Chapter 2: Q1DQ (page 79)
Provide the names of two (a) asset accounts, (b) liability accounts, and (c) equity accounts.
Assets – Inventory, Building
Liabilities – Bank Loan, Notes Payable
Equity – Common Stock, Retained earnings
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Humble Management Services opened for business and completed these transactions in September.
Sep. 1 Henry Humble, the owner, invested \(38,000 cash along with office equipment valued at \)15,000 in the company in exchange for common stock.
2 The company prepaid \(9,000 cash for 12 months’ rent for office space. (Hint:Debit Prepaid Rent for \)9,000.)
4 The company made credit purchases for \(8,000 in office equipment and \)2,400 in office supplies. Payment is due within 10 days.
8 The company completed work for a client and immediately received \(3,280 cash.
12 The company completed a \)15,400 project for a client, who must pay within 30 days.
13 The company paid \(10,400 cash to settle the payable created on September 4.
19 The company paid \)1,900 cash for the premium on an 18-month insurance policy. (Hint:Debit Prepaid Insurance for \(1,900.)
22 The company received \)7,700 cash as partial payment for the work completed on September 12.
24 The company completed work for another client for \(2,100 on credit.
28 The company paid \)5,300 cash in dividends.
29 The company purchased \(550 of additional office supplies on credit.
30 The company paid \)860 cash for this month’s utility bill.
Required
2. Open the following ledger accounts—their account numbers are in parentheses (use the balance column format): Cash (101); Accounts Receivable (106); Office Supplies (124); Prepaid Insurance (128); Prepaid Rent (131); Office Equipment (163); Accounts Payable (201); Common Stock (307); Dividends (319); Services Revenue (401); and Utilities Expense (690). Post journal entries from part 1 to the ledger accounts and enter the balance after each posting.
Question:The expanded accounting equation consists of assets, liabilities, common stock, dividends, revenues, and expenses. It can be used to reveal insights into changes in a company’s financial position.
Required
1. Form learning teamsof six (or more) members. Each team member must select one of the six components, and each team must have at least one expert on each component: (a) assets, (b) liabilities, (c) common stock, (d) dividends, (e) revenues, and ( f) expenses.
2. Form expert teamsof individuals who selected the same component in part 1. Expert teams are to draft a report that each expert will present to his or her learning team addressing the following:
c. Using the transaction and amounts in (b), verify the equality of the accounting equation and then explain any effects on the income statement and statement of cash flows.
3. Each expert should return to his/her learning team. In rotation, each member presents his/her expert team’s report to the learning team. Team discussion is encouraged.
Question:Assume that you are a cashier and your manager requires that you immediately enter each sale when it occurs. Recently, lunch hour traffic has increased and the assistant manager asks you to avoid delays by taking customers’ cash and making change without entering sales. The assistant manager says she will add up cash and enter sales after lunch. She says that, in this way, customers will be happy and the register record will always match the cash amount when the manager arrives at three o’clock. The advantage to the process proposed by the assistant manager includes improved customer service, fewer delays, and less work for you. The disadvantage is that the assistant manager could steal cash by simply recording less sales than the cash received and then pocketing the excess cash. You decide to reject her suggestion without the manager’s approval and to confront her on the ethics of her suggestion.
Required
Propose and evaluate two other courses of action you might consider, and explain why.
At the beginning of April, Bernadette Grechus launched a custom computer solutions company called Softworks. The company had the following transactions during April.
a. Bernadette Grechus invested \(65,000 cash, office equipment with a value of \)5,750, and \(30,000 of computer equipment in the company in exchange for common stock.
b. The company purchased land worth \)22,000 for an office by paying \(5,000 cash and signing a longterm note payable for \)17,000.
c. The company purchased a portable building with \(34,500 cash and moved it onto the land acquired in b.
d. The company paid \)5,000 cash for the premium on a two-year insurance policy.
e. The company provided services to a client and immediately collected \(4,600 cash.
f. The company purchased \)4,500 of additional computer equipment by paying \(800 cash and signing a long-term note payable for \)3,700.
g. The company completed \(4,250 of services for a client. This amount is to be received within 30 days.
h. The company purchased \)950 of additional office equipment on credit.
i. The company completed client services for \(10,200 on credit.
j. The company received a bill for rent of a computer testing device that was used on a recently completed job. The \)580 rent cost must be paid within 30 days.
k. The company collected \(5,100 cash in partial payment from the client described in transaction i.
l. The company paid \)1,800 cash for wages to an assistant.
m. The company paid \(950 cash to settle the payable created in transaction h.
n. The company paid \)608 cash for minor maintenance of the company’s computer equipment.
o. The company paid \(6,230 cash in dividends.
p. The company paid \)1,800 cash for wages to an assistant.
q. The company paid $750 cash for advertisements on the web during April.
Required
2. Open the following ledger accounts—their account numbers are in parentheses (use the balance column format): Cash (101); Accounts Receivable (106); Prepaid Insurance (108); Office Equipment (163); Computer Equipment (164); Building (170); Land (172); Accounts Payable (201); Notes Payable (250); Common Stock (307); Dividends (319); Fees Earned (402); Wages Expense (601); Computer Rental Expense (602); Advertising Expense (603); and Repairs Expense (604). Post the journal entries from part 1 to the accounts and enter the balance after each posting.
Roshaun Gould started a web consulting firm called Gould Solutions. He began operations and completed seven transactions in April that resulted in the following accounts, which all have normal balances.
Cash ………………………………………. \(20,000
Office supplies ……………………………….. 750
Prepaid rent ………………………………… 1,800
Office equipment …………………………. 12,250
Accounts payable ………………………… 12,250
Common stock ……………………………. 15,000
Dividends ……………………………………. 5,200
Consulting fees earned ………………….. 20,400
Miscellaneous expenses ………………….. 7,650
Required
2. The following seven transactions produced the account balances shown above.
a. Gould invested \)15,000 cash in the business in exchange for common stock.
b. Paid \(1,800 cash in advance for next month’s rent expense.
c. Paid \)7,650 cash for miscellaneous expenses.
d. Purchased office supplies for \(750 cash.
e. Purchased \)12,250 of office equipment on credit (with accounts payable).
f. Received \(20,400 cash for consulting services provided in April.
g. The company paid \)5,200 cash in dividends.
Prepare a Cash T-account, enter the cash effects (if any) of each transaction, and compute the ending Cash balance (code each entry in the T-account with one of the transaction codes athrough g).
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