Chapter 2: Q8DQ (page 79)
Why does the record keeper prepare a trial balance?
The trial balance is prepared to check the accuracy of transaction recording at the first level of the final account preparation.
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Question:Karla Tanner opened a web consulting business called Linkworks and completed the following transactions in its first month of operations.
Apr. 1 Tanner invested \(80,000 cash along with office equipment valued at \)26,000 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.)
3 The company made credit purchases for \(8,000 in office equipment and \)3,600 in office supplies. Payment is due within 10 days.
6 The company completed services for a client and immediately received \(4,000 cash.
9 The company completed a \)6,000 project for a client, who must pay within 30 days.
13 The company paid \(11,600 cash to settle the account payable created on April 3.
19 The company paid \)2,400 cash for the premium on a 12-month insurance policy. (Hint:Debit Prepaid Insurance for \(2,400.)
22 The company received \)4,400 cash as partial payment for the work completed on April 9.
25 The company completed work for another client for \(2,890 on credit.
28 The company paid \)5,500 cash in dividends.
29 The company purchased \(600 of additional office supplies on credit.
30 The company paid \)435 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 (403); and Utilities Expense (690). Post journal entries from part 1 to the ledger accounts and enter the balance after each posting.
Question:Refer to Apple’s financial statements in Appendix A for the following questions.
Required
3. Compute its debt ratio for each of the fiscal years ended September 26, 2015, and September 27, 2014. (Report ratio in percent and round it to one decimal.)
Question:A corporation had the following assets and liabilities at the beginning and end of this year.
Assets Liabilities
Beginning of the year \( 60,000 \)20,000
End of the year . . . . . . . . . . . . . . . . . 105,000 36,000
Determine the net income earned or net loss incurred by the business during the year for each of the following separatecases:
a. Owner made no investments in the business, and no dividends were paid during the year.
b. Owner made no investments in the business, but dividends were \(1,250 cash per month.
c. No dividends were paid during the year, but the owner did invest an additional \)55,000 cash in exchange for common stock.
d. Dividends were \(1,250 cash per month, and the owner invested an additional \)35,000 cash in exchange for common stock.
Question:1. Prepare general journal entries for the following transactions of Valdez Services.
a. The company paid \(2,000 cash for payment on a 6-month-old account payable for office supplies.
b. The company paid \)1,200 cash for the just completed two-week salary of the receptionist.
c. The company paid \(39,000 cash for equipment purchased.
d. The company paid \)800 cash for this month’s utilities.
e. The company paid $4,500 cash in dividends to the owner (sole shareholder).
2. Transactions a, c,and edid not record an expense. Match each transaction (a, c,and e) with one of the following reasons for not recording an expense.
______This transaction is a distribution of cash to the owner. Even though equity decreased, that decrease did not occur in the process of providing goods or services to customers.
______This transaction decreased cash in settlement of a previously existing liability (equity did not change). Supplies expense is recorded when assets are used, not necessarily when cash is paid.
______This transaction involves the purchase of an asset. The form of the company’s assets changed, but total assets did not (and neither did equity).
What is the difference between a note payable and an account payable?
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