Chapter 2: 11RQ (page 90)
Explain the five steps in journalizing and posting transactions.
Journal is the record of business transactions and there are five steps to journalizing and posting journal entries.
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Question:Journalizing transactions, posting journal entries to four-column accounts, and preparing a trial balance The following transactions occurred during the month for Teresa Parker, CPA:
Jun. 1 Parker opened an accounting firm by contributing \(13,200 cash and office furniture with a fair market value of \)5,300 in exchange for common stock.
5 Paid monthly rent of \(1,300.
9 Purchased office supplies on account, \)600.
14 Paid employee’s salary, \(1,900.
18 Received a bill for utilities to be paid next month, \)370.
21 Paid \(500 of the accounts payable created on June 9.
25 Performed accounting services on account, \)5,700.
28 Paid cash dividends of $6,700
Requirements 3. Prepare the trial balance as of June 30, 2018
Question:Roy Akins was the accounting manager at Zelco, a tire manufacturer, and he played golf with Hugh Stallings, the CEO, who was something of a celebrity in the community. The CEO stood to earn a substantial bonus if Zelco increased net income by year-end. Roy was eager to get into Hugh’s elite social circle; he boasted to Hugh that he knew some accounting tricks that could increase company income by simply revising a few journal entries for rental payments on storage units. At the end of the year, Roy changed the debits from “rent expense” to “prepaid rent” on several entries. Later, Hugh got his bonus, and the deviations were never discovered.
Requirements 2. Who gained and who lost as a result of these actions?
Question: Correcting errors in a trial balance
The following trial balance of Joy McDowell Tutoring Service as of May 31, 2018, does not balance.
Account Title Office Supplies Cash Debit Credit Accounts Receivable Computer Equipment Accounts Payable Utilities Payable Common Stock Dividends Service Revenue Salaries Expense Utilities Expense Rent Expense Total Balance \( 33,100 11,600 \) 11,100 9,600 800 \( 2,800 \) 35,000 1,900 800 700 2,000 600 15,800 10,400
Investigation of the accounting records reveals that the bookkeeper:
a. Recorded a \(400 cash revenue transaction by debiting Accounts Receivable. The credit entry was correct.
b. Posted a \)2,000 credit to Accounts Payable as \(200.
c. Did not record Utilities Expense or the related Utilities Payable in the amount of \)300.
d. Understated Common Stock by $100.
Prepare the corrected trial balance as of May 31, 2018, complete with a heading; journal entries are not required.
Better Days Ahead, a charitable organization, has a standing agreement with First National Bank. The agreement allows Better Days Ahead to overdraw its cash balance at the bank when donations are running low. In the past, Better Days Ahead managed funds wisely and rarely used this privilege. Jacob Henson has recently become the president of Better Days Ahead. To expand operations, Henson acquired office equipment and spent large amounts on fundraising. During Henson’s presidency, Better Days Ahead has maintained a negative bank balance of approximately $10,000.
What is the ethical issue in this situation, if any?
State why you approve or disapprove of Henson’s management of Better Days Ahead’s funds.
Question:Preparing financial statements from the trial balance and calculating the debt ratio
The trial balance as of July 31, 2018, for Sara Simon, Registered Dietician, is presented below:
Account Title Debit Credit
Office Supplies 2,300
Cash 38,000
Accounts Receivable 9,000
Prepaid Insurance 2,400
Equipment 16,000
Accounts Payable 3,000
Unearned Revenue 3,912
Notes Payable 31,000
Common Stock 18,000
Dividends 2,800
Salaries Expense 1,700
Rent Expense 1,100
Utilities Expense 500
Service Revenue 17,888
Total Balance \( 73,800 \) 73,800
Requirements 3. Prepare the balance sheet as of July 31, 2018.
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