Accounting Principles Manual
DO IT! Exercises
DO IT! 2.1 Ron Tost has just rented space in a strip mall. In this space, he
will open a photography studio, to be called Shutter Bug. A friend has
advised Tom to set up a double-entry set of accounting records in which to
record all of his business transactions.
Identify the balance sheet accounts that Ron will likely need to
record the transactions needed to open his business. Indicate whether the
normal balances of each account is a debit or credit.
Solution:
No. Name of Accounts Normal Balances
(1) Cash Debit balance
(2) Supplies Debit balance
(3) Equipment Debit balance
(4) Accounts Payable Credit balance
(5) Owner’s Capital Credit balance
DO IT! 2.2 Ron Tost engaged in the following activities in establishing his
photography studio, Shutter Bug:
1. Open a bank account in the name of Shutter Bug and deposited
$6500 of his own money into this account as his initial investment.
2. Purchase photography supplies at a total cost of $1200. The
business paid $400 in cash and the balance is on account.
3. Obtained estimates on the cost of photography equipment from the
different manufacturers.
Prepare the journal entries to record the transactions. (You may omit
explanations.)
Solution: (1) Cash ……………………………… 6500
Owner’s Capital………….. 6500
(2) Supplies …………… 1200
Cash ………………………… 400
Accounts Payable ……….….. 800
(3) No entry. (Because estimate is not a financial transaction.)
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Chapter 2: DO IT! Exercises
DO IT! 2.3 Tom Rast recorded the following transactions during the month
of April:
April 3 Cash 3400
Service Revenue 3400
April 16 Rent Expense 700
Cash 700
April 20 Salaries and Wages Expense 250
Cash 250
Post these entries to the Cash T-account of the general ledger to determine
the ending balance in cash. The beginning balance in cash on April 1 was
$1600.
Solution:
Cash
4/1 1600 4/16 700
4/3 3400 4/20 250
Ending balance 4050
5000 5000
DO IT! 2.4 The following accounts are taken from the ledger of Macon
Company at December 31, 2022.
200 Notes Payable $20000 101 Cash $6000
201 Owner’s Capital 28000 126 Supplies 7000
157 Equipment 80000 729 Rent Expense 4000
306 Owner’s Drawings 9000 212 Salaries and Wages Payable 3000
726 Salaries and Wages Expense 38000 201 Accounts Payable 11000
400 Service Revenue 90000 112 Accounts Receivable 8000
Prepare a trial balance in good form.
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Accounting Principles Manual
Solution:
MACON COMPANY
Trial Balance
December 31, 2022
Accounts Debit Credit
Cash $6000
Accounts Receivable 8000
Supplies 7000
Equipment 80000
Notes Payable $20000
Accounts Payable 11000
Salaries and Wages Payable 3000
Owner’s Capital 28000
Owner’s Drawing 9000
Service Revenue 90000
Rent Expense 4000
Salaries and Wages Expense 38000
Totals $152000 $152000
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