Analyzing Chapter 02 Transactions

Chapter 02 - Analyzing and Recording Transactions
Chapter 2
Problem Set B
Problem 2-1B (90 minutes) Part 1
Nov. 1
Cash............................................................101
Office Equipment.......................................163
K. Shaw, Capital.................................301
30,000
15,000
45,000
Owner invested cash and equipment..
Prepaid Rent...............................................131
Cash....................................................101
4,500
4,500
Prepaid six months rent.
Office Supplies...........................................124
Accounts Payable..............................201
2,500
600
3,100
Purchased equipment and supplies on credit.
Cash............................................................101
Services Revenue...............................403
3,400
3,400
Received cash for services.
12
Accounts Receivable.................................106
10,200
10,200
Billed client for completed work.
13
Accounts Payable......................................201
Cash....................................................101
3,100
3,100
Paid balance due on account.
19
Prepaid Insurance......................................128
Cash....................................................101
1,800
1,800
Paid premium for insurance.
22
Cash............................................................101
Accounts Receivable.........................106
5,200
5,200
Collected part of amount owed by client.
24
2-1
1,750
1,750
28
K. Shaw, Withdrawals................................302
Cash....................................................101
5,300
5,300
Withdrew cash from business.
29
Office Supplies...........................................124
249
249
Purchased supplies on account.
30
Utilities Expense........................................690
Cash....................................................101
Paid monthly utility bill.
2-2
531
531
Problem 2-1B (Continued)

Part 2
Date
Nov.
Date
Nov.
Date
Nov.
Date
Nov.
Date
Nov.
Date
Nov.
Date
Nov.
Explanation
1
2
8
13
19
22
28
30
Cash
PR
G1
G1
G1
G1
G1
G1
G1
G1
Debit
30,000
3,400
5,200
Acct. No. 101

Credit Balance
30,000
4,500
25,500
28,900
3,100
25,800
1,800
24,000
29,200
5,300
23,900
531
23,369
12
22
24
Accounts Receivable
Explanation
PR
Debit
G1
10,200
G1
G1
1,750
Acct. No. 106

Credit Balance
10,200
5,200
5,000
6,750
4
29
Office Supplies
Explanation
PR
G1
G1
Debit
600
249
Acct. No. 124

Credit Balance
600
849
19
Prepaid Insurance
Explanation
PR
Debit
G1
1,800
Acct. No. 128

Credit Balance
1,800
Prepaid Rent
Explanation
PR
G1
Debit
4,500
Acct. No. 131

Credit Balance
4,500
1
4
Office Equipment
Explanation
PR
G1
G1
Debit
15,000
2,500
Acct. No. 163

Credit Balance
15,000
17,500
4
13
29
Accounts Payable
Explanation
PR
G1
G1
G1
2-3
Debit
3,100
Acct. No. 201

Credit Balance
3,100
3,100
0
249
249
Date
Nov.
Date
Nov.
Date
Nov.
Date
Nov.
K. Shaw, Capital
Explanation
PR
G1
28
K. Shaw, Withdrawals
Explanation
PR
G1
8
12
24
Services Revenue
Explanation
PR
G1
G1
G1
30
Utilities Expense
Explanation
PR
G1
Debit
Debit
5,300
Debit
Debit
531
Acct. No. 301

Credit Balance
45,000
45,000
Acct. No. 302
Credit Balance
5,300
Acct. No. 403
Credit Balance
3,400
3,400
10,200
13,600
1,750
15,350
Acct. No. 690
Credit Balance
531
Part 3
SHAW MANAGEMENT SERVICES
Trial Balance
November 30
Debit
Cash....................................................................... $23,369
Accounts receivable............................................
6,750
Office supplies......................................................
849
Prepaid insurance................................................
1,800
Prepaid rent..........................................................
4,500
Office equipment.................................................. 17,500
Accounts payable.................................................
K. Shaw, Capital...................................................
K. Shaw, Withdrawals..........................................
5,300
Services revenue..................................................
Utilities expense...................................................
531
Totals..................................................................... $60,599
2-4
Credit
$ 249
45,000
15,350
______
$60,599

Problem 2-2B (90 minutes)
Part 1
a.
Cash............................................................101
Computer Equipment.................................164
B. Gable, Capital.................................301
45,000
4,500
28,000
77,500
Owner invested cash and equipment.
b.
Land............................................................172
Cash....................................................101
Notes Payable.....................................250
24,000
4,800
19,200
Purchased land with cash and note payable.
c.
Building.......................................................170
Cash....................................................101
21,000
21,000
Purchased building
d.
Prepaid Insurance......................................108
Cash....................................................101
6,600
6,600
Purchased 24-month insurance policy.
e.
Cash............................................................101
Fees Earned........................................402
3,200
3,200
Collected cash for completed work.
f.
Computer Equipment.................................164
Cash....................................................101
Notes Payable.....................................250
3,500
700
2,800
Purchased equipment with cash and note

payable.
g.
Fees Earned........................................402
3,750
3,750
Completed services for client.
h.
Purchased equipment on credit.
2-5
750
750
i.
Fees Earned........................................402
2-6
9,200
9,200
Problem 2-2B (Part 1 Continued)

j.
Computer Rental Expense........................602

320
320
Incurred computer rental expense.
k.
Cash............................................................101
Accounts Receivable.........................106
4,600
4,600
Collected cash on account.
l.
Wages Expense..........................................601
Cash....................................................101
1,600
1,600
Paid assistants wages.
m.
Cash...................................................101
750
750
Paid amount due on account.
n.
Repairs Expense........................................604
Cash...................................................101
425
425
Paid for repair of equipment.
o.
B. Gable, Withdrawals...............................302
Cash....................................................101
3,875
3,875
Cash withdrawn for personal use.
p.
Wages Expense..........................................601
Cash....................................................101
1,600
1,600
Paid assistants wages.
q.
Advertising Expense..................................603
Cash....................................................101
Paid for advertising expense.
2-7
800
800

Part 2
Cash
Date PR
(a)
(b)
(c)
(d)
(e)
(f)
(k)
(l)
(m)
(n)
(o)
(p)
(q)
Debit
45,000
Credit
4,800
21,000
6,600
3,200
700
4,600
1,600
750
425
3,875
1,600
800
No. 101
Balance
45,000
40,200
19,200
12,600
15,800
15,100
19,700
18,100
17,350
16,925
13,050
11,450
10,650
Accounts Receivable
No. 106
Date PR Debit
Credit
Balance
(g)
3,750
3,750
(i)
9,200
12,950
(k)
4,600
8,350
Accounts Payable
Date PR Debit
(h)
(j)
(m)
750
No. 201
Credit
Balance
750
750
320
1,070
320
Notes Payable
Date PR Debit
(b)
(f)
No. 250
Credit
Balance
19,200
19,200
2,800
22,000
B. Gable, Capital
Date PR Debit
(a)
No. 301
Credit
Balance
77,500
77,500
B. Gable, Withdrawals
Date PR Debit
Credit
(o)
3,875
No. 302
Balance
3,875
Balance
6,600
Fees Earned
Date PR Debit
(e)
(g)
(i)
Credit
No. 163
Balance
4,500
5,250
Wages Expense
Date PR Debit
(l)
1,600
(p)
1,600
Credit
No. 601
Balance
1,600
3,200
Computer Equipment
Date PR Debit
Credit
(a)
28,000
(f)
3,500
No. 164
Balance
28,000
31,500
Computer Rental Expense

Date PR Debit
Credit
(j)
320
No. 602
Balance
320
Building
Date PR
(c)
Credit
No. 170
Balance
21,000
Advertising Expense
Date PR Debit
Credit
(q)
800
No. 603
Balance
800
Credit
No. 172
Balance
24,000
Repairs Expense
Date PR Debit
(n)
425
No. 604
Balance
425
Prepaid Insurance
Date PR
(d)
Debit
6,600
Office Equipment
Date PR Debit
(a)
4,500
(h)
750
Land
Date PR
(b)
Debit
21,000
Debit
24,000
No. 108
Credit
2-8
No. 402
Credit
Balance
3,200
3,200
3,750
6,950
9,200
16,150
Credit
Problem 2-2B (Concluded)

Part 3
SOFTWAYS
Trial Balance
April 30
Debit
Cash ............................................................. $ 10,650
Accounts receivable....................................
8,350
Prepaid insurance.......................................
6,600
Office equipment.........................................
5,250
Computer equipment.................................. 31,500
Building........................................................ 21,000
Land.............................................................. 24,000
Accounts payable........................................
Notes payable..............................................
B. Gable, Capital..........................................
B. Gable, Withdrawals.................................
3,875
Fees earned..................................................
Wages expense............................................
3,200
Computer rental expense...........................
320
Advertising expense...................................
800
Repairs expense..........................................
425
Totals........................................................... $115,970
2-9
Credit
320
22,000
77,500
16,150
$115,970

Part 1
SCHMIT CO.
Balance Sheet
December 31, 2010
Assets
Cash................................. $ 14,000
Accounts receivable......
25,000
..........................................
Office supplies................
10,000
Office equipment............
60,000
Machinery........................
30,500
Total assets..................... $139,500
Liabilities
Accounts payable............. $
5,000
Owner's Equity
J. Schmit, Capital.............. 134,500
Total liabilities & equity.... $139,500
SCHMIT CO.
Balance Sheet
December 31, 2011
Assets
Cash................................. $ 10,000
Accounts receivable......
30,000
Office supplies................
12,500
Office equipment............
60,000
Machinery........................
30,500
Building........................... 260,000
Land.................................
65,000
Total assets..................... $468,000
Liabilities
Accounts payable............. $ 15,000
Note payable...................... 260,000
Total liabilities................... 275,000
Owner's Equity
J. Schmit, Capital.............. 193,000
Total liabilities & equity.... $468,000
Part 2
Calculation of 2011 net income:
Equity, December 31, 2011........................................................... $193,000
Equity, December 31, 2010........................................................... (134,500)
Increase in equity in 2011.............................................................
58,500
Deduct additional investment.....................................................
Net increase in 2011 equity, apart from new investment..........
(25,000)
33,500
Add withdrawals ($1,000 x 12).....................................................

12,000
Net income in 2011........................................................................ $ 45,500
2-10
Part 3
Debt ratio = $275,000 / $468,000 = 58.76%
Part 1
Sept.1 Cash..........................................................101
Office Equipment.....................................163
R. Lummus, Capital..........................301
28,000
25,000
Owner invested in the business.
Prepaid Rent.............................................131
Cash...................................................101
53,000
10,500
10,500
Prepaid twelve months rent.
Office Equipment.....................................163
Office Supplies.........................................124
Accounts Payable............................201
9,000
1,200
Cash..........................................................101
Service Fees Earned........................401
2,600
Purchased equipment and supplies on credit.
10,200
2,600
Received cash for services.
12
Accounts Receivable...............................106
13,400
13,400
13
Accounts Payable....................................201
Cash...................................................101
10,200
10,200
Paid balance due on account.
19
Prepaid Insurance....................................128
Cash...................................................101
2-11
5,200
5,200

Paid premium for insurance.
22
Cash..........................................................101
Accounts Receivable.......................106
7,800
7,800
Collected part of amount owed by client.
24
Accounts Receivable..............................106
1,900
1,900
28
R. Lummus, Withdrawals........................302
Cash...................................................101
5,300
5,300
Withdrew cash for personal use.
29
Office Supplies.........................................124
Accounts Payable............................201
1,700
Utilities Expense......................................690
Cash...................................................101
460
1,700
Purchased supplies on account.
30
Paid monthly utility bill.
2-12
460

Part 2
Date
Sept.
Date
Sept.
Date
Sept.
Date
Sept.
Date
Sept.
Date
Sept.
Explanation
1
2
8
13
19
22
28
30
Cash
PR
G1
G1
G1
G1
G1
G1
G1
G1
Debit
28,000
2,600
7,800
Acct. No. 101

Credit
Balance
28,000
10,500
17,500
20,100
10,200
9,900
5,200
4,700
12,500
5,300
7,200
460
6,740
12
22
24
Accounts Receivable
Explanation
PR
Debit
G1
13,400
G1
G1
1,900
Acct. No. 106

Credit
Balance
13,400
7,800
5,600
7,500
4
29
Office Supplies
Explanation
PR
Debit
G1
1,200
G1
1,700
Acct. No. 124

Credit
Balance
1,200
2,900
19
Prepaid Insurance
Explanation
PR
G1
Prepaid Rent
Explanation
PR
G1
1
4
Office Equipment
Explanation
PR
G1
G1
2-13
Debit
5,200
Acct. No. 128

Credit Balance
5,200
Debit
10,500
Acct. No. 131

Credit Balance
10,500
Debit
25,000
9,000
Acct. No. 163

Credit Balance
25,000
34,000

Date
Sept.
Date
Sept.
Date
Sept.
Date
Sept.
Date
Sept.
4
13
29
Accounts Payable
Explanation
PR
G1
G1
G1
R. Lummus, Capital
Explanation
PR
G1
28
R. Lummus, Withdrawals
Explanation
PR
Debit
G1
5,300
Acct. No. 302

Credit
Balance
5,300
8
12
24
Service Fees Earned

Explanation
PR
Debit
G1
G1
G1
Acct. No. 401

Credit Balance
2,600
2,600
13,400
16,000
1,900
17,900
30
Utilities Expense
Explanation
PR
G1
Acct. No. 690

Credit Balance
460
2-14
Debit
10,200
Debit
Debit
460
Acct. No. 201

Credit Balance
10,200
10,200
0
1,700
1,700
Acct. No. 301

Credit Balance
53,000
53,000

Part 3
LUMMUS MANAGEMENT SERVICES
Trial Balance
September 30
Debit
Cash.......................................................................
$ 6,740
Accounts receivable............................................
7,500
Office supplies......................................................
2,900
Prepaid insurance................................................
5,200
Prepaid rent..........................................................
10,500
Office equipment..................................................
34,000
Credit
$ 1,700
R. Lummus, Capital.............................................
53,000
R. Lummus, Withdrawals.....................................
5,300
Service fees earned..............................................

Utilities expense...................................................
17,900
460
______
Totals .................................................................... $72,600
$72,600
2-15

Part 1
a.
Cash............................................................101
C. Cooke, Capital..............................301
80,000
30,000
110,000
Owner invested cash and equipment.
b.
Land............................................................172 30,000
Building.......................................................170 170,000
Cash....................................................101
Notes Payable.....................................250
40,000
160,000
Purchased land and building with cash and

note payable.
c.
Office Supplies...........................................108
2,400
2,400
Purchased office supplies on account.
d.
Automobiles...............................................164
C. Cooke, Capital................................301
18,000
18,000
Owner contributed automobile to business.
e.
6,000
6,000
Purchased office equipment on account..
f.
Salaries Expense........................................601
Cash....................................................101
1,500
1,500
Paid assistants salary.
g.
Cash............................................................101
Fees Earned........................................402
6,000
6,000
Provided services for cash.
h.
Utilities Expense........................................602
Cash....................................................101
Paid cash for utilities.
2-16
800
800
Problem 2-5B (Part 1 Continued)

i.
Cash....................................................101
2,400
2,400
Paid cash on account.
j.
Cash....................................................101
20,000
20,000
Purchased new equipment with cash.
k.
Fees Earned........................................402
5,200
5,200
Provided services on account.
l.
Salaries Expense........................................601
Cash....................................................101
1,500
1,500
Paid assistants salary.
m.
Cash............................................................101
Accounts Receivable.......................106
3,800
3,800
Received cash due on account.
n.
C. Cooke, Withdrawals..............................302
Cash...................................................101
Cash withdrawn for personal use.
2-17
6,400
6,400

Part 2
Cash
Date PR
(a)
(b)
(f)
(g)
(h)
(i)
(j)
(l)
(m)
(n)
Debit
80,000
Credit
40,000
1,500
6,000
800
2,400
20,000
1,500
3,800
6,400
No. 101
Balance
80,000
40,000
38,500
44,500
43,700
41,300
21,300
19,800
23,600
17,200
Land
Date PR
(b)
Accounts Receivable
No. 106
Date PR Debit
Credit
Balance
(k)
5,200
5,200
(m)
3,800
1,400
Office Supplies
Date PR Debit
(c)
2,400
Credit
Office Equipment
Date PR
(a)
(e)
(j)
Debit
30,000
6,000
20,000
Automobiles
Date PR Debit
(d)
18,000
Building
Date PR
(b)
Debit
170,000
No. 108
Balance
2,400
Balance
30,000
36,000
56,000
Credit
No. 164
Balance
18,000
Credit
No. 170
Balance
170,000
Credit
Accounts Payable
Date PR Debit
(c)
(e)
(i)
2,400
No. 201
Credit
Balance
2,400
2,400
6,000
8,400
6,000
Notes Payable
Date PR Debit
(b)
No. 250
Credit
Balance
160,000 160,000
C. Cooke, Capital
Date PR Debit
(a)
(d)
No. 301
Credit
Balance
110,000 110,000
18,000 128,000
C. Cooke, Withdrawals
Date PR Debit
Credit
(n)
6,400
No. 163
Credit
Debit
30,000
Fees Earned
Date PR Debit
(g)
(k)
Salaries Expense
Date PR Debit
(f)
1,500
(l)
1,500
Date PR
(h)
Debit
800
No. 302
Balance
6,400
No. 402
Credit
Balance
6,000
6,000
5,200
11,200
Credit
Utilities Expense
2-18
No. 172
Balance
30,000
No. 601
Balance
1,500
3,000
No. 602
Credit
Balance
800

Part 3
COOKE CONSULTING
Trial Balance
June 30
Debit
Cash ............................................................ $ 17,200
Accounts receivable..................................
1,400
Office supplies............................................
2,400
Office equipment........................................ 56,000
Automobiles................................................ 18,000
Building....................................................... 170,000
Land............................................................. 30,000
Accounts payable.......................................
Notes payable.............................................
C. Cooke, Capital........................................
C. Cooke, Withdrawals...............................
6,400
Fees earned................................................
Salaries expense........................................
3,000
Utilities expense.........................................
800
Total............................................................. $305,200
2-19
Credit
$ 6,000
160,000
128,000
11,200
$305,200

Part 1
GOULD SOLUTIONS
Trial Balance
April 30
Debit
$12,485
560
1,500
11,450
Cash ......................................................................
Office supplies .....................................................
Prepaid rent .........................................................
Office equipment .................................................
M. Gould, Capital .................................................
M. Gould, Withdrawals ........................................
6,200
Consulting fees earned .......................................
Operating expenses ............................................
5,655
Totals .................................................................... $37,850
Credit
$11,450
10,000
16,400
$37,850
Part 2: Likely transactions (following order of trial balance).

1. Purchased $560 of office supplies for cash.
2. Paid $1,500 cash for prepaid rent.
3. Purchased $11,450 office equipment on credit.
4. Gould invested $10,000 cash in the business.
5. Gould withdrew $6,200 cash from the business for personal use.
6. Earned $16,400 cash in consulting fees.
7. Paid $5,655 cash for operating expenses.
2-20

Part 3
Report of Cash Received and Paid

Cash received
Amount invested ..................................... $10,000
Consulting fees ....................................... 16,400
Total cash received .................................
Cash paid
Office supplies .........................................
560
Prepaid rent .............................................
1,500
Withdrawals .............................................
6,200
Operating expenses ................................
5,655
Total cash paid.........................................
Ending balance...........................................
2-21
$26,400
13,915
$12,485

Analyzing Chapter 02 Transactions

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Analyzing Chapter 02 Transactions

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Chapter 02 - Analyzing and Recording Transactions

Owner invested cash and equipment..

Prepaid six months rent.

Purchased equipment and supplies on credit.

Received cash for services.

Billed client for completed work.

Paid balance due on account.

Paid premium for insurance.

Collected part of amount owed by client.

Chapter 02 - Analyzing and Recording Transactions

Withdrew cash from business.

Purchased supplies on account.

Chapter 02 - Analyzing and Recording Transactions

Problem 2-1B (Continued)

Acct. No. 101

Acct. No. 106

Acct. No. 124

Acct. No. 128

Acct. No. 131

Acct. No. 163

Acct. No. 201

Chapter 02 - Analyzing and Recording Transactions

Problem 2-1B (Continued)

Acct. No. 301

Chapter 02 - Analyzing and Recording Transactions

Owner invested cash and equipment.

Purchased land with cash and note payable.

Purchased 24-month insurance policy.

Collected cash for completed work.

Purchased equipment with cash and note

Completed services for client.

Chapter 02 - Analyzing and Recording Transactions

Chapter 02 - Analyzing and Recording Transactions

Problem 2-2B (Part 1 Continued)

Computer Rental Expense........................602

Incurred computer rental expense.

Collected cash on account.

Paid assistants wages.

Paid amount due on account.

Paid for repair of equipment.

Cash withdrawn for personal use.

Paid assistants wages.

Chapter 02 - Analyzing and Recording Transactions

Problem 2-2B (Continued)

Computer Rental Expense

Chapter 02 - Analyzing and Recording Transactions

Problem 2-2B (Concluded)

Chapter 02 - Analyzing and Recording Transactions

Problem 2-3B (60 minutes)

Add withdrawals ($1,000 x 12).....................................................

Chapter 02 - Analyzing and Recording Transactions

Owner invested in the business.

Prepaid twelve months rent.

Purchased equipment and supplies on credit.

Received cash for services.

Billed client for completed work.

Paid balance due on account.

Chapter 02 - Analyzing and Recording Transactions

Collected part of amount owed by client.

Billed client for completed work.

Withdrew cash for personal use.

Purchased supplies on account.