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Requirement

1. Analyze the effects of the preceding transactions on the accounting equation of
Top 40. Adapt the format to that of Exhibit 1-6.

/P1-44B OG Preparing financial statements and evaluating business performance
[20-30 min)
Presented here are the accounts of Quick and EZ Delivery for the year ended
Decembet 31, 2012.

Requirements

VI. Prepare Quick and EZ Delivery’s income statement.
v2. Prepare the statement of owner’s equity.
3. Prepare the balance sheet.
4. Answer these questions about the company:

a. Was the result of operations for the year a profit or a loss? How much?
b. How much in total economic resources does the company have as it moves

into the new year?
c. How much does the company owe to creditors?
d, What is the dollar amount of the owner’s equity in the business at the end of

the year?

During September 2012, the business completed the following transactions:

Crone,
capital

8,100+6,000

Accounts
payable +

Liabilities + Owner’s equity

o + 10,000

S 7,000 Owner investment, 2012 S 32,000

30,000 Accounts payable 14,000

2,900 Accounts receivable 1,700

32,000 Advertising expense 17,000

13,000 Building 137,900

69,000 Cash 6,000

500 Equipmem 17,000

192,000 Insurance expense 2,000
8,000 Interest expense 6,000

51,000

+2,000

OGOG Using the accounting equation for transaction analysis [60-75 min]
Missy Crone owns and operates a public relations firm called Top 40. The following
amounts summarize her business on August 31, 2012:

a. Gave capital to Crone and received cash of $10,000.
b. Performed service for a client and received cash of $1,000.

c. Paid off the beginning balance of accounts payable.
d. Purchased supplies from OfficeMax on account, $700.
e. Collected cash from a customer on account, $500.
f. Received cash of $1,900 and gave capital to owner.
g. Consulted for a new band and hilled the clienr for services rendered, $5,800.

h. Recorded the following business expenses for the month:
1. Paid office rent, $900.
2. Paid advertising, $400.

i. Returned supplies to OfficeMax for $80 ftom item d, which was the cost of the supplies.
j. Crone withdrew cash of $2,700.

Bal 2,100 +

Assets

Accounts
Date Cash + receivable + Supplies +

Land

~\\

Land

Note payable

Properey tax expense

Trott, drawing

Rent expense

Salary expense

Salary payable

Service revenue

Supplies

Trote, capital, 12/31/2011

yP.1-43B

54 Chapter 1

Requirements
1. Journalize each transaction, as shown for March 1. Explanations are not required.

2. Post the transactions to the T-accounts, using transaction dates as posting refer-
ences in the ledger accounts. Label the balance of each account Bal, as shown in
the chapter.

3. Prepare the trial balance of Vince Rockford, M.D., at March 31,2012.

P2-478 00 Journalizing transactions, posting to T-accounts, and preparing a
trial balance [45-60 min)
Beth Yung started her practice as a design consultant on November 1,2012. During
the first month of operations, the business completed the following transactions:

The business uses the following accounts: Cash; Accounts receivable; Supplies; Land;
Accounts payable; Notes payable; Rockford, capital; Rockford, drawing; Service
revenue; Salary expense; Rent expense; and Utilities expense.

74,000
r 74,000 (

Received $34,000 cash and issued capital to Yung.
Purchased supplies, $500, and furniture, $1,900, on
account.
Performed services for a law firm and received $1,200
cash.
Paid $25,000 cash to acquire land for a future office site.
Performed service for a hotel and received its promise t

o

pay the $1,200 within one week.
Paid for the furniture purchased November 4 on account.
Paid secretary’s hi-monthly salary, $540.
Received cash on account, $500.
Prepared a design for a school on account, $800.
Received $2,200 cash for consulting with Plummer &
Gorden.
Paid secretary’s hi-monthly salary, $540.
Paid rent expense, $830.
Yung withdrew cash of $2,700.

Rockford deposited $74,000 cash in the business bank account.
The business gave capital to Rockford.
Paid monthly rent on medical equipment, $560.
Paid $24,000 cash to purchase land for an office site.
Purchased supplies on account, $1,300.
Borrowed $19,000 from the hank for business use. Rockford
signed a note payable to the bank in the name of the business.
Paid $900 on account.
Revenues earned during the month included 57,100 cash and
$4,700 on account.
Paid employees’ salaries $2,000, office rent $1,600, and
utilities $320. Make a single compound entry.
Rockford withdrew cash of $8,000.

31

o
31

22
31

5
9
10

19

Nov 1
4

6

7
10

14
15
17
20
28

30
30
30

Mar

I Mar 1 (‘CaSh•. . Rockford, capital

~

eoo Analyzing and journalizing transactions, posting, and preparing a
trial balance [45-60 min)
Vince Rockford practices medicine under the business title Vince Rockford, M.D.
During March, the medical practice completed the following transactions:

f2-468

Chapter 2118

BUILDING BLOCKS CHILD CARE

Trial Balance
.\lay 31, 2012

Account Debit Credit
Cash $ 6,300
Accounts receivahle 3,000
Supplies 700
Equipment 88,000

I Accounts payable $ 57,000
Estella, capital 50,400
Estella, drawing 2,600
Service revenue 4,700
Salary expense 3,200

Rent expense 700

Total $ 104,500 $ 112,100

a. Cash is understated by $4,000.
h. A $2,000 debit to Accounts receivable was posted as a credit.
c. A $1,200 purchase of supplies on account was neither

journalized nor posted.
d. Equipmenr’s cost is $87,700, not $88,000.
c. Salary expense is overstated by $100.

a. Stubbs began the business with an investment of $40,000 cash
and a building at $26,000. The business gave $66,000 of
capital to Stubbs.

b. Purchased office supplies on account. $2,400.
c. Paid $18,000 for office furniture.
d. Paid employee’s salary. $1,900.
e. Performed consulting services on account, 53,600.
f. Paid $500 of the account payable created in transaction (b).
g. Received a 5300 bill for advertising expense that will be paid in

the near future.
h. Performed consulting service for cash, $800.
i. Received cash on account, $1,400.
j. I)aid the following cash expenses:

(1) Rent on equipment, $700.
(2) Utilities, $500.

k. Stubbs withdrew cash of $2,400.

00 Correcting errors in a trial balance [15-25min)
The trial balance of Building Blocks Child Care does not balance.

2.
3.
4.

The following errors are detected:

Requirements

I. Open the following four-column accounts: Cash; Accounts receivable; Office
supplies; Office furniture; Building; Accounts payable; Stubbs, capital; Stubbs,
drawing; Service revenue; Salary expense; Rent expense; Advertising expense;
and Utilities expense.
Record each transaction in the journal. Use the letters to identify the transactions.
Post to the accounts and keep a running balance for each account.
Prepare the trial balance of Stubbs Environmental Consulting Company at
October 31, 2012.

)2-528

122 Chapter 2