The following data (in millions) were taken from the financial statements of Costco Whole-sale Corporation:
Recent | Prior
Year | Year
Revenue $116,199 | $112,640
Operating expenses 112,575 | 109,420
Operating income $3,624 | $3,220
a. For Costco, determine the amount of change in millions and the percent of change (round to one decimal place) from the prior year to the recent year for:
1. Revenue
2. Operating expenses
3. Operating income
b. Comment on the results of your horizontal analysis in part (a).
c. Based upon Exercise 2-23, compare and comment on the operating results of Target and Costco for the recent year.
Answer:
a.
1. Revenue:
$3,559 million increase ($116,199 – $112,640)
3.2% increase ($3,559 ÷ $112,640)
2. Operating expenses:
$3,155 million increase ($112,575 – $109,420)
2.9% increase ($3,155 ÷ $109,420)
3. Operating income:
$404 million increase ($3,624 – $3,220)
12.5% increase ($404 ÷ $3,220)
b. During the recent year, revenue increased by 3.2%, while operating expenses increased by 2.9%. As a result, operating income increased by 12.5% from the prior year.
c. Because of the size differences between Target and Costco (Costco has more than 1.6 times the revenue), it is best to compare the two companies on the basis of percent changes from the prior year. Costco's revenues increased by3.2%, while Target's revenues increased by only 1.9%. The expenses of Costco
increased by 2.9%, which is less than the percentage increase in revenues. As a result, Costco's operating income increased by 12.5%. In contrast, Target's expenses increased by 3.0%, which is more than the percentage increase in revenues. As a result, Target's operating income decreased by 12.3%. Overall, Costco had a better operating performance than Target.
Showing posts with label Chapter 02 Exercises. Show all posts
Showing posts with label Chapter 02 Exercises. Show all posts
Monday, December 17, 2018
The following data (in millions) are taken from the financial statements of Target Corporation:
The following data (in millions) are taken from the financial statements of Target Corporation:
Recent | Prior
Year | Year
Revenue $72,618 | $71,279
Operating expenses 68,083 | 66,109
Operating income $ 4,535 | $ 5,170
a. For Target Corporation, determine the amount of change in millions and the percent of change (round to one decimal place) from the prior year to the recent year for:
1. Revenue
2. Operating expenses
3. Operating income
b. What conclusions can you draw from your analysis of the revenue and the total operating expenses?
Answer:
a.
1. Revenue:
$1,339 million increase ($72,618 – $71,279)
1.9% increase ($1,339 ÷ $71,279)
2. Operating expenses:
$1,974 million increase ($68,083 – $66,109)
3.0% increase ($1,974 ÷ $66,109)
3. Operating income:
–$635 million decrease ($4,535 – $5,170)
–12.3% decrease (–$635 ÷ $5,170)
b. During the recent year, revenue increased by 1.9%, while operating expenses increased by 3.0%. As a result, operating income decreased by –12.3%, from the prior year.
Recent | Prior
Year | Year
Revenue $72,618 | $71,279
Operating expenses 68,083 | 66,109
Operating income $ 4,535 | $ 5,170
a. For Target Corporation, determine the amount of change in millions and the percent of change (round to one decimal place) from the prior year to the recent year for:
1. Revenue
2. Operating expenses
3. Operating income
b. What conclusions can you draw from your analysis of the revenue and the total operating expenses?
Answer:
a.
1. Revenue:
$1,339 million increase ($72,618 – $71,279)
1.9% increase ($1,339 ÷ $71,279)
2. Operating expenses:
$1,974 million increase ($68,083 – $66,109)
3.0% increase ($1,974 ÷ $66,109)
3. Operating income:
–$635 million decrease ($4,535 – $5,170)
–12.3% decrease (–$635 ÷ $5,170)
b. During the recent year, revenue increased by 1.9%, while operating expenses increased by 3.0%. As a result, operating income decreased by –12.3%, from the prior year.
The following errors took place in journalizing and posting transactions: a. Cash of $8,800 received on account was recorded as a debit to Fees Earned and a credit to Cash.
The following errors took place in journalizing and posting transactions:
a. Cash of $8,800 received on account was recorded as a debit to Fees Earned and a credit to Cash.
b. A $1,760 purchase of supplies for cash was recorded as a debit to Supplies Expense and a credit to Accounts Payable.
Journalize the entries to correct the errors. Omit explanations.
Answer:
The correction could be made with one or two entries as shown below.
a. Cash17,600
Fees Earned8,800
Accounts Receivable8,800
or (reverses original entry)
Cash8,800
Fees8,800
Cash8,800
Accounts Receivable8,800
b. Accounts Payable*1,760
Supplies Expense1,760
Supplies1,760
Cash1,760
* The first entry reverses the original entry. The second entry is the entry that should
have been made initially.
a. Cash of $8,800 received on account was recorded as a debit to Fees Earned and a credit to Cash.
b. A $1,760 purchase of supplies for cash was recorded as a debit to Supplies Expense and a credit to Accounts Payable.
Journalize the entries to correct the errors. Omit explanations.
Answer:
The correction could be made with one or two entries as shown below.
a. Cash17,600
Fees Earned8,800
Accounts Receivable8,800
or (reverses original entry)
Cash8,800
Fees8,800
Cash8,800
Accounts Receivable8,800
b. Accounts Payable*1,760
Supplies Expense1,760
Supplies1,760
Cash1,760
* The first entry reverses the original entry. The second entry is the entry that should
have been made initially.
The following errors took place in journalizing and posting transactions: a. Insurance of $18,000 paid for the current year was recorded as a debit to Insurance Expense and a credit to Prepaid Insurance.
The following errors took place in journalizing and posting transactions:
a. Insurance of $18,000 paid for the current year was recorded as a debit to Insurance Expense and a credit to Prepaid Insurance.
b. A withdrawal of $10,000 by Brian Phillips, owner of the business, was recorded as a debit to Wages Expense and a credit to Cash.
Journalize the entries to correct the errors. Omit explanations.
Answer:
a. The correction could be made with one or two entries as shown below.
Prepaid Insurance36,000
Insurance Expense18,000
Cash18,000
or (reverses original entry)
Prepaid Insurance18,000
Insurance Expense18,000
Prepaid Insurance18,000
Cash18,000
b. Brian Phillips, Drawing10,000
Wages Expense10,000
a. Insurance of $18,000 paid for the current year was recorded as a debit to Insurance Expense and a credit to Prepaid Insurance.
b. A withdrawal of $10,000 by Brian Phillips, owner of the business, was recorded as a debit to Wages Expense and a credit to Cash.
Journalize the entries to correct the errors. Omit explanations.
Answer:
a. The correction could be made with one or two entries as shown below.
Prepaid Insurance36,000
Insurance Expense18,000
Cash18,000
or (reverses original entry)
Prepaid Insurance18,000
Insurance Expense18,000
Prepaid Insurance18,000
Cash18,000
b. Brian Phillips, Drawing10,000
Wages Expense10,000
Identify the errors in the following trial balance. All accounts have normal balances.Mascot Co. Unadjusted Trial Balance For the Month
Identify the errors in the following trial balance. All accounts have normal balances.
Mascot Co. Unadjusted Trial Balance For the Month Ending July 31, 2019 Account No. Debit Balances Credit Balances
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 36,000
Accounts Receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 112,600
Prepaid Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 18,000
Equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 375,000
Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 53,300
Salaries Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 7,500
Samuel Parson, Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 297,200
Samuel Parson, Drawing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 17,000
Fees Earned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 682,000
Salary Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 396,800
Advertising Expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 73,000
Miscellaneous Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 11,600
1,189,300 1,189,300
Answer:
1. The Debit column total is added incorrectly. The sum is $890,700 rather than
$1,189,300.
2. The trial balance should be dated “July 31, 2019,” not “For the Month
Ending July 31, 2019.”
3. The Accounts Receivable balance should be in the Debit column.
4. The Accounts Payable balance should be in the Credit column.
5. The Samuel Parson, Drawing, balance should be in the Debit column.
6. The Advertising Expense balance should be in the Debit column.
A corrected trial balance would be as follows:
Account Debit Credit
No. Balances Balances
Cash11 36,000
Accounts Receivable12 112,600
Prepaid Insurance13 18,000
Equipment14 375,000
Accounts Payable21 53,300
Salaries Payable22 7,500
Samuel Parson, Capital31 297,200
Samuel Parson, Drawing 32 17,000
Service Revenue41 682,000
Salary Expense51 396,800
Advertising Expense52 73,000
Miscellaneous Expense59 11,600
1,040,000 1,040,000
Mascot Co. Unadjusted Trial Balance For the Month Ending July 31, 2019 Account No. Debit Balances Credit Balances
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 36,000
Accounts Receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 112,600
Prepaid Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 18,000
Equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 375,000
Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 53,300
Salaries Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 7,500
Samuel Parson, Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 297,200
Samuel Parson, Drawing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 17,000
Fees Earned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 682,000
Salary Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 396,800
Advertising Expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 73,000
Miscellaneous Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 11,600
1,189,300 1,189,300
Answer:
1. The Debit column total is added incorrectly. The sum is $890,700 rather than
$1,189,300.
2. The trial balance should be dated “July 31, 2019,” not “For the Month
Ending July 31, 2019.”
3. The Accounts Receivable balance should be in the Debit column.
4. The Accounts Payable balance should be in the Credit column.
5. The Samuel Parson, Drawing, balance should be in the Debit column.
6. The Advertising Expense balance should be in the Debit column.
A corrected trial balance would be as follows:
Account Debit Credit
No. Balances Balances
Cash11 36,000
Accounts Receivable12 112,600
Prepaid Insurance13 18,000
Equipment14 375,000
Accounts Payable21 53,300
Salaries Payable22 7,500
Samuel Parson, Capital31 297,200
Samuel Parson, Drawing 32 17,000
Service Revenue41 682,000
Salary Expense51 396,800
Advertising Expense52 73,000
Miscellaneous Expense59 11,600
1,040,000 1,040,000
The following errors occurred in posting from a two-column journal: 1. A credit of $6,000 to Accounts Payable was not posted.
The following errors occurred in posting from a two-column journal:
1. A credit of $6,000 to Accounts Payable was not posted.
2. An entry debiting Accounts Receivable and crediting Fees Earned for $5,300 was not posted.
3. A debit of $2,700 to Accounts Payable was posted as a credit.
4. A debit of $480 to Supplies was posted twice.
5. A debit of $3,600 to Cash was posted to Miscellaneous Expense.
6. A credit of $780 to Cash was posted as $870.
7. A debit of $12,620 to Wages Expense was posted as $12,260.
Considering each case individually (i.e., assuming that no other errors had occurred), indicate (a) by “yes” or “no” whether the trial balance would be out of balance; (b) if answer to (a) is “yes,” the amount by which the trial balance totals would differ; and (c) whether the Debit or Credit column of the trial balance would have the larger total. Answers should be presented in the following form, with error (1) given as an example:
(a) (b) (c)
Error Out of Balance Difference Larger Total
1. yes $6,000 debit
Answer:
(a) (b)
Error Out of Balance Difference
1. yes $6,000
2. no —
3. yes 5,400
4. yes 480
5. no —
6. yes 90
7. yes 360
debit
debit
—
credit
credit
1. A credit of $6,000 to Accounts Payable was not posted.
2. An entry debiting Accounts Receivable and crediting Fees Earned for $5,300 was not posted.
3. A debit of $2,700 to Accounts Payable was posted as a credit.
4. A debit of $480 to Supplies was posted twice.
5. A debit of $3,600 to Cash was posted to Miscellaneous Expense.
6. A credit of $780 to Cash was posted as $870.
7. A debit of $12,620 to Wages Expense was posted as $12,260.
Considering each case individually (i.e., assuming that no other errors had occurred), indicate (a) by “yes” or “no” whether the trial balance would be out of balance; (b) if answer to (a) is “yes,” the amount by which the trial balance totals would differ; and (c) whether the Debit or Credit column of the trial balance would have the larger total. Answers should be presented in the following form, with error (1) given as an example:
(a) (b) (c)
Error Out of Balance Difference Larger Total
1. yes $6,000 debit
Answer:
(a) (b)
Error Out of Balance Difference
1. yes $6,000
2. no —
3. yes 5,400
4. yes 480
5. no —
6. yes 90
7. yes 360
debit
debit
—
credit
credit
The following preliminary unadjusted trial balance of Ranger Co., a sports ticket agency, does not balance:
The following preliminary unadjusted trial balance of Ranger Co., a sports ticket agency, does not balance:
Ranger Co. Unadjusted Trial Balance August 31, 2019 Debit Balances Credit Balances
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77,600 Accounts Receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,750
Prepaid Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,000
Equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,000
Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,100
Unearned Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,800
Carmen Meeks, Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110,000
Carmen Meeks, Drawing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,000
Fees Earned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 385,000
Wages Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 213,000
Advertising Expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,350
Miscellaneous Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,400
273,700 668,300
When the ledger and other records are reviewed, you discover the following: (1) the debits and credits in the cash account total $77,600 and $62,100, respectively; (2) a billing of $9,000 to a customer on account was not posted to the accounts receivable account; (3) a payment of $4,500 made to a creditor on account was not posted to the accounts payable account; (4) the balance of the unearned rent account is $5,400; (5) the correct balance of the equipment account is $190,000; and (6) each account has a normal balance.
Prepare a corrected unadjusted trial balance.
Answer:
RANGER CO.
Unadjusted Trial Balance
August 31, 2019
Debit Credit
Balances Balances
Cash15,500
Accounts Receivable46,750
Prepaid Insurance12,000
Equipment190,000
Accounts Payable24,600
Unearned Rent5,400
Carmen Meeks, Capital110,000
Carmen Meeks, Drawing13,000
Fees Earned385,000
Wages Expense213,000
Advertising Expense16,350
Miscellaneous Expense18,400
525,000 525,000
Ranger Co. Unadjusted Trial Balance August 31, 2019 Debit Balances Credit Balances
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77,600 Accounts Receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,750
Prepaid Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,000
Equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,000
Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,100
Unearned Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,800
Carmen Meeks, Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110,000
Carmen Meeks, Drawing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,000
Fees Earned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 385,000
Wages Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 213,000
Advertising Expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,350
Miscellaneous Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,400
273,700 668,300
When the ledger and other records are reviewed, you discover the following: (1) the debits and credits in the cash account total $77,600 and $62,100, respectively; (2) a billing of $9,000 to a customer on account was not posted to the accounts receivable account; (3) a payment of $4,500 made to a creditor on account was not posted to the accounts payable account; (4) the balance of the unearned rent account is $5,400; (5) the correct balance of the equipment account is $190,000; and (6) each account has a normal balance.
Prepare a corrected unadjusted trial balance.
Answer:
RANGER CO.
Unadjusted Trial Balance
August 31, 2019
Debit Credit
Balances Balances
Cash15,500
Accounts Receivable46,750
Prepaid Insurance12,000
Equipment190,000
Accounts Payable24,600
Unearned Rent5,400
Carmen Meeks, Capital110,000
Carmen Meeks, Drawing13,000
Fees Earned385,000
Wages Expense213,000
Advertising Expense16,350
Miscellaneous Expense18,400
525,000 525,000
Indicate which of the following errors, each considered individually, would cause the trial balance totals to be unequal:
Indicate which of the following errors, each considered individually, would cause the trial balance totals to be unequal:
a. A fee of $21,000 earned and due from a client was not debited to Accounts Receivable or credited to a revenue account, because the cash had not been received.
b. A receipt of $11,300 from an account receivable was journalized and posted as a debit of $11,300 to Cash and a credit of $11,300 to Fees Earned.
c. A payment of $4,950 to a creditor was posted as a debit of $4,950 to Accounts Payable and a debit of $4,950 to Cash.
d. A payment of $5,000 for equipment purchased was posted as a debit of $500 to Equipment and a credit of $500 to Cash.
e. Payment of a cash withdrawal of $19,000 was journalized and posted as a debit of $1,900 to Salary Expense and a credit of $19,000 to Cash.
Indicate which of the preceding errors would require a correcting entry.
Answer:
Inequality of trial balance totals would be caused by errors described in (c) and (e). For (c), the debit total would exceed the credit total by $9,900 ($4,950 + $4,950).For (e), the credit total would exceed the debit total by $17,100 ($19,000 – $1,900).
Errors (b), (c), (d), and (e) would require correcting entries. Although it is not a correcting entry, the entry that was not made in (a) should also be entered in the journal.
a. A fee of $21,000 earned and due from a client was not debited to Accounts Receivable or credited to a revenue account, because the cash had not been received.
b. A receipt of $11,300 from an account receivable was journalized and posted as a debit of $11,300 to Cash and a credit of $11,300 to Fees Earned.
c. A payment of $4,950 to a creditor was posted as a debit of $4,950 to Accounts Payable and a debit of $4,950 to Cash.
d. A payment of $5,000 for equipment purchased was posted as a debit of $500 to Equipment and a credit of $500 to Cash.
e. Payment of a cash withdrawal of $19,000 was journalized and posted as a debit of $1,900 to Salary Expense and a credit of $19,000 to Cash.
Indicate which of the preceding errors would require a correcting entry.
Answer:
Inequality of trial balance totals would be caused by errors described in (c) and (e). For (c), the debit total would exceed the credit total by $9,900 ($4,950 + $4,950).For (e), the credit total would exceed the debit total by $17,100 ($19,000 – $1,900).
Errors (b), (c), (d), and (e) would require correcting entries. Although it is not a correcting entry, the entry that was not made in (a) should also be entered in the journal.
The accounts in the ledger of Hickory Furniture Company as of December 31, 2019, are listed in alphabetical order as follows
The accounts in the ledger of Hickory Furniture Company as of December 31, 2019, are listed in alphabetical order as follows. All accounts have normal balances. The balance of the cash account has been intentionally omitted.
Accounts Payable $ 42,770
Notes Payable $ 50,000
Accounts Receivable 116,900
Prepaid Insurance 21,600
Cash ?
Rent Expense 48,000
Elaine Wells, Capital 75,000
Supplies 4,275
Elaine Wells, Drawing 24,000
Supplies Expense 6,255
Fees Earned 745,230
Unearned Rent 12,000
Insurance Expense 3,600
Utilities Expense 26,850
Land 50,000
Wages Expense 580,700
Miscellaneous Expense 9,500
Prepare an unadjusted trial balance, listing the accounts in their normal order and inserting the missing figure for cash.
Answer:
HICKORY FURNITURE COMPANY
Unadjusted Trial Balance
December 31, 2019
Debit Credit
Balances Balances
Cash33,320
Accounts Receivable116,900
Supplies4,275
Prepaid insurance21,600
Land50,000
Accounts Payable42,770
Unearned Rent12,000
Notes Payable50,000
Elaine Wells, Capital75,000
Elaine Wells, Drawing24,000
Fees Earned745,230
Wages Expense580,700
Rent Expense48,000
Utilities Expense26,850
Supplies Expense6,255
Insurance Expense3,600
Miscellaneous Expense9,500
925,000 925,000
*$33,320 = $925,000 – $9,500 – $3,600 – $6,255 – $26,850 – $48,000 – $580,700 – $24,000
– $50,000 – $21,600 – $4,275 – $116,900
Accounts Payable $ 42,770
Notes Payable $ 50,000
Accounts Receivable 116,900
Prepaid Insurance 21,600
Cash ?
Rent Expense 48,000
Elaine Wells, Capital 75,000
Supplies 4,275
Elaine Wells, Drawing 24,000
Supplies Expense 6,255
Fees Earned 745,230
Unearned Rent 12,000
Insurance Expense 3,600
Utilities Expense 26,850
Land 50,000
Wages Expense 580,700
Miscellaneous Expense 9,500
Prepare an unadjusted trial balance, listing the accounts in their normal order and inserting the missing figure for cash.
Answer:
HICKORY FURNITURE COMPANY
Unadjusted Trial Balance
December 31, 2019
Debit Credit
Balances Balances
Cash33,320
Accounts Receivable116,900
Supplies4,275
Prepaid insurance21,600
Land50,000
Accounts Payable42,770
Unearned Rent12,000
Notes Payable50,000
Elaine Wells, Capital75,000
Elaine Wells, Drawing24,000
Fees Earned745,230
Wages Expense580,700
Rent Expense48,000
Utilities Expense26,850
Supplies Expense6,255
Insurance Expense3,600
Miscellaneous Expense9,500
925,000 925,000
*$33,320 = $925,000 – $9,500 – $3,600 – $6,255 – $26,850 – $48,000 – $580,700 – $24,000
– $50,000 – $21,600 – $4,275 – $116,900
Based upon the data presented in Exercise 2-13, (a) prepare an unadjusted trial balance, listing the accounts in their proper order
Based upon the data presented in Exercise 2-13, (a) prepare an unadjusted trial balance, listing the accounts in their proper order. (b) Based upon the unadjusted trial balance, determine the net income or net loss.
Answer:
a.
Cash69,170
Accounts Receivable4,150
Supplies240
Equipment8,000
Accounts Payable3,700
Beth Worley, Capital75,000
Beth Worley, Drawing2,500
Service Revenue12,300
Operating Expenses6,940
b. Net income, $5,360 ($12,300 – $6,940)
Answer:
a.
Cash69,170
Accounts Receivable4,150
Supplies240
Equipment8,000
Accounts Payable3,700
Beth Worley, Capital75,000
Beth Worley, Drawing2,500
Service Revenue12,300
Operating Expenses6,940
b. Net income, $5,360 ($12,300 – $6,940)
Based upon the T accounts in Exercise 2-13, prepare the nine journal entries from which the postings were made. Journal entry explanations may be omitted.
Based upon the T accounts in Exercise 2-13, prepare the nine journal entries from which the postings were made. Journal entry explanations may be omitted.
Answer:
(1) Cash75,000
Beth Worley, Capital75,000
(2) Supplies900
Cash900
(3) Equipment8,000
Accounts Payable6,400
Cash1,600
(4) Operating Expenses6,280
Cash6,280
(5) Accounts Receivable12,300
Fees Earned12,300
(6) Accounts Payable2,700
Cash2,700
(7) Cash8,150
Accounts Receivable8,150
(8) Operating Expenses660
Supplies660
(9) Beth Worley, Drawing2,500
Cash2,500
National Park Tours Co. is a travel agency. The nine transactions recorded by National Park Tours during May 2019
National Park Tours Co. is a travel agency. The nine transactions recorded by National Park Tours during May 2019, its first month of operations, are indicated in the following T accounts:
Cash Equipment Beth Worley, Drawing
(1) 75,000 (2) 900 (3) 8,000 (9) 2,500
(7) 8,150 (3) 1,600
(4) 6,280
(6) 2,700
(9) 2,500
Accounts Receivable Accounts Payable Fees Earned
(5) 12,300 (7) 8,150 (6) 2,700 (3) 6,400 (5) 12,300
Supplies Beth Worley, Capital Operating Expenses
(2) 900 (8) 660 (1) 75,000 (4) 6,280
(8) 660
Indicate for each debit and each credit (a) whether an asset, liability, owner’s equity, drawing, revenue, or expense account was affected and (b) whether the account was increased (+) or decreased (–). Present your answers in the following form, with transaction (1) given as an example:
Account Debited Account Credited
Transaction Type Effect Type Effect
(1) asset + owner’s equity +
Answer:
a. and b.
Effect Type Effect
asset + owner’s equity +
asset + asset –
asset + asset –
liability +
expense + asset –
asset + revenue +
liability – asset –
asset + asset –
expense + asset –
drawing + asset –
Cash Equipment Beth Worley, Drawing
(1) 75,000 (2) 900 (3) 8,000 (9) 2,500
(7) 8,150 (3) 1,600
(4) 6,280
(6) 2,700
(9) 2,500
Accounts Receivable Accounts Payable Fees Earned
(5) 12,300 (7) 8,150 (6) 2,700 (3) 6,400 (5) 12,300
Supplies Beth Worley, Capital Operating Expenses
(2) 900 (8) 660 (1) 75,000 (4) 6,280
(8) 660
Indicate for each debit and each credit (a) whether an asset, liability, owner’s equity, drawing, revenue, or expense account was affected and (b) whether the account was increased (+) or decreased (–). Present your answers in the following form, with transaction (1) given as an example:
Account Debited Account Credited
Transaction Type Effect Type Effect
(1) asset + owner’s equity +
Answer:
a. and b.
Effect Type Effect
asset + owner’s equity +
asset + asset –
asset + asset –
liability +
expense + asset –
asset + revenue +
liability – asset –
asset + asset –
expense + asset –
drawing + asset –
During February, $186,500 was paid to creditors on account, and purchases on account were $201,400. Assuming that the February 28 balance
a. During February, $186,500 was paid to creditors on account, and purchases on account were $201,400. Assuming that the February 28 balance of Accounts Payable was $59,900, determine the account balance on February 1.
b. On October 1, the accounts receivable account balance was $115,800. During October, $449,600 was collected from customers on account. Assuming that the October 31 balance was $130,770, determine the fees billed to customers on account during October.
c. On April 1, the cash account balance was $46,220. During April, cash receipts totaled $248,600 and the April 30 balance was $56,770. Determine the cash payments made during April.
Answer:
a.
X + $201,400 – $186,500 = $59,900
X = $59,900 + $186,500 – $201,400
X = $45,000
b.
Oct. 1 115,800 449,600
Oct. 31 130,770
$115,800 + X – $449,600 = $130,770
X = $130,770 + $449,600 – $115,800
X = $464,570
c.
Apr. 1 46,220X
Apr. 30 56,770
$46,220 + $248,600 – X = $56,770
X = $46,220 + $248,600 – $56,770
X = $238,050
b. On October 1, the accounts receivable account balance was $115,800. During October, $449,600 was collected from customers on account. Assuming that the October 31 balance was $130,770, determine the fees billed to customers on account during October.
c. On April 1, the cash account balance was $46,220. During April, cash receipts totaled $248,600 and the April 30 balance was $56,770. Determine the cash payments made during April.
Answer:
a.
X + $201,400 – $186,500 = $59,900
X = $59,900 + $186,500 – $201,400
X = $45,000
b.
Oct. 1 115,800 449,600
Oct. 31 130,770
$115,800 + X – $449,600 = $130,770
X = $130,770 + $449,600 – $115,800
X = $464,570
c.
Apr. 1 46,220X
Apr. 30 56,770
$46,220 + $248,600 – X = $56,770
X = $46,220 + $248,600 – $56,770
X = $238,050
As of January 1, Terrace Waters, Capital had a credit balance of $500,000. During the year, withdrawals totaled $10,000
As of January 1, Terrace Waters, Capital had a credit balance of $500,000. During the year, withdrawals totaled $10,000, and the business incurred a net loss of $320,000.
a. Compute the balance of Terrace Waters, Capital as of the end of the year.
b. Assuming that there have been no recording errors, will the balance sheet prepared at December 31 balance? Explain.
Answer:
a. Credit balance of $170,000 ($500,000 – $10,000 – $320,000).
b. Yes. The balance sheet prepared at December 31 will balance, with Terrace Waters, Capital, being reported in the owner’s equity section as $170,000.
a. Compute the balance of Terrace Waters, Capital as of the end of the year.
b. Assuming that there have been no recording errors, will the balance sheet prepared at December 31 balance? Explain.
Answer:
a. Credit balance of $170,000 ($500,000 – $10,000 – $320,000).
b. Yes. The balance sheet prepared at December 31 will balance, with Terrace Waters, Capital, being reported in the owner’s equity section as $170,000.
The following selected transactions were completed during August of the current year: 1. Billed customers for fees earned, $73,900.
The following selected transactions were completed during August of the current year:
1. Billed customers for fees earned, $73,900.
2. Purchased supplies on account, $1,960.
3. Received cash from customers on account, $62,770.
4. Paid creditors on account, $820.
a. Journalize these transactions in a two-column journal, using the appropriate number to identify the transactions. Journal entry explanations may be omitted.
b. Post the entries prepared in (a) to the following T accounts: Cash, Supplies, Accounts Receivable, Accounts Payable, Fees Earned. To the left of each amount posted in the accounts, place the appropriate number to identify the transactions.
c. Assume that the unadjusted trial balance on August 31 shows a credit balance for Accounts Receivable. Does this credit balance mean that an error has occurred?
Answer:
a. (1) Accounts Receivable73,900
Fees Earned73,900
(2) Supplies1,960
Accounts Payable1,960
(3) Cash62,770
Accounts Receivable62,770
(4) Accounts Payable820
Cash820
b.
(3) 62,770 (4) 820 (4) 820 (2) 1,960
(2) 1,960 (1) 73,900
(1) 73,900 (3) 62,770
c. No. An error may not have necessarily occurred. A credit balance
in Accounts Receivable could occur if a customer overpaid his or
her account. Regardless, the credit balance should be investigated to
verify that an error has not occurred.
1. Billed customers for fees earned, $73,900.
2. Purchased supplies on account, $1,960.
3. Received cash from customers on account, $62,770.
4. Paid creditors on account, $820.
a. Journalize these transactions in a two-column journal, using the appropriate number to identify the transactions. Journal entry explanations may be omitted.
b. Post the entries prepared in (a) to the following T accounts: Cash, Supplies, Accounts Receivable, Accounts Payable, Fees Earned. To the left of each amount posted in the accounts, place the appropriate number to identify the transactions.
c. Assume that the unadjusted trial balance on August 31 shows a credit balance for Accounts Receivable. Does this credit balance mean that an error has occurred?
Answer:
a. (1) Accounts Receivable73,900
Fees Earned73,900
(2) Supplies1,960
Accounts Payable1,960
(3) Cash62,770
Accounts Receivable62,770
(4) Accounts Payable820
Cash820
b.
(3) 62,770 (4) 820 (4) 820 (2) 1,960
(2) 1,960 (1) 73,900
(1) 73,900 (3) 62,770
c. No. An error may not have necessarily occurred. A credit balance
in Accounts Receivable could occur if a customer overpaid his or
her account. Regardless, the credit balance should be investigated to
verify that an error has not occurred.
During the month, Warwick Co. received $515,000 in cash and paid out $375,000 in cash. a. Do the data indicate that Warwick Co. had net income of $140,000
During the month, Warwick Co. received $515,000 in cash and paid out $375,000 in cash.
a. Do the data indicate that Warwick Co. had net income of $140,000 during the month? Explain.
b. If the balance of the cash account is $200,000 at the end of the month, what was the cash balance at the beginning of the month?
Answer:
a. The increase of $140,000 ($515,000 – $375,000) in the cash account does notindicate net income of that amount. Net income is the excess of revenues over expenses and is normally not the same as the change in the cash account.
b. $60,000 ($200,000 – $140,000)
a. Do the data indicate that Warwick Co. had net income of $140,000 during the month? Explain.
b. If the balance of the cash account is $200,000 at the end of the month, what was the cash balance at the beginning of the month?
Answer:
a. The increase of $140,000 ($515,000 – $375,000) in the cash account does notindicate net income of that amount. Net income is the excess of revenues over expenses and is normally not the same as the change in the cash account.
b. $60,000 ($200,000 – $140,000)
On September 18, 2019, Afton Company purchased $2,475 of supplies on account. In Afton Company’s chart of accounts, the supplies account is No. 15
On September 18, 2019, Afton Company purchased $2,475 of supplies on account. In Afton Company’s chart of accounts, the supplies account is No. 15, and the accounts payable account is No. 21.
a. Journalize the September 18, 2019, transaction on page 87 of Afton Company’s two-column journal. Include an explanation of the entry.
b. Prepare a four-column account for Supplies. Enter a debit balance of $840 as of September 1, 2019. Place a check mark (¸) in the Posting Reference column.
c. Prepare a four-column account for Accounts Payable. Enter a credit balance of $10,900 as of September 1, 2019. Place a check mark (¸) in the Posting Reference column.
d. Post the September 18, 2019, transaction to the accounts.
e. Do the rules of debit and credit apply to all companies?
Answer:
a.
Post.
Ref. Debit Credit
2019
Sept. 18 Supplies15 2,475
Accounts Payable 21 2,475
Purchased supplies on account.
b., c., d.
Post.
Ref. Debit Debit Credit
2019
Sept. 1 Balance 840
18 87 2,475 3,315
Post.
Ref. Debit Debit Credit
2019
Sept. 1 Balance 10,900
18 8713,375
e. Yes. The rules of debit and credit apply to all companies.
a. Journalize the September 18, 2019, transaction on page 87 of Afton Company’s two-column journal. Include an explanation of the entry.
b. Prepare a four-column account for Supplies. Enter a debit balance of $840 as of September 1, 2019. Place a check mark (¸) in the Posting Reference column.
c. Prepare a four-column account for Accounts Payable. Enter a credit balance of $10,900 as of September 1, 2019. Place a check mark (¸) in the Posting Reference column.
d. Post the September 18, 2019, transaction to the accounts.
e. Do the rules of debit and credit apply to all companies?
Answer:
a.
Post.
Ref. Debit Credit
2019
Sept. 18 Supplies15 2,475
Accounts Payable 21 2,475
Purchased supplies on account.
b., c., d.
Post.
Ref. Debit Debit Credit
2019
Sept. 1 Balance 840
18 87 2,475 3,315
Post.
Ref. Debit Debit Credit
2019
Sept. 1 Balance 10,900
18 8713,375
e. Yes. The rules of debit and credit apply to all companies.
Concrete Consulting Co. has the following accounts in its ledger: Cash; Accounts Receivable; Supplies; Office Equipment; Accounts Payable
Concrete Consulting Co. has the following accounts in its ledger: Cash; Accounts Receivable; Supplies; Office Equipment; Accounts Payable; Jason Payne, Capital; Jason Payne, Drawing; Fees Earned; Rent Expense; Advertising Expense; Utilities Expense; Miscellaneous Expense.
Journalize the following selected transactions for October 2019 in a two-column journal. Journal entry explanations may be omitted.
Oct.
1. Paid rent for the month, $3,600.
3. Paid advertising expense, $1,200.
5. Paid cash for supplies, $750.
6. Purchased office equipment on account, $8,000.
10. Received cash from customers on account, $14,800.
15. Paid creditors on account, $7,110.
27. Paid cash for miscellaneous expenses, $400.
30. Paid telephone bill (utility expense) for the month, $250.
31. Fees earned and billed to customers for the month, $33,100.
31. Paid electricity bill (utility expense) for the month, $1,050.
31. Withdrew cash for personal use, $2,500.
Answer:
2019
Oct. 1 Rent Expense3,600
Cash3,600
3 Advertising Expense1,200
Cash1,200
5 Supplies750
Cash750
6 Office Equipment8,000
Accounts Payable8,000
10 Cash14,800
Accounts Receivable14,800
15 Accounts Payable7,110
Cash7,110
27 Miscellaneous Expense400
Cash400
30 Utilities Expense250
Cash250
31 Accounts Receivable33,100
Fees Earned33,100
31 Utilities Expense1,050
Cash1,050
31 Jason Payne, Drawing2,500
Cash2,500
Journalize the following selected transactions for October 2019 in a two-column journal. Journal entry explanations may be omitted.
Oct.
1. Paid rent for the month, $3,600.
3. Paid advertising expense, $1,200.
5. Paid cash for supplies, $750.
6. Purchased office equipment on account, $8,000.
10. Received cash from customers on account, $14,800.
15. Paid creditors on account, $7,110.
27. Paid cash for miscellaneous expenses, $400.
30. Paid telephone bill (utility expense) for the month, $250.
31. Fees earned and billed to customers for the month, $33,100.
31. Paid electricity bill (utility expense) for the month, $1,050.
31. Withdrew cash for personal use, $2,500.
Answer:
2019
Oct. 1 Rent Expense3,600
Cash3,600
3 Advertising Expense1,200
Cash1,200
5 Supplies750
Cash750
6 Office Equipment8,000
Accounts Payable8,000
10 Cash14,800
Accounts Receivable14,800
15 Accounts Payable7,110
Cash7,110
27 Miscellaneous Expense400
Cash400
30 Utilities Expense250
Cash250
31 Accounts Receivable33,100
Fees Earned33,100
31 Utilities Expense1,050
Cash1,050
31 Jason Payne, Drawing2,500
Cash2,500
During the month, Midwest Labs Co. has a substantial number of transactions affecting each of the following accounts
During the month, Midwest Labs Co. has a substantial number of transactions affecting each of the following accounts. State for each account whether it is likely to have (a) debit entries only, (b) credit entries only, or (c) both debit and credit entries.
1. Accounts Payable
2. Accounts Receivable
3. Cash
4. Fees Earned
Answer:
1. debit and credit entries (c)
2. debit and credit entries (c)
3. debit and credit entries (c)
4. credit entries only (b)
5. debit entries only (a)
6. debit entries only (a)
7. debit entries only (a)
1. Accounts Payable
2. Accounts Receivable
3. Cash
4. Fees Earned
Answer:
1. debit and credit entries (c)
2. debit and credit entries (c)
3. debit and credit entries (c)
4. credit entries only (b)
5. debit entries only (a)
6. debit entries only (a)
7. debit entries only (a)
Identify each of the following accounts of Dispatch Services Co. as asset, liability, owner’s equity, revenue, or expense and state in each case whether the normal balance is a debit or a credit:
Identify each of the following accounts of Dispatch Services Co. as asset, liability, owner’s equity, revenue, or expense and state in each case whether the normal balance is a debit or a credit:
a. Accounts Payable
b. Accounts Receivable
c. Ashley Griffin, Capital
d. Ashley Griffin, Drawing
e. Cash
f. Fees Earned
g. Office Equipment
h. Rent Expense
i. Supplies
j. Wages Expense
Answer:
a. Liability—credit
b. Asset—debit
c. Owner’s equity
(Ashley Griffin, Capital)—credit
d. Owner’s equityi. Asset—debit
(Ashley Griffin, Drawing)—debit
e. Asset—debit
f. Revenue—credit
g. Asset—debit
h. Expense—debit
j. Expense—debit
a. Accounts Payable
b. Accounts Receivable
c. Ashley Griffin, Capital
d. Ashley Griffin, Drawing
e. Cash
f. Fees Earned
g. Office Equipment
h. Rent Expense
i. Supplies
j. Wages Expense
Answer:
a. Liability—credit
b. Asset—debit
c. Owner’s equity
(Ashley Griffin, Capital)—credit
d. Owner’s equityi. Asset—debit
(Ashley Griffin, Drawing)—debit
e. Asset—debit
f. Revenue—credit
g. Asset—debit
h. Expense—debit
j. Expense—debit
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