Ass 2

1.

Groro Co. bills a client $62,000 for services provided and agrees to accept the following three items in full payment: (1) $10,000 cash, (2) computer equipment worth $80,000, and (3) to assume responsibility for a $28,000 note payable related to the computer equipment. The entry Groro makes to record this transaction includes which one or more of the following? (Select all that apply.)

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2.

Following are transactions of a new company called Pose-for-Pics.

   

Aug. 1	Madison Harris, the owner, invested $6,500 cash and $33,500 of photography equipment in the company in exchange for common stock.
2	The company paid $2,100 cash for an insurance policy covering the next 24 months.
5	The company purchased office supplies for $880 cash.
20	The company received $3,331 cash in photography fees earned.
31	The company paid $675 cash for August utilities.

     

Prepare general journal entries for the above transactions.

Date	General Journal	Debit	Credit
Aug. 1	Cash	6,500
	Photography equipment	33,500
	Common stock		40,000
Aug. 2	Prepaid insurance	2,100
	Cash		2,100
Aug. 5	Office supplies	880
	Cash		880
Aug. 20	Cash	3,331
	Photography fees earned		3,331
Aug. 31	Utilities expense	675
	Cash		675

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3.

The transactions of Spade Company:
a.	Kacy Spade, owner, invested $100,750 cash in the company in exchange for common stock.
b.	The company purchased office supplies for $1,250 cash.
c.	The company purchased $10,050 of office equipment on credit.
d.	The company received $15,500 cash as fees for services provided to a customer.
e.	The company paid $10,050 cash to settle the payable for the office equipment purchased in transaction c.
f.	The company billed a customer $2,700 as fees for services provided.
g.	The company paid $1,225 cash for the monthly rent.
h.	The company collected $1,125 cash as partial payment for the account receivable created in transaction f.
i.	The company paid $10,000 cash in dividends to Spade (sole shareholder).

      

Prepare general journal entries to record the transactions below for Spade Company by using the following accounts: Cash; Accounts Receivable; Office Supplies; Office Equipment; Accounts Payable; Common Stock; Dividends; Fees Earned; and Rent Expense.

Transaction	General Journal	Debit	Credit
a.	Cash	100,750
	Common stock		100,750
b.	Office supplies	1,250
	Cash		1,250
c.	Office equipment	10,050
	Accounts payable		10,050
d.	Cash	15,500
	Fees earned		15,500
e.	Accounts payable	10,050
	Cash		10,050
f.	Accounts receivable	2,700
	Fees earned		2,700
g.	Rent expense	1,225
	Cash		1,225
h.	Cash	1,125
	Accounts receivable		1,125
i.	Dividends	10,000
	Cash		10,000

Post them to T-accounts, which serves as the general ledger for this assignment.

	Rent Expense g. 1,225 Balance 1,225

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4.

The transactions of Spade Company:

  

a.	Kacy Spade, owner, invested $100,750 cash in the company in exchange for common stock.
b.	The company purchased office supplies for $1,250 cash.
c.	The company purchased $10,050 of office equipment on credit.
d.	The company received $15,500 cash as fees for services provided to a customer.
e.	The company paid $10,050 cash to settle the payable for the office equipment purchased in transaction c.
f.	The company billed a customer $2,700 as fees for services provided.
g.	The company paid $1,225 cash for the monthly rent.
h.	The company collected $1,125 cash as partial payment for the account receivable created in transaction f.
i.	The company paid $10,000 cash in dividends to Spade (sole shareholder).

  

Prepare a Trial Balance.

	SPADE COMPANY Trial Balance May 31, 2013 Debit Credit Cash 94,850 Accounts receivable 1,575 Office supplies 1,250 Office equipment 10,050 Accounts payable Common stock 100,750 Dividends 10,000 Fees earned 18,200 Rent expense 1,225 Totals $118,950 $118,950

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Questions 5-7
[The following information applies to the questions displayed below.]

Denzel Brooks opens a Web consulting business called Venture Consultants and completes the following transactions in March.

March 1	Brooks invested $150,000 cash along with $22,000 in office equipment in the company in exchange for common stock.
2	The company prepaid $6,000 cash for six months’ rent for an office. (Hint: Debit Prepaid Rent for $6,000.)
3	The company made credit purchases of office equipment for $3,000 and office supplies for $1,200. Payment is due within 10 days.
6	The company completed services for a client and immediately received $4,000 cash.
9	The company completed a $7,500 project for a client, who must pay within 30 days.
12	The company paid $4,200 cash to settle the account payable created on March 3.
19	The company paid $5,000 cash for the premium on a 12-month insurance policy. (Hint: Debit Prepaid Insurance for $5,000.)
22	The company received $3,500 cash as partial payment for the work completed on March 9.
25	The company completed work for another client for $3,820 on credit.
29	The company paid $5,100 cash in dividends.
30	The company purchased $600 of additional office supplies on credit.
31	The company paid $500 cash for this month’s utility bill.

5.

Required:
1.	Prepare general journal entries to record these transactions.

Date	General Journal	Debit	Credit
Mar 01	Cash	150,000
	Office equipment	22,000
	Common stock		172,000
Mar 02	Prepaid rent	6,000
	Cash		6,000
Mar 03	Office equipment	3,000
	Office supplies	1,200
	Accounts payable		4,200
Mar 06	Cash	4,000
	Services revenue		4,000
Mar 09	Accounts receivable	7,500
	Services revenue		7,500
Mar 12	Accounts payable	4,200
	Cash		4,200
Mar 19	Prepaid insurance	5,000
	Cash		5,000
Mar 22	Cash	3,500
	Accounts receivable		3,500
Mar 25	Accounts receivable	3,820
	Services revenue		3,820
Mar 29	Dividends	5,100
	Cash		5,100
Mar 30	Office supplies	600
	Accounts payable		600
Mar 31	Utilities expense	500
	Cash		500

6.

2.	Post the journal entries from part 1  to the ledger accounts.

7.

3.	Prepare a trial balance as of the end of March.

	VENTURE CONSULTANTS Trial Balance March 31 Debit Credit Cash 136,700 Accounts receivable 7,820 Office supplies 1,800 Prepaid insurance 5,000 Prepaid rent 6,000 Office equipment 25,000 Accounts payable 600 Common stock 172,000 Dividends 5,100 Services revenue 15,320 Utilities expense 500 Totals $187,920 $187,920

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8.

Karla Tanner opens a Web consulting business called Linkworks and completes the following transactions in its first month of operations.

  

April 1	Tanner invests $80,000 cash along with office equipment valued at $26,000 in the company in exchange for common stock.
2	The company prepaid $9,000 cash for 12 months’ rent for office space. (Hint: Debit Prepaid Rent for $9,000.)
3	The company made credit purchases for $8,000 in office equipment and $3,600 in office supplies. Payment is due within 10 days.
6	The company completed services for a client and immediately received $4,000 cash.
9	The company completed a $6,000 project for a client, who must pay within 30 days.
13	The company paid $11,600 cash to settle the account payable created on April 3.
19	The company paid $2,400 cash for the premium on a 12-month insurance policy. (Hint: Debit Prepaid Insurance for $2,400.)
22	The company received $4,400 cash as partial payment for the work completed on April 9.
25	The company completed work for another client for $2,890 on credit.
28	The company paid $5,500 cash in dividends.
29	The company purchased $600 of additional office supplies on credit.
30	The company paid $435 cash for this month’s utility bill.

  

Required:

1.

Prepare general journal entries to record these transactions. Date General Journal Debit Credit April 01 Cash 80,000 Office equipment 26,000 Common stock 106,000 April 02 Prepaid rent 9,000 Cash 9,000 April 03 Office equipment 8,000 Office supplies 3,600 Accounts payable 11,600 April 06 Cash 4,000 Services revenue 4,000 April 09 Accounts receivable 6,000 Services revenue 6,000 April 13 Accounts payable 11,600 Cash 11,600 April 19 Prepaid insurance 2,400 Cash 2,400 April 22 Cash 4,400 Accounts receivable 4,400 April 25 Accounts receivable 2,890 Services revenue 2,890 April 28 Dividends 5,500 Cash 5,500 April 29 Office supplies 600 Accounts payable 600 April 30 Utilities expense 435 Cash 435

2.	Post the journal entries from part 1 to the ledger accounts.

3.

Prepare a trial balance as of April 30. LINKWORKS Trial Balance April 30 Debit Credit Cash 59,465 Accounts receivable 4,490 Office supplies 4,200 Prepaid insurance 2,400 Prepaid rent 9,000 Office equipment 34,000 Accounts payable 600 Common stock 106,000 Dividends 5,500 Services revenue 12,890 Utilities expense 435 Total $119,490 $119,490

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Questions 9-11
[The following information applies to the questions displayed below.]

The accounting records of Nettle Distribution show the following assets and liabilities as of December 31, 2012 and 2013.

  

December 31	2012	2013
Cash	$  64,300	$  15,640
Accounts receivable	26,240	19,390
Office supplies	3,160	1,960
Office equipment	44,000	44,000
Trucks	148,000	157,000
Building	0	80,000
Land	0	60,000
Accounts payable	3,500	33,500
Note payable	0	40,000

  

Late in December 2013, the business purchased a small office building and land for $140,000. It paid $100,000 cash toward the purchase and a $40,000 note payable was signed for the balance. Mr. Nettle had to invest $35,000 cash in the business (in exchange for common stock) to enable it to pay the $100,000 cash. The business also pays $3,000 cash per month for dividends.

9.

Required:
1.	Prepare balance sheets for the business as of December 31, 2012 and 2013.

	NETTLE DISTRIBUTION Balance Sheet December 31, 2012 Assets Liabilities Cash $64,300 Accounts payable $3,500 Office supplies 3,160 Office equipment 44,000 Trucks 148,000 Equity Accounts receivable 26,240 Total equity 282,200 Total assets $285,700 Total liabilities and equity $285,700

	NETTLE DISTRIBUTION Balance Sheet December 31, 2013 Assets Liabilities Cash $15,640 Accounts payable $33,500 Accounts receivable 19,390 Note payable 40,000 Office supplies 1,960 Office equipment 44,000 Trucks 157,000 Total liabilities 73,500 Building 80,000 Equity Land 60,000 Total equity 304,490 Total assets $377,990 Total liabilities and equity $377,990

10.

2.	By comparing equity amounts from the balance sheets and using the additional information presented in this problem, prepare a calculation to show how much net income was earned by the business during 2013.

	Equity, December 31, 2012 $282,200 Add: Owner's investment 35,000 Add: Net income 23,290 340,490 Less: Dividends 36,000 Equity, December 31, 2013 $304,490

11.

3.	Compute the 2013 year-end debt ratio for the business.

	Debt ratio Choose Numerator: / Choose Denominator: = Debt ratio Total liabilities / Total assets = Debt ratio $73,500 / $377,990 = 19.4%

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12.

Business transactions completed by Hannah Venedict during the month of September are as follows.

a.	Venedict invested $60,000 cash along with office equipment valued at $25,000 in exchange for common stock of a new company named HV Consulting.
b.	The company purchased land valued at $40,000 and a building valued at $160,000. The purchase is paid with $30,000 cash and a long-term note payable for $170,000.
c.	The company purchased $2,000 of office supplies on credit.
d.	Venedict invested her personal automobile in the company in exchange for more common stock. The automobile has a value of $16,500 and is to be used exclusively in the business.
e.	The company purchased $5,600 of additional office equipment on credit.
f.	The company paid $1,800 cash salary to an assistant.
g.	The company provided services to a client and collected $8,000 cash.
h.	The company paid $635 cash for this month’s utilities.
i.	The company paid $2,000 cash to settle the account payable created in transaction c.
j.	The company purchased $20,300 of new office equipment by paying $20,300 cash.
k.	The company completed $6,250 of services for a client, who must pay within 30 days.
l.	The company paid $1,800 cash salary to an assistant.
m.	The company received $4,000 cash in partial payment on the receivable created in transaction k.
n.	The company paid $2,800 cash in dividends.

Required:
1.	Prepare general journal entries to record these transactions.

Transaction	General Journal	Debit	Credit
a.	Cash	60,000
	Office equipment	25,000
	Common stock		85,000
b.	Land	40,000
	Building	160,000
	Cash		30,000
	Notes payable		170,000
c.	Office supplies	2,000
	Accounts payable		2,000
d.	Automobiles	16,500
	Common stock		16,500
e.	Office equipment	5,600
	Accounts payable		5,600
f.	Salaries expense	1,800
	Cash		1,800
g.	Cash	8,000
	Fees earned		8,000
h.	Utilities expense	635
	Cash		635
i.	Accounts payable	2,000
	Cash		2,000
j.	Office equipment	20,300
	Cash		20,300
k.	Accounts receivable	6,250
	Fees earned		6,250
l.	Salaries expense	1,800
	Cash		1,800
m.	Cash	4,000
	Accounts receivable		4,000
n.	Dividends	2,800
	Cash		2,800

2.	Post the journal entries from part 1 to the ledger accounts.

3.

Prepare a trial balance as of the end of September. HV CONSULTING Trial Balance September 30 Debit Credit Cash 12,665 Accounts receivable 2,250 Office supplies 2,000 Office equipment 50,900 Automobiles 16,500 Building 160,000 Land 40,000 Accounts payable 5,600 Notes payable 170,000 Common stock 101,500 Dividends 2,800 Fees earned 14,250 Salaries expense 3,600 Utilities expense 635 Totals $291,350 $291,350

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13.
For each of the following (1) identify the type of account as an asset, liability, equity, revenue, or expense, (2) identify the normal balance of the account, and (3) select debit (Dr.) or credit (Cr.) to identify the kind of entry that would increase the account balance.

Account Type of Account Normal Balance Increase (Dr. or Cr.) a. Land Asset Debit Debit b. Cash Asset Debit Debit c. Legal Expense Expense Debit Debit d. Prepaid Insurance Asset Debit Debit e. Accounts Receivable Asset Debit Debit f. Dividends Equity Debit Debit g. License Fee Revenue Revenue Credit Credit h. Unearned Revenue Liability Credit Credit i. Fees Earned Revenue Credit Credit j Equipment Asset Debit Debit k Notes Payable Liability Credit Credit l. Common Stock Equity Credit Credit

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Questions 14-16 [The following information applies to the questions displayed below.]

Carmen Camry operates a consulting firm called Help Today, which began operations on August 1. On August 31, the company’s records show the following accounts and amounts for the month of August.

Cash	$	25,360	Consulting fees earned	$	27,000
Accounts receivable		22,360	Rent expense		9,550
Office supplies		5,250	Salaries expense		5,600
Land		44,000	Telephone expense		860
Office equipment		20,000	Miscellaneous expenses		520
Accounts payable		10,500	Common stock		102,000
Dividends		6,000

14.

Use the above information to prepare an August income statement for the business.

	HELP TODAY Income Statement For Month Ended August 31 Revenues: Consulting fees earned $27,000 Total Revenues $27,000 Expenses: Rent expense $9,550 Salaries expense 5,600 Telephone expense 860 Miscellaneous expenses 520 Total Expenses 16,530 Net income $10,470

15.

Use the above information to prepare an August statement of retained earnings for Help Today. (The owner invested $102,000 cash in the company on August 1 in exchange for common stock.)

	HELP TODAY Statement of Retained Earnings For Month Ended August 31 Retained earnings, July 31 $0 Add: Net income 10,470 10,470 Less: Dividends 6,000 Retained earnings, August 31 $4,470

16.

se the above information to prepare an August 31 balance sheet for Help Today. (The owner invested $102,000 cash in the company on August 1 in exchange for common stock.)

	HELP TODAY Balance Sheet As of August 31 Assets: Liabilities: Cash $25,360 Accounts payable $10,500 Office supplies 5,250 Office equipment 20,000 Equity: Land 44,000 Common stock 102,000 Accounts receivable 22,360 Retained earnings 4,470 Total Assets $116,970 Total Liabilities and Equity $116,970