CHAPTER 2

THE RECORDING PROCESS

Summary of Questions by Study Objectives
and Bloom’s Taxonomy

Note: C = Comprehension AP = Application AN = Analysis

SUMMARY OF STUDY OBJECTIVES BY QUESTION TYPE

Note: Ex = Exercise

Summary of Questions by LEVEL OF DIFFICULTY (LOD)

Note: E = Easy M = Medium H=Hard

CHAPTER STUDY OBJECTIVES

1. Define debits and credits and illustrate how they are used to record transactions. Debit means left and credit means right. The normal balance of an asset is a debit because assets are on the left side of the accounting equation. Assets are increased by debits and decreased by credits. The normal balance of liabilities and owner’s capital is a credit because they are on the right side of the accounting equation. Liabilities and owner’s capital are increased by credits and decreased by debits. Revenues increase owner’s equity and therefore are recorded as credits because credits increase owner’s equity. Credits increase revenues and debits decrease revenues. Expenses and drawings decrease owner’s equity and therefore are recorded as debits because debits decrease owner’s equity. Expenses and drawings are increased by debits and decreased by credits.

2. Explain the recording process and analyze, journalize, and post transactions. The steps in the recording process are the first three steps in the accounting cycle. These steps are: (a) analyze each transaction for its effect on the accounts, (b) record the transaction in a journal, and (c) transfer the journal information to the correct accounts in the ledger.

A journal: (a) discloses the complete effect of a transaction in one place, (b) provides a chronological record of transactions, (c) helps to prevent and locate errors because the debit and credit amounts for each entry can be easily compared, and (d) explains the transaction and, if there is one, identifies the source document.

The entire group of accounts maintained by a company is called the ledger. The ledger keeps in one place all the information about changes in each of the specific account balances. Posting is the procedure of transferring journal entries to the ledger accounts. After the journal entries have been posted, the ledger will show all of the increases and decreases that have been made to each account.

3. Explain the purpose of a trial balance, and prepare one. A trial balance is a list of the accounts in the ledger and the account balances at a specific time. Its main purpose is to prove that debits and credits are equal after posting. A trial balance uncovers certain types of errors in journalizing and posting, and is useful in preparing financial statements. Preparing a trial balance is the fourth step in the accounting cycle.

Exercises

Exercise 1

The chart of accounts used by Quick Copy Company is listed below. You are to indicate the proper accounts to be debited and credited for the following transactions by writing the account number(s) in the appropriate columns.

CHART OF ACCOUNTS

10 Cash 30 D. Quick, Capital

12 Accounts Receivable 35 D. Quick, Drawings

15 Paper Supplies 40 Photocopy Revenue

18 Copy Machines 51 Advertising Expense

22 Accounts Payable 53 Rent Expense

25 Notes Payable 54 Wages Expense

28 Unearned Revenue

——————————————————————————————————————————

Number(s) Number(s)

of account(s) of account(s)

debited credited

——————————————————————————————————————————

1. Don Quick invests $90,000 cash to start the business.

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2. Purchased three photocopy machines for $200,000, paying $50,000 cash and signing a 5-year, 6% note for the remainder.

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3. Purchased $5,000 paper supplies on credit.

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4. Cash photocopy revenue amounted to $7,000.

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5. Paid $500 cash for radio advertising.

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6. Paid $800 on account for paper supplies purchased in transaction 3.

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7. Don Quick withdrew $1,500 from the business for personal expenses.

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8. Paid $1,200 cash for rent for the current month.

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9. Received $2,000 cash advance from a customer for future copying.

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10. Billed a customer for $450 for photocopy work done.

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11. Paid $400 for wages for the month.

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Exercise 2

Indicate whether you would use a debit or a credit to record the following changes:

Debit or Credit

1. An increase in Salary Expense.

2. A decrease in Accounts Payable.

3. An increase in Prepaid Insurance.

4. An increase in Owner's Capital.

5. A decrease in Office Supplies.

6. An increase in Owner's Drawings.

7. An increase in Service Revenue.

8. A decrease in Accounts Receivable.

9. An increase in Rent Expense.

10. A decrease in Store Equipment.

Exercise 3

For the accounts listed below, indicate if the normal balance of the account is a debit or credit.

Normal Balance

Accounts Debit or Credit

1. Service Revenue

2. Cash

3. Accounts Receivable

4. Accounts Payable

5. Owner's Capital

6. Prepaid Insurance

7. Insurance Expense

8. Owner's Drawings

9. Office Building

10. Notes Receivable

Exercise 4

Using the accounts listed below, state the account to be debited and the account to be credited for each of the following transactions:

1. Owner invested cash in the business.

2. Purchased equipment for cash.

3. Earned revenue on account.

4. Purchased supplies on account.

5. Paid for supplies purchased in 4.

6. Received payment from customer in 3.

7. Paid employee salaries.

8. Owner withdrew cash for personal use.

9. Purchased equipment on credit.

10. Owner used personal funds to purchase a new computer for use in the business.

ACCOUNTS

Cash Owner’s Capital

Accounts Receivable Owner’s Drawings

Supplies Revenue

Equipment Salaries Payable

Accounts Payable Salaries Expense

Exercise 5

Identify the account to be debited and the account to be credited for each of the following transactions:

1. Purchased equipment for cash and a note payable.

2. Accepted a cash deposit from a customer for a service to be provided next month.

3. Provided services on account.

4. Purchased supplies on account

5. Received payment form the client in 3.

6. Provided services to customer in 2 and collected cash for the remaining work done.

7. Owner paid himself.

8. Paid in full for equipment purchased in 1.

Exercise 6

Eight transactions are recorded in the following T accounts:

CASH ACCOUNTS RECEIVABLE

(1) 35,000 (2) 3,500 (5) 27,500 (7) 22,500

(7) 22,500 (3) 1,950

(4) 2,225

(6) 8,000

(8) 4,500

SUPPLIES EQUIPMENT

(3) 1,950 (2) 13,500

T. SHAW, CAPITAL SERVICE REVENUE

(1) 35,000 (5) 27,500

ACCOUNTS PAYABLE T. SHAW, DRAWINGS

(6) 8,000 (2) 10,000 (8) 4,500

SALARIES EXPENSE

(4) 2,225

Indicate for each debit and each credit:

a. whether an asset, liability, capital, drawings, revenue, or expense account was affected and

b. whether the account was increased (+) or decreased (–).

Answers should be presented in the following chart form:

Transaction Account Debited Account Credited

No. Type Effect Type Effect

(1) (Example) Asset + Capital +

——————————————————————————————————————————

(2)

——————————————————————————————————————————

(3)

——————————————————————————————————————————

(4)

——————————————————————————————————————————

(5)

——————————————————————————————————————————

(6)

——————————————————————————————————————————

(7)

——————————————————————————————————————————

(8)

——————————————————————————————————————————

Exercise 7

Matt Dudeck has operated a lawn care business for 3 months. The following transactions occurred in the fourth month:

1. Matt decides that the business needs a new vehicle. A truck is purchased for $20,000 and financed by a note payable for the full amount.
2. Matt invested $5,000 of his own funds in the business.
3. Invoices to customers were issued for services completed. The total invoices amount to $4,500.
4. Paid $350 on account for supplies purchased the prior month.
5. Collected $3,750 from customers for work completed and invoiced the prior month.
6. Paid wages of $250 to an assistant.
7. Received $300 deposit from a new customer for whom work will not be performed until next month.

For each transaction, complete the information on the following table:

Exercise 8

For each of the following accounts indicate:

a. the type of account (Asset, Liability, Owner's capital, Owner’s drawings, Revenue, Expense), b. the debit and credit effects, and

c. the normal account balance.

Example

0. Cash a. Asset account

b. Debit increases, credit decreases

c. Normal balance – debit

ACCOUNTS

1. Accounts Payable 5. Service Revenue

2. Accounts Receivable 6. Insurance Expense

3. J. Brewer, Capital 7. Notes Payable

4. J. Brewer, Drawings 8. Equipment

Exercise 9

Melinda’s Magic Store has balances in the following accounts at the end of May. For each of the accounts indicate:

a. the type of account (Asset, Liability, Owner's capital, Owner’s drawings, Revenue, Expense), b. the debit and credit effects, and

c. the normal account balance.

ACCOUNTS

1. Supplies 6. Owner’s Capital

2. Accounts Receivable 7. Prepaid Insurance

3. Unearned Revenue 8. Equipment

4. Salaries Payable 9. Accounts Payable

5. Commission Revenue 10. Notes Payable

Exercise 10

For each transaction given, enter in the tabulation given below a "D" for debit and a "C" for credit to reflect the increases and decreases of the assets, liabilities, and owner's equity accounts. In some cases there may be a "D" and a "C" in the same column. If there is not a transaction which needs to be recorded, leave the column blank.

Transactions:

1. Owner invests cash in the business.

2. Pays insurance in advance for six months.

3. Hires new administrative assistant.

4. Purchases office supplies on account.

5. Pays electricity bill.

6. Borrows money from local bank.

7. Makes payment on account.

8. Receives cash from customers on account.

9. Provides services to customers on account.

10. Owner withdraws assets from the business.

Transaction #

1 2 3 4 5 6 7 8 9 10

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Assets

——————————————————————————————————————————

Liabilities

——————————————————————————————————————————

Owner's Capital

——————————————————————————————————————————

Owner's Drawings

——————————————————————————————————————————

Revenues

——————————————————————————————————————————

Expenses

——————————————————————————————————————————

Exercise 11

The chart of accounts used by Presto Printing is listed below. You are to indicate the proper accounts to be debited and credited for the following transactions by writing the account number(s) in the appropriate columns.

CHART OF ACCOUNTS

1 Cash 8 Interest Payable

2 Accounts Receivable 9 S. Presto, Capital

3 Paper Supplies 10 S. Presto, Drawings

4 Copy Machines 11 Service Revenue

5 Accounts Payable 12 Rent Expense

6 Note Payable 13 Utilities Expense

7 Unearned Revenue

Account Account

number(s) number(s)

debited credited

1. Sophia Presto invests $120,000 cash to start the business.

2. Purchased three digital copy machines for $400,000, paying $100,000 cash and signing a 5-year, 6% note for the remainder.

3. Purchased $10,000 paper supplies on credit.

4. Paid $1,200 cash for rent for the current month.

5. Paid $400 cash for utilities for the current month.

6. Paid $2,000 on account for paper supplies purchased in transaction 3.

7. Sophia Presto withdrew $1,500 for personal expenses.

8. Received $9,000 cash for printing services.

9. Received $2,000 cash advance from a customer for future printing.

10. Billed a customer for $450 for printing services completed.

Exercise 12

Journalize the following business transactions in general journal form. Identify each transaction by number. You may omit explanations of the transactions.

1. The owner, Rose Wier, invests $35,000 in cash to start a real estate office operating as a sole proprietorship.

2. Purchased $400 of office supplies on credit.

3. Purchased office equipment for $6,000, paying $2,500 in cash and signed a 30-day, $3,500, note payable.

4. Real estate commissions billed to clients amounted to $4,000.

5. Paid $700 in cash for the current month's rent.

6. Paid $200 cash on account for office supplies purchased in transaction 2.

7. Received a bill for $500 for advertising for the current month.

8. Paid $2,200 cash for office salaries.

9. Rose Wier withdrew $1,200 from the business for living expenses.

10. Received a cheque for $3,000 from a client in payment on account for commissions billed in transaction 4.

Exercise 13

Journalize the following business transactions in general journal form. Identify each transaction by number. You may omit explanations of the transactions.

1. Received $35,000 cash as investment from Roche Stone, the company’s owner.

2. Purchased equipment for $50,000, paying $15,000 in cash and giving a note payable for the remainder.

3. Paid $3,000 for a one-year insurance policy.

4. Billed customers for $12,500 of services provided on account.

5. Paid monthly rent of $1,500.

6. Performed $7,000 of services and immediately received $7,000 cash.

7. Collected $2,000 from customers on account.

8. Hired a secretary.

9. Paid the secretary his first week’s salary of $500.

Exercise 14

a. Journalize the following business transactions in general journal form. Identify each transaction by number. You may omit explanations of the transactions.

1. The owner, Hank Williams, invested $50,000 to start a record Company operating as a sole proprietorship.

2. Received a $10,000 deposit from a customer to produce a record.

3. Purchased $15,000 of sound equipment using cash and a $10,000 loan.

4. Paid 6 months rent in advance. Monthly rent is $750.

5. Provided services for $12,500, half of which was collected in cash at the time of the sale.

6. Paid staff salaries of $3,000.

7. Paid himself $2,500.

8. Collected the remaining outstanding balance on customer accounts.

9. Paid the outstanding loan, in full, from the purchase of the sound equipment.

b. What is the cash balance that would appear on the trial balance at the end of the period?

Exercise 15

Transactions for the Triple H Services company for the month of November are presented below:

1. Henry Highhat invested an additional $36,000 cash in the business.

2. Purchased land costing $18,000 for cash.

3. Purchased equipment costing $15,000 for $4,500 cash and the remainder on account.

4. Purchased supplies on account for $800.

5. Paid $3,000 for a one-year insurance policy.

6. Received $2,000 cash for services performed.

7. Received $4,000 for services previously performed on account.

8. Paid wages to employees for $2,500.

9. Paid $400 to Henry Highhat, the company’s owner.

Instructions

Journalize each transaction and identify each transaction by number. You may omit journal explanations.

Exercise 16

Mike’s Bike Repairs opened for business on November 1, 2014. The following transactions occurred in November:

Instructions

Journalize the above transactions. Explanations are not required.

Exercise 17

Journalize the following business transactions in general journal form. Identify each transaction by number. You may omit explanations of the transactions.

1. Jennie Beagle invests $25,000 cash to start a law firm, Legal Beagles, operating as a proprietorship.

2. Paid $2,100 cash for the first three month's rent.

3. Purchased office equipment for $10,000, paying $3,500 in cash and signed a 30-day, 5% note payable for $6,500.

4. Paid $600 cash for the purchase of office supplies.

5. Received a bill for $500 for advertising for the current month.

6. Billed $4,000 to clients for legal services.

7. Paid $200 cash on account for the advertising in transaction 5.

8. Paid $2,500 cash for office salaries.

9. Jennie withdrew $1,200 cash.

10. Received a cheque for $2,000 from a client in payment on account for services billed in transaction 6.

Exercise 18

The transactions of the Got It Now Store are recorded in the general journal below.

General Journal

Date Account Titles and Explanation Debit Credit

2014

Aug. 5 Accounts Receivable 2,800

Service Revenue 2,800

10 Cash 3,000

Service Revenue 3,000

19 Rent Expense 1,000

Cash 1,000

25 Cash 1,400

Accounts Receivable 1,400

Instructions

Post the journal entries to the following T accounts and calculate the August 31 balances.

General Ledger

Cash Accounts Receivable

Bal fwd 1,250 Bal fwd 800

J. Jackson, Capital

Bal fwd 2,050

Service Revenue Rent Expense

Exercise 19

Leaky Faucet plumbing services has the following account balances as of March 31:

Cash $1,500

Accounts Receivable 2,100

Accounts Payable 650

L. Faucet, Capital 2,950

The following transactions take place during April:

1. Services of $3,100 were made on account.
2. Paid April rent of $1,100.
3. Bought $650 of supplies on account.
4. Collected $4,000 cash on outstanding customer accounts.
5. Made payments on account $500.

Journalize April’s transactions. What are the April 30 account balances? Hint: You may wish to use T accounts.

Exercise 20

Carlisle Company is a newly organized business. The list of accounts to be opened in the general ledger is as follows:

Accounts Payable M. Carlisle, Drawings

Accounts Receivable Prepaid Insurance

Cash Prepaid Rent

Equipment Rent Expense

Fees Earned Salary Expense

Insurance Expense Salaries Payable

M. Carlisle, Capital Supplies

Supplies Expense

Organize the accounts into the order in which they should appear in the ledger of Carlisle Company and assign account numbers. Use the following system to assign account numbers.

100—199 Assets

200—299 Liabilities

300—399 Owner's Equity

400—499 Revenues

500—599 Expenses

Exercise 21

Jim’s Mountain Tours opened for business December 1, 2014. The following T- accounts include eight transactions that occurred in December 2014:

Cash Accounts Receivable

(1) 35,000 (2) 3,500 (5) 27,500 (7) 22,500

(7) 22,500 (3) 1,950

(4) 2,225

(6) 8,000

(8) 4,500

Supplies Equipment

(3) 1,950 (2) 13,500

J. Lee, Capital Tour Revenue

(1) 35,000 (5) 27,500

Accounts Payable J. Lee, Drawings

(6) 8,000 (2) 10,000 (8) 4,500

Salaries Expense

(4) 2,225

Instructions

a. For each transaction, journalize the transaction, including an explanation for the entry.

b. Determine the ending account balance for each account.

c. Prepare a trial balance as at December 31, 2014.

Exercise 22

The transactions of the Coronation Baked Goods Delivery are recorded in the general journal below.

General Journal J1

——————————————————————————————————————————

Date Account Titles and Explanation Ref. Debit Credit

——————————————————————————————————————————

2015

Sept. 1 Cash 15,000

M. Cory, Capital 15,000

Invested cash in business.

4 Delivery Trucks 30,000

Cash 10,000

Notes Payable 20,000

Purchased truck, paid cash and issued a 2-year, 6%, note payable.

8 Rent Expense 1,000

Cash 1,000

Paid September rent.

15 Prepaid Insurance 400

Cash 400

Paid one-year liability insurance.

18 Cash 2,500

Baked Goods Delivery Revenue 2,500

Received cash for delivery services.

20 Salaries Expense 500

Cash 500

Paid salaries for current period.

25 Utility Expense 100

Accounts Payable 100

Received a bill for September utilities.

30 M. Cory , Drawings 750

Cash 750

Withdrew cash for personal use.

30 Accounts Receivable 1,000

Baked Goods Delivery Revenue 1,000

Billed customer for delivery service.

Instructions

a. Post the journal entries to the accounts using the following general ledger.

b. Prepare a trial balance on the form provided.

General Ledger

Cash Account No. 100

——————————————————————————————————————————

Date Explanation Ref. Debit Credit Balance

——————————————————————————————————————————

Accounts Receivable Account No. 105

——————————————————————————————————————————

Date Explanation Ref. Debit Credit Balance

——————————————————————————————————————————

Prepaid Insurance Account No. 110

——————————————————————————————————————————

Date Explanation Ref. Debit Credit Balance

——————————————————————————————————————————

Delivery Trucks Account No. 150

——————————————————————————————————————————

Date Explanation Ref. Debit Credit Balance

——————————————————————————————————————————

Accounts Payable Account No. 200

——————————————————————————————————————————

Date Explanation Ref. Debit Credit Balance

——————————————————————————————————————————

Notes Payable Account No. 250

——————————————————————————————————————————

Date Explanation Ref. Debit Credit Balance

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M. Cory, Capital Account No. 300

——————————————————————————————————————————

Date Explanation Ref. Debit Credit Balance

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M. Cory, Drawings Account No. 350

——————————————————————————————————————————

Date Explanation Ref. Debit Credit Balance

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Baked Goods Delivery Revenue Account No. 400

——————————————————————————————————————————

Date Explanation Ref. Debit Credit Balance

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Rent Expense Account No. 520

——————————————————————————————————————————

Date Explanation Ref. Debit Credit Balance

——————————————————————————————————————————

Salaries Expense Account No. 530

——————————————————————————————————————————

Date Explanation Ref. Debit Credit Balance

——————————————————————————————————————————

Utility Expense Account No. 550

——————————————————————————————————————————

Date Explanation Ref. Debit Credit Balance

——————————————————————————————————————————

CORONATION BAKED GOODS DELIVERY

Trial Balance

September 30, 2015

——————————————————————————————————————————

Accounts Debit Credit

——————————————————————————————————————————

Exercise 23

The transactions of the Make it Quick Delivery Service are recorded in the general journal below.

General Journal

Date Account Titles and Explanation Debit Credit

2014

Sept. 1 Cash 25,000

J. Lough, Capital 25,000

Owner invested cash in business.

4 Delivery Trucks 40,000

Cash 10,000

Notes Payable 30,000

Purchased truck, paid cash and issued 2-year, 6% note payable.

8 Rent Expense 1,000

Cash 1,000

Paid September rent.

15 Prepaid Insurance 1,400

Cash 1,400

Paid one-year liability insurance.

18 Cash 2,500

Service Revenue 2,500

Received cash for delivery services.

20 Salaries Expense 500

Cash 500

Paid salaries for current period.

25 Utility Expense 100

Accounts Payable 100

Received a bill for September utilities.

30 J. Lough, Drawings 750

Cash 750

Paid drawings to owner.

30 Accounts Receivable 1,000

Service Revenue 1,000

Billed customer for delivery service.

Instructions

a. Post the journal entries to the accounts in the general ledger below.

b. Prepare a trial balance on the form provided.

a.

General Ledger

Cash Accounts Receivable

Prepaid Insurance Delivery Trucks

Accounts Payable Notes Payable

J. Lough, Capital J. Lough, Drawings

Service Revenue Rent Expense

Salaries Expense Utility Expense

b.

MAKE IT QUICK DELIVERY SERVICE

Trial Balance

September 30, 2014

Accounts Debit Credit

Exercise 24

Pat’s Party Planning provides food service and bartending for private and corporate parties. Pat’s does not prepare the food, but does provide supplies such as dishes, linens and ice for the event. The following transactions occurred in December 2014, the first month of the business operations:

Instructions

a. Prepare the journal entries for the above transactions. Explanations are not necessary.

b. Prepare a trial balance at December 31, 2014 based on the above accounts.

Exercise 25

The trial balance of P. Heavy Record Company shown below does not balance.

P. HEAVY RECORD COMPANY

Trial Balance

June 30, 2014

Debit Credit

Cash $ 2,600

Accounts receivable 7,600

Supplies 600

Equipment 8,300

Accounts payable $ 9,766

P. Heavy, capital 1,941

P. Heavy, drawings 1,500

Service revenue 15,200

Wages expense 3,800

Repair expense 1,600

Totals $26,000 $26,907

An examination of the ledger and journal reveals the following errors:

1. Each of the above listed accounts has a normal balance per the general ledger.

2. Cash of $350 received from a customer on account was debited to Cash $530 and credited to Accounts Receivable $530.

3. A withdrawal of $300 by the owner was posted as a credit to P. Heavy, Drawings, $300 and credit to Cash $300.

4. A debit of $300 was not posted to Wages Expense.

5. The purchase of equipment on account for $700 was recorded as a debit to Repair Expense and a credit to Accounts Payable for $700.

6. Services were performed on account for a customer, $510, for which Accounts Receivable was debited $510 and Service Revenue was credited $51.

7. A payment on account for $215 was credited to Cash for $215 and credited to Accounts Payable for $251.

Instructions

Prepare a correct trial balance.

Exercise 26

Listed below are the transactions for August 2014, the first month of operations of Peggy’s’ Pet Grooming, owned and operated by Peggy Markham.

August 1 Peggy invested $5,000 in the business, which was comprised of $3,500 in cash plus equipment valued at $1,500.

August 3 Paid rent of $400 for one month’s rent.

August 3 Hired a salesperson who will be paid on commission.

August 4 Purchases supplies on account for $125.

August 12 Purchased a used van for $6,000, paying cash of $1,000 and signing an 1 year, 6% note payable for the balance.

August 15 Completed services for clients. Of the services completed, $350 was paid in cash, and the remainder, $500 was on account.

August 18 Paid telephone expense of $60.

August 26 Received a utility bill for August of $110.

August 27 Collected $250 of the accounts receivable balance.

August 29 Billed clients for $400 in services.

August 30 Paid an assistant $225 in wages.

August 30 Peggy Markham withdrew $500 for personal use.

Instructions

a. Journalize the transactions.

b. Prepare a trial balance at August 31, 2014. Hint: You may want to use T accounts.

Exercise 27

The ledger accounts of Victoria’s Gym at June 30, 2014 are shown below:

Accounts Payable $ 6,100

Accounts Receivable 1,050

Building 51,400

V. Reese, Capital 63,100

Cash 12,000

Exercise Equipment 18,900

Weight Equipment 22,000

Notes Payable 49,000

Office Supplies 350

Office Equipment 2,000

V. Reese, Drawings 10,500

Instructions

Prepare a trial balance with the ledger accounts arranged in the proper financial statement order. Include the appropriate heading. All accounts have normal balances.

Exercise Equipment 18,900

Weight Equipment 22,000

Building 51,400

Accounts Payable $ 6,100

Notes Payable 49,000

V. Reese, Capital 63,100

V. Reese, Drawings 10,500

Totals $118,200 $118,200

Exercise 28

Archie and Associates is a financial planning service. The account balances at July 31, 2014 are shown by the following alphabetical list:

Accounts Payable $ 7,000

Accounts Receivable 21,000

Automobiles 27,500

Building 120,000

Cash 18,500

Computer Hardware 30,000

Computer Software 4,200

Land 42,000

M. Archie , Capital 179,700

Notes Payable 95,000

Notes Receivable 8,100

Office Furniture 15,400

Office Supplies 800

Technical Library 2,200

Service Revenue 10,000

Wage Expense 2,000

Instructions

Prepare a trial balance with the accounts arranged in financial statement order. All accounts have normal balances.

Exercise 29

Delaurier and Associates is an accounting practice. The account balances at December 31, 2014, are shown by the following alphabetical list:

A. Delaurier , Capital $64,700

A. Delaurier , Drawings 40,000

Accounts Payable 13,800

Accounts Receivable 26,000

Automobiles 29,500

Cash 18,500

Computer Hardware 29,000

Fees Earned 105,000

Notes Payable 55,000

Notes Receivable 19,100

Office Furniture 35,400

Office Supplies 800

Rent Expense 12,000

Salaries Expense 25,000

Technical Library 3,200

Instructions

Prepare a trial balance with the accounts arranged in financial statement order.

Exercise 30

Kali’s Courier Service has the following account balances at the July 31, 2014 year end. The accounts all have normal balances and are shown in the following alphabetical list:

Accounts Payable $10,800

Accounts Receivable 21,500

Cash........................................ 10,200

Courier Vehicles 60,000

Delivery Revenue 85,000

Insurance expense 2,400

R. Kali, Capital Account 39,800

R. Kali, Drawings 25,000

Notes Payable 42,500

Notes Receivable 1,800

Office Furniture 5,500

Prepaid Insurance 1,200

Rent Expense 12,500

Salaries Expense 30,500

Supplies 1,000

Supplies Expense 10,000

Unearned Revenue 3,500

Instructions

Prepare a trial balance with the accounts arranged in financial statement order.

Exercise 31

Some of the following errors would cause the debit and credit columns of the trial balance to have unequal totals. For each of the six cases, state whether the error would cause unequal totals in the trial balance. If the error causes unequal totals, indicate the amount of difference between the columns and state whether the debit or credit is larger. Each case is to be considered independently of the others.

1. A payment of $600 to a creditor was recorded by a debit to Accounts Payable of $60 and a credit to Cash of $600.

2. A $480 payment for a printer was recorded by a debit to Computer Equipment of $48 and a credit to Cash for $48.

3. An account receivable in the amount of $2,000 was collected in full. The collection was recorded by a credit to Cash for $2,000 and a credit to Accounts Receivable for $2,000.

4. An owner’s drawing was paid by issuing a cheque for $1,000. The payment was recorded by debiting Salaries Expense $1,000 and crediting Cash $1,000.

5. A payment of $600 from a customer on account was received and was credited to cash and debited to accounts receivable.

6. A payment of $450 to a creditor was recorded as a debit to cash and a credit to Accounts Payable.

Exercise 32

Some of the following errors would cause the debit and credit columns of the trial balance to have unequal totals.

1. A payment of $700 to a creditor was recorded by a debit to Accounts Payable of $70 and a credit to Cash of $700.

2. A $340 payment for a printer was recorded by a debit to Computer Equipment of $34 and a credit to Cash for $34.

3. An account receivable in the amount of $2,000 was collected in full. The collection was recorded by a debit to Cash for $2,000 and a debit to Accounts Payable for $2,000.

4. An account payable was paid by issuing a cheque for $800. The payment was recorded by a debit to Accounts Payable $800 and a credit to Accounts Receivable $800.

Instructions

For each of the four cases, state whether the error would cause unequal totals in the trial balance. If the error causes unequal totals, indicate the amount of difference between the columns and state whether the debit or credit is larger. Each case is to be considered independently of the others.

Exercise 33

The bookkeeper for Green Lawn Mowing Service made a number of errors in journalizing and posting as described below:

1. A debit posting to accounts receivable for $500 was omitted.

2. A payment of accounts payable for $600 was credited to cash and debited to accounts receivable.

3. A credit to accounts receivable for $750 was posted as $75.

4. A cash purchase of equipment for $673 was journalized as a debit to equipment and a credit to notes payable. The credit posting was made for $637.

5. A debit posting of $300 for purchase of supplies was credited to supplies.

6. A debit to repairs expense for $482 was posted as $428.

7. A debit posting for wages expense for $800 was made twice.

8. A cash purchase of supplies for $700 was journalized and posted as a debit to supplies for $70 and a credit to cash for $70.

Instructions

For each error, indicate (A) whether the trial balance will balance; if the trial balance will not balance, indicate (B) the amount of the difference, and (C) the trial balance column that will have the larger total. Consider each error separately. Use the following form, in which error 1. is given as an example.

(A) (B) (C)

Error In Balance Difference Larger Column

1. No $500 Credit

EXERCISE 34

The trial balance of the Karl’s Concrete Services shown below does not balance.

Karl’s Concrete Services

Trial Balance

June 30, 2014

Debit Credit

Cash $ 5,200

Accounts receivable 15,200

Supplies 1,200

Equipment 16,600

Accounts payable $ 19,610

K. Bruce, Capital 3,882

K. Bruce, drawings 3,000

Service revenue 30,400

Wages expense 7,600

Repair expense 3,200

Totals $52,000 $53,892

An examination of the ledger and journal reveals the following errors:

1. Each of the above listed accounts has a normal balance per the general ledger.

2. Cash of $260 received from a customer on account was debited to Cash $620 and credited to Accounts Receivable $620.

3. Drawings of $850 paid to the owner were posted as a credit to Drawings, $850 and a credit to Cash $850.

4. Wages Expense of $600 was omitted from the trial balance.

5. The purchase of equipment on account for $800 was recorded as a debit to Repair Expense and a credit to Accounts Payable for $800.

6. Services were performed on account for a customer, $1,020, for which Accounts Receivable was debited $1,020 and Service Revenue was credited $102.

7. A payment on account for $219 was credited to Cash for $219 and credited to Accounts Payable for $291.

Instructions

Prepare a correct trial balance.