Chapter 2 Check Points
(5 min.) CP 2-1
Hickman’s payment was not an expense.
Hickman acquired an asset, Equipment, because the computer is an economic resource of the business.
(5 min.) CP 2-2
a. $12,800 b. $ 3,000 c. $56,300 d. $ 500
e. $ 5,800 [Service revenue of $8,500 ($5,500 + $3,000) – Total expenses of $2,700 ($1,100 +
$1,200 + $400) = Net income of $5,800] e. $ 500
(5-10 min.) CP 2-3
Cash Accounts Receivable 30,000 4,000 6,000 2,000 Bal. 6,000 Bal. 28,000 (5 min.) CP 2-4
Increased total assets: May 1 (Cash)
May 1 (Medical supplies)
May 3 (Cash, Accounts receivable) Increased total liabilities: May 1 (Accounts payable) Decreased total assets: May 2 (Cash) (10 min.) CP 2-5
Journal
DATE ACCOUNT TITLES AND EXPLANATION DEBIT CREDIT Apr. 15 Cash…………………………………… 50,000 Note Payable……………………… 50,000 Borrowed money from the bank. 22 Accounts Receivable………………. 9,000 Service Revenue…………………. 9,000 Performed service on account. 28 Cash…………………………………… 6,000 Accounts Receivable……………. 6,000 Received cash on account. 29 Utilities Expense……………………. 600 Accounts Payable……………….. 600 Received utility bill. 30 Salary Expense……………………… 3,000 Cash………………………………… 3,000 Paid salary expense.
57 Chapter 2 Transaction Analysis
30 Interest Expense……………………. 300 Cash………………………………… Paid interest expense.
(10-15 min.) CP 2-6
Req. 1
Journal
DATE ACCOUNT TITLES AND EXPLANATION DEBIT Supplies……………………………….. 2,000 Accounts Payable………………… Purchased supplies on account. Accounts Payable…………………… 500 Cash………………………………… Paid cash on account.
Req. 2
Accounts Payable 500 2,000 Bal. 1,500
Req. 3
Biaggi’s business owes $1,500, as shown in the Accounts Payable account. (10-15 min.) CP 2-7
Req. 1
Req. 2
DATE
Journal
ACCOUNT TITLES AND EXPLANATION
Accounts Receivable……………….. Service Revenue………………….. Performed service on account.
Cash……………………………………. Accounts Receivable…………….. Received cash on account.
DEBIT
1,200
500
300
CREDIT
2,000
500
CREDIT
1,200
500
Bal. Req. 3
a. The Center earned b. Total assets
Cash 500 500 Accounts Receivable 1,200 500 Bal. 700 Service Revenue 1,200 Bal. 1,200 $1,200: Service Revenue
$1,200: Cash………………….. $ 500
Accounts receivable. 700 Total assets…………. $1,200 58 Financial Accounting 6/e Solutions Manual
(10 min.) CP 2-8
Old Navy Trial Balance December 31, 20X8
ACCOUNT
Cash……………………….…... Other assets………………….. Accounts payable…………… Other liabilities………………. Stockholders’ equity……….. Revenues……………………... Expenses……………………... Total……………………….……
Old Navy’s net income: $6 million ($30 – $24)
(10 min.) CP 2-9
1. Total assets
= $53,800 ($33,300 + $2,000 + $500 +
$18,000)
2. Total liabilities = $100
3. Total stockholders’ equity = $53,700 ($53,800 – $100) 4. Net income
= $5,800 ($8,500 – $1,100 – $1,200 – $400)
(10 min.) CP 2-10 1. Total debits = $121,600 ($58,600 + $81,000 – $18,000)
Total credits = $ 58,600 Difference
= $ 63,000 ($121,600 – $58,600)
$63,000 / 9 = $7,000 (an integer), which suggests either a transposition or a slide 2. Total debits
Difference
= $76,600 ($58,600 + $20,000 – $2,000)
Total credits = $58,600
= $18,000 ($76,600 – $58,600)
receivable)
3. Total debits
Difference
= $56,600 ($58,600 – $ 2,000)
Total credits = $60,600 ($58,600 + $ 2,000)
= $ 4,000 ($60,600 – $56,600)
$4,000 / 2 = $2,000 (original amount of accounts receivable) $18,000 / 9 = $2,000 (original amount of accounts
DEBIT
CREDIT
$ 1 2 2 30 ___ $35 Millions $ 2 9 24 $35 59 Chapter 2 Transaction Analysis
(5 min.) CP 2-12
Cash 250,000 Accounts Payable
100,000
Computer Equipment 100,000 Common Stock
Total debits = $350,000 ($250,000 + $100,000)
Total credits = $350,000 ($100,000 + $250,000)
Exercises
250,000 (10-15 min.) E 2-1
TO: Home Office
FROM: Store Manager
During the first week, I borrowed $320,000 on a note payable. I used the store’s beginning cash plus the borrowed money to purchase land, a building, copy equipment, and supplies. After all these transactions, the store’s balance sheet appears as follows:
Kinko’s
Oklahoma City Store Balance Sheet
Date
ASSETS
LIABILITIES
Cash $ 80,000* Note payable $320,000 Supplies 10,000 Copy equipment 60,000 STOCKHOLDERS’ EQUITY Land 90,000 Common stock 40,000 Building 120,000 Total liabilities and ________ Total assets $360,000 stockholders’ equity $360,000
_____
*$40,000 + $320,000 – $90,000 – $120,000 – $60,000 – $10,000 = $80,000
(5-10 min.) E 2-2
a. Issuance of stock Revenue transaction
b. Purchase of asset on account Borrow money
c. Purchase of asset for cash Sale of asset for cash
Collection of an account receivable d. Payment of dividends to owners Expense transaction e. Pay a liability
60 Financial Accounting 6/e Solutions Manual
(10-20 min.) E 2-4
Req. 1
Analysis of Transactions
ASSETS = LIABILITIES + STOCKHOLDERS’ EQUITY
Accounts Medical Accounts Note Common Retained
Date Cash + Receivable + Supplies + Land = Payable + Payable + Stock + Earnings Oct. 6 40,000 40,000
9 (30,000) 30,000 12 2,000 2,000 15 Not a transaction of the business. 15-31 4,000 4,000 8,000 15-31 (1,400) (1,400)
(1,000) (1,000) (300) (300) 31 500 (500) 31 10,000 10,000 31 (1,500) (1,500)
Bal. 20,300 4,000 1,500 30,000 500 10,000 40,000 5,300
55,800 55,800
Type of Stockholders’ Equity Transaction Issued stock
Service revenue Salary expense Rent expense Utilities expense
Chapter 2 Transaction Analysis 61