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ACCT 2213 Chapter 2 Homework Notes Solution

ACCT 2213 Chapter 2 Homework Notes Solution Create a chart of accounts for Raymond Autobody Shop using the standard numbering system. Each account is... [Show More] separated by a factor of 10. For example, the first asset account will be 100 and the next asset account will 110. (Use the first available line under each section, Asset, Liabilities, etc., when selecting the accounts. If a box is not used, leave the box empty; do not select any labels.) Accounts Payable Service Revenue Cash Equipment Utilities Expense Common Stock Automotive Supplies Advertising Expense Dividends Unearned Revenue Retained Earnings Balance Sheet Accounts Assets Liabilities Equity 100 Cash 200 Accounts Payable 300 Dividends 110 Equipment 210 Unearned Revenue 310 Common Stock 120 Automotive Supplies 320 Retained Earnings Income Statement Accounts (Part of Equity) Revenues Expenses 400 Service Revenue 500 Utilities Expense 510 Advertising Expense a. The business received $20,000 cash and issued common stock to stockholders. Bank deposit slip b. Purchased office supplies on account, $500. Purchase invoice c. Recorded $1,000 revenue for services rendered to customers. Sales invoice Journalize the transactions of Laughton Engineering. Include an explanation with each journal entry. Use the following accounts: Cash; Accounts Receivable; Office Supplies; Equipment; Accounts Payable; Notes Payable; Common Stock; Dividends; Service Revenue; Utilities Expense. (Record debits first, then credits. Select the explanation on the last line of the journal entry table.) July 2: Received $10,000 contribution from Sam Laughton in exchange for common stock. Date Accounts and Explanation Debit Credit Jul. 2 Cash 10,000 Common Stock 10,000 Issued common stock for cash. July 4: Paid utilities expense of $390. Date Accounts and Explanation Debit Credit Jul. 4 Utilities Expense 390 Cash 390 Paid cash expenses. July 5: Purchased equipment on account, $2,100. Date Accounts and Explanation Debit Credit Jul. 5 Equipment 2,100 Accounts Payable 2,100 Purchase of equipment on account. July 10: Performed services for a client on account, $3,200. Date Accounts and Explanation Debit Credit Jul. 10 Accounts Receivable 3,200 Service Revenue 3,200 Performed services on account. July 12: Borrowed $6,900 cash, signing a notes payable. Date Accounts and Explanation Debit Credit Jul. 12 Cash 6,900 Notes Payable 6,900 Borrowed cash by signing note. July 19: Cash dividends of $400 were paid to stockholders. Date Accounts and Explanation Debit Credit Jul. 19 Dividends 400 Cash 400 Paid cash dividends. July 21: Purchased office supplies for $840 and paid cash. Date Accounts and Explanation Debit Credit Jul. 21 Office Supplies 840 Cash 840 Purchase of office supplies with cash. July 27: Paid the liability from July 5. Accounts and Explanation Debit Credit Jul. 27 Accounts Payable 2,100 Cash 2,100 Paid cash on account. Requirement 1. Post the transactions to the T-accounts. Use the dates as posting references in the T-accounts. We will post to the accounts one transaction at a time. Begin by posting the event from the 2nd. Received $14,000 contribution from Bill Lexington in exchange for common stock. Cash Accounts Payable Service Revenue Jul. 2 14,000 Accounts Receivable Notes Payable Utilities Expense Office Supplies Common Stock 14,000 Jul. 2 Equipment Dividends July 4: Paid utilities expense of $410. Cash Accounts Payable Service Revenue Jul. 2 14,000 410 Jul. 4 Accounts Receivable Notes Payable Utilities Expense Jul. 4 410 Office Supplies Common Stock 14,000 Jul. 2 Equipment Dividends July 5: Purchased equipment on account, $1,500. Cash Accounts Payable Service Revenue Jul. 2 14,000 410 Jul. 4 1,500 Jul. 5 Accounts Receivable Notes Payable Utilities Expense Jul. 4 410 Office Supplies Common Stock 14,000 Jul. 2 Equipment Dividends Jul. 5 1,500 July 10: Performed services for a client on account, $3,300. Cash Accounts Payable Service Revenue Jul. 2 14,000 410 Jul. 4 1,500 Jul. 5 3,300 Jul. 10 Accounts Receivable Notes Payable Utilities Expense Jul. 10 3,300 Jul. 4 410 Office Supplies Common Stock 14,000 Jul. 2 Equipment Dividends Jul. 5 1,500 July 12: Borrowed $6,900 cash, signing a note payable. Cash Accounts Payable Service Revenue Jul. 2 14,000 410 Jul. 4 1,500 Jul. 5 3,300 Jul. 10 Jul. 12 6,900 Accounts Receivable Notes Payable Utilities Expense Jul. 10 3,300 6,900 Jul. 12 Jul. 4 410 Office Supplies Common Stock 14,000 Jul. 2 Equipment Dividends Jul. 5 1,500 July 19: Cash dividends of $700 were paid to stockholders. Cash Accounts Payable Service Revenue Jul. 2 14,000 410 Jul. 4 1,500 Jul. 5 3,300 Jul. 10 Jul. 12 6,900 700 Jul. 19 Accounts Receivable Notes Payable Utilities Expense Jul. 10 3,300 6,900 Jul. 12 Jul. 4 410 Office Supplies Common Stock 14,000 Jul. 2 Equipment Dividends Jul. 5 1,500 Jul. 19 700 July 21: Purchased office supplies for $860 and paid cash. Cash Accounts Payable Service Revenue Jul. 2 14,000 410 Jul. 4 1,500 Jul. 5 3,300 Jul. 10 Jul. 12 6,900 700 Jul. 19 860 Jul. 21 Accounts Receivable Notes Payable Utilities Expense Jul. 10 3,300 6,900 Jul. 12 Jul. 4 410 Office Supplies Common Stock Jul. 21 860 14,000 Jul. 2 Equipment Dividends Jul. 5 1,500 Jul. 19 700 July 27: Paid the liability from July 5. Cash Accounts Payable Service Revenue Jul. 2 14,000 410 Jul. 4 Jul. 27 1,500 1,500 Jul. 5 3,300 Jul. 10 Jul. 12 6,900 700 Jul. 19 860 Jul. 21 1,500 Jul. 27 Accounts Receivable Notes Payable Utilities Expense Jul. 10 3,300 6,900 Jul. 12 Jul. 4 410 Office Supplies Common Stock Jul. 21 860 14,000 Jul. 2 Equipment Dividends Jul. 5 1,500 Jul. 19 700 Requirement 2. Compute the July 31 balance for each account. Use a "Bal." posting reference on the proper side of each account to show the ending balances of the accounts. (For accounts with a $0 balance, make sure to enter "0" in the appropriate cell on the normal side of the account.) Cash Accounts Payable Service Revenue Jul. 2 14,000 410 Jul. 4 Jul. 27 1,500 1,500 Jul. 5 3,300 Jul. 10 Jul. 12 6,900 700 Jul. 19 0 Bal. 3,300 Bal. 860 Jul. 21 1,500 Jul. 27 Bal. 17,430 Accounts Receivable Notes Payable Utilities Expense Jul. 10 3,300 6,900 Jul. 12 Jul. 4 410 Bal. 3,300 6,900 Bal. Bal. 410 Office Supplies Common Stock Jul. 21 860 14,000 Jul. 2 Bal. 860 14,000 Bal. Equipment Dividends Jul. 5 1,500 Jul. 19 700 Bal. 1,500 Bal. 700 May 1: The business received cash of $86,000 and issued common stock to Adam Watson. Date Accounts and Explanation Debit Credit May 1 Cash 86,000 Common Stock 86,000 Issued common stock in exchange for cash. May 2: Purchased office supplies on account, $780. Date Accounts and Explanation Debit Credit May 2 Office Supplies 780 Accounts Payable 780 Purchased office supplies on account. May 4: Paid $52,000 cash for building and land. The building had a fair market value of $46,000. Prepare a compound entry. Date Accounts and Explanation Debit Credit May 4 Building 46,000 Land 6,000 Cash 52,000 Paid cash for building and land. May 6: Performed services for customers and received cash, 2,000. Date Accounts and Explanation Debit Credit May 6 Cash 2,000 Service Revenue 2,000 Performed services and received cash. May 9: Paid $530 on accounts payable. Date Accounts and Explanation Debit Credit May 9 Accounts Payable 530 Cash 530 Paid cash on account. May 17: Performed services for customers on account, $2,900. Date Accounts and Explanation Debit Credit May 17 Accounts Receivable 2,900 Service Revenue 2,900 Performed services on account. May 19: Paid rent expense for the month, $1,000. Date Accounts and Explanation Debit Credit May 19 Rent Expense 1,000 Cash 1,000 Paid cash expenses. May 20: Received $2,100 from customers for services to be performed next month. Accounts and Explanation Debit Credit May 20 Cash 2,100 Unearned Revenue 2,100 Collected cash for future services. May 21: Paid $700 for advertising in next month's IT Technology magazine. Date Accounts and Explanation Debit Credit May 21 Prepaid Advertising 700 Cash 700 Paid advertising in advance. May 23: Received $2,500 cash on account from a customer. Date Accounts and Explanation Debit Credit May 23 Cash 2,500 Accounts Receivable 2,500 Received cash on account. May 31: Incurred and paid salaries, $1,600. Date Accounts and Explanation Debit Credit May 31 Salaries Expense 1,600 Cash 1,600 Paid cash expenses. Alston Moving Company Trial Balance August 31, 2016 Balance Account Title Debit Credit Common Stock 36,700 Insurance Expense 800 Accounts Payable 4,200 Service Revenue 93,000 Building 43,000 Advertising Expense 400 Salaries Expense 6,000 Cash 5,000 Trucks 121,000 Fuel Expense 3,000 Dividends 6,100 Utilities Expense 500 Accounts Receivable 8,800 Notes Payable 61,000 Office Supplies 300 Total $194,900 $194,900 Geena Lunger has trouble keeping her debits and credits equal. During a recent month, Geena made the following accounting errors: a. In preparing the trial balance, Geena omitted a $7,000 Notes Receivable. The credit to Cash was correct. b. Geena posted a 1,000 Utilities Expense as 100. The credit to Cash was correct. c. In recording a $700 payment on account, Geena debited Furniture instead of Accounts Payable. d. In journalizing a receipt of cash for service revenue, Geena debited Cash for $600 instead of the correct amount of $60. The credit was correct. e. Geena recorded a $130 purchase of office supplies on account by debiting Office Supplies and crediting Accounts Payable for $310. Requirements 1. For each of these errors, state whether total debits equal total credits on the trial balance. 2. Identify each account that has an incorrect balance, and the amount and direction of the error (such as "Accounts Receivable $500 too high"). Requirement 1. For each of these errors, state whether total debits equal total credits on the trial balance. For each error determine whether total debits are "Greater than" (>), "Equal to" (=), or "Less than" (<) total credits. a. Total debits < Total credits b. Total debits < Total credits c. Total debits = Total credits d. Total debits > Total credits e. Total debits = Total credits Requirement 2. Identify each account that has an incorrect balance, and the amount and direction of the error (such as "Accounts Receivable $500 too high"). Account Amount Direction of Error a. Notes Receivable $7,000 Too low b. Utilities Expense 900 Too low c. Furniture 700 Too high Accounts Payable 700 Too high d. Cash 540 Too high e. Office Supplies 180 Too high Accounts Payable 180 Too high The debt ratio shows the proportion of assets financed with debt and is calculated by dividing total liabilities by total assets. It can be used to evaluate a business's ability to pay its debts. Think about the accounting equation (Assets = Liabilities + Equity). The equation shows who can claim the assets. The liabilities represent the claims of the creditors and the equity represents the claims of the owners (referred to as stockholders or shareholders). Companies that have a high percentage of liabilities are at greater risk. If they are unable to pay their creditors as the amounts become due, the creditors have the right to claim the assets. In other words, the creditors can repossess the company's assets. The debt ratio calculates the percentage of assets that are financed with liabilities. Begin by calculating the total assets. Recall that an asset is an economic resource that is expected to benefit the business in the future. Assets are something the business owns or has control of that has value. Use the following table to calculate the total assets of Jake Hill comma M.D.Jake Hill, M.D. Cash $40,000 Accounts Receivable 7,400 Office Supplies 3,000 Office Equipment 25,000 Building 80,000 Land 22,000 Total assets $177,400 Now calculate the total liabilities. Liabilities are debts that are owed to creditors. Liabilities are something the business owes and represent the creditors' claims on the business's assets. Many liabilities have the word payable in their titles. Use the following table to calculate the total liabilities of Jake Hill comma M.D.Jake Hill, M.D. Accounts Payable $1,500 Utilities Payable 400 Unearned Revenue 20,896 Notes Payable 73,000 Total liabilities $95,796 Finally, calculate the debt ratio. (Round the percentage to the nearest whole percent.) Total liabilities / Total assets = Debt ratio $95,796 / $177,400 = 54 % Jake Hill, M.D. Trial Balance September 30, 2016 Balance Account Title Debit Credit Cash $40,000 Accounts Receivable 7,400 Office Supplies 3,000 Office Equipment 25,000 Building 80,000 Land 22,000 Accounts Payable $1,500 Utilities Payable 400 Unearned Revenue 20,896 Notes Payable 73,000 Common Stock 110,000 Dividends 52,000 Service Revenue 48,904 Salaries Expense 23,300 Utilities Expense 1,100 Advertising Expense 900 Total $254,700 $254,700 [Show Less]

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