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Chapter 2 The Recording Process

EXERCISES: SET B
Analyze statements about
accounting and the recording
process.
(SO 1)

E2-1B Jake Chinley has prepared the following list of statements about accounts.
1. An account is an accounting record of either a specific asset or a specific owners equity item.
2. An account shows both increases and decreases in the item it relates to.
3. Some items, such as Accounts Payable and Accounts Receivable, are combined into one
account.
4. An account has a left, or debit side, and a right, or credit side.
5. A simple form of an account consisting of just the account title, and one column, is called a
T-account.
Instructions
Identify each statement as true or false. If false, indicate how to correct the statement.

Identify debits, credits, and

normal balances.

E2-2B Selected transactions for T. Carter, an interior decorator, in her first month of business,
are as follows.

(SO 2)

Jan. 2 Invested $20,000 cash in business.

3 Paid $500 cash for advertising.
9 Purchased equipment for $7,000 cash.
11 Billed customers $2,300 for services performed.
16 Purchased supplies on account for $700.
20 Received $1,100 cash from customers billed on January 11.
23 Paid creditor $400 cash on balance owed.
28 Withdrew $1,200 cash for personal use by owner.
Instructions
For each transaction indicate the following.
(a)
(b)
(c)
(d)

The basic type of account debited and credited (asset, liability, owners equity).
The specific account debited and credited (cash, rent expense, service revenue, etc.).
Whether the specific account is increased or decreased.
The normal balance of the specific account.
Use the following format, in which the January 2 transaction is given as an example.

Account Debited

Date

(a)
Basic
Type

(b)
Specific
Account

Jan. 2

Asset

Cash

(c)

Account Credited

Effect

(d)
Normal
Balance

(a)
Basic
Type

(b)
Specific
Account

Increase

Debit

Owners
Equity

T. Carter,
Capital

(c)
Effect

(d)
Normal
Balance

Increase

Credit

Journalize transactions.

E2-3B Data for T. Carter, interior decorator, are presented in E2-2B.

(SO 4)

Instructions
Journalize the transactions using journal page J1. (You may omit explanations.)

Analyze transactions and

determine their effect on
accounts.

E2-4B Presented below is information related to Clock Tower Real Estate Agency.

(SO 2)

Oct. 1 Ben Paul begins business as a real estate agent with a cash investment of $22,000.
2 Paid rent, $700, on office space.
3 Purchases office furniture for $2,800, on account.
6 Sells a house and lot for Shari Molena; bills Shari Molena $4,400 for realty services
provided.
27 Pays $1,100 on the balance related to the transaction of October 3.
30 Receives bill for October utilities, $120 (not paid at this time).
Instructions
Prepare the debit-credit analysis for each transaction as illustrated on pages 6065.

Journalize transactions.

E2-5B Transaction data for Clock Tower Real Estate Agency are presented in E2-4B.

(SO 4)

Instructions
Journalize the transactions. (You may omit explanations.)

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Exercises: Set B
E2-6B Thome Industries had the following transactions.

Analyze transactions and

journalize.

1. Borrowed $10,000 from the bank by signing a note.

2. Paid $3,100 cash for a computer.
3. Paid $ 800 for rent.

(SO 2, 3, 4)

Instructions
(a) Indicate what accounts are increased and decreased by each transaction.
(b) Journalize each transaction.
E2-7B Anderson Enterprises had the following selected transactions.
1.
2.
3.
4.

Analyze transactions and

journalize.

Brian Anderson invested $6,000 cash in the business.

Purchased $1,100 of supplies on account.
Performed consulting services and billed a client $4,500.
Brian Anderson withdrew $1,200 cash for personal use.

(SO 2, 3, 4)

Instructions
(a) Indicate the effect each transaction has on the basic accounting equation
(Assets  Liabilities  Owners Equity), using plus and minus signs.
(b) Journalize each transaction.
E2-8B Ho Siah has prepared the following list of statements about the general ledger.

Analyze statements about the

ledger and the general journal.

1. The general ledger contains all the liability and owners equity accounts, but no asset
accounts.
2. The general ledger is sometimes referred to as simply the journal.
3. The accounts in the general ledger are arranged in alphabetical order.
4. Each account in the general ledger is numbered for easier identification.
5. The general journal is a book of original entry.

(SO 5)

Instructions
Identify each statement as true or false. If false, indicate how to correct the statement.
E2-9B Selected transactions from the journal of Marietta Hernandez, investment broker, are
presented below.

Post journal entries and

prepare a trial balance.
(SO 6, 7)

Date
Aug. 1

10

12

25

31

Account Titles and Explanation

Ref.

Debit

Cash
Marietta Hernandez, Capital
(Owners investment of cash in business)

6,000

Cash
Service Revenue
(Received cash for services provided)

1,700

Office Equipment
Cash
Notes Payable
(Purchased office equipment for cash
and notes payable)

4,000

Accounts Receivable
Service Revenue
(Billed clients for services provided)

2,500

Cash
Accounts Receivable
(Receipt of cash on account)

Instructions
(a) Post the transactions to T accounts.
(b) Prepare a trial balance at August 31, 2008.

Credit
6,000

1,700

1,000
3,000

2,500
1,500
1,500

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10

Chapter 2 The Recording Process

Journalize transactions from

account data and prepare a
trial balance.

E2-10B The T accounts below summarize the ledger of Rachels Landscaping Company at the
end of the first month of operations.

(SO 4, 7)

Cash
4/1
4/12
4/29
4/30

10,000
1,200
900
1,400

4/15
4/25

Accounts Receivable
4/7

2,900

4/4

1,900

4/29

Supplies

1,600

4/30

700
1,600

No. 112

Rachel Runde, Capital

900

4/1

Service Revenue

No. 126

4/7
4/12

Accounts Payable
4/25

Unearned Revenue

No. 101

4/4

No. 201
1,900

Salaries Expense
4/15

No. 205
1,400

No. 301
10,000

No. 400
2,900
1,200

No. 726

700

Instructions
(a) Prepare the complete general journal (including explanations) from which the postings to
Cash were made.
(b) Prepare a trial balance at April 30, 2008.
Journalize transactions from
account data and prepare a
trial balance.

E2-11B Presented below and on the next page is the ledger for Hurley Co.

(SO 4, 7)

10/1
10/10
10/10
10/20
10/25

Cash
6,500
800
3,000
450
2,000

10/4
10/12
10/15
10/30
10/31

Accounts Receivable
10/6
10/20

800
1,070

10/20

Supplies
10/4

Hurley, Drawing
10/30

10/6
10/10
10/20

450

Store Wages Expense

No. 126

No. 149

10/10

Accounts Payable
10/3

6,500
2,000

No. 306

No. 407
800
800
1,070

No. 628

500

Rent Expense
10/15

No. 301

300

Service Revenue

No. 112

2,000

1,500

10/1
10/25

10/31

Notes Payable

10/12

400
1,500
250
300
500

400

Furniture
10/3

Hurley, Capital

No. 101

No. 729

250

No. 200
3,000

No. 201
2,000

Instructions
(a) Reproduce the journal entries for the transactions that occurred on October 1, 10, and 20,
and provide explanations for each.
(b) Determine the October 31 balance for each of the accounts above, and prepare a trial
balance at October 31, 2008.

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Problems: Set C
E2-12B Selected transactions for Angel Carerra Company during its first month in business are
presented below.
Sept. 1
5
25
30

Invested $18,000 cash in the business.

Purchased equipment for $20,000 paying $7,500 in cash and the balance on account.
Paid $9,000 cash on balance owed for equipment.
Withdrew $1,000 cash for personal use.

11

Prepare journal entries and

post using standard account
form.
(SO 4, 6)

Carerras chart of accounts shows: No. 101 Cash, No. 157 Equipment, No. 201 Accounts Payable,
No. 301 Angel Carerra, Capital, No. 306 Angel Carerra, Drawing.
Instructions
(a) Journalize the transactions on page J1 of the journal.
(b) Post the transactions using the standard account form.
E2-13B The bookkeeper for Sam Hurd Equipment Repair made a number of errors in journalizing and posting, as described below.

Analyze errors and their effects

on trial balance.

1. A credit posting of $500 to Accounts Receivable was omitted.

2. A debit posting of $750 for Insurance Expense was debited to Prepaid Insurance.
3. A collection from a customer of $200 in payment of its account owed was posted as a debit
to Cash $200 and a debit to Service Revenue $200.
4. A debit posting of $400 to Property Taxes Payable was made twice.
5. A cash purchase of supplies for $250 was journalized and posted as a debit to Supplies $25
and a credit to Cash $25.
6. A debit of $594 to Advertising Expense was posted as $549.

(SO 7)

Instructions
For each error:
(a) Indicate whether the trial balance will balance.
(b) If the trial balance will not balance, indicate the amount of the difference.
(c) Indicate the trial balance column that will have the larger total.
Consider each error separately. Use the following form, in which error (1) is given as an example.

Error

(a)
In Balance

(b)
Difference

(c)
Larger Column

(1)

No

$500

debit

E2-14B The accounts in the ledger of Saget Delivery Service contain the following balances on
July 31, 2008.
Accounts Receivable
Accounts Payable
Cash
Delivery Equipment
Gas and Oil Expense
Insurance Expense
Notes Payable

$ 4,220
5,110
?
30,000
450
310
11,000

Prepaid Insurance
Repair Expense
Service Revenue
Saget, Drawing
Saget, Capital
Salaries Expense
Salaries Payable

Prepare a trial balance.

(SO 2, 7)

$1,190
580
6,360
420
26,780
2,660
490

Instructions
Prepare a trial balance with the accounts arranged as illustrated in the chapter and fill in the
missing amount for Cash.

PROBLEMS: SET C
P2-1C Hyzer Disc Golf Course was opened on March 1 by Barry Schultz. The following selected events and transactions occurred during March:
Mar. 1
3

Invested $20,000 cash in the business.

Purchased Heerens Golf Land for $15,000 cash. The price consists of land $12,000,
shed $2,000, and equipment $1,000. (Make one compound entry.)

Journalize a series of
transactions.
(SO 2, 4)

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Chapter 2 The Recording Process

5
6
10
18
19
25
30
30
31

Advertised the opening of the driving range and miniature golf course, paying advertising expenses of $700.
Paid cash $600 for a one-year insurance policy.
Purchased golf discs and other equipment for $1,050 from Innova Company payable in
30 days.
Received $340 in cash for golf fees earned.
Sold 100 coupon books for $10 each. Each book contains 4 coupons that enable the
holder to play one round of disc golf.
Withdrew $800 cash for personal use.
Paid salaries of $250.
Paid Innova Company in full.
Received $200 cash for fees earned.

Barry Schultz uses the following accounts: Cash; Prepaid Insurance; Land; Buildings; Equipment;
Accounts Payable; Unearned Revenue; Barry Schultz, Capital; Barry Schultz, Drawing; Golf
Revenue; Advertising Expense; and Salaries Expense.
Instructions
Journalize the March transactions.
Journalize transactions, post,
and prepare a trial balance.

P2-2C Maria Juarez is a licensed dentist. During the first month of the operation of her business, the following events and transactions occurred.

(SO 2, 4, 6, 7)

April 1
1
2
3
10
11
20
30
30

Invested $40,000 cash.

Hired a secretary-receptionist at a salary of $600 per week payable monthly.
Paid office rent for the month $1,000.
Purchased dental supplies on account from Smile Company $4,000.
Provided dental services and billed insurance companies $5,100.
Received $1,000 cash advance from Trudy Borke for an implant.
Received $2,100 cash for services completed and delivered to John Stanley.
Paid secretary-receptionist for the month $2,400.
Paid $1,600 to Smile Company for accounts payable due.

Maria uses the following chart of accounts: No. 101 Cash, No. 112 Accounts Receivable, No. 126
Supplies, No. 201 Accounts Payable, No. 205 Unearned Revenue, No. 301 Maria Juarez, Capital,
No. 400 Service Revenue, No. 726 Salaries Expense, and No. 729 Rent Expense.
Trial balance totals $50,600

Instructions
(a) Journalize the transactions.
(b) Post to the ledger accounts.
(c) Prepare a trial balance on April 30, 2008.

Journalize transactions, post,

and prepare a trial balance.

P2-3C Slowhand Services was formed on May 1, 2008. The following transactions took place
during the first month.

(SO 2, 4, 6, 7)

Transactions on May 1:
1. Eric Clapton invested $50,000 cash in the company, as its sole owner.
2. Hired two employees to work in the warehouse. They will each be paid a salary of $2,800 per
month.
3. Signed a 2-year rental agreement on a warehouse; paid $24,000 cash in advance for the first year.
4. Purchased furniture and equipment costing $30,000. A cash payment of $10,000 was made
immediately; the remainder will be paid in 6 months.
5. Paid $1,800 cash for a one-year insurance policy on the furniture and equipment.
Transactions during the remainder of the month:
6.
7.
8.
9.
10.
11.
12.

Trial balance totals $91,300

Purchased basic office supplies for $500 cash.

Purchased more office supplies for $1,500 on account.
Total revenues earned were $20,000$8,000 cash and $12,000 on account.
Paid $400 to suppliers for accounts payable due.
Received $3,000 from customers in payment of accounts receivable.
Received utility bills in the amount of $200, to be paid next month.
Paid the monthly salaries of the two employees, totalling $5,600.

Instructions
(a) Prepare journal entries to record each of the events listed.

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Problems: Set C

13

(b) Post the journal entries to T accounts.

(c) Prepare a trial balance as of May 31, 2008.
P2-4C

The trial balance of Syed Moiz Co. shown below does not balance.

Prepare a correct trial balance.

(SO 7)

SYED MOIZ CO.

Trial Balance
June 30, 2008

Debit
Cash
Accounts Receivable
Supplies
Equipment
Accounts Payable
Unearned Revenue
S. Moiz, Capital
S. Moiz, Drawing
Service Revenue
Salaries Expense
Office Expense

Credit
$ 3,340

$ 2,731
1,200
2,600
3,666
1,100
8,000
800
2,480
3,200
810
$11,641

$17,486

Each of the listed accounts has a normal balance per the general ledger. An examination of the
ledger and journal reveals the following errors.
1. Cash received from a customer in payment of its account was debited for $480, and Accounts
Receivable was credited for the same amount. The actual collection was for $840.
2. The purchase of a computer on account for $620 was recorded as a debit to Supplies for $620
and a credit to Accounts Payable for $620.
3. Services were performed on account for a client for $890. Accounts Receivable was debited
for $890, and Service Revenue was credited for $89.
4. A debit posting to Salaries Expense of $700 was omitted.
5. A payment of a balance due for $306 was credited to Cash for $306 and credited to Accounts
Payable for $360.
6. The withdrawal of $600 cash for Moizs personal use was debited to Salaries Expense for $600
and credited to Cash for $600.
Instructions
Prepare a correct trial balance. (Hint: It helps to prepare the correct journal entry for the transaction described and compare it to the mistake made).
P2-5C The Josie Theater, owned by Josie Micheals, will begin operations in March. The Josie
will be unique in that it will show only triple features of sequential theme movies. As of March 1,
the ledger of Josie showed: No. 101 Cash $9,000; No. 140 Land $24,000; No. 145 Buildings (concession stand, projection room, ticket booth, and screen) $10,000; No. 157 Equipment $10,000;
No. 201 Accounts Payable $7,000; and No. 301 J. Micheals, Capital $46,000. During the month of
March the following events and transactions occurred.
Mar. 2
3
9
10
11

12
20

Rented the three Indiana Jones movies to be shown for the first 3 weeks of March. The
film rental was $3,500; $1,500 was paid in cash and $2,000 will be paid on March 10.
Ordered the Lord of the Rings movies to be shown the last 10 days of March. It will
cost $200 per night.
Received $4,000 cash from admissions.
Paid balance due on Indiana Jones movies rental and $2,100 on March 1 accounts
payable.
Josie Theater contracted with Stephanie Becker to operate the concession stand.
Becker is to pay 15% of gross concession receipts (payable monthly) for the right to
operate the concession stand.
Paid advertising expenses $450.
Received $5,000 cash from customers for admissions.

Trial balance totals $15,381

Journalize transactions, post,

and prepare a trial balance.
(SO 2, 4, 6, 7)

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Chapter 2 The Recording Process

20
31
31

31

Received the Lord of the Rings movies and paid the rental fee of $2,000.
Paid salaries of $2,500.
Received statement from Stephanie Becker showing gross receipts from concessions
of $6,000 and the balance due to Josie Theater of $900 ($6,000  15%) for March.
Becker paid one-half the balance due and will remit the remainder on April 5.
Received $9,000 cash from customers for admissions.

In addition to the accounts identified above, the chart of accounts includes: No. 112 Accounts
Receivable, No. 405 Admission Revenue, No. 406 Concession Revenue, No. 610 Advertising
Expense, No. 632 Film Rental Expense, and No. 726 Salaries Expense.

Trial balance totals $69,800

Instructions
(a) Enter the beginning balances in the ledger. Insert a check mark () in the reference column
of the ledger for the beginning balance.
(b) Journalize the March transactions.
(c) Post the March journal entries to the ledger. Assume that all entries are posted from page 1
of the journal.
(d) Prepare a trial balance on March 31, 2008.

CONTINUING COOKIE CHRONICLE

(Note: This is a continuation of the Cookie Chronicle from Chapter 1.)
CCC2 After researching the different forms of business organization, Natalie Koebel decides
to operate Cookie Creations as a proprietorship. She then starts the process of getting the business running. In November 2007, the following activities take place.
Nov. 8
8
11
13
14

16

17
20
25
30

Natalie cashes her U.S. Savings Bonds and receives $520, which she deposits in her personal bank account.
She opens a bank account under the name Cookie Creations and transfers $500 from
her personal account to the new account.
Natalie pays $165 to have advertising brochures and posters printed. She plans to distribute these as opportunities arise.
She buys baking supplies, such as flour, sugar, butter, and chocolate chips, for $125
cash.
Natalie starts to gather some baking equipment to take with her when teaching the
cookie classes. She has an excellent top-of-the-line food processor and mixer that originally cost her $750. Natalie decides to start using it only in her new business. She estimates that the equipment is currently worth $400.
Natalie realizes that her initial cash investment is not enough. Her grandmother lends
her $2,000 cash, for which Natalie signs a note payable in the name of the business.
Natalie deposits the money in the business bank account.
She buys more baking equipment for $900 cash.
She teaches her first class and collects $125 cash.
Natalie books a second class for December 4 for $125. She receives $25 cash in advance
as a down payment.
Natalie pays $1,320 for a one-year insurance policy that will expire on December 1,
2008.

Instructions
(a) Prepare journal entries to record the November transactions.
(b) Post the journal entries to general ledger accounts.
(c) Prepare a trial balance at November 30.