Quiz 2: Analyzing Transactions

Business

Continuing Company Analysis-Amazon: Horizontal analysis Amazon.com, Inc. is the largest Internet retailer in the United States. Amazon's income statements through income from operations for two recent years follow: A. Prepare a horizontal analysis of the operating income statements. (Round percentages to one decimal place.) B. Interpret the results of the horizontal analysis.

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Essay

Horizontal analysis of company a showing calculates relationships between items in operating income statement. It shows year-to-year changes in sales and expenses amounts in operating income statements Company A is retailer trader who is operating business online. Company's sales and expenses are in millions. They involve material and service products both, and expenses are accordingly. Their operating expenses are indirect expenses. Horizontal analysis shows comparison of change in amounts from year to year. 1. Above statement is prepared using MS Excel with appropriate formula In above statement there are two sides shown in T shape, one is debit and other is credit. Debit side of statement shows expenses. Credit side of statement is showing sales which are income credit. Income from operations is showing balancing figure of total of both the sides. This is matching with basic accounting equation where sales less cost gives income. 2.By comparing the results of year 1 and year 2, it can be concluded that though in the year2, there is an increase in the total sales, still there is a huge decrease in the profit. This happened due to increase in the operating expenses. This is figure comparison done in horizontal analysis.

Q 2

Rules of debit and credit and normal balances 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. Dividends 4. Miscellaneous Expense 5. Insurance Expense 6. Fees Earned

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Essay

In double entry accounting system, each transaction is recorded in the books of accounts, by giving two effects. The amount debited in one or more account is equal to amount credited in one or more accounts under the double entry accounting system. At the end of the fiscal period, each account is closed and an ending balance is transferred to the trial balance. Among these accounts, some are having debit balances, some have credit balance, and some can have either a debit or credit ending balance. Following are details of all balances: 1.Accounts Payable: This account normally has both type of entries, debit and credit. When supplies are bought on credit, this account is credited, and when payment is done, this account is debited.However, this account is having normally a credit balance at the end.2.Cash: Under this account all the receipts are debited and all the payments are credited. Hence, both type of debit and credit entries are made in this account. However, there can never be a negative amount of cash in the business. So, this account always has a debit balance. 3.Dividend: It is an amount paid to shareholders, this account is debited, and when it is paid to the stockholders, cash is credited. When dividend is increased by paying it out then it is debited, and when it is retained within company as retained earnings then it is credited. So, this account has both debit and credit type entries. Hence, dividend account normally has a debit balance. 4.Miscellaneous Expenses: These are very small amounts of expenditure in nature. So, they are paid off as they become due. So, in this account debit entries only are posted normally. This head is accumulation of many petty expenses. Hence, this is an expenditure account having a debit balance always. 5.Insurance Expense: It is an expense which is booked as per nominal rule, this account is debited. So, this account has debit type entries. In some cases it is paid in advance said to be prepaid insurance and then it will again be debited with different name. This will be shown on asset side of balance sheet under current assets head.Hence, this is an expenditure account having a debit balance always. 6.Fees Earned: It is the revenue/income account of the business. In this account, all the earnings of the business are recorded. Normally, in this account credit entries are passed.Hence, this is a revenue account having credit balance.

Q 3

The transactions completed by PS Music during June 2018 were described at the end of Chapter 1. The following transactions were completed during July, the second month of the business's operations: PS Music's chart of accounts and the balance of accounts as of July 1, 2018 (all normal balances), are as follows: Instructions 1. Enter the July 1, 2018, account balances in the appropriate balance column of a four-column account. Write Balance in the Item column, and place a check mark (?) in the Posting Reference column. ( Hint: Verify the equality of the debit and credit balances in the ledger before proceeding with the next instruction.) 2. Analyze and journalize each transaction in a two-column journal beginning on Page 1, omitting journal entry explanations. 3. Post the journal to the ledger, extending the account balance to the appropriate balance column after each posting. 4. Prepare an unadjusted trial balance as of July 31, 2018.

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Ledger Posting: It is the second process of recording transactions. The debit and credit amounts need to transfer in their corresponding four column accounts of ledger from journal entries. The T account format has substituted with the standard account. Hence, the following account shows the ledger posting of the journal entries. Journal Entry: Entries which help in recording of transactions that has occurred in the accounting process. The respective amounts to account names involved in the transactions are credited and debited under it. Trial Balance: It is a basic tool that lists the ending balances of each account. In the transactions of the business are represented in a summarized form. Its main purpose is to balance the value of debit column with the value of credit column. The errors can be detected, if the total of both columns doesn't match. The reason behind occurrence of any errors is not related to trial balance and the same kind of errors needs to rectify by passing journal entries. 1.Ledger account to show the account balance on July 1, 2018 of PS Music is as follows Cash account: It is based on real account concept, which states that debit is "what comes in" and credit is "what goes out". Accounts Receivables the Assets that indicate the amount received for sale of asset on credit. It is generally payable within few months of such credit sale that can be extended up to one year only Supplies are items which are issued to factory for supporting production. When any supplies purchased for cash are debited and vice a versa in case of return of supplies by company. Accounts Payable is the liability that indicates the amount due for purchased asset on credit. It is generally payable within few months of such credit purchase that can be extended up to one year only Stock and Shares that are authorized to make issue by the company can be said as capital stock. Generally, it consist the securities that are issued by the company for raising the funds. Dividends are payment in form of return to stockholders out of profits earned by business during the particular year. Generally, it is distributed as a pre-determined percent of last year profit. Service revenue is the revenue generated from rendering the services after making the payment for the expenses incurred in rendering those services. Wages expenses are the expenses incurred for paying wages to the employees. This ledger is based on nominal rule. Hence, it is debited Office rent expenses are the expenses incurred for paying rent for premises of the office. This ledger is based on nominal rule. Hence, it is debited Equipment rent expenses is the expenses incurred on hiring of plant and its tools for the equipment uses in the business for a particular period of time. Utility expenses are the cost of usage of utilities during accounting period it is the part of operating expense of the income statement in business Music expense is the expenses paid towards the repair and maintenance of the equipment of the music. Advertising expenses are the expenses paid towards the promotion of the products to aware the customer about the product to increase in sale Supplies are items which are issued to factory for supporting production. When any supplies purchased for cash are debited and vice a versa in case of return of supplies by company. Miscellaneous expenses are the expenses paid towards purchased miscellaneous items of the company. It always has debit balance and shown as expense in income statement 2.The required Journal entries for the transaction on July of PS Music is as follows The required journal entry for the common stock issued for cash as follows: Being common stock issued for cash has been recorded in the books of account by debiting the cash account and by crediting the common stock account with the same amount. The required journal entry for the payment of Rent expense as follows: Being rent paid has been recorded in the books of account by debiting the rent account and by crediting the cash account with the same amount. The required journal entry for the cash payment of insurance has been recorded as follows: Being cash paid for insurance has been recorded in the books of account by debiting the Prepaid Insurance account and by crediting the cash account with the same amount. The required journal entry for the cash received on account has been recorded in the books of account as follows: Being cash received on account has been recorded in the books of account by debiting the cash account and by crediting the account receivable account with the same amount. The required journal entry for the Fees in advance has been recorded in the books of account as follows: Being received Fees in advance has been recorded in the books of account by debiting the Cashaccount and by crediting the unearned Fees account with the same amount. The required journal entry for the cash paid to the accounts payable has been recorded in the books of account as follows: Being cash paid on account has been recorded in the books of account by debiting the accounts payable account and by crediting the cashaccount with the same amount. The required journal entry for the payment of Miscellaneous expense as follows: Being cash paid for miscellaneous expenses has been recorded in the books of account by debiting the miscellaneous expenses account and by crediting the cash account with the same amount. The required journal entry for the payment of office equipment expense as follows: Being equipment purchased on account has been recorded in the books of account by debiting the Office equipment account and by crediting the accounts payable account with the same amount. The required journal entry for the payment of advertisement expense as follows: Being cash paid for advertisement has been recorded in the books of account by debiting the advertising expenses account and by crediting the cash account with the same amount. The required journal entry for the received fees from clients as follows: Being cash received from clients has been recorded in the books of account by debiting the cash account and by crediting the Fees earned account with the same amount. The required journal entry for the payment of rent as follows: Being equipment rent paid has been recorded in the books of account by debiting the equipment rent account and by crediting the cash account with the same amount. The required journal entry for the payment of wages expense as follows Being wages paid has been recorded in the books of account by debiting the Wages expenses account and by crediting the cash account with the same amount. Page 2 The required journal entry cash received from clients has been recorded as follows: Being cash received from clients has been recorded in the books of account by debiting the cash account and by crediting the Fees earned account with the same amount. The required journal entry cash received from clients has been recorded as follows: Being supplies purchased on account has been recorded in the books of account by debiting the suppliesaccount and by crediting the accounts payable account with the same amount. The required journal entry cash received from clients has been recorded as follows: Being cash paid for miscellaneous expenses has been recorded in the books of account by debiting the miscellaneous expenses account and by crediting the cash account with the same amount. The required journal entry for the payment of advertisement expense as follows: Being cash paid for advertisement has been recorded in the books of account by debiting the advertising expenses account and by crediting the cash account with the same amount. The required journal entry for the payment of advertisement expense as follows: Being Service rendered in account and cash has been recorded in the books of account by debiting the Accounts receivable account and cash account and by crediting the service Fees account with the same amount. The required journal entry for the payment of Utility expense as follows: Being electric bill paid has been recorded in the books of account by debiting the Utility expenses account and by crediting the cash account with the same amount. The required journal entry for the payment of Wages expense as follows: Being wages paid has been recorded in the books of account by debiting the Wages expenses account and by crediting the cash account with the same amount. The required journal entry for the payment of Miscellaneous expenses as follows: Being cash paid for miscellaneous expenses has been recorded in the books of account by debiting the miscellaneous expenses account and by crediting the cash account with the same amount. The required journal entry for the accounts receivable account and cash account and by crediting the service Fees account as follows: Being Service rendered in account and cash has been recorded in the books of account by debiting the Accounts receivable account and cash account and by crediting the service Fees account with the same amount. The required journal entry for the cash received from clients has been recorded in the books of account as follows: Being cash received from clients has been recorded in the books of account by debiting the cash account and by crediting the Fees earned account with the same amount. The required journal entry for the cash paid for music expenses has been recorded in the books of account as follows: Being cash paid for music expenses has been recorded in the books of account by debiting the music expenses account and by crediting the cash account with the same amount. The required journal entry for cash paid for Dividend has been recorded in the books of account as follows: Being cash paid for Dividend has been recorded in the books of account by debiting the Dividend account and by crediting the cash account with the same amount. 3. Ledger entries for the transaction ofJuly, 2018 of PS Music is as follows Cash account: It is based on real account concept, which states that debit is "what comes in" and credit is "what goes out". Accounts Receivables the Assets that indicate the amount received for sale of asset on credit. It is generally payable within few months of such credit sale that can be extended up to one year only Supplies are items which are issued to factory for supporting production. When any supplies purchased for cash are debited and vice a versa in case of return of supplies by company. Final, debit balance of supplies is said to be assets. It cannot be termed as expenses unless it is issued. Accounts Payable is the liability that indicates the amount due for purchased asset on credit. It is generally payable within few months of such credit purchase that can be extended up to one year only. Stock and Shares that are authorized to make issue by the company can be said as capital stock. Generally, it consist the securities that are issued by the company for raising the funds. Dividends are payment in form of return to stockholders out of profits earned by business during the particular year. Generally, it is distributed as a pre-determined percent of last year profit. If dividend is already paid, the deduction of respective amount need to make from retained earnings under shareholders' fund. If it is payable, it is an item of liability that would be shown in balance sheet. Hence, all journal entries are posted to their ledger accounts Fees earned are revenue that indicates the amount received for sale of services. It is generally payable within few months of such credit services that can be extended up to one year only Wages expenses are the expenses incurred for paying wages to the employees. This ledger is based on nominal rule. Hence, it is debited Office rent expenses are the expenses incurred for paying rent for premises of the office. This ledger is based on nominal rule. Hence, it is debited Equipment rent expenses is the expenses incurred on hiring of plant and its tools for the equipment uses in the business for a particular period of time. Utility expenses are the cost of usage of utilities during accounting period it is the part of operating expense of the income statement in business. Music expense is the expenses paid towards the repair and maintenance of the equipment of the music Advertising expenses are the expenses paid towards the promotion of the products to aware the customer about the product to increase in sale Supplies are items which are issued to factory for supporting production. When any supplies purchased for cash are debited and vice a versa in case of return of supplies by company. Miscellaneous expenses are the expenses paid towards purchased miscellaneous items of the company. It always has debit balance and shown as expense in income statement The balance of miscellaneous expense of $2,475 is an indirect expense that needs to show as expenses in income statement. Prepaid insurance is current assets which indicates the insurance paid in advance for the current year which has not been expired Unearned revenue refers to income received for estimated goods and service from the company, firm or any individual which is expected to be fulfilled all the dues in future time Office equipment the expense which is paid for occupying the assets for using in office premises which helps a firm in running its daily business operations. 4. Trial balance refers to a statement designed to check the arithmetical accuracy of the ledger accounts. It shows the aggregate of all debit and credit balance at the end of the accounting period. The following unadjusted trial balance has presenting the balances of the accounts on its debit or credit side of PS Music as on July 31, 2018. Above trail balance shows the total amount of $40,750 on both sides.

Q 4

What is the difference between an account and a ledger?

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Q 5

Chart of accounts The following accounts appeared in recent financial statements of Delta Air Lines : Identify each account as either a balance sheet account or an income statement account. For each balance sheet account, identify it as an asset, a liability, or owner's equity. For each income statement account, identify it as a revenue or an expense.

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Q 6

Entries into T accounts and trial balance Marjorie Knaus, an architect, organized Knaus Architects on January 1, 2018. During the month, Knaus Architects completed the following transactions: A. Issued common stock to Marjorie Knaus in exchange for $30,000. B. Paid January rent for office and workroom, $2,500. C. Purchased used automobile for $28,500, paying $6,000 cash and giving a note payable for the remainder. D. Purchased office and computer equipment on account, $8,000. E. Paid cash for supplies, $2,100. F. Paid cash for annual insurance policies, $3,600. G. Received cash from client for plans delivered, $9,000. H. Paid cash for miscellaneous expenses, $2,600. I. Paid cash to creditors on account, $4,000. J. Paid installment due on note payable, $1,875. K. Received invoice for blueprint service, due in February, $5,500. L. Recorded fees earned on plans delivered, payment to be received in February, $31,400. M. Paid salary of assistants, $6,000. N. Paid gas, oil, and repairs on automobile for January, $1,300. Instructions 1. Record these transactions directly in the following T accounts, without journalizing: Cash, Accounts Receivable, Supplies, Prepaid Insurance, Automobiles, Equipment, Notes Payable, Accounts Payable, Common Stock, Professional Fees, Salary Expense, Blueprint Expense, Rent Expense, Automobile Expense, Miscellaneous Expense. To the left of the amount entered in the accounts, place the appropriate letter to identify the transaction. 2. Determine account balances of the T accounts. Accounts containing a single entry only (such as Prepaid Insurance) do not need a balance. 3. Prepare an unadjusted trial balance for Knaus Architects as of January 31, 2018. 4. Determine the net income or net loss for January.

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Q 7

Entries into T accounts and trial balance Ken Jones, an architect, organized Jones Architects on April 1, 2018. During the month, Jones Architects completed the following transactions: A. Transferred cash from a personal bank account to an account to be used for the business in exchange for common stock, $18,000. B. Purchased used automobile for $19,500, paying $2,500 cash and giving a note payable for the remainder. C. Paid April rent for office and workroom, $3,150. D. Paid cash for supplies, $1,450. E. Purchased office and computer equipment on account, $6,500. F Paid cash for annual insurance policies on automobile and equipment, $2,400. G. Received cash from a client for plans delivered, $12,000. H. Paid cash to creditors on account, $1,800. I. Paid cash for miscellaneous expenses, $375. J. Received invoice for blueprint service, due in May, $2,500. K. Recorded fees earned on plans delivered, payment to be received in May, $15,650. L. Paid salary of assistant, $2,800. M. Paid cash for miscellaneous expenses, $200. N. Paid installment due on note payable, $300. O. Paid gas, oil, and repairs on automobile for April, $550. Instructions 1. Record these transactions directly in the following T accounts, without journalizing: Cash, Accounts Receivable, Supplies, Prepaid Insurance, Automobiles, Equipment, Notes Payable, Accounts Payable, Common Stock, Professional Fees, Rent Expense, Salary Expense, Blueprint Expense, Automobile Expense, Miscellaneous Expense. To the left of each amount entered in the accounts, place the appropriate letter to identify the transaction. 2. Determine account balances of the T accounts. Accounts containing a single entry only (such as Prepaid Insurance) do not need a balance. 3. Prepare an unadjusted trial balance for Jones Architects as of April 30, 2018. 4. Determine the net income or net loss for April.

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Q 8

Ethics in Action Buddy Dupree is the accounting manager for On-Time Geeks, a tech support company for individuals and small businesses. As part of his job, Buddy is responsible for preparing the company's trial balance. His supervisor placed a "hard deadline" of Friday at 5 pm for the completion of the trial balance. Unfortunately, Buddy was unable to get the trial balance to balance by the due date. The credit side of the trial balance exceeded the debit side by $3,000. To make the deadline, Buddy decided to add a $3,000 debit to the vehicles account balance. He selected the vehicles account because it will not be significantly affected by the additional $3,000. 1. Is Buddy behaving ethically? Why? 2. Who is affected by Buddy's decision? 3. How should Buddy have handled this situation?

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Q 9

Chipotle: Horizontal analysis Chipotle Mexican Grill, Inc. is a quick-service restaurant providing a focused menu of burritos, tacos, and salads. Chipotle's balance sheets for the end of two recent years are as follows: A. Prepare a horizontal analysis of the two balance sheets. (Round percentages to one decimal place.) B. Interpret the horizontal analysis with respect to the change in total assets, total liabilities, and total stockholders' equity. (Treasury stock will be discussed in a later chapter and may be omitted from your analysis.)

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Q 10

Journal entry for asset purchase Prepare a journal entry for the purchase of office supplies on March 9 for $1,775, paying $275 cash and the remainder on account.

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Q 11

Do the terms debit and credit signify increase or decrease, or can they signify either? Explain.

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Q 12

Chart of accounts Oak Interiors is owned and operated by Fred Biggs, an interior decorator. In the ledger of Oak Interiors, the first digit of the account number indicates its major account classification (1-assets, 2-liabilities, 3-owner's equity, 4-revenues, 5-expenses). The second digit of the account number indicates the specific account within each of the preceding major account classifications. Match each account number with its most likely account in the list that follows. The account numbers are 11, 12, 13, 21, 31, 32, 41, 51, 52, and 53.

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Q 13

Journal entries and trial balance On October 1, 2018, Jay Crowley established Affordable Realty, which completed the following transactions during the month: A. Jay Crowley transferred cash from a personal bank account to an account to be used for the business in exchange for common stock, $40,000. B. Paid rent on office and equipment for the month, $4,800. C. Purchased supplies on account, $2,150. D. Paid creditor on account, $1,100. E. Earned sales commissions, receiving cash, $18,750. F. Paid automobile expenses (including rental charge) for month, $1,580, and miscellaneous expenses, $800. G. Paid office salaries, $3,500. H. Determined that the cost of supplies used was $1,300. I. Paid dividends, $1,500. Instructions 1. Journalize entries for transactions (A) through (I), using the following account titles: Cash, Supplies, Accounts Payable, Common Stock, Dividends, Sales Commissions, Rent Expense, Office Salaries Expense, Automobile Expense, Supplies Expense, Miscellaneous Expense. Explanations may be omitted. 2. Prepare T accounts, using the account titles in (1). Post the journal entries to these accounts, placing the appropriate letter to the left of each amount to identify the transactions. Determine the account balances after all posting is complete. Accounts containing only a single entry do not need a balance. 3. Prepare an unadjusted trial balance as of October 31, 2018. 4. Determine the following: A. Amount of total revenue recorded in the ledger. B. Amount of total expenses recorded in the ledger. C. Amount of net income for October. 5. Determine the increase or decrease in retained earnings for October.

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Q 14

Journal entries and trial balance On August 1, 2018, Rafael Masey established Planet Realty, which completed the following transactions during the month: A. Rafael Masey transferred cash from a personal bank account to an account to be used for the business in exchange for common stock, $17,500. B. Purchased supplies on account, $2,300. C. Earned sales commissions, receiving cash, $13,300. D. Paid rent on office and equipment for the month, $3,000. E. Paid creditor on account, $1,150. F. Paid dividends, $1,800. G. Paid automobile expenses (including rental charge) for month, $1,500, and miscellaneous expenses, $400. H. Paid office salaries, $2,800. I. Determined that the cost of supplies used was $1,050. Instructions 1. Journalize entries for transactions (A) through (I), using the following account titles: Cash, Supplies, Accounts Payable, Common Stock, Dividends, Sales Commissions, Rent Expense, Office Salaries Expense, Automobile Expense, Supplies Expense, Miscellaneous Expense. Journal entry explanations may be omitted. 2. Prepare T accounts, using the account titles in (1). Post the journal entries to these accounts, placing the appropriate letter to the left of each amount to identify the transactions. Determine the account balances, after all posting is complete. Accounts containing only a single entry do not need a balance. 3. Prepare an unadjusted trial balance as of August 31, 2018. 4. Determine the following: A. Amount of total revenue recorded in the ledger. B. Amount of total expenses recorded in the ledger. C. Amount of net income for August. 5. Determine the increase or decrease in retained earnings for August.

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Q 15

Team Activity In teams, select a public company that interests you. Obtain the company's most recent annual report on Form 10-K. The Form 10-K is a company's annually required filing with the Securities and Exchange Commission (SEC). It includes the company's financial statements and accompanying notes. The Form 10-K can be obtained either (A) from the investor relations section of the company's Web site or (B) by using the company search feature of the SEC's EDGAR database service found at www.sec.gov/edgar/searchedgar/companysearch.html. Based on the information in the company's most recent annual report, answer the following questions: 1. What amount of total assets does the company report on its balance sheet? 2. What amount of total liabilities does the company report on its balance sheet? 3. Using the accounting equation, determine the company's stockholders' equity. Compare this amount to the amount of stockholders' equity reported on the company's balance sheet. 4. How many years of information are reported on the company's income statement? 5. How many years of information are reported on the company's balance sheet? 6. What is the difference between the information reported on the income statement and the information reported on the balance sheet?

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Q 16

Target: Horizontal analysis The following data (in millions) are taken from the financial statements of Target Corporation , the owner of Target stores: A. For Target, determine the amount of change in millions and the percent of change (rounded to one decimal place) from Year 1 to Year 2 for: 1. Revenue 2. Operating expenses 3. Operating income B. What conclusions can you draw from your analysis of the revenue and total operating expenses?

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Q 17

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

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Q 18

McIntyre Company adheres to a policy of depositing all cash receipts in a bank account and making all payments by check. The cash account as of December 31 has a credit balance of $1,850, and there is no undeposited cash on hand. (a) Assuming that no errors occurred during journalizing or posting, what caused this unusual balance? (b) Is the $1,850 credit balance in the cash account an asset, a liability, owner's equity, a revenue, or an expense?

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Q 19

Chart of accounts Outdoor Leadership School is a newly organized business that teaches people how to inspire and influence others. The list of accounts to be opened in the general ledger is as follows: List the accounts in the order in which they should appear in the ledger of Outdoor Leadership School and assign account numbers. Each account number is to have two digits: the first digit is to indicate the major classification (1 for assets, for example), and the second digit is to identify the specific account within each major classification (11 for Cash, for example).

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Q 20

Journal entries and trial balance On November 1, 2018, Kris Lehman established an interior decorating business, Modern Designs. During the month, Kris completed the following transactions related to the business: Instructions 1. Journalize each transaction in a two-column journal beginning on Page 1, referring to the following chart of accounts in selecting the accounts to be debited and credited. (Do not insert the account numbers in the journal at this time.) Explanations may be omitted. 2. Post the journal to a ledger of four-column accounts, inserting appropriate posting references as each item is posted. Extend the balances to the appropriate balance columns after each transaction is posted. 3. Prepare an unadjusted trial balance for Modern Designs as of November 30, 2018. 4. Determine the excess of revenues over expenses for November. 5. Can you think of any reason why the amount determined in (4) might not be the net income for November?

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Q 21

Journal entries and trial balance On October 1, 2018, Jay Pryor established an interior decorating business, Pioneer Designs. During the month, Jay completed the following transactions related to the business: Instructions 1. Journalize each transaction in a two-column journal beginning on Page 1, referring to the following chart of accounts in selecting the accounts to be debited and credited. (Do not insert the account numbers in the journal at this time.) Journal entry explanations may be omitted. 2. Post the journal to a ledger of four-column accounts, inserting appropriate posting references as each item is posted. Extend the balances to the appropriate balance columns after each transaction is posted. 3. Prepare an unadjusted trial balance for Pioneer Designs as of October 31, 2018. 4. Determine the excess of revenues over expenses for October. 5. Can you think of any reason why the amount determined in (4) might not be the net income for October?

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Q 22

Communication and Decision Making The complexity of the current business and regulatory environment has increased the demand for individuals in all fields of business who have the ability to analyze business transactions and interpret their effects on the financial statements. Search the Internet or your local newspaper for job opportunities in business. One possible Web site is www.careerbuilder.com. Select a job opportunity to explore further. Write a brief memo to your instructor describing how the ability to analyze business transactions and interpret their effects on the financial statements would be needed for the job opportunity you have selected.

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Q 23

Walmart: Horizontal analysis The following data (in millions) are taken from the financial statements of Walmart Stores, Inc. : A. For Walmart, determine the amount of change in millions and the percent of change (rounded to one decimal place) from Year 1 to Year 2 for: 1. Revenue 2. Operating expenses 3. Operating income B. Comment on the results of your horizontal analysis in requirement (A). C. Based on ADM-3, compare and comment on the two-year change in operating results between Target and Walmart.

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Q 24

Journal entry for dividends Prepare a journal entry on June 30 for dividends of $11,500.

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Q 25

eCatalog Services Company performed services in October for a specific customer for a fee of $7,890. Payment was received the following November. (a) Was the revenue earned in October or November? (b) What accounts should be debited and credited in (1) October and (2) November?

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Q 26

Rules of debit and credit The following table summarizes the rules of debit and credit. For each of the items A through L, indicate whether the proper answer is a debit or a credit.

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Q 27

Journal entries and trial balance Elite Realty acts as an agent in buying, selling, renting, and managing real estate. The unadjusted trial balance on March 31, 2018, follows: The following business transactions were completed by Elite Realty during April 2018: Instructions 1. Record the April 1, 2018, balance of each account in the appropriate balance column of a four-column account, write Balance in the item section, and place a check mark (?) in the Posting Reference column. 2. Journalize the transactions for April in a two-column journal beginning on Page 18. Journal entry explanations may be omitted. 3. Post to the ledger, extending the account balance to the appropriate balance column after each posting. 4. Prepare an unadjusted trial balance of the ledger as of April 30, 2018. 5. Assume that the April 30 transaction for salaries and commissions should have been $19,100. (A) Why did the unadjusted trial balance in (4) balance? (B) Journalize the correcting entry. (C) Is this error a transposition or slide?

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Q 28

Journal entries and trial balance Valley Realty acts as an agent in buying, selling, renting, and managing real estate. The unadjusted trial balance on July 31, 2018, follows: The following business transactions were completed by Valley Realty during August 2018: Instructions 1. Record the August 1 balance of each account in the appropriate balance column of a four-column account, write Balance in the item section, and place a check mark (?) in the Posting Reference column. 2. Journalize the transactions for August in a two-column journal beginning on Page 18. Journal entry explanations may be omitted. 3. Post to the ledger, extending the account balance to the appropriate balance column after each posting. 4. Prepare an unadjusted trial balance of the ledger as of August 31, 2018. 5. Assume that the August 31 transaction for dividends should have been $10,000. (A) Why did the unadjusted trial balance in (4) balance? (B) Journalize the correcting entry. (C) Is this error a transposition or slide?

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Q 29

Missing amount from an account 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.

Essay

Q 30

If the two totals of a trial balance are equal, does it mean that there are no errors in the accounting records? Explain.

Essay

Q 31

Normal entries for accounts During the month, Gates 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 5. Insurance Expense 6. Dividends 7. Utilities Expense

Essay

Q 32

Corrected trial balance The Lexington Group has the following unadjusted trial balance as of May 31, 2018: The debit and credit totals are not equal as a result of the following errors: A. The cash entered on the trial balance was overstated by $7,000. B. A cash receipt of $8,200 was posted as a debit to Cash of $2,800. C. A debit of $16,500 to Accounts Receivable was not posted. D. A return of $125 of defective supplies was erroneously posted as a $1,250 credit to Supplies. E. An insurance policy acquired at a cost of $3,600 was posted as a credit to Prepaid Insurance. F. The balance of Notes Payable was understated by $9,000. G. A credit of $10,000 in Accounts Payable was overlooked when determining the balance of the account. H. A debit of $5,000 for dividends was posted as a credit to Retained Earnings. I. The balance of $60,300 in Rent Expense was entered as $63,000 in the trial balance. J. Gas, Electricity, and Water Expense, with a balance of $16,350, was omitted from the trial balance. Instructions 1. Prepare a corrected unadjusted trial balance as of May 31, 2018. 2. Does the fact that the unadjusted trial balance in (1) is balanced mean that there are no errors in the accounts? Explain.

Essay

Q 33

Corrected trial balance Tech Support Services has the following unadjusted trial balance as of January 31, 2018: The debit and credit totals are not equal as a result of the following errors: A. The cash entered on the trial balance was overstated by $8,000. B. A cash receipt of $4,100 was posted as a debit to Cash of $1,400. C. A debit of $12,350 to Accounts Receivable was not posted. D. A return of $235 of defective supplies was erroneously posted as a $325 credit to Supplies. E. An insurance policy acquired at a cost of $3,000 was posted as a credit to Prepaid Insurance. F. The balance of Notes Payable was overstated by $21,000. G. A credit of $3,450 in Accounts Payable was overlooked when the balance of the account was determined. H. A debit of $6,000 for dividends was posted as a debit to Retained Earnings. I. The balance of $28,350 in Advertising Expense was entered as $23,850 in the trial balance. J. Miscellaneous Expense, with a balance of $4,600, was omitted from the trial balance. Instructions 1. Prepare a corrected unadjusted trial balance as of January 31, 2018. 2. Does the fact that the unadjusted trial balance in (1) is balanced mean that there are no errors in the accounts? Explain.

Essay

Q 34

Trial balance errors 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.

Essay

Q 35

Assume that a trial balance is prepared with an account balance of $8,900 listed as $9,800 and an account balance of $1,000 listed as $100. Identify the transposition and the slide.

Essay

Q 36

Normal balances of accounts Identify each of the following accounts of Kaiser Services Co. as asset, liability, stockholders' 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. Cash D. Common Stock E. Dividends F. Fees Earned G. Office Equipment H. Rent Expense I. Supplies J. Wages Expense

Essay

Q 37

Correcting entries 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.

Essay

Q 38

Assume that when a purchase of supplies of $2,650 for cash was recorded, both the debit and the credit were journalized and posted as $2,560. (a) Would this error cause the trial balance to be out of balance? (b) Would the trial balance be out of balance if the $2,650 entry had been journalized correctly but the credit to Cash had been posted as $2,560?

Essay

Q 39

Transactions Zenith Consulting Co. has the following accounts in its ledger: Cash, Accounts Receivable, Supplies, Office Equipment, Accounts Payable, Common Stock, Retained Earnings, Dividends, Fees Earned, Rent Expense, Advertising Expense, Utilities Expense, Miscellaneous Expense. Journalize the following selected transactions for March 2018 in a two-column journal. Journal entry explanations may be omitted.

Essay

Q 40

Assume that Muscular Consulting erroneously recorded the payment of $7,500 of owner withdrawals as a debit to Salary Expense. (a) How would this error affect the equality of the trial balance? (b) How would this error affect the income statement, statement of owner's equity, and balance sheet?

Essay

Q 41

Journalizing and posting On October 3, 2018, Regal Company purchased $3,600 of supplies on account. In Regal's chart of accounts, the supplies account is No. 15, and the accounts payable account is No. 21. A. Journalize the October 3, 2018, transaction on page 91 of Regal Company's two-column journal. Include an explanation of the entry. B. Prepare a four-column account for Supplies. Enter a debit balance of $770 as of October 1, 2018. Place a check mark (?) in the Posting Reference column. C. Prepare a four-column account for Accounts Payable. Enter a credit balance of $26,200 as of October 1, 2018. Place a check mark (?) in the Posting Reference column. D. Post the October 3, 2018, transaction to the accounts. E. Do the rules of debit and credit apply to all companies?

Essay

Q 42

Assume that Sunshine Realty Co. borrowed $300,000 from Columbia First Bank and Trust. In recording the transaction, Sunshine erroneously recorded the receipt as a debit to Cash, $300,000, and a credit to Fees Earned, $300,000. (a) How would this error affect the equality of the trial balance? (b) How would this error affect the income statement, statement of owner's equity, and balance sheet?

Essay

Q 43

Transactions and T accounts 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?

Essay

Q 44

Checking accounts are a common form of deposits for banks. Assume that Surety Storage has a checking account at Ada Savings Bank. What type of account (asset, liability, owner's equity, revenue, expense, drawing) does the account balance of $11,375 represent from the viewpoint of (a) Surety Storage and (b) Ada Savings Bank?

Essay

Q 45

Cash account balance 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?

Essay

Q 46

Account balances 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.

Essay

Q 47

Retained earnings account balance As of January 1, Retained Earnings had a credit balance of $314,000. During the year, dividends totaled $10,000, and the business incurred a net loss of $320,000. A. Compute the balance of Retained Earnings 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.

Essay

Q 48

Identifying transactions Napa Tours Co. is a travel agency. The nine transactions recorded by Napa Tours during April 2018, its first month of operations, are indicated in the following T accounts: Indicate for each debit and each credit: (A) whether an asset, liability, stockholders' equity, dividend, 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:

Essay

Q 49

Journal entries 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.

Essay

Q 50

Trial balance 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.

Essay

Q 51

Trial balance The accounts in the ledger of Atlantic Furniture Company as of July 2018 are listed in alphabetical order as follows. All accounts have normal balances. The balance of the cash account has been intentionally omitted. Prepare an unadjusted trial balance, listing the accounts in their normal order and inserting the missing figure for cash.

Essay

Q 52

Effect of errors on trial balance 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 cash dividends 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.

Essay

Q 53

Errors in trial balance The following preliminary unadjusted trial balance of Ranger Co., a sports ticket agency, does not balance: 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.

Essay

Q 54

Effect of errors on trial balance? 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:

Essay

Q 55

Errors in trial balance Identify the errors in the following trial balance. All accounts have normal balances.

Essay

Q 56

Entries to correct errors 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. Dividends of $10,000 were recorded as a debit to Wages Expense and a credit to Cash. Journalize the entries to correct the errors. Omit explanations.

Essay

Q 57

Entries to correct errors 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.

Essay

Related Quizzes

Quiz 2: Analyzing Transactions

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