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Chapter 2: Q12E_3 (page 93)

Identifying accounts, increases in accounts, and normal balances

a. Interest Revenue b. Accounts Payable

c. Common Stock d. Office Supplies

e. Advertising Expense f. Unearned Revenue

g. Prepaid Rent h. Utilities Expense

i. Dividends j. Service Revenue

Requirements 3. Identify whether the normal balance is a debit (DR) or credit (CR).

Short Answer

Expert verified

Identification of normal balance as a debit or credit is given in step 2.

Step by step solution

01

Definition of Common Stock

Common stocks are defined as the stock representing the ownership of the business, which comes with voting rights.

02

Identification of each account

Accounts

Normal Balance is Debit (DR) or Credit (CR)

A Interest revenue

Credit (CR)

B Accounts Payable

Credit (CR)

C Common stock

Credit (CR)

D Office Supplies

Debit (DR)

E Advertising Expense

Debit (DR)

F Unearned Revenue

Credit (CR)

G Prepaid Rent

Debit (DR)

H Utility Expense

Debit (DR)

I Dividends

Debit (DR)

J Service Revenue

Credit (CR)

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Most popular questions from this chapter

Question:Courtney Meehan has trouble keeping her debits and credits equal. During a recent month, Courtney made the following accounting errors:

a. In preparing the trial balance, Courtney omitted a \(5,000 Notes Payable. The debit to Cash was correct.

b. Courtney posted a \)1,000 Utilities Expense as \(100. The credit to Cash was correct.

c. In recording a \)600 payment on account, Courtney debited Furniture instead of Accounts Payable.

d. In journalizing a receipt of cash for service revenue, Courtney debited Cash for \(50 instead of the correct amount of \)500. The credit was correct.

e. Courtney recorded a \(210 purchase of office supplies on account by debiting Office Supplies for \)120 and crediting Accounts Payable for \(120.

Requirements 2. Identify each account that has an incorrect balance and the amount and direction of the error (e.g., “Accounts Receivable \)500 too high”).

Roy Akins was the accounting manager at Zelco, a tire manufacturer, and he played golf with Hugh Stallings, the CEO, who was something of a celebrity in the community. The CEO stood to earn a substantial bonus if Zelco increased net income by year-end. Roy was eager to get into Hugh’s elite social circle; he boasted to Hugh that he knew some accounting tricks that could increase company income by simply revising a few journal entries for rental payments on storage units. At the end of the year, Roy changed the debits from “rent expense” to “prepaid rent” on several entries. Later, Hugh got his bonus, and the deviations were never discovered.

Requirements 1. How did the change in the journal entries affect the net income of the company at year-end?

Before you begin this assignment, review the Tying It All Together feature in the chapter. Part of the Fry’s Electronics, Inc.’s experience involves providing technical support to its customers. This includes in-home installations of electronics and also computer support at their retail store locations.

Requirements

  1. Suppose Fry’s Electronics, Inc. provides $10,500 of computer support at the Dallas-Fort Worth store during the month of November. How would Fry’s Electronics record this transaction? Assume all customers paid in cash. What financial statement(s) would this transaction affect?

Question: Correcting errors in a trial balance

The following trial balance of Joy McDowell Tutoring Service as of May 31, 2018, does not balance.

Account Title Office Supplies Cash Debit Credit Accounts Receivable Computer Equipment Accounts Payable Utilities Payable Common Stock Dividends Service Revenue Salaries Expense Utilities Expense Rent Expense Total Balance \( 33,100 11,600 \) 11,100 9,600 800 \( 2,800 \) 35,000 1,900 800 700 2,000 600 15,800 10,400

Investigation of the accounting records reveals that the bookkeeper:

a. Recorded a \(400 cash revenue transaction by debiting Accounts Receivable. The credit entry was correct.

b. Posted a \)2,000 credit to Accounts Payable as \(200.

c. Did not record Utilities Expense or the related Utilities Payable in the amount of \)300.

d. Understated Common Stock by $100.

Prepare the corrected trial balance as of May 31, 2018, complete with a heading; journal entries are not required.

In 35 words or fewer, explain the difference between a debit and a credit, and explain what the normal balance of the six account types is.
See all solutions

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