$5,000 was borrowed from a bank · Web viewNov. 1 $5,000 was borrowed from a bank. Nov. 2 Merchandise costing $750 was purchased on 30-day credit. Nov. 4 Purchased supplies for $75

MODULE 2RECORDING TRANSACTIONS

Demonstration Problem 1Debits and Credits

For each of the following accounts, indicate the side of the account that should be used torecord an increase in that account.

Account Name Side used to Record IncreasesOwners' Equity CreditSales Revenue Credit

Equipment DebitUtilities Expense DebitSupplies Expense DebitService Revenue Credit

Supplies DebitRent Expense DebitNotes Payable Credit

Cost of Goods Sold Debit

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Demonstration Problem 2Debits and Credits

For each of the following independent transactions, identify the account that would be debited and the account that would be credited.

Transaction Debit Credit1. Purchased furniture on credit. Furniture Accounts

Payable2. Purchased inventory for cash. Inventory Cash3. Sold goods to customers on credit. Accounts Receivable Sales Revenue4. Record cost of goods sold on the previous sale. Cost of Goods Sold Inventory5. Purchased supplies. Supplies Cash6. Borrowed money from a bank. Cash Notes Payable7. Paid employee wages for the month. Wages Expense Cash8. Paid for the furniture purchased previously. Accounts Payable Cash9. Paid rent for the month. Rent Expense Cash10. Collected cash from a customer for goods sold previously.

Cash Accounts Receivable

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Practice Problem 1Debits and Credits

For each of the following accounts, indicate the side of the account that should be used to record an increase in that account.

Account Name Side used to Record IncreasesOwners' Equity Credit

Service Revenue CreditCash Debit

Furniture DebitUtilities Expense Debit

Supplies DebitSales Revenue Credit

Accounts Payable CreditAccounts Receivable DebitCost of Goods Sold Debit

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Practice Problem 2Debits and Credits


Transaction Debit Credit1. Purchased a computer for cash. Computer Cash2. Purchased inventory on credit. Inventory Accounts Payable3. Purchased supplies. Supplies Cash4. Sold goods to customers on credit. Accounts

ReceivableSales Revenue

5. Record the cost of the goods sold. Cost of Goods Sold Inventory6. Borrowed money from a bank. Cash Notes Payable7. Paid employee wages for the month. Wages Expense Cash8. Paid for the inventory purchased previously. Accounts Payable Cash9. Collected cash from a customer for goods sold previously.

Cash Accounts Receivable

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Homework Problem 1Debit and Credit Terminology


Account Name Debit CreditCash DebitSupplies Expense DebitAccounts Payable CreditUtilities Expense DebitOwners' Equity CreditService Revenue CreditSupplies DebitRent Expense DebitNotes Payable CreditSalaries Expense Debit

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Account Name Debit CreditSupplies Expense DebitCash DebitAccounts Payable CreditEquipment DebitOwners' Equity CreditService Revenue CreditFurniture DebitRent Expense DebitNotes Payable CreditSalaries Expense Debit

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Transaction Debit Credit1. Borrowed money from a bank. Cash Notes Payable2. Purchased inventory for cash. Inventory Cash3. Purchased inventory on credit. Inventory Accounts Payable4. Sold goods to customers for cash. Cash Sales Revenue5. Sold goods to customers on credit. Accounts

ReceivableSales Revenue

6. Paid employee wages for the month. Wages Expense Cash7. Paid utilities for the current month. Utilities Expense Cash8. Recorded supplies used during the month. Supplies Expense Supplies9. Paid for equipment purchased previously. Accounts Payable Cash10. Repaid the note to the bank. Note Payable Cash

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Transaction Debit Credit1. Borrowed money from a bank. Cash Notes Payable2. Purchased supplies for cash. Supplies Cash3. Purchased equipment on credit. Equipment Accounts Payable4. Sold goods to customers for cash. Cash Sales Revenue5. Sold goods to customers on credit. Accounts Receivable Sales Revenue6. Paid employee wages for the month. Wages Expense Cash7. Paid utilities for the current month. Utilities Expense Cash8. Recorded supplies used during the month. Supplies Expense Supplies9. Paid for the equipment purchased previously.

Accounts Payable Cash

10. Repaid the note to the bank. Notes Payable Cash

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Homework QuizDebits and Credits

1. The Equipment account's proper classification is:a. Revenueb. Liability c. Expense d. Asset

2. The Supplies account's proper classification is:a. Asset b. Revenue c. Liabilityd. Expense

3. The Cost of Goods Sold account's proper classification is:a. Assetb. Revenue c. Liability d. Expense

4. The Fees Earned account's proper classification is:a. Asset b. Liability c. Owner's equity d. Revenue

5. The Accounts Payable account's proper classification and normal account balance are:a. Assetb. Liabilityc. Owner's equityd. Revenue

6. The Inventory account's proper classification is:a. Revenueb. Expensec. Liabilityd. Asset

7. The Accounts Receivable account's proper classification is:a. Assetb. Liabilityc. Owner's equityd. Revenue

8. Altoona Plumbing acquired Office Supplies on account. Which of the following entries properly records this transaction?

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a. Debit: Office Supplies; Credit: Cashb. Debit: Cash; Credit: Office Suppliesc. Debit: Office Supplies; Credit: Accounts Payabled. Debit: Accounts Payable; Credit: Office Supplies

9. Altoona Plumbing acquired Equipment by making a Cash down payment and issuing a note to finance the remaining balance. Which of the following entries properly records this transaction?a. Debit: Equipment; Credit: Cash, Accounts Payableb. Debit: Equipment; Credit: Cash, Notes Payablec. Debit: Equipment; Credit: Cashd. Debit: Equipment; Credit: Cash, Accounts Payable, Notes Payable

10. Altoona Plumbing made its monthly office rent payment. Which of the following entries properly records this transaction?a. Debit: Cash; Credit: Rent Expenseb. Debit: Rent Expense; Credit: Cashc. Debit: Rent Expense; Credit: Accounts Payabled. Debit: Accounts Payable; Credit: Rent Expense

11. Altoona Plumbing recorded its monthly service revenue reflecting both cash sales and sales on account. Which of the following entries properly records this transaction?a. Debit: Accounts Receivable; Credit: Service Revenueb. Debit: Service Revenue;Credit: Accounts Receivable, Cashc. Debit: Accounts Receivable, Cash; Credit: Service Revenued. Debit: Cash; Credit: Accounts Receivable

12. Josephine Marlow, M.D. just recorded her billing to clients for services rendered. Which of the following entries properly records this transaction?a. Debit: Accounts Receivable; Credit: Fees Earnedb. Debit: Accounts Receivable; Credit: Cashc. Debit: Fees Earned; Credit: Accounts Receivabled. Debit: Cash; Credit: Fees Earned

13. Josephine Marlow, M.D. recorded the collection of cash from her cash customers. Which of the following entries properly records this transaction?a. Debit: Fees Earned; Credit: Cashb. Debit: Fees Earned; Credit: Accounts Receivablec. Debit: Cash; Credit: Fees Earnedd. Debit: Accounts Receivable; Credit: Fees Earned

14. Josephine Marlow, M.D., a sole proprietor, collected cash from customers for services performed and billed previously. Which of the following entries properly records this transaction?a. Debit: Fees Earned; Credit: Cashb. Debit: Fees Earned; Credit: Accounts Receivablec. Debit: Cash; Credit: Accounts Receivabled. Debit: Accounts Receivable; Credit: Fees Earned

15. Ronald's Appliance Shop purchased Office Supplies for $1,000 on account. After inspecting the purchase, $200 of the goods was found to be defective and returned. Which of the following entries properly records the return of these goods?

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a. Debit: Cash, $200; Credit: Office Supplies, $200b. Debit: Cash, $800; Credit: Office Supplies, $800c. Debit: Accounts Payable, $200; Credit: Office Supplies, $200d. Debit: Accounts Payable, $800; Credit: Office Supplies, $800

16. Richard Valort, owner of Valort Landscaping Service, recently issued paychecks to his employees. The proper entry to record this transaction includes:a. A debit to the Drawing accountb. A debit to Wages Payablec. A debit to Wages Earnedd. A debit to Wages Expense

17. An employee of Valort Landscaping Service, a sole proprietorship reported an overpayment error to the owner, Richard Valort. (The error was made in computing and paying the employee's wages.) Valort receives cash from the employee for the amount of the overpayment, which of the following entries will Valort make?a. Cash, debit; Wages Expense, creditb. Wages Payable, debit; Wages Expense, creditc. Wages Expense, debit, Cash, creditd. Wages Expense, debit; Wages Payable, credit

18. Overstreet Computer Services bills all customers on account. Overstreet billed clients $80,000 during July. Overstreet's beginning Accounts Receivable balances for July was $32,200. How would July's customer billing be reflected on Overstreet's books?a. Debit Accounts Receivable, $32,200; Credit Fees Earned, $32,200b. Debit Accounts Receivable, $28,000; Credit Fees Earned, $28,00c. Debit Accounts Receivable, $80,000; Credit Fees Earned, $80,00d. Debit Cash, $32,200; Credit Fees Earned, $32,200

19. Overstreet Computer Services bills all customers on account. Overstreet billed clients $80,000 during July (Debit, Accounts Receivable; Credit, Fees Earned). No cash collections from customers were received during July. Overstreet's beginning Accounts Receivable balance for July was $32,200. Overstreet's ending Accounts Receivable balance for July was:a. $ 28,000b. $ 47,800c. $ 80,000d. $ 112,200

20. Overstreet Computer Services bills all customers on account. Overstreet billed clients $80,000 during July and collected $25,500 in customer payments. Overstreet's beginning Accounts Receivable balances for July was $32,200. How would July's customer payments be reflected on Overstreet's books?a. Debit Cash, $25,500; Credit, Accounts Receivable, $25,500b. Debit Cash, $32,200; Credit, Accounts Receivable, $32,200 c. Debit Cash, $80,000; Credit, Accounts Receivable, $80,000d. Debit Cash, $32,200; Credit, Fees Earned, $32,200

21. Which of the following account is increased by debits?a. Notes Payableb. Accounts Receivable

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c. Revenued. Owners' Equity

22. Which of the following account is increased by credits? a. Supplies Expenseb. Accounts Payablec. Inventoryd. Accounts Receivable

23. Tony's Landscaping Service borrowed $7,500 from a bank. To record this transaction:a. Notes Payable must be credited; Cash must be debitedb. Cash must be credited; Notes Payable must be debitedc. Cash debited; Notes Receivable must be creditedd. Cash credited; Notes Receivable must be debited

24. Tony's Landscaping Service purchased a truck for $2,500. $1,000 was paid in cash and a note payable was signed for the balance. To record this transaction:a. Notes Payable must be creditedb. Notes Payable must be debitedc. Cash must be debitedd. Trucks must be credited

25. A business paid $100 for utilities. To record this transaction:a. Utilities Expense must be credited;Cash must be debitedb. Cash and Utilities Expense must be debitedc. Cash and Utilities Expense must be creditedd. Utilities Expense must be debited; Cash must be credited

26. A business paid $100 to buy supplies. To record this transaction:a. Supplies Expense must be creditedb. Accounts Payable must be debitedc. Supplies must be debitedd. Supplies must be credited

27. A business sold goods to customers for $1,800 on credit. To record this transaction:a. Accounts Receivable must be creditedb. Accounts Payable must be debitedc. Accounts Receivable must be debitedd. Accounts Payable must be credited

28. A business paid $475 to a supplier for inventory purchased previously. To record this: transactiona. Accounts Payable must be credited; Cash must be debitedb. Cash must be credited; Accounts Payable must be debitedc. Cash debited; Accounts Receivable must be creditedd. Cash credited; Accounts Receivable must be debited

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29. Cash was collected from a customer for services provided previously. To record this:transactiona. Accounts Receivable must be creditedb. Accounts Payable must be debitedc. Accounts Receivable must be debitedd. Accounts Payable must be credited

30. Supplies costing $80 were used by a business. To record this transaction:a. Supplies Expense must be creditedb. Supplies Expense must be debitedc. Supplies must be debitedd. Cash must be credited

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MODULE 2Sole-Proprietorships

Demonstration Problem 1Clean-Rite Service

This example analyzes the transactions for Clean-Rite Service for March 2000. Clean-Rite Service is a sole-proprietorship. The transactions are recorded in the journal and posted to the ledger.

Mar. 1 Lisa used $500 of her own money to start Clean-Rite Service.Mar. 2 Lisa's company borrowed $1,500 from her dad.Mar. 4 Clean-Rite Service paid $400 for a used vacuum cleaner and shampoo machine.Mar. 9 Clean-Rite Service purchased a used truck for $1,000 from Fuller Trucks Inc. Lisa paid $250

down and signed a note payable for the balance.Mar. 11 Clean-Rite Service paid $115 for cleaning supplies.Mar. 15 During the first half of March, Clean-Rite Service performed $450 of cleaning services.

Customers paid $200 in cash and promised the remaining payment by March 30.Mar. 17 Clean-Rite Service used $80 of the cleaning supplies.Mar. 22 $250 was collected from customers for services performed previously.Mar. 24 Lisa's company paid back $500 to her dad.Mar. 31 Lisa withdrew $100 from the business.

DATE ACCOUNT DEBIT CREDIT

2000Mar. 1 Cash

Lisa, Capital500

500Mar. 2 Cash

Notes Payable1,500

1,500Mar. 4 Equipment

Cash400

400Mar. 9 Truck

Cash Notes Payable

1,000250750

Mar. 11 Supplies Cash

115115

Mar. 15 CashAccounts Receivable Service Revenue

200250

450Mar. 17 Supplies Expense

Supplies80

80Mar. 22 Cash

Accounts Receivable250

250Mar. 24 Notes Payable

Cash500

500Mar. 31 Lisa, Drawings

Cash100

100

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Practice Problem 1Burton Precision Tools

This assignment lists some transactions for Burton Precision Tools for January 2000. You have to analyze the accounts affected by each transaction and record it in the general journal.

Jan. 2 The business purchased inventory for $5,800 on credit.Jan. 3 Sold goods for $7,200 to customers for cash.Jan. 3 The cost of the goods sold in the previous transaction was $5,100.Jan. 9 Purchased supplies for $150.Jan. 11 Paid $4,800 to suppliers for the inventory purchased previously.Jan. 12 Paid $85 for utilities.Jan. 17 Supplies costing $45 were used in January.Jan. 28 Paid rent of $500 for January.

DATE ACCOUNT DEBIT CREDIT2000Jan. 2 Inventory

Accounts Payable5,800

5,800Jan. 3 Cash

Sales Revenue7,200

7,200 Jan. 3 Cost of Goods Sold

Inventory5,100

5,100Jan. 9 Supplies

Cash150

150Jan. 11 Accounts Payable

Cash4,800

4,800Jan. 12 Utilities Expense

Cash85

85Jan. 17 Supplies Expense

Supplies45

45Jan. 28 Rent Expense

Cash

500500

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Practice Problem 2East West Travels

East West Travels began operations in April 2000. The company is a sole-proprietorship. This assignment requires you to record the transactions for April in the general journal.

Apr. 1 Brian Smith started East West Travels by investing $40,000.Apr. 2 $15,000 was borrowed by issuing a note payable.Apr. 4 $500 was paid to purchase office supplies.Apr. 9 Travel arrangement services performed for customers totaled $2,000. Of this

amount, $800 was collected in cash.Apr. 11 Office supplies costing $200 were consumed.Apr. 14 An additional $300 of supplies were purchased.Apr. 17 A payment of $5,000 was made on the note payable.Apr. 18 $600 of accounts receivable was collected.Apr. 22 Services totaling $450 were performed ($200 for cash with the balance on credit).Apr. 28 $150 of supplies were consumed.Apr. 29 $200 of outstanding accounts receivable was collected.Apr. 30 Brian withdrew $500 from the business for personal use.

DATE ACCOUNT DEBIT CREDIT2000

Apr. 1 Cash Brian, Capital

40,00040,000

Apr. 2 Cash Notes Payable

15,00015,000

Apr. 4 Supplies Cash

500500

Apr. 9 CashAccounts Receivable Service Revenue

8001,200

2,000 Apr. 11 Supplies Expense

Supplies200

200Apr. 14 Supplies

Cash300

300 Apr. 17 Notes Payable

Cash5,000

5,000 Apr. 18 Cash


600 Apr. 22 Cash

Accounts Receivable Service Revenue

200250

450 Apr. 28 Supplies Expense

Supplies150

150 Apr. 29 Cash


200 Apr. 30 Brian, Drawings

Cash500

500

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Homework Problem 1Aiken Consulting

This assignment lists some typical transactions for Aiken Consulting for March 2000. You have to analyze the accounts affected by each transaction and record it in a journal.

Mar. 1 $12,000 was borrowed from a bank.Mar. 2 Purchased supplies for $250.Mar. 4 Consulting services were provided to clients for $2,800 on credit.Mar. 9 Paid wages of $1,000 to the secretary.Mar. 11 $1,200 was collected from customers for services provided previously.Mar. 15 The cost of supplies used in March was $80. Mar. 17 $2,000 of the note payable was paid. Mar. 31 A payment of $700 was made for rent.


Mar. 1 Cash Notes Payable

12,00012,000

Mar. 2 Supplies Cash

250250

Mar. 4 Accounts Receivable Service Revenue

2,8002,800

Mar. 9 Wages Expense Cash

1,0001,000

Mar. 11 Cash Accounts Receivable

1,2001,200

Mar. 15 Supplies Expense Supplies

8080

Mar. 17 Notes Payable Cash

2,0002,000

Mar. 31 Rent Expense Cash

700700

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Homework Problem 2Annie’s Bakery

This assignment lists some typical transactions for Annie's Bakery for November 2000. You have to analyze the accounts affected by each transaction and record it in the journal.

Chart of Accounts

Nov. 1 $5,000 was borrowed from a bank.Nov. 2 Merchandise costing $750 was purchased on 30-day credit.Nov. 4 Purchased supplies for $75.Nov. 9 Goods were sold for $1,400 in cash.Nov. 9 The cost of the goods sold was $500. Nov. 14 $85 was paid for utilities.Nov. 17 Supplies costing $35 were used in November.Nov. 18 Paid $750 to the supplier for the merchandise purchased previously.Nov. 22 Paid rent of $500 for November.

DATEACCOUNT

DEBIT CREDIT

2000

Nov. 1 Cash Notes Payable

5,0005,000

Nov. 2 Inventory Accounts Payable

750750

Nov. 4 Supplies Cash

7575

Nov. 9 Cash Sales Revenue

1,4001,400

Nov. 9 Cost of Goods Sold Inventory

500500

Nov. 14 Utilities Expense Cash

8585

Nov. 17 Supplies Expense Supplies

3535

Nov. 18 Accounts Payable Cash

750750

Nov. 22 Rent Expense Cash

500500

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Homework Problem 3Carlson Realty I

On June 1, 2000, George Carlson started Carlson Realty. The company is a sole-proprietorship.This assignment requires you to record the transactions for the first month of operations in the accounting system.

Jun. 1 George invested $8,000 in the business. Jun. 2 Supplies were purchased on credit for $520. Jun. 4 Furniture was purchased for $5,500. $2,500 was paid in cash and a note was

signed for the balance. Jun. 9 $250 was paid for the supplies purchased previously.Jun. 11 The business earned sales commissions of $11,000. The customers paid cash.Jun. 29 The receptionist was paid a salary of $2,400 for June.Jun. 29 Rent of $1,400 was paid for June.Jun. 30 The business paid $1,350 for automobile expenses.Jun. 30 $140 was paid for utilities for June.Jun. 30 Supplies costing $135 were used in June.Jun. 30 George withdrew $1,000 for personal use.

DATEACCOUNT

DEBIT CREDIT

2000 Jun. 1 Cash

George, Capital8,000

8,000 Jun. 2 Supplies

Accounts Payable520

520 Jun. 4 Furniture

Cash Notes Payable

5,5002,5003,000

Jun. 9 Accounts Payable Cash

250250

Jun. 11 Cash Service Revenue

11,00011,000

Jun. 29 Salaries Expense Cash

2,400 2,40

0 Jun. 29 Rent Expense

Cash1,400

1,400 Jun. 30 Automobile Expense

Cash1,350

1,350 Jun. 30 Utilities Expense

Cash140

140 Jun. 30 Supplies Expense

Supplies135

135 Jun. 30 George, Drawings

Cash1,000

1,000

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Homework Problem 4Jackie’s Floral Designs

Jackie's Floral Designs sells plants, flowers, and silk and dried arrangements. The company is a sole-proprietorship. This assignment requires you to record the transactions for February 2000 in the accounting system.

Feb. 1 Jackie Simmons started Jackie's Floral Designs by investing $12,500.Feb. 5 Merchandise costing $5,700 was purchased on 30-day credit.Feb. 7 $350 was paid for supplies.Feb. 28 Goods were sold for $8,000. $5,500 was collected in cash.Feb. 28 The cost of the goods sold was $5,000. Feb. 28 Supplies costing $175 were used during February.Feb. 28 Employees were paid $1,200 in wages for February.Feb. 28 A payment of $1,700 was made for the merchandise purchased previously. Feb. 28 A payment of $800 was made for rent for February.Feb. 28 $150 was paid for utilities for February.Feb. 28 Jackie withdrew $500 for personal expenses.

DATEACCOUNT

DEBIT CREDIT

2000Feb. 1 Cash

Jackie, Capital12,500

12,500Feb. 5 Inventory


5,700 Feb. 7 Supplies

Cash350

350Feb. 28 Cash

Accounts Receivable Sales Revenue

5,5002,500

8,000Feb. 28 Cost of Goods Sold

Inventory5,000

5,000Feb. 28 Supplies Expense

Supplies175

175Feb. 28 Wages Expense

Cash1,200

1,200Feb. 28 Accounts Payable

Cash1,700

1,700Feb. 28 Rent Expense

Cash800

800Feb. 28 Utilities Expense

Cash150

150Feb. 28 Jackie, Drawings

Cash500

500

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Homework QuizSole-Proprietorships

1. A business, operated for profit and owned by one person, is called a:a. Nonprofit organizationb. Partnershipc. Corporationd. Sole Proprietorship

2. A business entity can be organized in one of three major types. They are:a. Corporations, partnerships, and sole proprietorshipsb. Corporations, associations, and nonprofit organizationsc. Profit, nonprofit, and corporate organizationsd. Institutions, partnerships, and corporations

3. A sole proprietorship can obtain financial resources from which of the following types of accounts?

a. Liabilitiesb. Owner's Equityc. Assetsd. Both a and b

4. In a sole proprietorship, which of the following accounts reflects the owner's financial position in the business?a. Capital Stockb. Retained Earningsc. Inventory d. Owner's Capital

5. In a sole proprietorship, the Owner's Capital account balance appears in:a. The Owner's Equity section of the balance sheet.b. The Asset section of the balance sheet.c. The Liability section of the balance sheet.d. Both the Asset and Owner's Equity sections of the balance sheet.

6. Robert Pringle, a sole proprietor, invested $10,000 in his business to fund initial operations. This transaction will be reflected as a:a. Debit to Cash and a credit to Note Payable.b. Debit to Cash and a credit to Accounts Receivable.c. Debit to Cash and a credit to Robert Pringle, Capital.d. Debit to Cash and a credit to Fees Earned.

7. Robert Pringle, a sole proprietor, borrowed $10,000 from a local bank. It will be repaid with interest over the next year. This transaction will be reflected as a:a. Debit to Cash and a credit to Note Payable.b. Debit to Cash and a credit to Accounts Receivable.c. Debit to Cash and a credit to Robert Pringle, Capital.d. Debit to Cash and a credit to Fees Earned.

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8. Robert Pringle, a sole proprietor, repaid $2,000 of the $10,000 he recently borrowed from a local bank. The payment applied exclusively to the principal borrowed. This transaction will be reflected as a:

a. Debit to Note Payable and a credit to Robert Pringle, Capital.b. Debit to Note Payable and a credit to Accounts Receivable.c. Debit to Note Payable and a credit to Cash.d. Debit to Notes Payable and a credit to Fees Earned.

9. Robert Pringle, a sole proprietor, purchased Supplies on account for $2,500 during June. These items will be used over the next 18 months. This transaction will be recorded as a:a. Debit to Supplies Expense and a credit to Cash.b. Debit to Supplies Expense and a credit to Accounts Payable.c. Debit to Supplies and a credit to Cash.d. Debit to Supplies and a credit to Accounts Payable.

10. Of the supplies purchased in question #9, $1,500 was used in the current year. The entry reflecting this consumption will include a:a. Debit to Suppliesb. Debit to Supplies Expensec. Credit to Supplies Expensed. Credit to Supplies Revenue

11. Ruth's Computer Consulting, a sole proprietorship, purchased computer supplies and recorded the acquisition as a debit to the asset account, Supplies. The entry to record the cost of supplies used during an accounting period is:

a. Debit Supplies; credit Accounts Payableb. Debit Accounts Payable; credit Suppliesc. Debit Supplies Expense; credit Suppliesd. Debit Supplies Expense; credit Accounts Payable

12. Ruth's Computer Consulting, a sole proprietorship, purchased supplies during July of $3,000 and recorded the acquisition as a debit to the asset account, Supplies. At the end of July, the supplies on hand at July 31 totaled $2,800. The amount to be recorded as Supplies Expense for July is:

a. $200b. $2,800c. $3,000d. $5,800

13. Ruth's Computer Consulting is a sole proprietorship. The balance in her Office Supplies account on March 1 was $3,200. Supplies purchased during March amounted to $2,800, and the supplies on hand at March 31 were $2,500. The amount to be used for debited to Supplies Expense on March 31st is: a. $3,500b. $2,800c. $3,200d. $2,500

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14. Ruth's Computer Consulting is a sole proprietorship. Her Office Supplies account has a balance of $1,950 at the beginning of the year and was debited during the year for $5,600, representing the total of supplies purchased during the year. If $1,500 of supplies is on hand at the end of the year, the supplies expense to be reported on the income statement for the year is:

a. $1,500b. $1,950c. $5,600d. $6,050

15. Ruth's Computer Consulting is a sole proprietorship. She recently purchased Computer Equipment costing $15,000. One third was paid in cash and the remainder was on account. To record this entry, Ruth should include a:

a. Debit to Computer Equipment of $5,000.b. Debit to Computer Equipment for $10,000.c. Debit to Computer Equipment of $15,000.d. Debit to Computer Expense of $10,000.


a. Credit to Cash for $5,000.b. Credit to Cash for $10,000. c. Credit to Cash for $15,000. d. Credit to Cash for some other amount.


a. Credit to Accounts Payable for $5,000.b. Credit to Accounts Payable for $10,000.c. Credit to Accounts Payable for $15,000.d. Credit to Accounts Payable for some other amount.

18. Ruth's Computer Consulting is a sole proprietorship. During August, she billed clients $12,000 for services rendered on account. To record this entry, Ruth should:

a. Debit Cash and credit Fees Earned. b. Debit Accounts Receivable and credit Fees Earned. c. Debit Cash and credit Accounts Receivable.d. Debit Fees Earned and credit Cash.

19. Ruth's Computer Consulting is a sole proprietorship. During September, she billed clients $15,000 for services rendered and received $10,000 in payment of prior Accounts Receivable. Ruth's entries for September should include a:

a. Debit to Cash for $5,000.b. Debit to Cash for $10,000.c. Debit to Cash for $15,000.d. Debit to Cash for $25,000.

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20. Ruth's Computer Consulting is a sole proprietorship. During September, she billed clients $15,000 for services rendered and received $10,000 in payment of prior Accounts Receivable. Ruth's entries for September should include a:

a. Debit to Accounts Receivable for $5,000.b. Debit to Accounts Receivable for $10,000.c. Debit to Accounts Receivable for $15,000.d. Debit to Accounts Receivable for $25,000.

21. A business paid $800 for rent. To record this transaction: a. Rent Expense must be credited; Cash must be debitedb. Rent Expense must be debited; Cash must be creditedc. Cash debited; Rent Revenue must be creditedd. Cash credited; Rent Revenue must be debited

22. A sole-proprietorship and its owners are distinct entities:a. From a legal standpointb. From an accounting standpointc. From an accounting and legal standpointd. None of the above

23. The account used by sole-proprietorships to record owner investments is:a. Capitalb. Retained Earningsc. Capital Stockd. Drawings

24. A business paid $100 to buy supplies. To record this transaction:a. Supplies Expense must be creditedb. Supplies must be debitedc. Supplies must be creditedd. None of the above

25. To record the payment of cash for inventory purchased on credit earlier:a. Accounts Payable must be debitedb. Accounts Payable must be creditedc. Accounts Receivable must be debitedd. Accounts Receivable must be credited

26. The account used to record withdrawals of cash by owners of sole-proprietorships is:a. Capitalb. Retained Earningsc. Capital Stockd. Drawings

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27. Owner investments in sole-proprietorships are recorded by:a. Debiting Capital; crediting Cashb. Debiting Cash; crediting Capitalc. Debiting Capital Stock; crediting Cashd. Debiting Cash; crediting Capital Stock

28. Which of the following accounts are increased by credits?a. Supplies b. Accounts Receivablec. Inventoryd. Revenue

29. Withdrawals of cash by owners of sole-proprietorships is recorded by:a. Debiting Drawings; crediting Cashb. Debiting Cash; crediting Drawingsc. Debiting Dividends; crediting Cashd. Debiting Cash; crediting Dividends

30. A business paid salaries of $1,800 for November. To record this transaction:a. Salaries Expense must be creditedb. Salaries Expense must be debitedc. Cash must be debited

d. None of the above

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MODULE 2Corporations

Demonstration Problem 1Music Stop

This example analyzes the transactions for Music Stop for April 2000. The company is a corporation. The transactions are recorded in the general journal and posted to the general ledger.

Apr. 2 Music Stop issued stock for $10,000.Apr. 2 The company signed a two year note for $40,000. Apr. 4 Merchandise costing $20,000 was purchased on credit.Apr. 9 The company paid $12,000 for equipment.Apr. 11 Goods were sold to customers for $5,500.Apr. 11 The cost of the goods sold in the previous transaction was $3,000.Apr. 17 Employees were paid $1,000 in wages.Apr. 22 The company paid the utility bill of $100.Apr. 24 A payment of $5,000 was made for the merchandise purchased previously.Apr. 30 Music Stop declared and paid dividends of $1,000.

DATE ACCOUNT DEBIT CREDIT2000Apr. 2 Cash

Capital Stock10,000

10,000Apr. 2 Cash

Notes Payable40,000

40,000Apr. 4 Inventory


20,000Apr. 9 Equipment

Cash12,000

12,000Apr. 11 Cash

Sales Revenue5,500

5,500Apr. 11 Cost of Goods Sold

Inventory3,000

3,000Apr. 17 Wages Expense

Cash1,000

1,000 Apr. 22 Utilities Expense

Cash100

100 Apr. 24 Accounts Payable

Cash 5,000

5,000 Apr. 30 Dividends

Cash1,000

1,000

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Practice Problem 1Downtown Fitness Center

This assignment lists some typical transactions for Downtown Fitness Center for April 2000. After analyzing the transactions, you must record them in the general journal.

Apr. 2 $5,000 was borrowed from a bank.Apr. 2 Purchased equipment on credit for $10,000.Apr. 4 Purchased supplies for $200. Paid cash.Apr. 9 Services were provided to customers on credit for $3,500.Apr. 11 Paid the utilities bill of $105 for April.Apr. 15 Paid employees’ salaries of $1,000 for April.Apr. 17 Rent of $600 was paid for April.Apr. 28 $2,500 was paid to the supplier for the equipment purchased previously.Apr. 30 $1,500 was collected from customers for services provided previously


Apr. 2 Cash Notes Payable

5,0005,000

Apr. 2 Equipment Accounts Payable

10,00010,000

Apr. 4 Supplies Cash

200200

Apr. 9 Accounts Receivable Service Revenue

3,5003,500

Apr. 11 Utilities Expense Cash

105105

Apr. 15 Salaries Expense Cash

1,0001,000

Apr. 17 Rent Expense Cash

600600

Apr. 28 Accounts Payable Cash

2,5002,500

Apr. 30 Cash Accounts Receivable

1,5001,500

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Practice Assignment 2O’Grady Building Supplies

This assignment analyzes the transactions for O'Grady Building Supplies for July 2000. This companyt is a corporation. After analyzing the transactions, you must record them in the general journal.

July 1 The owners started the business by investing $50,000. O’Grady Building Supplies issued stock for $50,000.

July 2 The business purchased inventory on credit for $22,500.July 5 The business purchased supplies for $500.July 31 Goods were sold to customers for $18,000. The customers paid cash.July 31 The cost of goods sold for the month was $13,500. July 31 Supplies costing $100 was used during the month.July 31 Rent of $1,800 was paid for July.July 31 $6,000 was paid to suppliers for inventory purchased previously.


Jul. 1 Cash Capital Stock

50,00050,000

Jul. 2 Inventory Accounts Payable

22,50022,500

Jul. 5 Supplies Cash

500500

Jul. 31 Cash Sales Revenue

18,00018,000

Jul. 31 Cost of Goods Sold Inventory

13,50013,500

Jul. 31 Supplies Expense Supplies

100100

Jul. 31 Rent Expense Cash

1,8001,800

Jul. 31 Accounts Payable Cash

6,0006,000

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Homework Problem 1Osborne Office Supplies

This assignment lists some typical transactions for Osborne Office Supplies for January 2000. You have to record each transaction in the general journal.

Jan. 1 $15,000 was borrowed by issuing a note payable.Jan. 2 Merchandise costing $3,000 was purchased on credit.Jan. 4 Office supplies were sold to customers on credit for $2,000. Jan. 4 The cost of the supplies sold was $1,100.Jan. 11 Goods were sold to customers for $2,700 for cash.Jan. 11 The cost of the goods sold in the previous transaction was $1,400.Jan. 17 Paid $2,000 to the supplier for the merchandise purchased previously.Jan. 18 $600 of accounts receivable was collected.Jan. 22 Rent of $600 was paid for January. Jan. 28 $100 was paid for utilities for January.Jan. 29 Employees were paid $800 for wages.

DATE ACCOUNT DEBIT CREDIT2000Jan. 1 Cash

Notes Payable15,000

15,000Jan. 2 Inventory


3,000Jan. 4 Accounts Receivable

Sales Revenue2,000

2,000Jan. 4 Cost of Goods Sold

Inventory1,100

1,100Jan. 11 Cash

Sales Revenue2,700

2,700Jan. 11 Cost of Goods Sold

Inventory1,400

1,400Jan. 17 Accounts Payable

Cash2,000

2,000Jan. 18 Cash


600Jan. 22 Rent Expense

Cash600

600Jan. 28 Utilities Expense

Cash100

100Jan. 29 Wages Expense

Cash800

800

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Homework Problem 2Discount Books

This assignment lists some transactions for Discount Books for September 2000. You have to analyze the accounts affected by each transaction and record it in the general journal.

Sept. 1 Boston Bank loaned the firm $16,000 in exchange for the firm's one year note payable.Sept. 2 Merchandise costing $8,000 was purchased on 30-day credit.Sept. 5 Goods were sold for $3,000 in cash.Sept. 5 The cost of the goods sold was $2,000. Sept. 9 Employees were paid $1,000 in wages.Sept. 12 A payment of $2,000 was made for the merchandise purchased previously.Sept. 16 Goods were sold for cash totaling $4,500.Sept. 16 The cost of the goods sold was $3,000. Sept. 22 $1,800 of notes payable was paid. Sept. 28 A payment of $800 was made for rent.

DATEACCOUNT

DEBIT CREDIT

2000

Sept. 1 Cash Notes Payable

16,00016,000

Sept. 2 Inventory Accounts Payable

8,0008,000

Sept. 5 Cash Sales Revenue

3,0003,000

Sept. 5 Cost of Goods Sold Inventory

2,0002,000

Sept. 9 Wages Expense Cash

1,0001,000

Sept. 12 Accounts Payable Cash

2,0002,000

Sept. 16 Cash Sales Revenue

4,5004,500

Sept. 16 Cost of Goods Sold Inventory

3,0003,000

Sept. 22 Notes Payable Cash

1,8001,800

Sept. 28 Rent Expense Cash

800800

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Homework Problem 3The Audio Exchange

The Audio Exchange sells used audio equipment and provides repair services. Below are the transactions occurring during November 2000. This assignment requires you to prepare journal entries for these transactions.

Nov. 1 Audio exchange issued stock for $12,000.Nov. 1 Supplies were purchased for $500.Nov. 4 An inventory of audio equipment was purchased on credit for $15,000.Nov. 7 $700 was paid for advertising that appeared in the paper during the month.Nov. 8 $120 was paid for repairs.Nov. 10 $6,000 was paid to the supplier for the inventory purchased earlier.Nov. 12 Services provided to clients for cash totaled $3,300.Nov. 16 Services totaling $2,500 were performed on credit.Nov. 18 Audio equipment was sold to customers for $4,000. Nov. 24 The cost of the equipment sold was $2,500.Nov. 24 $200 of the supplies were used during the month.Nov. 30 Audio Exchange declared and paid dividends of $1,000.


Nov. 1 Cash Capital Stock

12,00012,000

Nov. 1 Supplies Cash

500500

Nov. 4 Inventory Accounts Payable

15,00015,000

Nov. 7 Advertising Expense Cash

700700

Nov. 8 Repairs Expense Cash

120120

Nov. 10 Accounts Payable Cash

6,0006,000

Nov. 12 Cash Service Revenue

3,3003,300

Nov. 16 Accounts Receivable Service Revenue

2,5002,500

Nov. 18 Cash Sales Revenue

4,0004,000

Nov. 24 Cost of Goods Sold Inventory

2,5002,500

Nov. 24 Supplies Expense Supplies

200200

Nov. 30 Dividends Cash

1,0001,000

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Homework Problem 4Hoffman Consulting

The transactions for the first month of operations of Hoffman Consulting Inc. are given below. This assignment requires you to prepare journal entries for these transactions.

Oct. 1 The owners started the business by investing $25,000. Hoffman Consulting Inc. issuedstock for $25,000.

Oct. 5 A computer system was purchased for $2,000 on credit.Oct. 10 $400 was paid for office supplies.Oct. 17 Services were performed for $2,500 on credit.Oct. 21 $1,000 was paid for the computer purchased previously.Oct. 31 Services were performed for $8,000. The customers paid cash. Oct. 31 $275 was paid for advertisements in October.Oct. 31 $155 was paid for utilities for October.Oct. 31 Supplies costing $135 were used in October. Oct. 31 Customers paid $1,500 for services performed previously on credit. Oct. 31 $1,800 was paid as rent for the office for October.

DATE ACCOUNT DEBIT CREDIT2000Oct. 1 Cash

Capital Stock25,000

25,000Oct. 5 Computer


2,000Oct. 10 Supplies

Cash400

400Oct. 17 Accounts Receivable

Service Revenue2,500

2,500 Oct. 21 Accounts Payable

Cash1,000

1,000 Oct. 31 Cash

Service Revenue8,000

8,000Oct. 31 Advertising Expense

Cash275

275 Oct. 31 Utilities Expense

Cash155

155 Oct. 31 Supplies Expense

Supplies135

135 Oct. 31 Cash

Accounts Receivable1,500

1,500 Oct. 31 Rent Expense

Cash1,800

1,800

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Homework QuizCorporations

1. Which organizational form allows the business to be a separate, distinct entity from the owners? a. Proprietorship

b. Partnershipc. Corporation d. All of the above

2. The Retained Earnings account is unique to which of the following forms of business organization?a. Partnershipb. Proprietorshipc. Corporationd. A Retained Earnings account is used in all of the above choices.

3. The issuance of a cash dividend:a. Increases a corporation's retained earnings balance.b. Decreases the value of outstanding stock.c. Increases the number of shares of outstanding stock.d. Decreases a corporation's retained earnings balance.

4. Which of the following is true of a corporation's Retained Earnings account? a. It usually equals cash on hand.

b. It includes all of the Corporation's Liabilities.c. It includes the transfer of dividends declared during the period.d. It is shown as a section of the corporation's income statement.

5. A corporation issuing only one class of stock will usually title it: a. Common Stock

b. Treasury Stockc. No-par Stockd. Preferred Stock

6. Bob and Ray recently purchased shares of BR, Incorporated, a corporation, for $100,000 each. This transaction will consist of the following entries to BR, Incorporated's records:

a. Debit Accounts Receivable; credit Capital Stockb. Debit Cash; credit Accounts Payablec. Debit Cash; credit Capital Stockd. Debit Accounts Receivable; credit Accounts Payable

7. Bob and Ray organized BR, Incorporated, a corporation for which they are the only stockholders. At the end of the first year of operations, they elect to withdraw dividends in the amount of $2,000 each. This transaction will consist of the following entries on BR Incorporated's records:

a. Debit Drawing; credit Cashb. Debit Wages Expense; credit Cashc. Debit Capital Stock; credit Cashd. Debit Dividends; credit Cash

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8. Bob and Ray have just purchased shares of BR, Incorporated, a corporation, for $100,000 each. This transaction will impact the corporation's Stockholders' Equity by what amount?

a. $ -0- b. $ 100,000c. $ 200,000d. Some other amount.

9. Which of the following properly reflects the transaction to record a Corporation's issuance of stock? a. Capital Stock: Credit; Cash: Debit

b. Capital Stock: Debit; Cash: Debitc. Capital Stock: Credit; Cash: Creditd. Capital Stock: Debit; Cash: Credit

10. Which of the following properly reflects a Corporation's issuance of stock on the Capital Stock and Dividends accounts?

a. Capital Stock: Increases; Dividends: Decreases b. Capital Stock: Increases; Dividends: No effectc. Capital Stock: No effect; Dividends: Increasesd. Capital Stock: Decreases; Dividends: Increases

11. BR, Incorporated, a corporation, pays $4,000 in dividends. This $4,000 payment will: a. Increase the Cash account.

b. Increase the Dividends account.c. Increase the Capital Stock account.d. Decrease the Capital Stock account.

12. BR, Incorporated, a corporation, pays $4,000 in dividends. This $4,000 payment will be recorded as a:

a. Dividends: Credit; Cash: Debitb. Dividends: Debit; Cash: Creditc. Dividends: No effect; Cash: No effectd. Dividends: Debit; Cash: No effect

13. BR, Incorporated, a corporation, has a $100,000 Capital Stock balance at the beginning of the year. Additional Common Stock of $45,000 was issued during the year. The Capital Stock balance at the end of the year is:

a. $ 145,000b. $ 100,000c. $ 55,000 d. $ 45,000

14. BR, Incorporated issued $100,000 in Capital Stock to each of its two shareholders. The Corporation paid Dividends of $20,000 during the year. The balance in the Capital Stock account at the end of the year is:

a. $ 220,000b. $ 200,000c. $ 120,000d. $ 100,000

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15. Carriage Company, Inc.'s Capital Stock balance was $38,000 on December 31, 2001. Additional stock of $13,000 was issued during the year. Carriage's Capital Stock balance on January 1, 2001 was:

a. $51,000b. $38,000c. $25,000d $13,000

16. StarCo, a newly formed corporation, paid its office rental for the month of April 2001. What accounts are impacted by this transaction?

a. Debit Dividends; credit Capital Stockb. Debit Rent Revenue; credit Cashc. Debit Drawings; credit Capital Stockd. Debit Rent Expense; credit Cash

17. StarCo, a newly formed corporation, purchased Inventory on account from a vendor. What accounts are impacted by this transaction?

a. Debit Inventory; credit Cashb. Debit Inventory; credit Accounts Payablec. Debit Drawings; credit Cashd. Debit Drawings; credit Accounts Payable

18. The corporation, Joe's Discount Furniture, recorded sales for the month of May 2001 amounting to $200,000. Sixty percent (60%) of these sales were on account. As a result of this transaction, Joe's Accounts Receivable account will increase by:

a. $ -0-b. $ 80,000c. $120,000d. $200,000

19. The corporation, Joe's Discount Furniture, recorded sales for the month of May 2001 amounting to $200,000. Sixty percent (60%) of these sales were on account. As a result of this transaction, Joe's Revenue account will increase by:

a. $ -0-b. $ 80,000c. $120,000d. $200,000

20. The corporation, Joe's Discount Furniture, recorded sales for the month of May 2001 amounting to $200,000. Sixty percent (60%) of these sales were on account. As a result of this transaction, how will the following accounts be impacted?

a. Cash: $ -0-; Capital Stock: $200,000 increaseb. Cash: $ 80,000 increase; Capital Stock: No effectc. Cash: $120,000 increase; Capital Stock: No effectd. Cash: $200,000 increase; Capital Stock: $200,000 increase

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21. A corporation and its' owners are distinct entities:a. From a legal standpointb. From an accounting standpointc. From an accounting and legal standpointd. None of the above

22. After analyzing a transaction, it is recorded in: a. The general ledgerb. The general journalc. T-accountsd. Trial balance

23. The account used by corporations to record owner investments is:a. Capitalb. Retained Earningsc. Capital Stockd. Drawings

24. Which of the following accounts is debited for increases?a. Capitalb. Retained Earningsc. Capital Stockd. Dividends

25. The account used by corporations to record reinvested profits is:a. Capitalb. Retained Earningsc. Capital Stockd. Drawings

26. Which of the following accounts is debited for decreases?a. Capitalb. Cashc. Dividendsd. Drawings

27. To record the repayment of a loan to a creditor:a. Notes Payable must be creditedb. Cash must be debitedc. Notes Payable must be debitedd. Both a and b are correct

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28. Owner investments in corporations are recorded by:a. Debiting Capital; crediting Cashb. Debiting Cash; crediting Capitalc. Debiting Capital Stock; crediting Cashd. Debiting Cash; crediting Capital Stock

29. To record the sale of goods to customers on credit:a. Accounts Payable must be debitedb. Accounts Payable must be creditedc. Accounts Receivable must be debitedd. Accounts Receivable must be credited

30. The distribution of cash to investors of corporations are recorded by:a. Debiting Drawings; crediting Cashb. Debiting Cash; crediting Drawingsc. Debiting Dividends; crediting Cashd. Debiting Cash; crediting Dividends

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Documents

$5,000 was borrowed from a bank · Web viewNov. 1 $5,000 was borrowed from a bank. Nov. 2 Merchandise costing $750 was purchased on 30-day credit. Nov. 4 Purchased supplies for $75