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Solution Manual for College Accounting: A Practical Approach, 14th Edition

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    College Accounting Fourteenth Edition Jeffrey Slater Mike Deschamps Instructor's Resource Manual for College A ccounting: A practical A pproach By Carolyn Strauch

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    1-1 1 Accounting Concepts and Procedures ANSWERS TO DISCUSSION QUESTIONS AND CRITICAL THINKING/ETHICAL CASE 1 . The functions of accounting are to analyze, record, classify, summarize, report, interpret , and communicate financial information. 2 . Sole proprietorship — 1 owner; unlimited liability; easy to form; limited life Partnership — 2 or more owners; unlimited liability; easy to form; limited life Corporation — Stockholders; limited liability; difficult to form; unlimited life 3 . Businesses are classified as s ervice , merchandise, or manufacturing . 4 . Computer technology has greatly reduced the time required for performing the bookkeeping function. 5 . The three elements of the basic accounting equation are assets, liabilities, and owner's equity. 6 . Capital is the owner's current investment or equity in the assets of a business. It is one subdivision of owner's equity. 7 . True. The sum of the left side of the equation (assets) must equal the sum of the right side of the equation (liabilities and owner's equity). 8 . False. That is the income statement. 9 . False. Revenue is a subdivision of owner's equity. 10 . Owner's equity is subdivided into Capital, Withdrawals, Revenue, and Expenses. 11 . False. It is a subdivision of owner's equity and records payments of the owner’s personal (non - business) expenses or distributions direct to the owner . It is not a business expense. 12 . Reject . As expenses increase, owner's equity decreases. 13 . Revenue less Expenses; an income statement shows performance over time . 14 . False. It calculates ending capital. 15 . The question in this case is whether Paul should be allowed to "pad" his expense account with an additional $100 of expenses. This would be unethical. Paul should only expense those items that are business related. Paul's argument that he is entitled to an additional $100 is not a valid assumption. However, he should be reimbursed for any business expenses during the weekend.

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    1-2 SOLUTIONS TO CON CEPT CHECKS 1. a. A b. A c. L d. A e. OE f. A 2. a. Liabilities b. Total Assets c. Accounts Payable 3. a. I b. S 4. Total assets = Cash $26,000 + Computer equipment $20,000 = $46,000 5. b. J. Penny, Capital d. J. Penny, Withdrawals f. Advertising Expense g. Taxi Fees Earned 6. c . Accounts Payable d . Grooming Fees Earned 7. a, b, d 8. a. IS b. BS c. BS d. BS e. IS f. IS g. OE h. BS 9. a. OE b. BS c. BS d. IS

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    1-3 SOLUTIONS TO SET A EXERCISES 1A - 1. a. $17,500 = $6,000 + $11,500 b. $65,000 = $5,000 + $60,000 c. $15,000 = $12,000 + $3,000 1A - 2. Assets = Liabilities + Owner’s Equity Cash + Equipment = Accounts + Payable M organ , Capital a. +1 24 ,000 +1 24 ,000 b. (1, 3 00) +1, 3 00 c. +9 0 0 +9 0 0 1A - 3. R ABBIT CO MPANY CLEANERS BALANCE SHEET SEPTEM BER 30, 201X Assets Liabilities and Owner’s Equity Cash $ 67 0 0 0 Liabilities Equipment 7 0 0 0 Accounts Payable $1 3 0 0 0 1 3 0 0 0 Total Liabilities Owner's Equity B. R abbit , Capital 61 0 0 0 Total Liabilities and Total Assets $ 74 0 0 0 Owner's Equity $ 74 0 0 0

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    1-4 EXERCISES (CONTINUED) 1 A - 4. ASSETS = LIABILITIES + OWNER'S EQUITY B. B. Accounts Computer Accounts B aker , B aker , Cash + Rec. + Equip. = Payable + Capital – Withd. + Revenue s – Expenses a . + 8 0 ,000 + 8 0 ,000 b . + 4 ,000 + 4 ,000 c . ( 1 25 ) + 1 25 d . +1 3 , 6 00 + 1 3 , 6 00 e . + 30, 0 00 + 30, 0 00 f . ( 4 , 1 00 ) + 4 , 1 00 g . ( 1,4 9 0 ) + 1,4 9 0 Remember, as withdrawals or expenses increase, the end result is to reduce owner's equity . 1A - 5. ( a ) FRE EMAN REALTY INCOME STATEMENT MONTH ENDED JUNE 30, 201X Revenue: Professional Fees $ 3 1 0 0 Operating Expenses: Salaries Expense $ 4 5 0 Utilities Expense 1 5 0 Rent Expense 4 5 0 Total Operating Expenses 1 1 0 5 0 Net Income $ 2 0 5 0 ( b ) FRE EMAN REALTY STATEMENT OF OWNER’S EQUITY MONTH ENDED JUNE 30, 201X S. Fre eman , Capital, June 1, 201X $ 10 2 4 5 Net Income for June $ 2 0 5 0 Less: Withdrawals for June ( 2 2 5 ) Increase in Capital 1 8 2 5 S. Fre eman , Capital, June 30, 201X $ 12 0 7 0

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    1-5 EXERCISES (CONTINUED) ( c ) FRE EMAN REALTY BALANCE SHEET JUNE 30, 201X Assets Liabilities and Owner’s Equity Cash $ 5 2 0 0 Liabilities Accounts Rec eivable 1 3 7 0 Accounts Payable $ 6 0 0 0 Office Equip ment 11 5 0 0 Owner's Equity S. Fre eman , Capital 12 0 7 0 Total Liabilities and Total Assets $ 1 8 0 7 0 Owner's Equity $ 1 8 0 7 0 SOLUTIONS TO SET B EXERCISES 1B - 1. a. $ 19 ,000 = $ 6 ,000 + $ 13 ,000 b. $ 100 ,000 = $ 4 ,000 + $ 96 ,000 c. $ 45 ,000 = $ 10 ,000 + $ 3 5,000 1B - 2. Assets = Liabilities + Owner’s Equity Cash + Equipment = Accounts + Payable M elody , Capital a. +1 28 ,000 +1 28 ,000 b. (1,6 5 0) +1,6 5 0 c. +1, 20 0 +1, 20 0 1 B - 3 . R AUSCHER COMPANY CLEANERS BALANCE SHEET NOVEMBER 30, 201X ASSETS LIABILITIES AND OWNER’S EQUITY Cash $ 65 0 0 0 Liabilities Equipment 10 0 0 0 Accounts Payable $ 29 0 0 0 Total Liabilities $ 29 0 0 0 Owner's Equity B. R auscher , Capital $ 46 0 0 0 Total Liabilities and Total Assets $ 75 0 0 0 Owner's Equity $ 75 0 0 0

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    1-6 EXERCISES (CONTINUED) 1 B - 4 . ASSETS = LIABILITIES + OWNER'S EQUITY B. B. Accounts Computer Accounts B eadell , B ead ell , Cash + Rec. + Equip. = Payable + Capital – Withdr . + Revenue s – Expenses a . + 6 5 ,000 + 6 5 ,000 b . + 7 ,500 + 7 ,500 c . ( 22 5 ) + 22 5 d . + 1 3 , 5 00 + 1 3 , 5 00 e . + 29,600 + 29,600 f . (3, 8 00) + 3, 8 00 g . ( 1,5 3 0) + 1, 5 3 0 Remember, as withdrawals or expenses increase, the end result is to reduce owner's equity . 1B - 5 . ( a ) F AIRMONT REALTY INCOME STATEMENT MONTH ENDED NOV EMBER 30, 201X Revenue: Professional Fees $ 4 0 0 0 Operating Expenses: Salaries Expense $ 3 0 0 Utilities Expense 2 5 0 Rent Expense 3 0 0 Total Operating Expenses 8 5 0 Net Income $ 3 1 5 0 ( b ) F AIRMONT REALTY STATEMENT OF OWNER'S EQUITY MONTH ENDED NOVE MBER 30, 201X S. F airmont , Capital, Nov ember 1, 201X $ 10 0 1 5 Net Income for Nov ember $ 3 1 5 0 Less: Withdrawals for Nov ember ( 1 7 5 ) Increase in Capital 2 9 7 5 S. F airmont , Capital, Nov ember 30, 201X $ 12 9 9 0

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    1-7 ( c ) F AIRMONT REALTY BALANCE SHEET NOV EMBER 30, 201X ASSETS LIABILITIES AND OWNER'S EQUITY Cash $ 4 5 0 0 Liabilities Accounts Rec eivable 1 4 9 0 Accounts Payable $ 6 0 0 0 Office Equip ment 1 3 0 0 0 Owner's Equity S. F airmont , Capital 12 9 9 0 Total Liabilities and Total Assets $ 1 8 9 9 0 Owner's Equity $1 8 9 9 0

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    1-8 SOLUTIONS TO SET A PROBLEMS PROBLEM 1 A - 1 M ELODY 'S NAIL SPA Transaction Assets = Liabilities + Owner’s Equity Cash Store Equipment Accounts Payable M. A bington , Capital a. +1 9 ,000 +1 9 ,000 b. (3, 4 00) +3, 4 00 c. +6, 10 0 +6, 10 0 d. ( 1,2 00) ( 1,2 00) Total 1 4 , 4 00 9,5 0 0 4 , 90 0 1 9 ,000 PROBLEM 1A - 2 S IMON ’S INTE RNET SERVICE BALANCE SHEET NOVEMBER 30, 201X ASSETS LIABILITIES AND OWNER'S EQUITY Cash $ 45 0 0 0 Liabilities Equipment 24 0 0 0 Accounts Payable $ 1 6 5 0 0 Building 30 0 0 0 Owner's Equity B. Simon , Capital 8 2 5 0 0 Total Liabilities and Total Assets $ 99 0 0 0 Owner's Equity $ 99 0 0 0

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    1-9 PROBLEM 1A - 3 Expenses 0 0 0 0 + 32 5 32 5 + 22 0 5 45 + 8 00 1, 3 45 1, 3 45 – - - - - - - - - - – - – - – - – OWNER'S EQUITY Computer Service Revenue 0 0 + 1,3 00 1,3 00 + 2, 2 00 3 , 5 00 3 , 5 00 3,5 00 3,5 00 3,5 00 + + + + + + + + + + + + + + + + + F ALCO COMPUTER SERVICE R. F alco , Withd. 0 0 0 0 0 0 0 + 3 00 3 00 – - - - - - - - - - - - - - - - – R . F alco , Capital + 40 ,000 40 , 000 40 ,000 40 ,000 40 ,000 40 ,000 40 ,000 40 ,000 40 ,000 + + + + + + + + + + + + + + + + + + LIABILITIES Accounts Payable 0 + 6 ,5 00 6 ,500 6 ,5 00 6 ,5 00 6 ,5 00 6 ,5 00 + 8 00 7 , 3 00 7 , 3 00 49 , 1 55 = = = = = = = = = = = = = = = = = = Computer Equipment 0 + 6 ,500 6 ,500 6 ,500 6 ,5 00 6 ,50 0 6 ,5 00 6 ,5 00 6 ,5 00 4 9, 1 55 + + + + + + + + + + + + + + + + + ASSETS Accounts Receivable 0 0 0 + 2, 2 00 2, 2 00 2, 2 00 2, 2 00 2, 2 00 2, 2 00 + + + + + + + + + + + + + + + + + Cash + 40 ,000 40 ,000 40 ,000 + 1,3 00 41 , 3 00 41 , 3 00 ( 32 5 ) 40 , 97 5 ( 22 0 ) 40 , 75 5 40 , 75 5 ( 3 00 ) 40 , 45 5 a . BALANCE b . BALANCE c . BALANCE d . BALANCE e . BALANCE f . BALANCE g . BALANCE h . ENDING BALANCE

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    1-10 PROBLEM 1A - 4 ( a ) W ENGLER HOME DECORATING SERVICE INCOME STATEMENT MONTH ENDED JUNE 30, 201X Revenue: Home Decorating Fees $ 2 4 0 0 Operating Expenses: Advertising Expense $ 1 4 5 Repair Expense 5 5 Travel Expense 2 5 0 Supplies Expense 5 5 Rent Expense 3 7 5 Total Operating Expenses 8 8 0 Net Income $ 1 5 2 0 ( b ) W ENGLER HOME DECORATING SERVICE STATEMENT OF OWNER'S EQUITY MONTH ENDED JUNE 30, 201X J. W engler Capital, June 1, 201X $ 3 8 8 5 Net Income for June $ 1 5 2 0 Less: Withdrawals for June (1 0 0 0 ) Increase in Capital 5 2 0 J. Wengler , Capital, June 30, 201X $ 4 4 0 5 ( c ) W ENGLER HOME DECORATING SERVICE BALANCE SHEET JUNE 30, 201X ASSETS LIABILITIES AND OWNER'S EQUITY Cash $ 2 3 0 0 Liabilities Accounts Receivable 1 2 0 0 Accounts Payable $ 2 5 0 Decorating Equipment 1 1 5 5 Owner's Equity J. Wengler , Capital 4 4 0 5 Total Liabilities and Total Assets $ 4 6 5 5 Owner's Equity $ 4 6 5 5

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    1-11 PROBLEM 1A - 5 OWNER’ S EQU I TY Expenses 0 0 0 0 0 + 69 0 69 0 69 0 69 0 + 6 0 75 0 75 0 75 0 75 0 + 50 0 1, 25 0 + 55 0 1,80 0 – - - - - - - - - - - - – - – - – - – - – - – - – - – - – Catering Revenue 0 0 0 0 + 2,4 00 2,4 00 2,4 0 0 + 175 2,575 2,575 2,575 2,575 +1, 9 00 4,475 4,475 4,475 4,475 + + + + + + + + + + + + + + + T RUM A N’ S CATERING SERVICE J. T ruman , Withd 0 0 0 0 0 0 0 0 0 + 9 0 9 0 9 0 9 0 9 0 9 0 – - - - - - - - - - - - - - - - - - - - – - - - – - – - – J. T ruman , Capital + 33 ,000 33 ,000 33 ,000 33 ,000 33 ,000 33 ,000 33 ,000 33 ,000 33 ,000 33 ,000 33 ,000 33 ,000 33 ,000 33 ,000 33 ,000 + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + LIABILIT I ES Accounts Payable 0 0 +2, 1 00 2, 1 00 ( 2 00) 1 ,9 00 1, 9 00 1, 9 00 1 ,9 00 1, 9 00 1, 9 00 1, 9 0 0 1, 9 00 + 8 0 0 2,7 00 + 50 0 3,2 00 3,2 0 0 $ 38,785 = = = = = = = = = = = = = = = = = Equipment + 1,6 00 1,6 00 +2, 1 00 3 , 7 00 3,7 00 3,7 00 3,7 00 3,7 00 3,7 00 3,7 00 3,7 00 3,7 00 + 8 00 4, 5 00 4, 5 00 4, 5 00 $ 38,7 8 5 + + + + + + + + + + + + + + + + + + + + + + + + + + + + + ASSETS Accounts Receivable 0 0 0 0 0 0 + 175 175 ( 120 ) 55 55 55 55 55 55 55 + + + + + + + + + + + + + + + + + + + + + + + + + + + + + Cash + 33 ,000 33 ,000 ( 1 , 6 00) 31 , 4 0 0 31,4 00 ( 2 00) 31,2 00 + 2,4 00 33,6 00 ( 69 0) 32,91 0 32,91 0 + 12 0 33,03 0 ( 6 0) 32,97 0 ( 9 0) 32,88 0 +1, 9 00 34,78 0 34,78 0 34,78 0 ( 55 0) 34,23 0 5 /25 BALANCE 5 /27 BALANCE 5 /28 BALANCE 5 /29 BALANCE 6 /1 BALANCE 6 /5 BALANCE 6 /8 BALANCE 6 /10 BALANCE 6 / 15 BALANCE 6 /17 BALANCE 6 /20 BALANCE 6 /25 BALANCE 6 /2 8 BALANCE 6 /30 END . BAL.

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    1-12 PROBLEM 1A - 5 (CONTINUED) ( b ) T RUMAN 'S CATERING SERVICE BALANCE SHEET MAY 31, 201X ASSETS LIABILITIES AND OWNER'S EQUITY Cash $ 31 2 0 0 Liabilities Equipment 3 7 0 0 Accounts Payable $ 1 9 0 0 Owner's Equity J. T ruman , Capital 33 0 0 0 Total Liabilities and Total Assets $ 34 9 0 0 Owner's Equity $ 34 9 0 0 ( c ) T RUMAN 'S CATERING SERVICE INCOME STATEMENT MONTH ENDED JUNE 30, 201X Revenue: Catering Revenue $ 4 4 7 5 Operating Expenses: Salaries Expense $ 6 9 0 Telephone Expense 6 0 Rent Expense 5 0 0 Supplies Expense 5 5 0 Total Operating Expenses 1 8 0 0 Net Income $ 2 6 7 5

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    1-13 P ROBLEM 1 - 5A(CONCLUDED) ( d ) T RUMAN 'S CATERING SERVICE STATEMENT OF OWNER'S EQUITY MONTH ENDED JUNE 30, 201X J . T ruman , Capital June 1, 201X $ 33 0 0 0 Net Income for June $ 2 6 7 5 Less: Withdrawals for June (9 0 ) Increase in Capital 2 5 8 5 J. T ruman , Capital , June 30, 201X $ 3 5 5 8 5 ( e ) T RUMAN 'S CATERING SERVICE BALANCE SHEET JUNE 30, 201X ASSETS LIABILITIES AND OWNER'S EQUITY Cash $ 34 2 3 0 Liabilities Accounts Receivable 5 5 Accounts Payable $ 3 2 0 0 Equipment 4 5 0 0 Owner's Equity J. T ruman , Capital 3 5 5 8 5 Total Liabilities and Total Assets $ 38 7 8 5 Owner's Equity $ 38 7 8 5

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    1-14 SOLUTIONS TO SET B PROBLEMS PROBLEM 1B - 1 MA DELINE ’S NAIL SPA Transaction Assets = Liabilities + Owner’s Equity Cash Store Equipment Accounts Payable M. A bdul , Capital a. + 17 ,000 + 17 ,000 b. (3, 9 00) +3, 9 00 c. + 6,20 0 + 6,20 0 d. ( 8 00) ( 8 00) Total 1 2,3 00 10,10 0 5,40 0 17 ,000 PROBLEM 1B - 2 S AM 'S INTERNET SERVICE BALANCE SHEET SEPT EMBER 30, 201X ASSETS LIABILITIES AND OWNER'S EQUITY Cash $ 5 0 0 0 Liabilities Equipment 3 4 0 0 0 Accounts Payable $ 15 5 0 0 Building 45 0 0 0 Owner's Equity B. Sam , Capital 68 5 0 0 Total Liabilities and Total Assets $ 84 0 0 0 Owner's Equity $ 84 0 0 0

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    1-15 PROBLEM 1B - 3 FANNIER COMPUTER SERVICE RED FUMAN COMPUTER SERVICE Expenses 0 0 0 0 + 3 00 3 00 +180 48 0 + 1,0 00 1, 48 0 1, 48 0 – - - - - - - - – - – - – - – - – OWNER'S EQUITY Computer Service Revenue 0 0 + 7 00 7 00 + 1,2 00 1,9 00 1,9 00 1,9 00 1,9 00 1,9 00 + + + + + + + + + + + + + + + + + R . F annier Withd. 0 0 0 0 0 0 0 + 8 00 8 00 – - - - - - - - - - - - - - – - – R. F annier , Capital + 1 7 ,00 0 1 7 ,000 1 7 ,000 1 7 ,000 1 7 ,000 1 7 ,000 1 7 ,000 1 7 ,000 1 7 ,000 + + + + + + + + + + + + + + + + + + LIABILITIE S Accounts Payable 0 + 5 ,000 5 ,000 5 ,000 5 ,000 5 ,000 5 ,000 + 1,0 00 6,0 00 6,0 00 $ 22,62 0 = = = = = = = = = = = = = = = = = = = Computer Equipment 0 + 5 ,000 5 ,000 5 ,000 5 ,000 5 ,000 5 ,000 5 ,000 5 ,000 $ 22,62 0 + + + + + + + + + + + + + + + + + ASSETS Accounts Receivable 0 0 0 + 1 ,200 1 ,200 1 ,200 1 ,200 1 ,200 1 ,200 + + + + + + + + + + + + + + + + + Cash + 1 7 ,00 0 1 7 ,00 0 1 7 ,000 + 7 00 1 7,7 00 1 7,7 00 ( 3 00 ) 17,4 00 ( 1 8 0 ) 17,22 0 17,22 0 ( 8 00 ) 16,42 0 a . BALANCE b . BALANCE c . BALANCE d . BALANCE e . BALANCE f . BALANCE g . BALANCE h . ENDING BALANCE

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    1-16 PROBLEM 1B - 4 ( a ) W ADDEN HOME DECORATING SERVICE INCOME STATEMENT MONTH ENDED SEPTEMBER 30, 201X Revenue: Home Decorating Fees $ 2 4 0 0 Operating Expenses: Advertising Expense $ 2 5 0 Repair Expense 4 0 Travel Expense 7 5 0 Supplies Expense 9 5 Rent Expense 3 0 0 Total Operating Expenses 1 4 3 5 Net Income $ 9 6 5 ( b ) W ADDEN HO ME DECORATING SERVICE STATEMENT OF OWNER'S EQUITY MONTH ENDED SEPTEMBER 30, 201X J. W adden , Capital, September 1, 201X $ 2 6 7 5 Net income for September $ 9 6 5 Less: Withdrawals for September ( 8 0 0 ) In crease in Capital 1 6 5 J. W adden , Capital, September 30, 201X $ 2 8 4 0 ( c ) W ADDEN HOME DECORATING SERVICE BALANCE SHEET SEPTEMBER 30, 201X ASSETS LIABILITIES AND OWNER'S EQUITY Cash $ 2 5 0 0 Liabilities Accounts Receivable 5 5 0 Accounts Payable $ 9 3 5 Decorating Equipment 7 2 5 Owner's Equity J. W adden , Capital 2 8 4 0 Total Liabilities and Total Assets $3 7 7 5 Owner's Equity $ 3 7 7 5

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    1-17 PROBLEM 1B - 5 OWNER’ S EQUITY Expenses 0 0 0 0 0 + 1,50 0 1,50 0 1,50 0 1,50 0 +50 1,55 0 1,55 0 1,55 0 1,55 0 + 5 50 2 , 10 0 + 2 5 0 2 , 35 0 – - - - - - - - - - - - – - – - – - - - – - - - – - – - – Catering Revenue 0 0 0 0 +2, 0 00 2 , 0 00 2, 0 0 0 + 1 50 2, 1 50 2, 1 50 2, 1 50 2, 1 50 + 1,0 00 3 , 1 50 3 , 1 50 3 , 1 50 3 , 1 50 + + + + + + + + + + + + + + + + + + + + + + + + + + + + + T RICKETT ’ S CATERING SERVICE J. T rickett , Withd 0 0 0 0 0 0 0 0 0 + 40 0 40 0 40 0 40 0 40 0 40 0 – - - - - - - - - - - - - - - - - - - - – - - - – - – - – J. T rickett , Capital +2 2 ,00 0 2 2 ,00 0 2 2 ,000 2 2 ,0 00 2 2, 0 00 2 2 ,0 00 2 2 ,0 00 2 2 ,0 00 2 2 ,0 00 2 2 ,0 00 2 2 ,0 00 2 2 ,0 00 2 2, 0 00 2 2 ,0 00 2 2 ,0 00 + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + LIABILITIES Accounts Payable 0 0 + 2,1 00 2,1 00 ( 8 00) 1,3 00 1,3 00 1,3 00 1,3 00 1,3 00 1,3 00 1,3 00 1,3 00 + 4 00 1,700 + 5 50 2, 2 50 2, 2 50 $ 24,65 0 = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = Equipment 0 + 7 00 7 00 + 2,1 00 2, 8 00 2, 8 00 2, 8 00 2, 8 00 2, 8 00 2, 8 00 2, 8 00 2, 8 00 2, 8 00 + 4 00 3, 2 00 3, 2 00 3, 2 00 $ 24,65 0 + + + + + + + + + + + + + + + + + + + + + + + + + + + + + ASSETS Accounts Receivable 0 0 0 0 0 0 + 1 50 1 50 ( 10 0 ) 5 0 5 0 5 0 5 0 5 0 5 0 5 0 + + + + + + + + + + + + + + + + + + + + + + + + + + + + + Cash + 2 2 ,0 00 2 2 ,000 ( 7 00 ) 2 1,3 00 2 1,3 00 ( 8 00 ) 2 0,5 00 + 2, 0 00 2 2,5 00 ( 1, 5 0 0 ) 2 1, 0 0 0 2 1,00 0 + 10 0 2 1 , 10 0 ( 50 ) 2 1,05 0 ( 40 0 ) 2 0,65 0 + 1,0 00 2 1,65 0 2 1,65 0 2 1,65 0 ( 2 50 ) 2 1,40 0 10 /25 BALANCE 10 /27 BALANCE 10 /28 BALANCE 10 /29 BALANCE 11 /1 BALANCE 11 /5 BALANCE 11 /8 BALANCE 11 /10 BALANCE 11 /15 BALANCE 11 /17 BALANCE 11 / 20 BALANCE 11 /25 BALANCE 11 /2 8 BALANCE 11 /30 END BAL.

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    1-18 PROBLEM 1B - 5 (CONTINUED) ( b ) T RICKETT 'S CATERING SERVICE BALANCE SHEET OCTOBER 31, 201X ASSETS LIABILITIES AND OWNER'S EQUITY Cash $ 2 0 5 0 0 Liabilities Equipment 2 8 0 0 Accounts Payable $ 1 3 0 0 Owner's Equity J. T rickett , Capital 2 2 0 0 0 Total Liabilities and Total Assets $ 2 3 3 0 0 Owner's Equity $ 2 3 3 0 0 ( c ) T RICKETT 'S CATERING SERVICE INCOME STATEMENT MONTH ENDED NOVEMBER 3 0 , 201X Revenue: Catering Revenue $ 3 1 5 0 Operating Expenses: Salaries Expense $ 1 5 0 0 Telephone Expense 5 0 Rent Expense 5 5 0 Supplies Expense 2 5 0 Total Operating Expenses 2 3 5 0 Net Income $ 8 0 0

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    1-19 PROBLEM 1B - 5 (CONCLUDED) ( d ) T RICKETT 'S CATERING SERVICE STATEMENT OF OWNER'S EQUITY MONTH ENDED NOVEMBER 30, 201X J . Trickett , Capital, November 1, 20 1X $ 2 2 0 0 0 Net Income for November $ 8 0 0 Less: Withdrawals for November ( 4 0 0) Increase in Capital 4 0 0 J. Trickett , Capital, November 30, 20 1X $ 2 2 4 0 0 ( e ) T RICKETT 'S CATERING SERVICE BALANCE SHEET NOVEMBER 30, 201X ASSETS LIABILITIES AND OWNER'S EQUITY Cash $ 2 1 4 0 0 Liabilities Accounts Receivable 5 0 Accounts Payable $ 2 2 5 0 Equipment 3 2 0 0 Owner's Equity J. T rickett , Capital 2 2 4 0 0 Total Liabilities and Total Assets $ 24 6 5 0 Owner's Equity $ 24 6 5 0 FINANCIAL REPORT PROBLEM SOLUTION — 201 6 Amazon ’s Annual Report YEAR Cash and Cash Equivalents 201 6 $ 19, 334 million 201 5 $ 15,890 million In crease $ 3,444 million Cash and cash equivalents in creased $ 3.4 b illion from 201 5 to 201 6 .

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    1-20 KEEPING IT REAL -- S uarez Computer Center Solution Expenses +$ 8 00 (Rent) 8 00 8 00 8 00 + 100 ( Util . ) 900 900 $ 900 OWNER'S EQUITY – – – – – – – Service Revenue +$ 1,0 00 1,0 00 + 7 00 1, 7 00 1, 7 00 +1, 4 00 3, 1 00 $ 3, 1 00 + + + + + + F alco , Withdrawals +1 ,500 $1 ,500 – – =LIABILITIES+ F alco , + Capital +$ 12,5 00 12,5 00 12,5 00 12,5 00 12,5 00 12,5 00 12,5 00 12,5 00 12,5 00 12,5 00 $ 12,5 00 $ 13 , 800 S UAREZ COMPUTER CENTER Accounts P ayable + + + + + + + + + +$ 5 0 0 5 0 0 5 0 0 5 0 0 5 0 0 + 100 600 600 $ 600 = = = = = = = = = = = = Office Equipment +$ 1 , 5 00 1,5 00 1,5 00 1,5 00 1,5 00 1,5 00 1,5 00 1,5 00 $ 1,5 00 $ 13 , 800 + + + + + + + + + Computer Shop Equipment +$1, 26 0 1, 26 0 1, 26 0 1, 26 0 1, 26 0 1, 26 0 1, 26 0 1, 26 0 1, 26 0 $1, 26 0 + + + + + + + + + + ASSETS Supplies +$ 5 0 0 5 0 0 5 0 0 5 0 0 5 0 0 5 0 0 5 0 0 $ 5 0 0 + + + + + + + + Cash +$ 12 , 5 00 12 , 5 00 – 1, 26 0 11 ,2 4 0 – 1 , 5 00 9 ,74 0 9 ,74 0 – 8 00 8,94 0 + 1,0 0 0 9 , 94 0 + 7 00 1 0 , 64 0 1 0 , 64 0 +1, 4 00 12 , 04 0 – 1 ,500 $ 10 , 540 a . BALANCE b . BALANCE c. BALANCE d . BALANCE e . BALANCE f . BALANCE g . BALANCE h . BALANCE i . BALANCE j. END ING BALA NCE

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    1-21 S UAREZ COMPUTER CENTER INCOME STATEMENT FOR THE MONTH ENDED JULY 31, 20 1X Revenue: Service Revenue $ 3 1 0 0 00 Operating Expenses: Rent Expense $ 8 0 0 00 Utilities Expense 1 0 0 00 Total Operating Expenses 9 0 0 00 Net Income $ 2 2 0 0 00 S UAREZ COMPUTER CENTER STATEMENT OF OWNER'S EQUITY FOR MONTH ENDED JULY 31, 20 1X T. Falco , Capital, July 1, 20 1X $ 0 00 Investment for July 12 5 0 0 00 Total investment for July 12 5 0 0 00 Net Income for July $ 2 2 0 0 00 Less: Withdrawals for July (1 5 0 0 00) Increase in Capital 7 0 0 00 T. Falco , Capital, July 31, 20 1X $ 13 2 0 0 00 S UAREZ COMPUTER CENTER BALANCE SHEET JULY 31, 20 1X ASSETS LIABILITIES AND OWNER'S EQUITY Cash $ 10 5 4 0 00 Liabilities: Supplies 5 0 0 00 Accounts Payable $ 6 0 0 00 Computer Shop Equipment 1 2 6 0 00 Office Equipment 1 5 0 0 00 Owner ’ s Equity T. Falco , Capital 13 2 0 0 00 Total Liabilities and Total Assets $ 13 8 0 0 00 Owner's Equity $ 13 8 0 0 00

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    2-1 2 Debits and Credits: Analyzing and Recording Business Transactions ANSWERS TO DISCUSSION QUESTIONS AND CRITICAL THINKING/ETHICAL CASE 1. A ledger is a group of accounts that records in monetary value the data from business transactions. 2. The left - hand side is always the debit side. It is an arbitrary rule. 3. False. Accounts with one entry will not need footings. 4. The financial statements are the end product s of the accounting process. 5. The transaction analysis chart is a teaching device that is not used in the regular accounting process. 6. Which accounts are affected ? In w hich categor ies do the accounts belong ? A re the accounts increasing or decreasing? W hat do the rule s of debit and credit say? W hat does the T - account look like? 7. Disagree . C omputers will record debits and credits based on the account type. 8. False. The trial balance is an i nformal report that does not have the same status as financial statements. The trial balance is used to verify the equality of total debits and credits and prepare the financial statements. 9. The financial statements are prepared from the ending balances of the accounts (debit or credit) in the ledger. The columns on financial statements are used for listing amounts and for subtotaling. 10. It is easier to prepare the reports from the trial balance rather than the expanded accounting equation because the trial balance list s all accounts and their balances. The columns for revenue, expenses, etc., i n the expanded accounting equation do not list specific titles and their balances. 11. The question in this case is whether Joshua should be allowed to put fictitious figures into the trial balance. I would not support this type of behavior. H is behavior is extremely unprofessional and goes against professional ethical standards. Instead of putting in fictitious figures, Joshua should stay late and correct the trial balance . H e could also ask for help.

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    2-2 SOLUTIONS TO C ONCEPT CHECKS 1. The ending balance in Cash is $1 9 , 5 00(debit balance). The ending balance in C. Rice , Capital is $1 8 ,000(credit balance). Cash 110 6/24 8,000 6/28 12,000 500 6/26 20,000 500 Bal. 19,500 C. Rice, Capital 311 11,000 6/1 6,000 6/8 1,000 6/22 18,000 Bal. 2. Category Incr. Decr. Normal Bal . A. Liability Cr. Dr. Cr. B. Revenue Cr. Dr. Cr. C. Asset Dr. Cr. Dr. D. Capital Cr. Dr. Cr. E. Withdrawal Dr. Cr. Dr. F. Asset Dr. Cr. Dr. G. Expense Dr. Cr. Dr. 3. Account Category Increase/Decrease Dr. or Cr. T Accounts Cash Asset ↑ Dr. Cash 6 00 Acc ounts Rec eivable Asset ↑ Dr. Acc. Rec. 2,900 Design Fees Earned Revenue ↑ Cr. Design Fees Earned 3 , 5 00

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    2-3 4. Cash Accounts Receivable Office Equipment Accounts Payable B. O’Mally, Capital B. O’Mally, Withdrawals Hair Salon Fees Earned Selling Expense Salary Expense Advertising Expense 5. A. BS B. BS C.BS D.BS E.OE F.OE G.IS H.IS I. IS J.IS K.IS

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    2-4 SOLUTIONS TO SET A EXERCISES 2 A - 1. Balance Sheet Accounts Assets 111 Cash 112 Accounts Receivable 121 Office Equipment ( Microsoft Surface Tablet ) Liabilities 211 Accounts Payable Owner's Equity 311 L. J ana s, Capital 312 L. J ana s, Withdrawals Income Statement Accounts Revenue 411 Legal Fees Expenses 511 Salar y Expense 512 Repair Expense 513 Advertisin g Expense 2A - 2. 1. Accounts Affected 2. Category 3. ↑ ↓ 4. Rules 5. T - Account Update Computer Equipment Asset ↑ Dr. Computer Equipment 2 6 ,000 Cash Asset ↓ Cr. Cash 9 ,000 Accounts Payable Liability ↑ Cr. Accounts Payable 1 7 ,000

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    2-5 EXERCISES (CONTINUED) 2A - 3 . ACCOUNT CATEGORY ↑ ↓ FINANCIAL STATEMENT Computer Supplies Asset Dr. Cr. Balance Sheet Legal Fees Earned Revenue Cr. Dr. Income Statement P . R o y, Withdrawals Withdrawal Dr. Cr. Statement of Owner's Equity Accounts Payable Liability Cr. Dr. Balance Sheet Salaries Expense Expense Dr. Cr. Income Statement Auto Asset Dr. Cr. Balance Sheet 2A - 4 . Dr. Cr. A. 8 1 B. 6 1 C. 9 4 D. 1 7 E. 10 1 F. 3 5 G. 2 7 H. 1 2 I. 3 4

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    2-6 EXERCISES (CONTINUED) 2 A - 5. (1) H ELM 'S CLEANERS INCOME STATEMENT FOR MONTH ENDED MARCH 31, 201X Revenue: Cleaning Fees $ 4 6 6 Operating Expenses: Salaries Expense $ 1 2 5 Utilities Expense 1 6 2 Total Operating Expenses 2 8 7 Net Income $ 1 7 9 (2) H ELM 'S CLEANERS STATEMENT OF OWNER' S EQUITY FOR MONTH ENDED MARCH 31, 201X J. H elm , Capital, March 1, 201X $ 7 2 6 Net Income for March $ 1 7 9 Less: Withdrawals for March ( 5 5 ) Increase in Capital 1 2 4 J. H elm , Capital, March 31, 201X $ 8 5 0 (3) H ELM 'S CLEANERS BALANCE SHEET MARCH 31, 201X ASSETS LIABILITIES AND OWNER'S EQUITY Cash $ 7 5 0 Liabilities Equipment 5 0 0 Accounts Payable $ 4 0 0 Owner's Equity J. H elm , Capital 8 5 0 Total Liabilities and Total Assets $1 2 5 0 Owner's Equity $ 1 2 5 0

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    2-7 SOLUTIONS TO SET B EXERCISES 2B - 1 . Balance Sheet Accounts Assets 111 Cash 112 Accounts Receivable 121 Office Equipment ( Apple iPad ) Liabilities 211 Accounts Payable Owner's Equity 311 L. J one s, Capital 312 L. J one s, Withdrawals Income Statement Accounts Revenue 411 Legal Fees Earned Expenses 511 Sala r y Expense 512 Rent Expense 513 Advertising Expense 2B - 2. 1. Accounts Affected 2. Category 3. ↑ ↓ 4. Rules 5. T - Account Update Computer Equipment Asset ↑ Dr. Computer Equipment 2 8 ,000 Cash Asset ↓ Cr. Cash 8 ,000 Accounts Payabl e Liability ↑ Cr. Accounts Payable 20 ,000

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    2-8 EXERCISES (CONTINUED) 2 B - 3 . ACCOUNT CATEGORY ↑ ↓ FINANCIAL STATEMENT Office Supplies Asset Dr. Cr. Balance Sheet Rental Fees Earned Revenue Cr. Dr. Income Statement A. Troy , Withdrawals Withdrawal Dr. Cr. Statement of Owner's Equity Accounts Payable Liability Cr. Dr. Balance Sheet Wage Expense Expense Dr. Cr. Income Statement Computer Asset Dr. Cr. Balance Sheet 2 B - 4 . Dr. Cr. A. 8 1 B. 6 1 C. 9 4 D. 1 7 E. 10 1 F. 3 5 G. 2 7 H. 1 2 I. 3 4

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