FINANCIAL ACCOUNTING (CHAPTER # 3) – PROBLEMS - ANSWERS
Problem 3.4 The Accounting Cycle: Journalizing, Posting, and Preparing a Trial Balance a. Transaction
Revenue -
June 1 June 2 June 4 June 15 June 15 June 18 June 25 June 30 June 30 June 30 June 30
NE NE NE I NE NE NE I NE NE NE
Income Statement Expenses = Net Income NE NE I NE I I NE NE I I NE
NE NE D I D D NE I D D NE
b.
Assets I I D I D D NE I D NE NE
=
Balance Sheet Liabilities + NE I NE NE NE NE NE NE NE I I
Owners’ Equity I NE D I D D NE I D D D
General Journal 2005
June
1
Cash
60,000
Capital Stock Issued stock to Wendy Winger 2
60,000
Aircraft
220,000
Cash Notes Payable Purchased plane from Utility Aircraft 4
15
15
18
25
40,000 180,000
Rent Expense Cash Paid office and hangar rent for June.
2,500
Accounts Receivable Aerial Photography Revenue Billed customers for first half of June.
8,320
Salaries Expense Cash Paid salaries for first half of June.
5,880
Maintenance Expense Cash Paid Hannigan’s Hangar for repair services
1,890
Cash
4,910
2,500
8,320
5,880
1,890
Accounts Receivable Collected portion of amount billed to customers 30
30
30
30
Accounts Receivable Aerial Photography Revenue Billed customers for services rendered through month-end
4,910
16,450 16,450
Salaries Expense Cash Paid salaries through month-end
6,000
Fuel Expense Accounts Payable Received bill for fuel used during June
2,510
Dividends Dividends Payable Declared dividend payable July 15.
2,000
Page 1 of 6
6,000
2,510
2,000
FINANCIAL ACCOUNTING (CHAPTER # 3) – PROBLEMS - ANSWERS
Cash Date 2005
June
Explanation
Debt
1 2 4 15 18 25 30
Credit
60,000 40,000 2,500 5,880 1,890 4,910 6,000
Balance
60,000 20,000 17,500 11,620 9,730 14,640 8,640
Accounts Receivable Date 2005
June
Explanation
Debt
15 25 30
Credit
8,320 4,910 16,450
Balance
8,320 3,410 19,860
Aircraft Date 2005
June
Explanation
Debt
2
Credit
220,000
Balance
220,000
Notes Payable Date 2005
June
Explanation
Debt
2
Credit
180,000
Balance
180,000
Accounts Payable Date 2005
June
Explanation
Debt
30
Credit
2,510
Balance
2,510
Dividends Payable Date 2005
June
Explanation
Debt
30
Credit
2,000
Balance
2,000
Capital Stock Date 2005
June
Explanation
Debt
1
Credit
60,000
Balance
60,000
Dividends Date 2005
June
Explanation
Debt
1
Credit
2,000
Balance
2,000
Aerial Photography Revenue Date 2005
June
Explanation
Debt
15 30
Credit
8,320 16,450
Balance
8,320 24,770
Maintenance Expense Date 2005
June
Explanation
Debt
18
1,890
Page 2 of 6
Credit
Balance
1,890
FINANCIAL ACCOUNTING (CHAPTER # 3) – PROBLEMS - ANSWERS
Fuel Expense Date 2005
June
Explanation
Debt
30
Credit
2,510
Balance
2,510
Salaries Expense Date 2005
June
Explanation
Debt
15 30
Credit
5,880 6,000
Balance
5,880 11,880
Rent Expense Date 2005
June
Explanation
Debt
4
Credit
2,500
2,500
d. AERIAL VIEWS Trial Balance June 30, 2005 (Rs.) 8,640 19,860 220,000
Cash Accounts receivable Aircraft Notes payable Accounts payable Dividends payable Capital stock Retained earnings Dividends Aerial Photography revenue Maintenance expense Fuel expense Salaries expense Rent expense
(Rs.)
180,000 2,510 2,000 600,000 0 2,000 24,770 1,890 2,510 11,880 2,500 269,280
_______ 269,280
e. (Rs.)
Total assets: Cash Accounts receivable Aircraft Total assets
(Rs.)
8,640 19,860 220,000 248,500
Total liabilities: Notes payable Accounts payable Dividends payable Total liabilities Total stockholders’ equity: Total assets – total liabilities (Rs. 248,500 – Rs. 184,510) (Alternates computation – net all owners’ equity accounts, permanent and temporary: The above figures are most likely not the amounts to be reported in the balance sheet dated June 30. The accounting cycle includes adjustments that must be made to the trial balance figures before financial statements are prepared. The adjusting process is covered in Chapter 4.
Page 3 of 6
Balance
180,000 2,510 2,000 184,510 63,990
FINANCIAL ACCOUNTING (CHAPTER # 3) – PROBLEMS - ANSWERS
Problem 3.5 The Accounting Cycle: Journalizing, Posting and Preparing and Preparing a Trial Balance a. Transaction
Revenue -
May 1 May 4 May 9 May 16 May 21 May 24 May 27 May 28 May 31
NE NE NE NE NE I NE NE NE
Income Statement Expenses = Net Income NE NE NE NE NE NE I NE I
NE NE NE NE NE I D NE D
b.
Assets I I NE I NE I NE NE D
=
Balance Sheet Liabilities + NE I NE I NE NE I NE NE
Owners’ Equity I NE NE NE NE I D NE D
General Journal 2005
May
1
Cash
400,000
Capital Stock Issued 5,000 shares of capital stock 4
Land Building
400,000
70,000 180,000
Cash Notes Payable Purchased land and building 9
10
21
24
27
28
100,000 150,000
Medical Instruments Cash Purchased medical instruments.
130,000 130,000
Office Fixtures & Equipment Cash Accounts Payable Purchased fixtures and equipment
50,000 20,000 30,000
Office Supplies Cash Purchased office supplies.
5,000
Cash Accounts Receivable Veterinary Service Revenue Recorded veterinary service revenue earned.
1,900 300
5,000
2,200
Advertising Expense Accounts Payable Recorded advertising expense incurred in May.
400
Cash
100
400
Accounts Receivable Collected cash for May 24 services. 31
Salary Expense Cash Paid May salary expense
100
2,800 2,800
Page 4 of 6
FINANCIAL ACCOUNTING (CHAPTER # 3) – PROBLEMS - ANSWERS
c. May 1 May 24 May 28
Cash 400,000 1,900 100
May 31 Bal.
144,200
May 4 May 9 May 16 May 21 May 31
Accounts Receivable 300 May 28
May 24 May 31 Bal.
Notes Payable May 4
100,000 130,000 20,000 5,000 2,800
100
200 Office Supplies 5,000
May 21 May 31 Bal.
May 31 Bal.
150,000
Accounts Payable May 16 May27 May 31 Bal.
30,000 400 30,400
5,000
May 31 Bal. Veterinary Service Revenue May 24
130,000
May 31 Bal.
Office Fixtures & Equipment 50,000
May 31
May 31 Bal.
Capital Stock May 1
Medical Instruments 130,000
May 5
May 27
May 31 Bal.
50,000
May 04
Land 70,000
May 31
May 31 Bal.
70,000
May 31 Bal.
Advertising Expense 400
May 31 Bal.
400
Salary Expense 2,800
2,800
Building 180,000
May 04 May 31 Bal.
180,000
d. AERIAL VIEWS Trial Balance June 30, 2005 (Rs.) 144,200 200 5,000 130,000 50,000 70,000 180,000
Cash Accounts receivable Office supplies Medical Instruments Office fixtures & equipment Land Building Notes pyable Accounts payable Capital stock Retained earnings Veterinary service revenue Advertising expense Salary expense
(Rs.)
150,000 30,400 400,000 0 2,200 400 2,800 582,600
Page 5 of 6
150,000
________ 582,600
400,000 400,000
2,200 2,200
FINANCIAL ACCOUNTING (CHAPTER # 3) – PROBLEMS - ANSWERS
e. (Rs.)
Total assets: Cash Accounts receivable Office supplies Medical instruments Office fixtures & equipment Land Building Total assets
(Rs.)
144,200 200 5,000 130,000 50,000 70,000 180,000 579,400
Total liabilities: Notes payable Accounts payable Total liabilities Total owners’ (stockholders’) equity: Total assets – total liabilities (Rs. 579,400 – Rs. 180,400)
150,000 30,400 180,400 399,000
As shown below, the business was not profitable in its first month of operations: Veterinary service revenue Less:
2,200
Advertising expense Salary expense Net loss
400 2,800
Page 6 of 6
3,200 (1,000)
