CHAPTER 2

ANALYZING TRANSACTIONS
QUESTION INFORMATION
Number Objective Description Difficult Time AACSB AICPA SS GL
y
EO2-1 2-2 Easy 5 min Analytic FN-
Measurement
EO2-2 2-1 Easy 5 min Analytic FN-
Measurement
EO2-3 2-1 Easy 5 min Analytic FN-
Measurement
EO2-4 2-1 Easy 5 min Analytic FN-
Measurement
EO2-5 2-1 Easy 5 min Analytic FN-
Measurement
EO2-6 2-2 Easy 5 min Analytic FN-
Measurement
EO2-7 2-1 Easy 5 min Analytic FN-
Measurement
EO2-8 2-3 Easy 5 min Analytic FN-
Measurement
EO2-9 2-3 Easy 5 min Analytic FN-
Measurement
EO2-10 2-4 Easy 5 min Analytic FN-
Measurement
EO2-11 2-4 Easy 5 min Analytic FN-
Measurement
EO2-12 2-4 Easy 5 min Analytic FN-
Measurement
EO2-13 2-4 Easy 5 min Analytic FN-
Measurement
EO2-14 2-4 Easy 5 min Analytic FN-
Measurement
EO2-15 2-1 Easy 5 min Analytic FN-
Measurement
PE2-1A 2-1 Journal entry for Easy 5 min Analytic FN-
purchase of office Measurement
equipment
PE2-1B 2-1 Journal entry for Easy 5 min Analytic FN-
purchase of office Measurement
supplies
PE2-2A 2-1 Journal entry for fees Easy 5 min Analytic FN-
earned on account Measurement
PE2-2B 2-1 Journal entry for cash Easy 5 min Analytic FN-
received for services Measurement
rendered
PE2-3A 2-1 Journal entry for Easy 5 min Analytic FN-
owner's withdrawal Measurement
PE2-3B 2-1 Journal entry for Easy 5 min Analytic FN-
owner's withdrawal Measurement
PE2-4A 2-1 Rules of debit and Easy 5 min Analytic FN-
credit and normal Measurement
balances
PE2-4B 2-1 Rules of debit and Easy 5 min Analytic FN-
credit and normal Measurement
balances
PE2-5A 2-2 Determining cash Easy 5 min Analytic FN-

55
Number Objective Description Difficult Time AACSB AICPA SS GL
y
receipts Measurement
PE2-5B 2-2 Determining supplies Easy 5 min Analytic FN-
expense Measurement
PE2-6A 2-3 Effect of errors on a Moderate 10 Analytic FN-
trial balance min Measurement
PE2-6B 2-3 Effect of errors on a Moderate 10 Analytic FN-
trial balance min Measurement
PE2-7A 2-4 Correction of errors Easy 5 min Analytic FN-
Measurement
PE2-7B 2-4 Correction of errors Easy 5 min Analytic FN-
Measurement
Ex2-1 2-1 Chart of accounts Easy 5 min Analytic FN-
Measurement
Ex2-2 2-1 Chart of accounts Easy 5 min Analytic FN-
Measurement
Ex2-3 2-1 Chart of accounts Easy 10 Analytic FN-
min Measurement
Ex2-4 2-1 Identifying Easy 10 Analytic FN-
transactions min Measurement
Ex2-5 2-1, 2-2 Journal entries Easy 10 Analytic FN-
min Measurement
Ex2-6 2-3 Trial balance Easy 5 min Analytic FN- Exl
Measurement
Ex2-7 2-1 Normal entries for Easy 5 min Analytic FN-
accounts Measurement
Ex2-8 2-1 Normal balances of Easy 5 min Analytic FN-
accounts Measurement
Ex2-9 2-1 Rules of debit and Easy 5 min Analytic FN-
credit Measurement
Ex2-10 2-1 Capital account Easy 5 min Analytic FN-
balance Measurement
Ex2-11 2-1 Cash account Easy 5 min Analytic FN-
balance Measurement
Ex2-12 2-1 Accounts balances Moderate 10 Analytic FN-
min Measurement
Ex2-13 2-1, 2-2 Transactions Moderate 15 Analytic FN-
min Measurement
Ex2-14 2-1, 2-2 Journalizing and Easy 10 Analytic FN-
posting min Measurement
Ex2-15 2-1, 2-2 Transactions and T Easy 15 Analytic FN- Exl
accounts min Measurement
Ex2-16 2-3 Trial balance Moderate 10 Analytic FN- Exl
min Measurement
Ex2-17 2-3 Effect of errors on Moderate 10 Analytic FN-
trial balance min Measurement
Ex2-18 2-3 Errors in trial balance Difficult 15 Analytic FN-
min Measurement
Ex2-19 2-3 Effect of errors on Moderate 10 Analytic FN-
trial balance min Measurement
Ex2-20 2-3 Errors in trial balance Easy 10 Analytic FN-
min Measurement
Ex2-21 2-4 Entries to correct Easy 5 min Analytic FN-
errors Measurement
Ex2-22 2-4 Entries to correct Easy 5 min Analytic FN-
errors Measurement
Pr2-1A 2-1, 2-2, Entries into T Moderate 1 1/2 Analytic FN-
2-3 accounts and trial hr Measurement
balance
Pr2-2A 2-1, 2-2, Journal entries and Moderate 1 1/2 Analytic FN- Exl KA
2-3 trial balance hr Measurement

56
Number Objective Description Difficult Time AACSB AICPA SS GL
y
Pr2-3A 2-1, 2-2, Journal entries and Moderate 1 1/2 Analytic FN- Exl KA
2-3 trial balance hr Measurement
Pr2-4A 2-1, 2-2, Journal entries and Moderate 2 hr Analytic FN- Exl KA
2-3 trial balance Measurement
Pr2-5A 2-3,2-4 Errors in trial balance Difficult 2 hr Analytic FN-
Measurement
Pr2-6A 2-3 Corrected trial Difficult 1 1/2 Analytic FN- Exl
balance hr Measurement
Pr2-1B 2-1, 2-2, Entries into T Moderate 1 1/2 Analytic FN-
2-3 accounts and trial hr Measurement
balance
Pr2-2B 2-1, 2-2, Journal entries and Moderate 1 1/2 Analytic FN- Exl KA
2-3 trial balance hr Measurement
Pr2-3B 2-1, 2-2, Journal entries and Moderate 1 1/2 Analytic FN- Exl KA
2-3 trial balance hr Measurement
Pr2-4B 2-1, 2-2, Journal entries and Moderate 2 hr Analytic FN- Exl KA
2-3 trial balance Measurement
Pr2-5B 2-3, 2-4 Errors in trial balance Difficult 2 hr Analytic FN-
Measurement
Pr2-6B 2-3 Corrected trial Difficult 1 1/2 Analytic FN- Exl
balance hr Measurement
DM-2 Continuing Problem KA
SA2-1 2-3 Ethics and Easy 5 min Ethics BB-Industry
professional conduct
in business
SA2-2 2-1 Account for revenue Easy 5 min Analytic FN-
Measurement
SA2-3 2-1 Record transactions Easy 5 min Analytic FN-
Measurement
SA2-4 2-1 Debits and credits Easy 15 Analytic FN-
min Measurement
SA2-5 2-1, 2-2 Transactions and Moderate 1 hr Analytic FN-
income statement Measurement
SA2-6 1-1 Opportunities for Easy 15 Reflective FN-Research
accountants min Thinking

57
 EYE OPENERS

1. An account is a form designed to record 11. a. No. Because the same error occurred
changes in a particular asset, liability, on both the debit side and the credit
owner’s equity, revenue, or expense. A side of the trial balance, the trial
ledger is a group of related accounts. balance would not be out of balance.
2. The terms debit and credit may signify b. Yes. The trial balance would not
either an increase or decrease, depending balance. The error would cause the
upon the nature of the account. For credit total of the trial balance to exceed
example, debits signify an increase in asset the debit total by $450.
and expense accounts but a decrease in 12. a. The equality of the trial balance would
liability, owner’s capital, and revenue not be affected.
accounts.
b. On the income statement, total
3. Liabilities and owner’s equity both have
operating expenses (salary expense)
rights or claims to assets as indicated by the
would be overstated by $5,000, and net
accounting equation, Assets = Liabilities +
Owner’s Equity. Therefore, the same rules income would be understated by
of debit and credit apply to both liabilities $5,000. On the statement of owner’s
and owner’s equity. equity, the beginning and ending capital
4. a. Decrease in owner’s equity would be correct. However, net income
and withdrawals would be understated
b. Increase in expense
by $5,000. These understatements
5. a. Increase in owner’s equity offset one another, and, thus, ending
b. Increase in revenue owner’s equity is correct. The balance
6. a. Assuming no errors have occurred, the sheet is not affected by the error.
credit balance in the cash account
13. a. The equality of the trial balance would
resulted from drawing checks for $2,500
not be affected.
in excess of the amount of cash on
deposit. b. On the income statement, revenues
b. The $2,500 credit balance in the cash (fees earned) would be overstated by
account as of January 31 is a liability $80,000, and net income would be
owed to the bank. It is usually referred overstated by $80,000. On the
to as an “overdraft” and should be statement of owner’s equity, the
classified on the balance sheet as a beginning capital would be correct.
liability. However, net income and ending capital
7. a. The revenue was earned in February. would be overstated by $80,000. The
b. (1) Debit Accounts Receivable and balance sheet total assets is correct.
credit Fees Earned or another However, liabilities (notes payable) is
appropriately titled revenue account understated by $80,000, and owner’s
in February. equity is overstated by $80,000. The
understatement of liabilities is offset by
(2) Debit Cash and credit Accounts
the overstatement of owner’s equity,
Receivable in March.
and, thus, total liabilities and owner’s
8. The trial balance is a proof of the equality of
equity is correct.
the debits and the credits in the ledger.
9. No. Errors may have been made that had 14. The preferred procedure is to journalize and
the same erroneous effect on both debits post a correcting entry debiting Accounts
and credits, such as failure to record and/or Payable and crediting Cash.
post a transaction, recording the same 15. a. From the viewpoint of Peachtree
transaction more than once, and posting a Storage, the balance of the checking
transaction correctly but to the wrong account represents an asset.
account. b. From the viewpoint of Buckhead
10. The listing of $21,630 is a transposition; the Savings Bank, the balance of the
listing of $15,000 is a slide. checking account represents a liability.

58
 PRACTICE EXERCISES

PE 2–1A

Nov. 23 Office Equipment.................................................. 13,750

Cash.................................................................. 5,000
Accounts Payable .......................................... 8,750

PE 2–1B

Mar. 13 Office Supplies..................................................... 6,500

Cash.................................................................. 1,300
Accounts Payable........................................... 5,200

PE 2–2A

Feb. 2 Accounts Receivable........................................... 6,300

Fees Earned..................................................... 6,300

PE 2–2B

Jan. 21 Cash....................................................................... 1,250

Fees Earned..................................................... 1,250

PE 2–3A

Oct. 31 Amy Sykes, Drawing............................................ 4,500

Cash.................................................................. 4,500

PE 2–3B

July 31 Paul Wright, Drawing............................................ 7,250

Cash.................................................................. 7,250

59
PE 2–4A

1. Debit and credit entries, Normal credit balance

2. Debit and credit entries, Normal debit balance
3. Debit entries only, Normal debit balance
4. Credit entries only, Normal credit balance
5. Debit and credit entries, Normal credit balance
6. Credit entries only, Normal credit balance

PE 2–4B

1. Debit and credit entries, Normal debit balance

2. Credit entries only, Normal credit balance
3. Debit entries only, Normal debit balance
4. Debit entries only, Normal debit balance
5. Debit and credit entries, Normal credit balance
6. Debit and credit entries, Normal debit balance

PE 2–5A

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

Cash
Apr. 1 Bal. 18,750 219,140 Cash payments
Cash receipts ?
Apr. 30 Bal. 22,175

$22,175 = $18,750 + Cash receipts – $219,140

Cash receipts = $22,175 + $219,140 – $18,750 = $222,565

60
PE 2–5B

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

Supplies
Jan. 1 Bal. 1,035 ? Supplies expense
Cash receipts 2,325
Jan. 31 Bal. 786

$786 = $1,035 + $2,325 – Supplies expense

Supplies expense = $1,035 + $2,325 – $786 = $2,574

PE 2–6A

a. The totals are equal since both the debit and credit entries were journalized
and posted for $486.

b. The totals are unequal. The debit total is higher by $2,260 ($1,130 + $1,130).

c. The totals are unequal. The credit total is higher by $90 ($2,540 – $2,450).

PE 2–6B

a. The totals are unequal. The credit total is higher by $300 ($1,312 – $1,012).

b. The totals are equal since both the debit and credit entries were journalized
and posted for $4,500.

c. The totals are unequal. The credit total is higher by $1,278 ($1,420 – $142).

61
PE 2–7A

a. Accounts Payable............................................................ 3,125

Accounts Receivable............................................... 3,125

b. Advertising Expense....................................................... 1,500

Miscellaneous Expense........................................... 1,500
Advertising Expense....................................................... 1,500
Cash........................................................................... 1,500

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

Advertising Expense....................................................... 3,000

Miscellaneous Expense........................................... 1,500
Cash........................................................................... 1,500

PE 2–7B

a. Supplies............................................................................ 2,690
Office Equipment...................................................... 2,690
Supplies............................................................................ 2,690
Accounts Payable..................................................... 2,690

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

Supplies............................................................................ 5,380
Office Equipment...................................................... 2,690
Accounts Payable..................................................... 2,690

b. Cash.................................................................................. 3,750
Accounts Receivable............................................... 3,750

62
 EXERCISES

Ex. 2–1

Balance Sheet Accounts Income Statement Accounts

Assets Revenue
Flight Equipment Cargo and Mail Revenue
Purchase Deposits Passenger Revenue
for Flight Equipment* Expenses
Spare Parts and Supplies Aircraft Fuel Expense
Liabilities Commissions***
Accounts Payable Landing Fees****
Air Traffic Liability**
Owner’s Equity
None
*Advance payments on aircraft purchases
**Passenger ticket sales not yet recognized as revenue
***Commissions paid to travel agents
****Fees paid to airports for landing rights

Ex. 2–2

Account
Account Number
Accounts Payable 21
Accounts Receivable 12
Angie Stowe, Capital 31
Angie Stowe, Drawing 32
Cash 11
Fees Earned 41
Land 13
Miscellaneous Expense 53
Supplies Expense 52
Wages Expense 51

63
Ex. 2–3
Balance Sheet Accounts Income Statement Accounts
1. Assets 4. Revenue
11 Cash 41 Fees Earned
12 Accounts Receivable 5. Expenses
13 Supplies 51 Wages Expense
14 Prepaid Insurance 52 Rent Expense
15 Equipment 53 Supplies Expense
2. Liabilities 59 Miscellaneous Expense
21 Accounts Payable
22 Unearned Rent
3. Owner’s Equity
31 Rebecca Wimmer, Capital
32 Rebecca Wimmer, Drawing

Note: The order of some of the accounts within the major classifications is
somewhat arbitrary, as in accounts 13–14 and accounts 51–53. In a new business,
the order of magnitude of balances in such accounts is not determinable in
advance. The magnitude may also vary from period to period.

Ex. 2–4

a. and b.
Account Debited Account Credited
Transaction Type Effect Type Effect
(1) asset + owner’s equity +
(2) asset + asset –
(3) asset + asset –
liability +
(4) expense + asset –
(5) asset + revenue +
(6) liability – asset –
(7) asset + asset –
(8) drawing + asset –
(9) expense + asset –

64
Ex. 2–5

(1) Cash....................................................................... 30,000

Tosha Lewis, Capital....................................... 30,000
(2) Supplies................................................................. 1,800
Cash.................................................................. 1,800
(3) Equipment............................................................. 24,000
Accounts Payable........................................... 15,000
Cash.................................................................. 9,000
(4) Operating Expenses............................................. 3,050
Cash.................................................................. 3,050
(5) Accounts Receivable........................................... 15,000
Service Revenue.............................................. 15,000
(6) Accounts Payable................................................. 7,500
Cash.................................................................. 7,500
(7) Cash....................................................................... 10,000
Accounts Receivable...................................... 10,000
(8) Tosha Lewis, Drawing.......................................... 2,500
Cash.................................................................. 2,500
(9) Operating Expenses............................................. 1,050
Supplies........................................................... 1,050

Ex. 2–6

EOS CO.
Unadjusted Trial Balance
March 31, 2008
Debit Credit
Balances Balances
Cash...................................................................................... 16,150
Accounts Receivable.......................................................... 5,000
Supplies................................................................................ 750
Equipment............................................................................ 24,000
Accounts Payable................................................................ 7,500
Tosha Lewis, Capital........................................................... 30,000
Tosha Lewis, Drawing......................................................... 2,500
Service Revenue.................................................................. 15,000
Operating Expenses............................................................ 4,100
52,500 52,500

65
Ex. 2–7

1. debit and credit (c)

2. debit and credit (c)
3. debit and credit (c)
4. credit only (b)
5. debit only (a)
6. debit only (a)
7. debit only (a)

Ex. 2–8
a. Liability—credit e. Asset—debit
b. Asset—debit f. Revenue—credit
c. Owner’s equity g. Asset—debit
(Boyd Magnus, Capital)—credit h. Expense—debit
d. Owner’s equity i. Asset—debit
(Boyd Magnus, Drawing)—debit j. Expense—debit

Ex. 2–9

a. debit g. debit
b. debit h. credit
c. credit i. credit
d. debit j. debit
e. debit k. credit
f. credit l. credit

Ex. 2–10

a. Debit (negative) balance of $3,700 ($21,800 – $1,500 – $24,000). Such a

negative balance means that the liabilities of Sarah’s business exceed the
assets.
b. Yes. The balance sheet prepared at December 31 will balance, with Sarah
Bredy, Capital, being reported in the owner’s equity section as a negative
$3,700.

66
Ex. 2–11

a. The increase of $166,870 ($479,250 – $312,380) in the cash account does

not indicate earnings of that amount. Earnings will represent the net
change in all assets and liabilities from operating transactions.
b. $75,055 ($241,925 – $166,870)

Ex. 2–12

a. $67,700 ($11,150 + $72,300 – $15,750)

b. $117,000 ($115,000 + $27,500 – $25,500)
c. $5,100 ($60,500 – $77,700 + $22,300)

Ex. 2–13

2007
Oct. 1 Rent Expense........................................................ 2,500
Cash.................................................................. 2,500
3 Advertising Expense............................................ 1,100
Cash.................................................................. 1,100
4 Supplies................................................................. 725
Cash.................................................................. 725
6 Office Equipment.................................................. 7,500
Accounts Payable........................................... 7,500
10 Cash....................................................................... 3,600
Accounts Receivable...................................... 3,600
12 Accounts Payable................................................. 600
Cash.................................................................. 600
20 Alfonso Finley, Drawing....................................... 1,000
Cash.................................................................. 1,000
27 Miscellaneous Expense....................................... 500
Cash.................................................................. 500
30 Utilities Expense................................................... 195
Cash.................................................................. 195
31 Accounts Receivable........................................... 20,150
Fees Earned..................................................... 20,150
31 Utilities Expense................................................... 315
Cash.................................................................. 315

67
Ex. 2–14

a.
JOURNAL Page 38
Post.
Date Description Ref. Debit Credit

2008
July 27 Supplies................................................... 15 1,875
Accounts Payable............................... 21 1,875
Purchased supplies on account.

b., c., d.

Supplies 15
Post. Balance
Date Item Ref. Dr. Cr. Dr. Cr.

2008
July 1 Balance..................................  ............ ............ 735 ............
27 ................................................ 38 1,875 ............ 2,610 ............

Accounts Payable 21
2008
July 1 Balance..................................  ............ ............ ............ 11,380
27 ................................................ 38 ............ 1,875 ............ 13,255

68
Ex. 2–15

a.
(1) Accounts Receivable........................................... 13,750
Fees Earned..................................................... 13,750
(2) Supplies................................................................. 1,325
Accounts Payable........................................... 1,325
(3) Cash....................................................................... 8,150
Accounts Receivable...................................... 8,150
(4) Accounts Payable................................................. 800
Cash.................................................................. 800

b.

Cash Accounts Payable

(3) 8,150 (4) 800 (4) 800 (2) 1,325

Supplies Fees Earned

(2) 1,325 (1) 13,750

Accounts Receivable
(1) 13,750 (3) 8,150

69
Ex. 2–16

MATICE CO.
Unadjusted Trial Balance
July 31, 2008
Debit Credit
Balances Balances
Cash...................................................................................... 52,350
Accounts Receivable.......................................................... 112,500
Supplies................................................................................ 6,300
Prepaid Insurance................................................................ 9,000
Land...................................................................................... 255,000
Accounts Payable................................................................ 56,130
Unearned Rent..................................................................... 27,000
Notes Payable...................................................................... 120,000
Milton Adair, Capital............................................................ 259,920
Milton Adair, Drawing.......................................................... 60,000
Fees Earned......................................................................... 930,000
Wages Expense................................................................... 525,000
Rent Expense....................................................................... 180,000
Utilities Expense.................................................................. 124,500
Supplies Expense................................................................ 23,700
Insurance Expense.............................................................. 18,000
Miscellaneous Expense...................................................... 26,700
1,393,050 1,393,050

Ex. 2–17

Inequality of trial balance totals would be caused by errors described in (b) and
(d).

70
Ex. 2–18

AWESOME CO.
Unadjusted Trial Balance
December 31, 2008
Debit Credit
Balances Balances
Cash...................................................................................... 26,750
Accounts Receivable.......................................................... 49,200
Prepaid Insurance................................................................ 16,000
Equipment............................................................................ 150,000
Accounts Payable................................................................ 22,360
Unearned Rent..................................................................... 8,500
Sean Milner, Capital............................................................. 164,840
Sean Milner, Drawing........................................................... 20,000
Service Revenue.................................................................. 167,500
Wages Expense................................................................... 84,000
Advertising Expense........................................................... 14,400
Miscellaneous Expense...................................................... 2,850
363,200 363,200

Ex. 2–19

(a) (b) (c)

Error Out of Balance Difference Larger Total
1. yes $5,125 debit
2. yes 1,350 credit
3. yes 1,375 debit
4. yes 18 credit
5. no — —
6. yes 180 credit
7. no — —

71
Ex. 2–20

1. The debit column total is added incorrectly. The sum is $291,750, rather
than $458,250.
2. The trial balance should be dated “for the month ending October 31,
2008,” not for the month of October.
3. The Accounts Receivable balance should be in the debit column.
4. The Accounts Payable balance should be in the credit column.
5. The Nolan Towns, Drawing, balance should be in the debit column.
6. The Advertising Expense balance should be in the debit column.

A corrected trial balance would be as follows:

HYBRID CO.
Unadjusted Trial Balance
October 31, 2008
Debit Credit
Balances Balances
Cash...................................................................................... 22,500
Accounts Receivable.......................................................... 49,200
Prepaid Insurance................................................................ 10,800
Equipment............................................................................ 150,000
Accounts Payable................................................................ 5,550
Salaries Payable.................................................................. 3,750
Nolan Towns, Capital.......................................................... 129,600
Nolan Towns, Drawing........................................................ 18,000
Service Revenue.................................................................. 236,100
Salary Expense.................................................................... 98,430
Advertising Expense........................................................... 21,600
Miscellaneous Expense...................................................... 4,470
375,000 375,000

Ex. 2–21

a. Joel Goodson, Drawing....................................... 20,000

Wages Expense............................................... 20,000
b. Prepaid Rent......................................................... 3,600
Cash.................................................................. 3,600

72
Ex. 2–22

a. Accounts Payable................................................. 940

Supplies Expense........................................... 940
Supplies................................................................. 940
Cash.................................................................. 940

b. Cash....................................................................... 5,500
Fees Earned..................................................... 2,750
Accounts Receivable...................................... 2,750

73
 PROBLEMS

Prob. 2–1A

1. and 2.
Cash Equipment
(a) 25,000 (b) 2,000 (d) 6,500
(g) 3,750 (c) 1,500
(e) 975 Notes Payable
(f) 1,200 (j) 450 (c) 15,000
(h) 240 Bal. 14,550
(i) 2,500
(j) 450 Accounts Payable
(m) 1,500 (i) 2,500 (d) 6,500
(n) 280 (k) 750
Bal. 18,105 Bal. 4,750

Accounts Receivable Hannah Knox, Capital

(l) 3,150 (a) 25,000
Supplies Professional Fees
(e) 975 (g) 3,750
(l) 3,150
Bal. 6,900

Prepaid Insurance Rent Expense

(f) 1,200 (b) 2,000

Automobiles Salary Expense

(c) 16,500 (m) 1,500

Automobile Expense
(n) 280

Blueprint Expense
(k) 750

Miscellaneous Expense
(h) 240

74
Prob. 2–1A Concluded

3.
HANNAH KNOX, ARCHITECT
Unadjusted Trial Balance
July 31, 2008

Debit Credit
Balances Balances
Cash...................................................................................... 18,105
Accounts Receivable.......................................................... 3,150
Supplies................................................................................ 975
Prepaid Insurance................................................................ 1,200
Automobiles......................................................................... 16,500
Equipment............................................................................ 6,500
Notes Payable...................................................................... 14,550
Accounts Payable................................................................ 4,750
Hannah Knox, Capital......................................................... 25,000
Professional Fees................................................................ 6,900
Rent Expense....................................................................... 2,000
Salary Expense.................................................................... 1,500
Automobile Expense........................................................... 280
Blueprint Expense............................................................... 750
Miscellaneous Expense...................................................... 240
51,200 51,200

75
Prob. 2–2A

1.
(a) Cash....................................................................... 15,000
Kara Frantz, Capital........................................ 15,000
(b) Rent Expense........................................................ 2,500
Cash.................................................................. 2,500
(c) Supplies................................................................. 850
Accounts Payable........................................... 850
(d) Accounts Payable................................................. 400
Cash.................................................................. 400
(e) Cash....................................................................... 15,750
Sales Commissions........................................ 15,750
(f) Automobile Expense............................................ 2,400
Miscellaneous Expense....................................... 600
Cash.................................................................. 3,000
(g) Office Salaries Expense....................................... 3,250
Cash.................................................................. 3,250
(h) Supplies Expense................................................. 575
Supplies........................................................... 575
(i) Kara Frantz, Drawing............................................ 1,000
Cash.................................................................. 1,000

76
Prob. 2–2A Continued
2.
Cash Sales Commissions
(a) 15,000 (b) 2,500 (e) 15,750
(e) 15,750 (d) 400
(f) 3,000 Office Salaries Expense
(g) 3,250 (g) 3,250
(i) 1,000
Bal. 20,600
Supplies Rent Expense
(c) 850 (h) 575 (b) 2,500
Bal. 275
Accounts Payable Automobile Expense
(d) 400 (c) 850 (f) 2,400
Bal. 450
Kara Frantz, Capital Supplies Expense
(a) 15,000 (h) 575

Kara Frantz, Drawing Miscellaneous Expense

(i) 1,000 (f) 600

3. MUDCAT REALTY
Unadjusted Trial Balance
March 31, 2008
Debit Credit
Balances Balances
Cash...................................................................................... 20,600
Supplies................................................................................ 275
Accounts Payable................................................................ 450
Kara Frantz, Capital............................................................. 15,000
Kara Frantz, Drawing........................................................... 1,000
Sales Commissions............................................................. 15,750
Office Salaries Expense...................................................... 3,250
Rent Expense....................................................................... 2,500
Automobile Expense........................................................... 2,400
Supplies Expense................................................................ 575
Miscellaneous Expense...................................................... 600
31,200 31,200

77
Prob. 2–2A Concluded

4. a. $15,750
b. $9,325
c. $6,425

78
Prob. 2–3A

1.
JOURNAL Pages 1 and 2
Post.
Date Description Ref. Debit Credit

2008
June 1 Cash.......................................................... 11 18,000
Brooks Dodd, Capital......................... 31 18,000
5 Rent Expense........................................... 53 2,150
Cash..................................................... 11 2,150
6 Equipment................................................ 16 8,500
Accounts Payable............................... 22 8,500
8 Truck......................................................... 18 18,000
Cash..................................................... 11 10,000
Notes Payable..................................... 21 8,000
10 Supplies................................................... 13 1,200
Cash..................................................... 11 1,200
12 Cash.......................................................... 11 10,500
Fees Earned......................................... 41 10,500
15 Prepaid Insurance................................... 14 2,400
Cash..................................................... 11 2,400
23 Accounts Receivable.............................. 12 5,950
Fees Earned......................................... 41 5,950
24 Truck Expense......................................... 55 1,000
Accounts Payable............................... 22 1,000
29 Utilities Expense..................................... 54 1,200
Cash..................................................... 11 1,200
29 Miscellaneous Expense.......................... 59 400
Cash..................................................... 11 400
30 Cash.......................................................... 11 3,200
Accounts Receivable.......................... 12 3,200

79
Prob. 2–3A Continued

JOURNAL Pages 1 and 2

Post.
Date Description Ref. Debit Credit

2008
June 30 Wages Expense....................................... 51 2,900
Cash..................................................... 11 2,900
30 Accounts Payable................................... 22 2,125
Cash..................................................... 11 2,125
30 Brooks Dodd, Drawing........................... 32 1,750
Cash..................................................... 11 1,750

2.
GENERAL LEDGER
Cash 11
Post. Balance
Date Item Ref. Dr. Cr. Dr. Cr.

2008
June 1 ................................................ 1 18,000 ............ 18,000 ............
5 ................................................ 1 ............ 2,150 15,850 ............
8 ................................................ 1 ............ 10,000 5,850 ............
10 ................................................ 1 ............ 1,200 4,650 ............
12 ................................................ 1 10,500 ............ 15,150 ............
15 ................................................ 1 ............ 2,400 12,750 ............
29 ................................................ 2 ............ 1,200 11,550 ............
29 ................................................ 2 ............ 400 11,150 ............
30 ................................................ 2 3,200 ............ 14,350 ............
30 ................................................ 2 ............ 2,900 11,450 ............
30 ................................................ 2 ............ 2,125 9,325 ............
30 ................................................ 2 ............ 1,750 7,575 ............

Accounts Receivable 12
2008
June 23 ................................................ 1 5,950 ............ 5,950 ............
30 ................................................ 2 ............ 3,200 2,750 ............

80
Prob. 2–3A Continued
Supplies 13
Post. Balance
Date Item Ref. Dr. Cr. Dr. Cr.

2008
June 10 ................................................ 1 1,200 ............ 1,200 ............

Prepaid Insurance 14
2008
June 15 ................................................ 1 2,400 ............ 2,400 ............

Equipment 16
2008
June 6 ................................................ 1 8,500 ............ 8,500 ............

Truck 18
2008
June 8 ................................................ 1 .18,000 ............ 18,000 ............

Notes Payable 21
2008
June 8 ................................................ 1 ............ 8,000 ............ 8,000

Accounts Payable 22
2008
June 6 ................................................ 1 ............ 8,500 ............ 8,500
24 ................................................ 1 ............ 1,000 ............ 9,500
30 ................................................ 2 2,125 ............ ............ 7,375

Brooks Dodd, Capital 31

2008
June 1 ................................................ 1 ............ 18,000 ............ 18,000

Brooks Dodd, Drawing 32

2008
June 30 ................................................ 2 1,750 ............ 1,750 ............

81
Prob. 2–3A Continued
Fees Earned 41
Post. Balance
Date Item Ref. Dr. Cr. Dr. Cr.

2008
June 12 ................................................ 1 ............ 10,500 ............ 10,500
23 ................................................ 1 ............ 5,950 ............ 16,450

Wages Expense 51
2008
June 30 ................................................ 2 2,900 ............ 2,900 ............

Rent Expense 53
2008
June 5 ................................................ 1 2,150 ............ 2,150 ............

Utilities Expense 54
2008
June 29 ................................................ 2 1,200 ............ 1,200 ............

Truck Expense 55
2008
June 24 ................................................ 1 1,000 ............ 1,000 ............

Miscellaneous Expense 59
2008
June 29 ................................................ 2 400 ............ 400 ............

82
Prob. 2–3A Concluded

3.
COORDINATED DESIGNS
Unadjusted Trial Balance
June 30, 2008

Debit Credit
Balances Balances
Cash...................................................................................... 7,575
Accounts Receivable.......................................................... 2,750
Supplies................................................................................ 1,200
Prepaid Insurance................................................................ 2,400
Equipment............................................................................ 8,500
Truck..................................................................................... 18,000
Notes Payable...................................................................... 8,000
Accounts Payable................................................................ 7,375
Brooks Dodd, Capital.......................................................... 18,000
Brooks Dodd, Drawing........................................................ 1,750
Fees Earned......................................................................... 16,450
Wages Expense................................................................... 2,900
Rent Expense....................................................................... 2,150
Utilities Expense.................................................................. 1,200
Truck Expense..................................................................... 1,000
Miscellaneous Expense...................................................... 400
49,825 49,825

83
Prob. 2–4A

2. and 3.

JOURNAL Pages 18 and 19

Post.
Date Description Ref. Debit Credit

2008
Nov. 1 Rent Expense........................................... 52 5,000
Cash..................................................... 11 5,000
2 Office Supplies........................................ 14 1,750
Accounts Payable............................... 21 1,750
5 Prepaid Insurance................................... 13 4,800
Cash..................................................... 11 4,800
10 Cash.......................................................... 11 52,000
Accounts Receivable.......................... 12 52,000
15 Land.......................................................... 16 90,000
Cash..................................................... 11 10,000
Notes Payable..................................... 23 80,000
17 Accounts Payable................................... 21 7,750
Cash..................................................... 11 7,750
20 Accounts Payable................................... 21 250
Office Supplies.................................... 14 250
23 Advertising Expense............................... 53 2,100
Cash..................................................... 11 2,100
27 Cash.......................................................... 11 700
Salary and Commission Expense..... 51 700
28 Automobile Expense............................... 54 1,500
Cash..................................................... 11 1,500
29 Miscellaneous Expense.......................... 59 450
Cash..................................................... 11 450
30 Accounts Receivable.............................. 12 48,400
Fees Earned......................................... 41 48,400
30 Salary and Commission Expense......... 51 25,000
Cash..................................................... 11 25,000
30 Ashley Carnes, Drawing......................... 32 8,000
Cash..................................................... 11 8,000
30 Cash.......................................................... 11 2,500
Unearned Rent.................................... 22 2,500

84
Prob. 2–4A Continued

1. and 3.
Cash 11
Post. Balance
Date Item Ref. Dr. Cr. Dr. Cr.
2008
Nov. 1 Balance..................................  ............ ............ 26,300 ............
1 ................................................ 18 ............ 5,000 21,300 ............
5 ................................................ 18 ............ 4,800 16,500 ............
10 ................................................ 18 .52,000 ............ 68,500 ............
15 ................................................ 18 ............ 10,000 58,500 ............
17 ................................................ 18 ............ 7,750 50,750 ............
23 ................................................ 18 ............ 2,100 48,650 ............
27 ................................................ 19 700 ............ 49,350 ............
28 ................................................ 19 ............ 1,500 47,850 ............
29 ................................................ 19 ............ 450 47,400 ............
30 ................................................ 19 ............ 25,000 22,400 ............
30 ................................................ 19 ............ 8,000 14,400 ............
30 ................................................ 19 2,500 ............ 16,900 ............

Accounts Receivable 12
2008
Nov. 1 Balance..................................  ............ ............ 67,500 ............
10 ................................................ 18 ............ 52,000 15,500 ............
30 ................................................ 19 .48,400 ............ 63,900 ............

Prepaid Insurance 13
2008
Nov. 1 Balance..................................  ............ ............ 3,000 ............
5 ................................................ 18 4,800 ............ 7,800 ............

Office Supplies 14
2008
Nov. 1 Balance..................................  ............ ............ 1,800 ............
2 ................................................ 18 1,750 ............ 3,550 ............
20 ................................................ 18 ............ 250 3,300 ............

Land 16
2008
Nov. 15 ................................................ 18 .90,000 ............ 90,000 ............

85
Prob. 2–4A Continued
Accounts Payable 21
Post. Balance
Date Item Ref. Dr. Cr. Dr. Cr.

2008
Nov. 1 Balance..................................  ............ ............ ............ .13,020
2 ................................................ 18 ............ 1,750 ............ .14,770
17 ................................................ 18 7,750 ............ ............ 7,020
20 ................................................ 18 250 ............ ............ 6,770

Unearned Rent 22
2008
Nov. 30 ................................................ 19 ............ 2,500 ............ 2,500

Notes Payable 23
2008
Nov. 15 ................................................ 18 ............ 80,000 ............ 80,000

Ashley Carnes, Capital 31

2008
Nov. 1 Balance..................................  ............ ............ ............ .32,980

Ashley Carnes, Drawing 32

2008
Nov. 1 Balance..................................  ............ ............ 2,000 ............
30 ................................................ 19 8,000 ............ 10,000 ............

Fees Earned 41
2008
Nov. 1 Balance..................................  ............ ............ ............ 260,000
30 ................................................ 19 ............ 48,400 ............ 308,400

Salary and Commission Expense 51

2008
Nov. 1 Balance..................................  ............ ............ 148,200 ............
27 ................................................ 19 ............ 700 147,500 ............
30 ................................................ 19 .25,000 ............ 172,500 ............

Prob. 2–4A Continued

86
Rent Expense 52
Post. Balance
Date Item Ref. Dr. Cr. Dr. Cr.

2008
Nov. 1 Balance..................................  ............ ............ 30,000 ............
1 ................................................ 18 5,000 ............ 35,000 ............

Advertising Expense 53
2008
Nov. 1 Balance..................................  ............ ............ 17,800 ............
23 ................................................ 18 2,100 ............ 19,900 ............

Automobile Expense 54
2008
Nov. 1 Balance..................................  ............ ............ 5,500 ............
28 ................................................ 19 1,500 ............ 7,000 ............

Miscellaneous Expense 59
2008
Nov. 1 Balance..................................  ............ ............ 3,900 ............
29 ................................................ 19 450 ............ 4,350 ............

87
Prob. 2–4A Concluded

4.
PASSPORT REALTY
Unadjusted Trial Balance
November 30, 2008
Debit Credit
Balances Balances
Cash...................................................................................... 16,900
Accounts Receivable.......................................................... 63,900
Prepaid Insurance................................................................ 7,800
Office Supplies.................................................................... 3,300
Land...................................................................................... 90,000
Accounts Payable................................................................ 6,770
Unearned Rent..................................................................... 2,500
Notes Payable...................................................................... 80,000
Ashley Carnes, Capital........................................................ 32,980
Ashley Carnes, Drawing...................................................... 10,000
Fees Earned......................................................................... 308,400
Salary and Commission Expense...................................... 172,500
Rent Expense....................................................................... 35,000
Advertising Expense........................................................... 19,900
Automobile Expense........................................................... 7,000
Miscellaneous Expense...................................................... 4,350
430,650 430,650

88
Prob. 2–5A

1. Totals of preliminary trial balance: Debit $39,224.40

Credit $38,336.50

2. Difference between preliminary trial balance totals: $887.90

3. Errors in trial balance:

(a) Supplies debit balance was listed as $979.90 instead of $997.90.
(b) Notes Payable credit balance of $6,500.00 was listed as debit balance.
(c) Martin Tresp, Drawing debit balance of $1,350.00 was listed as credit
balance.
(d) Miscellaneous Expense of $283.50 was omitted.

4. Errors in account balances:

(a) Accounts Payable balance of $1,077.50 was totaled as $1,225.90.

5. Errors in posting:
(a) Prepaid Insurance entry of July 9 for $144.00 was posted as $1,440.00
(slide).
(b) Land entry of July 10 for $12,000.00 was posted as $1,200.00 (slide).
(c) Cash entry of July 25 for $1,681.30 was posted as $1,683.10
(transposition).
(d) Wages Expense entry of July 31 for $1,390.00 was posted as $1,930.00
(transposition).

6. July 31 Advertising Expense........................ 53 125.00

Cash............................................. 11 125.00

89
Prob. 2–5A Concluded

7.
MAINSTAY TV REPAIR
Unadjusted Trial Balance
July 31, 20—
Debit Credit
Balances Balances
Cash...................................................................................... 8,791.00
Supplies................................................................................ 997.90
Prepaid Insurance................................................................ 395.50
Land...................................................................................... 26,625.00
Notes Payable...................................................................... 6,500.00
Accounts Payable................................................................ 1,077.50
Martin Tresp, Capital........................................................... 27,760.20
Martin Tresp, Drawing......................................................... 1,350.00
Service Revenue.................................................................. 8,000.40
Wages Expense................................................................... 2,518.60
Utilities Expense.................................................................. 436.60
Advertising Expense........................................................... 400.00
Rent Expense....................................................................... 1,540.00
Miscellaneous Expense...................................................... 283.50
43,338.10 43,338.10

90
Prob. 2–6A

1.
IBERIAN CARPET
Unadjusted Trial Balance
March 31, 2008
Debit Credit
Balances Balances
Cash...................................................................................... 6,400*
Accounts Receivable.......................................................... 13,720
Supplies................................................................................ 2,500
Prepaid Insurance................................................................ 1,230
Equipment............................................................................ 56,000
Notes Payable...................................................................... 33,600
Accounts Payable................................................................ 8,800
Jose Mendrano, Capital...................................................... 34,900
Jose Mendrano, Drawing.................................................... 18,000
Fees Earned......................................................................... 122,700
Wages Expense................................................................... 70,000
Rent Expense....................................................................... 16,600
Advertising Expense........................................................... 7,200
Gas, Electricity, and Water Expense................................. 6,900
Miscellaneous Expense...................................................... 1,450
200,000 200,000
*$4,300 + $3,000 (a) – $900 (b)

2. No. The trial balance indicates only that the debits and credits are equal. Any
errors that have the same effect on debits and credits will not affect the
balancing of the trial balance.

91
Prob. 2–1B

1. and 2.

Cash Accounts Payable

(a) 22,500 (b) 4,000 (h) 1,800 (e) 5,200
(g) 6,500 (c) 2,500 (j) 800
(d) 1,200 Bal. 4,200
(f) 1,600
(h) 1,800 Lynette Moss, Capital
(i) 300 (a) 22,500
(l) 1,500
(m) 210 Professional Fees
(n) 200 (g) 6,500
(o) 250 (k) 3,500
Bal. 15,440 Bal. 10,000

Accounts Receivable Rent Expense

(k) 3,500 (c) 2,500

Supplies Salary Expense

(d) 1,200 (l) 1,500

Prepaid Insurance Blueprint Expense

(f) 1,600 (j) 800

Automobiles Automobile Expense

(b) 15,300 (o) 250

Equipment Miscellaneous Expense

(e) 5,200 (i) 300
(m) 210
Bal. 510

Notes Payable
(n) 200 (b) 11,300
Bal. 11,100

92
Prob. 2–1B Concluded

3.
LYNETTE MOSS, ARCHITECT
Unadjusted Trial Balance
April 30, 2008
Debit Credit
Balances Balances
Cash...................................................................................... 15,440
Accounts Receivable.......................................................... 3,500
Supplies................................................................................ 1,200
Prepaid Insurance................................................................ 1,600
Automobiles......................................................................... 15,300
Equipment............................................................................ 5,200
Notes Payable...................................................................... 11,100
Accounts Payable................................................................ 4,200
Lynette Moss, Capital.......................................................... 22,500
Professional Fees................................................................ 10,000
Rent Expense....................................................................... 2,500
Salary Expense.................................................................... 1,500
Blueprint Expense............................................................... 800
Automobile Expense........................................................... 250
Miscellaneous Expense...................................................... 510
47,800 47,800

93
Prob. 2–2B

1.
(a) Cash....................................................................... 18,000
Bill Bonds, Capital.......................................... 18,000
(b) Supplies................................................................. 1,000
Accounts Payable........................................... 1,000
(c) Cash....................................................................... 14,600
Sales Commissions........................................ 14,600
(d) Rent Expense........................................................ 3,000
Cash.................................................................. 3,000
(e) Accounts Payable................................................. 600
Cash.................................................................. 600
(f) Bill Bonds, Drawing.............................................. 1,500
Cash.................................................................. 1,500
(g) Automobile Expense............................................ 2,000
Miscellaneous Expense....................................... 500
Cash.................................................................. 2,500
(h) Office Salaries Expense....................................... 2,800
Cash.................................................................. 2,800
(i) Supplies Expense................................................. 725
Supplies........................................................... 725

94
Prob. 2–2B Continued

2.

Cash Sales Commissions

(a) 18,000 (d) 3,000 (c) 14,600
(c) 14,600 (e) 600
(f) 1,500
(g) 2,500 Rent Expense
(h) 2,800 (d) 3,000
Bal. 22,200

Supplies Office Salaries Expense

(b) 1,000 (i) 725 (h) 2,800
Bal. 275

Accounts Payable Automobile Expense

(e) 600 (b) 1,000 (g) 2,000
Bal. 400

Bill Bonds, Capital Supplies Expense

(a) 18,000 (i) 725

Bill Bonds, Drawing Miscellaneous Expense

(f) 1,500 (g) 500

95
Prob. 2–2B Concluded

3. GENESIS REALTY
Unadjusted Trial Balance
July 31, 2008
Debit Credit
Balances Balances
Cash...................................................................................... 22,200
Supplies................................................................................ 275
Accounts Payable................................................................ 400
Bill Bonds, Capital............................................................... 18,000
Bill Bonds, Drawing............................................................. 1,500
Sales Commissions............................................................. 14,600
Rent Expense....................................................................... 3,000
Office Salaries Expense...................................................... 2,800
Automobile Expense........................................................... 2,000
Supplies Expense................................................................ 725
Miscellaneous Expense...................................................... 500
33,000 33,000

4. a. $14,600
b. $9,025
c. $5,575

96
Prob. 2–3B

1.
JOURNAL Pages 1 and 2
Post.
Date Description Ref. Debit Credit

2008
Oct. 1 Cash.......................................................... 11 20,000
Kristy Gomez, Capital......................... 31 20,000
3 Rent Expense........................................... 53 1,600
Cash..................................................... 11 1,600
10 Truck......................................................... 18 15,000
Cash..................................................... 11 5,000
Notes Payable..................................... 21 10,000
13 Equipment................................................ 16 4,500
Accounts Payable............................... 22 4,500
14 Supplies................................................... 13 1,100
Cash..................................................... 11 1,100
15 Prepaid Insurance................................... 14 2,800
Cash..................................................... 11 2,800
15 Cash.......................................................... 11 6,100
Fees Earned......................................... 41 6,100
21 Accounts Payable................................... 22 2,400
Cash..................................................... 11 2,400
24 Accounts Receivable.............................. 12 8,600
Fees Earned......................................... 41 8,600
26 Truck Expense......................................... 55 875
Accounts Payable............................... 22 875
27 Utilities Expense..................................... 54 900
Cash..................................................... 11 900
27 Miscellaneous Expense.......................... 59 315
Cash..................................................... 11 315

97
Prob. 2–3B Continued

JOURNAL Pages 1 and 2

Post.
Date Description Ref. Debit Credit

2008
Oct. 29 Cash.......................................................... 11 4,100
Accounts Receivable.......................... 12 4,100
30 Wages Expense....................................... 51 2,500
Cash..................................................... 11 2,500
31 Kristy Gomez, Drawing........................... 32 3,000
Cash..................................................... 11 3,000

2.
Cash 11
Post. Balance
Date Item Ref. Dr. Cr. Dr. Cr.

2008
Oct. 1 ................................................ 1 20,000 ............ 20,000 ............
3 ................................................ 1 ............ 1,600 18,400 ............
10 ................................................ 1 ............ 5,000 13,400 ............
14 ................................................ 1 ............ 1,100 12,300 ............
15 ................................................ 1 ............ 2,800 9,500 ............
15 ................................................ 1 6,100 ............ 15,600 ............
21 ................................................ 2 ............ 2,400 13,200 ............
27 ................................................ 2 ............ 900 12,300 ............
27 ................................................ 2 ............ 315 11,985 ............
29 ................................................ 2 4,100 ............ 16,085 ............
30 ................................................ 2 ............ 2,500 13,585 ............
31 ................................................ 2 ............ 3,000 10,585 ............

Accounts Receivable 12
2008
Oct. 24 ................................................ 2 8,600 ............ 8,600 ............
29 ................................................ 2 ............ 4,100 4,500 ............

98
Prob. 2–3B Continued
Supplies 13
Post. Balance
Date Item Ref. Dr. Cr. Dr. Cr.

2008
Oct. 14 ................................................ 1 1,100 ............ 1,100 ............

Prepaid Insurance 14
2008
Oct. 15 ................................................ 1 2,800 ............ 2,800 ............

Equipment 16
2008
Oct. 13 ................................................ 1 4,500 ............ 4,500 ............

Truck 18
2008
Oct. 10 ................................................ 1 .15,000 ............ 15,000 ............

Notes Payable 21
2008
Oct. 10 ................................................ 1 ............ 10,000 ............ .10,000

Accounts Payable 22
2008
Oct. 13 ................................................ 1 ............ 4,500 ............ 4,500
21 ................................................ 2 2,400 ............ ............ 2,100
26 ................................................ 2 ............ 875 ............ 2,975

Kristy Gomez, Capital 31

2008
Oct. 1 ................................................ 1 ............ 20,000 ............ 20,000

Kristy Gomez, Drawing 32

2008
Oct. 31 ................................................ 2 3,000 ............ 3,000 ............

99
Prob. 2–3B Continued
Fees Earned 41
Post. Balance
Date Item Ref. Dr. Cr. Dr. Cr.

2008
Oct. 15 ................................................ 1 ............ 6,100 ............ 6,100
24 ................................................ 2 ............ 8,600 ............ 14,700

Wages Expense 51
2008
Oct. 30 ................................................ 2 2,500 ............ 2,500 ............

Rent Expense 53
2008
Oct. 3 ................................................ 1 1,600 ............ 1,600 ............

Utilities Expense 54
2008
Oct. 27 ................................................ 2 900 ............ 900 ............

Truck Expense 55
2008
Oct. 26 ................................................ 2 875 ............ 875 ............

Miscellaneous Expense 59
2008
Oct. 27 ................................................ 2 315 ............ 315 ............

100
Prob. 2–3B Concluded

3.
ULTIMATE DESIGNS
Unadjusted Trial Balance
October 31, 2008
Debit Credit
Balances Balances
Cash...................................................................................... 10,585
Accounts Receivable.......................................................... 4,500
Supplies................................................................................ 1,100
Prepaid Insurance................................................................ 2,800
Equipment............................................................................ 4,500
Truck..................................................................................... 15,000
Notes Payable...................................................................... 10,000
Accounts Payable................................................................ 2,975
Kristy Gomez, Capital......................................................... 20,000
Kristy Gomez, Drawing....................................................... 3,000
Fees Earned......................................................................... 14,700
Wages Expense................................................................... 2,500
Rent Expense....................................................................... 1,600
Utilities Expense.................................................................. 900
Truck Expense..................................................................... 875
Miscellaneous Expense...................................................... 315
47,675 47,675

101
Prob. 2–4B

2. and 3.
JOURNAL Pages 18 and 19
Post.
Date Description Ref. Debit Credit

2008
Aug. 1 Office Supplies........................................ 14 1,500
Accounts Payable............................... 21 1,500
2 Rent Expense........................................... 52 2,500
Cash..................................................... 11 2,500
3 Cash.......................................................... 11 28,720
Accounts Receivable.......................... 12 28,720
5 Prepaid Insurance................................... 13 3,600
Cash..................................................... 11 3,600
9 Accounts Payable................................... 21 250
Office Supplies.................................... 14 250
17 Advertising Expense............................... 53 3,450
Cash..................................................... 11 3,450
23 Accounts Payable................................... 21 2,670
Cash..................................................... 11 2,670
29 Miscellaneous Expense.......................... 59 500
Cash..................................................... 11 500
30 Automobile Expense............................... 54 1,500
Cash..................................................... 11 1,500
31 Cash.......................................................... 11 1,000
Salary and Commission Expense..... 51 1,000
31 Salary and Commission Expense......... 51 17,400
Cash..................................................... 11 17,400
31 Accounts Receivable.............................. 12 51,900
Fees Earned......................................... 41 51,900
31 Land.......................................................... 16 75,000
Cash..................................................... 11 10,000
Notes Payable..................................... 23 65,000
31 Jody Craft, Drawing............................... 32 5,000
Cash..................................................... 11 5,000
31 Cash.......................................................... 11 2,000
Unearned Rent.................................... 22 2,000

102
Prob. 2–4B Continued

1. and 3.
Cash 11
Post. Balance
Date Item Ref. Dr. Cr. Dr. Cr.

2008
Aug. 1 Balance..................................  ............ ............ 21,200 ............
2 ................................................ 18 ............ 2,500 18,700 ............
3 ................................................ 18 28,720 ............ 47,420 ............
5 ................................................ 18 ............ 3,600 43,820 ............
17 ................................................ 18 ............ 3,450 40,370 ............
23 ................................................ 18 ............ 2,670 37,700 ............
29 ................................................ 19 ............ 500 37,200 ............
30 ................................................ 19 ............ 1,500 35,700 ............
31 ................................................ 19 1,000 ............ .36,700 ............
31 ................................................ 19 ............ 17,400 19,300 ............
31 ................................................ 19 ............ 10,000 9,300 ............
31 ................................................ 19 ............ 5,000 4,300 ............
31 ................................................ 19 2,000 ............ 6,300 ............

Accounts Receivable 12
2008
Aug. 1 Balance..................................  ............ ............ 35,750 ............
3 ................................................ 18 ............ 28,720 7,030 ............
31 ................................................ 19 51,900 ............ 58,930 ............

Prepaid Insurance 13
2008
Aug. 1 Balance..................................  ............ ............ 4,500 ............
5 ................................................ 18 3,600 ............ 8,100 ............

Office Supplies 14
2008
Aug. 1 Balance..................................  ............ ............ 1,000 ............
1 ................................................ 18 1,500 ............ 2,500 ............
9 ................................................ 18 ............ 250 2,250 ............

Land 16
2008
Aug. 31 ................................................ 19 75,000 ............ 75,000 ............

103
Prob. 2–4B Continued
Accounts Payable 21
Post. Balance
Date Item Ref. Dr. Cr. Dr. Cr.

2008
Aug. 1 Balance..................................  ............ ............ ............ 6,200
1 ................................................ 18 ............ 1,500 ............ 7,700
9 ................................................ 18 250 ............ ............ 7,450
23 ................................................ 18 2,670 ............ ............ 4,780

Unearned Rent 22
2008
Aug. 31 ................................................ 19 ............ 2,000 ............ 2,000

Notes Payable 23
2008
Aug. 31 ................................................ 19 ............ 65,000 ............ 65,000

Jody Craft, Capital 31

2008
Aug. 1 Balance..................................  ............ ............ ............ 31,550

Jody Craft, Drawing 32

2008
Aug. 1 Balance..................................  ............ ............ 16,000 ............
31 ................................................ 19 5,000 ............ .21,000 ............

Fees Earned 41
2008
Aug. 1 Balance..................................  ............ ............ ............ 220,000
31 ................................................ 19 ............ 51,900 ............ 271,900

Salary and Commission Expense 51

2008
Aug. 1 Balance..................................  ............ ............ 140,000 ............
31 ................................................ 19 ............ 1,000 139,000 ............
31 ................................................ 19 17,400 ............ 156,400 ............

Prob. 2–4B Continued

104
Rent Expense 52
Post. Balance
Date Item Ref. Dr. Cr. Dr. Cr.

2008
Aug. 1 Balance..................................  ............ ............ 17,500 ............
2 ................................................ 18 2,500 ............ 20,000 ............

Advertising Expense 53
2008
Aug. 1 Balance..................................  ............ ............ 14,300 ............
17 ................................................ 18 3,450 ............ 17,750 ............

Automobile Expense 54
2008
Aug. 1 Balance..................................  ............ ............ 6,400 ............
30 ................................................ 19 1,500 ............ 7,900 ............

Miscellaneous Expense 59
2008
Aug. 1 Balance..................................  ............ ............ 1,100 ............
29 ................................................ 19 500 ............ 1,600 ............

105
Prob. 2–4B Concluded

4.
EQUITY REALTY
Unadjusted Trial Balance
August 31, 2008
Debit Credit
Balances Balances
Cash...................................................................................... 6,300
Accounts Receivable.......................................................... 58,930
Prepaid Insurance................................................................ 8,100
Office Supplies.................................................................... 2,250
Land...................................................................................... 75,000
Accounts Payable................................................................ 4,780
Unearned Rent..................................................................... 2,000
Notes Payable...................................................................... 65,000
Jody Craft, Capital............................................................... 31,550
Jody Craft, Drawing............................................................. 21,000
Fees Earned......................................................................... 271,900
Salary and Commission Expense...................................... 156,400
Rent Expense....................................................................... 20,000
Advertising Expense........................................................... 17,750
Automobile Expense........................................................... 7,900
Miscellaneous Expense...................................................... 1,600
375,230 375,230

106
Prob. 2–5B

1. Totals of preliminary trial balance: Debit $39,224.40

Credit $38,336.50

2. Difference between preliminary trial balance totals: $887.90

3. Errors in trial balance:

(a) Supplies debit balance was listed as $979.90 instead of $997.90.
(b) Notes Payable credit balance of $6,500.00 was listed as debit balance.
(c) Martin Tresp, Drawing debit balance of $1,350.00 was listed as credit
balance.
(d) Miscellaneous Expense of $283.50 was omitted.

4. Errors in account balances:

(a) Accounts Payable balance of $1,077.50 was totaled as $1,225.90.

5. Errors in posting:
(a) Prepaid Insurance entry of July 9 for $144.00 was posted as $1,440.00
(slide).
(b) Land entry of July 10 for $12,000.00 was posted as $1,200.00 (slide).
(c) Cash entry of July 25 for $1,681.30 was posted as $1,683.10
(transposition).
(d) Wages Expense entry of July 31 for $1,390.00 was posted as $1,930.00
(transposition).

6. July 31 Utilities Expense.............................. 53 110.00

Cash............................................. 11 110.00

107
Prob. 2–5B Concluded

7.
MAINSTAY TV REPAIR
Unadjusted Trial Balance
July 31, 20—
Debit Credit
Balances Balances
Cash...................................................................................... 8,806.00
Supplies................................................................................ 997.90
Prepaid Insurance................................................................ 395.50
Land...................................................................................... 26,625.00
Notes Payable...................................................................... 6,500.00
Accounts Payable................................................................ 1,077.50
Martin Tresp, Capital........................................................... 27,760.20
Martin Tresp, Drawing......................................................... 1,350.00
Service Revenue.................................................................. 8,000.40
Wages Expense................................................................... 2,518.60
Utilities Expense.................................................................. 546.60
Advertising Expense........................................................... 275.00
Rent Expense....................................................................... 1,540.00
Miscellaneous Expense...................................................... 283.50
43,338.10 43,338.10

108
Prob. 2–6B
1.
EPIC VIDEO
Unadjusted Trial Balance
July 31, 2008
Debit Credit
Balances Balances
Cash...................................................................................... 6,750*
Accounts Receivable.......................................................... 15,300
Supplies................................................................................ 2,250
Prepaid Insurance................................................................ 1,710
Equipment............................................................................ 54,000
Notes Payable...................................................................... 18,000
Accounts Payable................................................................ 5,580
Carlton Dey, Capital............................................................. 32,400
Carlton Dey, Drawing........................................................... 13,500
Fees Earned......................................................................... 178,020
Wages Expense................................................................... 102,000
Rent Expense....................................................................... 20,850
Advertising Expense........................................................... 9,450
Gas, Electricity, and Water Expense................................. 5,670
Miscellaneous Expense...................................................... 2,520
234,000 234,000
*$6,250 – $5,000 (a) + $5,500 (b)

2. No. The trial balance indicates only that the debits and credits are equal. Any
errors that have the same effect on debits and credits will not affect the
balancing of the trial balance.

109
 CONTINUING PROBLEM

2. and 3.
JOURNAL Page 1
Post.
Date Description Ref. Debit Credit

2008
May 1 Cash.......................................................... 11 2,500
Kris Payne, Capital............................. 31 2,500
1 Office Rent Expense............................... 51 1,600
Cash..................................................... 11 1,600
1 Prepaid Insurance................................... 15 3,360
Cash..................................................... 11 3,360
2 Cash.......................................................... 11 1,350
Accounts Receivable.......................... 12 1,350
3 Cash.......................................................... 11 4,800
Unearned Revenue............................. 23 4,800
3 Accounts Payable................................... 21 250
Cash..................................................... 11 250
4 Miscellaneous Expense.......................... 59 300
Cash..................................................... 11 300
5 Office Equipment.................................... 17 5,000
Accounts Payable............................... 21 5,000
8 Advertising Expense............................... 55 180
Cash..................................................... 11 180
11 Cash.......................................................... 11 750
Fees Earned......................................... 41 750
13 Equipment Rent Expense....................... 52 500
Cash..................................................... 11 500
14 Wages Expense....................................... 50 1,000
Cash..................................................... 11 1,000

110
Continuing Problem Continued

2. and 3.
JOURNAL Page 2
Post.
Date Description Ref. Debit Credit

2008
May 16 Cash.......................................................... 11 1,500
Fees Earned......................................... 41 1,500
18 Supplies................................................... 14 750
Accounts Payable............................... 21 750
21 Music Expense........................................ 54 325
Cash..................................................... 11 325
22 Advertising Expense............................... 55 800
Cash..................................................... 11 800
23 Cash.......................................................... 11 750
Accounts Receivable.............................. 12 1,750
Fees Earned......................................... 41 2,500
27 Utilities Expense..................................... 53 560
Cash..................................................... 11 560
28 Wages Expense....................................... 50 1,000
Cash..................................................... 11 1,000
29 Miscellaneous Expense.......................... 59 150
Cash..................................................... 11 150
30 Cash.......................................................... 11 400
Accounts Receivable.............................. 12 1,100
Fees Earned......................................... 41 1,500
31 Cash.......................................................... 11 2,800
Fees Earned......................................... 41 2,800
31 Music Expense........................................ 54 900
Cash..................................................... 11 900
31 Kris Payne, Drawing................................ 32 1,000
Cash..................................................... 11 1,000

111
Continuing Problem Continued
1. and 3.
Cash 11
Post. Balance
Date Item Ref. Dr. Cr. Dr. Cr.
2008
May 1 Balance..................................  ............ ............ 9,160 ............
1 ................................................ 1 2,500 ............ 11,660 ............
1 ................................................ 1 ............ 1,600 10,060 ............
1 ................................................ 1 ............ 3,360 6,700 ............
2 ................................................ 1 1,350 ............ 8,050 ............
3 ................................................ 1 4,800 ............ 12,850 ............
3 ................................................ 1 ............ 250 12,600 ............
4 ................................................ 1 ............ 300 12,300 ............
8 ................................................ 1 ............ 180 12,120 ............
11 ................................................ 1 750 ............ 12,870 ............
13 ................................................ 1 ............ 500 12,370 ............
14 ................................................ 1 ............ 1,000 11,370 ............
16 ................................................ 2 1,500 ............ 12,870 ............
21 ................................................ 2 ............ 325 12,545 ............
22 ................................................ 2 ............ 800 11,745 ............
23 ................................................ 2 750 ............ 12,495 ............
27 ................................................ 2 ............ 560 11,935 ............
28 ................................................ 2 ............ 1,000 10,935 ............
29 ................................................ 2 ............ 150 10,785 ............
30 ................................................ 2 400 ............ 11,185 ............
31 ................................................ 2 2,800 ............ 13,985 ............
31 ................................................ 2 ............ 900 13,085 ............
31 ................................................ 2 ............ 1,000 12,085 ............
Accounts Receivable 12
2008
May 1 Balance..................................  ............ ............ 1,350 ............
2 ................................................ 1 ............ 1,350 — —
23 ................................................ 2 1,750 ............ 1,750 ............
30 ................................................ 2 1,100 ............ 2,850 ............
Supplies 14
2008
May 1 Balance..................................  ............ ............ 170 ............
18 ................................................ 2 750 ............ 920 ............
Prepaid Insurance 15
2008
May 1 ................................................ 1 3,360 ............ 3,360 ............

112
Continuing Problem Continued
Office Equipment 17
Post. Balance
Date Item Ref. Dr. Cr. Dr. Cr.
2008
May 5 ................................................ 1 5,000 ............ 5,000 ............

Accumulated Depreciation—Office Equipment 18

This account is not used in Chapter 2.

Accounts Payable 21
2008
May 1 Balance..................................  ............ ............ ............ 250
3 ................................................ 1 250 ............ — —
5 ................................................ 1 ............ 5,000 ............ 5,000
18 ................................................ 2 ............ 750 ............ 5,750

Wages Payable 22
This account is not used in Chapter 2.

Unearned Revenue 23
2008
May 3 ................................................ 1 ............ 4,800 ............ 4,800

Kris Payne, Capital 31

2008
May 1 Balance..................................  ............ ............ ............ 10,000
1 ................................................ 1 ............ 2,500 ............ 12,500

Kris Payne, Drawing 32

2008
May 1 Balance..................................  ............ ............ 300 ............
31 ................................................ 2 1,000 ............ 1,300 ............
Income Summary 33
This account is not used in Chapter 2.
Fees Earned 41
2008
May 1 Balance..................................  ............ ............ ............ 5,700
11 ................................................ 1 ............ 750 ............ 6,450
16 ................................................ 2 ............ 1,500 ............ 7,950
23 ................................................ 2 ............ 2,500 ............ 10,450
30 ................................................ 2 ............ 1,500 ............ 11,950
31 ................................................ 2 ............ 2,800 ............ 14,750

113
Continuing Problem Continued
Wages Expense 50
Post. Balance
Date Item Ref. Dr. Cr. Dr. Cr.
2008
May 1 Balance..................................  ............ ............ 400 ............
14 ................................................ 1 1,000 ............ 1,400 ............
28 ................................................ 2 1,000 ............ 2,400 ............

Office Rent Expense 51

2008
May 1 Balance..................................  ............ ............ 1,000 ............
1 ................................................ 1 1,600 ............ 2,600 ............

Equipment Rent Expense 52

2008
May 1 Balance..................................  ............ ............ 800 ............
13 ................................................ 1 500 ............ 1,300 ............

Utilities Expense 53
2008
May 1 Balance..................................  ............ ............ 350 ............
27 ................................................ 2 560 ............ 910 ............

Music Expense 54
2008
May 1 Balance..................................  ............ ............ 1,340 ............
21 ................................................ 2 325 ............ 1,665 ............
31 ................................................ 2 900 ............ 2,565 ............

Advertising Expense 55
2008
May 1 Balance..................................  ............ ............ 750 ............
8 ................................................ 1 180 ............ 930 ............
22 ................................................ 2 800 ............ 1,730 ............

Supplies Expense 56
2008
May 1 Balance..................................  ............ ............ 180 ............

Insurance Expense 57
This account is not used in Chapter 2.

114
Continuing Problem Concluded
Depreciation Expense 58
Post. Balance
Date Item Ref. Dr. Cr. Dr. Cr.
This account is not used in Chapter 2.

Miscellaneous Expense 59
2008
May 1 Balance..................................  ............ ............ 150 ............
4 ................................................ 1 300 ............ 450 ............
29 ................................................ 2 150 ............ 600 ............

4.
DANCIN MUSIC
Unadjusted Trial Balance
May 31, 2008
Debit Credit
Balances Balances
Cash...................................................................................... 12,085
Accounts Receivable.......................................................... 2,850
Supplies................................................................................ 920
Prepaid Insurance................................................................ 3,360
Office Equipment................................................................. 5,000
Accounts Payable................................................................ 5,750
Unearned Revenue.............................................................. 4,800
Kris Payne, Capital.............................................................. 12,500
Kris Payne, Drawing............................................................ 1,300
Fees Earned......................................................................... 14,750
Wages Expense................................................................... 2,400
Office Rent Expense........................................................... 2,600
Equipment Rent Expense................................................... 1,300
Utilities Expense.................................................................. 910
Music Expense..................................................................... 2,565
Advertising Expense........................................................... 1,730
Supplies Expense................................................................ 180
Miscellaneous Expense...................................................... 600
37,800 37,800

115
 SPECIAL ACTIVITIES

SA 2–1

Acceptable ethical conduct requires that Tomas look for the difference. If Tomas
cannot find the difference within a reasonable amount of time, he should confer
with his supervisor as to what action should be taken so that the financial
statements can be prepared by the 5 o’clock deadline. Tomas’s responsibility to
his employer is to act with integrity, objectivity, and due care, so that users of the
financial statements will not be misled.

SA 2–2

The following general journal entry should be used to record the receipt of tuition
payments received in advance of classes:

Cash....................................................................... XXXX
Unearned Tuition Deposits............................ XXXX

Cash is an asset account, and Unearned Tuition Deposits is a liability account. As

the classes are taught throughout the term, the unearned tuition deposits
become earned revenue.

SA 2–3

The journal is called the book of original entry. It provides a time-ordered history
of the transactions that have occurred for the firm. This time-ordered history is
very important because it allows one to trace ledger account balances back to
the original transactions that created those balances. This is called an “audit
trail.” If the firm recorded transactions by posting ledgers directly, it would be
nearly impossible to reconstruct actual transactions. The debits and credits
would all be separated and accumulated into the ledger balances. Once the
transactions become part of the ledger balances, the original transactions would
be lost. That is, there would be no audit trail, and any errors that might occur in
recording transactions would be almost impossible to trace. Thus, firms first
record transaction debits and credits in a journal. These transactions are then
posted to the ledger to update the account balances. The journal and ledger are
linked using posting references. This allows an analyst to trace the transaction
flow forward or backward, depending upon the need.

116
SA 2–4

1. The rules of debit and credit must be memorized. Miguel is correct in that the
rules of debit and credit could be reversed as long as everyone accepted and
abided by the rules. However, the important point is that everyone accepts
the rules as the way in which transactions should be recorded. This
generates uniformity across the accounting profession and reduces errors
and confusion. Since the current rules of debit and credit have been used for
centuries, Miguel should adapt to the current rules of debit and credit, rather
than devise his own.

The primary reason that all accounts do not have the same rules for
increases and decreases is for control of the recording process. The double-
entry accounting system, which includes both (1) the rules of debit and credit
and (2) the accounting equation, guarantees that (1) debits always equals
credits and (2) assets always equals liabilities plus owner’s equity. If all
increases in the account were recorded by debits, then the control that debits
always equals credits would be removed. In addition, the control that the
normal balance of assets is a debit would also be removed. The accounting
equation would still hold, but the control over recording transactions would
be weakened.

Miguel is correct that we could call the left and right sides of an account
different terms, such as “LE” or “RE.” Again, centuries of tradition dictate the
current terminology used. One might note, however, that in Latin, debere
(debit) means left and credere (credit) means right.

2. The accounting system may be designed to capture information about the

buying habits of various customers or vendors, such as the quantity normally
ordered, average amount ordered, number of returns, etc. Thus, in a sense,
there can be other “sides” of (information about) a transaction that are
recorded by the accounting system. Such information would be viewed as
supplemental to the basic double-entry accounting system.

117
SA 2–5

a. Although the titles and numbers of accounts may differ, depending on how
expenses are classified, the following accounts would be adequate for
recording transaction data for Birdie Caddy Service:

Balance Sheet Accounts Income Statement Accounts

1. Assets 4. Revenue
11 Cash 41 Service Revenue
12 Accounts Receivable
13 Supplies 5. Expenses
51 Rent Expense
2. Liabilities 52 Supplies Expense
21 Accounts Payable 53 Wages Expense
54 Utilities Expense
3. Owner’s Equity 55 Miscellaneous Expense
31 Shane Raburn, Capital
32 Shane Raburn, Drawing
b.
BIRDIE CADDY SERVICE
Income Statement
For Month Ended June 30, 2008

Service revenue................................................................... $7,200

Expenses:
Rent expense................................................................ $2,000
Supplies expense......................................................... 810
Wages expense............................................................ 450
Utilities expense........................................................... 160
Miscellaneous expense............................................... 180
Total expenses....................................................... 3,600
Net income........................................................................... $3,600
Note to Instructors: Students may have prepared slightly different income
statements, depending upon the titles of the major expense classifications
chosen. Regardless of the classification of expenses, however, the total sales,
total expenses, and net income should be as presented above.
T accounts are not required for the preparation of the income statement of Birdie
Caddy Service. The following presentation illustrates one solution using T
accounts. Alternative solutions are possible if students used different accounts.
In presenting the following T account solution, instructors may wish to
emphasize the advantages of using T accounts (or a journal and four-column
accounts) when a large number of transactions must be recorded.

118
SA 2–5 Continued

Cash 11 Service Revenue 41

2008 2008 2008
June 1 2,000 June 1 500 June 15 3,150
15 3,150 2 650 25 850
30 3,200 3 750 30 3,200
30 550 17 350 Bal. 7,200
20 750
28 180 Rent Expense 51
30 160 2008
___ 30 450 June 1 500
Bal. 5,110 3 1,500
Bal. 2,000

Accounts Receivable 12 Supplies Expense 52

2008 2008 2008
June 25 850 June 30 550 June 30 810
Bal. 300

Supplies 13 Wages Expense 53

2008 2008 2008
June 2 650 June 30 810 June 30 450
7 350
22 200 Utilities Expense 54
Bal. 390 2008
June 30 160
Accounts Payable 21
2008 2008 Miscellaneous Expense 55
June 17 350 June 3 750 2008
20 750 7 350 June 28 180
22 200
Bal. 200

Shane Raburn, Capital 31

2008
June 1 2,000

119
SA 2–5 Concluded

c. $5,110, computed in the following manner:

Cash receipts:
Initial investment.................................................... $2,000
Cash sales.............................................................. 6,350
Collections on accounts....................................... 550
Total cash receipts during June.................. $8,900

Cash disbursements:
Rent expense.......................................................... $2,000
Supplies purchased for cash................................ 650
Wages expense...................................................... 450
Payment for supplies on account........................ 350
Utilities expense.................................................... 160
Miscellaneous expense......................................... 180
Total cash disbursements during June....... 3,790
Cash on hand according to records.......................... $5,110*
*If the student used T accounts in completing part (b), or this part, this
amount ($5,110) should agree with the balance of the cash account.

d. The difference of $130 between the cash on hand according to records

($5,110) and the cash on hand according to the count ($4,980) could be due to
many factors, including errors in the record keeping and withdrawals made
by Shane.

SA 2–6

Note to Instructors: The purpose of this activity is to familiarize students with the
job opportunities available in accounting or in fields that require (or prefer) the
employee to have some knowledge of accounting.

120