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Copyright © 2015 John Wiley & Sons, Inc. Weygandt, Accounting Principles, 12/e, Instructor’s Manual (For Instructor Use Only) 2-1

CHAPTER 2

LEARNING OBJECTIVES

1. DESCRIBE HOW ACCOUNTS, DEBITS, AND CREDITSARE USED TO RECORD BUSINESS TRANSACTIONS.

2. INDICATE HOW A JOURNAL IS USED IN THERECORDING PROCESS.

3. EXPLAIN HOW A LEDGER AND POSTING HELP INTHE RECORDING PROCESS.

4. PREPARE A TRIAL BALANCE.

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CHAPTER REVIEW

The Account

1. (L.O. 1) An account is an individual accounting record of increases and decreases in a specificasset, liability, or owner’s equity item.

2. In its simplest form, an account consists of (a) the title of the account, (b) a left or debit side, and(c) a right or credit side. The alignment of these parts resembles the letter T, and therefore theaccount form is called a T-account.

Debits and Credits

3. The terms debit and credit mean left and right, respectively.a. The act of entering an amount on the left side of an account is called debiting the account

and making an entry on the right side is crediting the account.b. When the debit amounts exceed the credits, an account has a debit balance; when the

reverse is true, the account has a credit balance.

4. In a double-entry system, equal debits and credits are made in the accounts for each transaction.Thus, the total debits will always equal the total credits.

5. The effects of debits and credits on assets and liabilities and the normal balances are:

Accounts Debits Credits Normal BalanceAssets Increase Decrease DebitLiabilities Decrease Increase Credit

6. Accounts are kept for each of the four subdivisions of owner’s equity: capital, drawings, revenues,and expenses.

7. The effects of debits and credits on the owner’s equity accounts and the normal balances are:

Accounts Debits Credits Normal BalanceOwner’s Capital Decrease Increase CreditOwner’s Drawings Increase Decrease DebitRevenues Decrease Increase CreditExpenses Increase Decrease Debit

8. The expanded accounting equation is:

Assets = Liabilities + Owner’s Capital – Owner’s Drawings + Revenues – Expenses

The Journal

9. (L.O. 2) The basic steps in the recording process are:a. Analyze each transaction for its effect on the accounts.b. Enter the transaction information in a journal.c. Transfer the journal information to the appropriate accounts in the ledger.


10. Transactions are initially recorded in a journal.a. A journal is referred to as a book of original entry.b. A general journal is the most basic form of journal.

11. The journal makes several significant contributions to the recording process:a. It discloses in one place the complete effect of a transaction.b. It provides a chronological record of transactions.c. It helps to prevent or locate errors because the debit and credit amounts for each entry can

be easily compared.

12. Entering transaction data in the journal is known as journalizing. When three or more accountsare required in one journal entry, the entry is known as a compound entry.

The Ledger

13. (L.O. 3) The ledger is the entire group of accounts maintained by a company. It keeps in oneplace all the information about changes in account balances and it is a source of useful data formanagement.

14. The standard form of a ledger account has three columns and the balance in the account isdetermined after each transaction.

15. Posting is the procedure of transferring journal entries to the ledger accounts. The following stepsare used in posting:a. In the ledger, enter in the appropriate columns of the account(s) debited the date, journal

page, and debit amount.b. In the reference column of the journal, write the account number to which the debit amount

was posted.c. Perform the same steps in a. and b. for the credit amount.

The Chart of Accounts

16. A chart of accounts is a listing of the accounts and the account numbers which identify theirlocation in the ledger. The numbering system usually starts with the balance sheet accounts andfollows with the income statement accounts.


The Basic Steps

17. The basic steps in the recording process are illustrated as follows:

Transaction On September 4, Fesmire Inc. pays $3,000 cash to a creditor in full payment ofthe balance due.

Basic analysis The liability Accounts Payable is decreased $3,000, and the asset Cash isdecreased $3,000.

Debit-credit Debits decrease liabilities: debit Accounts Payable $3,000.analysis Credits decrease assets: credit Cash $3,000.

The Trial Balance

18. (L.O. 4) A trial balance is a list of accounts and their balances at a given time. The trial balanceproves the mathematical equality of debits and credits after posting.

19. A trial balance does not prove that the company has recorded all transactions or that the ledger iscorrect because the trial balance may balance even whena. a transaction is not journalized.b. a correct journal entry is not posted.c. a journal entry is posted twice.d. incorrect accounts are used in journalizing or posting.e. offsetting errors are made in recording the amount of a transaction.


LECTURE OUTLINE

A. The Account.

An account is an individual accounting record of increases and decreases ina specific asset, liability, or owner’s equity item.

An account consists of three parts:

1. A title.

2. A left or debit side.

3. A right or credit side.

B. Debits and Credits.

The terms debit and credit are directional signals: Debit indicates left, and creditindicates right.

1. Assets, drawings, and expenses are increased by debits and decreasedby credits.

2. Liabilities, owner’s capital, and revenues are increased by credits anddecreased by debits.

C. Steps in the Recording Process.

There are three basic steps in the recording process:

1. Analyze each transaction for its effects on the accounts.

2. Enter the transaction information in a journal.


3. Transfer the journal information to the appropriate accounts in the ledger.

D. The General Journal/Journalizing.

Entering transaction data in the general journal is called journalizing.

The general journal:

1. Discloses in one place the complete effects of a transaction.

2. Provides a chronological record of transactions.

3. Helps to prevent or locate errors because the debit and credit amountsfor each entry can be easily compared.

4. A simple journal entry involves only two accounts (one debit and one credit)whereas a compound journal entry involves three or more accounts.

E. The Ledger.

The ledger is the entire group of accounts maintained by a company. A gen-eral ledger contains all the assets, liabilities, and owner’s equity accounts.

1. The ledger provides the balance in each of the accounts as well askeeps track of changes in these balances.

2. Companies arrange the ledger in the sequence in which they presentthe accounts in the financial statements, beginning with the balance sheetaccounts.

F. Posting/Chart of Accounts.

1. Posting is transferring journal entries to the ledger accounts.

2. Posting involves the following steps:


a. In the ledger, in the appropriate columns of the account(s) debited,enter the date, journal page, and debit amount shown in the journal.

b. In the reference column of the journal, write the account number towhich the debit amount was posted.

c. In the ledger, in the appropriate columns of the account(s) credited,enter the date, journal page, and credit amount shown in the journal.

d. In the reference column of the journal, write the account number towhich the credit amount was posted.

3. A chart of accounts lists the accounts and the account numbers thatidentify their location in the ledger. Accounts are usually numbered startingwith the balance sheet accounts followed by income statement accounts.

G. Trial Balance.

A trial balance is a list of accounts and their balances at a given time.

1. It proves the mathematical equity of debits and credits after posting.

2. It may also uncover errors in journalizing and posting.

3. It is useful the preparation of financial statements.


INVESTOR INSIGHT

Bank regulators fined Bank One Corporation (Now Chase) $1.8 million becausethey felt the reliability of the bank’s accounting system caused it to violateregulatory requirements. The financial records of Waste Management Inc. werein such disarray that 10,000 employees were receiving pay slips that were inerror.

In order for these companies to prepare and issue financial statements, theiraccounting equations must have been in balance at year-end. How could theseerrors or misstatements have occurred?

Answer: A company’s accounting equation (its books) can be in balance yet itsfinancial statements have errors or misstatements because of thefollowing: entire transactions were not recorded, transactions wererecorded at wrong amounts; transactions were recorded in the wrongaccounts; transactions were recorded in the wrong accounting period.Audits of financial statements uncover some, but not all, errors ormisstatements.


IFRSA Look At IFRS

International companies use the same set of procedures and records to keep track oftransaction data. Thus, the material in Chapter 2 dealing with the account, general rulesof debit and credit, and steps in the recording process—the journal, ledger, and chart ofaccounts—is the same under both GAAP and IFRS.

KEY POINTS

Following are the key similarities and differences between GAAP and IFRS as related to therecording process:

Transaction analysis is the same under IFRS and GAAP. Both the IASB and FASB go beyond the basic definitions provided in the textbook for

the key elements of financial statements, that is, assets, liabilities, equity, revenue, andexpenses.

A trial balance under IFRS follows the same format as shown in the textbook. As shown in the textbook, dollar signs are typically used only in the trial balance and the

financial statements. The same practice is followed under IFRS, using the currency ofthe country where the reporting company is headquartered.

A trial balance under IFRS follows the same format as shown in the textbook. IFRS relies less on historical cost and more on fair value than do FASB standards. Internal controls are a system of checks and balances designed to prevent and detect

fraud and errors. While most public U. S. companies have these systems in place, manynon-U.S. companies have never completely documented the controls nor had anindependent auditor attest to their effectiveness.

LOOKING TO THE FUTURE

The basic recording process shown in this textbook is followed by companies across the globe.It is unlikely to change in the future. The definitional structure of assets, liabilities, equity,revenues, and expenses may change over time as the IASB and FASB evaluate their overallconceptual framework for establishing accounting standards.


20 MINUTE QUIZ

Circle the correct answer.True/False

1. Assets are increased by debits and liabilities are decreased by credits.

True False

2. The owner’s capital account is increased by credits.

True False

3. An account will have a credit balance if the total debit amounts exceed the total creditamounts.

True False

4. The ledger is the entire group of accounts maintained by a company.

True False

5. The basic steps in the recording process are (1) to analyze each transaction, (2) to enterthe transaction in a journal, and (3) to transfer the journal entry to the appropriate ledgeraccounts.

True False

6. Transferring journal entries to the ledger accounts is called posting and should be per-formed in chronological order.

True False

7. Assets = liabilities + owner’s capital – drawings + revenues – expenses is a correct formof the expanded basic accounting equation.

True False

8. In posting, one should enter “J2” in the Post. Ref. Column on page two of the journal.

True False

9. When the columns of the trial balance equal each other, it proves no errors occurred inrecording and posting.

True False

10. The double-entry system helps ensure the accuracy of the recorded amounts and helps todetect errors.

True False


Multiple Choice

1. Transactions are initially recorded in thea. general ledger.b. general journal.c. trial balance.d. balance sheet.

2. The right side of an account is referred to as thea. footing.b. chart side.c. debit side.d. credit side.

3. A purchase of equipment for cash requires a credit toa. Equipment.b. Cash.c. Accounts Payable.d. Owner’s Capital.

4. The equality of the accounting equation can be proven by preparing aa. trial balance.b. journal.c. general ledger.d. T-account.

5. Which of the following accounts would be increased with a debit?a. Rent Payableb. Owner’s Capitalc. Service Revenued. Owner’s Drawings


ANSWERS TO QUIZ

True/False

1. False 6. True2. True 7. True3. False 8. False4. True 9. False5. True 10. True

Multiple Choice

1. b.2. d.3. b.4. a.5. d.

Copyright © 2015 John Wiley & Sons, Inc. Weygandt, Accounting Principles, 12/e, Problems: Set B Solutions (For Instructor Use Only) 2-1

CHAPTER 2SOLUTIONS TO PROBLEMS: SET B

PROBLEM 2-1B

J1Date Account Titles and Explanation Ref. Debit CreditApr. 1 Cash ....................................................... 35,000

Owner’s Capital ............................. 35,000(Owner’s investment of cash

in business)

4 Land ....................................................... 27,000Cash ............................................... 27,000

(Purchased land for cash)

8 Advertising Expense............................. 1,800Accounts Payable ......................... 1,800

(Incurred advertisingexpense on account)

11 Salaries and Wages Expense ............... 1,500Cash ............................................... 1,500

(Paid salaries)

12 No entry—Not a transaction.

13 Prepaid Insurance ................................. 1,650Cash ............................................... 1,650

(Paid for one-yearinsurance policy)

17 Owner’s Drawings ................................. 1,000Cash ............................................... 1,000

(Withdrew cash for personaluse)

20 Cash ....................................................... 6,800Service Revenue............................ 6,800

(Received cash for servicesperformed)


PROBLEM 2-1B (Continued)

Date Account Titles and Explanation Ref. Debit CreditApr. 25 Cash ......................................................

Unearned Service Revenue .............(Received cash for futureservices)

2,5002,500

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


8,9008,900

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

(Paid creditor on account)

900900


PROBLEM 2-2B

(a)J1

Date Account Titles and Explanation Ref. Debit CreditMay 1 Cash ....................................................... 101 20,000

Owner’s Capital ............................. 301 20,000(Owner’s investment of cashin business)

2 No entry—not a transaction.

3 Supplies ................................................. 126 2,500Accounts Payable ......................... 201 2,500

(Purchased supplies onaccount)

7 Rent Expense ........................................ 729 900Cash ............................................... 101 900

(Paid office rent)

11 Accounts Receivable ............................ 112 3,200Service Revenue............................ 400 3,200

(Billed client for servicesperformed)

12 Cash ....................................................... 101 3,500Unearned Service Revenue .......... 209 3,500

(Received cash for futureservices)

17 Cash ....................................................... 101 1,200Service Revenue............................ 400 1,200


31 Salaries and Wages Expense ............... 726 2,000Cash ............................................... 101 2,000

(Paid salaries)



Date Account Titles and Explanation Ref. Debit CreditMay 31 Accounts Payable ($2,500 X 60%)..........

Cash ..............................................(Paid creditor on account)

201101

1,5001,500

(b)

Cash No. 101Date Explanation Ref. Debit Credit BalanceMay 1 J1 20,000 20,000

7 J1 900 19,10012 J1 3,500 22,60017 J1 1,200 23,80031 J1 2,000 21,80031 J1 1,500 20,300

Accounts Receivable No. 112Date Explanation Ref. Debit Credit BalanceMay11 J1 3,200 3,200

Supplies No. 126Date Explanation Ref. Debit Credit BalanceMay 3 J1 2,500 2,500

Accounts Payable No. 201Date Explanation Ref. Debit Credit BalanceMay 3 J1 2,500 2,500

31 J1 1,500 1,000

Unearned Service Revenue No. 209Date Explanation Ref. Debit Credit BalanceMay 12 J1 3,500 3,500



Owner’s Capital No. 301Date Explanation Ref. Debit Credit BalanceMay 1 J1 20,000 20,000

Service Revenue No. 400Date Explanation Ref. Debit Credit BalanceMay11

17J1J1

3,2001,200

3,2004,400

Salaries and Wages Expense No. 726Date Explanation Ref. Debit Credit BalanceMay31 J1 2,000 2,000

Rent Expense No. 729Date Explanation Ref. Debit Credit BalanceMay 7 J1 900 900

(c) IRIS BECK, CPATrial BalanceMay 31, 2017

Debit CreditCash..................................................................... $20,300Accounts Receivable.......................................... 3,200Supplies .............................................................. 2,500Accounts Payable............................................... $ 1,000Unearned Service Revenue................................ 3,500Owner’s Capital .................................................. 20,000Service Revenue................................................. 4,400Salaries and Wages Expense ............................ 2,000Rent Expense...................................................... 900

$28,900 $28,900


PROBLEM 2-3B

(a) & (c)Cash

Balance 8,000(1) 1,000(3) 2,000

(4) 14,000(5) 15,000

6) 6,000(7) 3,500(8) 3,000

3,500

Accounts ReceivableBalance 15,000

(4) 14,000(7) 9,000

10,000

SuppliesBalance 13,000(2) 4,200

17,200

Prepaid RentBalance 3,000

3,000

EquipmentBalance 20,000

20,000

Accounts PayableBalance 19,000

Owner’s CapitalBalance 40,000

40,000

Owner’s Drawings(8) 3,000

3,000

Service Revenue(7) 15,000

15,000

Advertising Expense(1) 1,000

1,000

Miscellaneous Expense(3) 2,000

2,000

Salaries and Wages Expense(7) 3,500

3,500

(5) 15,000(2) 4,200

8,200



(b)

Trans. Account Titles and Explanation Debit Credit1. Advertising Expense.............................. 1,000

Cash ............................................... 1,000

2. Supplies .................................................. 4,200Accounts Payable ......................... 4,200

3. Miscellaneous Expense ......................... 2,000Cash ............................................... 2,000

4. Cash ........................................................ 14,000Accounts Receivable .................... 14,000

5. Accounts Payable .................................. 15,000Cash ............................................... 15,000

6. Cash ........................................................ 6,000Accounts Receivable ............................. 9,000

Service Revenue ........................... 15,000

7. Salaries and Wages Expense ................ 3,500Cash ............................................... 3,500

8. Owner’s Drawings.................................. 3,000Cash ............................................... 3,000



(d) VIAN REPAIR SERVICETrial Balance

January 31, 2017

Debit CreditCash.................................................................... $ 3,500Accounts Receivable......................................... 10,000Supplies.............................................................. 17,200Prepaid Rent....................................................... 3,000Equipment .......................................................... 20,000Accounts Payable .............................................. $ 8,200Owner’s Capital.................................................. 40,000Owner’s Drawings.............................................. 3,000Service Revenue ................................................ 15,000Advertising Expense ......................................... 1,000Miscellaneous Expense..................................... 2,000Salaries and Wages Expense............................ 3,500

$63,200 $63,200


PROBLEM 2-4B

SEAN DEVINE COMPANYTrial BalanceMay 31, 2014

Debit CreditCash ($5,850 + $520 – $486) ........................................ $ 5,884Accounts Receivable ($2,570 – $210) ......................... 2,360Prepaid Insurance ($700 + $100) ................................. 800Supplies ($0 + $520) ..................................................... 520Equipment ($8,000 – $520)........................................... 7,480Accounts Payable ($4,500 – $100 + $520 – $210)....... $ 4,710Unearned Service Revenue ......................................... 650Owner’s Capital ($11,700 + $1,000) ............................. 12,700Owner’s Drawings ($0 + $1,000).................................. 1,000Service Revenue .......................................................... 6,960Salaries and Wages Expense ($4,200 + $200) ............ 4,400Advertising Expense ($1,100 + $486).......................... 1,586Utilities Expense ($890 + $100) ................................... 990

$25,020 $25,020


PROBLEM 2-5B

(a) & (c)

Cash No. 101Date Explanation Ref. Debit Credit BalanceApr. 1 Balance 4,000

2 J1 1,100 2,9009 J1 2,800 5,700

10 J1 3,000 2,70012 J1 500 2,20025 J1 5,200 7,40029 J1 2,000 5,40030 J1 85 5,48530 J1 1,200 4,285

Accounts Receivable No. 112Date Explanation Ref. Debit Credit BalanceApr. 30 J1 85 85

Prepaid Rent No. 136Date Explanation Ref. Debit Credit BalanceApr. 30 J1 1,200 1,200

Land No. 140Date Explanation Ref. Debit Credit BalanceApr. 1 Balance 10,000

Buildings No. 145Date Explanation Ref. Debit Credit BalanceApr. 1 Balance 8,000



Equipment No. 157Date Explanation Ref. Debit Credit BalanceApr. 1 Balance 6,000

Accounts Payable No. 201Date Explanation Ref. Debit Credit BalanceApr. 1 Balance 2,000

10 J1 1,000 1,00020 J1 1,000 2,000

Mortgage Payable No. 275Date Explanation Ref. Debit Credit BalanceApr. 1 Balance 8,000

10 J1 2,000 6,000

Owner’s Capital No. 301Date Explanation Ref. Debit Credit BalanceApr. 1 Balance 18,000

Service Revenue No. 400Date Explanation Ref. Debit Credit BalanceApr. 9 J1 2,800 2,800

25 J1 5,200 8,000

Rent Revenue No. 429Date Explanation Ref. Debit Credit BalanceApr.30 J1 170 170



Advertising Expense No. 610Date Explanation Ref. Debit Credit BalanceApr. 12 J1 500 500

Salaries and Wages Expense No. 726Date Explanation Ref. Debit Credit BalanceApr. 29 J1 2,000 2,000

Rent Expense No. 729Date Explanation Ref. Debit Credit BalanceApr. 2 J1 1,100 1,100

20 J1 1,000 2,100

(b)J1

Date Account Titles and Explanation Ref. Debit CreditApr. 2 Rent Expense.....................................

Cash...........................................(Paid film rental)

729101

1,1001,100


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


101400

2,8002,800

10 Mortgage Payable ..............................Accounts Payable..............................

Cash...........................................(Made payments onmortgage and accountspayable)

275201101

2,0001,000

3,000



Date Account Titles and Explanation Ref. Debit CreditApr. 11 No entry—not a transaction.

12 Advertising Expense.............................Cash ..............................................

(Paid advertising expenses)

610101

500500

20 Rent Expense ........................................Accounts Payable ........................

(Rented film on account)

729201

1,0001,000

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


101400

5,2005,200

29 Salaries and Wages Expense ...............Cash ..............................................

(Paid salaries expense)

726101

2,0002,000

30 Cash .......................................................Accounts Receivable ............................

Rent Revenue ...............................(17% X $1,000)(Received cash andbalance on account forrent revenue)

101112429

8585

170

30 Prepaid Rent ..........................................Cash ..............................................

(Paid cash for future filmrentals)

136101

1,2001,200



(d) CLASSIC THEATERTrial BalanceApril 30, 2017

Debit CreditCash.................................................................... $ 4,285Accounts Receivable......................................... 85Prepaid Rent....................................................... 1,200Land.................................................................... 10,000Buildings ............................................................ 8,000Equipment .......................................................... 6,000Accounts Payable .............................................. $ 2,000Mortgage Payable .............................................. 6,000Owner’s Capital.................................................. 18,000Service Revenue ................................................ 8,000Rent Revenue..................................................... 170Advertising Expense ......................................... 500Salaries and Wages Expense............................ 2,000Rent Expense ..................................................... 2,100

$34,170 $34,170

Copyright © 2015 John Wiley & Sons, Inc. Weygandt, Accounting Principles, 12/e, Challenge Exercise Solutions Page 2-1

Weygandt Accounting Principles, 12eChapter Two

Solutions to Challenge Exercises

Challenge Exercise 2-1 – Solution1.

1 Cash………….. ........................................................... 25,000Owner’s Capital .............................................. 25,000

2 No entry, not a transaction

3 Equipment .................................................................. 2,900Cash…………………………………………………… 700Accounts Payable .................................................. 2,200

6 Cash........................................................................Accounts Receivable ................................................

6003,000

Service Revenue............................................. 3,600

27 Accounts Payable ..................................................... 900Cash................................................................. 900

30 Salaries and Wages Expense................................... 2,300Cash................................................................. 2,300

31 Cash…. ....................................................................... 1,200Accounts Receivable ..................................... 1,200

2. The October 31 balance of Accounts Payable is $1,300 ($2,200 - $900), and would be reported in theliabilities section of the balance sheet.

3. The October 31 balance of Accounts Receivable is $1,800 ($3,000 - $1,200), and would be reported inthe assets section of the balance sheet.


Challenge Exercise 2-2 – Solution(a)

General Journal J1

Date Account Titles Ref. Debit Credit

Sept. 1 Cash….........................................................................Owner’s Capital...............................................

101301

20,00020,000

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

157101201

17,0006,000

11,000

11 Cash….........................................................................Accounts Receivable.................................................

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

101112400

1,0002,900

3,900

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

201101

7,0007,000

29 Owner’s Drawings .....................................................Cash .................................................................

306101

600600

30 Cash….........................................................................Accounts Receivable......................................

101112

1,5001,500

(b)

Cash No. 101

Date Explanation Ref. Debit Credit Balance

Sept. 1 J1 20,000 20,0005

11J1J1 1,000

6,000 14,00015,000

25 J1 7,000 8,0002930

J1J1 1,500

600 7,4008,900


Accounts Receivable No. 112


Sept. 11 J1 2,900 2,90030 J1 1,500 1,400

Challenge Exercise 2-2 – Solution (Continued)

Equipment No. 157


Sept. 5 J1 17,000 17,000

Accounts Payable No. 201


Sept. 5 J1 11,000 11,000

25 J1 7,000 4,000

Owner’s Capital No. 301


Sept. 1 J1 20,000 20,000

Owner’s Drawings No. 306


Sept.29 J1 600 600

Service Revenue No. 400


Sept. 11 J1 3,900 3,900

(c) Total assets would be $27,300 ($8,900 + $1.400 + $17,000).

(d) Total liabilities would be $4,000 (just accounts payable).

19-1

SOLUTIONChapter 19 Waterways Continuing Problem

19-2

(b)Waterways Corporation

Cost of Goods Manufactured ScheduleFor the Month of November

Work in process 11/1 $ 52,900Direct materials

Raw materials inventory 11/1 $ 38,000Raw material purchases 185,400Total raw materials available for use 223,400Less: Raw materials inventory 11/30 52,700Direct materials used $170,700

Direct labor 22,000Manufacturing overhead

Depreciation--factory equipment 16,800Factory supplies used 16,850Factory utilities 10,200Indirect labor 48,000Rent--factory equipment 47,000Repairs--factory equipment 4,200Total factory overhead 143,050

Total manufacturing costs 335,750Total cost of work in process 388,650Less: Work in process 11/30 42,000Cost of goods manufactured $346,650

19-3

Waterways CorporationIncome Statement

For the Month of November

Sales $1,350,000Cost of goods sold

Finished goods inventory 11/1 $ 72,550Cost of goods manufactured 346,650Cost of goods available for sale 419,200Less: Finished goods inventory 11/30 68,300Cost of goods sold 350,900

Gross profit 999,100Operating expenses

Selling expensesAdvertising expenses 54,000Sales commissions 40,500

Total selling expenses 94,500Administrative expenses

Depreciation--office equipment $ 2,500Office supplies expense 1,400Other administrative expenses 72,000Salaries 325,000

Total administrative expenses 400,900Total operating expenses 495,400

Net income $ 503,700

19-4

Waterways CorporationBalance Sheet (partial)

November 30

Current assetsCash $260,000Accounts receivable 295,000Inventories

Raw materials inventory $52,700Work in process inventory 42,000Finished goods inventory 68,300 163,000

Prepaid expenses 41,250Total current assets $759,250

Copyright © 2015 John Wiley & Sons, Inc. Weygandt, Accounting Principles, 12/e, Solutions Manual (For Instructor Use Only) 2-1

CHAPTER 2The Recording Process

ASSIGNMENT CLASSIFICATION TABLE

Learning Objectives QuestionsBrief

Exercises Do It! ExercisesA

Problems

1. Indicate how accounts,debits, and credits are usedto record businesstransactions.

1, 2, 3, 4, 5,6, 7, 8, 9, 19,21

1, 2, 5 1 1, 2, 4, 6, 7,14

1A, 2A, 3A,5A

2. Indicate how a journal isused in the recordingprocess.

10, 11, 12,13, 14, 16

3, 4, 6 2 3, 5, 6, 7, 10,11, 12

1A, 2A, 3A,5A

3. Explain how a ledger andposting help in the recordingprocess.

15, 17 7, 8 3 8, 9, 12 2A, 3A, 5A

4. Prepare a trial balance. 18, 20 9, 10 4 9, 10, 11, 13,14

2A, 3A, 4A,5A

2-2 Copyright © 2015 John Wiley & Sons, Inc. Weygandt, Accounting Principles, 12/e, Solutions Manual (For Instructor Use Only)

ASSIGNMENT CHARACTERISTICS TABLE

ProblemNumber Description

DifficultyLevel

Time Allotted(min.)

1A Journalize a series of transactions. Simple 20–30

2A Journalize transactions, post, and prepare a trial balance. Simple 30–40

3A Journalize transactions, post, and prepare a trial balance. Moderate 40–50

4A Prepare a correct trial balance. Moderate 30–40

5A Journalize transactions, post, and prepare a trial balance. Moderate 40–50


WEYGANDT ACCOUNTING PRINCIPLES 12ECHAPTER 2

THE RECORDING PROCESS

Number LO BT Difficulty Time (min.)

BE1 1 C Simple 6–8


BE3 2 AP Simple 4–6

BE4 2 C Moderate 4–6






BE10 4 AN Moderate 6–8

DI1 1 C Simple 3–5

DI2 2 AP Simple 3–5



EX1 1 K Simple 2–4

EX2 1 C Simple 10–15

EX3 2 AP Simple 8–10

EX4 1 C Simple 6–8

EX5 2 AP Simple 6–8

EX6 1, 2 AP Simple 6–8


EX8 3 K Simple 2–4


EX10 2, 4 AP Moderate 10–12



EX13 4 AN Moderate 6–8



THE RECORDING PROCESS (Continued)

Number LO BT Difficulty Time (min.)

P1A 1, 2 AP Simple 20–30

P2A 1, 2, 3, 4 AP Simple 30–40

P3A 1, 2, 3, 4 AP Moderate 40–50

P4A 4 AN Moderate 30–40

P5A 1, 2, 3, 4 AP Moderate 40–50

BYP1 1 C Simple 8–10

BYP2 1, 2 AN Simple 8–10

BYP3

BYP4

—

—

AP

AP, S

Simple

Simple

15–20

15–20

BYP5 3, 4 AP, S Moderate 20–30

BYP6 4 AN, E Moderate 10–15

BYP7

BYP8

BYP9

—

—

—

E

E

E

Moderate

Moderate

Moderate

10–15

15–20

15–20

BYP10 — E Moderate 20–30

BLO

OM

’S TAXO

NO

MY TA

BLE

Copyright ©

2015 John Wiley & Sons, Inc.

Weygandt,Accounting P

rinciples,12/e,Solutions Manual

(For Instructor Use O

nly)2-5

Correlation Chart between Bloom’s Taxonomy, Learning Objectives and End-of-Chapter Exercises and Problems

Learning Objective Knowledge Comprehension Application Analysis Synthesis Evaluation

1. Describe how accounts,debits, and credits are used torecord business transactions.

Q2-1Q2-21E2-1

Q2-2Q2-3Q2-4Q2-5Q2-6Q2-7

Q2-8Q2-9Q2-19BE2-1BE2-2BE2-5

DI2-1E2-2E2-4

E2-6E2-7E2-14

P2-1AP2-2AP2-3A

P2-5A

2. Indicate how a journal is usedin the recording process.

Q2-10Q2-12

Q2-11Q2-13Q2-14BE2-4

Q2-16BE2-3BE2-6DI2-2E2-3

E2-5E2-6E2-7E2-10E2-11

E2-12P2-1AP2-2AP2-3AP2-5A

3. Explain how a ledger andposting help in the recordingprocess.

E2-8 Q2-15Q2-17

BE2-7BE2-8DI2-3

E2-9E2-12P2-2A

P2-3AP2-5A

4. Prepare a trial balance. Q2-18Q2-20

BE2-9DI2-4E2-9

E2-10E2-11E2-14

P2-2AP2-3AP2-5A

BE2-10E2-13P2-4A

Broadening Your Perspective Financial Reporting Real-World Focus Comparative AnalysisEthics Case

CommunicationDecision Making

Across theOrganization

Real-WorldFocus

All About YouEthics CaseConsideringP, P, and P


ANSWERS TO QUESTIONS

1. A T account has the following parts: (a) the title, (b) the left or debit side, and (c) the right or credit side.

2. Disagree. The terms debit and credit mean left and right respectively.

3. Heath is incorrect. The double-entry system merely records the dual effect of a transaction on theaccounting equation. A transaction is not recorded twice; it is recorded once, with a dual effect.

4. Erica is incorrect. A debit balance only means that debit amounts exceed credit amounts in anaccount. Conversely, a credit balance only means that credit amounts are greater than debitamounts in an account. Thus, a debit or credit balance is neither favorable nor unfavorable.

5. (a) Asset accounts are increased by debits and decreased by credits.(b) Liability accounts are decreased by debits and increased by credits.(c) Revenues and owner’s capital are increased by credits and decreased by debits. Expenses

and owner’s drawing are increased by debits and decreased by credits.

6. (a) Accounts Receivable—debit balance.(b) Cash—debit balance.(c) Owner’s Drawings—debit balance.(d) Accounts Payable—credit balance.(e) Service Revenue—credit balance.(f) Salaries and Wages Expense—debit balance.(g) Owner’s Capital—credit balance.

7. (a) Accounts Receivable—asset—debit balance.(b) Accounts Payable—liability—credit balance(c) Equipment—asset—debit balance.(d) Owner’s Drawings—owner’s equity—debit balance.(e) Supplies—asset—debit balance.

8. (a) Debit Supplies and credit Accounts Payable.(b) Debit Cash and credit Notes Payable.(c) Debit Salaries and Wages Expense and credit Cash.

9. (1) Cash—both debit and credit entries.(2) Accounts Receivable—both debit and credit entries.(3) Owner’s Drawings—debit entries only.(4) Accounts Payable—both debit and credit entries.(5) Salaries and Wages Expense—debit entries only.(6) Service Revenue—credit entries only.

10. The basic steps in the recording process are:(1) Analyze each transaction for its effect on the accounts.(2) Enter the transaction information in a journal.(3) Transfer the journal information to the appropriate accounts in the ledger.


Questions Chapter 2 (Continued)

11. The advantages of using the journal in the recording process are:(1) It discloses in one place the complete effects of a transaction.(2) It provides a chronological record of all transactions.(3) It helps to prevent or locate errors because the debit and credit amounts for each entry can

be easily compared.

12. (a) The debit should be entered first.(b) The credit should be indented.

13. When three or more accounts are required in one journal entry, the entry is referred to as acompound entry. An example of a compound entry is the purchase of equipment, part of which ispaid for with cash and the remainder is on account.

14. (a) No, debits and credits should not be recorded directly in the ledger.(b) The advantages of using the journal are:

1. It discloses in one place the complete effects of a transaction.2. It provides a chronological record of all transactions.3. It helps to prevent or locate errors because the debit and credit amounts for each entry

can be easily compared.

15. The advantage of the last step in the posting process is to indicate that the item has been posted.

16. (a) Cash ............................................................................................ 9,000Owner’s Capital................................................................... 9,000

(Invested cash in the business)

(b) Prepaid Insurance........................................................................ 800Cash ................................................................................... 800

(Paid one-year insurance policy)

(c) Supplies....................................................................................... 2,000Accounts Payable ............................................................... 2,000

(Purchased supplies on account)

(d) Cash ............................................................................................ 7,500Service Revenue................................................................. 7,500

(Received cash for services performed)

17. (a) The entire group of accounts maintained by a company, including all the asset, liability, andowner’s equity accounts, is referred to collectively as the ledger.

(b) A chart of accounts is a list of accounts and the account numbers that identify their locationin the ledger. The chart of accounts is important, particularly for a company that has a largenumber of accounts, because it helps organize the accounts and define the level of detail thata company desires in its accounting system.


Questions Chapter 2 (Continued)

18. A trial balance is a list of accounts and their balances at a given time. The primary purpose of atrial balance is to prove (check) that the debits equal the credits after posting. A trial balance alsofacilitates the discovery of errors in journalizing and posting. In addition, it is useful in preparingfinancial statements.

19. No, Victor is not correct. The proper sequence is as follows:(b) Business transaction occurs.(c) Information entered in the journal.(a) Debits and credits posted to the ledger.(e) Trial balance is prepared.(d) Financial statements are prepared.

20. (a) The trial balance would balance.(b) The trial balance would not balance.

21. The normal balances are Cash debit, Accounts Payable credit, and Interest Expense debit.


SOLUTIONS TO BRIEF EXERCISES

BRIEF EXERCISE 2-1

(a)DebitEffect

(b)CreditEffect

(c)NormalBalance

1. Accounts Payable Decrease Increase Credit2. Advertising Expense Increase Decrease Debit3. Service Revenue Decrease Increase Credit4. Accounts Receivable Increase Decrease Debit5. Owner’s Capital Decrease Increase Credit6. Owner’s Drawings Increase Decrease Debit

BRIEF EXERCISE 2-2

Account Debited Account CreditedJune 1 Cash Owner’s Capital

2 Equipment Accounts Payable3 Rent Expense Cash

12 Accounts Receivable Service Revenue

BRIEF EXERCISE 2-3

June 1 Cash..................................................................... 5,000Owner’s Capital ........................................... 5,000

2 Equipment ........................................................... 2,400Accounts Payable........................................ 2,400

3 Rent Expense ...................................................... 800Cash ............................................................. 800

12 Accounts Receivable .......................................... 300Service Revenue.......................................... 300


BRIEF EXERCISE 2-4

The basic steps in the recording process are:

1. Analyze each transaction. In this step, business documents are examinedto determine the effects of the transaction on the accounts.

2. Enter each transaction in a journal. This step is called journalizing andit results in making a chronological record of the transactions.

3. Transfer journal information to ledger accounts. This step is calledposting. Posting makes it possible to accumulate the effects ofjournalized transactions on individual accounts.

BRIEF EXERCISE 2-5

(a) Effect on Accounting Equation (b) Debit-Credit Analysis

Aug. 1 The asset Cash is increased; theowner’s equity accountOwner’s Capital is increased.

Debits increase assets:debit Cash $8,000.Credits increase owner’s equity:credit Owner’s Capital $8,000.

4 The asset Prepaid Insurance isincreased; the asset Cash isdecreased.

Debits increase assets:debit Prepaid Insurance $1,800.Credits decrease assets:credit Cash $1,800.

16 The asset Cash is increased; therevenue Service Revenue isincreased.

Debits increase assets:debit Cash $3,600.Credits increase revenues:credit Service Revenue $3,600.

27 The expense Salaries and WagesExpense is increased; the assetCash is decreased.

Debits increase expenses:debit Salaries and Wages Expense$1,000.Credits decrease assets:credit Cash $1,000.


BRIEF EXERCISE 2-6

Aug. 1 Cash...................................................................... 8,000Owner’s Capital ............................................ 8,000

4 Prepaid Insurance................................................ 1,800Cash .............................................................. 1,800

16 Cash...................................................................... 3,600Service Revenue .......................................... 3,600

27 Salaries and Wages Expense.............................. 1,000Cash .............................................................. 1,000

BRIEF EXERCISE 2-7

Cash Service Revenue5/12 2,400 5/5 4,4005/15 3,000 5/15 3,000Ending Bal. 5,400 Ending Bal. 7,400

Accounts Receivable5/5 4,400 5/12 2,400

Ending Bal. 2,000

BRIEF EXERCISE 2-8

CashDate Explanation Ref. Debit Credit BalanceMay 12 J1 2,400 2,400

15 J1 3,000 5,400


BRIEF EXERCISE 2-8 (Continued)

Accounts ReceivableDate Explanation Ref. Debit Credit BalanceMay 5 J1 4,400 4,400

12 J1 2,400 2,000

Service RevenueDate Explanation Ref. Debit Credit BalanceMay 5 J1 4,400 4,400

15 J1 3,000 7,400

BRIEF EXERCISE 2-9

AMARO COMPANYTrial BalanceJune 30, 2017

Debit CreditCash ........................................................................... $ 5,800Accounts Receivable ................................................ 3,000Equipment.................................................................. 17,000Accounts Payable...................................................... $ 8,100Owner’s Capital ......................................................... 15,000Owner’s Drawings ..................................................... 1,200Service Revenue........................................................ 10,000Salaries and Wages Expense ................................... 5,100Rent Expense............................................................. 1,000

$33,100 $33,100


BRIEF EXERCISE 2-10

CAPPSHAW COMPANYTrial Balance

December 31, 2017

Debit CreditCash ............................................................................ $10,800Prepaid Insurance ...................................................... 3,500Accounts Payable ...................................................... $ 3,000Unearned Service Revenue ....................................... 2,200Owner’s Capital .......................................................... 9,000Owner’s Drawings...................................................... 4,500Service Revenue ........................................................ 25,600Salaries and Wages Expense .................................... 18,600Rent Expense ............................................................. 2,400

$39,800 $39,800

SOLUTIONS FOR DO IT! REVIEW EXERCISES

DO IT! 2-1

Tom would likely need the following accounts in which to record thetransactions necessary to ready his photography studio for opening day:

Cash (debit balance) Equipment (debit balance)Supplies (debit balance) Accounts Payable (credit balance)Notes Payable (credit balance) Owner’s Capital (credit balance)

DO IT! 2-2

Each transaction that is recorded is entered in the general journal. Thethree activities would be recorded as follows:

1. Cash.............................................................. 6,300Owner’s Capital................................... 6,300

2. Supplies ....................................................... 1,100Cash..................................................... 400Accounts Payable............................... 700

3. No entry because no transaction has occurred.


DO IT! 2-3

Cash4/1 1,600 4/16 7004/3 3,400 4/20 2504/30 4,050

DO IT! 2-4

CARLAND COMPANYTrial Balance

December 31, 2017

Debit CreditCash ........................................................................... $ 6,000Accounts Receivable ................................................ 8,000Supplies ..................................................................... 6,000Equipment.................................................................. 80,000Notes Payable............................................................ $ 20,000Accounts Payable...................................................... 11,000Salaries and Wages Payable .................................... 3,000Owner’s Capital ......................................................... 28,000Owner’s Drawings ..................................................... 8,000Service Revenue........................................................ 88,000Rent Expense............................................................. 4,000Salaries and Wages Expense ................................... 38,000

$150,000 $150,000


SOLUTIONS TO EXERCISES

EXERCISE 2-1

1. False. An account is an accounting record of a specific asset, liability,or owner’s equity item.

2. False. An account shows increases and decreases in the item it relates to.

3. False. Each asset, liability, and owner’s equity item has a separateaccount.

4. False. An account has a left, or debit side, and a right, or credit side.

5. True.

EXERC

ISE 2-2

2-16C

opyright © 2015 John W

iley & Sons, Inc.W

eygandt,Accounting Principles,12/e,Solutions M

anual(For Instructor U

se Only)

Account Debited Account Credited

Transaction

(a)BasicType

(b)SpecificAccount

(c)

Effect

(d)NormalBalance

(a)BasicType

(b)SpecificAccount

(c)

Effect

(d)NormalBalance

Jan. 2 Asset Cash Increase Debit Owner’sEquity

Owner’sCapital

Increase Credit

3 Asset Equipment Increase Debit Asset Cash Decrease Debit

9 Asset Supplies Increase Debit Liability AccountsPayable

Increase Credit

11 Asset AccountsReceivable

Increase Debit Owner’sEquity

ServiceRevenue

Increase Credit

16 Owner’sEquity

AdvertisingExpense

Increase Debit Asset Cash Decrease Debit

20 Asset Cash Increase Debit Asset AccountsReceivable

Decrease Debit

23 Liability AccountsPayable

Decrease Credit Asset Cash Decrease Debit

28 Owner’sEquity

Owner’sDrawings

Increase Debit Asset Cash Decrease Debit


EXERCISE 2-3

General Journal J1Date Account Titles and Explanation Ref. Debit CreditJan. 2 Cash................................................... 10,000

Owner’s Capital ......................... 10,000

3 Equipment ......................................... 3,000Cash ........................................... 3,000

9 Supplies............................................. 500Accounts Payable ..................... 500

11 Accounts Receivable ........................ 2,400Service Revenue........................ 2,400

16 Advertising Expense......................... 350Cash ........................................... 350

20 Cash................................................... 700Accounts Receivable ................ 700

23 Accounts Payable ............................. 300Cash ........................................... 300

28 Owner’s Drawings............................. 1,000Cash ........................................... 1,000

EXERCISE 2-4

Oct. 1 Debits increase assets: debit Cash $15,000.Credits increase owner’s equity: credit Owner’s Capital $15,000.

2 No transaction.

3 Debits increase assets: debit Equipment $1,900.Credits increase liabilities: credit Accounts Payable $1,900.


EXERCISE 2-4 (Continued)

Oct. 6 Debits increase assets: debit Accounts Receivable $3,800.Credits increase revenues: credit Service Revenue $3,800.

27 Debits decrease liabilities: debit Accounts Payable $1,100.Credits decrease assets: credit Cash $1,100.

30 Debits increase expenses: debit Salaries and Wages Expense$2,500.Credits decrease assets: credit Cash $2,500.

EXERCISE 2-5

General JournalDate Account Titles and Explanation Ref. Debits CreditOct. 1 Cash .................................................. 15,000

Owner’s Capital ....................... 15,000

2 No entry.

3 Equipment ........................................ 1,900Accounts Payable ................... 1,900

6 Accounts Receivable ....................... 3,800Service Revenue...................... 3,800

27 Accounts Payable ............................ 1,100Cash ......................................... 1,100

30 Salaries and Wages Expense .......... 2,500Cash ......................................... 2,500


EXERCISE 2-6

(a) 1. Increase the asset Cash, increase the liability Notes Payable.2. Increase the asset Equipment, decrease the asset Cash.3. Increase the asset Supplies, increase the liability Accounts Payable.

(b) 1. Cash ................................................................. 5,000Notes Payable ........................................... 5,000

2. Equipment........................................................ 3,100Cash .......................................................... 3,100

3. Supplies ........................................................... 850Accounts Payable..................................... 850

EXERCISE 2-7

(a) Assets = Liabilities + Owner’s Equity1. + + (Investment)2. – – (Expense)3. + + (Revenue)4. – – (Drawings)

(b) 1. Cash ................................................................. 4,000Owner’s Capital ........................................ 4,000

2. Rent Expense .................................................. 840Cash .......................................................... 840

3. Accounts Receivable ...................................... 5,200Service Revenue....................................... 5,200

4. Owner’s Drawings ........................................... 750Cash .......................................................... 750

EXERCISE 2-8

1. False. The general ledger contains all the asset, liability, and owner’sequity accounts.

2. True.3. False. The accounts in the general ledger are arranged in financial

statement order: first the assets, then the liabilities, owner’s capital,owner’s drawings, revenues, and expenses.

4. True.5. False. The general ledger is not a book of original entry; transactions

are first recorded in the general journal, then in the general ledger.


EXERCISE 2-9

(a)

CashAug. 1 5,000 Aug. 12 2,300

10 2,60031 900

Bal. 6,200

Accounts ReceivableAug. 25 1,700 Aug. 31 900Bal. 800

EquipmentAug. 12 5,000

Notes PayableAug. 12 2,700

Owner’s CapitalAug. 1 5,000

Service RevenueAug. 10 2,600

25 1,700Bal. 4,300

(b) JUNE FELDMAN, INVESTMENT BROKERTrial Balance

August 31, 2017

Debit CreditCash........................................................................ $ 6,200Accounts Receivable............................................. 800Equipment .............................................................. 5,000Notes Payable ........................................................ $ 2,700Owner’s Capital...................................................... 5,000Service Revenue .................................................... 4,300

$12,000 $12,000


EXERCISE 2-10

(a)General Journal

Date Account Titles and Explanation Ref. Debit CreditApr. 1 Cash ....................................................

Owner’s Capital ..............................(Owner’s investment ofcash in business)

12,00012,000

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

(Received cash forservices performed)

900900

15 Salaries and Wages Expense ............Cash ................................................

(Paid salaries to date)

1,3001,300

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

(Paid creditors on account)

1,5001,500

29 Cash ....................................................Accounts Receivable .....................

(Received cash in paymentof account)

400400

30 Cash ....................................................Unearned Service Revenue ...........

(Received cash for futureservices)

1,0001,000



(b) DAGGETT LANDSCAPING COMPANYTrial BalanceApril 30, 2017

Debit CreditCash.......................................................................... $11,500Accounts Receivable............................................... 2,800Supplies.................................................................... 1,800Accounts Payable .................................................... $ 300Unearned Service Revenue..................................... 1,000Owner’s Capital........................................................ 12,000Service Revenue ...................................................... 4,100Salaries and Wages Expense.................................. 1,300

$17,400 $17,400

EXERCISE 2-11

(a) Oct. 1 Cash............................................................. 3,000Owner’s Capital .................................... 3,000

(Owner’s investment of cash inbusiness)

10 Cash............................................................. 750Service Revenue .................................. 750


10 Cash............................................................. 4,000Notes Payable....................................... 4,000

(Obtained loan from bank)

20 Cash............................................................. 500Accounts Receivable ........................... 500

(Received cash in payment ofaccount)

20 Accounts Receivable .................................. 940Service Revenue .................................. 940

(Billed clients for servicesperformed)



(b) SHUMWAY CO.Trial Balance

October 31, 2017

Debit CreditCash..................................................................... $ 7,200Accounts Receivable.......................................... 1,240Supplies .............................................................. 400Equipment ........................................................... 2,000Notes Payable ..................................................... $ 4,000Accounts Payable............................................... 500Owner’s Capital .................................................. 5,000Owner’s Drawings .............................................. 300Service Revenue................................................. 2,490Salaries and Wages Expense ............................ 500Rent Expense ..................................................... 350

$11,990 $11,990

EXERCISE 2-12

(a)General Journal J1

Date Account Titles and Explanation Ref. Debit CreditSept. 1 Cash...................................................

Owner’s Capital .........................101301

10,00010,000

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

157101201

12,0004,0008,000

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

201101

3,0003,000

30 Owner’s Drawings.............................Cash ...........................................

306101

700700



(b)

Cash No. 101Date Explanation Ref. Debit Credit BalanceSept. 1 J1 10,000 10,000

5 J1 4,000 6,00025 J1 3,000 3,00030 J1 700 2,300

Equipment No. 157Date Explanation Ref. Debit Credit BalanceSept. 5 J1 12,000 12,000

Accounts Payable No. 201Date Explanation Ref. Debit Credit BalanceSept. 5 J1 8,000 8,000

25 J1 3,000 5,000

Owner’s Capital No. 301Date Explanation Ref. Debit Credit BalanceSept. 1 J1 10,000 10,000

Owner’s Drawings No. 306Date Explanation Ref. Debit Credit BalanceSept. 30 J1 700 700


EXERCISE 2-13

Error(a)

In Balance(b)

Difference(c)

Larger Column1. No $525 Debit2. Yes — —3. Yes — —4. No 415 Credit5. Yes — —6. No 27 Debit

EXERCISE 2-14

OVERNITE DELIVERY SERVICETrial BalanceJuly 31, 2017

Debit CreditCash ($78,821 – Debit total without Cash

$66,340) ................................................................... $12,481Accounts Receivable ................................................. 7,642Prepaid Insurance ...................................................... 1,968Equipment................................................................... 49,360Notes Payable............................................................. $17,000Accounts Payable ...................................................... 8,396Salaries and Wages Payable ..................................... 815Owner’s Capital .......................................................... 42,000Owner’s Drawings...................................................... 700Service Revenue ........................................................ 10,610Salaries and Wages Expense .................................... 4,428Maintenance and Repairs Expense........................... 961Gasoline Expense ...................................................... 758Utilities Expense ........................................................ 523

$78,821 $78,821


SOLUTIONS TO PROBLEMS

PROBLEM 2-1A

J1Date Account Titles and Explanation Ref. Debit CreditMar. 1 Cash ........................................................ 20,000

Owner’s Capital .............................. 20,000(Owner’s investment of cashin business)

3 Land......................................................... 12,000Buildings................................................. 2,000Equipment............................................... 1,000

Cash ................................................ 15,000(Purchased Rainbow’s Golf Land)

5 Advertising Expense .............................. 900Cash ................................................ 900

(Paid for advertising)

6 Prepaid Insurance .................................. 600Cash ................................................ 600

(Paid for one-year insurancepolicy)

10 Equipment............................................... 1,050Accounts Payable .......................... 1,050

(Purchased equipment onaccount)

18 Cash ........................................................ 1,100Service Revenue ............................ 1,100


19 Cash ........................................................ 1,500Unearned Service Revenue ........... 1,500

(Received cash for couponbooks sold)


PROBLEM 2-1A (Continued)

Date Account Titles and Explanation Ref. Debit CreditMar. 25 Owner’s Drawings...............................

Cash .............................................(Withdrew cash for personaluse)

800800

30 Salaries and Wages Expense.............Cash .............................................

(Paid salaries)

250250

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

(Paid creditor on account)

1,0501,050

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


2,7002,700


PROBLEM 2-2A

(a)J1

Date Account Titles and Explanation Ref. Debit CreditApr. 1 Cash........................................................ 101 20,000

Owner’s Capital ............................. 301 20,000(Owner’s investment of cashin business)


2 Rent Expense ......................................... 729 1,100Cash ............................................... 101 1,100

(Paid monthly office rent)

3 Supplies.................................................. 126 4,000Accounts Payable.......................... 201 4,000

(Purchased supplies onaccount from Dazzle Company)

10 Accounts Receivable............................. 112 5,100Service Revenue............................ 400 5,100

(Billed clients for servicesperformed)

11 Cash........................................................ 101 1,000Unearned Service Revenue........... 209 1,000

(Received cash for futureservice)

20 Cash........................................................ 101 2,100Service Revenue............................ 400 2,100


30 Salaries and Wages Expense................ 726 2,800Cash ............................................... 101 2,800

(Paid monthly salary)



Date Account Titles and Explanation Ref. Debits CreditApr. 30 Accounts Payable .............................. 201 2,400

Cash ............................................ 101 2,400(Paid Dazzle Company onaccount)

(b)

Cash No. 101Date Explanation Ref. Debit Credit BalanceApr. 1 J1 20,000 20,000

2 J1 1,100 18,90011 J1 1,000 19,90020 J1 2,100 22,00030 J1 2,800 19,20030 J1 2,400 16,800

Accounts Receivable No. 112Date Explanation Ref. Debit Credit BalanceApr. 10 J1 5,100 5,100

Supplies No. 126Date Explanation Ref. Debit Credit BalanceApr. 3 J1 4,000 4,000

Accounts Payable No. 201Date Explanation Ref. Debit Credit BalanceApr. 3 J1 4,000 4,000

30 J1 2,400 1,600

Unearned Service Revenue No. 209Date Explanation Ref. Debit Credit BalanceApr. 11 J1 1,000 1,000



Owner’s Capital No. 301Date Explanation Ref. Debit Credit BalanceApr. 1 J1 20,000 20,000

Service Revenue No. 400Date Explanation Ref. Debit Credit BalanceApr. 10 J1 5,100 5,100

20 J1 2,100 7,200

Salaries and Wages Expense No. 726Date Explanation Ref. Debit Credit BalanceApr. 30 J1 2,800 2,800

Rent Expense No. 729Date Explanation Ref. Debit Credit BalanceApr. 2 J1 1,100 1,100

(c) EMILY VALLEY, DENTISTTrial BalanceApril 30, 2017

Debit CreditCash.................................................................... $16,800Accounts Receivable......................................... 5,100Supplies.............................................................. 4,000Accounts Payable .............................................. $ 1,600Unearned Service Revenue............................... 1,000Owner’s Capital.................................................. 20,000Service Revenue ................................................ 7,200Salaries and Wages Expense............................ 2,800Rent Expense ..................................................... 1,100

$29,800 $29,800


PROBLEM 2-3A

(a)

Trans. Account Titles and Explanation Debit Credit1. Cash .................................................... 40,000

Owner’s Capital ......................... 40,000

2. No entry—Not a transaction.

3. Prepaid Rent ....................................... 24,000Cash ........................................... 24,000

4. Equipment .......................................... 30,000Cash ........................................... 10,000Accounts Payable ..................... 20,000

5. Prepaid Insurance .............................. 1,800Cash ........................................... 1,800

6. Supplies .............................................. 420Cash ........................................... 420

7. Supplies .............................................. 1,500Accounts Payable ..................... 1,500

8. Cash .................................................... 8,000Accounts Receivable ......................... 12,000

Service Revenue ....................... 20,000

9. Accounts Payable .............................. 400Cash ........................................... 400

10. Cash .................................................... 3,000Accounts Receivable ................ 3,000

11. Utilities Expense ................................ 380Accounts Payable ..................... 380



Trans. Account Titles and Explanation Debit Credit12. Salaries and Wages Expense.......... 6,100

Cash .......................................... 6,100

(b)Cash

(1) 40,000(3) 24,000(4) 10,000(5) 1,800(6) 420

(8) 8,000(9) 400

(10) 3,000(12) 6,100

8,280

Accounts Receivable(8) 12,000

(10) 3,0009,000

Supplies(6) 420(7) 1,500

1,920

Prepaid Insurance(5) 1,800

1,800

Prepaid Rent(3) 24,000

24,000

Equipment(4) 30,000

30,000

Accounts Payable(4) 20,000(7) 1,500

(9) 400(11) 380

21,480

Owner’s Capital(1) 40,000

40,000

Service Revenue(8) 20,000

20,000

Salaries and Wages Expense(12) 6,100

6,100

Utilities Expense(11) 380

380



(c) MAQUOKETA SERVICESTrial BalanceMay 31, 2017

Debit CreditCash................................................................. $ 8,280Accounts Receivable...................................... 9,000Supplies .......................................................... 1,920Prepaid Insurance........................................... 1,800Prepaid Rent ................................................... 24,000Equipment ....................................................... 30,000Accounts Payable........................................... $21,480Owner’s Capital .............................................. 40,000Service Revenue............................................. 20,000Salaries and Wages Expense ........................ 6,100Utilities Expense............................................. 380

$81,480 $81,480


PROBLEM 2-4A

AVTAR SANDHU CO.Trial BalanceJune 30, 2017

Debit CreditCash ($3,340 + $270) ................................................. $ 3,610Accounts Receivable ($2,812 – $270) ...................... 2,542Supplies ($1,200 – $710) ........................................... 490Equipment ($2,600 + $710)........................................ 3,310Accounts Payable ($3,666 – $306 – $360)................ $ 3,000Unearned Service Revenue ...................................... 1,100Owner’s Capital ......................................................... 8,000Owner’s Drawings ($800 + $600) .............................. 1,400Service Revenue ($2,480 + $882).............................. 3,362Salaries and Wages Expense

($3,200 + $700 – $600) ............................................ 3,300Utilities Expense........................................................ 810

$15,462 $15,462


PROBLEM 2-5A

(a) & (c)

Cash No. 101Date Explanation Ref. Debit Credit BalanceMar. 1 Balance 3,000

2 J1 1,500 1,5009 J1 4,300 5,800

10 J1 4,100 1,70012 J1 900 80020 J1 5,000 5,80020 J1 2,000 3,80031 J1 3,100 70031 J1 450 1,15031 J1 9,000 10,150

Accounts Receivable No. 112Date Explanation Ref. Debit Credit BalanceMar. 31 J1 450 450

Land No. 140Date Explanation Ref. Debit Credit BalanceMar. 1 Balance 24,000

Buildings No. 145Date Explanation Ref. Debit Credit BalanceMar. 1 Balance 10,000

Equipment No. 157Date Explanation Ref. Debit Credit BalanceMar. 1 Balance 10,000



Accounts Payable No. 201Date Explanation Ref. Debit Credit BalanceMar. 1 Balance 7,000

2 J1 2,000 9,00010 J1 4,100 4,900

Owner’s Capital No. 301Date Explanation Ref. Debit Credit BalanceMar. 1 Balance 40,000

Service Revenue No. 400Date Explanation Ref. Debit Credit BalanceMar. 9 J1 4,300 4,300

20 J1 5,000 9,30031 J1 9,000 18,300

Rent Revenue No. 429Date Explanation Ref. Debit Credit BalanceMar.31 J1 900 900

Advertising Expense No. 610Date Explanation Ref. Debit Credit BalanceMar.12 J1 900 900

Salaries and Wages Expense No. 726Date Explanation Ref. Debit Credit BalanceMar. 31 J1 3,100 3,100



Rent Expense No. 729Date Explanation Ref. Debit Credit BalanceMar. 2 J1 3,500 3,500

20 J1 2,000 5,500

(b)J1

Date Account Titles and Explanation Ref. Debit CreditMar. 2 Rent Expense ....................................... 729 3,500

Accounts Payable ....................... 201 2,000Cash ............................................. 101 1,500

(Rented films for cash andon account)

3 No entry.

9 Cash ...................................................... 101 4,300Service Revenue.......................... 400 4,300


10 Accounts Payable ($2,000 + $2,100) ...... 201 4,100Cash ............................................. 101 4,100

(Paid creditors on account)

11 No entry.

12 Advertising Expense............................ 610 900Cash ............................................. 101 900

(Paid advertising expense)

20 Cash ...................................................... 101 5,000Service Revenue.......................... 400 5,000


20 Rent Expense ....................................... 729 2,000Cash ............................................. 101 2,000

(Paid film rental)



Date Account Titles and Explanation Ref. Debit CreditMar. 31 Salaries and Wages Expense............... 726 3,100

Cash ............................................. 101 3,100(Paid salaries expense)

31 Cash....................................................... 101 450Accounts Receivable............................ 112 450

Rent Revenue............................... 429 900(15% X $6,000)(Received cash and balanceon account for rentrevenue)

31 Cash....................................................... 101 9,000Service Revenue.......................... 400 9,000


(d) STARR THEATERTrial Balance

March 31, 2017

Debit CreditCash ................................................................. $10,150Accounts Receivable ...................................... 450Land.................................................................. 24,000Buildings.......................................................... 10,000Equipment........................................................ 10,000Accounts Payable............................................ $ 4,900Owner’s Capital ............................................... 40,000Service Revenue.............................................. 18,300Rent Revenue .................................................. 900Advertising Expense ....................................... 900Salaries and Wages Expense ......................... 3,100Rent Expense.................................................. 5,500

$64,100 $64,100


CC2 COOKIE CREATIONS

(a) GENERAL JOURNAL J1Account Titles and Explanation Debit Credit

Nov. 8 No entry required for cashing U.S.Savings Bonds—this is a personaltransaction.

8 Cash ......................................................... 500Owner’s Capital .................................. 500

11 Advertising Expense............................... 65Cash..................................................... 65

13 Supplies ................................................... 125Cash..................................................... 125

14 Equipment ............................................... 300Owner’s Capital .................................. 300

16 Cash ......................................................... 2,000Notes Payable ..................................... 2,000

17 Equipment ............................................... 900Cash..................................................... 900

20 Cash ......................................................... 125Service Revenue................................. 125

25 Cash ......................................................... 30Unearned Service Revenue................ 30

30 Prepaid Insurance ................................... 1,320Cash..................................................... 1,320


CC2 (Continued)

(b)

CashDate Explanation Ref. Debits Credits Balance

Nov. 8 J1 500 50011 J1 65 43513 J1 125 31016 J1 2,000 2,31

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