Accounting Hw: Chapter 02 PE

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Sunday, April 7, 2019

Two income statements for Fuller Company follow:Prepare a horizontal analysis of Fuller Company’s income statements.

Two income statements for Fuller Company follow:

Fuller Company

Income Statements

For Years Ended December 31

2019 | 2018

Fees earned $680,000 | $850,000

Operating expenses 541,875 | 637,500

Net income $138,125 | $212,500

Prepare a horizontal analysis of Fuller Company’s income statements.

Answer:

FULLER COMPANY

Income Statements

For Years Ended December 31

2019 2018 Amount Percent

Fees earned $680,000 $850,000 $(170,000) –20.0%

Operating expenses 541,875 637,500 (95,625) –15.0%

Net income $138,125 $212,500 $ (74,375) –35.0%

Two income statements for Paragon Company follow:Prepare a horizontal analysis of Paragon Company’s income statements.

Two income statements for Paragon Company follow:

Paragon Company

Income Statements

For Years Ended December 31

2019 | 2018

Fees earned $1,416,000 | $1,200,000

Operating expenses 1,044,000 | 900,000

Net income. $372,000 | $300,000

Prepare a horizontal analysis of Paragon Company’s income statements.

Answer:

PARAGON COMPANY

Income Statements

For Years Ended December 31

2019 2018 Amount Percent

Fees earned $1,416,000 $1,200,000 $216,000 18.0%

Operating expenses 1,044,000 900,000 144,000 16.0%

Net income $ 372,000 $ 300,000 $ 72,000 24.0%

The following errors took place in journalizing and posting transactions: a. The receipt of $8,400 for services rendered

The following errors took place in journalizing and posting transactions:

a. The receipt of $8,400 for services rendered was recorded as a debit to Accounts Receivable and a credit to Fees Earned.

b. The purchase of supplies of $2,500 on account was recorded as a debit to Office Equipment and a credit to Supplies.

Journalize the entries to correct the errors. Omit explanations.

Answer:

Cash 8,400

Accounts Receivable 8,400

Supplies 2,500

Office Equipment 2,500

Supplies 2,500

Accounts Payable 2,500

Note: The first entry in (b) reverses the incorrect entry, and the second entry records the correct entry. These two entries could also be combined into one entry as shown below; however, preparing two entries would make it easier for someone to understand later what happened and why the entries were necessary.

Supplies 5,000

Office Equipment 2,500

Accounts Payable 2,500

For each of the following errors, considered individually, indicate whether the error would cause the trial balance totals to be unequal

For each of the following errors, considered individually, indicate whether the error would cause the trial balance totals to be unequal. If the error would cause the trial balance totals to be unequal, indicate whether the debit or credit total is higher and by how much.

a. The payment of cash for the purchase of office equipment of $12,900 was debited to Land for $12,900 and credited to Cash for $12,900.

b. The payment of $1,840 on account was debited to Accounts Payable for $184 and credited to Cash for $1,840.

c. The receipt of cash on account of $3,800 was recorded as a debit to Cash for $8,300 and a credit to Accounts Receivable for $3,800.

Answer:

a. The trial balance totals are equal because both the debit and credit entries were journalized and posted for $12,900.

b. The trial balance totals are unequal. The credit total is higher by $1,656 ($1,840 – $184).

c. The trial balance totals are unequal. The debit total is higher by $4,500 ($8,300 – $3,800).

The following errors took place in journalizing and posting transactions: a. Rent expense of $4,650 paid for the current month

The following errors took place in journalizing and posting transactions:

a. Rent expense of $4,650 paid for the current month was recorded as a debit to Miscellaneous Expense and a credit to Rent Expense.

b. The payment of $3,700 from a customer on account was recorded as a debit to Cash and a credit to Accounts Payable.

Journalize the entries to correct the errors. Omit explanations.

Answer:

Rent Expense 4,650

Miscellaneous Expense 4,650

Rent Expense 4,650

Cash 4,650

Note: The first entry in (a) reverses the incorrect entry, and the second entry records the correct entry. These two entries could also be combined into one entry as shown below; however, preparing two entries would make it easier for someone to understand later what happened and why the entries were necessary.

Rent Expense 9,300

Miscellaneous Expense 4,650

Cash 4,650

Accounts Payable 3,700

Accounts Receivable 3,700

On July 1, the cash account balance was $37,450. During July, cash payments totaled $115,860 and the July 31 balance was $29,600

On July 1, the cash account balance was $37,450. During July, cash payments totaled $115,860 and the July 31 balance was $29,600. Determine the cash receipts during July.

Answer:

Using the following T account, solve for the amount of cash receipts (indicated by ? below).

July 1 Bal. 37,450 115,860 Cash payments Cash receipts ? July 31 Bal.

29,600 $29,600 = $37,450 + Cash receipts – $115,860

Cash receipts = $29,600 + $115,860 – $37,450 = $108,010

On August 1, the supplies account balance was $1,025. During August, supplies of $3,110 were purchased, and $1,324 of supplies

On August 1, the supplies account balance was $1,025. During August, supplies of $3,110 were purchased, and $1,324 of supplies were on hand as of August 31. Determine supplies expense for August.

Answer:

Using the following T account, solve for the amount of supplies expense (indicated by ? below).

Aug. 1 Bal. 1,025 ? Supplies expense Supplies purchased 3,110 Aug. 31 Bal. 1,324

$1,324 = $1,025 + $3,110 – Supplies expense

Supplies expense = $1,025 + $3,110 – $1,324 = $2,811

For each of the following errors, considered individually, indicate whether the error would cause the trial balance totals to be unequal

a. The payment of an insurance premium of $5,400 for a three-year policy was debited to Prepaid Insurance for $5,400 and credited to Cash for $4,500.

b. A payment of $270 on account was debited to Accounts Payable for $720 and credited to Cash for $720.

c. A purchase of supplies on account for $1,600 was debited to Supplies for $1,600 and debited to Accounts Payable for $1,600.

Answer:

a. The trial balance totals are unequal. The debit total is higher by $900 ($5,400 – $4,500).

b. The trial balance totals are equal because both the debit and credit entries were journalized and posted for $720.

c. The trial balance totals are unequal. The debit total is higher by $3,200 ($1,600 + $1,600).

Prepare a journal entry on June 30 for the withdrawal of $11,500 by Dawn Pierce for personal use.

Answer:

June 30

Dawn Pierce, Drawing 11,500

Cash 11,500

Prepare a journal entry on April 30 for fees earned on account, $11,250.

Answer:

Apr. 30

Accounts Receivable 11,250

Fees Earned 11,250

Prepare a journal entry on August 13 for cash received for services rendered, $9,000.

Answer:

Aug. 13

Cash 9,000

Fees Earned 9,000

Prepare a journal entry on December 23 for the withdrawal of $20,000 by Steve Buckley for personal use.

Answer:

Dec. 23

Steve Buckley, Drawing 20,000

Cash 20,000

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

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. Also indicate its normal balance.

1. Accounts Payable

2. Cash

3. Del Robinson, Drawing

4. Miscellaneous Expense

5. Insurance Expense

6. Fees Earned

Answer:

1. Debit and credit entries (c), normal credit balance

2. Debit and credit entries (c), normal debit balance

3. Debit entries only (a), normal debit balance

4. Debit entries only (a), normal debit balance

5. Debit entries only (a), normal debit balance

6. Credit entries only (b), normal credit balance

Prepare a journal entry for the purchase of office equipment on February 19 for $18,500 paying $4,500 cash and the remainder on account

Prepare a journal entry for the purchase of office equipment on February 19 for $18,500 paying $4,500 cash and the remainder on account.

Answer:

Feb. 19

Office Equipment 18,500

Cash 4,500

Accounts Payable 14,000

Prepare a journal entry for the purchase of office supplies on September 30 for $2,500, paying $800 cash and the remainder on account.

Answer:

Sept. 30

Office Supplies 2,500

Cash 800

Accounts Payable 1,700

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

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. Also indicate its normal balance.

1. Accounts Receivable

2. Commissions Earned

3. Heidi Schmidt, Capital

4. Rent Expense

5. Rent Revenue

6. Wages Payable

Answer:

1. Debit and credit entries (c), normal debit balance

2. Credit entries only (b), normal credit balance

3. Credit entries only (b), normal credit balance

4. Debit entries only (a), normal debit balance

5. Credit entries only (b), normal credit balance

6. Debit and credit entries (c), normal credit balance