner’s Drawings.............................

1,200

Cash ...........................................

1,200

EXERCISE 2-4B

Oct. 1 Debits increase assets: debit Cash $22,000.

Credits increase owner’s equity: credit Owner’s Capital $22,000.

2 Debits increase expenses: debit Rent Expense, $700.

Credits decrease assets: credit Cash $700.

3 Debits increase assets: debit Equipment $2,800.

Credits increase liabilities: credit Accounts Payable $2,800.

EXERCISE 2-4B (Continued)

Oct. 6 Debits increase assets: debit Accounts Receivable $5,400.

Credits increase revenues: credit Service Revenue $5,400.

27 Debits decrease liabilities: debit Accounts Payable $1,100.

Credits decrease assets: credit Cash $1,100.

30 Debits increase expenses: debit Utilities Expense $180.

Credits increase liabilities: credit Accounts Payable $180.

EXERCISE 2-5B

General Journal

Date

Account Titles and Explanation

Ref.

Debits

Credit

Oct. 1

Cash...................................................

22,000

Owner’s Capital........................

22,000

Rent Expense ....................................

700

Cash..........................................

700

Equipment .........................................

2,800

Accounts Payable ....................

2,800

Accounts Receivable........................

5,400

Service Revenue ......................

5,400

Accounts Payable .............................

Cash..........................................

1,100

Utilities Expense ...............................

180

Accounts Payable ....................

180

EXERCISE 2-6B

(a) 1. Increase the asset Cash, increase the liability Notes Payable.

2. Increase the asset Equipment, decrease the asset Cash.

3. Increase the expense Rent Expense, decrease the asset Cash.

(b) 1. Cash ................................................................. 15,000

Notes Payable........................................... 15,000

2. Equipment........................................................ 3,100

Cash .......................................................... 3,100

3. Rent Expense .................................................. 900

Cash .......................................................... 900

EXERCISE 2-7B

(a) Assets = Liabilities + Owners’ Equity

1. + +

2. + +

3. + +

4. – –

(b) 1. Cash ................................................................. 6,000

Owner’s Capital ........................................ 6,000

2. Supplies ........................................................... 1,100

Accounts Payable..................................... 1,100

3. Accounts Receivable ...................................... 4,500

Service Revenue....................................... 4,500

4. Owner’s Drawings........................................... 1,200

Cash .......................................................... 1,200

EXERCISE 2-8B

1. False. The general ledger contains all the asset, liability, and owner’s

equity accounts.

2. False The general ledger is sometimes referred to as the ledger.

3. False. The accounts in the general ledger are arranged in financial

statement order: first the assets, then the liabilities, owner’s capital,

owner’s drawing, revenues, and expenses.

4. True.

5. True.

EXERCISE 2-9B

(a)

Cash

Aug. 1 6,000

Aug. 12 1,000

10 1,700

31 1,500

Bal. 8,200

Accounts Receivable

Aug. 25 2,500

Aug. 31 1,500

Bal. 1,000

Equipment

Aug. 12 6,000

Notes Payable

Aug. 12 5,000

Owner’s Capital

Aug. 1 6,000

Service Revenue

Aug. 10 1,700

25 2,500

Bal. 4,200

(b) BRET QUANDT, INVESTMENT BROKER

Trial Balance

August 31, 2017

Debit Credit

Cash......................................................................... $ 8,200

Accounts Receivable.............................................. 1,000

Equipment............................................................... 6,000

Notes Payable ......................................................... $ 5,000

Owner’s Capital ...................................................... 6,000

Service Revenue..................................................... 4,200

$15,200 $15,200

EXERCISE 2-10B

(a) General Journal

Date

Account Titles and Explanation

Ref.

Debit

Credit

Apr. 1

Cash ....................................................

Owner’s Capital..............................

(Owner’s investment of

cash in business)

18,000

Cash ....................................................

Service Revenue ............................

(Received cash for

services provided)

1,200

Salaries and Wages Expense ............

Cash ................................................

(Paid salaries to date)

700

Accounts Payable...............................

Cash ................................................

(Paid creditors on account)

1,600

Cash ....................................................

Accounts Receivable .....................

(Received cash in payment

of account)

900

Cash ....................................................

Unearned Service Revenue ...........

(Received cash for future

services)

1,400

EXERCISE 2-10B (Continued)

(b) CARRIE’S GARDENING COMPANY

Trial Balance

April 30, 2017

Debit Credit

Cash.......................................................................... $19,200

Accounts Receivable............................................... 2,000

Supplies ................................................................... 1,900

Accounts Payable.................................................... $ 300

Unearned Service Revenue..................................... 1,400

Owner’s Capital ....................................................... 18,000

Service Revenue...................................................... 4,100

Salaries and Wages Expense ................................. 700

$23,800 $23,800

EXERCISE 2-11B

(a) Oct. 1 Cash............................................................. 8,500

Owner’s Capital.................................... 8,500

(Owner’s investment of cash in

business)

10 Cash............................................................. 800

Service Revenue .................................. 800

(Received cash for services

provided)

10 Cash............................................................. 3,000

Notes Payable ...................................... 3,000

(Obtained loan from bank)

20 Cash............................................................. 450

Accounts Receivable........................... 450

(Received cash in payment of

account)

20 Accounts Receivable.................................. 1,070

Service Revenue .................................. 1,070

(Billed clients for services

provided)

EXERCISE 2-11B (Continued)

(b) NOLASKO CO.

Trial Balance

October 31, 2017

Debit Credit

Cash..................................................................... $ 11,800

Accounts Receivable.......................................... 1,420

Supplies .............................................................. 400

Equipment........................................................... 2,000

Notes Payable ..................................................... $ 3,000

Accounts Payable............................................... 500

Owner’s Capital .................................................. 10,500

Owner’s Drawings .............................................. 300

Service Revenue................................................. 2,670

Salaries and Wages Expense ............................ 500

Rent Expense ..................................................... 250

$16,670 $16,670

EXERCISE 2-12B

(a) General Journal J1

Date

Account Titles and Explanation

Ref.

Debit

Credit

Sept. 1

Cash...................................................

Owner’s Capital.........................

101

301

25,000

Equipment .........................................

Cash...........................................

Accounts Payable .....................

157

101

201

30,000

7,500

22,500

Accounts Payable.............................

Cash...........................................

201

101

6,500

Owner’s Drawings.............................

Cash...........................................

306

101

1,000

EXERCISE 2-12B (Continued)

(b)

Cash No. 101

Date

Explanation

Ref.

Debit

Credit

Balance

Sept. 1

25,000

7,500

17,500

6,500

11,000

1,000

10,000

Equipment No. 157

Date

Explanation

Ref.

Debit

Credit

Balance

Sept. 5

30,000

Accounts Payable No. 201

Date

Explanation

Ref.

Debit

Credit

Balance

Sept. 5

22,500

6,500

16,000

Owner’s Capital No. 301

Date

Explanation

Ref.

Debit

Credit

Balance

Sept. 1

25,000

Owner’s Drawings No. 306

Date

Explanation

Ref.

Debit

Credit

Balance

Sept. 30

1,000

EXERCISE 2-13B

Error

(a)

In Balance

(b)

Difference

(c)

Larger Column

$500

Debit

Yes

—

400

Debit

400

Debit

Yes

—

Credit

EXERCISE 2-14B

MORAN DELIVERY SERVICE

Trial Balance

July 31, 2017

Debit Credit

Cash ($54,740 – Debit total without Cash

$40,830)................................................................... $ 13,910

Accounts Receivable ................................................. 5,220

Prepaid Insurance ...................................................... 1,190

Equipment................................................................... 30,000

Notes Payable............................................................. $16,000

Accounts Payable ...................................................... 5,110

Salaries and Wages Payable ..................................... 490

Owner’s Capital.......................................................... 26,780

Owner’s Drawings...................................................... 420

Service Revenue ........................................................ 6,360

Salaries and Wages Expense .................................... 2,660

Maintenance and Repairs Expense........................... 580

Gasoline Expense ...................................................... 450

Insurance Expense..................................................... 310

$54,740 $54,740

SOLUTIONS TO PROBLEMS—SET C

PROBLEM 2-1C

Date

Account Titles and Explanation

Ref.

Debit

Credit

Mar. 1

Cash.........................................................

50,000

Owner’s Capital ..............................

50,000

(Owner’s investment of cash

in business)

Land.........................................................

23,000

Buildings.................................................

9,000

Equipment...............................................

6,000

Cash ................................................

38,000

(Purchased Tee’s Golf Land)

Advertising Expense ..............................

1,600

Cash ................................................

1,600

(Paid for advertising)

Prepaid Insurance ..................................

1,480

Cash ................................................

1,480

(Paid for one-year insurance

policy)

Equipment...............................................

2,600

Accounts Payable ..........................

2,600

(Purchased equipment on

account)

Cash.........................................................

800

Service Revenue.............................

800

(Received cash for services

provided)

Cash.........................................................

1,500

Unearned Service Revenue ...........

1,500

(Received cash for future

services)

PROBLEM 2-1C (Continued)

Date

Account Titles and Explanation

Ref.

Debit

Credit

Mar. 25

Owner’s Drawings...............................

Cash.............................................

(Withdrew cash for personal

use)

2,000

Salaries and Wages Expense.............

Cash.............................................

(Paid salaries)

600

Accounts Payable...............................

Cash.............................................

(Paid creditor on account)

2,600

Cash.....................................................

Service Revenue .........................

(Received cash for services

provided)

500

PROBLEM 2-2C

(a) J1

Date

Account Titles and Explanation

Ref.

Debit

Credit

Apr. 1

Cash........................................................

101

45,000

Owner’s Capital .............................

301

45,000

(Owner’s investment of cash

in business)

No entry—not a transaction.

Rent Expense.........................................

729

800

Cash ...............................................

101

800

(Paid monthly office rent)

Supplies .................................................

126

1,500

Accounts Payable .........................

201

1,500

(Purchased supplies on

account)

Accounts Receivable.............................

112

1,800

Service Revenue............................

400

1,800

(Billed clients for services

provided)

Cash........................................................

101

500

Unearned Service Revenue ..........

209

500

(Received cash for future

service)

Cash........................................................

101

1,500

Service Revenue............................

400

1,500

(Received cash for services

provided)

Salaries and Wages Expense ...............

726

2,000

Cash ...............................................

101

2,000

(Paid monthly salary)

PROBLEM 2-2C (Continued)

Date

Account Titles and Explanation

Ref.

Debits

Credit

Apr. 30

Accounts Payable ..............................

201

600

Cash............................................

101

600

(Paid creditor on account)

(b)

Cash No. 101

Date

Explanation

Ref.

Debit

Credit

Balance

Apr. 1

35,000

45,000

800

44,200

500

44,700

1,500

46,200

2,000

44,200

600

43,600

Accounts Receivable No. 112

Date

Explanation

Ref.

Debit

Credit

Balance

Apr. 10

1,800

Supplies No. 126

Date

Explanation

Ref.

Debit

Credit

Balance

Apr. 3

1,500

Accounts Payable No. 201

Date

Explanation

Ref.

Debit

Credit

Balance

Apr. 3

1,500

600

900

Unearned Service Revenue No. 209

Date

Explanation

Ref.

Debit

Credit

Balance

Apr. 11

500

PROBLEM 2-2C (Continued)

Owner’s Capital No. 301

Date

Explanation

Ref.

Debit

Credit

Balance

Apr. 1

45,000

Service Revenue No. 400

Date

Explanation

Ref.

Debit

Credit

Balance

Apr. 10

1,800

1,500

3,300

Salaries and Wages Expense No. 726

Date

Explanation

Ref.

Debit

Credit

Balance

Apr. 30

2,000

Rent Expense No. 729

Date

Explanation

Ref.

Debit

Credit

Balance

Apr. 2

800

Trial Balance

April 30, 2017

Debit

Credit

Cash..................................................................... $43,600

Accounts Receivable.......................................... 1,800

Supplies .............................................................. 1,500

Accounts Payable............................................... $ 900

Unearned Service Revenue................................ 500

Owner’s Capital .................................................. 45,000

Service Revenue................................................. 3,300

Salaries and Wages Expense ............................ 2,000

Rent Expense...................................................... 800

$49,700 $49,700

PROBLEM 2-3C

(a)

Trans.

Account Titles and Explanation

Debit

Credit

Cash ....................................................

100,000

Owner’s Capital.........................

100,000

No entry—Not a transaction.

Prepaid Rent.......................................

36,000

Cash ...........................................

36,000

Equipment ..........................................

60,000

Cash ...........................................

20,000

Accounts Payable .....................

40,000

Prepaid Insurance ..............................

3,000

Cash ...........................................

3,000

Supplies..............................................

1,000

Cash ...........................................

1,000

Supplies..............................................

3,000

Accounts Payable .....................

3,000

Cash ....................................................

10,000

Accounts Receivable .........................

20,000

Service Revenue .......................

30,000

Accounts Payable ..............................

800

Cash ...........................................

800

10.

Cash ....................................................

5,000

Accounts Receivable ................

5,000

11.

Utilities Expense ................................

400

Accounts Payable .....................

400

PROBLEM 2-3C (Continued)

Trans.

Account Titles and Explanation

Debit

Credit

12.

Salaries and Wages Expense...........

6,000

Cash ...........................................

6,000

(b)

Cash

(1) 100,000

(3) 36,000

(4) 20,000

(5) 3,000

(6) 1,000

(8) 10,000

(9) 800

(10) 5,000

(12) 6,000

48,200

Accounts Receivable

(8) 20,000

(10) 5,000

15,000

Supplies

(6) 1,000

(7) 3,000

4,000

Prepaid Insurance

(5) 3,000

3,000

Prepaid Rent

(3) 36,000

36,000

Equipment

(4) 60,000

60,000

Accounts Payable

(4) 40,000

(7) 3,000

(9) 800

(11) 400

42,600

Owner’s Capital

(1) 100,000

100,000

Service Revenue

(8) 30,000

30,000

Salaries and Wages Expense

(12) 6,000

6,000

Utilities Expense

(11) 400

400

PROBLEM 2-3C (Continued)

Trial Balance

May 31, 2017

Debit

Credit

Cash................................................................. $ 48,200

Accounts Receivable...................................... 15,000

Supplies .......................................................... 4,000

Prepaid Insurance........................................... 3,000

Prepaid Rent ................................................... 36,000

Equipment....................................................... 60,000

Accounts Payable........................................... $ 42,600

Owner’s Capital .............................................. 100,000

Service Revenue............................................. 30,000

Salaries and Wages Expense ........................ 6,000

Utilities Expense............................................. 400

$172,600 $172,600

PROBLEM 2-4C

BILL BELLICHEK CO.

Trial Balance

June 30, 2017

Debit

Credit

Cash ($2,840 + $270) .................................................. $ 3,110

Accounts Receivable ($3,231 – $270) ....................... 2,961

Supplies ($800 – $340)............................................... 460

Equipment ($3,000 + $340) ........................................ 3,340

Accounts Payable ($2,666 – $206 – $260)................. $ 2,200

Unearned Service Revenue ....................................... 1,200

Owner’s Capital.......................................................... 9,000

Owner’s Drawing ($800 + $500)................................. 1,300

Service Revenue ($2,380 + $801) .............................. 3,181

Salaries and Wages Expense

($3,400 + $600 – $500)............................................. 3,500

Supplies Expense....................................................... 910

$15,581 $15,581

PROBLEM 2-5C

(a)&(c)

Cash No. 101

Date

Explanation

Ref.

Debit

Credit

Balance

Mar. 1

Balance

16,000

3,000

13,000

6,500

19,500

7,000

12,500

800

11,700

7,200

18,900

3,000

15,900

4,800

11,100

400

11,500

7,000

18,500

Accounts Receivable No. 112

Date

Explanation

Ref.

Debit

Credit

Balance

Mar. 31

400

Land No. 140

Date

Explanation

Ref.

Debit

Credit

Balance

Mar. 1

Balance

42,000

Buildings No. 145

Date

Explanation

Ref.

Debit

Credit

Balance

Mar. 1

Balance

18,000

Equipment No. 157

Date

Explanation

Ref.

Debit

Credit

Balance

Mar. 1

Balance

16,000

PROBLEM 2-5C (Continued)

Accounts Payable No. 201

Date

Explanation

Ref.

Debit

Credit

Balance

Mar. 1

Balance

12,000

3,000

15,000

7,000

8,000

Owner’s Capital No. 301

Date

Explanation

Ref.

Debit

Credit

Balance

Mar. 1

Balance

80,000

Service Revenue No. 400

Date

Explanation

Ref.

Debit

Credit

Balance

Mar. 9

6,500

7,200

13,700

7,000

20,700

Rent Revenue No. 429

Date

Explanation

Ref.

Debit

Credit

Balance

Mar.31

800

Advertising Expense No. 610

Date

Explanation

Ref.

Debit

Credit

Balance

Mar.12

800

Rent Expense No. 632

Date

Explanation

Ref.

Debit

Credit

Balance

Mar. 2

6,000

3,000

9,000

PROBLEM 2-5C (Continued)

Salaries and Wages Expense No. 726

Date

Explanation

Ref.

Debit

Credit

Balance

Mar. 31

4,800

(b) J1

Date

Account Titles and Explanation

Ref.

Debit

Credit

Mar. 2

Rent Expense .......................................

632

6,000

Accounts Payable .......................

201

3,000

Cash .............................................

101

3,000

(Rented films for cash and

on account)

No entry.

Cash ......................................................

101

6,500

Service Revenue..........................

400

6,500

(Received cash for services

provided)

Accounts Payable ($3,000 + $4,000) ......

201

7,000

Cash .............................................

101

7,000

(Paid creditors on account)

No entry.

Advertising Expense............................

610

800

Cash .............................................

101

800

(Paid advertising expense)

Cash ......................................................

101

7,200

Service Revenue..........................

400

7,200

(Received cash for services

provided)

Rent Expense .......................................

632

3,000

Cash .............................................

101

3,000

(Paid film rental)

PROBLEM 2-5C (Continued)

Date

Account Titles and Explanation

Ref.

Debit

Credit

Mar.31

Salaries and Wages Expense ..............

726

4,800

Cash .............................................

101

4,800

(Paid salaries expense)

Cash.......................................................

101

400

Accounts Receivable............................

112

400

Rent Revenue

(10% X $8,000) ...........................

429

800

(Received cash and balance

on account for rent

revenue)

Cash.......................................................

101

7,000

Service Revenue..........................

400

7,000

(Received cash for services

provided)

(d) JENSEN THEATER

Trial Balance

March 31, 2017

Debit

Credit

Cash .................................................................

$ 18,500

Accounts Receivable ......................................

400

Land .................................................................

42,000

Buildings..........................................................

18,000

Equipment........................................................

16,000

Accounts Payable ...........................................

$ 8,000

Owner’s Capital...............................................

80,000

Service Revenue .............................................

20,700

Rent Revenue ..................................................

800

Advertising Expense.......................................

800

Rent Expense ..................................................

9,000

Salaries and Wages Expense .........................

4,800

$109,500

Accounting Principles 12th Edition Weygandt Solution Manual

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