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Chapter 2: Q1TI (page 60)

Consider the following accounts and identify each as an asset (A), liability (L), or equity (E). 1. Rent Expense 6. Accounts Payable 2. Common Stock 7. Unearned Revenue 3. Furniture 8. Notes Receivable 4. Service Revenue 9. Dividends 5. Prepaid Insurance 10. Insurance Expense

Short Answer

Expert verified

Assets are the resources that help in generating income and the identification is done

Step by step solution

01

Definition of Assets

The assets are defined as the financial resources owned by the business or the individual which will generate income in the future.

02

Identification of various accounts

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Most popular questions from this chapter

Question: Journalizing transactions, posting journal entries to T-accounts, and preparing a trial balance

Vince York practices medicine under the business title Vince York, M.D. During July, the medical practice completed the following transactions:

Jul. 1 York contributed \(63,000 cash to the business in exchange for common stock.

5 Paid monthly rent on medical equipment, \)510.

9 Paid \(23,000 cash to purchase land to be used in operations.

10 Purchased office supplies on account, \)1,600.

19 Borrowed \(22,000 from the bank for business use.

22 Paid \)1,100 on account.

28 The business received a bill for advertising in the daily newspaper to be paid in August, \(240.

31 Revenues earned during the month included \)6,400 cash and \(6,000 on account.

31 Paid employees’ salaries \)2,200, office rent \(1,900, and utilities \)560. Record as a compound entry.

31 The business received \(1,120 for medical screening services to be performed next month.

31 Paid cash dividends of \)7,200.

The business uses the following accounts: Cash; Accounts Receivable; Office Supplies; Land; Accounts Payable; Advertising Payable; Unearned Revenue; Notes Payable; Common Stock; Dividends; Service Revenue; Salaries Expense; Rent Expense; Utilities Expense; and Advertising Expense.

Requirements 1. Journalize each transaction. Explanations are not required

Question:The accountant for Countryside Painting Specialists is having a hard time preparing the trial balance as of November 30, 2018:

Account Title Debit Credit

Accounts Receivable 1,300

PaintingEquipment 13,500

Cash 12,100

Advertising Expense 550

Dividends 3,500

Accounts Payable 3,300

Rent Expense 1,800

Common Stock 15,000

Service Revenue 15,600

Unearned Revenue 1,700

Salaries Expense 2,400

Office Supplies 200

Utilities Expense 250

Total 48,600 22,600

Prepare the corrected trial balance as of November 30, 2018. Assume all amounts are correct and all accounts have normal balances.

Calculating the balance of a T-account

Accounts Payable

May 2 6,000 21,000 May 1

May 22 11,500 500 May 5

8,500 May 15

500 May 23

Calculate the Accounts Payable balance.

Correcting errors in a trial balance

The trial balance of Beautiful Tots Child Care does not balance.

Account Title Debit Credit

Office Supplies 1,000

Cash 7,900

Accounts Receivable 6,700

Prepaid Insurance 300

Equipment 91,500

Accounts Payable 3,400

Notes Payable 45,000

Common Stock 57,000

Dividends 5,000

Service Revenue 12,350

Rent Expense 750

Salaries Expense 4,400

Total Balance \( 117,550 \) 117,750

The following errors are detected:

a. Cash is understated by \(1,500.

b. A \)4,100 debit to Accounts Receivable was posted as a credit.

c. A \(1,400 purchase of office supplies on account was neither journalized nor posted.

d. Equipment was incorrectly transferred from the ledger as \)91,500. It should have been transferred as \(83,000.

e. Salaries Expense is overstated by \)700.

f. A \(300 cash payment for advertising expense was neither journalized nor posted.

g. A \)200 cash dividend was incorrectly journalized as \(2,000.

h. Service Revenue was understated by \)4,100.

i. A 12-month insurance policy was posted as a $1,900 credit to Prepaid Insurance. Cash was posted correctly.

Prepare the corrected trial balance as of August 31, 2018. Journal entries are not required.

Your friend, Dean McChesney, requested that you advise him on the effects that certain transactions will have on his business, A-Plus Travel Planners. Time is short, so you cannot journalize the transactions. Instead, you must analyze the transactions without a journal. McChesney will continue the business only if he can expect to earn a monthly net income of \(6,000. The business completed the following transactions during June:

a. McChesney deposited \)10,000 cash in a business bank account to start the company. The company issued common stock to McChesney.

b. Paid \(300 cash for office supplies.

c. Incurred advertising expense on account, \)700.

d. Paid the following cash expenses: administrative assistant’s salary, \(1,400; office rent, \)1,000.

e. Earned service revenue on account, \(8,800.

f. Collected cash from customers on account, \)1,200.

Requirements

4. Compute the amount of net income or net loss for this first month of operations. Would you recommend that McChesney continue in business?
See all solutions

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