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Chapter 2: Q1TIAT_1 (page 116)

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?

Short Answer

Expert verified

The business transaction is recorded in Step 1 and the two financial statements are the balance sheet and income statement.

Step by step solution

01

Recording the transaction

Journal Entries

Date

Particulars

Debit ($)

Credit ($)

Cash

$10,500

Service Revenue

$10,500

02

Financial Statement affected by the transaction

The two major financial statements which are directly affected by this transaction will be as follows:

Balance Sheet: The cash received will increase the assets side of the balance sheet.

Income statement: The service revenue will increase the revenue shown on the business's income statement.

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Most popular questions from this chapter

When are credits increases? When are credits decreases?

Journalizing transactions, posting journal entries to four-column accounts, and preparing a trial balance

Theodore McMahon opened a law office on April 1, 2018. During the first month of operations, the business completed the following transactions:

Apr. 1 McMahon contributed \(70,000 cash to the business, Theodore McMahon, Attorney. The business issued common stock to McMahon.

3 Purchased office supplies, \)1,100, and furniture, \(1,300, on account.

4 Performed legal services for a client and received \)2,000 cash.

7 Purchased a building with a market value of \(150,000, and land with a market value of \)30,000. The business paid \(40,000 cash and signed a note payable to the bank for the remaining amount.

11 Prepared legal documents for a client on account, \)400.

15 Paid assistant’s semi monthly salary, \(1,200.

16 Paid for the office supplies purchased on April 3 on account. 18 Received \)2,700 cash for helping a client sell real estate.

19 Defended a client in court and billed the client for \(1,700.

25 Received a bill for utilities, \)650. The bill will be paid next month.

28 Received cash on account, \(1,100.

29 Paid \)3,600 cash for a 12-month insurance policy starting on May 1.

29 Paid assistant’s semi monthly salary, \(1,200.

30 Paid monthly rent expense, \)2,100.

30 Paid cash dividends of $3,200.

Requirements 4. Prepare the trial balance of Theodore McMahon, Attorney, at April 30, 2018.

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.

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

Ann Simpson started her practice as a design consultant on September 1, 2018. During the first month of operations, the business completed the following transactions:

Sep. 1 Received \(48,000 cash and issued common stock to Simpson.

4 Purchased office supplies, \)1,200, and furniture, \(1,300, on account.

6 Performed services for a law firm and received \)1,900 cash.

7 Paid \(18,000 cash to acquire land to be used in operations.

10 Performed services for a hotel and received its promise to pay the \)1,200 within one week.

14 Paid for the furniture purchased on September 4 on account.

15 Paid assistant’s semimonthly salary, \(1,500.

17 Received cash on account, \)1,000.

20 Prepared a design for a school on account, \(650.

25 Received \)2,100 cash for design services to be performed in October.

28 Received \(2,900 cash for consulting with Plummer & Gordon.

29 Paid \)600 cash for a 12-month insurance policy starting on October 1.

30 Paid assistant’s semimonthly salary, \(1,500.

30 Paid monthly rent expense, \)600.

30 Received a bill for utilities, \(350. The bill will be paid next month.

30 Paid cash dividends of \)3,700.

Requirements 3. Post the journal entries to the T-accounts, using transaction dates as posting references in the ledger accounts. Label the balance of each account Bal

Question:Preparing financial statements from the trial balance and calculating the debt ratio

Preparing financial statements from the trial balance and calculating the debt ratio

Account Title Debit Credit

Office Supplies 1,400

Cash 32,000

Accounts Receivable 9,100

Prepaid Insurance 2,600

Equipment 24,000

Accounts Payable 3,400

Unearned Revenue 1,296

Notes Payable 34,000

Common Stock 20,000

Dividends 3,000

Salaries Expense 1,600

Rent Expense 700

Utilities Expense 100

Service Revenue 15,804

Total Balance \( 74,500 \) 74,500

Requirements 4. Calculate the debt ratio as of July 31, 2018.
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