CHAPTER 2

The Recording Process

ASSIGNMENT CLASSIFICATION TABLE

Study Objectives

Questions

Brief
Exercises

Exercises

Problems
Set A

Problems
Set B

1. Explain what an account is and

how it helps in the recording
process.

2. Define debits and credits and

illustrate how they are used to
record business transactions.

3. Describe the basic steps in the

1, 2, 3, 4, 5,
6, 7, 8, 9

1, 2, 3

10, 18

11, 12, 13,

14, 18

5, 6

1, 2, 3

1, 2

1, 2

10

10

4, 5, 6, 7

2, 3, 4, 5, 6, 7

2, 3, 4, 5, 6, 7

4, 5, 6, 7

12

12

recording process.

4. Explain what a journal is, how it

helps in the recording process,
and journalize business
transactions.
5. Explain what a ledger is and how
it helps in the recording process.

14, 15, 18

6. Explain what posting is, and how

it helps in the recording process.

15, 16, 18

6, 8, 9

3, 4, 5, 6, 7

3, 4, 5, 6, 7

7. Explain the purpose of, and

17, 18, 19

8, 9

7, 8, 9,
10

3, 4, 5, 6, 7, 8,
9, 10, 11, 12

3, 4, 5, 6, 7, 8,
9, 10, 11, 12

prepare, a trial balance.

2-1

ASSIGNMENT CHARACTERISTICS TABLE

Problem
Number

Description

Difficulty
Level

Time
Allotted (min.)

1A

Identify increases, decreases, normal balances, and

types of accounts.

Simple

15-20

2A

Journalize a series of transactions.

Simple

20-30

3A

Journalize transactions, post, and prepare trial balance.

Moderate

40-50

4A

Journalize transactions, post, and prepare trial balance.

Moderate

55-65

5A

Journalize transactions, post, and prepare trial balance.

Moderate

55-65

6A

Journalize transactions, post, and prepare trial balance

and financial statements.

Moderate

80-90

7A

Journalize transactions, post, prepare trial balance, and

determine elements of financial statements.

Moderate

65-75

8A

Prepare financial statements from trial balance.

Simple

25-35

9A

Prepare trial balance and financial statements.

Simple

30-40

10A

Answer questions about trial balance error and identify

source documents.

Moderate

25-30

11A

Identify errors and prepare correct trial balance.

Moderate

25-35

12A

Prepare correct trial balance.

Complex

30-40

1B

Identify increases, decreases, normal balances, and

types of accounts.

Simple

15-20

2B

Journalize a series of transactions.

Simple

20-30

3B

Journalize transactions, post, and prepare trial balance.

Moderate

40-50

4B

Journalize transactions, post, and prepare trial balance.

Moderate

55-65

5B

Journalize transactions, post, and prepare trial balance.

Moderate

55-65

6B

Journalize transactions, post, and prepare trial balance

and financial statements.

Moderate

80-90

7B

Journalize transactions, post, prepare trial balance, and

determine elements of financial statements.

Moderate

65-75

8B

Prepare financial statements from trial balance.

Simple

25-35

9B

Prepare trial balance and financial statements.

Simple

30-40

10B

Answer questions about trial balance error and identify

source documents.

Moderate

25-30

11B

Identify errors and prepare correct trial balance.

Moderate

25-35

12B

Prepare correct trial balance.

Complex

30-40

2-2

BLOOMS TAXONOMY TABLE

Correlation Chart between Blooms Taxonomy, Study Objectives and End-of-Chapter Material
Study Objective
1. Explain what
an account is
and how it
helps in the
recording
process.

Knowledge

Comprehension

Application

2. Define debits
and credits and
illustrate how
they are used
to record
business
transactions.

Q2-5
Q2-6
Q2-7
BE2-1
BE2-2
BE2-3
E2-1
E2-2
P2-1A
P2-1B

Q2-1
Q2-2
Q2-3
Q2-4
Q2-8
Q2-9

E2-3
P2-2A
P2-2B

BE2-4
Q2-10

Q2-18

Q2-12

Q2-13,
Q2-14
Q2-18
BE2-5
BE2-6
E2-4
E2-5
E2-6
E2-7
P2-2A
P2-3A
Q2-14
Q2-15
Q2-18

P2-4A
P2-5A
P2-6A
P2-7A
P2-2B
P2-3B
P2-4B
P2-5B
P2-6B
P2-7B

Q2-15
Q2-16
Q2-18
BE2-7
E2-6
E2-8
P2-3A
P2-4A
Q2-17
Q2-18
BE2-8
BE2-9
E2-7
E2-8
E2-10
P2-3A
P2-4A
P2-5A
P2-6A
BYP2-3

P2-5A
P2-6A
P2-7A
P2-3B
P2-4B
P2-5B
P2-6B
P2-7B
P2-7A
P2-8A
P2-9A
P2-3B
P2-4B
P2-5B
P2-6B
P2-7B
P2-8B
P2-9B

3. Describe the
basic steps in
the recording
process.
4. Explain what a
journal is, how
it helps in the
recording
process, and
journalize
business
transactions.

Q2-11

5. Explain what a
ledger is and
how it helps in
the recording
process.
6. Explain what
posting is, and
how it helps in
the recording
process.

7. Explain the
purpose of,
and prepare, a
trial balance.

Broadening Your
Perspective

BYP2-1

BYP2-2

2-3

Analysis

Synthesis

Evaluation

P2-10A
P2-10B

P2-12A
P2-12B

E2-9

E2-9
P2-10A
P2-11A
P2-12A
P2-10B
P2-11B
P2-12B

Q2-19

BYP2-4

BYP2-5

BYP2-6

ANSWERS TO QUESTIONS
01. A T account is the shape of the letter T. It has three parts: (1) the
account title across the top of the T; (2) the left side of the T in which
debit entries are recorded; and (3) the right side in which credit entries
are recorded.
02. Disagree. The terms debit and credit are synonymous with the left and
right sides of an account, respectively. Whether they mean increase or
decrease depends on the type of account being considered.
03. Jos is incorrect. The double-entry system merely records the effect of
a transaction on the accounting equation. A transaction is not
recorded twice; it is recorded once, with a dual effect on the equation.
04. Kim 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. Whether a debit or credit balance is favourable or
unfavourable depends on the type of account being considered.
05. (a) Asset accounts are increased by debits and decreased by credits.
The normal balance of asset accounts is a debit balance.
(b) Liability accounts are decreased by debits and increased by
credits. The normal balance of liability accounts is a credit
balance.
(c) Owner's equity accounts are decreased by debits and increased by
credits. The normal balance of equity accounts is a credit balance.
06. (a)
(b)
(c)
(d)
(e)
(f)
(g)

Accounts Receivabledebit balance.

Cashdebit balance.
Owner's Drawingsdebit balance.
Accounts Payablecredit balance.
Service Revenuecredit balance.
Salaries Expensedebit balance.
Owner's Capitalcredit balance.

2-4

Questions Chapter 2 (Continued)

07. (a)
(b)
(c)
(d)

Accounts Receivableassetdebit balance.

Accounts Payableliabilitycredit balance.
Equipmentassetdebit balance.
Owner's Drawingsowner's equitydebit balance (since it is a
reduction of capital).
(e) Suppliesassetdebit balance.
(f) Unearned Revenueliabilitycredit balance.

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

(b) Debit Cash and credit Notes Payable.
(c) Debit Salaries Expense and credit Cash.
9. 1.
2.
3.
4.
5.
6.

Accounts Payableboth debit and credit entries.

Accounts Receivableboth debit and credit entries.
Cashboth debit and credit entries.
Owner's Drawingsdebit entries only.
Salaries Expensedebit entries only.
Service Revenuecredit entries only.

10. The basic steps in the recording process are:

(1) Analyse 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.
11. (a) The debit should be entered first.
(b) The credit should be indented.
12. 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 (Debit Equipment, credit Cash and
credit Accounts Payable).
2-5

Questions Chapter 2 (Continued)

13. (a) Cash.............................................................................

Doris Wang, Capital..............................................
Invested cash in the business.

9,000

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

Cash.......................................................................
Paid one-year insurance policy.

800

(c) Supplies ......................................................................

Accounts Payable .................................................
Purchased supplies on account.

1,500

(d) Cash.............................................................................
Service Revenue ...................................................
Received cash for services rendered.

7,500

9,000

800

1,500

7,500

14. (a) Yes, debits and credits could be recorded directly in the ledger.
(b) The benefits of using the journal are:
1. It discloses in one place the complete effect 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 readily compared. The
advantage of the last step in the posting process is to indicate
that the item has been posted, and to provide a cross-reference.
15. (a) The entire group of accounts maintained by a company, including
all the asset, liability, and owners' equity accounts, is referred to
collectively as the ledger.
(b) The chart of accounts is important, particularly for a company that
has a large number of accounts, because it helps organize the
accounts and identify their location in the ledger. A chart of
accounts lists the accounts and account numbers that identify
their location in the ledger. The numbering system used to identify
the accounts usually starts with the balance sheet accounts and
follows with the income statement accounts.

2-6

Questions Chapter 2 (Continued)

16. The advantage of the last step in the posting process is to indicate that
the item has been posted, and to provide a cross-reference.
17. 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 the mathematical
equality of debits and credits, after all journalized transactions have
been posted. A trial balance also facilitates the discovery of errors in
journalizing and posting. In addition, it is useful in preparing financial
statements.
18. The proper sequence is as follows:
1. Business transaction occurs.
2. Information entered in the journal.
3. Debits and credits posted to the ledger.
4. Trial balance is prepared.
5. Financial statements are prepared.
19. (a) The trial balance would balance, because the debits ($600) are
equal to the credits ($600).
(b) The trial balance would not balance, because the debits ($900) and
credits ($90) are not equal.

2-7

SOLUTIONS TO BRIEF EXERCISES

BRIEF EXERCISE 2-1

1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.

Accounts Payable
Advertising Expense
Service Revenue
Accounts Receivable
J. Takamoto, Capital
J. Takamoto, Drawings
Prepaid Insurance
Office Equipment
Rent Expense
Unearned Revenue
Advertising Supplies
Notes Payable

(a)
Debit
Effect

(a)
Credit
Effect

(b)
Normal
Balance

Decrease
Increase
Decrease
Increase
Decrease
Increase
Increase
Increase
Increase
Decrease
Increase
Decrease

Increase
Decrease
Increase
Decrease
Increase
Decrease
Decrease
Decrease
Decrease
Increase
Decrease
Increase

Credit
Debit
Credit
Debit
Credit
Debit
Debit
Debit
Debit
Credit
Debit
Credit

BRIEF EXERCISE 2-2

June 1
2
3
12

Account Credited
D. Ing, Capital
Accounts Payable
Cash
Service Revenue

Account Debited
Cash
Equipment
Rent Expense
Accounts Receivable

2-8

BRIEF EXERCISE 2-3

(b) Debit-Credit Analysis

(a) Basic Analysis

Aug. 1 The asset Cash is increased;
the owner's equity account
A. Fisher, Capital is
increased.
4 The asset Prepaid Insurance
is increased; the asset Cash
is decreased.

Debits increase assets:

debit Cash $6,000.
Credits increase owner's equity:
credit A. Fisher, Capital $6,000.
Debits increase assets:
debit Prepaid Insurance $1,800.
Credits decrease assets:
credit Cash $1,800.

16 The asset Cash is increased;

the revenue Service Revenue is
increased.

Debits increase assets:

debit Cash $900.
Credits increase revenues:
credit Service Revenue $900.

27 The expense Salaries Expense is

increased; the asset Cash is
decreased.

Debits increase expenses:

debit Salaries Expense $500.
Credits decrease assets:
credit Cash $500.

BRIEF EXERCISE 2-4

The basic steps in the recording process are:
(1)
(2)
(3)

Analyse each transaction. In this step, business documents are

examined to determine the effects of the transaction on the accounts.
Enter each transaction in a journal. This step is called journalizing and
it results in making a chronological record of the transactions.
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.

2-9

BRIEF EXERCISE 2-5

June 1

12

Cash ........................................................................
D. Ing, Capital .................................................

2,000

Equipment ..............................................................
Accounts Payable...........................................

900

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

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

500

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

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

300

2,000

900

500

300

BRIEF EXERCISE 2-6

Aug.

16

27

Cash ........................................................................
A. Fisher, Capital ............................................

6,000

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

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

1,800

Cash ........................................................................
Service Revenue.............................................

900

Salaries Expense....................................................
Cash ................................................................

500

2-10

6,000

1,800

900

500

BRIEF EXERCISE 2-7

5/12
5/15

Cash
2,400
2,000
4,400

Service Revenue
5/5
5/15

3,200
2,000
5,200

Accounts Receivable
5/5

5/12

2,400

800

BRIEF EXERCISE 2-8

BEIRSDORF COMPANY
Trial Balance
June 30, 2003
Debit
Cash ...............................................................................
Accounts Receivable ....................................................
Equipment......................................................................
Accounts Payable..........................................................
Beirsdorf, Capital ..........................................................
Beirsdorf, Drawings ......................................................
Service Revenue............................................................
Salaries Expense...........................................................
Rent Expense ................................................................

2-11

Credit

$04,800
003,000
017,000
$05,000
020,000
001,200
006,000
4,000
001,000
$31,000

0000000
$31,000

BRIEF EXERCISE 2-9

BOURQUE COMPANY
Trial Balance
December 31, 2002
Debit
Cash................................................................................
Prepaid Insurance .........................................................
Accounts Payable ..........................................................
Unearned Revenue ........................................................
Bourque, Capital............................................................
Bourque, Drawings........................................................
Service Revenue ............................................................
Salaries Expense ...........................................................
Rent Expense.................................................................

2-12

Credit

$16,800
003,500
$03,000
002,200
015,000
004,500
025,600
018,600
002,400
$45,800

0000-00
$45,800

SOLUTIONS TO EXERCISES
EXERCISE 2-1

1. Accounts Payable
2. Accounts Receivable
3. Cash
4. H. Poitras, Drawings

(a)
Normal
Balance
Credit
Debit
Debit
Debit

(b)
Decreased
By
Debit
Credit
Credit
Credit

5. Interest Revenue
6. Office Equipment
7. Prepaid Insurance
8. Rent Expense

Credit
Debit
Debit
Debit

Debit
Credit
Credit
Credit

Account

2-13

(c)
Financial
Statement
Balance Sheet
Balance Sheet
Balance Sheet
Statement of Owners
Equity
Income Statement
Balance Sheet
Balance Sheet
Income Statement

EXERCISE 2-2
Account Debited
Transaction

(a)
Basic
Type

(b)
Specific
Account

(c)

Account Credited

Effect

(d)
Normal
Balance

(a)
Basic
Type

(b)
Specific
Account

(c)
Effect

(d)
Normal
Balance

Mar. 3

Asset

Cash

Increase

Debit

Owners
Equity
Capital

L. Visser,
Capital

Increase

Credit

Asset

Equipment
(or Vehicle)

Increase

Debit

Asset

Cash

Decrease

Debit

Asset

Supplies

Increase

Debit

Liability

Accounts
Payable

Increase

Credit

12

Asset

Accounts
Receivable

Increase

Debit

Owners
Equity
Revenue

Service
Revenue

Increase

Credit

21

Owners
Equity
Expense

Advertising
Expense

Increase

Debit

Asset

Cash

Decrease

Debit

25

Asset

Cash

Increase

Debit

Asset

Accounts
Receivable

Decrease

Debit

28

Liability

Accounts
Payable

Decrease

Credit

Asset

Cash

Decrease

Debit

31

Owners
Equity
Drawings

L. Visser,
Drawings

Increase

Debit

Asset

Cash

Decrease

Debit

2-14

EXERCISE 2-3
Oct.

Debits increase assets: debit Cash $15,000.

Credits increase owner's equity: credit Lynn Gardiner, Capital
$15,000.

No transaction at this point in time (see Oct. 30).

Debits increase assets: debit Office Furniture $1,900.

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

Debits increase assets: debit Accounts Receivable $3,200.

Credits increase revenues: credit Fees Earned $3,200.

10

Debits increase assets: debit Cash $140.

Credits increase revenues: credit Fees Earned $140.

27

Debits decrease liabilities: debit Accounts Payable $700.

Credits decrease assets: credit Cash $700.

30

Debits increase expenses: debit Salaries Expense $960.

Credits decrease assets: credit Cash $960.

2-15

EXERCISE 2-4

GENERAL JOURNAL
Date

Account Titles and Explanation

J1
Ref.

Debit

March 3 Cash ....................................................

L. Visser, Capital..........................

8,000

6 Equipment (or Vehicle) ......................

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

04,000

7 Supplies ..............................................
Accounts Payable ........................

00,500

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

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

01,800

21 Advertising Expense ..........................

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

00,200

25 Cash ....................................................
Accounts Receivable...................

00,700

28 Accounts Payable...............................
Cash..............................................

00,300

31 L. Visser, Drawings ............................

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

00,500

Credit
8,000

04,000

00,500

01,800

00,200

00,700

00,300

00,500

Note: Explanations have not been reproduced from the text in this
exercise. Students should recognize, however, that explanations are a
critical part of the journal entry in real life.

2-16

EXERCISE 2-5
GENERAL JOURNAL
Date

Account Titles and Explanation

Oct. 1

Cash ..................................................
Lynn Gardner, Capital................

Ref.

Debit
15,000

15,000

No entry.

Office Furniture.................................
Accounts Payable ......................

01,900

Accounts Receivable........................
Fees Earned ...............................

03,200

Cash ..................................................
Fees Earned ...............................

00,140

Accounts Payable.............................
Cash ............................................

00,700

Salaries Expense ..............................

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

00,960

10

27

30

Credit

01,900

03,200

00,140

00,700

00,960

Note: Explanations have not been reproduced from the text in this
exercise. Students should recognize, however, that explanations are a
critical part of the journal entry in real life.

2-17

EXERCISE 2-6
(a)
GENERAL JOURNAL

J1

Date

Account Titles and Explanation

Ref.

Debit

Sept. 1

Cash....................................................
Shirley Basler, Capital ................

101
301

12,000

Equipment ..........................................
Cash .............................................
Accounts Payable........................

157
101
201

10,000

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

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

201
101

03,000

Shirley Basler, Drawings...................

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

306
101

00,500

25

30

Credit
12,000

04,000
06,000

03,000

00,500

Note: Explanations have not been reproduced from the text in this
exercise. Students should recognize, however, that explanations are a
critical part of the journal entry in real life.

2-18

EXERCISE 2-6 (Continued)

(b)
Cash
Date

Explanation

Sept. 1
5
25
30

Ref.
J1
J1
J1
J1

No. 101
Debit

Credit

12,000
04,000
03,000
00,500

Equipment
Date

Explanation

Sept. 5

Ref.
J1

Explanation

Sept. 5
25

Ref.
J1
J1

Debit

Credit

10,000

Explanation

Sept. 1

Ref.

No. 201
Debit

Credit
6,000

03,000

Debit

J1

Sept. 30

Explanation

Ref.

Credit
12,000

J1

2-19

Debit
00,500

Balance
6,000
3,000

No. 301

Shirley Basler, Drawings

Date

Balance
10,000

Shirley Basler, Capital

Date

12,000
8,000
05,000
04,500

No. 157

Accounts Payable
Date

Balance

Balance
12,000

No. 306
Credit

Balance
00,500

EXERCISE 2-7
(a) Oct.

10

10

12

20

20

25

Cash ..............................................................
A. Fortin, Capital...................................
Invested cash in business.

5,000

Furniture .......................................................
Accounts Payable.................................
Purchased furniture on account.

2,000

Supplies ........................................................
Cash ......................................................
Purchased supplies.

400

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

Service Revenue...................................
Billed clients for services rendered.

800

Cash ..............................................................
Service Revenue...................................
Received cash for services rendered.

650

5,000

2,000

400

800

650

Cash ..............................................................
Notes Payable .......................................
Obtained loan from bank.

5,000

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

Cash ......................................................
Paid cash on account.

1,500

5,000

1,500

Cash ..............................................................
Accounts Receivable............................
Received cash in payment of account.

500

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

Service Revenue...................................
Billed clients for services provided.

940

Cash ..............................................................
A. Fortin, Capital...................................
Invested cash in business.

2,000

2-20

500

940

2,000

EXERCISE 2-7 (Continued)

(a) (Continued)
Oct. 30

31

31

(b)

A. Fortin, Drawings ......................................

Cash ......................................................
Withdrew cash for personal use.

300

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

Cash ......................................................
Paid rent for month.

250

Store Wages Expense..................................

Cash ......................................................
Paid store wages.

500

300

250

500

FORTIN CO.
Trial Balance
October 31, 2003
Debit
Cash .......................................................................
Accounts Receivable ............................................
Supplies .................................................................
Furniture ................................................................
Notes Payable........................................................
Accounts Payable .................................................
A. Fortin, Capital ...................................................
A. Fortin, Drawings ...............................................
Service Revenue ...................................................
Store Wages Expense...........................................
Rent Expense ........................................................

2-21

Credit

$10,200
001,240
000,400
002,000
$05,000
000,500
007,000
000,300
002,390
000,500
250
$14,890

000000
$14,890

EXERCISE 2-8
(a)
Cash
Aug. 01
10
31

Notes Payable

2,600 Aug. 12
2,400
900
4,900

1,000

Aug. 12

3,000

L. Meche, Capital

Accounts Receivable
Aug. 25

1,400 Aug. 31

900

Aug.

500

Service Revenue

4,000

Aug. 10
25

4,000

(b)

2,600
2,600

Office Equipment
Aug. 12

3,000

2,400
1,400
3,800

L. MECHE, INVESTMENT BROKER

Trial Balance
August 31, 2003
Debit
Cash .............................................................................
Accounts Receivable ..................................................
Office Equipment ........................................................
Notes Payable .............................................................
L. Meche, Capital.........................................................
Service Revenue .........................................................

2-22

Credit

$4,900
00,500
04,000

00000
$9,400

$3,000
02,600
03,800
$9,400

EXERCISE 2-9

Error

(a)
In Balance

(b)
Difference

(c)
Larger Column

1.
2.
3.
4.
5.
6.

No
Yes
Yes
No
Yes
No

$400
00
00
0300
00
180

Debit

Credit

Debit

EXERCISE 2-10
EXPRESS DELIVERY SERVICE
Trial Balance
July 31, 2003
Debit
Cash ($81,907 $67,340 total debits without Cash)
Accounts Receivable..................................................
Prepaid Insurance.......................................................
Delivery Equipment ......................................................
Notes Payable ...............................................................
Accounts Payable .........................................................
Salaries Payable ...........................................................
T. Weld, Capital .............................................................
T. Weld, Drawings.........................................................
Service Revenue ...........................................................
Salaries Expense ..........................................................
Gas and Oil Expense ....................................................
Repair Expense.............................................................
Insurance Expense .......................................................

2-23

Credit

$14,567
008,642
001,968
049,360
$18,450
007,396
000,815
044,636
000,700
010,610
004,428
000,758
000,961
000,523
$81,907

000,000
$81,907

SOLUTIONS TO PROBLEMS
PROBLEM 2-1A

Account
1. Cash
2. Accounts
Receivable
3. Drawings

4. Interest
Expense
5. Land
6. Office
Supplies
7. Salary
Expense
8. Service
Revenue

(1)
Type of
Account
Asset
Asset
Owners
Equity
Drawings
Expense
Asset
Asset
Owners
Equity
Expense
Owners
Equity
Revenue

(2)
Financial
Statement
Balance
Sheet
Balance
Sheet
Statement of
Owners
Equity
Income
Statement
Balance
Sheet
Balance
Sheet
Income
Statement

(3)
Normal
Balance
Debit

Debit

Credit

Debit

Debit

Credit

Debit

Debit

Credit

Debit

Debit

Credit

Debit

Debit

Credit

Debit

Debit

Credit

Debit

Debit

Credit

Income
Statement

Credit

Credit

Debit

2-24

(4)
Increase

(5)
Decrease

PROBLEM 2-2A

GENERAL JOURNAL

J1

Date

Account Titles and Explanation

May 1

Cash ..................................................................
Amod Phatarpeker, Capital.......................
Invested cash in business.

45,000

Land ..................................................................
Building ............................................................
Equipment ........................................................
Cash ...........................................................
Purchased Lee's Golf Land.

23,000
09,000
06,000

Advertising Expense........................................
Cash ...........................................................
Paid for advertising.

01,600

Prepaid Insurance.............................................
Cash ...........................................................
Paid for one-year insurance policy.

01,480

Equipment ........................................................
Accounts Payable......................................
Purchased equipment on account.

01,600

Cash ..................................................................
Golf Fees Earned.......................................
Received cash for fees earned.

00,800

Cash ..................................................................
Unearned Golf Fees...................................
Received cash for coupon books
sold.

01,500

10

18

19

2-25

Ref. Debit

Credit
45,000

38,000

01,600

01,480

01,600

00,800

01,500

PROBLEM 2-2A (Continued)

Date

Account Titles and Explanation

May 25

Amod Phatarpeker, Drawings .........................

Cash ...........................................................
Withdrew cash for personal use.

0,500

Salaries Expense .............................................

Cash ...........................................................
Paid salaries expense.

0,600

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

Cash ...........................................................
Paid creditor on account.

1,600

31 Cash...................................................................
Golf Fees Earned.......................................
Received cash for fees earned.

0,500

30

30

2-26

Ref. Debit

Credit
0,500

0,600

1,600

0,500

PROBLEM 2-3A

(a)
GENERAL JOURNAL

J1

Date

Account Titles and Explanation

Ref.

Apr. 1

Cash............................................................... 101
Maria Rojas, Capital ............................... 301
Invested cash in business.

Debit
15,000

15,000

No entrynot a transaction.

Rent Expense ................................................ 729

Cash ........................................................ 101
Paid monthly office rent.

00,800

Supplies......................................................... 126
Accounts Payable................................... 201
Purchased supplies on account
from Halo Company.

01,500

Accounts Receivable .................................... 112

Service Revenue..................................... 400
Billed clients for services
rendered.

00,900

Cash............................................................... 101
Unearned Revenue ................................. 209
Received cash advance for
future service.

00,500

Cash............................................................... 101
Service Revenue..................................... 400
Received cash for services
rendered.

01,500

10

11

20

2-27

Credit

00,800

01,500

00,900

00,500

01,500

PROBLEM 2-3A (Continued)

(a) (Continued)
Date
Apr. 30

30

Account Titles and Explanation

Ref.

Debit

Salaries Expense .......................................... 726

Cash ........................................................ 101
Paid monthly salary.

Credit

0
1,200
01,200

Accounts Payable ......................................... 201

Cash ........................................................ 101
Paid Halo Company on account.

600
600

(b)
Cash
Date

Explanation

Apr. 1
2
11
20
30
30

No. 101
Ref.
J1
J1
J1
J1
J1
J1

Debit

Credit

15,000
0,800
00,500
01,500
1,200
0,600

Accounts Receivable
Date

Explanation

Apr. 10

Ref.
J1

Apr. 3

Explanation

15,000
14,200
14,700
16,200
15,000
14,400
No. 112

Debit

Credit

00,900

Balance
00,900

Supplies
Date

Balance

No. 126
Ref.
J1

2-28

Debit
01,500

Credit

Balance
01,500

PROBLEM 2-3A (Continued)

(b) (Continued)
Accounts Payable
Date

Explanation

Apr. 3
30

No. 201
Ref.
J1
J1

Debit

Credit
1,500

00,600

Unearned Revenue
Date

Explanation

Apr.11

Ref.

Debit

J1

Explanation

Apr. 1

Credit
0,500

Ref.

Debit

J1

Explanation

Apr.10
20

Credit
15,000

Ref.

Debit

J1
J1

Explanation

Apr.30

Credit
00,900
01,500

Ref.
J1

Apr. 2

Explanation

Balance
15,000

Balance
00,900
02,400
No. 726

Debit

Credit

01,200

Balance
01,200

Rent Expense
Date

00,500

No. 400

Salaries Expense
Date

Balance

No. 301

Service Revenue
Date

01,500
00,900
No. 209

Maria Rojas, Capital

Date

Balance

No. 729
Ref.
J1

2-29

Debit
00,800

Credit

Balance
00,800

PROBLEM 2-3A (Continued)

(c)

MARIA ROJAS, ARCHITECT

Trial Balance
April 30, 2003
Debit
Cash .......................................................................
Accounts Receivable ............................................
Supplies .................................................................
Accounts Payable .................................................
Unearned Revenue................................................
Maria Rojas, Capital ..............................................
Service Revenue ...................................................
Salaries Expense...................................................
Rent Expense ........................................................

2-30

Credit

$14,400
000,900
001,500
$00,900
000,500
015,000
002,400
001,200
000,800
$18,800

000,000
$18,800

PROBLEM 2-4A

(a) & (c)

Cash
Date
Oct.

Explanation
1
5
15
20
22
29
31

Balance

No. 101
Ref.
!
J1
J1
J1
J1
J1
J1

Debit

Credit

0,800

200

1,200
1,600
0,
500
0,600

Accounts Receivable
Date

Explanation

Oct. 1
5
10

Balance

Explanation

Oct. 1
26

Balance

Ref.
!
J1
J1

Debit

Credit
0,800

5,500

Explanation

Oct. 1

Balance

Balance
2,200
1,400
6,900
No. 126

Ref.
!
J1

Debit

Credit

Balance
1,700
2,000

300

Equipment
Date

7,500
8,300
7,100
5,500
5,700
5,200
4,600
No. 112

Supplies
Date

Balance

No. 157
Ref.
!

2-31

Debit

Credit

Balance
8,000

PROBLEM 2-4A (Continued)

(a) & (c) (Continued)
Accounts Payable
Date

Explanation

Oct. 1
20
26

Balance

No. 201
Ref.
!
J1
J1

Debit

Credit

1,600
300

Unearned Revenue
Date

Explanation

Oct. 1
17

Balance

Explanation

Oct. 1

Balance

Ref.
!
J1

Debit

Credit

Explanation

Oct. 29

0,400

No. 301
Ref.

Debit

Credit

No. 306
Ref.
J1

Explanation

Oct. 10
17
22

Debit

Credit

0,500

No. 426
Ref.

Debit

J1
J1
J1

Oct.15

Explanation

Balance
00,500

Credit
5,500
0,400
200

Salaries Expense
Date

Balance
14,700

Laundry Revenue
Date

Balance
00,700
00,300

Jane Kent, Drawings

Date

4,000
2,400
2,700
No. 209

Jane Kent, Capital

Date

Balance

Balance
05,500
05,900
6,100
No. 726

Ref.
J1

2-32

Debit
1,200

Credit

Balance
01,200

PROBLEM 2-4A (Continued)

(a) & (c) (Continued)
Utilities Expense
Date

Explanation

Oct.31

No. 732
Ref.
J1

Debit

Credit

0,600

Balance
00,600

(b)
GENERAL JOURNAL
Date

Account Titles and Explanation

J1
Ref.

Debit
0
,800

Oct. 5

Cash............................................................
Accounts Receivable ..........................
Received collections from
customers on account.

101
112

10

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

Laundry Revenue ................................
Billed customers for services
performed.

112
426

5,500

Salaries Expense .......................................

Cash .....................................................
Paid employee salaries.

726
101

1,200

Unearned Revenue ....................................

Laundry Revenue ................................
Performed services for customers
who paid in advance.

209
426

0,400

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

Cash .....................................................
Paid creditors on account.

201
101

1,600

15

17

20

2-33

Credit
0
,800

5,500

1,200

0,400

1,600

PROBLEM 2-4A (Continued)

(b) (Continued)
GENERAL JOURNAL

J1

Date

Account Titles and Explanation

Oct. 22

Cash............................................................
Laundry Revenue ...............................
Performed services for cash.

101
426

200

26

Supplies......................................................
Accounts Payable................................
Purchased supplies on account.

126
201

300

29

Jane Kent, Drawings..................................

Cash .....................................................
Withdrew cash for personal use.

306
101

0,500

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

Cash .....................................................
Paid utilities.

732
101

0,600

31

2-34

Ref.

Debit

Credit

200

0,
300

0,500

0,600

PROBLEM 2-4A (Continued)

(d)

SPEEDY LAUNDRY
Trial Balance
October 31, 2003
Debit
Cash ........................................................................
Accounts Receivable .............................................
Supplies..................................................................
Equipment ..............................................................
Accounts Payable ..................................................
Unearned Revenue.................................................
Jane Kent, Capital ..................................................
Jane Kent, Drawings..............................................
Laundry Revenue ...................................................
Salaries Expense ...................................................
Utilities Expense ....................................................

2-35

Credit

$04,600
006,900
002,000
008,000
$02,700
000,300
014,700
000,500
006,100
001,200
600
$23,800

000000
$23,800

PROBLEM 2-5A
(a) & (c)
Cash
Date

Explanation

Mar. 1
2
9
10
12
20
21
31
31
31

Balance

No. 101
Ref.
!
J2
J2
J2
J2
J2
J2
J2
J2
J2

Debit

Credit
03,000

6,500
9,000
800
7,200
3,000
3,800
0,0600
12,500

Accounts Receivable
Date

Explanation

Mar.31

Ref.

Debit

Credit

0,0600

Mar. 1

Balance

No. 140
Ref.

Debit

Credit

Explanation

Mar. 1

Balance

No. 145
Ref.

Debit

Credit

Explanation

Mar. 1

Balance

Balance
018,000

Equipment
Date

Balance
42,000

Buildings
Date

Balance
00,0600

Land
Explanation

16,000
13,000
19,500
10,500
9,700
16,900
13,900
10,100
10,700
23,200
No. 112

J2

Date

Balance

No. 157
Ref.
!

2-36

Debit

Credit

Balance
016,000

PROBLEM 2-5A (Continued)

(a) & (c) (Continued)
Accounts Payable
Date

Explanation

Mar. 1
2
10

Balance

No. 201
Ref.
!
J2
J2

Debit

Credit
6,000

9,000

Explanation

Mar. 1

Balance

Ref.

Debit

Credit

Explanation

Mar. 9
20
31

No. 405
Ref.

Debit

J2
J2
J2

Credit
6,500
7,200
12,500

Concession Revenue
Date

Explanation

Mar. 31

Ref.

Debit

J2

Explanation

Mar. 12

Credit
0,1,200

Ref.
J2

Mar. 2
21

Explanation

06,500
13,700
26,200

Balance
00,1,200
No. 610

Debit

Credit

0,800

Balance
0,800

Film Rental Expense

Date

Balance

No. 406

Advertising Expense
Date

Balance
80,000

Admission Revenue
Date

012,000
18,000
9,000
No. 301

L. Baroni, Capital
Date

Balance

No. 632
Ref.
J2
J2
2-37

Debit
9,000
3,000

Credit

Balance
9,000
12,000

PROBLEM 2-5A (Continued)

(a) & (c) (Continued)
Salaries Expense
Date

Explanation

Mar. 31

No. 726
Ref.
J2

Debit

Credit

Balance

3,800

3,800

(b)
GENERAL JOURNAL
Date

Account Titles and Explanation

Mar. 2

Film Rental Expense .................................

Cash ....................................................
Accounts Payable...............................
Paid film rental.

No entrynot a transaction.

Cash ...........................................................
Admission Revenue ...........................
Received cash for admissions.

J2
Ref.

Debit

632
101
201

0,9,000

101
405

6,500

10 Accounts Payable ($6,000 + $3,000) ........ 201

Cash .................................................... 101
Paid balance due on Star Wars and
$3,000 on account.

Credit
0,3,000
6,000

6,500

9,000
9,000

11 No entryNot a transaction.
12 Advertising Expense................................
Cash ...................................................
Paid advertising expenses.

2-38

610
101

800
800

PROBLEM 2-5A (Continued)

(b) (Continued)
Date

Account Titles and Explanation

Mar. 20 Cash ..........................................................

Admission Revenue ..........................
Received cash for admissions.
21

31

31

31

Ref.

Debit

101
405

7,200

Film Rental Expense ................................

Cash ...................................................
Paid for Scream films.

632
101

3,000

Salaries Expense .....................................

Cash ...................................................
Paid salaries expense.

726
101

3,800

Cash ..........................................................
Accounts Receivable ...............................
Concession Revenue ........................
Received cash and balance on
account for concession revenue.

101
112
406

0,0600
0,0600

Cash ..........................................................
Admission Revenue ..........................
Received cash for admissions.

101
405

12,500

2-39

Credit

7,200

3,000

3,800

0,1,200

12,500

PROBLEM 2-5A (Continued)

(d)
STARLITE THEATRE
Trial Balance
March 31, 2003
Debit
Cash ...................................................................... $ 23,200
Accounts Receivable ...........................................
0,0600
Land ....................................................................... 042,000
Buildings................................................................ 018,000
Equipment .............................................................
016,000
Accounts Payable .................................................
L. Baroni, Capital...................................................
Admission Revenue ..............................................
Concession Revenue ............................................
Advertising Expense............................................. 000,800
Film Rental Expense .............................................
12,000
Salaries Expense................................................... 0003,800
$116,400

2-40

Credit

$ 9,000
080,000
026,200
001,200

0000000
$116,400

PROBLEM 2-6A
(a)
Date

Account Titles and Explanation

May 1

Cash ...........................................................
Jacob Bablad, Capital.........................

Debit
120,000

Credit
120,000

No entry at this time.

Prepaid Rent .............................................. 4433,000

Rent Expense ($36,000 12 mos.) ...........
3,000
Cash.....................................................

036,000

Furniture & Equipment.............................. 00,70,000

Cash.....................................................
Accounts Payable ...............................

20,000
50,000

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

Insurance Expense ($3,000 12 mos.) ....
Cash.....................................................

02,750
250
03,000

Office Supplies ..........................................

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

11,000

Office Supplies ..........................................

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

02,000

Cash ...........................................................
Accounts Receivable ................................
Brokerage Fees Earned......................

010,000
20,000

Accounts Payable......................................
Cash.....................................................

00, 800

12

15

20

22

26

01,000

02,000

030,000

00,800

Cash ........................................................... 00, 5,000

Accounts Receivable..........................
00,5,000

2-41

PROBLEM 2-6A (Continued)

(a) (Continued)
Date

Account Titles and Explanation

May 30 Utility Expense ............................................

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

Debit
00
, 400

Credit

00,400

30 Salaries Expense........................................ 00, 2,000

Cash......................................................
00,2,000

2-42

(b)

Cash
Debit

Prepaid Rent

Credit

Debit

120,000
36,000
20,000
3,000
1,000

33,000

10,000
800
5,000
2,000
72,200

Accounts Receivable
Debit

Credit

020,000
5,000
15,000

Office Supplies
Debit

Credit

01,000
2,000
3,000

Prepaid Insurance
Debit

Credit

0,2,750
2-43

Credit

PROBLEM 2-6A (Continued)

(b) (Continued)
Furniture & Equipment
Debit

Utilities Expense

Credit

Debit

0,70,000

0,400

Accounts Payable
Debit

Insurance Expense

Credit

Debit

50,000
2,000

0,250

00,800
400
51,600
J. Bablad, Capital
Debit

Credit
0120,000

Brokerage Fees Earned

Debit
0,

Credit
30,000

Salaries Expense
Debit

Credit

2,000
Rent Expense
Debit

Credit

Credit

3,000
2-44

Credit

PROBLEM 2-6A (Continued)

(c)
BABLAD BROKERAGE SERVICES
Trial Balance
May 31, 2003
Debit
Cash .......................................................................
Accounts Receivable ...........................................
Office Supplies ......................................................
Prepaid Insurance ................................................
Prepaid Rent .........................................................
Furniture and Equipment......................................
Accounts Payable .................................................
J. Bablad, Capital ..................................................
Brokerage Fees Earned ........................................
Salaries Expense...................................................
Rent Expense ........................................................
Utilities Expense ...................................................
Insurance Expense ...............................................

2-45

Credit

$ 72,200
15,000
3,000
2,750
33,000
70,000
$ 51,600
120,000
30,000
2,000
3,000
400
0000250
0$201,600

,51
000,0600
$201,600

PROBLEM 2-6A (Continued)

(d)

BABLAD BROKERAGE SERVICES

Income Statement
For the Month Ended May 31, 2003
Revenues
Brokerage fees earned.......................................................
Expenses
Salaries expense ...............................................
$2,000
Rent expense.....................................................
3,000
Insurance expense............................................
250
Utilities expense................................................
00,400
Total expenses............................................................
Net income .................................................................................

$30,000

0 5,650
$24,350

BABLAD BROKERAGE SERVICES

Statement of Owner's Equity
For the Month Ended May 31, 2003
Capital, May 1, 2003.................................................
Add: Investment.....................................................
Net income.....................................................
Capital, May 31, 2003...............................................

2-46

0
120,000
24,350
$144,350

PROBLEM 2-6A (Continued)

(d) (Continued)
BABLAD BROKERAGE SERVICES
Balance Sheet
May 31, 2003
Assets
Cash............................................................................................
Accounts receivable ..................................................................
Office supplies ...........................................................................
Prepaid insurance......................................................................
Prepaid rent................................................................................
Furniture & equipment ..............................................................

$ 72,200
15,000
3,000
0442,750
0033,000
0070,000

Total assets ........................................................................

$195,950

Liabilities and Owner's Equity

Liabilities
Accounts payable............................................................... 0$ 51,600
Owner's Equity
Jacob Bablad, Capital ........................................................ 00144,350
Total liabilities and owner's equity............................

2-47

$195,950

PROBLEM 2-7A
(a) As indicated in item (9), $4,500 was paid for three months in advance
on December 1. One month has passed, so 1/3 X $4,500 = $1,500 of
rent has expired and become an expense. Two months are still to
come, so 2/3 x $4,500 = $3,000 remains in the prepaid rent account as
an asset.
(b) & (d)

Cash
10,000
(1)
(3)

500
2,000

(4) 13,000
(5) 15,000
(7) 4,000
(8) 3,000
(10) 5,000
1,500
Accounts Receivable
15,000
(7) 9,000
(4) 13,000
11,000

2-48

Repair Parts Inventory

13,000
(2) 2,000
(6) 4,000
11,000

Prepaid Rent
3,000
(9) 1,500
1,500

2-50

PROBLEM 2-7A (Continued)

(b) & (d) (Continued)
Shop Equipment
21,000
Accounts Payable
(5) 15,000

19,000
(2) 2,000
6,000

Leo Mataruka, Capital

43,000
Leo Mataruka, Drawings
(10) 5,000
5,000
Repair Services Revenue
(7) 13,000
Advertising Expense
(1) 500

Miscellaneous Expense
(3) 2,000

Repair Parts Expense

(6) 4,000

Wages Expense
(8) 3,000

Rent Expense
(9) 1,500
2-51

PROBLEM 2-7A (Continued)

(c)
GENERAL JOURNAL
Account Titles and Explanation
1.

Advertising Expense
Cash

2.

Repair Parts Inventory

Accounts Payable

3.

4.

5.

500

0
2,000

Miscellaneous Expense
Cash
Cash
Accounts Receivable

0
13,000
0
15,000

Accounts Payable
Cash

7.

Cash
Accounts Receivable
Repair Services Revenues

10.

500

2,000

Repair Parts Expense

Repair Parts Inventory

9.

Credit

2,000

6.

8.

Debit

0
4,000

4,000
9,000
0
3,000

Wages Expense
Cash

0
1,500

Rent Expense
Prepaid Rent

0
5,000

Leo Mataruka, Drawings

Cash

2-52

0
2,000
0
13,000
0
15,000
0
4,000

0
13,000
0
3,000
0
1,500
0
5,000

PROBLEM 2-7A (Continued)

(e)

CYBERDYNE REPAIR SERVICE

Trial Balance
January 31, 2003
Debit

Cash...............................................................................
Accounts Receivable....................................................
Repair Parts Inventory..................................................
Prepaid Rent .................................................................
Shop Equipment ...........................................................
Accounts Payable .........................................................
Leo Mataruka, Capital...................................................
Leo Mataruka, Drawings ..............................................
Repair Services Revenue .............................................
Advertising Expense ....................................................
Miscellaneous Expense ...............................................
Repair Parts Expense...................................................
Rent Expense ................................................................
Wages Expense ............................................................

(f)

Cash
Accounts Receivable
Repair Parts Inventory
Prepaid Rent
Shop Equipment
Total Assets

$ 1,500
11,000
11,000
1,500
21,000
$46,000

(g) Repairs Services Revenue $13,000

Advertising Expense
(500)
Miscellaneous Expense
(2,000)
Repair Parts Expense
(4,000)
Rent Expense
(1,500)
Wages Expense
(3,000)
Net Income
$2,000
2-53

Credit

$01,500
011,000
011,000
001,500
0021,000

5,000
500
2,000
4,000
1,500
0 3,000
$62,000

$06,000
043,000
0
13,000

0000 00
$62,000

PROBLEM 2-8A

(a)

CYBERDYNE REPAIR SERVICE

Income Statement
For the Month Ended January 31, 2003
Revenues
Repair services revenue ....................................................

$13,000

Expenses
Wages expense .................................................
$3,000
Rent expense.....................................................
1,500
Repair parts expense ........................................
4,000
Miscellaneous expense .................................... 00,2,000
Advertising expense ......................................... 00, 500
Total expenses............................................................

11,000

Net income .................................................................................

$ 2,000

(b)
CYBERDYNE REPAIR SERVICE
Statement of Owner's Equity
For the Month Ended January 31, 2003
Leo Mataruka, Capital, January 1, 2003 .................

$43,000

Add: Net income ....................................................

2,000
45,000

Less: Drawings .......................................................

5,000

Leo Mataruka, Capital, January 31, 2003 ...............

$40,000

2-54

PROBLEM 2-8A (Continued)

(c)
CYBERDYNE REPAIR SERVICE
Balance Sheet
January 31, 2003
Assets
Cash............................................................................................ $ 1,500
Accounts receivable ..................................................................
11,000
Repair parts inventory...............................................................
11,000
Prepaid rent................................................................................
001,500
Shop equipment......................................................................... 04421,000
Total assets ........................................................................

$46,000

Liabilities and Owner's Equity

Liabilities
Accounts payable............................................................... 0 $ 6,000
Owner's Equity
Leo Mataruka, Capital ........................................................

040,000

Total liabilities and owner's equity............................

$46,000

2-55

PROBLEM 2-9A
(a)
KIA TAGGAR ENTERPRISES
Trial Balance
June 30, 2003
Debit
$ 180
500
510
90
495
800
1,200

Cash
Accounts receivable
Supplies
Prepaid insurance
Long-term investment
Land
Equipment
Notes payable, current
Long-term debt
Taggar, Capital
Service revenue
Operating expense
Insurance expense
Interest expense

Credit

$1,000
1,200
800
2,000
870
130
225
$5,000

2-56

00000
$5,000

PROBLEM 2-9A (Continued)

(b)
KIA TAGGAR ENTERPRISES
Income Statement
For the Year Ended June 30, 2003
Revenue
Service revenue......................................................
Expenses
Insurance expense.................................................
Interest expense.....................................................
Operating expense.................................................
Total expenses................................................
Net income .....................................................................

$2,000

$130
225
870
01,225
$ 775

KIA TAGGAR ENTERPRISES

Statement of Owner's Equity
For the Year Ended June 30, 2003
Taggar, Capital, July 1, 2002 .........................................

$ 800

Add: Net income ..........................................................

775

Taggar, Capital, June 30, 2003......................................

$1,575

2-57

PROBLEM 2-9A (Continued)

(b) (Continued)
KIA TAGGAR ENTERPRISES
Balance Sheet
June 30, 2003
Assets
Cash............................................................................................
Accounts receivable ..................................................................
Prepaid insurance......................................................................
Supplies......................................................................................
Long-term investment ...............................................................
Land............................................................................................
Equipment ..................................................................................
Total assets ........................................................................

$ 180
500
00990
510
495
800
0441,200
$3,775

Liabilities and Owner's Equity

Liabilities
Note payable.......................................................................
Long-term debt...................................................................
Total liabilities ............................................................

$1,000
1,200
2,200

Owner's Equity
Taggar, Capital ...................................................................
Total liabilities and owner's equity............................

01,575
$3,775

2-58

PROBLEM 2-10A

(a)
1.
2.
3.
4.
5.

Correctly stated
Understated
Correctly stated (the debit posting was to a credit balance
account, Accounts Payable)
Understated
$374,000 ($360,000 + $7,000 to reverse debit to Accounts Payable
account + $7,000 to record credit to Accounts Payable account)

(b)
1.
3.
4.

Invoice from supplier

Utility bill
Sales ticket

2-59

PROBLEM 2-11A
(a)

Errors in the trial balance are:

1.

The trial balance should be dated at a specific point in time, not

for the year ended.
2.
Machinery and equipment should be a debit.
3.
Accounts Payable should be a credit.
4.
Prepaid Rent should be a debit.
5.
Capital should be a credit.
6.
Advertising Expenses should be a debit.
7.
Notes Payable should be a credit.
8.
Accounts Receivable should be a debit.
9.
They are not arranged in the proper sequence: 1) assets; 2)
liabilities; 3) owners equity (capital and drawings); and 4) income
statement accounts (revenues and expenses).
10. The totals should be equal.
(b)

MEHTA AUTOMOTIVE SERVICES

Trial Balance
December 31, 2002
Debit

Cash .......................................................................
Accounts Receivable.............................................
Prepaid Rent ..........................................................
Prepaid Insurance .................................................
Machinery and Equipment ....................................
Accounts Payable..................................................
Note Payable ..........................................................
Capital ....................................................................
Drawings ................................................................
Service Revenues..................................................
Miscellaneous Expense ........................................
Wages Expense .....................................................
Advertising Expense .............................................

2-60

Credit

$ 24
31
5
3
89
$ 38
45
42
20
202
49
76
30
$327

0000
$327

PROBLEM 2-12A

WINAU CO.
Trial Balance
June 30, 2003
Debit
Cash ($2,840 + $180).....................................................
Accounts Receivable ($3,231 $180)..........................
Supplies ($800 $340) .................................................
Equipment ($3,000 + $340) ...........................................
Accounts Payable ($2,666 $206 $260) ...................
Unearned Fees ..............................................................
T. Winau, Capital...........................................................
T. Winau, Drawings ($800 + $400) ...............................
Fees Earned ($2,380 + $801) ........................................
Salaries Expense ($3,400 + $600 $400) ....................
Office Expense..............................................................

2-61

Credit

$ 3,020
003,051
000,460
003,340
$02,200
001,200
009,000
001,200
003,181
003,600
910
$15,581

000000
$15,581

PROBLEM 2-1B

Account
1. Cash
2. Accounts
Payable
3. Kobiashi,
Capital

4. Kobiashi,
Drawings

(1)
Type of
Account
Asset
Liability
Owners
Equity
Capital

Balance Sheet Credit

and
Statement of
Owners
Equity
Owners Statement of
Debit
Equity Owners
Drawings Equity
Asset
Balance Sheet Debit

5. Office
Equipment
6. Office
Asset
Supplies
7. Rent Expense Expense
8. Service
Revenue

(2)
(3)
(4)
(5)
Financial
Normal
Increase Decrease
Statement
Balance
Balance Sheet Debit
Debit
Credit
Balance Sheet Credit
Credit
Debit

Revenue

Credit

Debit

Debit

Credit

Debit

Credit

Balance Sheet Debit

Debit

Credit

Income
Statement
Income
Statement

Debit

Debit

Credit

Credit

Credit

Debit

2-62

PROBLEM 2-2B

GENERAL JOURNAL

J1

Date

Account Titles and Explanation

April 1

Cash................................................................
Al Rossy, Capital .....................................
Invested cash in business.

50,000

Land ................................................................
Cash .........................................................
Purchased land.

30,000

Advertising Expense......................................
Accounts Payable....................................
Purchased advertising on account.

01,800

Salaries Expense ...........................................

Cash .........................................................
Paid employees salaries.

1,1,500
5

11

Ref.

Debit

50,000

30,000

01,800

12

No entry required

13

Prepaid Insurance..........................................
Cash .........................................................
Paid for one-year insurance policy.

01,500

17 Al Rossy, Drawings.........................................
Cash .........................................................
Withdrew cash for personal use.

600600

20

05,700

Cash................................................................
Admissions Revenue ..............................
Received cash for admissions.

2-63

Credit

1,500

01,500

00
600

05,700

PROBLEM 2-2B (Continued)

Date

Account Titles and Explanation

April 25 Cash ...............................................................

Unearned Admissions Revenue ...........
Received cash for coupon books
sold.
30

30

Ref.

Debit
02,500

02,500

Cash ..............................................................
Admissions Revenue.............................
Received cash for fees earned.

00,5,900

Accounts Payable.........................................
Cash........................................................
Made payment on account.

0700

2-64

Credit

5,900

0700

PROBLEM 2-3B
(a)

GENERAL JOURNAL

Date

Account Titles and Explanation

May 1

Cash.......................................................
Lisa Heins, Capital .........................
Invested cash in business.

J1
Ref.

Debit

101
301

32,000
32,000

No entrynot a transaction.

Supplies.................................................
Accounts Payable...........................
Purchased supplies on account.

126
201

01,200

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

Cash ................................................
Paid monthly office rent.

729
101

00,900

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

Service Revenue.............................
Billed clients for tax services.

112
400

00,1,100

Cash.......................................................
Unearned Revenue .........................
Received cash advance for
future service.

101
209

033,500

Cash.......................................................
Service Revenue.............................
Received cash for fees earned.

101
400

01,200

Salaries Expense ..................................

Cash ................................................
Paid monthly salary.

726
101

01,000

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

Cash ................................................
Paid Read Supply 40% of amount
owing.

201
101

480

11

12

17

31

31

2-65

Credit

01,200

00,900

001,100

03,500

01,200

01,000

480

PROBLEM 2-3B (Continued)

(b)
Cash
Date

Explanation

May 1
7
12
17
31
31

No. 101
Ref.
J1
J1
J1
J1
J1
J1

Debit

Credit

32,000
0,9900
03,500
01,200
1,000
0,480

Accounts Receivable
Date

Explanation

May 11

Ref.
J1

Explanation

May 3

Debit

Credit

00,1,100

No. 126
Ref.
J1

Explanation

May 3
31

Debit

Credit

01,200

No. 201
Ref.
J1
J1

May12

Explanation

Balance
01,200

Debit

Credit
1,200

00,480

Unearned Revenue
Date

Balance
00,1,100

Accounts Payable
Date

32,000
31,100
34,600
35,800
34,800
34,320
No. 112

Supplies
Date

Balance

Balance
01,200
00,720
No. 209

Ref.
J1

2-66

Debit

Credit
0,3,500

Balance
00,3,500

PROBLEM 2-3B (Continued)

(b) (Continued)
Lisa Heins, Capital
Date

Explanation

May 1

No. 301
Ref.

Debit

J1

Credit
32,000

Service Revenue
Date

Explanation

May11
17

Ref.

Debit

J1
J1

Explanation

Credit
0,1,100
01,200

Ref.

Debit

Credit

01,000

May 7

Explanation

01,100
02,300

Balance
01,000

Rent Expense
Date

Balance

No. 726

J1

May31

32,000

No. 400

Salaries Expense
Date

Balance

No. 729
Ref.
J1

2-67

Debit
00,9900

Credit

Balance
00,900

PROBLEM 2-3B (Continued)

(c)

LISA HEINS, CGA

Trial Balance
May 31, 2003
Debit
Cash .......................................................................
Accounts Receivable ............................................
Supplies .................................................................
Accounts Payable .................................................
Unearned Revenue................................................
Lisa Heins, Capital ................................................
Service Revenue ...................................................
Salaries Expense...................................................
Rent Expense ........................................................

2-68

Credit

$34,320
001,100
001,200
$00,720
003,500
032,000
002,300
001,000
000,900
$38,520

00 000
$38,520

PROBLEM 2-4B

(a) & (c)

Cash
Date

Explanation

July 1
8
9
11
14
30
31

Balance

No. 101
Ref.
!
J1
J1
J1
J1
J1
J1

Debit

Credit

0,5,936
2,100
4,325
10,750
, 5,190
0700

Accounts Receivable
Date

Explanation

July 1
8
22

Balance

Explanation

July 1
17

Balance

Ref.
!
J1
J1

Debit

Credit
0,5,936

5,700

Explanation

July 1

Balance

Balance
10,536
4,600
10,300

No. 126
Ref.
!
J1

Debit

Credit

Balance
4,844
5,398

554

Equipment
Date

12,532
18,468
16,368
20,693
9,943
4,753
4,053

No. 112

Supplies
Date

Balance

No. 157
Ref.
!
2-69

Debit

Credit

Balance
25,950

PROBLEM 2-4B (Continued)

(a) & (c) (Continued)
Accounts Payable
Date

Explanation

July 1
14
17

Balance

No. 201
Ref.
!
J1
J1

Debit

Credit

10,750
554

Unearned Revenue
Date

Explanation

July 1

Balance

Explanation

July 1

Balance

Ref.

Debit

Credit

Explanation

July 31

No. 301
Ref.

Debit

Credit

No. 306
Ref.
J1

Explanation

July 11
22

Debit

Credit

0,700

No. 428
Ref.

Debit

J1
J1

July 30

Explanation

Balance
00,700

Credit
4,325
5,700

Repair Expense
Date

Balance
36,254

Dry Cleaning Revenue

Date

Balance
1,730

C. Steiner, Drawings
Date

15,878
5,128
5,682
No. 209

C. Steiner, Capital
Date

Balance

Balance
04,325
010,025
No. 622

Ref.
J1

2-70

Debit
0,692

Credit

Balance
00,692

PROBLEM 2-4B (Continued)

(a) & (c) (Continued)
Salaries Expense
Date

Explanation

July 9
30

No. 726
Ref.
J1
J1

Debit

Credit

2,100
3,114

02,100
5,214

Utilities Expense
Date
July31

Explanation

Balance

No. 732
Ref.
J1

2-71

Debit
0,1,384

Credit

Balance
00,1,384

PROBLEM 2-4B (Continued)

(b)
GENERAL JOURNAL
Date

Account Titles and Explanation

J1
Ref.

Debit
0
5,936

July 8

Cash............................................................
Accounts Receivable ..........................
Received collections from
customers on account.

101
112

Salaries Expense .......................................

Cash .....................................................
Paid employee salaries.

726
101

2,100

Cash............................................................
Dry Cleaning Revenue ........................
Performed services for cash.

101
428

4,325

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

Cash .....................................................
Paid creditors on account.

201
101

10,750

17

Supplies......................................................
Accounts Payable................................
Purchased supplies on account.

126
201

0,554

22

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

Dry Cleaning Revenue ........................
Billed customers for services
rendered.

112
428

5,700

11

14

2-72

Credit
0
5,936

2,100

4,325

10,750

0,
554

5,700

PROBLEM 2-4B (Continued)

(b) (Continued)
Date

Account Titles and Explanation

July 30 Salaries Expense ........................................

Utilities Expense ........................................
Repair Expense ..........................................
Cash .....................................................
Paid salaries, utilities and repairs in
cash.
31

(d)

C. Steiner, Drawings ..................................

Cash .....................................................
Withdrew cash for personal use.

Ref.
726
732
622
101

306
101

Debit
Credit
0,
3,114
1,384
692
0,5,190

0,7700
0,700

STEINER DRY CLEANERS

Trial Balance
July 31, 2003
Debit
Cash .......................................................................
Accounts Receivable ............................................
Supplies .................................................................
Equipment .............................................................
Accounts Payable .................................................
Unearned Revenue................................................
C. Steiner, Capital .................................................
C. Steiner, Drawings .............................................
Dry Cleaning Revenue ..........................................
Repair Expense .....................................................
Salaries Expense...................................................
Utilities Expense ...................................................

2-73

Credit

$04,053
0010,300
005,398
025,950
$ 5,682
1,730
36,254
000,700
10,025
692
5,214
1,384
$53,691

000000
$53,691

PROBLEM 2-5B
(a) & (c)
Cash
Date

Explanation

Apr. 1
2
9
10
12
25
29
30
30

Balance

No. 101
Ref.
!
J1
J1
J1
J1
J1
J1
J1
J1

Debit

Credit
800

1,800
0

0,3,000
300

5,200
1,600
8855
700,

Accounts Receivable
Date

Explanation

Apr. 30

Ref.

Debit

J1

Explanation

Apr.30

Credit

85

85,

Ref.

Debit

Credit

03,700

Apr. 1

Balance

Balance
00,700

Land
Explanation

Balance

No. 136

J1

Date

6,000
5,200
7,000
4,000
3,700
8,900
7,300
7,385
6,685

No. 112

Prepaid Rentals
Date

Balance

No. 140
Ref.
!

2-74

Debit

Credit

Balance
10,000

PROBLEM 2-5B (Continued)

(a) & (c) (Continued)
Buildings
Date

Explanation

Apr. 1

Balance

No. 145
Ref.

Debit

Credit

0 8,000

Equipment
Date

Explanation

Apr. 1

Balance

No. 157
Ref.

Debit

Credit

Explanation

Apr. 1
20

Balance

No. 201
Ref.
!
J1
J1

Debit

Credit

1,000
500

Mortgage Payable
Date

Explanation

Apr. 1
10

Balance

Explanation

Apr. 1

Balance

Ref.
!
J1

Debit

Credit

Apr. 9
25

Explanation

2,000
1,000
1,500

Balance
8,000
6,000

2,000

No. 301
Ref.

Debit

Credit

Balance
20,000

Admissions Revenue
Date

Balance

No. 275

Fran Holley, Capital

Date

Balance
0 6,000

Accounts Payable
Date

Balance

No. 405
Ref.
J1
J1
2-75

Debit

Credit
1,800
5,200

Balance
01,800
7,000

PROBLEM 2-5B (Continued)

(a) & (c) (Continued)
Concession Revenue
Date

Explanation

Apr. 30

No. 406
Ref.

Debit

Credit

J1

0,170

Advertising Expense
Date

Explanation

Apr. 12

Ref.

Debit

J1

Explanation

Apr. 2
20

Credit

0,300

No. 632
Ref.
J1
J1

Explanation

Apr. 29

Balance
0,300

Debit
,

Credit

0,800
500

Balance
800
1,300

Salaries Expense
Date

00,170
No. 610

Film Rental Expense

Date

Balance

No. 726
Ref.
J1

Debit

Credit

01,600

Balance
1,600

(b)
GENERAL JOURNAL
Date

Account Titles and Explanation

Apr. 2

Film Rental Expense .................................

Cash ....................................................
Paid film rental.

No entrynot a transaction.

Cash ...........................................................
Admissions Revenue .........................
Received cash for admissions.
2-76

J1
Ref.

Debit

632
101

0,800

101
405

1,800

Credit
0,800

1,800

PROBLEM 2-5B (Continued)

(b) (Continued)
Date

Account Titles and Explanation

Apr. 10

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

Accounts Payable .....................................
Cash
Made payments on mortgage and
accounts payable.

0,2,000
1,000

610
101

0,300

Film Rental Expense .................................

632
Accounts Payable...............................
201
Received film and billed on account.

0,500

Cash ...........................................................
Admissions Revenue .........................
Received cash for admissions.

101
405

5,200

Salaries Expense ......................................

Cash ....................................................
Paid salaries expense.

726
101

1,600

Cash ...........................................................
Accounts Receivable ................................
Concession Revenue .........................
Received cash and balance on
account for concession revenue.

101
112
406

0,085
0,085

Prepaid Rentals.........................................
Cash ....................................................
Paid for film to be shown next
month.

136
101

700

No entrynot a transaction.

12

Advertising Expense.................................
Cash ....................................................
Paid advertising expenses.

25

29

30

30

Debit

275
201
101

11

20

Ref.

2-77

Credit

0,3,000

0,300

0,500

5,200

1,600

0,170

700

PROBLEM 2-5B (Continued)

(d)
GRAND THEATRE
Trial Balance
April 30, 2003
Debit
Cash .......................................................................
Accounts Receivable ............................................
Prepaid Rentals......................................................
Land ........................................................................
Buildings ................................................................
Equipment ..............................................................
Accounts Payable ..................................................
Mortgage Payable ..................................................
Fran Holley, Capital................................................
Admissions Revenue .............................................
Concession Revenue .............................................
Advertising Expense..............................................
Film Rental Expense ..............................................
Salaries Expense ...................................................

2-78

Credit

$ 6,685
0,085
0,700
01110,000
08,000
06,000

000
300
001,300
1,600
$34,670

$ 1,500
6,000
020,000
07,000
00170

000000
$34,670

PROBLEM 2-6B
(a)
GENERAL JOURNAL

J1

Date

Account Titles and Explanation

Debit

Sept. 1

Cash..........................................................
B. Rowland, Capital..........................

125,000

Credit

125,000

1 No entry.
5 Rent Expense ..........................................
Cash ..................................................

443,750
3,750

8 Furniture & Equipment ........................... 00,75,000

Cash ..................................................
Accounts Payable
10 Insurance Expense .................................
Cash ..................................................

0320

12 Office Supplies .......................................

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

11,100

19 Office Supplies .......................................

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

01,900

24 Cash.........................................................
Accounts Receivable..............................
Brokerage Fees Earned ...................

015,000
25,000

26 Accounts Payable ...................................

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

00, 750

320

01,100

01,900

040,000

29 Cash......................................................... 00, 6,500

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

2-79

25,000
50,000

00,750

00,6,500

PROBLEM 2-6B (Continued)

(a) (Continued)
Date

Account Titles and Explanation

Sept. 30 Utility Expense ........................................

Accounts Payable............................
30

Salaries Expense ..................................

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

Debit
00,
450

Credit
0
0,450

, 3,600
0,3,600

Note: Journal entry explanations have not been reproduced from the text in
part (a). Students should recognize, however, that explanations are a
critical part of the journal entry in real life.

2-80

(b)

Debit
Ca sh
Debit

50,000
1,900

Credit

00,750

125,000

450

3,750
25,000
320
1,100

51,600

15,000
750
6,500
3,600
111,980
Accounts Receivable
Debit

Credit

025,000
6,500
18,500

Office Supplies
Debit

Credit

1,100
1,900
3,000
Furniture & Equipment
Debit

Credit

Credit

0,75,000
Accounts Payable
2-81

PROBLEM 2-6B (Continued)

(b) (Continued)
B. Rowland, Capital
Debit

Credit
125,000

Brokerage Fees Earned

Debit
0,

Credit
40,000

Salaries Expense
Debit

Credit

3,600
Rent Expense
Debit

Credit

3,750
Utilities Expense
Debit

Credit

0,450
Insurance Expense
Debit

Credit

0,320

2-82

PROBLEM 2-6B (Continued)

(c)
ROWLAND BROKERAGE SERVICES
Trial Balance
September 30, 2003
Debit
Cash ......................................................................
Accounts Receivable ...........................................
Office Supplies ......................................................
Furniture and Equipment......................................
Accounts Payable .................................................
B. Rowland, Capital...............................................
Brokerage Fees Earned ........................................
Salaries Expense...................................................
Rent Expense ........................................................
Utilities Expense ...................................................
Insurance Expense ...............................................

2-83

Credit

$111,980
18,500
3,000
75,000
$ 51,600
125,000
40,000
3,600
3,750
450
320
0$216,600

51
000,0600
$216,600

PROBLEM 2-6B (Continued)

(d)

ROWLAND BROKERAGE SERVICES

Income Statement
For the Month Ended September 30, 2003
Revenues
Brokerage fees earned.......................................................
Expenses
Salaries expense ...............................................
$3,600
Rent expense.....................................................
3,750
Insurance expense............................................
320
Utilities expense................................................
00,450
Total expenses............................................................
Net income .................................................................................

$40,000

008,120
$31,880

ROWLAND BROKERAGE SERVICES

Statement of Owner's Equity
For the Month Ended September 30, 2003
Capital, September 1, 2003 .....................................
Add: Investment.....................................................
Net income.....................................................
Capital, September 30, 2003 ...................................

2-84

0
125,000
31,880
$156,880

PROBLEM 2-6B (Continued)

(d) (Continued)
ROWLAND BROKERAGE SERVICES
Balance Sheet
September 30, 2003
Assets
Cash............................................................................................
Accounts receivable ..................................................................
Office supplies ...........................................................................
Furniture and equipment...........................................................

$111,980
18,500
3,000
0075,000

Total assets ........................................................................

$208,480

Liabilities and Owner's Equity

Liabilities
Accounts payable............................................................... 0$ 51,600
Owner's Equity
B. Rowland, Capital............................................................

0156,880

Total liabilities and owner's equity............................

$208,480

2-85

PROBLEM 2-7B
(a)

As indicated in item (9), $4,800 was paid for three months in advance
on March 1. One month has passed, so 1/3 X $4,800 = $1,600 of rent
has expired and become an expense. Two months are still to come,
so 2/3 x $4,800 = $3,200 remains in the Prepaid Rent account as an
asset.

(b) & (d)

Cash
7,000
(1)
(3)
(4) 9,000
(5)
(7) 3,000
(8)
(10)

Accounts Receivable
12,000
(4) 9,000
(7) 9,000

900
2,100
8,000
4,000
1,000

3,000

12,000

Repair Parts Inventory

15,000
(2) 3,200
(6) 3,000
15,200

Prepaid Rent
3,200
(9) 1,600
1,600

Shop Equipment
21,000

Accounts Payable
21,000
(2) 3,200
(5) 8,000
16,200

Gary Hobson, Capital

37,200

Gary Hobson, Drawings

(10) 1,000

2-86

PROBLEM 2-7B (Continued)

(b) & (d) (Continued)

Repair Services Revenue

(7) 12,000

Advertising Expense
(1) 900

Miscellaneous Expense
(3) 2,100

Repair Parts Expense

(6) 3,000

Rent Expense
(9) 1,600

Wages Expense
(8) 4,000

2-87

PROBLEM 2-7B (Continued)

(c)
GENERAL JOURNAL
Account Titles and Explanation

Debit

1.

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

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

900

2.

Repair Parts Inventory ...................................

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

3,200

3.

4.

5.

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

Cash.........................................................
Cash ................................................................
Accounts Receivable..............................
Accounts Payable...........................................
Cash.........................................................

6.

Repair Parts Expense ....................................

Repair Parts Inventory............................

7.

Cash ................................................................
Accounts Receivable .....................................
Repair Services Revenue .......................

8.

9.

10.

Wages Expense ..............................................

Cash
Rent Expense .................................................
Prepaid Rent ...........................................
Gary Hobson, Drawings.................................
Cash.........................................................

Credit
900

3,200
0
2,100
0
9,000
0
8,000
0
3,000

3,000
9,000
0
4,000
0
1,600
0
1,000

0
2,100
0
9,000
0
8,000
0
3,000

0
12,000
0
4,000
0
1,600
0
1,000

Note: Journal entry explanations have not been reproduced from the text in
this part of the problem. Students should recognize, however, that
explanations are a critical part of the journal entry in real life.
2-88

PROBLEM 2-7B (Continued)

(e)

SOFT-Q REPAIR SERVICE

Trial Balance
April 30, 2003
Debit

Cash ...............................................................................
Accounts Receivable ....................................................
Repair Parts Inventory ..................................................
Prepaid Rent ..................................................................
Shop Equipment............................................................
Accounts Payable .........................................................
Gary Hobson, Capital....................................................
Gary Hobson, Drawings................................................
Repair Services Revenue .............................................
Advertising Expense.....................................................
Miscellaneous Expense ................................................
Repair Parts Expense ...................................................
Rent Expense ................................................................
Wages Expense.............................................................

(f)

Cash
Accounts Receivable
Repair Parts Inventory
Prepaid Rent
Shop Equipment
Total Assets

(g) Repair Services Revenue

Advertising Expense
Miscellaneous Expense
Repair Parts Expense
Rent Expense
Wages Expense
Net Income

$ 3,000
12,000
15,200
1,600
21,000
$52,800

$12,000
(900)
(2,100)
(3,000)
(1,600)
(4,000)
$ 400
2-89

Credit

$03,000
012,000
015,200
001,600
0021,000

1,000
900
2,100
3,000
1,600
004,000
$65,400

$16,200
037,200
0
12,000

000000
$65,400

PROBLEM 2-8B

(a)

SOFT-Q REPAIR SERVICE

Income Statement
For the Month Ended April 30, 2003
Revenues
Repair services revenue ....................................................

$12,000

Expenses
Wages expense .................................................
$4,000
Rent expense.....................................................
1,600
Repair parts expense ........................................
3,000
Miscellaneous expense .................................... 00,2,100
Advertising expense ......................................... 00, 900
Total expenses............................................................

011,600

Net income .................................................................................

$ 400

(b)
SOFT-Q REPAIR SERVICE
Statement of Owner's Equity
For the Month Ended April 30, 2003
Gary Hobson, Capital, April 1, 2003..........................................

$37,200

Add: Net income ......................................................................

400
37,600

Less: Drawings .........................................................................

1,000

Gary Hobson, Capital, April 30, 2003........................................

$36,600

2-90

PROBLEM 2-8B (Continued)

(c)
SOFT-Q REPAIR SERVICE
Balance Sheet
April 30, 2003
Assets
Cash............................................................................................
Accounts receivable ..................................................................
Repair parts inventory...............................................................
Prepaid rent................................................................................
Shop equipment.........................................................................

$ 3,000
12,000
15,200
001,600
0421,000

Total assets ........................................................................

$52,800

Liabilities and Owner's Equity

Liabilities
Accounts payable...............................................................

$16,200

Owner's Equity
Gary Hobson, Capital.........................................................

0036,600

Total liabilities and owner's equity............................

$52,800

2-91

PROBLEM 2-9B
(a)
HUDSONS BAY COMPANY
Trial Balance
January 31, 2000
(thousands)

Cash in stores
Short-term deposits
Credit card receivables
Other accounts receivable
Merchandise inventories
Prepaid expenses
Income taxes recoverable
Investments
Long-term receivables
Capital assets
Other assets
Trade accounts payable
Short-term borrowings
Other accounts payable and accrued
expenses
Long-term debt due within one year
Long-term debt
Future income taxes payable
Other long-term liabilities
Shareholders equity
Sales and revenue
Operating expenses
Interest expense
Income tax expense
Totals

2-92

Debit
$
8,480
41,792
483,940
127,522
1,598,695
44,606
25,445
49,264
29,348
1,447,200
378,970

Credit

$ 384,804
29,597
584,644
151,695
700,184
54,368
64,445
2,169,490
7,295,751
7,024,207
79,140
96,369
$11,434,978

0000000000
$11,434,978

PROBLEM 2-9B (Continued)

(b)
HUDSONS BAY COMPANY
Income Statement
For the Year Ended January 31, 2000
(thousands)

Revenues
Sales and revenue
Expenses
Operating expenses
Interest expense
Income tax expense

$7,295,751

$7,024,207
79,140
96,369

Net income

7,199,716
$

2-93

96,035

PROBLEM 2-9B (Continued)

(b) (Continued)
HUDSONS BAY COMPANY
Balance Sheet
January 31, 2000
(thousands)
Assets
Current assets
Cash in stores
Short-term deposits
Credit card receivables
Other accounts receivable
Merchandise inventories
Prepaid expenses
Income taxes recoverable
Total current assets
Investments
Long-term receivables
Capital assets
Other assets
Total assets

8,480
41,792
483,940
127,522
1,598,695
44,606
25,445
2,330,480
49,264
29,348
1,447,200
378,970
$4,235,262

Liabilities and Shareholders Equity

Current liabilities
Short-term borrowings
Trade accounts payable
Other accounts payable and accrued expenses
Long-term debt due within one year
Total current liabilities
Long-term debt
Future income taxes payable
Other long-term liabilities
Total liabilities
Shareholders equity ($2,169,490 + $96,035)
Total liabilities and shareholders equity

2-94

29,597
384,804
584,644
151,695
1,150,740
700,184
54,368
64,445
1,969,737
2,265,525
$4,235,262

PROBLEM 2-10B

(a)
1.
2.
3.
4.
5.

Understated by $10,000 ($5,000 to reverse the incorrect entry and

$5,000 for the correct entry)
Correctly stated
Understated
Correct
$360,000 ($350,000 debit column + $5,000 debit to reverse credit
to Accounts Receivable + $5,000 debit to record Accounts
Receivable)

(b)
1.
3.
4.
7.

Cheque
Property tax bill
Sales slip
Cash register tape

2-95

PROBLEM 2-11B

(a)

Errors in the trial balance are:

1.
2.
3.
4.
5.
6.
7.

8.

The trial balance should be dated at a specific point in time, not

for the year ended.
Machinery and equipment should be a debit.
Accounts Payable should be a credit.
Capital should be a credit.
Note Payable should be a credit.
Accounts Receivable should be a debit.
They are not arranged in the proper sequence: 1) assets; 2)
liabilities; 3) owners equity (capital and drawings); and 4)
income statement accounts (revenues and expenses).
The totals should be equal.

(b)
CHRISTOPHERS SMALL ENGINE REPAIRS
Trial Balance
December 31, 2002
Debit
Cash......................................................................
Accounts Receivable ...........................................
Prepaid Rent.........................................................
Prepaid Insurance................................................
Machinery and Equipment ..................................
Accounts Payable ................................................
Note Payable ........................................................
Capital...................................................................
Drawings ..............................................................
Service Revenue ..................................................
Miscellaneous Expense.......................................
Wages Expense....................................................

2-96

Credit

$ 29
40
5
25
91
$ 41
50
45
30
202
47
71
$338

0000
$338

PROBLEM 2-12B

SHAWNEE COMPANY
Trial Balance
May 31, 2003
Debit
Cash ($5,850 + $520 + $25 - $250) ...............................
Accounts Receivable ($2,570 $210)..........................
Prepaid Insurance ($700 +$100) ..................................
Equipment ($8,000 - $520)............................................
Supplies ($520) .............................................................
Accounts Payable ($4,600 + $100 + $520 - $210) ........
Property Taxes Payable ($560) ....................................
M. Flynn, Capital ($11,700 + $700) ...............................
M. Flynn, Drawings ($700)............................................
Service Revenue ($6,960).............................................
Salaries Expense ($4,200 + $200) ................................
Advertising Expense ($1,100 - $25 + $250) .................
Property Tax Expense ($1,100 + $100) ........................

2-97

Credit

$06,145
002,360
000,800
007,480
520
$05,010
00 560
012,400
700
6, 6,960
044,400
1,325
1,200
$24,930

000000
$24,930

BYP 2-1 FINANCIAL REPORTING PROBLEM

(a)
(1)
Decrease
Side

Accounts Payable and

Accrued Liabilities

Credit

Debit

Credit

Accounts Receivable

Debit

Credit

Debit

Capital Assets

Debit

Credit

Debit

Franchise Revenue

Credit

Debit

Credit

Income Taxes Expense

Debit

Credit

Debit

Interest and Other

Investment Expense

Debit

Credit

Debit

Debit

Credit

Debit

Account

Prepaid Expenses and

Sundry Assets
(b)
1.
2.
3.
4.
5.
6.

(2)
Normal
Balance

(1)
Increase
Side

Cash is increased.
Cash is decreased and/or long-term debt is increased.
Cash is increased (or Accounts Receivable).
Income Tax Payable is increased or Cash is decreased.
Cash is decreased or Interest Payable increased.
Cash is decreased.

2-98

BYP 2-2 INTERPRETING FINANCIAL STATEMENTS

(a)
UNITED GRAIN GROWERS LIMITED
Trial Balance
July 31, 2000
(in thousands)

Debit
Cash ...................................................................... $ 13,340
Accounts receivable and prepaid expenses ......
128,126
Inventories ............................................................
106,604
Capital assets .......................................................
307,202
Other assets .........................................................
44,159
Bank and other loans ...........................................
Accounts payable and accrued expenses..........
Dividends payable ................................................
Long-term debt .....................................................
Shareholders (owners) equity ...........................
Sales and revenue from services........................
Cost of goods sold expense................................ 1,576,718
Operating, general and administrative expense
154,250
Depreciation and amortization expense .............
26,380
Interest expense ...................................................
17,350
Other expense ......................................................
595
Income tax expense .............................................
2,313
Totals ............................................................. $2,377,037

2-99

Credit

66,352
91,440
5,315
210,051
224,090
1,779,789

000000000
$2,377,037

BYP 2-2 (Continued)

(b)
Assets =
Cash $13,340 +
Accounts Receivable
and Prepaid
Expenses $128,126 +
Inventories $106,604
+ Capital Assets
$307,202 +
Other Assets $44,159

$599,431 =

Liabilities +
Bank and Other Loans
$66,352 + Accounts
Payable and Accrued
Expenses $91,440 +
Dividends Payable
$5,315 + Long-term
Debt $210,051

$373,158 +

2-100

Owners Equity
Shareholders (owners)
Equity $224,090 + Sales
and Revenue from
Services $1,779,789 Cost of Goods Sold
Expense $1,576,718 Operating, General
and Administrative
Expense $154,250 Depreciation and
Amortization Expense
$26,380 - Interest
Expense $17,350 - Other
Expenses $595 - Income
Tax Expense $2,313
$226,273

BYP 2-3 ACCOUNTING ON THE WEB

Due to the frequency of change with regard to information available on the
world wide web, the Accounting on the Web cases are updated as required.
Their suggested solutions are also updated whenever necessary, and can
be found on-line in the Instructor Resources section of our home page
[www.wiley.com/canada/weygandt2].

2-101

BYP 2-4 COLLABORATIVE LEARNING ACTIVITY

(a) May

Correct.

Cash ................................................................
Lesson Fees Earned ...............................

250

Cash ................................................................
Unearned Boarding Fees........................

1,500

Hay and Feed Supplies ..................................

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

1,700

Office Equipment............................................
Cash .........................................................

800

A. Boudreau, Drawings ..................................

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

400

Cash ................................................................
Riding Fees Earned ................................

154

14

15

20

31

Correct.

31

Hay and Feed Expense...................................

Hay and Feed Supplies ...........................

250

1,500

1,700

800

400

154

1,000
1,000

(b) The errors in the entries of May 14, 20, and May 31 second entry would
prevent the trial balance from balancing.
(c) Net income as reported .................................................
Add: 5/9, Hay and feed expense .................................
5/15, Salaries expense (A. Boudreau,
Drawings) .........................................................
Less: 5/7, Boarding fees unearned..............................
Correct net income ........................................................

2-102

$4,500
$1,700
02,100
6,600
00,131 1,500
$5,100

00,400

BYP 2-4 (Continued)

(d) Cash as reported ........................................................
Add: 5/9, Purchase on account...............................
5/20, Transposition error .................................
5/31, Hay and feed used ..................................

2-103

$12,475
$1,700
9
00,0100

001,809
$14,284

BYP 2-5

COMMUNICATION ACTIVITY
MEMORANDUM

To:
Instructor
From: Student
Date:
Subject: Steps in the Recording Process
As requested, following is an explanation and illustration of the steps in
the recording process as they relate to the March 15 transactions for Merry
Maid Company:
(1) In the first transaction, bills totaling $6,000 were sent to customers for
services rendered. Therefore, the asset Accounts Receivable is
increased $6,000 and the revenue Cleaning Services Revenue is
increased $6,000. Debits increase assets and credits increase revenues,
so the journal entry is:
Accounts Receivable......................................................
Cleaning Services Revenue ...................................
Billed customer for services rendered.

6,000
6,000

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 Cleaning Services Revenue.
(2) In the second transaction, $2,000 was paid in salaries to employees.
Therefore, the expense Salaries 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 Expense ............................................................
Cash.........................................................................
Paid salaries.

2,000
2,000

The $2,000 amount is then posted to the debit side of the general ledger
account Salaries Expense and to the credit side of the general ledger
account Cash.

2-104

BYP 2-5 (Continued)

I trust that the foregoing is satisfactory. Please let me know if anything
further is required.

2-105

BYP 2-6

ETHICS CASE

(a) The stakeholders in this situation are:

Vu Hung, assistant chief accountant.
Users of the company's financial statements (internal and external).
Her supervisor (the chief accountant, who evaluates her).
(b) By adding $1,000 to the Equipment account, that account total is
intentionally misstated. By not locating the error causing the
imbalance, some other account(s) may also be misstated. 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), Vus action might not be considered unethical in the
preparation of interim financial statements. However, she should
disclose what she has done. Otherwise, if Vu is violating a company
accounting policy by her action, then she is acting unethically.
(c) Vu's alternatives are:
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 (if
any) in the next quarter.

2-106