Ch02 Solution

CHAPTER 2
The Recording Process
ASSIGNMENT CLASSIFICATION TABLE

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Brief A B
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Study Objectives Questions Exercises Exercises Problems Problems

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1. Explain what an account 1 1

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is and how it helps in the

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recording process.
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2. Define debits and credits 2, 3, 4, 5, 6, 1, 2, 5 2, 4, 6, 1A, 2A, 1B, 2B,

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and explain their use in 7, 8, 9, 14 7, 14 3A, 5A 3B, 5B

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recording business
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transactions.
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3. Identify the basic steps in 10, 19 4 6, 7

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the recording process.

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4. Explain what a journal is 11, 12, 13, 3, 6 3, 5, 6, 7 1A, 2A, 1B, 2B,
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and how it helps in the 14, 16 10, 11, 12 3A, 5A 3B, 5B

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recording process.
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5. Explain what a ledger is 17 8

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and how it helps in the

recording process.
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6. Explain what posting is 15, 17 7, 8 9, 12 2A, 3A, 5A 2B, 3B, 5B

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and how it helps in the

recording process.
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7. Prepare a trial balance 18, 20 9, 10 9, 10, 11, 2A, 3A, 2B, 3B,
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and explain its purposes. 13, 14 4A, 5A 4B, 5B

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ASSIGNMENT CHARACTERISTICS TABLE
Problem Difficulty Time Allotted

Number Description Level (min.)
1A Journalize a series of transactions. Simple 20–30
2A Journalize transactions, post, and prepare a trial balance. Simple 30–40

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3A Journalize and post transactions, and prepare a trial balance. Moderate 40–50
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4A Prepare a correct trial balance. Moderate 30–40

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

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

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

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

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

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

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Correlation Chart between Bloom’s Taxonomy, Study Objectives and End-of-Chapter Exercises and Problems
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Study Objective Knowledge Comprehension Application Analysis Synthesis Evaluation
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1. Explain what an account Q2-1
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is and how it helps in the E2-1
recording process.
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2. Define debits and credits and Q2-2 Q2-9 E2-6 P2-2A P2-2B
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explain their use in recording Q2-3 Q2-14 E2-7 P2-3A P2-3B
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business transactions. Q2-4 BE2-1 E2-14 P2-5A P2-5B
Q2-5 BE2-2 P2-1A P2-1B
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Q2-6 BE2-5
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Q2-7 E2-2
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Q2-8 E2-4
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BLOOM’S TAXONOMY TABLE
3. Identify the basic steps in Q2-10 Q2-19 E2-6

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the recording process. BE2-4 E2-7
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4. Explain what a journal is and Q2-12 Q2-11 Q2-16 E2-7 P2-3A
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how it helps in the recording Q2-13 BE2-3 E2-10 P2-5A
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process. Q2-14 BE2-6 E2-11 P2-1B
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E2-3 E2-12 P2-2B
E2-5 P2-1A P2-3B
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E2-6 P2-2A P2-5B
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5. Explain what a ledger is and E2-8 Q2-17
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how it helps in the recording
process.
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6. Explain what posting is and Q2-15 BE2-7 P2-2A P2-3B
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how it helps in the recording Q2-17 BE2-8 P2-3A P2-5B
process. E2-9 P2-5A
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E2-12 P2-2B
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Q2-18 P2-4B
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7. Prepare a trial balance and BE2-9 E2-14 P2-2B Q2-20
explain its purposes. E2-9 P2-2A P2-3B BE2-10
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E2-10 P2-3A P2-5B E2-13
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E2-11 P2-5A P2-4A
Broadening Your Perspective Financial Reporting Decision Making Comparative Analysis Communication All About You
Across the Decision Making Ethics Case
Organization Across the
Exploring the Web Organization
ANSWERS TO QUESTIONS
1. A T account has the following parts: (a) the title, (b) the left or debit side, and (c) the right or credit side.
2. Disagree. The terms debit and credit mean left and right respectively.
3. Jeff is incorrect. The double-entry system merely records the dual effect of a transaction on the
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accounting equation. A transaction is not recorded twice; it is recorded once, with a dual effect.
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4. Maria is incorrect. A debit balance only means that debit amounts exceed credit amounts in an
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account. Conversely, a credit balance only means that credit amounts are greater than debit
amounts in an account. Thus, a debit or credit balance is neither favorable nor unfavorable.
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5. (a) Asset accounts are increased by debits and decreased by credits.

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(b) Liability accounts are decreased by debits and increased by credits.

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(c) Revenues and owner’s capital are increased by credits and decreased by debits. Expenses
and owner’s drawing are increased by debits and decreased by credits.
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6. (a) Accounts Receivable—debit balance.

(b) Cash—debit balance.
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(c) Owner’s Drawing—debit balance.

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(d) Accounts Payable—credit balance.

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(e) Service Revenue—credit balance.

(f) Salaries Expense—debit balance.
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(g) Owner’s Capital—credit balance.

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7. (a) Accounts Receivable—asset—debit balance.

(b) Accounts Payable—liability—credit balance
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(c) Equipment—asset—debit balance.

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(d) Owner’s Drawing—owner’s equity—debit balance.

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(e) Supplies—asset—debit balance.

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8. (a) Debit Supplies and credit Accounts Payable.

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(b) Debit Cash and credit Notes Payable.

(c) Debit Salaries Expense and credit Cash.
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9. (1) Cash—both debit and credit entries.

(2) Accounts Receivable—both debit and credit entries.
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(3) Owner’s Drawing—debit entries only.

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(4) Accounts Payable—both debit and credit entries.

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(5) Salaries Expense—debit entries only.

(6) Service Revenue—credit entries only.
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10. The basic steps in the recording process are:

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(1) Analyze each transaction for its effect on the accounts.

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(2) Enter the transaction information in a journal.

(3) Transfer the journal information to the appropriate accounts in the ledger.
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Questions Chapter 2 (Continued)
11. The advantages of using the journal in the recording process are:
(1) It discloses in one place the complete effects of a transaction.
(2) It provides a chronological record of all transactions.
(3) It helps to prevent or locate errors because the debit and credit amounts for each entry can
be easily compared.
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12. (a) The debit should be entered first.

(b) The credit should be indented.
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13. When three or more accounts are required in one journal entry, the entry is referred to as a
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compound entry. An example of a compound entry is the purchase of equipment, part of which is
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paid for with cash and the remainder is on account.

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

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1. It discloses in one place the complete effects of a transaction.

2. It provides a chronological record of all transactions.
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3. It helps to prevent or locate errors because the debit and credit amounts for each entry
can be easily compared.
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15. The advantage of the last step in the posting process is to indicate that the item has been posted.
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16. (a) Cash............................................................................................................. 9,000

Hector Molina, Capital.................................................................... 9,000
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(Invested cash in the business)

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

Cash .................................................................................................. 800
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(Paid one-year insurance policy)

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

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Accounts Payable ........................................................................... 2,000

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(Purchased supplies on account)

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

Service Revenue............................................................................. 7,500
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(Received cash for services rendered)

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

(b) A chart of accounts is a list of accounts and the account numbers that identify their location in
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the ledger. The chart of accounts is important, particularly for a company that has a large number
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of accounts, because it helps organize the accounts and identify their location in the ledger.
The numbering system used to identify the accounts usually starts with the balance sheet
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accounts and follows with the income statement accounts.
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Questions Chapter 2 (Continued)
18. A trial balance is a list of accounts and their balances at a given time. The primary purpose of a
trial balance is to prove (check) that the debits equal the credits after posting. A trial balance also
facilitates the discovery of errors in journalizing and posting. In addition, it is useful in preparing
financial statements.
19. No, Jim is not correct. The proper sequence is as follows:

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(b) Business transaction occurs.

(c) Information entered in the journal.
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(a) Debits and credits posted to the ledger.

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(e) Trial balance is prepared.

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(d) Financial statements are prepared.

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20. (a) The trial balance would balance.

(b) The trial balance would not balance.
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SOLUTIONS TO BRIEF EXERCISES
BRIEF EXERCISE 2-1
(a) (b) (c)

Debit Credit Normal
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Effect Effect Balance

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1. Accounts Payable Decrease Increase Credit

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2. Advertising Expense Increase Decrease Debit

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3. Service Revenue Decrease Increase Credit

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4. Accounts Receivable Increase Decrease Debit

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5. A. J. Ritter, Capital Decrease Increase Credit

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6. A. J. Ritter, Drawing Increase Decrease Debit

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BRIEF EXERCISE 2-2

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Account Debited Account Credited

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June 1 Cash Hank Norris, Capital

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2 Equipment Accounts Payable

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3 Rent Expense Cash

12 Accounts Receivable Service Revenue
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BRIEF EXERCISE 2-3

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June 1 Cash.................................................................................. 5,000

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Hank Norris, Capital ........................................... 5,000

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2 Equipment ...................................................................... 900

Accounts Payable ............................................... 900
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3 Rent Expense ................................................................ 800

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Cash......................................................................... 800
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12 Accounts Receivable .................................................. 300

Service Revenue.................................................. 300
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BRIEF EXERCISE 2-4
The basic steps in the recording process are:
1. Analyze each transaction. In this step, business documents are examined

to determine the effects of the transaction on the accounts.
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2. Enter each transaction in a journal. This step is called journalizing and

it results in making a chronological record of the transactions.
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3. Transfer journal information to ledger accounts. This step is called

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posting. Posting makes it possible to accumulate the effects of

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journalized transactions on individual accounts.

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BRIEF EXERCISE 2-5

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

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Equation
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Aug. 1 The asset Cash is increased; Debits increase assets:

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the owner’s equity account debit Cash $8,000.

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T. J. Carlin, Capital is increased. Credits increase owner’s equity:

credit T. J. Carlin, Capital $8,000.
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4 The asset Prepaid Insurance is Debits increase assets:

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increased; the asset Cash is debit Prepaid Insurance $1,800.

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decreased. Credits decrease assets:

credit Cash $1,800.
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16 The asset Cash is increased; Debits increase assets:

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the revenue Service Revenue is debit Cash $800.

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increased. Credits increase revenues:

credit Service Revenue $800.
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27 The expense Salaries Expense Debits increase expenses:

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is increased; the asset Cash is debit Salaries Expense $1,000.

decreased. Credits decrease assets:
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credit Cash $1,000.

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BRIEF EXERCISE 2-6
Aug. 1 Cash .................................................................................. 8,000

T. J. Carlin, Capital .............................................. 8,000
4 Prepaid Insurance ........................................................ 1,800

Cash ......................................................................... 1,800
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16 Cash .................................................................................. 800

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Service Revenue .................................................. 800

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27 Salaries Expense .......................................................... 1,000

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

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BRIEF EXERCISE 2-7

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Cash Service Revenue

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5/12 2,400 5/5 5,000

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5/15 3,000 5/15 3,000

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Ending Bal. 5,400 Ending Bal. 8,000

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Accounts Receivable
5/5 5,000 5/12 2,400
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Ending Bal. 2,600

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BRIEF EXERCISE 2-8

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Cash
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Date Explanation Ref. Debit Credit Balance

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May 12 J1 2,400 2,400

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15 J1 3,000 5,400
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BRIEF EXERCISE 2-8 (Continued)
Accounts Receivable
May 5 J1 5,000 5,000
12 J1 2,400 2,600
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Service Revenue
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May 5 J1 5,000 5,000

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15 J1 3,000 8,000
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BRIEF EXERCISE 2-9

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CLELAND COMPANY
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Trial Balance
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June 30, 2008

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Debit Credit
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Cash ......................................................................................... $ 8,800

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Accounts Receivable.......................................................... 3,000

Equipment .............................................................................. 17,000
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Accounts Payable................................................................ $ 9,000

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Cleland, Capital .................................................................... 20,000

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Cleland, Drawing.................................................................. 1,200

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Service Revenue .................................................................. 8,000

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Salaries Expense ................................................................. 6,000

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Rent Expense ........................................................................ 1,000

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$37,000 $37,000
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BRIEF EXERCISE 2-10
KWUN COMPANY
Trial Balance
December 31, 2008
Debit Credit
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Cash .......................................................................................... $14,800

Prepaid Insurance ................................................................ 3,500
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Accounts Payable ................................................................ $ 3,000

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Unearned Revenue............................................................... 2,200

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P. Kwun, Capital.................................................................... 13,000

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P. Kwun, Drawing ................................................................. 4,500

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Service Revenue ................................................................... 25,600

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Salaries Expense .................................................................. 18,600

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Rent Expense......................................................................... 2,400

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$43,800 $43,800
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SOLUTIONS TO EXERCISES
EXERCISE 2-1
1. False. An account is an accounting record of a specific asset, liability,

or owner’s equity item.
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2. False. An account shows increases and decreases in the item it relates to.
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3. False. Each asset, liability, and owner’s equity item has a separate
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account.
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4. False. An account has a left, or debit side, and a right, or credit side.
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5. True.
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Account Debited Account Credited
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EXERCISE 2-2
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(a) (b) (c) (d) (a) (b) (c) (d)
Basic Specific Normal Basic Specific Normal
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Transaction Type Account Effect Balance Type Account Effect Balance
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Jan. 2 Asset Cash Increase Debit Owner’s D. Reyes, Increase Credit
Equity Capital
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3 Asset Equipment Increase Debit Asset Cash Decrease Debit
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9 Asset Supplies Increase Debit Liability Accounts Increase Credit
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Payable
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11 Asset Accounts Increase Debit Owner’s Service Increase Credit
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Receivable Equity Revenue
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16 Owner’s Advertising Increase Debit Asset Cash Decrease Debit
Equity Expense
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20 Asset Cash Increase Debit Asset Accounts Decrease Debit
Receivable
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23 Liability Accounts Decrease Credit Asset Cash Decrease Debit
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Payable
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28 Owner’s D. Reyes, Increase Debit Asset Cash Decrease Debit
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Equity Drawing
EXERCISE 2-3
General Journal
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Date Account Titles and Explanation Ref. Debit Credit
Jan. 2 Cash ............................................................ 10,000
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D. Reyes, Capital............................ 10,000

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3 Equipment................................................. 4,000
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Cash ................................................... 4,000

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

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11 Accounts Receivable............................. 1,800

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Service Revenue ............................ 1,800

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16 Advertising Expense ............................. 200

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Cash ................................................... 200

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20 Cash ............................................................ 700

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Accounts Receivable.................... 700

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

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Cash ................................................... 300

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28 D. Reyes, Drawing .................................. 1,000

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

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EXERCISE 2-4
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Oct. 1 Debits increase assets: debit Cash $15,000.

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Credits increase owner’s equity: credit Pete Hanshew, Capital

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$15,000.
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2 No transaction.
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3 Debits increase assets: debit Office Furniture $1,900.

Credits increase liabilities: credit Accounts Payable $1,900.
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EXERCISE 2-4 (Continued)
Oct. 6 Debits increase assets: debit Accounts Receivable $3,200.

Credits increase revenues: credit Service Revenue $3,200.
27 Debits decrease liabilities: debit Accounts Payable $700.

Credits decrease assets: credit Cash $700.
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30 Debits increase expenses: debit Salaries Expense $2,500.

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Credits decrease assets: credit Cash $2,500.

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EXERCISE 2-5
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General Journal
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Date Account Titles and Explanation Ref. Debits Credit

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Oct. 1 Cash............................................................. 15,000

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Pete Hanshew, Capital ................ 15,000

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2 No entry.
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3 Office Furniture........................................ 1,900

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Accounts Payable......................... 1,900

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6 Accounts Receivable ............................. 3,200

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Service Revenue ........................... 3,200

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27 Accounts Payable ................................... 700

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Cash .................................................. 700

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30 Salaries Expense..................................... 2,500

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Cash .................................................. 2,500

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EXERCISE 2-6
(a) 1. Increase the asset Cash, increase the liability Notes Payable.
2. Increase the asset Computer, decrease the asset Cash.
3. Increase the asset Supplies, increase the liability Accounts Payable.
(b) 1. Cash.............................................................................. 5,000

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Notes Payable ................................................... 5,000

2. Computer .................................................................... 2,500
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Cash...................................................................... 2,500
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3. Supplies ...................................................................... 700

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Accounts Payable ............................................ 700

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EXERCISE 2-7
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(a) Assets = Liabilities + Owners’ Equity

1. + + (Investment)
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2. – – (Expense)
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3. + + (Revenue)
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4. – – (Drawings)
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(b) 1. Cash.............................................................................. 4,000

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A. Rowand, Capital .......................................... 4,000

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2. Rent Expense ............................................................ 1,100

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Cash...................................................................... 1,100
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3. Accounts Receivable .............................................. 5,200

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Consulting Revenue........................................ 5,200

4. A. Rowand, Drawing................................................ 700
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Cash...................................................................... 700
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EXERCISE 2-8
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1. False. The general ledger contains all the asset, liability, and owner’s
equity accounts.
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2. True.
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3. False. The accounts in the general ledger are arranged in financial

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statement order: first the assets, then the liabilities, owner’s capital,
owner’s drawing, revenues, and expenses.
4. True.
5. False. The general ledger is not a book of original entry; transactions
are first recorded in the general journal, then in the general ledger.
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EXERCISE 2-9
(a)
Cash Notes Payable

Aug. 1 5,000 Aug. 12 1,000 Aug. 12 4,000
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10 2,400
31 900
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Bal. 7,300 Teresa Gonzalez, Capital

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Aug. 1 5,000
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Accounts Receivable
Aug. 25 1,600 Aug. 31 900
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Service Revenue
Bal. 700 Aug. 10 2,400
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25 1,600
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Bal. 4,000
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Office Equipment
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Aug. 12 5,000
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(b) TERESA GONZALEZ, INVESTMENT BROKER

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Trial Balance
August 31, 2008
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Debit Credit
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Cash ..................................................................................... $ 7,300

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Accounts Receivable...................................................... 700

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Office Equipment............................................................. 5,000

Notes Payable................................................................... $ 4,000
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Teresa Gonzalez, Capital .............................................. 5,000

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Service Revenue .............................................................. 4,000

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$13,000 $13,000
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EXERCISE 2-10
(a) General Journal

Apr. 1 Cash .............................................................. 15,000
J. Simon, Capital.................................. 15,000
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(Owner’s investment of
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cash in business)
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12 Cash .............................................................. 900

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Service Revenue .................................. 900

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(Received cash for

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services provided)
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15 Salaries Expense ...................................... 600

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Cash ......................................................... 600

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(Paid salaries to date)

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25 Accounts Payable..................................... 1,500

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Cash ......................................................... 1,500

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(Paid creditors on account)

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29 Cash .............................................................. 400

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Accounts Receivable.......................... 400

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(Received cash in payment

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of account)
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30 Cash .............................................................. 1,000

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Unearned Revenue.............................. 1,000

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(Received cash for future

services)
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(b) SIMON LANDSCAPING COMPANY

Trial Balance
April 30, 2008
Debit Credit
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Cash....................................................................................... $15,200
Accounts Receivable ....................................................... 2,800
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Supplies................................................................................ 1,800
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Accounts Payable ............................................................. $ 300

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Unearned Revenue ........................................................... 1,000

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J. Simon, Capital ............................................................... 15,000

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Service Revenue................................................................ 4,100

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Salaries Expense............................................................... 600

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$20,400 $20,400
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EXERCISE 2-11
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(a) Oct. 1 Cash ....................................................................... 5,000

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Heerey, Capital............................................ 5,000

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(Owner’s investment of cash in

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business)
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10 Cash ....................................................................... 650

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Service Revenue ........................................ 650

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(Received cash for services

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provided)
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10 Cash ....................................................................... 4,000

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Notes Payable ............................................. 4,000

(Obtained loan from bank)
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20 Cash ....................................................................... 500

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Accounts Receivable................................ 500

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(Received cash in payment of

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account)
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20 Accounts Receivable........................................ 940

Service Revenue ........................................ 940
(Billed clients for services
provided)
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(b) HEEREY CO.

Trial Balance
October 31, 2008
Debit Credit
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Cash ................................................................................ $ 9,200

Accounts Receivable................................................. 1,240
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Supplies ......................................................................... 400

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Furniture ........................................................................ 2,000

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Notes Payable.............................................................. $ 4,000

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Accounts Payable....................................................... 500

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Heerey, Capital ............................................................ 7,000

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Heerey, Drawing.......................................................... 300

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Service Revenue ......................................................... 2,390

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Store Wages Expense ............................................... 500

Rent Expense ............................................................... 250
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$13,890 $13,890
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EXERCISE 2-12
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(a) General Journal

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Sept. 1 Cash ........................................................... 101 10,000

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Tina Cordero, Capital .................. 301 10,000

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5 Equipment ................................................ 157 12,000

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Cash .................................................. 101 5,000

Accounts Payable......................... 201 7,000
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25 Accounts Payable.................................. 201 3,000

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Cash .................................................. 101 3,000

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30 Tina Cordero, Drawing ......................... 306 500

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Cash .................................................. 101 500

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(b)
Cash No. 101

Sept. 1 J1 10,000 10,000
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5 J1 5,000 5,000
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25 J1 3,000 2,000
30 J1 500 1,500
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d e
to
Equipment No. 157

yo

u
Sept. 5 J1 12,000 12,000

by
ht
Accounts Payable No. 201

tp

://
tb
Sept. 5 J1 7,000 7,000

sr
25 J1 3,000 4,000
es
ou
rc
Tina Cordero, Capital No. 301

es

.w
Sept. 1 J1 10,000 10,000

ix.
omc
Tina Cordero, Drawing No. 306

/tb
Sept. 30 J1 500 500

sr
es
ou
rc
es
2-21
EXERCISE 2-13
(a) (b) (c)

Error In Balance Difference Larger Column
1. No $400 Debit
2. Yes — —
3. Yes — —
De
4. No 300 Credit
liv
5. Yes — —
6. No 18 Credit
er
e d
to
EXERCISE 2-14
yo
u
SANFORD DELIVERY SERVICE

by
Trial Balance
July 31, 2008
ht
tp
Debit Credit
://
Cash ($82,907 – Debit total without Cash

tb
$66,340) .............................................................................. $16,567

sr
Accounts Receivable.......................................................... 7,642

es
Prepaid Insurance ............................................................... 1,968

ou
Delivery Equipment............................................................. 49,360

Notes Payable....................................................................... $18,450
rc
Accounts Payable................................................................ 8,396

es
Salaries Payable .................................................................. 815

.w
Sanford, Capital ................................................................... 44,636

ix.
Sanford, Drawing................................................................. 700

c
Service Revenue .................................................................. 10,610

om
Salaries Expense ................................................................. 4,428

Repair Expense .................................................................... 961
/tb
Gas and Oil Expense .......................................................... 758

sr
Insurance Expense ............................................................. 523

es
$82,907 $82,907
ou
rc
es
2-22
SOLUTIONS TO PROBLEMS
PROBLEM 2-1A
J1
De

liv
Apr. 1 Cash................................................................. 40,000

C. J. Mendez, Capital ........................ 40,000
er
(Owner’s investment of cash

ed
in business)
to
4 Land ................................................................. 30,000

yo
Cash ....................................................... 30,000

u
(Purchased land for cash)

by
ht
8 Advertising Expense .................................. 1,800

tp
Accounts Payable .............................. 1,800

://
(Incurred advertising
tb
expense on account)
sr
es
11 Salaries Expense ......................................... 1,500

Cash ....................................................... 1,500
ou
(Paid salaries)
rc
es
12 No entry—Not a transaction.
.w
ix.
13 Prepaid Insurance ....................................... 1,500

c
Cash ....................................................... 1,500

om
(Paid for one-year

insurance policy)
/tb
sr
17 C. J. Mendez, Drawing ............................... 1,000

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

ou
(Withdrew cash for personal

use)
rc
es
20 Cash................................................................. 5,700
Admission Revenue .......................... 5,700
provided)
2-23
PROBLEM 2-1A (Continued)

Apr. 25 Cash ............................................................... 2,500
Unearned Admission Revenue......... 2,500
De
services)
liv
30 Cash ............................................................... 8,900

er
Admission Revenue ......................... 8,900

e

d
provided)
to
yo
30 Accounts Payable...................................... 900

u
Cash....................................................... 900
by
(Paid creditor on account)

ht
tp
://
tb
sr
es
ou
rc
es
.w
ix.
c om
/tb
sr
es
ou
rc
es
2-24
PROBLEM 2-2A
(a)
J1
De
May 1 Cash................................................................. 101 25,000

liv
Jane Kent, Capital.............................. 301 25,000

er

e
in business)
d
to
2 No entry—not a transaction.
yo
3 Supplies.......................................................... 126 2,500

u
by
Accounts Payable.............................. 201 2,500

(Purchased supplies on
ht
account)
tp
://
7 Rent Expense................................................ 729 900

tb
Cash ....................................................... 101 900

sr
(Paid office rent)

es
ou
11 Accounts Receivable ................................. 112 2,100

Service Revenue ................................ 400 2,100
rc
(Billed client for services

es
provided)
.w
ix.
12 Cash................................................................. 101 3,500

c
Unearned Revenue ............................ 205 3,500

om

/tb
services)
sr
17 Cash................................................................. 101 1,200

es
Service Revenue ................................ 400 1,200

ou

rc
provided)
es
31 Salaries Expense ......................................... 726 2,000

Cash ....................................................... 101 2,000
(Paid salaries)
2-25

May 31 Accounts Payable ($2,500 X 40%)............. 201 1,000
Cash...................................................... 101 1,000
De
liv
(b)
er
Cash No. 101

ed

to
May 1 J1 25,000 25,000

yo
7 J1 900 24,100
12 J1 3,500 27,600
u
17 J1 1,200 28,800
by
31 J1 2,000 26,800
ht
31 J1 1,000 25,800
tp
://
tb
Accounts Receivable No. 112

sr

es
May 11 J1 2,100 2,100

ou
rc
es
Supplies No. 126

.w

ix.
May 3 J1 2,500 2,500

c om

/tb

sr
es
May 3 J1 2,500
31 J1 1,000 1,500
ou
rc
es
Unearned Revenue No. 205

May 12 J1 3,500 3,500
2-26
Jane Kent, Capital No. 301

May 1 J1 25,000 25,000
De
Service Revenue No. 400

liv

er
May 11 J1 2,100 2,100

e
17 J1 1,200 3,300
d
to
yo
Salaries Expense No. 726

u

by
May 31 J1 2,000 2,000

ht
tp
://
Rent Expense No. 729

tb

sr
May 7 J1 900 900

es
ou
rc
(c) JANE KENT, CPA

es
Trial Balance
.w
May 31, 2008

ix.
Debit Credit
c om
Cash................................................................................. $25,800
Accounts Receivable ................................................. 2,100
/tb
Supplies.......................................................................... 2,500
sr
Accounts Payable ....................................................... $ 1,500

es
Unearned Revenue ..................................................... 3,500

ou
Jane Kent, Capital....................................................... 25,000

Service Revenue.......................................................... 3,300
rc
Salaries Expense......................................................... 2,000

es
Rent Expense ............................................................... 900

$33,300 $33,300
2-27
PROBLEM 2-3A
(a) & (c)

Cash Jack Shellenkamp, Capital
Balance 8,000 Balance 41,000
De
(1) 1,000 41,000

(3) 2,000
liv
(4) 14,000
er
(5) 15,000 Jack Shellenkamp, Drawing

e
(7) 6,000 (9) 3,000

d
(8) 3,000 3,000

to
(9) 3,000
yo
4,000
Repair Services Revenue
u
Accounts Receivable (7) 15,000

by
Balance 15,000 15,000

ht
(4) 14,000
tp
(7) 9,000
10,000
://
Advertising Expense
tb
(1) 1,000
Parts Inventory
sr
1,000
Balance 13,000
es
(2) 4,000
ou
(6) 4,000 Miscellaneous Expense

rc
13,000 (3) 2,000

es
2,000
Prepaid Rent
.w
Balance 3,000
ix.
3,000 Repair Parts Expense

c
om
(6) 4,000
Shop Equipment 4,000
/tb
Balance 21,000
21,000
sr
es
Wage Expense
Accounts Payable (8) 3,000
ou
Balance 19,000 3,000

rc
(2) 4,000
es
(5) 15,000
8,000
2-28
(b)
Trans. Account Titles and Explanation Debit Credit

1. Advertising Expense..................................... 1,000
De
Cash......................................................... 1,000
liv
2. Parts Inventory................................................ 4,000

er
Accounts Payable ............................... 4,000

d e
3. Miscellaneous Expense ............................... 2,000

to
Cash......................................................... 2,000
yo
u
4. Cash.................................................................... 14,000
by
Accounts Receivable ......................... 14,000

ht
5. Accounts Payable .......................................... 15,000

tp
Cash......................................................... 15,000
://
tb
6. Repair Parts Expense ................................... 4,000

sr
Parts Inventory..................................... 4,000

es
ou
7. Cash.................................................................... 6,000
rc
Accounts Receivable .................................... 9,000

es
Repair Services Revenue.................. 15,000

.w
8. Wage Expense ................................................ 3,000

ix.
Cash......................................................... 3,000
c om
9. Jack Shellenkamp, Drawing ....................... 3,000

/tb
Cash......................................................... 3,000
sr
es
ou
rc
es
2-29
(d) BYTE REPAIR SERVICE

Trial Balance
January 31, 2008
Debit Credit
De
Cash ................................................................................ $ 4,000

Accounts Receivable................................................. 10,000
liv
Parts Inventory ............................................................ 13,000

er
Prepaid Rent................................................................. 3,000

e
Shop Equipment ......................................................... 21,000

d
Accounts Payable....................................................... $ 8,000

to
Jack Shellenkamp, Capital ...................................... 41,000

yo
Jack Shellenkamp, Drawing.................................... 3,000

u
Repair Services Revenue......................................... 15,000

by
Advertising Expense ................................................. 1,000

Miscellaneous Expense............................................ 2,000
ht
Repair Parts Expense................................................ 4,000

tp
Wage Expense ............................................................. 3,000

://
$64,000 $64,000
tb
sr
es
ou
rc
es
.w
ix.
omc
/tb
sr
es
ou
rc
es
2-30
PROBLEM 2-4A
STERLING COMPANY
Trial Balance
May 31, 2008
De
Debit Credit
liv
Cash ($5,850 + $520 – $405) ............................................... $ 5,965

er
Accounts Receivable ($2,570 – $210).............................. 2,360

e
Prepaid Insurance ($700 + $100)....................................... 800

d
Supplies ($0 + $520) .............................................................. 520

to
Equipment ($8,000 – $520) .................................................. 7,480

yo
Accounts Payable ($4,500 – $100 + $520 – $210)........ $ 4,710

u
Property Taxes Payable ....................................................... 560

by
M. Sterling, Capital ($11,700 + $1,000) ............................ 12,700

M. Sterling, Drawing ($0 + $1,000) .................................... 1,000
ht
Service Revenue..................................................................... 6,960

tp
Salaries Expense ($4,200 + $200) ..................................... 4,400

://
Advertising Expense ($1,100 + $405) .............................. 1,505

tb
Property Tax Expense ($800 + $100) ............................... 900

sr
$24,930 $24,930
es
ou
rc
es
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ix.
com
/tb
sr
es
ou
rc
es
2-31
PROBLEM 2-5A
(a) & (c)
Cash No. 101

De

liv
Apr. 1 Balance 6,000

er
2 J1 800 5,200
e
9 J1 2,800 8,000
d
to
10 J1 3,000 5,000
12 J1 500 4,500
yo
25 J1 5,200 9,700
u
by
29 J1 2,000 7,700
30 J1 85 7,785
ht
tp
30 J1 900 6,885
://
tb
sr

es

ou
Apr. 30 J1 85 85
rc
es
Prepaid Rentals No. 136

.w
ix.

c
Apr. 30 J1 900 900

om
/tb
Land No. 140

sr

es

ou
rc
es
Buildings No. 145

2-32
Equipment No. 157

De

liv

er

e
10 J1 1,000 1,000
d
20 J1 1,000 2,000
to
yo
u
Mortgage Payable No. 275

by

ht

tp
10 J1 2,000 6,000
://
tb
sr
Tony Carpino, Capital No. 301

es

ou

rc
es
.w
Admission Revenue No. 405

ix.

c
Apr. 9 J1 2,800 2,800

om
25 J1 5,200 8,000
/tb
sr
Concession Revenue No. 406

es

ou
Apr. 30 J1 170 170

rc
es
2-33
Advertising Expense No. 610

Apr. 12 J1 500 500
De
Film Rental Expense No. 632

liv

er
Apr. 2 J1 800 800

e
20 J1 1,000 1,800
d
to

yo

u
Apr. 29 J1 2,000 2,000

by
ht
(b)
tp
J1
://
tb

sr
Apr. 2 Film Rental Expense ............................... 632 800

es
Cash................................................... 101 800

ou
(Paid film rental)

rc
es
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ix.
9 Cash ............................................................. 101 2,800

Admission Revenue ..................... 405 2,800
c om

provided)
/tb
sr
10 Mortgage Payable .................................... 275 2,000

es
Accounts Payable.................................... 201 1,000

ou
Cash................................................... 101 3,000

(Made payments on
rc
es
mortgage and accounts

payable)
2-34

Apr. 11 No entry—not a transaction.
12 Advertising Expense................................. 610 500

De
Cash ..................................................... 101 500

(Paid advertising expenses)
liv
er
e
20 Film Rental Expense ................................. 632 1,000

d
Accounts Payable ........................... 201 1,000

to
(Rented film on account)

yo
u
25 Cash................................................................ 101 5,200

by
Admission Revenue........................ 405 5,200

ht
provided)
tp
://
29 Salaries Expense........................................ 726 2,000

tb
Cash ..................................................... 101 2,000

sr
(Paid salaries expense)

es
ou
30 Cash................................................................ 101 85
rc
Accounts Receivable ................................ 112 85

es
Concession Revenue ..................... 406 170

.w
(17% X $1,000)
ix.
(Received cash and

balance on account for
c om
concession revenue)
/tb
sr
30 Prepaid Rentals .......................................... 136 900

es
Cash ..................................................... 101 900

ou
(Paid cash for future film

rc
rentals)
es
2-35
(d) LAKE THEATER

Trial Balance
April 30, 2008
Debit Credit
De
Cash ................................................................................ $ 6,885

Accounts Receivable................................................. 85
liv
Prepaid Rentals........................................................... 900

er
Land ................................................................................ 10,000

e
Buildings ....................................................................... 8,000

d
Equipment..................................................................... 6,000
to
Accounts Payable....................................................... $ 2,000

yo
Mortgage Payable....................................................... 6,000

u
Tony Carpino, Capital ............................................... 20,000

by
Admission Revenue................................................... 8,000

Concession Revenue ................................................ 170
ht
Advertising Expense ................................................. 500

tp
Film Rental Expense.................................................. 1,800

://
Salaries Expense ........................................................ 2,000

tb
$36,170 $36,170
sr
es
ou
rc
es
.w
ix.
omc
/tb
sr
es
ou
rc
es
2-36
PROBLEM 2-1B
J1
Mar. 1 Cash .................................................................. 50,000
Jerry Glover, Capital .......................... 50,000
De

liv
in business)
er
e
3 Land .................................................................. 23,000

d
Buildings ......................................................... 9,000

to
Equipment....................................................... 6,000
yo
Cash ........................................................ 38,000

(Purchased Lee’s Golf Land)
u
by
5 Advertising Expense ................................... 1,600

ht
Cash ........................................................ 1,600

tp
(Paid for advertising)

://
tb
6 Prepaid Insurance ........................................ 1,480

sr
Cash ........................................................ 1,480

es
(Paid for one-year insurance

ou
policy)
rc
10 Equipment....................................................... 2,600
es
Accounts Payable............................... 2,600

.w
(Purchased equipment on
ix.
account)
c om
18 Cash .................................................................. 800

Golf Revenue........................................ 800
/tb

sr
provided)
es
ou
19 Cash .................................................................. 1,500

rc
Unearned Revenue ............................. 1,500

es
(Received cash for coupon

books sold)
2-37
PROBLEM 2-1B (Continued)

Mar. 25 Jerry Glover, Drawing ............................ 2,000
Cash .................................................... 2,000
(Withdrew cash for personal
use)
De
liv
30 Salaries Expense ..................................... 600

er
Cash .................................................... 600

(Paid salaries)
e d
to
30 Accounts Payable.................................... 2,600

yo
Cash .................................................... 2,600

u
by
31 Cash ............................................................. 500

ht
Golf Revenue.................................... 500

tp

://
provided)
tb
sr
es
ou
rc
es
.w
ix.
c om
/tb
sr
es
ou
rc
es
2-38
PROBLEM 2-2B
(a)
J1
De
Apr. 1 Cash .................................................................. 101 30,000

liv
Rosa Perez, Capital ............................ 301 30,000

er

e
in business)
d
to
yo
2 Rent Expense................................................. 729 800

u
by
Cash ........................................................ 101 800

(Paid monthly office rent)
ht
tp
3 Supplies ........................................................... 126 1,500

://
Accounts Payable............................... 201 1,500

tb
(Purchased supplies on
sr
account from Halo Company)

es
ou
10 Accounts Receivable................................... 112 1,200

Service Revenue ................................. 400 1,200
rc
(Billed clients for services

es
provided)
.w
ix.
11 Cash .................................................................. 101 500

c
Unearned Revenue ............................. 205 500

om

/tb
service)
sr
20 Cash .................................................................. 101 1,500

es
Service Revenue ................................. 400 1,500

ou

rc
provided)
es
30 Salaries Expense .......................................... 726 2,000

Cash ........................................................ 101 2,000
(Paid monthly salary)
2-39
Date Account Titles and Explanation Ref. Debits Credit

Apr. 30 Accounts Payable .................................... 201 600
Cash .................................................... 101 600
(Paid Halo Company on
De
account)
liv
(b)
er
e
Cash No. 101

d
to

yo
Apr. 1 J1 30,000 30,000

u
2 J1 800 29,200
by
11 J1 500 29,700
ht
20 J1 1,500 31,200
tp
30 J1 2,000 29,200
://
30 J1 600 28,600
tb
sr
es

ou

rc
Apr. 10 J1 1,200 1,200

es
.w
Supplies No. 126

ix.

c
om
Apr. 3 J1 1,500 1,500

/tb

sr

es
Apr. 3 J1 1,500 1,500

ou
30 J1 600 900
rc
es
Unearned Revenue No. 205

Apr. 11 J1 500 500
2-40
Rosa Perez, Capital No. 301

Apr. 1 J1 30,000 30,000
De
Service Revenue No. 400

liv

er
Apr. 10 J1 1,200 1,200

e
20 J1 1,500 2,700
d
to
yo

u

by
Apr. 30 J1 2,000 2,000

ht
tp
://
Rent Expense No. 729

tb

sr
Apr. 2 J1 800 800

es
ou
rc
(c) ROSA PEREZ, ARCHITECT

es
Trial Balance
.w
April 30, 2008

ix.
Debit Credit
c om
Cash................................................................................. $28,600
Accounts Receivable ................................................. 1,200
/tb
Supplies.......................................................................... 1,500
sr
Accounts Payable ....................................................... $ 900

es
Unearned Revenue ..................................................... 500

ou
Rosa Perez, Capital .................................................... 30,000

Service Revenue.......................................................... 2,700
rc
Salaries Expense......................................................... 2,000

es
Rent Expense ............................................................... 800

$34,100 $34,100
2-41
PROBLEM 2-3B
(a)

1. Cash ........................................................... 100,000
De
Ronald Slocombe, Capital ....... 100,000

liv
2. No entry—Not a transaction.
er
e d
3. Prepaid Rent............................................ 36,000

to
Cash ................................................ 36,000

yo
4. Furniture & Equipment ........................ 60,000

u
Cash ................................................ 20,000

by
Accounts Payable....................... 40,000

ht
tp
5. Prepaid Insurance ................................. 3,000

://
Cash ................................................ 3,000

tb
sr
6. Office Supplies ....................................... 1,000

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

ou
7. Office Supplies ....................................... 3,000

rc
Accounts Payable....................... 3,000

es
.w
8. Cash ........................................................... 10,000

ix.
Accounts Receivable ........................... 20,000

Service Revenue ......................... 30,000
c
om
9. Accounts Payable ................................. 800

/tb
Cash ................................................ 800

sr
es
10. Cash ........................................................... 5,000

ou
Accounts Receivable................. 5,000

rc
11. Utility Expense ....................................... 400

es
Accounts Payable....................... 400
2-42

12. Salaries Expense .................................. 6,000
Cash ................................................. 6,000
De
(b)
Cash Furniture & Equipment
liv
(1) 100,000 (4) 60,000

er
(3) 36,000 60,000

e
(4) 20,000
d
(5) 3,000
to
(6) 1,000 Accounts Payable

yo
(8) 10,000 (4) 40,000

u
(9) 800 (7) 3,000

by
(10) 5,000 (9) 800

(12) 6,000 (11) 400
ht
48,200 42,600
tp
://
tb
Accounts Receivable Ronald Slocombe, Capital

sr
(8) 20,000 (1) 100,000

es
(10) 5,000 100,000

ou
15,000
rc
es
Service Revenue
.w
Office Supplies (8) 30,000

(6) 1,000
ix.
30,000
(7) 3,000
c om
4,000
/tb
Salaries Expense
(12) 6,000
sr
Prepaid Insurance
6,000
es
(5) 3,000
ou
3,000
rc
Utility Expense
es
(11) 400
Prepaid Rent
400
(3) 36,000
36,000
2-43
(c) SLOCOMBE SERVICES

Trial Balance
May 31, 2008
Debit Credit
De
Cash............................................................................ $ 48,200
liv
Accounts Receivable ............................................ 15,000

Office Supplies........................................................ 4,000
er
Prepaid Insurance.................................................. 3,000

e d
Prepaid Rent ............................................................ 36,000

to
Furniture & Equipment ......................................... 60,000

Accounts Payable .................................................. $ 42,600
yo
Ronald Slocombe, Capital................................... 100,000

u
Service Revenue..................................................... 30,000

by
Salaries Expense.................................................... 6,000

ht
Utility Expense ........................................................ 400

tp
$172,600 $172,600
://
tb
sr
es
ou
rc
es
.w
ix.
com
/tb
sr
es
ou
rc
es
2-44
PROBLEM 2-4B
DON KELSO CO.

Trial Balance
June 30, 2008
De
Debit Credit
liv
Cash ($2,840 + $270)........................................................... $ 3,110

er
Accounts Receivable ($3,231 – $270) ........................... 2,961

e
Supplies ($800 – $340) ....................................................... 460

d
Equipment ($3,000 + $340) ............................................... 3,340

to
Accounts Payable ($2,666 – $206 – $260) ................... $ 2,200

yo
Unearned Revenue.............................................................. 1,200

u
D. Kelso, Capital................................................................... 9,000

by
D. Kelso, Drawing ($800 + $500) ..................................... 1,300

Service Revenue ($2,380 + $801).................................... 3,181
ht
Salaries Expense ($3,400 + $600 – $500)..................... 3,500

tp
Office Expense ..................................................................... 910

://
$15,581 $15,581
tb
sr
es
ou
rc
es
.w
ix.
c om
/tb
sr
es
ou
rc
es
2-45
PROBLEM 2-5B
(a) & (c)
Cash No. 101

De
Mar. 1 Balance 16,000

liv
2 J1 3,000 13,000
er
9 J1 6,500 19,500
d e
10 J1 7,000 12,500
to
12 J1 800 11,700
yo
20 J1 7,200 18,900
u
20 J1 3,000 15,900
by
31 J1 4,800 11,100
ht
31 J1 400 11,500
tp
31 J1 11,000 22,500
://
tb
sr

es

ou
Mar. 31 J1 400 400

rc
es
.w
Land No. 140

ix.

c

om
/tb
Buildings No. 145

sr
es

ou
rc
es
Equipment No. 157

2-46

2 J1 3,000 15,000
10 J1 7,000 8,000
De
liv
er
M. Quinn, Capital No. 301

e

d

to
yo
u
Admission Revenue No. 405

by

ht
Mar. 9 J1 6,500 6,500

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20 J1 7,200 13,700
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31 J1 11,000 24,700
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Concession Revenue No. 406

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Mar.31 J1 800 800

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Advertising Expense No. 610

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Mar.12 J1 800 800

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Film Rental Expense No. 632

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Mar. 2 J1 6,000 6,000

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20 J1 3,000 9,000
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2-47

Mar. 31 J1 4,800 4,800
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(b)
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Mar. 2 Film Rental Expense .................................. 632 6,000

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Accounts Payable............................. 201 3,000

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Cash ...................................................... 101 3,000

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(Rented films for cash and

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on account)
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3 No entry.
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9 Cash................................................................. 101 6,500

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Admission Revenue......................... 405 6,500

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provided)
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10 Accounts Payable ($3,000 + $4,000)......... 201 7,000

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Cash ...................................................... 101 7,000

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(Paid creditors on account)

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11 No entry.
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12 Advertising Expense.................................. 610 800

Cash ...................................................... 101 800
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(Paid advertising expense)

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20 Cash................................................................. 101 7,200

Admission Revenue......................... 405 7,200
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provided)
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20 Film Rental Expense .................................. 632 3,000

Cash ...................................................... 101 3,000
(Paid film rental)
2-48

Mar.31 Salaries Expense......................................... 726 4,800
Cash...................................................... 101 4,800
(Paid salaries expense)
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31 Cash................................................................. 101 400

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Accounts Receivable ................................. 112 400

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Concession Revenue ...................... 406 800

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(10% X $8,000)
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(Received cash and balance

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on account for concession

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revenue)
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31 Cash................................................................. 101 11,000

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Admission Revenue ........................ 405 11,000

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provided)
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(d) QUINN THEATER

Trial Balance
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March 31, 2008

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Debit Credit
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Cash ............................................................................. $ 22,500

Accounts Receivable.............................................. 400
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Land ............................................................................. 42,000

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Buildings .................................................................... 18,000

Equipment.................................................................. 16,000
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Accounts Payable ................................................... $ 8,000

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M. Quinn, Capital ..................................................... 80,000

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Admission Revenue................................................ 24,700

Concession Revenue ............................................. 800
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Advertising Expense .............................................. 800

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Film Rental Expense............................................... 9,000

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Salaries Expense .................................................... 4,800

$113,500 $113,500
2-49
BYP 2-1 FINANCIAL REPORTING PROBLEM
(a) (1) (1) (2)

Increase Decrease Normal
Account Side Side Balance
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Accounts Payable Right Left Credit

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Accounts Receivable Left Right Debit

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Property, Plant, and Equipment Left Right Debit

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Income Taxes Payable Right Left Credit

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Interest Expense Left Right Debit

Inventory Left Right Debit
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(b) (1) Cash is increased.

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(2) Cash is decreased.

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(3) Cash is decreased or Accounts Payable is increased.

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(c) (1) Cash is decreased.

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(2) Cash is decreased or Notes or Mortgage Payable is increased.

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2-50
BYP 2-2 COMPARATIVE ANALYSIS PROBLEM
(a) PepsiCo Coca-Cola

1. Inventory: debit 1. Accounts Receivable: debit
2. Property, Plant, and debit 2. Cash and Equivalents: debit
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Equipment:
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3. Accounts Payable: credit 3. Cost of Goods Sold: debit

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4. Interest Expense: debit 4. Sales (Revenue): credit

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(b) The following other accounts are ordinarily involved:

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(1) Increase in Accounts Receivable: Service Revenue or Sales is

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increased (credited).
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(2) Decrease in Wages Payable: Cash is decreased (credited).

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(3) Increase in Property, Plant, and Equipment: Notes Payable is

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increased (credited) or Cash is decreased (credited).

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(4) Increase in Interest Expense: Cash is decreased (credited).

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2-51
BYP 2-3 EXPLORING THE WEB
The answer is dependent upon the company selected by the student.

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2-52
BYP 2-4 DECISION MAKING ACROSS THE ORGANIZATION
(a) May 1 Correct.
5 Cash................................................................... 250
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Lesson Revenue.................................... 250

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7 Cash................................................................... 300
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Unearned Boarding Revenue ............ 300

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14 Office Equipment........................................... 800

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Cash........................................................... 800
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15 Lisa Ortega, Drawing ................................... 400

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Cash........................................................... 400
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20 Cash................................................................... 184
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Riding Revenue...................................... 184

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30 Correct.
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31 Hay and Feed Supplies ............................... 1,700

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Accounts Payable ................................. 1,700

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(b) The errors in the entries of May 14 and 20 would prevent the trial
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balance from balancing.

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(c) Net income as reported ................................................... $4,500

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Add: 5/15, Salaries expense (Lisa Ortega,

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Drawing) .............................................................. $ 400

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5/31, Hay and feed expense (still on

hand)..................................................................... 1,700 2,100
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6,600
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Less: 5/7, Boarding revenue unearned ..................... 300

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Correct net income............................................................ $6,300

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(d) Cash as reported................................................................ $12,475

Add: 5/20, Transposition error.................................... $ 36
5/31, Purchase on account ................................ 1,700 1,736
$14,211
2-53
BYP 2-5 COMMUNICATION ACTIVITY
Date: May 25, 2008
To: Accounting Instructor

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From: Student
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In the first transaction, bills totaling $6,000 were sent to customers for
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services rendered. Therefore, the asset Accounts Receivable is increased

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$6,000 and the revenue Service Revenue is increased $6,000. Debits increase
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assets and credits increase revenues, so the journal entry is:

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Accounts Receivable ........................................................................ 6,000

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Service Revenue........................................................................ 6,000

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(Bill customers for services provided)

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The $6,000 amount is then posted to the debit side of the general ledger
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account Accounts Receivable and to the credit side of the general ledger
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account Service Revenue.

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In the second transaction, $2,000 was paid in salaries to employees. Therefore,

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the expense Salaries Expense is increased $2,000 and the asset Cash is
decreased $2,000. Debits increase expenses and credits decrease assets,
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so the journal entry is:

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Salaries Expense................................................................................ 2,000

Cash............................................................................................... 2,000
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(Salaries paid)
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The $2,000 amount is then posted to the debit side of the general ledger
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account Salaries Expense and to the credit side of the general ledger
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account Cash.
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2-54
BYP 2-6 ETHICS CASE
(a) The stakeholders in this situation are:
Mary Jansen, assistant chief accountant.

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Users of the company’s financial statements.

The Casey Company.
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(b) By adding $1,000 to the Equipment account, that account total is inten-
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tionally misstated. By not locating the error causing the imbalance,

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some other account may also be misstated by $1,000. If the amount of

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$1,000 is determined to be immaterial, and the intent is not to commit

fraud (cover up an embezzlement or other misappropriation of assets),
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Mary’s action might not be considered unethical in the preparation of

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interim financial statements. However, if Mary is violating a company

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accounting policy by her action, then she is acting unethically.

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(c) Mary’s alternatives are:

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1. Miss the deadline but find the error causing the imbalance.
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2. Tell her supervisor of the imbalance and suffer the consequences.

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3. Do as she did and locate the error later, making the adjustment in
the next quarter.
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2-55
BYP 2-7 ALL ABOUT YOU ACTIVITY
(a) Students’ responses to this question will vary. It is important that the
steps that they identify be as specific as possible, and clearly directed
toward achieving their goal. You may wish to ask a follow-up question
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asking them to explain how each step will assist them in achieving
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their goal.
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(b) There are many sites on the Internet that provide information about
d e
preparing a résumé. For example, you can find extensive resources at:
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http://www.rileyguide.com/resprep.html. Many schools also have re-

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sources in their placement centers or writing labs. The Writing Center

at Rensselaer Polytechnic Institute provides useful, concise informa-
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tion on its website at http://www.rpi.edu/web/writingcenter/resume.html.

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A wide variety of sample résumés can be found. For example,

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Monster.com provides samples for a wide variety of professions and

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situations at http://content.monster.com/experts/resume/library/
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(c) As noted in the All About You feature in chapter 2 of the text, overstating
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accomplishments on a résumé can result in many problems. It is

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important to provide accurate and complete documentation of all

relevant training, education, and employment experiences so as to
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provide assurance to the potential employer, and also to enable that

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employer to do follow-up work. If you say you have certain skills, such
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as computer skills, try to substantiate the claim with recognized proof

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of proficiency. Make sure that all addresses and phone numbers are
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accurate and up-to-date. Also, ensure that the people you use as
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references have a copy of your résumé and cover letter, and that they
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are informed that you are interviewing so they know to expect a call.
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(d) See the sample résumés provided in the websites above for various
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format options. You might also mention to students that there are
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electronic résumé templates available on the Internet.

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2-56

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CHAPTER 2

The Recording Process

ASSIGNMENT CLASSIFICATION TABLE

Study Objectives Questions Exercises Exercises Problems Problems

1. Explain what an account 1 1

is and how it helps in the

2. Define debits and credits 2, 3, 4, 5, 6, 1, 2, 5 2, 4, 6, 1A, 2A, 1B, 2B,

and explain their use in 7, 8, 9, 14 7, 14 3A, 5A 3B, 5B

3. Identify the basic steps in 10, 19 4 6, 7

the recording process.

and how it helps in the 14, 16 10, 11, 12 3A, 5A 3B, 5B

5. Explain what a ledger is 17 8

and how it helps in the

6. Explain what posting is 15, 17 7, 8 9, 12 2A, 3A, 5A 2B, 3B, 5B

and how it helps in the

and explain its purposes. 13, 14 4A, 5A 4B, 5B

Problem Difficulty Time Allotted

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

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

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

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

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

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

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

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

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

3. Identify the basic steps in Q2-10 Q2-19 E2-6

5. (a) Asset accounts are increased by debits and decreased by credits.

(b) Liability accounts are decreased by debits and increased by credits.

6. (a) Accounts Receivable—debit balance.

(c) Owner’s Drawing—debit balance.

(d) Accounts Payable—credit balance.

(e) Service Revenue—credit balance.

(g) Owner’s Capital—credit balance.

7. (a) Accounts Receivable—asset—debit balance.

(c) Equipment—asset—debit balance.

(d) Owner’s Drawing—owner’s equity—debit balance.

(e) Supplies—asset—debit balance.

8. (a) Debit Supplies and credit Accounts Payable.

(b) Debit Cash and credit Notes Payable.

9. (1) Cash—both debit and credit entries.

(3) Owner’s Drawing—debit entries only.

(4) Accounts Payable—both debit and credit entries.

(5) Salaries Expense—debit entries only.

10. The basic steps in the recording process are:

(1) Analyze each transaction for its effect on the accounts.

(2) Enter the transaction information in a journal.

12. (a) The debit should be entered first.

paid for with cash and the remainder is on account.

(b) The advantages of using the journal are:

1. It discloses in one place the complete effects of a transaction.

16. (a) Cash............................................................................................................. 9,000

(Invested cash in the business)

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

(Paid one-year insurance policy)

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

Accounts Payable ........................................................................... 2,000

(Purchased supplies on account)

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

(Received cash for services rendered)