Working Paper- Chapters 1-4

Naser Abdelkarim
(1) For each of the following accounts indicate the effect of a debit or a credit on the account and
the normal balance. Increase (+), Decrease (–).
Debit_ _Credit_ Normal Balance
1. Salaries and wages expense. ___________ ___________ ___________
2. Accounts receivable. ________ ________ ________
3. Service revenue. ___________ ___________ ___________
4. Owner’s Capital. ___________ ___________ ___________
5. Owner’s Drawings. ___________ ___________ ___________

(2) Journalize the following transactions for Xiu Xiu Company for June 2020, the company’s first
month of operations. You may omit explanations for the transactions.
1. Purchased equipment on account for $9,000.
2. Billed customers $5,000 for services performed.
3. Made payment of $2,300 on account for equipment purchased earlier in month.
4. Collected $2,900 on customer accounts.

(3) The transactions of the Liberty Belle Store are recorded in the general journal below. You are to
post the journal entries to T-accounts.

General Journal
___________________________________________________________________________________________________________________
Date Account Titles Debit Credit
___________________________________________________________________________________________________________________
2020
Aug. 5 Accounts Receivable 4,400
Service Revenue 4,400

10 Cash 3,000
Service Revenue 3,000

19 Rent Expense 1,100

Cash 1,100

25 Cash 1,400
Accounts Receivable 1,40
General Ledger
Cash Accounts Receivable

Service Revenue Rent Expense

(4) Prepare a trial balance from the ledger accounts of Black Diamond Express as of January 31,
2019:

Accounts Payable $ 1,100 Rent Expense $ 500

Accounts Receivable 1,700 Service Revenue 3,000
Cash 1,400 Supplies 200
Owner’s Capital 2,000 Salaries and Wages Expense 1,300
Owner’s Drawings 1,000

(5) Prepare a corrected trial balance for Stereo lab Company. All accounts should have a
normal balance.

STEROELAB COMPANY
Trial Balance
For the Quarter Ended 3/31/20

Debit Credit
Cash $ 14,000
Accounts Receivable $ 23,000
Prepaid Insurance 2,500
Equipment 60,000
Accounts Payable 15,000
Unearned Service Revenue 10,000
Notes Payable 25,000
Owner’s Capital 38,000
Owner’s Drawings 1,500
Service Revenue 43,000
Salaries and Wages Expense 15,000
Utilities Expense 5,000
Rent Expense 10,000
$116,500 $145,500

(6) State whether each situation is a prepaid expense (PE), unearned revenue (UR),
accrued revenue (AR) or an accrued expense (AE).
1. Unrecorded interest on savings bonds is $245.
2. Property taxes that have been incurred but that have not yet been paid or recorded
amount to $300.
3. Legal fees of $1,000 were collected in advance. By year end 60 percent were still
unearned.
4. Prepaid insurance had a $500 balance prior to adjustment. By year end, 40 percent was
still unexpired.
(7) For each of the following oversights, state whether total assets will be understated (U),
overstated (O), or no affect (NA).
_____ 1. Failure to record revenue recognized but not yet received.
_____ 2. Failure to record expired prepaid rent.
_____ 3. Failure to record accrued interest on the bank savings account.
_____ 4. Failure to record depreciation.
_____ 5. Failure to record accrued wages.
_____ 6. Failure to record the recognized portion of unearned revenues.

(8) The adjusted trial balance of Rocky Acre Spread Inc. on December 31, 2019 includes the
following accounts: Depreciation Expense, $2,000; Notes Payable $7,500; Interest Expense $150;
Utilities Expense, $300; Rent Expense, $500; Service Revenue, $19,600; Salaries and Wages
Expense, $6,000; Supplies, $200; Supplies Expense, $1,200; Salaries and Wages Payable, $600.
Prepare an income statement for 2019.

(4) The balance sheets of Red House Painters include the following:
12/31/19 12/31/18
Interest Receivable $0 $4,300
Supplies 3,000 5,000
Salaries and Wages Payable 3,800 5,600
Unearned Service Revenue 4,000 -0-

The income statement for 2019 shows the following:

Interest Revenue $18,400
Service Revenue 72,700
Supplies Expense 8,700
Salaries and Wages Expense 39,000

Instructions
Calculate the following for 2019:
1. Cash received for interest.
2. Cash paid for supplies.
3. Cash paid for salaries and wages.
4. Cash received for revenue.

(9) On December 31, 2019, Fashion Nugget Company prepared an income statement and
balance sheet and failed to take into account three adjusting entries. The incorrect income
statement showed net income of $35,000. The balance sheet showed total assets, $115,000;
total liabilities, $45,000; and owner's equity, $70,000.
:The data for the three adjusting entries were
(1) Depreciation of $10,000 was not recorded on equipment.
(2) Wages amounting to $7,000 for the last two days in December were not paid and not
recorded. The next payroll will be in January.
(3) Rent of $12,000 was paid for two months in advance on December 1. The entire amount was
debited to Rent Expense when paid.

Instructions
Complete the following tabulation to correct the financial statement amounts shown (indicate
:deductions with parentheses)
Item Net Income Total Assets Total Liabilities Owner’s Equity
Incorrect balances $ 35,000 $115,000 $ 45,000 $ 70,000
Effects of:
Depreciation
 Wages
Rent
Correct Balances

(10) Presented below is the Trial Balance and Adjusted Trial Balance for Morning Jacket Company
on December 31.
MORNING JACKET
Trial Balance
December 31
——————————————————————————————————————————
—
Before Adjustment After Adjustment
Dr. Cr. Dr. Cr.
Cash $ 2,000 $ 2,000
Accounts Receivable 2,800 3,800
Prepaid Rent 2,100 1,400
Supplies 1,200 650
Equipment 18,000 18,000
Accumulated depreciation—
Equipment $ 1,300 $ 1,550
Accounts Payable 2,700 2,700
Notes Payable 10,000 10,000
Interest Payable 140
Salaries and Wages Payable 1,270
Unearned Service Revenue 4,460 3,960
Owner's Capital 7,200 7,200
Owner's Drawings 3,200 3,200
Service Revenue 8,000 9,500
Salaries and Wages Expense 3,860 5,130
Rent Expense 500 1,200
Supplies Expense 550
Depreciation Expense—
Equipment 250
Interest Expense 140
Totals $33,660 $33,660 $36,320 $36,320

Instructions
a) Prepare in journal form, with explanations, the adjusting entries that explain the changes in the
balances from the trial balance to the adjusted trial balance.
b) Prepare income statement.

(11) The adjusted trial balance of C.S. Financial Planners appears below. Using the information
from the adjusted trial balance, you are to prepare for the month ending December 31, 2019:
1. an income statement.
2. a balance sheet.

C.S. Financial Planners

Adjusted Trial Balance
 December 31, 2019
——————————————————————————————————————————
—
Debit Credit
Cash.......................................................................................................................................... $ 4,900
Accounts Receivable.......................................................................................................... 2,200
Supplies................................................................................................................................... 1,800
Equipment.............................................................................................................................. 15,000
Accumulated Depreciation—Equipment................................................................... $ 4,000
Accounts Payable................................................................................................................ 3,300
Unearned Service Revenue............................................................................................. 6,000
Owner's Capital.................................................................................................................... 14,400
Owner's Drawings............................................................................................................... 2,500
Service Revenue................................................................................................................... 4,200
Supplies Expense................................................................................................................ 600
Depreciation Expense........................................................................................................ 2,500
Rent Expense........................................................................................................................ 2,400
$31,900 $31,900