Chapter 2: 4SE (page 91)
Calculating the balance of a T-account
Accounts Payable
May 2 6,000 21,000 May 1
May 22 11,500 500 May 5
8,500 May 15
500 May 23
Calculate the Accounts Payable balance.
Accounts payable is money owed to the supplier and the balance of accounts payable is $13,000
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Question:The following transactions occurred for Lawrence Engineering:
Jul. 2 Received \(14,000 contribution from Brett Lawrence in exchange for common stock.
4 Paid utilities expense of \)370.
5 Purchased equipment on account, \(1,600.
10 Performed services for a client on account, \)2,900.
12 Borrowed \(7,100 cash, signing a notes payable.
19 Cash dividends of \)200 were paid to stockholders.
21 Purchased office supplies for $840 and paid cash.
27 Paid the liability from July 5.
Requirements 1. Open the following T-accounts for Lawrence Engineering: Cash; Accounts Receivable; Office Supplies; Equipment; Accounts Payable; Notes Payable; Common Stock; Dividends; Service Revenue; and Utilities Expense.
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.
When are credits increases? When are credits decreases?
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 1. How did the change in the journal entries affect the net income of the company at year-end?
What is the calculation for the debt ratio? Explain what the debt ratio evaluates.
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