FINANCIAL ACCOUNTING (CHAPTER # 3) PROBLEMS - ANSWERS

Problem 3.4
The Accounting Cycle: Journalizing, Posting, and Preparing a Trial Balance a.
Transaction June 1 June 2 June 4 June 15 June 15 June 18 June 25 June 30 June 30 June 30 June 30 Revenue 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 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

b.
2005 June 1 Cash Capital Stock Issued stock to Wendy Winger 2 Aircraft Cash Notes Payable Purchased plane from Utility Aircraft 4 Rent Expense Cash Paid office and hangar rent for June.

General Journal
60,000 60,000 220,000 40,000 180,000 2,500 2,500 8,320 8,320 5,880 5,880 1,890 1,890 4,910 4,910 16,450 16,450 6,000 6,000 2,510 2,510 2,000 2,000

15

Accounts Receivable Aerial Photography Revenue Billed customers for first half of June. Salaries Expense Cash Paid salaries for first half of June. Maintenance Expense Cash Paid Hannigans Hangar for repair services Cash Accounts Receivable Collected portion of amount billed to customers

15

18

25

30

Accounts Receivable Aerial Photography Revenue Billed customers for services rendered through month-end Salaries Expense Cash Paid salaries through month-end Fuel Expense Accounts Payable Received bill for fuel used during June Dividends Dividends Payable Declared dividend payable July 15.

30

30

30

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FINANCIAL ACCOUNTING (CHAPTER # 3) PROBLEMS - ANSWERS

Cash
Date 2005 June 1 2 4 15 18 25 30 Explanation Debt 60,000 40,000 2,500 5,880 1,890 4,910 6,000 Credit Balance 60,000 20,000 17,500 11,620 9,730 14,640 8,640

Accounts Receivable
Date 2005 June 15 25 30 Explanation Debt 8,320 4,910 16,450 Credit Balance 8,320 3,410 19,860

Aircraft
Date 2005 June 2 Explanation Debt 220,000 Credit Balance 220,000

Notes Payable
Date 2005 June 2 Explanation Debt Credit 180,000 Balance 180,000

Accounts Payable
Date 2005 June 30 Explanation Debt Credit 2,510 Balance 2,510

Dividends Payable
Date 2005 June 30 Explanation Debt Credit 2,000 Balance 2,000

Capital Stock
Date 2005 June 1 Explanation Debt Credit 60,000 Balance 60,000

Dividends
Date 2005 June 1 Explanation Debt 2,000 Credit Balance 2,000

Aerial Photography Revenue

Date 2005 June 15 30 Explanation Debt Credit 8,320 16,450 Balance 8,320 24,770

Maintenance Expense
Date 2005 June 18 Explanation Debt 1,890 Credit Balance 1,890

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FINANCIAL ACCOUNTING (CHAPTER # 3) PROBLEMS - ANSWERS

Fuel Expense
Date 2005 June 30 Explanation Debt 2,510 Credit Balance 2,510

Salaries Expense
Date 2005 June 15 30 Explanation Debt 5,880 6,000 Credit Balance 5,880 11,880

Rent Expense
Date 2005 June 4 Explanation Debt 2,500 Credit Balance 2,500

d.
AERIAL VIEWS Trial Balance June 30, 2005
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.) 8,640 19,860 220,000 (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 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. 8,640 19,860 220,000 248,500 180,000 2,510 2,000 184,510 63,990 (Rs.)

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FINANCIAL ACCOUNTING (CHAPTER # 3) PROBLEMS - ANSWERS

Problem 3.5
The Accounting Cycle: Journalizing, Posting and Preparing and Preparing a Trial Balance a.
Transaction May 1 May 4 May 9 May 16 May 21 May 24 May 27 May 28 May 31 Revenue 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 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

b.
2005 May 1 Cash Capital Stock Issued 5,000 shares of capital stock 4 Land Building Cash Notes Payable Purchased land and building 9 Medical Instruments Cash Purchased medical instruments. Office Fixtures & Equipment Cash Accounts Payable Purchased fixtures and equipment Office Supplies Cash Purchased office supplies.

General Journal
400,000 400,000 70,000 180,000 100,000 150,000 130,000 130,000 50,000 20,000 30,000 5,000 5,000 1,900 300 2,200 400 400 100 100 2,800 2,800

10

21

24

Cash Accounts Receivable Veterinary Service Revenue Recorded veterinary service revenue earned. Advertising Expense Accounts Payable Recorded advertising expense incurred in May. Cash Accounts Receivable Collected cash for May 24 services.

27

28

31

Salary Expense Cash Paid May salary expense

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FINANCIAL ACCOUNTING (CHAPTER # 3) PROBLEMS - ANSWERS c. May 1 May 24 May 28 May 31 Bal. Cash 400,000 1,900 100 144,200 Accounts Receivable 300 May 28 200 Office Supplies 5,000 5,000 Medical Instruments 130,000 130,000 Office Fixtures & Equipment 50,000 50,000 Land 70,000 70,000 Building 180,000 180,000 May 27 May 31 Bal. May 4 May 9 May 16 May 21 May 31 100,000 130,000 20,000 5,000 2,800 Notes Payable May 4 150,000

May 31 Bal. Accounts Payable May 16 May27 May 31 Bal. Capital Stock May 1 May 31 Bal. Veterinary Service Revenue May 24 May 31 Bal. Advertising Expense 400 400 Salary Expense 2,800 2,800

150,000

May 24 May 31 Bal. May 21 May 31 Bal. May 5 May 31 Bal. May 31 May 31 Bal.

100

30,000 400 30,400 400,000 400,000 2,200 2,200

May 04 May 31 Bal. May 04 May 31 Bal.

May 31 May 31 Bal.

d.
AERIAL VIEWS Trial Balance June 30, 2005
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.) 144,200 200 5,000 130,000 50,000 70,000 180,000 (Rs.)

150,000 30,400 400,000 0 2,200 400 2,800 582,600 ________ 582,600

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FINANCIAL ACCOUNTING (CHAPTER # 3) PROBLEMS - ANSWERS

e.
(Rs.) Total assets: Cash Accounts receivable Office supplies Medical instruments Office fixtures & equipment Land Building Total assets Total liabilities: Notes payable Accounts payable Total liabilities Total owners (stockholders) equity: Total assets total liabilities (Rs. 579,400 Rs. 180,400) As shown below, the business was not profitable in its first month of operations: Veterinary service revenue Less: Advertising expense Salary expense Net loss 400 2,800 2,200 3,200 (1,000) 144,200 200 5,000 130,000 50,000 70,000 180,000 579,400 150,000 30,400 180,400 399,000 (Rs.)

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