PROBLEM SET NO.

Problem 2.2

(a) Purchased equipment for cash at a cost of $3,200. Fully paid.

(b) Received cash payment for services amounting to $900 previously rendered,
but were not paid for at the time.
(c) Purchased equipment costing $13,500, cash downpayment of $3,500 and
balance of $10,000 to be paid at a later date.
(d) Made a cash payment of $14,500 towards payment owned.
(e) Ownder P. Youngblood made additional investment of $15,000, increasing
cash.
(f) Purchased equipment for $2,100, entire amount to be paid at a later date.

Problem 3.4 (A)

1. a. Rent is an operating expense. Expenses recorded by debits.

Debit Rent Expense, $4,400.
b. The asset cash was decreased. Decreases in assets are recorded by
credits.
Credit Cash, $4,400.

2. a. Asset Accounts Receivable is acquired, services completely rendered,

obligation fulfilled. Increases in assets are recorded by debits.
Debit Accounts Receivable by $5,620.
b. Revenue has been earned. Revenue increases owner’s equity and is
recorded by a credit.
Credit Repair Service Revenue by $5,620.

3. a. The asset Cash was increased. Increases in assets are recorded by debits.
Debit Cash, $2,830
b. Revenue has been earned. Revenue increases owner’s equity and is
recorded by a credit.
Credit Repair Service Revenue by $2,830

4. a. The cost of advertising is an expense. Expenses are recorded by debits,

and decrease owner’s equity.
Debit Advertising Expense, $165
b. The liability Accounts Payable is incurred. Increases in liabilities are
recorded by credits.
Credit Accounts Payable, $165

5. a. The asset Cash is increased. Increases in assets are recorded by debits.

Debit Cash, $5,620
b. The asset Accounts Receivable is decreased. Decreases in assets are
recorded by credits.
Credit Accounts Receivable, $5,620

6. a. The asset Cash is increased. Increases in assets are recorded by debits.

 Debit Cash, $400
b. The asset Accounts Receivable is increased. Increases in assets are
recorded by debits.
Debit Accounts Receivable, $1,490
c. Revenue has been earned. Revenue increases owner’s equity and is
recorded by a credit.
Credit Repair Service Revenue by $1,890

7. a. The liability Accounts Payable is decreased. Decreases in liabilities are

recorded by debits.
Debit Accounts Payable, $165
b. The asset Cash is decreased. Decreases in assets are recorded by credits.
Credit Cash, $165

8. a. The asset Cash is decreased. Decreases in assets are recorded by credits.

Credit Cash, $7,600

Problem 3.5

(A. Recording)
CAMPBELL CROP DUSTING
Entries for June 2001
Date Debit Credit
01 June Cash $60,000
Pat Campbell, Capital $60,000
Campbell deposited $60,000 cash in a bank account in the name of
the business.

02 June Aircraft $220,000

Cash $40,000
Notes Payable $180,000
Purchased a crop-dusting aircraft from Utility Aircraft for $220,000.
Made a $40,000 cash down payment and issued a note payable for
$180,000.

04 June Rent Expense $2,500

Cash $2,500
Paid Woodrow Airport $2,500 to rent office and hangar space for the
month.

15 June Accounts Receivable $8,320

Crop-Dusting Revenue $8,320
Billed customers $8,320 for crop-dusting services rendered during the
first half of June.
Salaries Expense $5,880
Cash $5,880
 Paid $5,880 salaries to employees for services rendered during the
first half of June.

18 June Maintenance Expense $1,890

Cash $1,890
Paid Hannigan’s Hangar $1,890 for maintenance and repair services.

25 June Cash $4,910

Accounts Receivable $4,910
Collected $4,910 of the amounts billed to customers on June 15.

30 June Accounts Receivable $16,450

Crop-Dusting Revenue $16,450
Billed customers $16,450 for crop-dusting services rendered during the
second half of the month.
Salaries Expense $6,000
Cash $6,000
Paid $6,000 in salaries to employees for services rendered during the
second half of June.

Fuel Expense $2,510

Accounts Payable $2,510
Received a fuel bill from Henry’s Feed & Fuel for $2,510 of aircraft fuel
purchased during June. This amount is due by July 10.

Pat Campbell, Capital $2,000

Pat Campbell, Drawing $2,000
Campbell withdrew $2,000 cash from the business for personal use.

(B. Posting)
CAMPBELL CROP DUSTING
T-Accounts for June 2001
30 $6,000
CASH June
Date Debit Credit TOTAL $8,640
01 $60,000
PAT CAMPBELL, CAPITAL
June
Date Debit Credit
02 $40,000
01 $60,000
June
June
04 $2,500
30 $2,000
June
June
15 $5,880
TOTAL $58,000
June
18 $1,890 AIRCRAFT
June Date Debit Credit
25 $4,910 02 $220,000
June June
 TOTAL $220,000 June
30 $6,000
NOTES PAYABLE
June
Date Debit Credit
TOTAL $11,880
02 $180,000
June MAINTENANCE EXPENSE
TOTAL $180,000 Date Debit Credit
18 $1,890
ACCOUNTS PAYABLE
June
Date Debit Credit
TOTAL $1,890
30 $2,510
June FUEL EXPENSE
TOTAL $2,510 Date Debit Credit
30 $2,510
June
TOTAL $2,510
ACCOUNTS RECEIVABLE
CROP-DUSTING REVENUE
Date Debit Credit
Date Debit Credit
15 $8,320
15 $8,320
June
June
25 $4,910
30 $16,450
June
June
30 $16,450
TOTAL $24,770
June
TOTAL $19,860 PAT CAMPBELL, DRAWING
Date Debit Credit
RENT EXPENSE
30 $2,000
Date Debit Credit
June
04 $2,500
TOTAL $2,000
June
TOTAL $2,500
SALARIES EXPENSE
Date Debit Credit
15 $5,880

(C. Trial Balance)

CAMPBELL CROP DUSTING

Trial Balance for June 2001
D. TRIAL BALANCE
 Total Debit Credit Assets = Cash
+ Cash $8,640 Aircraft +
Aircraft $220,000 Accounts
Accounts Receivable $19,860 Receivable
Rent Expense $2,500 = $8,640 +
Salaries Expense $11,880 $220,000 +
$19,860 Maintenance Expense $1,890
Fuel Expense $2,510 = $248,500
 Total Pat Campbell, Capital $58,000 Liabilities =
Accounts Payable $2,510 Accounts
Payable Notes Payable $180,000 + Notes
Payable Crop-Dusting Revenue $24,770
Pat Campbell, Drawing $2,000 = $2,510 +
TOTAL $267,280 $267,280 $180,000
= $182,510
 Total Equities = Rent Expense + Salaries Expense Maintenance Expense +
Fuel Expense
+ Pat Campbell, Capital + Crop-Dusting Revenue + Pat
Campbell, Drawing
= (-$2,500) + (-$11,880) + (-$1,890) + (-$2,510) + $58,000 +
$24,770 + (-$2,000)
= $65,990
 Total Assets = Total Liabilities + Total Equities
$248,500 = $182,510 + $65,990
$248,500 = $248,500

Yes, the figures for total assets, total liabilities, and total owner’s equity will
be reported in the balance sheet at June 30, 2001. Based on the solution above, the
figures adhere to the accounting equation, which states that the total assets must
be equal to the sum of the total liabilities and the total owner’s equity at all times.
This proves that all finances that went in and out of the company were accounted
for.

Problem 4.3

a.) Applying the Apportioning Recorded Costs Adjusting Entry

Answer:

Rental Expense $ 300,000

Prepaid Rent $ 300,000
To compute for the prepaid rent: $1,500,000 / 5 months = $300,000
b.) Applying the Apportioning Unearned Revenues

Answer:
 Unearned Revenue $ 2,560,000
Revenue $ 2,560,000

The Outlaws
Adjusting Entries
08/01
Rental Expense $ 1,500,000
Prepaid Rent $ 1,500,000
Unearned Revenue $ 2,560,000
Revenue $ 2,560,000

Problem 4.4

DALE & CLARK LAW FIRM

Accrued Salary

Date Debit Credit

15 December Salaries Expense $17800
Salaries Payable $17800
Adjusting entry for accrued salaries due to employees on every 15 th of each
month
31 December Salaries Expense $17800
Salaries Payable $17800
Adjusting entry for accrued salary expense due to employees required on 31 st
of December
Accounts Receivable $18900
Service Revenue $18900
Adjusting entry for accrued legal fees revenue required on 31st of December
that has not yet been billed to Stone
15 January Salaries Expense $17200
Salaries Payable $17200
Adjusting entry for accrued salary expense accounted for the 15th of January
assuming that the salaries paid to the staff amounts to $35000

b. Since the $17,800 of the 35,000 was recorded already, the salary expense will be
$17,200 for January
c. $42000, because the $18900 has already been accounted for.