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Short Exercises
Short exercises are simple applications of chapter material for one or more learning objectives. If you need
help locating the related text discussions, refer to the LO numbers in the margin.
LO1 Recognition
SE 1. Which of the following events would be recognized and entered in the accounting records of Kazuo
Company? Why?
Jan. 10 Kazuo Company places an order for office supplies.
Feb. 15 Kazuo Company receives the office supplies and a bill for them.
Mar. 1 Kazuo Company pays for the office supplies.

Solution:-
According to recognition rules, a transaction should be recorded when title to merchandise passes from
supplier and creates an obligation to pay.

LO1 LO3 Recognition, Valuation, and Classification

SE 2. Tell how the concepts of recognition, valuation, and classification apply to this transaction:
Cash Supplies
Dr. Cr. Dr. Cr.
June1 1000 June1 1000

Solution:-
1. According to recognition rules, a transaction should be recorded when title to merchandise
passes from supplier to purchaser and creates and obligation to pay. We recognize on June 1.
2. The valuation issue focusses on assigning a monetary value to a business transaction. All the
business transaction should be valued at fair value. In this transaction the valuation is 1,000.
3. One of the most important classification issues in accounting is difference between an asset and
expense both represents debits, we classify this supplies as an asset because we see as a future
use.

LO1 Classification of Accounts

SE 3. Tell whether each of the following accounts is an asset, a liability, a revenue, an expense, or none of
these:
a. Accounts Payable
b. Supplies
c. Withdrawals
d. Fees Earned
e. Supplies Expense
f. Accounts Receivable
g. Unearned Revenue
h. Equipment

Solution:-
¨ Account payable=liability
¨ Supplies = assets
¨ Withdrawals = none of these
¨ Fee earned = revenue
¨ Supplies expense = expense
¨ Account receivables = Assets
¨ Unearned Revenue = Liability
¨ Equipment = Assets

LO2 Normal Balances

SE 4. Tell whether the normal balance of each account in SE 3 is a debit or a credit
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Solution:-

Account payable=Credit
Supplies = Debit
Withdrawals = Debit
Fee earned = Credit
Supplies expense = Debit
Account receivables = Debit
Unearned revenue = credit
Equipment = debit

LO3 Transaction Analysis

SE 5. Leon Bear started a computer programming business, Bear’s Programming Service. For each
transaction that follows, indicate which account is debited and which account is credited.
May 2 Leon Bear invested $5,000.
5 Purchased a computer for $2,500 in cash.
7 Purchased supplies on credit for $300.
19 Received cash for programming services performed, $500.
22 Received cash for programming services to be performed, $600.
25 Paid the rent for May, $650.
31 Billed a customer for programming services performed, $250.

Solution:-

General journal
Particular Debit Credit
Cash 5000
Capital 5000

computer 2500
Cash 2500

Supplies 300
account
payable 300

Cash 500
Revenue
earned 500

unearned
revenue 600
revenue
earned 600

Rent
expense 650
Cash 650

A/R 250
Revenue SE 6. Set up T accounts and record each transaction in SE 5. Determine the
earned 250 balance of each account.

Solution:-

Account Rent
cash capital payables expenses

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Dr. cr. Dr. Cr. Dr. Cr. Dr. Cr.

5000 2500 5000 300 650
500 650
2350

Revenue
Computer supplies earned A/R
Dr. Cr. Dr. Cr. 500 Dr. Cr.
2500 300 600 250
250
1350

Rent
expenses
Dr. Cr.

650

A/R
Dr. Cr.
250

SE 7. From the T accounts created in SE6 prepare a trial balance dated May 31,2010.

TRIAL BALANCE:
Particulars Debit Credit
Cash 23,50
Supplies 300
Unearned revenue 600
Computer 2,500
A/R 350
Rent Expense 650
A/P 300
Revenue Earned 1,350
Capital 5,000
TOTAL 6,650 6,650

LO5 Timing and Cash Flow

SE 8. Use the T account for cash flow to record the portion of each following transactions if any that affect
cash. How do these transactions affect the company’s liquidity?

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CASH

Jan 2. Provided services for cash $1,200.

Jan 4. Paid expenses in cash $700.
Jan 8. Provided expenses on credit $1,100.
Jan 9. Incurred expenses on credit, $800.

ANSWER:
Because Miller Incurred expenses providing this service it must pay careful attention to its cash flow and
liquidity.One-way Miller can manage its expenditure is to rely on its creditors to give its time to pay.
1,200-700=500

SO6 Recording Transactions in the General Journal

SE 9. Prepare a general journal formlike the onein Exhibit 2-4 and label it page 4.Sept. 6. Build a customer
for services performed, $3,800 Sept. 16. Received partial payment from the customer billed on September
6. $1,800.
GENERAL JOURNAL:

s.no Particular L.F Debit Credit

Sep A/R 3,800
6.
Revenue Earned 3,800
Sep Cash 1,800
7.
A/R 1,800

SO6 Posting to the ledger accounts

SE 10. Prepare ledger accounts from ones in exhibit 2-5 for the following accounts: Cash (111), Accounts
Receivable (113), and service revenue (411). Post the transactions that are recorded in SE 9 to the ledger
accounts for 2011, at the same time making the proper posting references. Also prepare a trial balance.

cash A/R cash A/R

A/R Revenue
1800 earned cash
3,800 1800

Revenue Earned
A/R
3800

SE 11
Recording Transactions in the General Journal SE 11. Record the transactions in SE 5 in the general
journal for 2011.
General journal
Particular Debit Credit
Cash 5000
Capital 5000

computer 2500
Cash 2500

Supplies 300
account
payable 300

Cash 500
Revenue 500
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earned

unearned
revenue 600
revenue
earned 600

Rent
expense 650
Cash 650

A/R 250
Revenue
earned 250
Discussion Questions E 1. Develop a brief answer to each of the following
questions.
E1
1. Which is the most important issue in recording a transaction: recognition, valuation, or
classification?
Recognition is the most important issue in recording a transaction because when the date is incorrect so all
the financial statement will be considered false

2.What is the example of how a company could make false financial statement through a valuation
of recognition concept?
Computer Associates violated the guidelines for recognition when it kept its books open a few days after
the end of a reporting period so revenues could be counted a quarter earlier than they should have been.
In all, the company prematurely reported $3.3 billion in revenues from 363 software contracts. When the
SEC ordered the company to stop the practice, Computer Associates’ stock price dropped by 43 percent in
a single day.
3. How are assets and expenses related, and why are the debit and credit effects
for assets and expenses the same?

Assets and expenses have natural debit balances. This means positive values for assets and expenses
are debited and negative balances are credited. ... In effect, a debit increases an expense account in the
income statement, and a credit decreases it. Liabilities, revenues, and equity accounts have natural credit
balances

4.In what way are unearned revenues the opposite of prepaid expenses?
· Unearned revenue is the cash which paid in advance before giving services if a teacher gets his
money at the beginning of semester it is unearned revenue.
· Prepaid expense is the money that we pay in advance before consuming services like rent expense
paid in advance

E 2. Develop a brief answer to each of the following questions.

1. Which account would be most likely to have an account balance that is not normal?
The definition of a normal balance is defined by the accounting equation of assets = liabilities + equity. In
the equation, assets have normal debit balance, as do expense accounts. Liabilities and equity have
normal credit balances as well as revenue accounts.
Accounts that are not normal would be the opposite of the expected balance as defined above. There are
three common exceptions to normal balances: the allowance for doubtful accounts is a contra account to
accounts receivable, accumulated depreciation is a reduction of fixed assets, and dividends are a
reduction of equity. All three have reverse balances from what is considered 'normal' for the type of
account
1. A company incurs a cost for a part that is needed to repair a piece of equipment. Is the cost
an asset or an expense? Explain.

Repairing and maintaining office equipment is an immediate expense. This is true even if
the repair cost is a very large amount. If a large expenditure is made to improve office equipment,
that cost would be recorded as an asset and then depreciated over the remaining life of
the equipment.

3.If a company’s cash flows for expenses temporarily exceed its cash flows from revenues,
how might it make up the difference so that it can maintain liquidity?
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Liquidity can impact cash flow. The cash flow for a company is considered positive if the closing
balance is more than the opening balance. It's considered negative if the closing balance is more than
the opening balance. If a company does not have cash flow sufficient to cover an obligation, it can
liquidate an asset to increase the cash on hand. The more liquid an asset is, the easier it'll be for the
company to convert it to cash and improve cash flow. For example, a certificate of deposit is generally
easier to convert to cash than the sale of a piece of land

1. How would the asset accounts in the chart of accounts for Miller Design Studio differ if it
were a retail company that sold promotional products instead of a service company?
service company and retails company both have assets like cash, A/R, office equipment, office
supplies these all assets have a place on both companies chart of accounts A miller design studio
will be differ if it were a retail company instead of service company because a retail company must
stock inventory

E3
Recognition
E 3. Which of the following events would be recognized and recorded in the
accounting records of Villa Company on the date indicated?
Jan. 15 Villa Company offers to purchase a tract of land for $140,000.
There is a high likelihood that the offer will be accepted.
Feb. 2 Villa Company receives notice that its rent will increase from
$500 to $600 per month effective March 1.
Mar. 29 Villa Company receives its utility bill for the month of March.
The bill is not due until April 9.
June 10 Villa Company places an order for new office equipment costing
$21,000.
July 6 The office equipment Villa Company ordered on June 10 arrives.
Payment is not due until August 1.

Recognition concepts states the supplies passes from sender to receiver and creates an
obligation to pay so Feb2 and March 29 will be recognized

E4
Application of Recognition Point E 4. Torez Flower Shop uses a large amount of supplies in
its business. The following table summarizes selected transaction data for supplies that
Torez Flower Shop purchased:

Determine the total purchases of supplies for July alone under each of the following
assumptions: 1. Torez Flower Shop recognizes purchases when orders are shipped. 2.
Torez Flower Shop recognizes purchases when orders are received.

1.Torez Flower Shop recognizes purchases when orders are shipped

TOTAL=2500
2.Torez Flower Shop recognizes purchases when orders are received
TOTAL=2050

LO2 T Accounts, Normal Balance, and the Accounting Equation

E5. You are given the following list of accounts with dollar amounts:
Rent Expense $ 450
Cash 1,725
Service Revenue 750
M. Powell, Withdrawals 375
Accounts Payable 600
M. Powell, Capital 1,200
Insert each account name at the top of its corresponding T accounts and enter the dollar amount as a
normal balance in the account. Then show that the accounting equation is in balance.

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EXPENSES A/P
450 DR. CR.
600

REVENUE
750

CASH
WITHDRAWL DR. CR.
375 1725

CAPITAL
1200

Assets = Liabilities + Owner’s Equity

1,725 = 600 + {1,200 + (750 – 450) – 375}
1,725 = 600 +1,125
1,725=1,725

LO2 Classification of Accounts

E6. The following ledger accounts are for the Tuner Service Company:
a. Cash m. FeesEarned
b. Wages Expense n. R. Shuck man, Withdrawals
c. Accounts Receivable o. Wages Payable
d. R. Shuck man, Capital p. Unearned Revenue
e. Service Revenue q. Office Equipment
f. Prepaid Rent r. Rent Payable
g. Accounts Payable s. Notes Receivable
h. Investments in Securities t. Interest Expense
i. Land u. Notes Payable
j. Supplies Expense v. Supplies
k. Prepaid Insurance w. Interest Receivable
l. Utilities Expense x. Rent Expense

Complete the Following table; using X’s to indicate each account’s classification and normal balance
(whether a debit or a credit increases the account).

TYPE OF ACCOUNT NORMAL BALANCE OWNER’S EQUITY(INCREASED BALANCE)

Item Asset Liability Capital Withdrawals Revenue ExpensesDebit Credit

a. X X
b. X X
c. X X
d. X X
e. X X
f. X X
g. X X
h. X X

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i. X X
j. X X
k. X X
l. X X
m. X X
n. X X
o. X X
p. X X
q. X X
r. X X
s. X X
t. X X
u. X X
v. X X
w. X X
x. X X

LO3 Transaction Analysis

E7. Analyze transactions a-g, following the example below.
a. Sarah Lopez invested $2,500 in cash to establish Sarah’s Beauty Parlor.
b. Paid two months’ rent in advance, $1,680.
c. Purchased supplies on credit, $120.
d. Received cash for barbering services, $700.
e. Paid for supplies purchased in c.
f. Paid utility bill, $72.
g. Withdrew $100 in cash.
ANSWER:
a. The asset account cash was increased. Increases in assets are recorded by debits. Debit Cash $2,500.
A component of owner’s equity, S. Lopez, Capital, was increased. Increases in owner’s capital are
recorded by credits. Credit S. Lopez, Capital $2,500.
b. The amount of cash was decreased. Decreases in assets are recorded by credits. Credit was $1,680.
Prepaid rent increased. Increases in assets are recorded by debit. Debit was $1,680.
c. A component of Owner Equity, Supplies, Increased. Increases in asset are recorded by debit. Debit was
$120. Supplies on account. Increases in liability are recorded by credit. Credit is $120.
d. The amount of cash increased. Increases in assets are recorded by debit. Debit Cash $700. Revenue
increased. Credit was $700.
e. The amount of cash decreased. Decreases in asset are recorded by credit. Credit Cash $120. Liability
decreased. Decreases in liability are recorded by debit. Debit A/P$120.
f. The amount of cash decreased. Decreases in asset are recorded by Credit. Credit cash $72. Expense
increased. Increases in expense are recorded by Debit. Debit Expense $72.
g. The amount of Cash decreased. Decreases in asset are recorded by Credit. Credit Cash $100.
Increases in Withdrew are recorded by Debit. Debit was $100.
LO3 Transaction Analysis
E8. The accounts are applicable to Dale’s Lawn Service, a company that maintains condominium grounds:
1. Cash
2. Accounts Receivable
3. Supplies
4. Equipment
5. Accounts Payable
6. Lawn Services Revenue
7. Wages Expense
8. Rent Expense
Dale’s Lawn Service completed the following transactions:
Debit Credit
a. Paid for supplies purchased on credit last month. 51
b. Received cash from customers billed last month. 12
c. Made a payment on accounts payable. 51
d. Purchased supplies on credit. 35
e. Billed a client for lawn services. 62
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f. Made a rent payment for the current month. 81

g. Received cash from customers for lawn services. 16
h. Paid employee wages. 71
i. Ordered equipment. ----
j. Received and paid for the equipment ordered. ----
Analyze each transaction and show the accounts affected by entering the corresponding numbers in the
appropriate debit or credit columns as shown in the transaction a. indicate no entry, if appropriate.

LO3 Recording Transactions in T Accounts

E9. Open the following T accounts: Cash; Repair Supplies; Repair Equipment; Accounts Payable; T.
Ornega, Capital; Withdrawals; Repair Fees Earned; Salaries Expenses; and Rent Expense. Record the
following transactions for the month of June directly in the T accounts; use the letters to identify the
transactions in your T accounts. Determine the balance in each account.
a. Tony Ornega opened Ornega repair services by investing $4,300 in cash and $1,600 in repair
equipment.
b. Paid $800 for the current month’s rent.
c. Purchased repair supplies on credit $1,100.
d. Purchased additional repair equipment for cash, $600.
e. Paid salary to helper, $900.
f. Paid $400 of amount purchased on credit in c.
g. Accepted cash for repairs completed, $3,720.
h. Withdrew $1,000 in cash.

CASH REPAIR
3720 FEE EARNED
5900 800 3720
600 BAL B/D
900 3720
400 3720 3720
1000
BAL C/D
5920 A/P
9620 9620 400 1,100
BAL BALC/D700
B/D5920 700 700
BAL
REPAIR SUPPLIES B/D700
1,100
BAL C/D
1,100 DRAWING
1,100 1,100 1000
BAL B/D
1,100 BAL B/D
RENT EXPENSE 1000
800
BAL C/D REPAIR EQUIPMENT
800 600
800 800 BALC/D600
BAL B/D 600 600
800 BAL
B/D600

CAPITAL SALARY EXPENSE

5,900 900
BALC/D BALC/D900
5,900 900 900
5900 5900
BAL B/D
5900

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LO4 TRIAL BALANCE

E10. After recording the transaction in E9, Prepare a trial balance in proper sequence for Ornega Repair
Service as of June 30, 2011.
GENERAL JOURNAL:
DEBIT CREDIT
PARTICULAR
Cash 5,920
Rent Expense 800
Repair Supplies 1,100
Salary Expense 900
Repair Equipment 600
Drawing 1,000
Capital 5,900
A/P 700
Repair Fees Earned 3,720
TOTAL 10,300 10,300

LO3 Analysis of transactions

E11. Explain each transaction (a-h) enteredin the following T accounts:

CASH
20,000 7500 A/P
750 1800 2,250 4,500
450 2,250

A/R equipment
4000 750 7,500 450
4,500

CAPITAL
Wages expense 20,000
1800

SERVICE REVENUE
40,000

a. $20,000 of Cash invested by owner.

b. Equipment purchased on cash $7,500.
c. Services rendered but cash $40,000 not received yet.
d. Equipment purchased on credit $4,500.
e. Paid Wages $1,800.
f. Paid $2,250 of amount purchased on credit in d.
g. Collected on account $750.
h. Equipment purchased on cash $450.

LO4 Preparing a trial balance

E12. The list that follows presents the accounts (in alphabetical order) of the Dymarski Company as of
March 31, 2011.The list does not include the amount of Accounts Payable.

Accounts Payable ?
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Accounts Receivable $ 2,800

Building 20,400
Cash 5,400
K. Dymarski, Capital 18,870
Equipment 7,200
Land 3,120
Notes Payable 10,000
Prepaid Insurance 660

Prepare a trial balance with the proper heading (see Exhibit 2-2) and with the account listed in the chart of
accounts sequence (see Exhibit 2-3). Compute the balance of Accounts Payable.

ASSETS = LIABILITIES + CAPITAL

Cash + Building + Equipment + A/R + Land + Prepaid Insurance = Capital + Notes Payable + A/P
5,400 + 20,400 + 7,200 + 2,800 + 3,120 + 660 = 18,870 + 10,000 + A/P
39,580 = 28,870 + A/P
A/P = 39,580 – 28,870
A/P = 10,710

LO4 Effects of errors on a trial balance

E13. Which of the following errors would cause a trial balance to have unequal totals? Explain your
answers.
a. A payment to a creditor was recorded as a debit to Account payable for $129 and as a credit to cash for
$102
b. A Payment of $150 to a creditor for an Account payable was debited to Accounts Receivable and a
credited to Cash.
c. A purchase of office supplies of $420 was recorded as a debit to office supplies for $42 and as a credit
to Cash for $42.
d. A purchase of equipment for $450 was recorded as a debit to supplies for $450 and as a credit to Cash
for $450.

ANSWER:
a. A/P 129
Cash 102
Debit and credit are not equal.
b. A/R 150
Cash 150
A/P is debited as A/R.
c. Supplies 42
Cash 42
The actual cost is understated by 100.
d. Equipment 450
Cash 450
Equipments are noted as supplies which will cause errors while totaling.

LO5 Cash flow analysis

E15. A company engaged in the following transactions:
Dec. 1. Performed services for cash, $750.
1. Paid expenses in cash, $550.
2. Performed services on credit, $900
3. Collected on account, $600.
4. Incurred expenses on credit, $650.
5. Paid on account, $350.
Enter the correct titles on the following T accounts and enter the above transactions in the accounts.
Determine the cash balance after these transactions, the amount still to be received, and the amount still to
be paid.
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T ACCOUNTS

cash Expense
750 550 550
600 350 Bal B/D
bal 550
C/D450
1350
BAL
B/D 450 1350 incurred expense
650

Service rendered Bal B/D

900 650
Bal C/D
900 900 A/R
900 600
A/P Bal B/D
350 650 300

BAL
B/D
300

revenue
750

TRIAL BALANCE
PARTICULAR DEBIT CREDIT
CASH 450
A/R 300
EXPENSE 550
INCURED
EXPENSE 650
A/P 300
SERVICE
RENDERED 900
REVENUE 750

1950 1950

Amount to be received = 300

Amount to be paid = 300

SO6 Record transactions in the General Journal

E16. Record the transactions of E9 in general journal.
GENERAL JOURNAL.

S.No Particulars L.F Debit Credit

a. Cash 5,900
1200
Capital 5,900
Rent
b. Expense 800

Cash 800
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c. Supplies 1,100
Expense
A/P 1,100
Rent
d. Equipment 600

Cash 600
Salary
e. Expense 900

Cash 900
f. A/P 400

Cash 400
g. Cash 3,720

Repair Fees
Earned 3,720
h. Drawing 1,000
Cash 1,000

SO6 Analysis of Unfamiliar Transactions

E17. Managers and accountants often encounter transactions with which they are unfamiliar. Use your
analytical skills to analyze and record in journal form the following transactions, which have not yet been
discussed in the text.

May
1. Purchased merchandise inventory on account, $1,200.
2. Purchase marketable securities for Cash, $3,000.
3. Returned part of merchandise inventory purchased for full credit, $250.
4. Sold merchandise inventory on account, $800 (record sale only).
5. Purchased land and building for $300,000. Payment is $60,000 cash, and there is a 30-year mortgage
for the remainder. The purchase price is allocated as follows: $100,000 to the land and $200,000 to the
building.
6. Received an order for $12,000 in services to be provided. With the order was a deposit of $3,500.

GENERAL JOURNAL:
s.no Particulars Debit Credit
1. Merchandise inventory 1,200
A/P 1,200
2. Marketable securities 3,000
Cash 3,000
3. A/P 250
Cash 250
4. A/R 800
Services rendered 800
5. Cash 3,500
Un-earned Revenue 3,500

SO6 Recording transactions in the General Journal and Posting to the Ledger Accounts
E18. Open a general journal form like the one in Exhibit 2-4, and label it page 10. After opening the form,
record the following transactions in the journal:
Dec.14. Purchased equipment for $6,000, paying $2,000 as a cash down payment.
28. Paid $3,000 of the amount bowed on the equipment.
Prepare three ledger account forms like the one shown in Exhibit 2-5. Use the following account numbers:
Cash, 111; Office Equipment, 146; and Accounts Payable, 212. Then post the two transactions from the
General Journal to the ledger accounts, being sure to make proper posting references. Assume that the
Cash account has a debit balance of $8,000 on the day prior to the first transaction.

GENERAL JPURNAL:
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s.no PARTICULARS DEBIT CREDIT

a. Equipments 6,000
Cash 4,000
A/P 2,000
b. A/P 3,000
Cash 3,000

3,000 2,000 Cash 111 Office Equipment 146 A/P 212

8,000 4,000 Bal
3,000 3,000 C/D
3,000
Bal 6,000 6,000
Bal
B/D 6,000 6,000
C/D
1,000
1,000 Bal
8,000 8,000 B/D
Bal 6,000
B/D
1,000

LO2 T Accounts, Normal Balance, and the Accounting Equation

P1. Delux Design Company creates radio and television advertising for local business in the twin cities.
The following alphabetic list shows Delux Design’s account balance as of January 31, 2011:
a. Account Payable $ 3,210
b. Accounts Receivable 39,000
c. Cash 9,200
d. Design Revenue 105,000
e. Equipment ?
f. J. Smith, Capital 37,000
g. J. Smith, Withdrawals 18,000
h. Loans Payable 5,000
i. Rent Expense 5,940
j. Telephone Expense 480
k. Unearned Revenue 9,000
l. Wages Expense 62,000
REQUIRED:
Insert the account title at the top of its corresponding T account and enter the dollar amount as a normal
balance in the account. Determine the balance of Equipment and then show that the accounting equation
is in balance.
ANSWER:
A/R A/P Capital
30,000 3,210 37,000
Cash Loan/P Withdrew
4,200 5,000 18,000
Equipment Unearned Revenue Revenue
9,000 105,000
Rent Exp. Telephone Exp. Wages Exp.
5,940 480 62,000
Assets = Liabilities + Capital – Withdrawal + Revenue – Expense
39,000 + 9,200 +? = 3,210 +5,000 + 9,000 + 37,000 – 18,000 + 105,000 -
(5,940 + 480 + 62,000)
48,200 +? = 72,790 – 24,590
72,790 = 72,790

LO3 Transaction Analysis

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P 2. The following accounts are applicable to Tom’s Warehouse Sweeps:

1. Cash 7. Accounts Payable
2. Accounts Receivable 8. T. Henzel, Capital
3. Supplies 9. T. Henzel, Withdrawals
4. Prepaid Insurance 10. Service Revenue
5. Equipment 11. Rent Expense
6. Notes Payable 12. Repair Expense
Tom’s Warehouse Sweeps completed the following transactions: Debit Credit
a. Paid for supplies purchased on credit last month. 71
b. Billed customers for services performed. 110
c. Paid the current month’s rent. 111
d. Purchased supplies on credit. 37
e. Received cash from customers for services performed but not yet billed. 1 10
f. Purchased equipment on account 57
g. Received a bill for repairs. 127
h. Returned part of the equipment purchased in f for a credit. 75
i. Received payments from customers previously billed. 110
j. Paid the bill received in g. 71
k. Received an order for services to be performed. NO ENTRY
l. Paid for repairs with cash. 121
m. Made a payment to reduce the principal of the note payable. 61
n. Made cash withdrawal. 91

Required
Analyze each transaction and show the accounts affected by entering the corresponding numbers in the
appropriate debit or credit column as shown in transaction a. Indicate no entry, if appropriate.

L03 LO4 Transaction Analysis, T Accounts, and Trial Balance

LO5 P 3. Carmen Dahlen opened a secretarial school called Star Office Training.
a. Dahlen contributed the following assets to the business:
Cash $5,700
Computers 5,000
Office Equipment 3,600
b. Found a location for her business and paid the first month’s rent, $260.
c. Paid for an advertisement announcing the opening of the school, $190.
d. Received applications from three students for a four-week secretarial program and two students for a
ten-day keyboarding course. The students will be billed a total of $1,300.
e. Purchased supplies on credit, $330.
f. Billed the enrolled students, $2,040.
g. Purchased a second-hand computer, $480, and office equipment, $380, on credit.
h. Paid for the supplies purchased on credit in e, $330.
i. Paid cash to repair a broken computer, $40.
j. Received partial payment from students previously billed, $1,380.
k. Paid the utility bill for the current month, $90.
l. Paid an assistant one week’s salary, $440.
m. made cash withdrawal of $300.

Required
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1. Set up the following T accounts: Cash; Accounts Receivable; Supplies; Computers; Office Equipment;
Accounts Payable; C. Dahlen, Capital; C. Dahlen, Withdrawals; Tuition Revenue; Salaries Expense;
Utilities Expense; Rent Expense; Repair Expense; and Advertising Expense.
2. Record the transactions directly in the T accounts, using the transaction letter to identify each debit and
credit.
3. Prepare a trial balance using today’s date.
4. Examine transactions f and j. What were the revenues, and how much cash was received from the
revenues? What business issues might you see arising from the differences in these numbers?
T ACCOUNTS:
CASH
Owner Equity 5700 Rent expense 260
Advertising
Tuition revenue 1300 expense 190

A/R 1380 A/P 330

Repair expense 40
Utility
expense 90

Salary expense 440

Dahlen
Withdrawals 300

8380 8380
Bal b/d 6730

A/R
Tuition revenue 2040 Cash 1380

2040 2040
Bal b/d 660

Supplies
A/P 330

300 300
Bal b/d 300

Computer
Owner equity 5000
A/p 480

5480 5480
Bal b/d 5480

Office
Equipment
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Owner Equity 3600

A/P 380

3980 3980
Bal b/d 3980

A/P
Cash 330 Supplies 330
Computer 480
Office Equipment 380
1190 1190
Bal b/d 860

Dahlen Capital
Cash 5700
Computer 5000
Office equipment 3600
14300 14300
Bal b/d 14300

Dahlen
Withdrawals
Cash 300

300 300
Bal b/d 300

Tuition revenue
Cash 1300

A/P 2040

3340 3340

Bal b/d 3340

Salaries
Expense
Cash 440

440 440
Bal b/d 440
Utilities
Expense
Cash 90

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90 90
Bal b/d 90

Rent Expense
Cash 260

260 260
Bal b/d 260

Repair expense
Cash 40

40 40
Bal b/d 40

Advertising
Expense
Cash 190

190 190
Bal b/d 190

Trail Balance:
SNO TITLES Debit Credit
1 Cash 6730
2 A/R 660
3 Supplies 330

4 Computers 5480
5 Office equipment’s 3980
6 Dalhen Withdrawals 300
7 Salaries expense 440
8 Utility expense 90
9 Rent expense 260
10 Repair expense 40
11 Advertising expense 190
12 A/p 860
13 Dalhen capital 14300
14 Tuition revenue 3340
18500 18500

L01 LO5 Transaction Analysis, Journal Form, T Accounts, and Trial Balance
L04 P 4. Melvin Patel bid for and won a concession to rent bicycles in the local park during the summer.
During the month of June, Patel completed the following transactions for his bicycle rental business:
June 2 Began business by placing $7,200 in a business checking account in the name of the company.
3 Purchased supplies on account for $150.
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4 Purchased 10 bicycles for $2,500, paying $1,200 down and agreeing to pay the rest in 30 days.
June 5 paid $2,900 in cash for a small shed to store the bicycles and to use for other operations.
8 Paid $400 in cash for shipping and installation costs (considered an addition to the cost of the shed) to
place the shed at the park entrance.
9 Hired a part-time assistant to help out on weekends at $7 per hour.
10 Paid a maintenance person $75 to clean the grounds.
13 Received $970 in cash for rentals.
17 Paid $150 for the supplies purchased on June 3.
18 Paid a $55 repair bill on bicycles.
23 Billed a company $110 for bicycle rentals for an employee outing.
25 Paid the $100 fee for June to the Park District for the right to operate the bicycle concession.
27 Received $960 in cash for rentals.
29 Paid the assistant $240.
30 Made a cash withdrawal of $500.
Required
1. Prepare entries to record these transactions in journal form.
2. Set up the following T accounts and post all the journal entries: Cash; Accounts Receivable; Supplies;
Shed; Bicycles; Accounts Payable; M. Patel, Capital; M. Patel, Withdrawals; Rental Revenue; Wages
Expense; Maintenance Expense; Repair Expense; and Concession Fee Expense. 3. Prepare a trial
balance for Patel Rentals as of June 30, 2011.
4. Compare and contrast how the issues of recognition, valuation, and classification are settled in the
transactions of June 3 and 10.

General journal:
Date Particular LF Debit Credit
June 2 Cash 7200
Patel Capital 7200
3 Supplies 150
A/P 150
4 Bicycles 2500
Cash 1200
A/P 1300
5 Shed 2900
Cash 2900
8 Shed 400
Cash 400
9 Wages Expense 7
Cash 7
10 Maintenance Expense 75
Cash 75
13 Cash 970
Rental Revenue 970
17 A/P 150
Cash 150
18 Repair Expense 55
Cash 55
23 A/R 110
Rental Revenue 110
25 Concession Fee Expense 100
Cash 100
27 Cash 960
Rental Revenue 960
29 Wages Expense 240
Cash 240
30 Withdrawals 500
Cash 500

T Accounts:
Cash
Patel capital 7200 Bicycles 1200
Rental revenue 970 Shed 2900
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Rental revenue 960 Shed 400

Wages expense 7
Maintenance
expense 75
A/P 150
Repair expense 55
Concession fee
expense 100
Wages expense 240
Withdrawals 500

9130 9130
Bal b/d 3503

A/R
Rental Revenue 110

110 110
Bal

Supplies
A/P 150

150 150
Bal b/d

Shed
Cash 2900
Cash 400

3300 3300
Bal b/d 3300

Bicycles
Cash 1200
A/P 1300

2500 2500
Bal b/d 2500

A/P
Cash 150 Supplies 150
Bicycles 1300

1450 1450
Bal b/d 1300

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M.Patel Capital
Cash 7200

7200 7200
Bal b/d 7200

M.Patel Withdrawals
Cash 500

500 500
Bal b/d 500

Rental Revenue
Cash 970
Rental revenue 110
Cash 960

2040 2040
Bal b/d 2040

Wages Expense
Cash 7
Cash 240

247 247
Bal b/d 247

Maintenance expense
Cash 75

75 75
Bal b/d 75

Repair Expence
Cash 55

55 55
Bal
b/d
55

Concession fee
Expense
Cash 100

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100 100
Bal b/d 100

Trail Balance:

Sno Titles Debit Credit

1 Cash 3503
2 A/R 110
3 Supplies 150
4 Shed 3300
5 Bicycles 2500
6 M.Patel withdrawals 500
7 Wages expense 247
8 Maintenance expense 75
9 Repair expense 55
10 Concession expense 100
11 A/P 1300
12 M.Patel Capital 7200
13 Rental revenue 2040
10540 10540

L03 L04
Transaction Analysis, General Journal, Ledger Accounts, and Trial Balance
L05 L06 P 5. Alpha Pro Company is a marketing firm. The company’s trial balance on July 31, 2011,
appears below.
Alpha Pro Company Trial Balance July 31, 2011
Cash (111) $10,590
Accounts Receivable (113) 5,500
Office Supplies (116) 610
Office Equipment (146) 4,200
Accounts Payable (212) $ 2,600
K. Yating, Capital (311) 18,300
$ 20900 $20,900
During the month of August, the company completed the following transactions:
Aug. 2 Paid rent for August, $650.
3 Received cash from customers on account, $2,300.
7 Ordered supplies, $380.
10 Billed customers for services provided, $2,800.
12 Made a payment on accounts payable, $1,300.
14 Received the supplies ordered on August 7 and agreed to pay for them in 30 days, $380.
17 Discovered some of the supplies were not as ordered and returned them for full credit, $80.
19 Received cash from a customer for services provided, $4,800.
24 Paid the utility bill for August, $250.
26 Received a bill, to be paid in September, for advertisements placed in the local newspaper during the
month of August to promote Alpha Pro Company, $700.
29 Billed a customer for services provided, $2,700.
30 Paid salaries for August, $3,800. 31 Made a cash withdrawal of $1,200.
Required
1. Open accounts in the ledger for the accounts in the trial balance plus the following accounts: K. Yating,
Withdrawals (313); Marketing Fees (411); Salaries Expense (511); Rent Expense (514); Utilities Expense
(512); and Advertising Expense (516).

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2. Enter the July 31, 2011, account balances from the trial balance. 3.
Enter the August transactions in the general journal (Pages 22 and 23).
4. Post the journal entries to the ledger accounts. Be sure to make
the appropriate posting references in the journal and ledger as you post.
5. Prepare a trial balance as of August 31, 2011.
6. Examine the transactions for August 3, 10, 19, and 29.
What were the revenues, and how much cash was received from the revenues? What business issues
might you see arising from the differences in these numbers?

General journal:
Date Particular LF Debit Credit
Aug 2 Rent expense 650
Cash 650
3 Cash 2300
A/R 2300
10 B/R 2800
Service revenue 2800
12 A/P 1300
Cash 1300
14 Supplies 380
A/p 380
17 A/p 80
Supplies 80
19 Cash 4800
Service income 4800
24 Utility Expense 250
Cash 250
26 Advertising expense 700
Bill payable 700
29 A/R 2700
Service income 2700
30 Salaries expense 3800
Cash 3800
31 Withdrawals 1200
Cash 1200

T Accounts:

Cash
650
2300 1300
4800 250
3000
1200

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17690 17690
Bal b/d 10590

A/R
5500 2300

5500 5500
Bal 3200

Supplies
610
380

990 990
Bal 910

A/P
1300 2600
80 380

2980 2980
Bal 1600

B/R
2800
2700

5500 5500
Bal 5500

Service
income
2800
4800
2700

10300 10300
Bal 10300

Trail Balance :
Sno Titles Debit Credit
1 Equipment 4200
2 Capital 18300
3 Cash 1049
4 A/R 3200
5 Supplies 910
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6 A/P 1600
7 Bill receivable 5500
8 Service income 10300
9 Rent expense 650
10 Utility expense 250
11 Advertisement expense 700
12 Bill payable 700
13 Salaries expense 3800
14 Withdrawals 1200
30900 30900

LO2 Alternate Problems T Accounts, Normal Balance, and the Accounting Equation
P 6. The Stewart Construction Company builds foundations for buildings and parking lots. The following
alphabetical list shows Stewart Construction’s account balances as of April 30, 2011: A. Stewart, Capital
$20,000
A. Stewart, Withdrawals 3,500
Accounts Payable 1,950
Accounts Receivable 5,060
Cash ?
Equipment 13,750
Notes Payable 10,000
Revenue Earned 8 ,700
Supplies 3,250
Supplies Expense 3,600
Utilities Expense 210
Wages Expense 4,400
Required
Insert the account at the top of its corresponding T account, and enter the dollar amount as a normal
balance in the account. Determine the balance of cash and then show that the accounting equation is in
balance.

T Accounts:

A.Stewart Capital
20000

20000 20000
Bal b/d 20000

A.Stewart Withdrawal
3500

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3500 3500
Bal b/d 3500

A/P
1950

1950 1950
Bal b/d 1950

A/R
5060

5060 5060
Bal b/d 5060

Equipment
13750

13750 13750
Bal b/d 13750

Notes payable
10000

10000 10000
Bal b/d 10000

Revenue Earned
8700

8700 8700
Bal b/d 8700

Supplies
3250

3250 3250
Bal b/d 3250

Supplies Expense
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3600

3600 3600
Bal b/d 3600

Utility expence
210

210 210
Bal b/d 210

Wages expense
4400

4400 4400
Bal b/d 4400

Assets = Liabilities +Owners Equity

Assets = liabilities + Capital – Withdrawals + Revenue – Expense
A/R + Cash + Equipement + Supplies = A/P +Notes payable + Capital – Withdrawals +revenue earned –
supplies expense + utilities Expense +wages Expense

5060 + Cash +13750 + 3250 =1950 + 10000 +20000 – 3500 +8700 -3600 +210 +4400
Cash = 2120

LO1 LO3 LO4Transaction Analysis, T Accounts, and Trial Balances

P 7. Brad Cupello began an upholstery cleaning business on October 1 and engaged in the following
transactions during the month:
Oct. 1 Began business by depositing $15,000 in a bank account in the name of the company.
2 Ordered cleaning supplies, $3,000.
3 Purchased cleaning equipment for cash, $2,800.
4 Made two months’ van lease payment in advance, $1,200.
7 Received the cleaning supplies ordered on October 2 and agreed to pay half the amount in 10 days and
the rest in 30 days.
9 Paid for repairs on the van with cash, $1,080.
12 Received cash for cleaning upholstery, $960.
17 Paid half the amount owed on supplies purchased on October 7, $1,500.
21 Billed customers for cleaning upholstery, $1,340.
24 Paid cash for additional repairs on the van, $80.
27 Received $600 from the customers billed on October 21.
31 Made a cash withdrawal of $700.
Required
1. Set up the following T accounts: Cash; Accounts Receivable; Cleaning Supplies; Prepaid Lease;
Cleaning Equipment; Accounts Payable; B. Cupello, Capital; B. Cupello, Withdrawals; Cleaning Revenue;
and Repair Expense.
2. Record transactions directly in the T accounts. Identify each entry by date.
3. Prepare a trial balance for Cupello Upholstery Cleaning as of October 31, 2011.

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4. Compare and contrast how the issues of recognition, valuation, and classification are settled in the
transactions of October 7 and 9.

Cash
Cleaning
Cupello capital 15000 equipment 2800
Cleaning
revenue 960 Prepaid lease 1200
Cleaning
A/R 600 supplies 1500
Repair expense 1080
A/P 1500
Repair expense 80
Withdrawals 700

16560 16560
Bal b/d 7700

A/R
Cleaning
revenue 1340 Cash 600

1340 1340
Bal b/d 740

Cleaning
supplies
Cash 1500
A/P 1500

30000 30000
Bal b/d 30000

Prepaid lease
Cash 1200

1200 1200
Bal b/d 1200

Cleaning
equipment
Cash 2800

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2800 2800
Bal 2800

A/P
Cash 1500 Cash 1500

1500 1500
Bal 0

Cupello
capital
Cash 15000

15000 15000
Bal 15000

Cupello
withdrawals
Cash 700

700 700
Bal 700

Cleaning
revenue
Cash 960
A/R 1340

2300 2300
Bal b/d 2300

Repair Expense
Cash 1080
Cash 80

1160 1160
Bal 1160

Sno Titles Debit Credit

1 Cash 7700
2 A/R 740
3 Cleaning supplies 3000
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4 Prepaid lease 1200

5 Cleaning equipment 2800
6 Repair expense 1160
7 Cupello withdrawals 700
8 Cupello capital 1500
9 A/P 0
10 Cleaning revenue 2300
17300 17300

LO3 LO4 LO5 SO6 Transaction Analysis, General Journal, Ledger Accounts, and Trial Balance
P 8. The Golden Nursery School Company provides baby-sitting and child-care programs. On January 31,
2011, the company had the following trial balance:
Golden Nursery School Company
Trial Balance
January 31, 2011
Cash (111) $ 2,070
Accounts Receivable (113) 1,700
Equipment (146) 1,040
Buses (148) 17,400
Notes Payable (211) $15,000
Accounts Payable (212) 1,640
Kuo, Capital (311) 5,570
$22,210 $22,210
During the month of February, the company completed the following transactions:
Feb. 2 Paid this month’s rent, $400.
3 Received fees for this month’s services, $650.
4 Purchased supplies on account, $85.
5 Reimbursed the bus driver for gas expenses, $40.
6 Ordered playground equipment, $1,000.
8 Made a payment on account, $170.
9 Received payments from customers on account, $1,200.
10 Billed customers who had not yet paid for this month’s services, $700.
11 Paid for the supplies purchased on February 4.
13 Purchased and received playground equipment ordered on February 6 for cash, $1,000.
17 Purchased equipment on account, $290.
19 Paid this month’s utility bill, $145.
22 Received payment for one month’s services from customers previously billed, $500.
26 Paid part-time assistants for services, $460.
27 Purchased gas and oil for the bus on account, $325.
28 Made a cash withdrawal of $200.
Required
1. Open accounts in the ledger for the accounts in the trial balance plus the following ones: Supplies (116);
T. Kuo, Withdrawals (313); Service Revenue (411); Rent Expense (514); Gas and Oil Expense (510);
Wages Expense (511); and Utilities Expense (512).
2. Enter the January 31, 2011, account balances from the trial balance.
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3. Enter the above transactions in the general journal (Pages 17 and 18).
4. Post the entries to the ledger accounts. Be sure to make the appropriate posting references in the
journal and ledger as you post.
5. Prepare a trial balance as of February 28, 2011.
6. Examine the transactions for February 3, 9, 10, and 22. What were the revenues, and how much cash
was received from the revenues? What business issue might you see arising from the differences in these
numbers?

General Journal :

Date Particular LF Debit Credit

Feb 2 Rent exp 400
Cash 400
3 Cash 650
Services revenue 650
4 Supplies 85
A/P 85
5 Gas expense 40
Cash 40
8 Cash 170
A/P 170
9 Cash 1200
A/R 1200
10 A/R 700
Service revenue 700
11 A/P 85
Cash 85
13 Equipment 1000
Cash 1000
17 Equipment 290
A/P 290
19 Utility exp 145
Cash 145
22 Cash 500
Service revenue 500
26 Wages expense 460
Cash 460
27 Gas and oil expense 325
A/P 325
28 Withdrawals 200
Cash 200

T Accounts:

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Cash
2070 400
650 40
1200 170
500 85
1000
145
460
200

4420 4420
Bal b/d 1920

A/R
1700 1200
500

1700 1700
Bal 500

Equipment
1040
1000
290

2330 2330
Bal 2330

A/P
170 1640
85 85
290
325
2340 2340
Bal 2085

Gas
exp
40
325

365 365
Bal 365

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Bill
recievable
700 500

700 700
Bal 200

Service income
650
700

1350 1350
Bal 1350

Trail Balance:
Sno Titles Debit Credit
1 Buses
17400
2 Notes payable
1500
3 Capital
5570
4 Cash
1920
5 A/R
500
6 Equipment
2330
7 A/P
2085
8 Service income
1350
9 Gas expense
365
10 Bill /R
200
11 Rent expense
400
12 Supplies
85
13 Utility bill expense
145
14 Wages expense
460
15 Withdrawals
200
24005 24005

LO3 Transaction Analysis

P 9. The following accounts are applicable to Walter’s Chimney Sweeps:
1. Cash
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2. Accounts Receivable
3. Supplies
4. Prepaid Insurance
5. Equipment
6. Notes Payable
7. Accounts Payable
8. W. Norman, Capital
9. W. Norman, Withdrawals
10. Service Revenue
11. Rent Expense
12. Repair Expense
Walter’s Chimney Sweeps completed the following transactions:
Debit Credit
a. Paid for supplies purchased on credit last month. 71
b. Billed customers for services performed. 210
c. c.Paid the current month’s rent. 111
d. Purchased supplies on credit. 37
e. Received cash from customers for services performed but not yet billed. 110
f. Purchased equipment on account. 57
g. Received a bill for repairs. 127
h. Returned part of the equipment purchased in f for a credit. 75
i. Received payments from customers previously billed. 110
j. Paid the bill received in g. 71
k. Received an order for services to be performed. No Entry
l. Paid for repairs with cash. 121
m. Made a payment to reduce the principal of the note payable. 61
n. Made a cash withdrawal. 91
Required
Analyze each transaction and show the accounts affected by entering the corresponding numbers in the
appropriate debit or credit column as shown in transaction a. Indicate no entry, if appropriate.
LO3 LO4 LO5 Transaction Analysis, T Accounts, and Trial Balance
P 10. Bob Lutz opened a secretarial school called Best Secretarial Training.
a. Lutz contributed the following assets to the business:
Cash $5,700
Computers 4,300
Office Equipment 3,600
b. Found a location for his business and paid the first month’s rent, $260.
c. Paid for an advertisement announcing the opening of the school, $190.
d. Received applications from three students for a four-week secretarial program and two students for a
ten-day keyboarding course. The students will be billed a total of $1,300.
e. Purchased supplies on credit, $330.
f. Billed the enrolled students, $1,740.

g. Purchased a second-hand computer, $480, and office equipment, $380, on credit.

h. Paid for the supplies purchased on credit in e, $330.
i. Paid cash to repair a broken computer, $40.
j. Received partial payment from students previously billed, $1,080.
k. Paid the utility bill for the current month, $90.

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l. Paid an assistant one week’s salary, $440.

m. Made a cash withdrawal of $300.
Required
1. Set up the following T accounts: Cash; Accounts Receivable; Supplies; Computers; Office Equipment;
Accounts Payable; B. Lutz, Capital; B. Lutz,
Withdrawals; Tuition Revenue; Salaries Expense; Utilities Expense; Rent Expense; Repair Expense; and
Advertising Expense.
2. Record the transactions directly in the T accounts, using the transaction letter to identify each debit and
credit.
3. Prepare a trial balance using today’s date.
4. Examine transactions f and j. What were the revenues and how much cash was received from the
revenues? What business issues might you see arising from the differences in these numbers?

T Accounts:

Cash
Capital 5700 Rent expense 260
Advertisement
Tuition revenue 1080 expense 190
A/p 330
Repair expense 40
Utility expense 90
Salary expense 440
Lutz withdrawal 300

6780 6780
Bal b/d 5130

A/R
Tution revenue 1740

1740 1740
Bal 1740

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Supplies
A/P 330

330 330
Bal 330

Computers
Capital 4300
A/P 480

4780 4780
Bal 4780

Office
Equipment
Capital 3600
A/P 380

3980 3890
Bal 3890

A/P
Cash 330 Supplies 330
Computer 480
Office equipment 380

1190 1190
Bal 860

Lutz
capital
Cash 5700
Computer 4300
Office equipment 3600

13600 13600
Bal 13600

Lutz
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withdrawals
Cash 300

300 300
Bal 300

Tuition
revenue
A/R 1740
Cash 1080

2820 2820
Bal 2820

Salaries
expense
Cash 440

440 440
Bal 440

Utilities
expense
Cash 90

90 90
Bal 90

Repair expense
Cash 40

40 40
Bal 40

Rent expense

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Cash 260
Cash 40

300 300
Bal 300

Advertisement
expense
Cash 190

190 190
Bal 190

Trail Balance:
Sno Titles Debit Credit
1 Cash 5130
2 A/R 1740
3 Supplies 330
4 Computer 4780
5 Office equipment 3980
6 Lutz withdrawals 300
7 Salaries expense 440
8 Utilities expense 90
9 Rent expense 300
10 Repair expense 40
11 Advertisement expense 190
12 A/P 860
13 Lutz capital 13600
14 Tuition revenue 2820

17280 17280

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