ACCT 201 – Financial Accounting
Practice Exercises – Chapter 2 (SOLUTIONS)
#1
Below are the external transactions for Shockers Incorporated.
Required:
Analyze each transaction. Under each category in the accounting equation, indicate whether the transaction increases, decreases, or has no effect. The first item is provided as an example.
|
Assets |
= |
Liabilities |
+ |
Stockholders’ Equity |
|
|
1. |
Increase |
= |
No effect |
+ |
Increase |
|
2. |
Decrease |
= |
No effect |
+ |
Decrease |
|
3. |
Increase |
= |
Increase |
+ |
No effect |
|
4. |
Decrease |
= |
No effect |
+ |
Decrease |
|
5. |
Decrease |
= |
No effect |
+ |
Decrease |
|
6. |
Increase |
= |
Increase |
+ |
No effect |
#2
Below is a list of common accounts.
|
Accounts |
Debit or Credit |
|
Supplies |
1. DEBIT |
|
Service Revenue |
2. CREDIT |
|
Dividends |
3. DEBIT |
|
Deferred Revenue |
4. CREDIT |
|
Buildings |
5. DEBIT |
|
Common Stock |
6. CREDIT |
|
Advertising Expense |
7. DEBIT |
|
Prepaid Rent |
8. DEBIT |
|
Interest Expense |
9. DEBIT |
|
Notes Payable |
10. CREDIT |
Required:
Indicate whether the normal balance of each account is a debit or a credit.
#3
Below are several external transactions for Hokies Company.
|
Account Debited |
Account Credited |
|
|
Example: Purchase equipment in exchange for cash. |
Equipment |
Cash |
|
1. Provide services to customers on account. |
Accounts Receivable |
Service Revenue |
|
2. Purchase land for cash. |
Land |
Cash |
|
3. Purchase supplies on account. |
Supplies |
Accounts Payable |
|
4. Pay workers’ salaries for the current month. |
Salaries Expense |
Cash |
|
5. Purchase advertising for the current month. |
Advertising Expense |
Cash |
|
6. Pay rent for the current month. |
Rent Expense |
Cash |
|
7. Receive cash in advance from customers. |
Cash |
Deferred Revenue |
|
8. Issue common stock in exchange for cash. |
Cash |
Common Stock |
|
9. Pay dividends to stockholders. |
Dividends |
Cash |
|
10. Issue a note payable in exchange for cash. |
Cash |
Notes Payable |
Hokies uses the following accounts:
|
Accounts Payable |
Equipment |
Accounts Receivable |
|
Cash |
Supplies |
Advertising Expense |
|
Land |
Rent Expense |
Service Revenue |
|
Common Stock |
Notes Payable |
Retained Earnings |
|
Unearned Revenue |
Salaries Expense |
Dividends |
Required:
Indicate which accounts should be debited and which should be credited.
#4
Bearcat Construction begins operations in March and has the following transactions.
|
March 1 |
Receive cash from customers for services provided, $21,300. |
|
March 5 |
Issue common stock for cash, $11,000. |
|
March 10 |
Receive cash from customers who were previously billed, $14,600. |
|
March 15 |
Pay salaries for the current month of $3,800. |
|
March 22 |
Pay rent for one year in advance, $15,700. |
|
March 27 |
Pay dividends to stockholders, $9,000. |
|
March 28 |
Purchase office supplies with cash, $3,800. |
Required:
Record each transaction.
|
March 1 |
Debit |
Credit |
|
Cash |
21,300 |
|
|
Service Revenue |
21,300 |
|
|
(Provide services to customers for cash) |
||
|
March 5 |
||
|
Cash |
11,000 |
|
|
Common stock |
11,000 |
|
|
(Issue common stock for cash) |
||
|
March 10 |
||
|
Cash |
14,600 |
|
|
Accounts Receivable |
14,600 |
|
|
(Receive cash from customers on account) |
||
|
March 15 |
||
|
Salaries Expense |
3,800 |
|
|
Cash |
3,800 |
|
|
(Pay salaries for current month) |
||
|
March 22 |
||
|
Prepaid Rent |
15,700 |
|
|
Cash |
15,700 |
|
|
(Pay for rent in advance) |
||
|
March 27 |
||
|
Dividends |
9,000 |
|
|
Cash |
9,000 |
|
|
(Pay dividends to stockholders) |
||
|
March 28 |
||
|
Supplies |
3,800 |
|
|
Cash |
3,800 |
|
|
(Purchase office supplies with cash) |
||
#5
Below is the complete list of accounts of Sooner Company and the related balance at the end of April. All accounts have their normal debit or credit balance. Supplies, $1,700; Buildings, $44,200; Salaries Payable, $3,200; Common Stock, $36,500; Accounts Payable, $2,600; Utilities Expense, $5,200; Prepaid Insurance, $2,000; Service Revenue, $20,900; Accounts Receivable, $4,500; Cash, $3,100; Salaries Expense, $7,900; Retained Earnings, $5,400.
Required:
Prepare a trial balance with the list of accounts in the following order: assets, liabilities, stockholders’ equity, revenues, and expenses.
|
Sooner Company Trial Balance April 30 |
||
|
Accounts |
Debit |
Credit |
|
Cash |
$ 3,100 |
|
|
Accounts receivable |
4,500 |
|
|
Supplies |
1,700 |
|
|
Prepaid insurance |
2,000 |
|
|
Buildings |
44,200 |
|
|
Accounts payable |
$ 2,600 |
|
|
Salaries payable |
3,200 |
|
|
Common stock |
36,500 |
|
|
Retained earnings |
5,400 |
|
|
Service revenue |
20,900 |
|
|
Salaries expense |
7,900 |
|
|
Utilities expense |
5,200 |
|
|
Totals |
$68,600 |
$68,600 |
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