Chapter 2 Exercises

E2.1  
Analyze statements about accounting and the recording process.
(LO 1) Kim Yi has prepared the following list of statements about accounts.
 1.An account is an accounting record of either a specific asset or a specific liability.
 2.An account shows only increases, not decreases, in the item it relates to.
 3.Some items, such as Cash and Accounts Receivable, are combined into one account.
 4.An account has a left, or credit side, and a right, or debit side.
 5.A simple form of an account consisting of just the account title, the left side, and the right side, is
called a T-account.
Instructions
Identify each statement as true or false. If false, indicate how to correct the statement.

E2.2  
Identify debits, credits, and normal balances.
(LO 1) Selected transactions for M. Acosta, an interior decorator, in her first month of business, are as follows.
Jan 2 Invested $10,000 cash in business.
.
  3 Purchased used car for $3,000 cash for use in business.
  9 Purchased supplies on account for $600.
  11 Billed customers $2,400 for services performed.
  16 Paid $350 cash for advertising.
  20 Received $900 cash from customers billed on January 11.
  23 Paid creditor $300 cash on balance owed.
  28 Withdrew $1,000 cash for personal use by owner.
Instructions
For each transaction, indicate the following.
(a)  The basic type of account debited and credited (asset, liability, owner's equity).
(b)  The specific account debited and credited (Cash, Rent Expense, Service Revenue, etc.).
(c)  Whether the specific account is increased or decreased.
(d)  The normal balance of the specific account.
Use the following format, in which the January 2 transaction is given as an example.
Account Debited Account Credited
  (a) (b) (c) (d) (a) (b) (c) (d)
Basic Specific Normal Specific Normal
Date Type Account Effect Balance Basic Type Account Effect Balance
Jan. Asset Cash Increas Debit Owner's Owner's Increas Credit
2 e Equity Capital e

E2.3  
Journalize transactions.
(LO 2) Data for M. Acosta, interior decorator, are presented in E2.2.
Instructions
Journalize the transactions using journal page J1. (You may omit explanations.)

E2.4  
Analyze transactions and determine their effect on accounts.
(LO 1) The following information relates to Royale Real Estate Agency.
Oct 1 James Royale begins business as a real estate agent with a cash investment of $17,000.
.
  2 Hires an administrative assistant.
  3 Purchases office furniture for $1,900, on account.
  6 Sells a house and lot for C. Rouse; bills C. Rouse $3,800 for realty services performed.
  2 Pays $1,300 on the balance related to the transaction of October 3.
7
  3 Pays the administrative assistant $2,500 in salary for October.
0
Instructions
Prepare the debit-credit analysis for each transaction as illustrated in the textbook.

E2.5  
Journalize transactions.
(LO 2) Transaction data for Royale Real Estate Agency are presented in E2.4.
Instructions
Journalize the transactions. (You may omit explanations.)

E2.6  
Analyze transactions and journalize.
(LO 1, 2) Lennon Industries had the following transactions.
 1.Borrowed $5,000 from the bank by signing a note.
 2.Paid $3,900 cash for a computer.
 3.Purchased $650 of supplies on account.
Instructions
(a)  Indicate what accounts are increased and decreased by each transaction.
(b)  Journalize each transaction. (Omit explanations.)

E2.7  
Analyze transactions and journalize.
(LO 1, 2) Halladay Enterprises had the following selected transactions.
 1.Bo Halladay invested $4,000 cash in the business.
 2.Paid office rent of $840.
 3.Performed consulting services and billed a client $5,200.
 4.Bo Halladay withdrew $750 cash for personal use.
Instructions
(a)  Indicate the effect each transaction has on the accounting equation (Assets = Liabilities + Owner's Equity),
using plus and minus signs.
(b)  Journalize each transaction. (Omit explanations.)

E2.8  
Journalize a series of transactions.
(LO 2) Selected transactions for Sophie's Dog Care are as follows during the month of March.
Marc 1 Paid monthly rent of $1,200.
h
  3 Performed services for $160 on account.
  5 Performed services for cash of $75.
  8 Purchased equipment for $600. The company paid cash of $90 and the balance was on account.
  12 Received cash from customers billed on March 3.
  14 Paid salaries and wages to employees of $525.
  22 Paid utilities of $72.
  24 Borrowed $1,500 from Grafton State Bank by signing a note.
  27 Paid $220 to repair service for plumbing repairs.
  28 Paid balance amount owed from equipment purchase on March 8.
  30 Paid $1,800 for six months of insurance.
Instructions
Journalize the transactions. (Omit explanations.)

E2.9  
Record journal entries.
(LO 2) On April 1, Adventures Travel Agency began operations. The following transactions were completed
during the month.
 1.Owner invested $24,000 in the business.
 2.Obtained a bank loan for $7,000 by issuing a note payable.
 3.Paid $11,000 cash to buy equipment.
 4.Paid $1,200 cash for April office rent.
 5.Paid $1,450 for supplies.
 6.Purchased $600 of advertising in the Daily Herald, on account.
 7.Performed services for $18,000: cash of $2,000 was received from customers, and the balance of
$16,000 was billed to customers on account.
 8.Cash withdrawal of $400 by owner for personal use.
 9.Paid the utility bill for the month, $2,000.
 10.Paid Daily Herald the amount due in transaction (6).
 11.Paid $40 of interest on the bank loan obtained in transaction (2).
 12.Paid employees' salaries and wages, $6,400.
 13.Received $12,000 cash from customers billed in transaction (7).
Instructions
Journalize the transactions. (Omit explanations).

E2.10  
Analyze statements about the ledger.
(LO 3) Alma Ortiz has prepared the following list of statements about the general ledger.
 1.The general ledger contains all the asset and liability accounts but no owner's equity accounts.
 2.The general ledger is sometimes referred to as simply the ledger.
 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 ledger is a book of original entry.
Instructions
Identify each statement as true or false. If false, indicate how to correct the statement.

E2.11  
Post journal entries and prepare a trial balance.
(LO 3, 4) Selected transactions from the journal of June Feldman, investment broker, are presented below.
Date Account Titles and Explanation Ref. Debit   Credit  
Aug. Cash   5,000  
1
  Owner's Capital     5,000
  (Owner's investment of cash in business)      
10 Cash   2,600  
  Service Revenue     2,600
  (Received cash for services performed)      
12 Equipment   5,000  
  Cash     2,300
  Notes Payable     2,700
  (Purchased equipment for cash and notes payable)      
25 Accounts Receivable   1,700  
  Service Revenue     1,700
  (Billed clients for services performed)      
31 Cash   900  
  Accounts Receivable     900
  (Receipt of cash on account)      
Instructions
(a)  Post the transactions to T-accounts.
(b)  Prepare a trial balance at August 31, 2020.

E2.12  
Journalize transactions from account data and prepare a trial balance.
(LO 2, 4) The T-accounts below summarize the ledger of Negrete Landscaping Company at the end of the first
month of operations.
  Cash No. 101   Unearned Service Revenue No. 209
4/1 14,000 4/15 1,300     4/30 1,000
4/1 900 4/25 1,500        
2
4/2 400            
9
4/3 1,000            
0
  Cash No. 101   Unearned Service Revenue No. 209
  Accounts No. 112   Owner's Capital No. 301
Receivable
4/7 3,000 4/29 400     4/1 14,000
  Supplies No. 126   Service Revenue No. 400
4/4 1,800         4/7 3,000
            4/12 900
  Accounts Payable No. 201   Salaries and Wages No. 726
Expense
4/2 1,500 4/4 1,800 4/15 1,300    
5
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, 2020.

E2.13  
Journalize transactions from account data and prepare a trial balance.
(LO 2, 4) Presented below is the ledger for Shumway Co.
Cash No. 101
10/1 3,000 10/4 400
10/10 750 10/12 1,500
10/10 4,000 10/15 350
10/20 500 10/30 300
10/25 2,000 10/31 500
Accounts
Receivable No. 112
10/6 800 10/20 500
10/20 940    
Supplies No. 126
10/ 400    
4
Equipment No. 157
10/ 2,000    
3
Notes Payable No. 200
    10/10 4,000
Accounts Payable No. 201
10/12 1,500 10/3 2,000
Owner's Capital No. 301
    10/1 3,000
    10/25 2,000
Owner's Drawings No. 306
10/30 300    
Service Revenue No. 400
    10/6 800
    10/10 750
    10/20 940
Salaries and Wages
Expense No. 726
10/31 500    
Rent
Expense No. 729
10/15 350    
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,
2020.

E2.14  
Prepare journal entries and post using standard account form.
(LO 2, 3) Selected transactions for Bonnie Donne Company during its first month in business are presented
below.
Sept. 1 Invested $10,000 cash in the business.
  5 Purchased equipment for $14,000 paying $4,000 in cash and the balance on account.
  2 Paid $3,000 cash on balance owed for equipment.
5
  3 Withdrew $900 cash for personal use.
0
Donne's chart of accounts shows No. 101 Cash, No. 157 Equipment, No. 201 Accounts Payable, No. 301
Owner's Capital, and No. 306 Owner's Drawings.
Instructions
(a)  Journalize the transactions on page J1 of the journal. (Omit explanations.)
(b)  Post the transactions using the standard account form.

E2.15  
Analyze errors and their effects on trial balance.
(LO 4) The bookkeeper for J.L. Kang Equipment Repair made a number of errors in journalizing and posting,
as described below.
 1.A credit posting of $525 to Accounts Receivable was omitted.
 2.A debit posting of $750 for Prepaid Insurance was debited to Insurance Expense.
 3.A collection from a customer of $100 in payment of its account owed was journalized and posted as a
debit to Cash $100 and a credit to Service Revenue $100.
 4.A credit posting of $415 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 $625 to Advertising Expense was posted as $652.
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.
  (a) (b) (c)
Erro
r In Balance Difference Larger Column
(1) No $525 debit

E2.16  
Prepare a trial balance.
(LO 4) The accounts in the ledger of Prompt Delivery Service contain the following balances on July 31, 2020.
Accounts $  7,64 Prepaid Insurance $  1,968
Receivable 0
Accounts Payable 8,394 Maintenance and Repairs Expense 961
Cash ?        Service Revenue 10,610
Equipment 45,360 Owner's Drawings 700
Gasoline Expense 758 Owner's Capital 38,000
Utilities Expense 523 Salaries and Wages Expense 4,428
Notes Payable 17,000 Salaries and Wages Payable 815
Instructions
Prepare a trial balance with the accounts arranged as illustrated in the chapter and fill in the missing amount for
Cash.

E2.17  
Journalize transactions, post transactions to T-accounts, and prepare trial balance.
(LO 2, 3, 4) Beyers Security Company provides security services. Selected transactions for Beyers are presented
below.
Oct 1 Invested $66,000 cash in the business.
.
  2 Hired part-time security consultant. Salary will be $2,000 per month. First day of work will be
October 15.
  4 Paid one month of rent for building for $2,000.
  7 Purchased equipment for $18,000, paying $4,000 cash and the balance on account.
   8 Paid $500 for advertising.
  10 Received bill for equipment repair cost of $390.
  12 Provided security services for event for $3,200 on account.
  16 Purchased supplies for $410 on account.
  21 Paid balance due from October 7 purchase of equipment.
  24 Received and paid utility bill for $148.
  27 Received payment from customer for October 12 services performed.
  31 Paid employee salaries and wages of $5,100.
Instructions
(a)  Journalize the transactions. Do not provide explanations.
(b)  Post the transactions to T-accounts.
(c)  Prepare a trial balance at October 31, 2020.
(Hint: Compute ending balances of T-accounts first.)
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