Problems PROBLEM 3.1 Recording Transactions iva Journal Louis Dixon, a dentist, resigned from his position with a large dental ‘own pediatric dental practice. The practice was organized as a sole Dixon Pediatric Dentistry. The business transactions during Se being organized are listed below. Sept. group in order to begin his Proprietorship, called Louis peer she te nenenae Dic pent bask vexoot th le resn which he had saved over a number of years. EE A ea Sept. 10 Purchased a small office building located on a large lot fora total prc Teton or awe a ea ea ayment of $36,500 was made and a note payable was issued for i rte aes ied ore ae aProblems Sept. 18 Purchased a microcom s omputer system from Computer Stores, Inc Sept. 19 Purchased office furnishings, includin, Ca eee eaten: ; dental equipment, fom Turney € Inc; ata cou of $5,740 A cash downpayment of SA) nar ade Me Poe Paid i thice equal installments due §: Mt nents due September 24, October 26. and November 2 The purchase was on open account and did not n oa ae Sept. 26 A S140 monitor in the mictoco i microcomputer system purchased on September 15 stopped wotking The monitor turned to C way returned to Computer Stores, Inc , fund the $140 within five days So Sept. 28 Paid Turnkey Operations, Inc., payable for office furnishings Sept. 30 Received $140 cash from Computer Stores, Inc ceivable created on September 26, . Instructions a, Prepare journal entries to record the above transactions from the following chant of accounts: equite signing of a promissory note $1600 cash as the first installment due on the account « in full settlement of the account re- Select the appropriate account titles Cash Office Furnishings ‘Accounts Receivable Notes Payable Land Accounts Payable Building Louis Dixon, Capital Computer System 'b. What impact did the Sept. 10 transaction have on the financial postion of the company? (la- dicate direction and dollar effect of this transaction on the propriewrship’s assets, lisbiliues, and owner's equity.) Lars Retton is the founder and owner of North Coast Gymnastics, a youth gymnastics training facility. A few of the company’s business transactions occurring during July are described below: 1, On July 2, collected cash of $700 from accounts receivable. 2. On July 7. purchased gymnastics equipment for $2.17, paying $500 in cash and charging the remainder on the company’s 30-day account at Weider Fitness Co. 3. On July 9, returned to Weider Fitness Co. $200 of gymnastics equipment that was not needed. ‘The return of this equipment reduced by $200 the amount owed to Weider Fitness Co. 4, On July 25, Retton made an additional investment in North Coast Gymnastics by depositing ‘$5,000 cash in the company bank account. 5. On July 31, paid the remaining $1,475 owed to Weider Fitness Co. Instructions f. Prepare an analysis of each of the above transactions. The form of analysis to be used is as follows, using transaction 1 as an example. a) The asset Cash was increased. Increases in assets are recorded by debits. Debit Cash, $700. (b) The asset Accounts Receivable was decreased. Decreases in assets are recorded by cred- its. Credit Accounts Receivable, $700. b. Prepare journal entries, including explanations, forthe above transactions. City Flights provides transportation by helicopter between a major airport and various business ‘centers ofa large city. Among the ledger accounts used by the company are the following Cash Passenger Fare Revenue Accounts Payable ‘Advertising Expense Aircraft Fuel Expense Accounts Receivable Rent Expense (0, Wright, Capital Repair & Maintenance Expense O.Wright, Drawing Salaries Expense PROBLEM 3.2 ‘Analyzing Transactions and Prepanng Journal Entnes PROBLEM 3.3, Journal Entnes EBRTEEI7, 12 1CC OO ——— t— 134 PROBLEM 3.4 Analyzing Transactions and Preparing Journal Entries BGWS 4167, 0,12 PROBLEM 3.5 Preparing Journal Entries, Posting, and Preparing a Tral Balance BREE S.6.00.12 G Events CHAPTER 3 The Accounting Cyeie: Captunng Economic below: Some of the January transactions of City Flights are listed luring January. Jan. Paid $3,520 rent fr bangar space dang Ee a Jan. Paced aversing in oa aspaper for publication tanng 1 of $860 was payable within 10 days after t seed uf bo.t00 Jan. 15 Cash receipts from passengers forthe first half of January amout 18 ra nal use. Jan, 15 0. Wright, the owner, withdrew $7,500 cash for Ce alee 200, Jn. 16 Paid slanes wo employees for services rendered in int al of Janu cae Jan. 25 Provided transportation for executives sti Hse Corporation, customer. Sent bill for $470, due within 30 days. : ts Jan, 29 Received a bill from Western Oil Co. for fuel used in January, amounting to S4, and payable by February 10. : Jan. 31 Paid $3,372 to Stevens Motors for repair and maintenance work during January Instructions @. Prepare a journal entry (including an explanation) for each of the above transactions. Dae 'b Describe the effect ofthe January 29 transaction involving fuel used in January on ach of he following: assets, liabilities, owner's equity, and net income. For each of the four items, cate whether the transaction caused an increase, decrease, or no effect. ‘Garwood Marine is a boat repair yard. During August its transactions included the following: 1, On August 1, paid rent for the month of August, $4.400. 2 On August 3, at request of Kiwi Insurance, Inc. made repairs on boat of Michael Fay. Sent bill for $5,620 for services rendered to Kiwi Insurance, Inc. (Credit Repair Service Revenue ) 3 On August 9, made repairs to boat of Dennis Conner and collected in fll the charge of $2,830 + On August 14, placed advertisement in Yachring World to be published in issue of. August 20 at cost of S165. payment to be made within 30 days. 5. On August 25 received a check for $5,620 from Kiwi Insurance, Ine., -epresenting collection of the receivable of August 3. 6. On August 26, made repairs on the vessel Independent totaling $1,890. Collected $400 cash; balance due within 30 days. pany, called Campbell Crop Dust of June were as follows: June 1 Campbell deposited $60,000 cash in a June 2 Purchased a crop-dusting aircraft from cash down payment and issued a note bank account in the name of the business. Uiilty Aircraft for $220,000. M, payable for $180,000. wen gS Jeo f Office and hangar space forthe month Jone : eit waded uring the first half of June i 2 a during the first half of June and repair services, Jom % ‘to customers on June 15, junepoole 135 June 30 Paid $6,000 in salaies to employes for services rendered during these cs rendered dh luring the second half of June Jane 30° Received a fuel bill from Henry's Feed danng Jane. This amount deg bys ee S210 of scr al prc june 30 Campbell withdrew $2,000 cash Y from the business for personal use The account tiles used by Campbell Crop Dusting sting were: Re Pat Campbell, Drawing ‘Accounts Receivable Crop-Dusting Revenue ° piers Maintenance Expense Notes Payable Fuel Expense ‘Accounts Payable Salaries Expense Pat Campbell. Capital Rent Expense Instructions Based on the foregoing transactions: a. Prepare journal entries. 1 Pos to ledger accounts ¢. Prepare atrial balance at une 30, 2001 4 Using th las Jane 30,201 ga cont eh of the wing at ae 3 total assets, total liabilities, total owner's equity, Are these amounts the figures that would Explain your answer briefly. d 8 Environmental Solutions prepares financial statements and closes i P statements and closes is accounts atthe end of each PROBLEM 3.6 calendar year, The following adjusted wal balance was prepared at December 31, 2001 Adjusted Tial Balance, Part |— Preparing Financial Statements ENVIRONMENTAL SOLUTIONS [567,8,10.1 Adjusted Trial Balance December 31, 2001 rm con 370 m Notes Recowable 12.740 ‘Accounts Pecenabie 65,090 Supple: 5.300 Lena 196.000 Building: ao 126,000 Accumulated Depreciation. Building $ 33.600 LOtice Equipment 33,600 ‘Accumulated Depreciation: Oiice Eauipneat 13.40 Notes Payable 112,000 ‘Accounts Payable 22.680 Frank L. Adams, Capital, December 31, 2009 230,300 Frank L. Adams, Drawing .- 70,000 Consulting Fees Earned «1... ++ > 487,200 Advertising Expense - : x 31.500 Insurance Expense... i 98,720 Utilities Expense ....- . . 15,040 Salaries Expense . : 245,280 Supplies Expense 9.640 Depreciation Expense: Building 4.200 Depreciation Expense: Oltce Equipment 3.360 20 $99220PROBLEM 3.7 ‘Adjusted Trial Balance, Part iI— Preparing Closing Entries @ PROBLEM 3.8 Preparing Financial Statements from an Adjusted Trial Balance CHAPTER 3 The Accounting Gye: Capturing Economic Events " ment of owner's equity for the year ended December trae ons come statement and a statement of owner's equity forthe year en sember ‘a. Prepare a scember 31, 2001 », Prepare a balance sheet (in report form) as of De «What was the estimated useful life used by Environment! CO son ate forthe building? Approximately how long has uilding in its operations? Show computati : co 4. Rees seeas ‘Ansel is trying to understand what the net income of the busin + geen eos thaneti by the owner should be available as cash sents, He feels that net income less withdrawals He asa ae Hheretont ‘Solutions’ 2001 net income, less withdrawals by owner. 0 th cash reported in the balance sheet and asks what happened to the rest of the net 9 , Explain the concept of net income to Ansel Adams, including in your answcr an explana where the undistributed net income from 2001 (and prior years) “ended up.’ it the deprecia- tal Solutions in setting the depr he ymental Solutions been using in lem 3.6: Using the data shown in the adjusted tril balance in Problem 8. Prepare journal ens to cos the accounts Use four entries (1) 0 cose the evens account (2) to close the expense accounts, (3) to close the Income Summary account, and (4) to close the owner’s drawing account. ; aa . Does the amount of net income or net loss appear in the closing entries? Explain fully ‘ sted on rented land [NP Enterprises operates several miniature golf courses, all of which are locat within ety parks, Shown below isthe company's adjusted wal balance at December 31, 200) ‘The company closes its accounts atthe end of each calendar year 2) SNP ENTERPRISES ‘Adjusted Tiial Balance “= December 312001, | ae Cash S 41.100 Accounts Receivable 7,800 Buildings 180,000 ‘Accumulated Depreciation: Buldings S$” 36,000 Golf Course Structures a 270.000 Accumulated Deprociation: Gol! Course Structures 90,000 Accounts Payable . « 23.100 Salaries Payable 6.900 ‘Nick Palmer, Capital (December 31, 2000) 331,560 Nick Palmer, Drawing . 75,000 ‘Admissions Revenue ‘ , 576,000 Advertising Expense 45,000 Rent Expense ‘i 108.000 Repairs Expense pean F 18.600 Salaries Expense ‘ 237,000 Light & Power Expense 13.500 Depreciation Expense: Buildings ee Depreciation Expense: Golf Course Structures 45,000 Insurance Expense 7580) $1.063.560 §1,063.500 Instructions ‘a, Prepare an income statement and a statement of owner’ 31, 2001 'S equity for the year ended DecemberProviens 1b Prepare a balance sheet (in report form) 28 of December 31, 2001 & Is 2001 the first year of operations for NP Enterprises? Sopport your snrwez (d. Assume that Nick Palmer imvested $300,000 to stant NP Enterprises. Does he Effeccace be- EnPar ie owner's capital at December 31, 2001, and ts $300,000 imal amemment egal amount of profits generated by the business since inceptice? Exptace brcfy Using the adjusted tal balance presenta in Problem 1 Prepare jour enres to clos the acount. Use fou enc (1) 1 chon te rea acon (2) to close the expense acount, 3) 0 clove he Income Seaway Svan. ed te the owners dewing account 1. Assume that ia the following year NP Enterprises again had SST&OOD of atmos vest betta expenses ined SN ON. Aving are rene noma pense acounts had bee closed int the incoue Susary accuse Dececber 31. pepe a journal entry to close the Income Summary accoust. " During the absence of the regular accountant of Vanderpool Consultin Q lar q 3g. 2 new exployee. Doce ‘Webb, prepared the closing entries from the ledger sccounts for the year 2001. WeBD has very Et Ue understanding of eceounting. and the closing entries he prepared Were not satisfactory in sew~ ceral respects. The entries by Webb were: Entry 1 Professional Fees Eamed . 273.800 ‘Accumulated Depreciation: Building : 25.600 Accounts Payable 86.400 Salaries Payable . LD “e200 Income Summary 394.800 ‘To close accounts with credit balances. Entry 2 Income Summary . .. Salaries Expense... 96.400 ‘Al Vanderpool, Drawing 36,000 ‘Advertising Expense 5 12.500 Depreciation Expense: Building . 600 Insurance Expense .. = 19,200 To close accounts with debit balances Entry 3 ‘Al Vanderpool, Capital 234,000 234,000 Income Summary ‘Tp close the owners capital account. Instructions i For each entryidentify any errors that Webb made. ». Prepare four correct closing entries, following the pattem illustrated on pages (116-118). ‘e. Using the information presented above (and considering your answers to parts a and b), com- pute net income or net loss of Vanderpool Consulting for the year 2001. Show computation, ‘The operations of Hempstead Realty consist of obtaining listings of houses being offered for sale by owners, advertising these houses, and showing them to prospective buyers. The company eams revenue in the form of commissions. The building and office equipment used in the business were dequired on January 1 ofthe current year and were immediately placed in use. Useful life of the building was estimated to be 30 years and that ofthe office equipment five years. The company closes its accounts monthly: on March 31 of the current year, the trial balance is as follows: desma ~“@G re PROBLEM 3.11 End-ol-Perod Acjusting and Closing Procedures: Preparing Financal Statements BBBFs, enInstructions From the trial balance and supplementary data given, prepare the following as of March 31, 2001: a. Adjusting entries for depreciation during March of building and of office equipment. b. Adjusting entry to recognize as expense the cost of office supplies used in March. At the end fof March, the supplies on hand are estimated to have a cost of $500. ‘e. Adjusted trial balance. 4. Income statement and a statement of owner's equity for the month of March, and a balance sheet at March 31 in report form. Assume no additional investments by owner during March. €. Closing entries. {. After-closing trial balance.