Chapter 2: Brief Exercises
Brief Exercises
BE2.1 For each of the following accounts, indicate the effects of (a) a debit
and (b) a credit on the accounts and (c) the normal balance of the account.
1. Accounts Payable.
2. Advertising Expense.
3. Service Revenue.
4. Accounts Receivable.
5. Owner’s Capital.
6. Owner’s Drawings.
Solution: Effects of the Accounts
No. (a) (b) (c)
Accounts Debit Credit Normal
Effect Effect Balance
1. Accounts Payable Decrease Increase Credit
2. Advertising Expense Increase Decrease Debit
3. Service Revenue Decrease Increase Credit
4. Accounts Receivable Increase Decrease Debit
5. Owner’s Capital Decrease Increase Credit
6. Owner’s Drawing Increase Decrease Debit
BE2.2 Transactions for Oleg Thorn Company for the month of June are
presented as follows. Identify the accounts to be debited and credited for
cash transaction.
June 1 Oleg Thorn invests $5000 cash in a small welding business of
which he is the sole proprietor.
2 Purchase equipment on account for $3600.
3 $800 cash is paid to landlord for June rent.
12 Sends a bill to K. Johnsen $400 for welding work done on
account.
Solution:
Debit and Credit Identification
Account Debited Account Credited
June 1 Cash Owner’s Capital
2 Equipment Accounts Payable
3 Rent Expense Cash
12 Accounts Receivable Service Revenue
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Accounting Principles Manual
BE2.3 Transactions for Oleg Thorn Company for the month of June are
presented as follows. Journalize the transactions. (You may omit
explanations.)
June 1 Oleg Thorn invests $5000 cash in a small welding business of
which he is the sole proprietor.
2 Purchase equipment on account for $3600.
3 $800 cash is paid to landlord for June rent.
12 Sends a bill to K. Johnsen $400 for welding work done on
account.
Solution:
Journal
Date Account Titles and Explanations Ref. Debit Credit
June 1 Cash 5000
Owner’s Capital 5000
2 Equipment 3600
Accounts Payable 3600
3 Rent Expense 800
Cash 800
12 Accounts Receivable 400
Service Revenue 400
BE2.4 Shea Jonas, a fellow student, is unclear about the basic steps in the
recording process. Identify and briefly explain the steps in the order in
which they occur.
Solution: The basic steps in the recording process are:
Step 1: To analyze each transaction. In this step, business documents are
examined to determine the effects of the transaction on the accounts.
Step 2: To enter each transaction in a journal. This step is called journalizing
and its results in making a chronological record of the transactions.
Step 3: To transfer journal information to ledger accounts. This step is called
posting. Posting makes it possible to accumulate the effect of journalized
transactions on individual accounts.
BE2.5 M. Gonzales has the following transactions during August of the
current year. Indicate (a) the effect on the accounting equation and (b) the
debit-credit analysis illustrated in the textbook.
Aug. 1 Opens an office as a financial advisor, investing $9000 in cash.
4 Pays insurance in advance for 6 months, $2100 cash.
16 Receives $3600 from clients for services rendered.
27 Pays secretary $1000 salary.
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Chapter 2: Brief Exercises
Solution: Effects and Debit-Credit Analyses
(a) Effect on Accounting Equation (b) Debit-Credit Analysis
Aug 1 The assets Cash is increased; Debits increase assets:
the owner’s equity account debit Cash $9000
T. J. Carlin, Capital is Credits increase owner’s equity:
increased. credit Owner’s Capital $9000
4 The assets Prepaid Insurance Debits increase assets:
is increased; the asset Cash debit Prepaid Insurance $2100
is decreased. Credits decrease assets:
credit Cash $2100.
16 The assets Cash is increased; Debits increase assets:
the revenue service revenue debit Cash $3600
is increased. Credits increase revenue:
credit Service Revenue $3600
27 The expense Salaries Expense Debits increase expense:
is increased; the asset Cash debit Salaries Expense $1000.
is decreased. Credits decrease assets:
credit Cash $1000.
BE2.6 M. Gonzales has the following transactions during August of the
current year. Journalize the transactions. (You may omit explanations.)
Aug. 1 Opens an office as a financial advisor, investing $9000 in cash.
4 Pays insurance in advance for 6 months, $2100 cash.
16 Receives $3600 from clients for services rendered.
27 Pays secretary $1000 salary.
Solution:
Journal
Date Account Titles and Explanations Ref. Debit Credit
Aug 1 Cash 9000
Owner’s Capital 9000
4 Prepaid Insurance 2100
Cash 2100
16 Cash 3600
Service Revenue 3600
27 Salaries Expense 1000
Cash 1000
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Accounting Principles Manual
BE2.7 The following selected transactions for Walt Bryce Company are
presented in journal form. Post the transactions to T-accounts. Make one
T-account for each item and determine each account’s ending balance.
Date Account Titles and Explanations Ref. Debit Credit
May 5 Accounts Receivable 5400
Service Revenue 5400
(Billed for services performed)
12 Cash 4200
Accounts Receivable 4200
(Received cash in payment of account)
15 Cash 3000
Service Revenue 3000
(Received cash for services performed)
Solution:
WALT BRYCE COMPANY
T Accounts
Cash
5/12 4200
5/15 3000
Ending balance 7200
7200 7200
Accounts Receivable
5/5 5400 5/12 4200
Ending balance 1200
5400 5400
Service Revenue
5/5 5400
5/15 3000
Ending balance 8400
8400 8400
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Chapter 2: Brief Exercises
BE2.8 Selected journal entries for the Walt Bryce Company are presented
as follows. Post the transactions using the standard form of account.
Date Account Titles and Explanations Ref. Debit Credit
May 5 Accounts Receivable 5400
Service Revenue 5400
(Billed for services performed)
12 Cash 4200
Accounts Receivable 4200
(Received cash in payment of account)
15 Cash 3000
Service Revenue 3000
(Received cash for services performed)
Solution: WALT BRYCE COMPANY
Standard Form of Account
(General Ledger)
Cash
Date Explanation Ref. Debit Credit Balance
May 12 J1 4200 4200
15 J1 3000 7200
Accounts Receivable
Date Explanation Ref. Debit Credit Balance
May 5 J1 5400 5400
12 J1 4200 1200
Service Revenue
Date Explanation Ref. Debit Credit Balance
May 5 J1 5400 5400
15 J1 3000 8400
BE2.9 From the ledger balances given below, prepare a trail balance for the
Amaro Company at June 30, 2022. List the accounts in the order shown in
the text. All account balances are normal.
Accounts Payable $8100, Cash $5800, Owner’s Capital $15000
Owner’s Drawings $1200, Equipment $17000, Service Revenue $10000,
Accounts Receivable $3000, Salaries and Wages Expense $5100, and Rent
Expense $1000.
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Solution:
AMARO COMPANY
Trial Balance
June 30, 2022
Accounts Debit Credit
Cash $5800
Accounts Receivable 3000
Equipment 17000
Accounts Payable $8100
Owner’s Capital 15000
Owner’s Drawing 1200
Service Revenue 10000
Salaries and Wages Expense 5100
Rent Expense 1000
Totals 33100 33100
BE2.10 An inexperienced bookkeeper prepared the following trail balance.
Prepare a correct trial balance, assuming all account balances are normal.
Shaushank Company
Trial Balance
December 31, 2022
Debit Credit
Cash $10600
Prepaid Insurance $3500
Accounts Payable 3000
Unearned Service Revenue 2200
Owner’s Capital 9000
Owner’s Drawings 4500
Service Revenue 25400
Salaries and Wages Expense 18600
Rent Expense 2400
$31400 $47800
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Chapter 2: Brief Exercises
Solution:
Shaushank Company
Trial Balance
December 31, 2022
Accounts Debit Credit
Cash $10600
Prepaid Insurance 3500
Accounts Payable $3000
Unearned Service Revenue 2200
Owner’s Capital 9000
Owner’s Drawing 4500
Service Revenue 25400
Salaries and Wages Expense 18600
Rent Expense 2400
Totals $39600 $39600
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