Financial Accounting

Solutions to Chapter 2-4 handout

It is easy in first accounting courses to lose points by making simple mistakes. You should schedule a few practice sessions and aim at high accuracy to ensure good test performance.

Problem One—(memorandum entries left off)

a. Cash	10,000
Capital (Paid in capital, see chapter 12)		10,000
b. Rent expense	400
Cash		400
c. Wage expense	600
Cash		600
d. Supplies on hand	150
Cash		150
e. Prepaid insurance	600
Cash		600
f. Cash	5,000
Revenue		5,000
g. Accounts receivable	4,000
Revenue		4,000
Note on”f” or “g”: revenue is recorded when services are rendered or goods or sold. It is not relevant whether cash is received at the time or not.
h. Cash	3,000
Accounts receivable		3,000
i. Cash	15,000
Notes payable		15,000
j. Notes payable	2,000
Cash		2,000
k. Cash	5,000
Revenue received in advance		5,000
l. Supplies on hand	200
Accounts payable		200
m. Accounts payable	200
Cash		200
n. Withdrawals (Dividends)	2,000
Cash		2,000

For those posting to individual T accounts for practice, a trial balance showing ending account balances is provided.

Mr. Smith's Company
Unadjusted Trial Balance
As of ____________________
Cash	32,050
Prepaid Insurance	600
Supplies on hand	350
Accounts receivable	1,000
Accounts payable		0
Notes payable		13,000
Revenue received in advance		5,000
Capital (PIC + Retained Earnings)		10,000
Withdrawals (Dividends)	2,000
Revenue		9,000
Rent expense	400
Wage expense	600
	37,000	37,000

Temporary accounts are located in the blue region or the trial balance.

Problem Two (memorandum entries are left off)

a. Cash	15,000
Capital (Paid in capital, see chapter 12)		15,000
b. Advertising expense	200
Cash		200
c. Utilities expense	300
Cash		300
d. Supplies on hand	200
Cash		200
e. Prepaid insurance	700
Cash		700
f. Cash	4,000
Revenue		4,000
g. Accounts receivable	1,000
Revenue		1,000
Note on”f” or “g”: revenue is recorded when services are rendered or goods or sold. It is not relevant whether cash is received at the time or not.
h. Cash	1,000
Accounts receivable		1,000
i. Cash	10,000
Notes payable		10,000
j. Notes payable	4,000
Cash		4,000
k. Cash	5,000
Revenue received in advance		5,000
l. Supplies on hand	300
Accounts payable		300
m. Accounts payable	200
Cash		200
n. Withdrawals (Dividends)	1,000
Cash		1,000

For those posting to individual T accounts for practice, a trial balance showing ending account balances is provided.

Ms. Jones' Company
Unadjusted Trial Balance
As of ____________________
Cash	28,400
Prepaid Insurance	700
Supplies on hand	500
Accounts receivable	0
Accounts payable		100
Notes payable		6,000
Revenue received in advance		5,000
Capital (PIC + Retained Earnings)		15,000
Withdrawals (Dividends)	1,000
Revenue		5,000
Advertising expense	200
Utilities expense	300
	31,100	31,100

Problem Three	Debit	Credit
a. Supplies expense	200
Supplies on hand		200
b. Insurance expense	200
Prepaid insurance		200
c. Unearned revenue	2,000
Revenue		2,0000
d. Wage expense (two days)	8,000
Wages payable		8,000
e. Depreciation expense	2,000
Accumulated depreciation		2,000
Problem Four	Debit	Credit
a. Supplies expense	2,200
Supplies on hand		2,200
b. Insurance expense	300
Prepaid insurance		300
c. Unearned revenue	1,000
Revenue		1,000
d. Wage expense (four days)	12,000
Wages payable		12,000
e. Depreciation expense	1,000
Accumulated depreciation		1,000

Problem Five	Debit	Credit
a. Supplies expense	400
Supplies on hand		400
b. Insurance expense	400
Prepaid insurance		400
c. Unearned revenue	1,000
Revenue		1,000
d. Wage expense	3,000
Wages payable		3,000
e. Depreciation expense	500
Accumulated depreciation		500