Accounting

Properly-formatted heading for balance sheet

1st line: company name 2nd line: name of the statement 3rd line: identifies the date of the statement or the period covered by the statement. Ex: Earl Coffee Roasters Corp. Balance Sheet August 31, 2019

Transaction

A transaction is any event that has a financial impact on the business and can be measured reliably. Transactions provide objective information about the financial impact on a company. Every transaction has two​ sides: you give something and you receive something. In accounting we always record both sides of a transaction.​ Also, we must be able to measure the financial impact of the event on the business before recording it as a transaction.

Requirement 1. Record each transaction in the journal. Key each transaction by date. Explanations are not required. ​(Record debits​ first, then credits. Exclude explanations from journal​ entries.)

A transaction is any event that has a financial impact on the business and can be measured reliably. Transactions provide objective information about the financial impact on a company. Every transaction has two​ sides: you give something and you receive something. In accounting we always record both sides of a transaction.​ Also, we must be able to measure the financial impact of the event on the business before recording it as a transaction. The rules of debit and credit illustrate how increases and decreases affect an account. An​ account's normal balance falls on the side of the​ account, debit or​ credit, where increases are recorded. Increases in assets are recorded on the left​ (debit) side of the account. Decreases in assets are recorded on the right​ (credit) side.​ Conversely, increases in liabilities and ​stockholders' equity are recorded by credits. Decreases in liabilities and ​stockholders' equity are recorded by debits. Accountants use a chronological record of transactions called a​ journal, also known as the book of original entry. Journal entries are used to record accounting transactions. A journal entry includes the account to be​ debited, which is listed​ first, and an account to be​ credited, which is listed second. The journalizing process follows three​ steps: 1. Specify each account affected by the transaction and classify each account by type​ (asset, liability,​ stockholders' equity,​ revenue, or​ expense). 2. Determine whether each account is increased or decreased by the transaction. Use the rules of debit and credit to increase or decrease each account. 3. Record the transaction in the​ journal, including a brief explanation. The debit side is entered on the left​ margin, and the credit side is indented to the right. Please note that we are told to exclude explanations from the journal entries in this problem. Requirement 1. Record each transaction in the journal. Be sure to record the date in each entry. Explanations are not required. ​(Record debits​ first, then credits. Exclude explanations from any journal​ entries.) ​Let's apply the three steps of the journalizing process to the first transaction of PorierPorier. JulJul ​2: Porier ServicesPorier Services received $ 67 comma 000$67,000 cash and issued common stock to the stockholders. Step 1 The business receives cash and issues stock. Cash and Common Stock are affected. Cash is an​ asset, and Common Stock is​ stockholders' equity. Step 2 Both Cash and Common Stock increase. Debit Cash to record an increase in this asset. Credit Common Stock to record an increase in this equity account. Step 3 Journalize the transaction. Journal Entry Date Accounts Debit Credit Jul 2 Cash 67,000 Common Stock 67,000 JulJul ​3: Purchased​ supplies, $ 500$500​, and​ equipment, $ 11 comma 900$11,900​, on account. Recall that purchasing​ "on account" means that you pay later. The purchase increased Supplies and​ Equipment, both​ assets, and Accounts​ Payable, a liability. To increase an asset we debit the​ account, and to increase a liability we credit the account. Record the entry now. Journal Entry Date Accounts Debit Credit Jul 3 Supplies 500 Equipment 11,900 Accounts Payable 12,400 JulJul ​4: Performed services for a customer and received​ cash, $ 5 comma 400$5,400. To record the cash​ receipt, PorierPorier will increase​ (or debit) the Cash​ account, and increase​ (or credit) the Service Revenue account for the services performed. Record the entry now. Journal Entry Date Accounts Debit Credit Jul 4 Cash 5,400 Service Revenue 5,400 JulJul ​7: Paid cash to acquire​ land, $ 34 comma 000$34,000. ​Remember, the word​ "paid" indicates that cash is involved in the transaction. The Land account will​ increase, and Cash will decrease. Journal Entry Date Accounts Debit Credit Jul 7 Land 34,000 Cash 34,000 JulJul ​11: Performed services for a customer and billed the​ customer, $ 3 comma 100$3,100. PorierPorier expects to collect within one month. PorierPorier performed services for a customer on account. The customer did not pay​ immediately, so PorierPorier billed the customer for the amount due. The transaction increased accounts​ receivable; therefore, PorierPorier will debit Accounts Receivable. Service revenue also​ increased, so PorierPorier will credit the Service Revenue account. Record the entry now. Journal Entry Date Accounts Debit Credit Jul 11 Accounts Receivable 3,100 Service Revenue 3,100 JulJul ​16: Paid for the equipment purchased JulyJuly 3 on account. The business paid $ 11 comma 900$11,900 on an account payable owed to a creditor. PorierPorier will decrease​ (or credit) Cash for the payment and decrease​ (or debit) the Accounts Payable account. Record the entry now. Journal Entry Date Accounts Debit Credit Jul 16 Accounts Payable 11,900 Cash 11,900 JulJul ​17: Paid for newspaper​ advertising, $ 610$610. Advertising Expense​ increased, so debit the account. Recall that the word​ "paid" indicates that cash was paid. Cash should be decreased​ (or credited) for $ 610$610. Record the entry now. Journal Entry Date Accounts Debit Credit Jul 17 Advertising Expense 610 Cash 610 JulJul ​18: Received partial payment from customer on​ account, $ 1 comma 000$1,000. PorierPorier will increase​ (or debit) the Cash account and decrease​ (or credit) the Accounts Receivable account. Record the entry now. Journal Entry Date Accounts Debit Credit Jul 18 Cash 1,000 Accounts Receivable 1,000 JulJul ​22: Received and paid the water and electricity​ bills, $ 440$440. This is another transaction in which we pay a cost of operating the business. Utilities Expense​ increases, so debit the account.​ Remember, the word​ "paid" indicates that cash was paid. Cash should be decreased​ (or credited) for $ 440$440. Journal Entry Date Accounts Debit Credit Jul 22 Utilities Expense 440 Cash 440 JulJul ​29: Received $ 2 comma 100$2,100 cash for servicing the heating unit of a customer. To record the cash​ receipt, PorierPorier will increase​ (or debit) the Cash​ account, and increase​ (or credit) the Service Revenue account for the services performed. Record the entry now. Journal Entry Date Accounts Debit Credit Jul 29 Cash 2,100 Service Revenue 2,100 JulJul ​31: Paid employee​ salary, $ 2 comma 800$2,800. An​ expense, Salary​ Expense, increased and should be debited. Recall that the word​ "paid" indicates that cash was paid. Cash should be decreased​ (or credited) for the transaction. Record the entry now. Journal Entry Date Accounts Debit Credit Jul 31 Salary Expense 2,800 Cash 2,800 JulJul ​31: Declared and paid dividends of $ 1 comma 800$1,800. This transaction decreases Cash and increases the Dividends account. To increase the Dividends account will debit the account. Remember that the Dividends account is a negative​ (or contra​) equity accounts. Increases to the Dividends account will decrease​ stockholders' equity. Record the entry now. Journal Entry Date Accounts Debit Credit Jul 31 Dividends 1,800 Cash 1,800 Requirement 2. Post the transactions to the​ T-accounts, using transaction dates as posting references. Determine the ending balance in each account. An account can be represented by the letter T. We call this a ​T-account. The vertical line in the letter T represents the division of the account into its two​ sides: left and right. The account title appears at the top of the T. The left side of each account is called the debit​ side, and the right side is called the credit side. ​T-accounts are used to illustrate the effect of transactions on accounts. The debits and credits in the​ T-account mirror the debits and credits in the journal entry. In other​ words, if an account is debited in the journal​ entry, it is also debited in the​ T-account. Note that debits to the account are placed on the left side and credits to the account are placed on the right side. The first step in completing a​ T-account is to list an​ account's beginning balance if applicable. Then we use the journal entries to retrieve the debit and credit amounts. Once all entries are​ posted, we are able to calculate the​ account's ending balances. We must use our knowledge of the​ account's normal balance in our calculation of the ending balance. Now​ let's use the information from the journal entries to post the JulyJuly transactions to the​ T-accounts. We will begin with the transaction from JulJul 2. Porier ServicesPorier Services received $ 67 comma 000$67,000 cash and issued common stock to the stockholders. PorierPorier increases Cash with a debit and increases Common Stock with a credit.​ Remember, a debit in the journal entries is recorded on the left side of the​ T-accounts and a credit in the journal entries is recorded on the right side of the​ T-accounts. Post the JulJul 2 transaction to the​ T-accounts now. Be sure to select enter the correct date when posting the transaction. Review the journal entry for July 2.LOADING... Cash Common Stock Jul 2 67,000 Jul 2 67,000 Accounts Receivable Dividends Supplies Service Revenue Equipment Salary Expense Land Advertising Expense Accounts Payable Utilities Expense Now post the remaining journal entries to the​ T-accounts. Remember, a debit in the journal entries is recorded on the left side of the​ T-accounts and a credit in the journal entries is recorded on the right side of the​ T-accounts. Be sure to label each transaction with the appropriate posting reference. Review the remaining journal entries.LOADING... Cash Common Stock Jul 2 67,000 Jul 7 34,000 Jul 2 67,000 Jul 16 11,900 Jul 17 610 Jul 4 5,400 Jul 22 440 Jul 18 1,000 Jul 31(a) 2,800 Jul 29 2,100 Jul 31(b) 1,800 Accounts Receivable Dividends Jul 11 3,100 Jul 18 1,000 Jul 31(b) 1,800 Supplies Service Revenue Jul 4 5,400 Jul 11 3,100 Jul 3 500 Jul 29 2,100 Equipment Salary Expense Jul 3 11,900 Jul 31(a) 2,800 Land Advertising Expense Jul 7 34,000 Jul 17 610 Accounts Payable Utilities Expense Jul 16 11,900 Jul 3 12,400 Jul 22 440 Now that we have posted all of the entries to the​ T-accounts, we can total our accounts. We do this by adding all of the debits and all of the credits.​ Next, we subtract the lower number from the higher number. We enter the difference in the​ T-account on the side of the larger number. Select the​ "Bal" label on the normal balance side of the account and enter the ending balances. Cash Common Stock Jul 2 67,000 Jul 7 34,000 Jul 2 67,000 Jul 4 5,400 Jul 16 11,900 Jul 18 1,000 Jul 17 610 Jul 29 2,100 Jul 22 440 Jul 31(a) 2,800 Jul 31(b) 1,800 Bal 23,950 Bal 67,000 Accounts Receivable Dividends Jul 11 3,100 Jul 18 1,000 Jul 31(b) 1,800 Bal 2,100 Bal 1,800 Supplies Service Revenue Jul 3 500 Jul 4 5,400 Jul 11 3,100 Jul 29 2,100 Bal 500 Bal 10,600 Equipment Salary Expense Jul 3 11,900 Jul 31(a) 2,800 Bal 11,900 Bal 2,800 Land Advertising Expense Jul 7 34,000 Jul 17 610 Bal 34,000 Bal 610 Accounts Payable Utilities Expense Jul 16 11,900 Jul 3 12,400 Jul 22 440 Bal 500 Bal 440 Requirement 3. Prepare the trial balance of PorierPorier Heating and Air​ Conditioning, Inc., at JulyJuly 31 of the current year. ​First, we must choose the accounts to include in our trial balance. Recall that a trial balance summarizes all the accounts with their balances. Recall that there is a proper sequence to list accounts on a trial balance. Assets are listed first and in the order of their​ liquidity, that​ is, how quickly an asset can be converted to cash. Accounts receivable is generally listed after cash and before other assets. After​ assets, list the liabilities in the order they are​ due; generally accounts payable is the first liability.​ Shareholders' equity,​ revenue, and expenses are listed​ next, in that order. Porier Services Trial Balance July 31 Account Debit Credit Cash Accounts receivable Supplies Equipment Land Accounts payable Common stock Dividends Service revenue Salary expense Advertising expense Utilities expense Total Now that we have entered the accounts in the trial​ balance, let's put the ending balances in the proper column for each account. Recall that​ assets, dividends, and expenses normally have debit​ balances; liabilities,​ equity, and revenues normally have credit balances. Add your total debits and your total credits.​ Remember, total debits should equal total credits. The ending balances have been summarized in the following​ T-accounts. LOADING... ​(Click the icon for the completed​ T-accounts.) Porier Services Trial Balance July 31 Account Debit Credit Cash $23,950 Accounts receivable 2,100 Supplies 500 Equipment 11,900 Land 34,000 Accounts payable $500 Common stock 67,000 Dividends 1,800 Service revenue 10,600 Salary expense 2,800 Advertising expense 610 Utilities expense 440 Total $78,100 $78,100 Requirement 4. JamesJames PorierPorier​, the​ manager, asks you how much in total resources the business has to work​ with, how much it​ owes, and whether JulyJuly was profitable​ (and by how​ much). ​Let's start by calculating the total resources​ (total assets). Recall that assets are economic resources that provide future benefit for a business. Review the assets given below and enter the amounts to solve for total assets. Cash $23,950 Accounts receivable 2,100 Supplies 500 Equipment 11,900 Land 34,000 Total assets $72,450 Now determine the amount owed​ (total liabilities). Recall that a liability is a debt. There is only one liability​ account, Accounts Payable. Total liabilities = $ 500 ​Finally, determine if the company was profitable and by how much. Enter the total revenues and expenses from the trial balance and calculate the net income​ (loss). ​(Enter a net loss using parentheses or a minus​ sign.) Revenues - Expenses = Net income (loss) $10,600 - $3,850 = $6,750

Requirement 1. Journalize the transactions of Raymour Computing comma Inc.Raymour Computing, Inc. ​(Record debits​ first, then credits. Exclude explanations from any journal​ entries.)

A transaction is any event that has a financial impact on the business and can be measured reliably. Transactions provide objective information about the financial impact on a company. Every transaction has two​ sides: you give something and you receive something. In accounting we always record both sides of a transaction.​ Also, we must be able to measure the financial impact of the event on the business before recording it as a transaction. The rules of debit and creditLOADING... illustrate how increases and decreases affect an account. An​ account's normal balance falls on the side of the​ account, debit or​ credit, where increases are recorded. Increases in assets are recorded on the left​ (debit) side of the account. Decreases in assets are recorded on the right​ (credit) side.​ Conversely, increases in liabilities and ​stockholders' equity are recorded by credits. Decreases in liabilities and ​stockholders' equity are recorded by debits. Accountants use a chronological record of transactions called a journal​, also known as the book of original entry. Journal entries are used to record accounting transactions. A journal entry includes the account to be​ debited, which is listed​ first, and an account to be​ credited, which is listed second. The journalizing process follows three​ steps: 1. Specify each account affected by the transaction and classify each account by type​ (asset, liability,​ stockholders' equity,​ revenue, or​ expense). 2. Determine whether each account is increased or decreased by the transaction. Use the rules of debit and credit to increase or decrease each account. 3. Record the transaction in the​ journal, including a brief explanation. The debit side is entered on the left​ margin, and the credit side is indented to the right. Please note that we are told to exclude explanations from the journal entries in this problem. Requirement 1. Journalize the transactions of Raymour Computing comma Inc.Raymour Computing, Inc. Explanations are not required. ​(Record debits​ first, then credits. Exclude explanations from any journal​ entries.) ​Let's apply the three steps of the journalizing process to the first transaction of Raymour Computing comma Inc.Raymour Computing, Inc. a. The company received cash of $ 4 comma 000$4,000 and issued common stock. Step 1 The company receives cash and issues stock. Cash and Common Stock are affected. Cash is an​ asset, and Common Stock is​ stockholders' equity. Step 2 Both Cash and Common Stock increase. Debit Cash to record an increase in this asset. Credit Common Stock to record an increase in this equity account. Step 3 Journalize the transaction. Journal Entry Accounts Debit Credit (a) Cash 4,000 Common Stock 4,000 b. Performed services for a customer and received cash of $ 6 comma 100$6,100. To record the cash​ receipt, Raymour ComputingRaymour Computing will increase​ (or debit) the Cash​ account, and increase​ (or credit) the Service Revenue account for the services performed. Record the entry now. Journal Entry Accounts Debit Credit (b) Cash 6,100 Service Revenue 6,100 c. Paid $ 4 comma 600$4,600 on accounts payable. The business paid $ 4 comma 600$4,600 on an account payable owed to a creditor. Raymour ComputingRaymour Computing will decrease​ (or credit) Cash for the payment and decrease​ (or debit) the Accounts Payable account. Record the entry now. Journal Entry Accounts Debit Credit (c) Accounts Payable 4,600 Cash 4,600 d. Purchased supplies on​ account, $ 1 comma 400$1,400. Recall that purchasing​ "on account" means that you pay later. The purchase increased​ Supplies, an​ asset, and Accounts​ Payable, a liability. To increase an asset we debit the​ account, and to increase a liability we credit the account. Record the entry now. Journal Entry Accounts Debit Credit (d) Supplies 1,400 Accounts Payable 1,400 e. Collected cash from a customer on​ account, $ 1 comma 800$1,800. Raymour ComputingRaymour Computing will increase​ (or debit) the Cash account and decrease​ (or credit) the Accounts Receivable account. Record the entry now. Journal Entry Accounts Debit Credit (e) Cash 1,800 Accounts Receivable 1,800 f. Consulted on the design of a computer system and billed the customer for services​ rendered, $ 4 comma 900$4,900. Raymour ComputingRaymour Computing performed services for a customer on account. The customer did not pay​ immediately, so Raymour ComputingRaymour Computing billed the customer for the amount due. The transaction increased accounts​ receivable; therefore, Raymour ComputingRaymour Computing will debit Accounts Receivable. Service revenue also​ increased, so Raymour ComputingRaymour Computing will credit the Service Revenue account. Record the entry now. Journal Entry Accounts Debit Credit (f) Accounts Receivable 4,900 Service Revenue 4,900 g. Recorded the following business expenses for the​ month: (1) paid office rentlong dash— $ 2 comma 000$2,000​; ​(2) paid advertisinglong dash—$ 750$750. The expenses​ increased, so debit each expense account separately. Recall that the word​ "paid" indicates that cash was paid. Cash should be decreased​ (or credited) for the sum of the expense accounts. Record the entry now. Journal Entry Accounts Debit Credit (g) Rent Expense 2,000 Advertising Expense 750 Cash 2,750 h. Declared and paid a cash dividend of $ 3 comma 300$3,300. This transaction decreases Cash and increases the Dividends account. To increase the Dividends account will debit the account. Remember that the Dividends account is a negative​ (or contra​) equity accounts. Increases to the Dividends account will decrease​ stockholders' equity. Record the entry now. Journal Entry Accounts Debit Credit (h) Dividends 3,300 Cash 3,300 Requirement 2. Prepare​ T-Accounts for each account. Insert in each​ T-account its SeptemberSeptember 3030 balance as given​ (example: Cash $ 2 comma 150$2,150​). ​Then, post the OctoberOctober transactions to the​ T-accounts. An account can be represented by the letter T. We call this a ​T-account. The vertical line in the letter T represents the division of the account into its two​ sides: left and right. The account title appears at the top of the T. The left side of each account is called the debit​ side, and the right side is called the credit side. ​T-accounts are used to illustrate the effect of transactions on accounts. The debits and credits in the​ T-account mirror the debits and credits in the journal entry. In other​ words, if an account is debited in the journal​ entry, it is also debited in the​ T-account. Note that debits to the account are placed on the left side and credits to the account are placed on the right side. The first step in completing a​ T-account is to list an​ account's beginning balance if applicable. Then we use the journal entries to retrieve the debit and credit amounts. Once all entries are​ posted, we are able to calculate the​ account's ending balances. We must use our knowledge of the​ account's normal balance in our calculation of the ending balance. ​Let's begin by entering the SeptemberSeptember 3030 beginning balances in each​ T-account. Select the​ "Bal" label on the normal balance side of the account and enter the beginning balances as provided in the information given in the problem. Recall that the normal balance of an account is the side where increases to the account are found. ​(For accounts with a zero beginning​ balance, do not enter a​ "0" or select the​ "Bal" reference.) Cash Common Stock Bal 2,150 Bal 6,200 Accounts Receivable Retained Earnings Bal 3,400 Bal 2,950 Supplies Dividends Equipment Service Revenue Bal 11,700 Accounts Payable Rent Expense Bal 8,100 Advertising Expense Now​ let's use the information from the journal entries to post the OctoberOctober transactions to the​ T-accounts. We will begin with transaction​ (a). The business received cash of $ 4 comma 000$4,000 and issued common stock. Raymour ComputingRaymour Computing increases Cash with a debit and increases Common Stock with a credit.​ Remember, a debit in the journal entries is recorded on the left side of the​ T-accounts and a credit in the journal entries is recorded on the right side of the​ T-accounts. Post transaction​ (a) to the​ T-accounts now. Be sure to select the posting reference​ (a) when posting the transaction. Review the journal entry for transaction (a).LOADING... Cash Common Stock Bal 2,150 Bal 6,200 (a) 4,000 (a) 4,000 Accounts Receivable Retained Earnings Bal 3,400 Bal 2,950 Supplies Dividends Equipment Service Revenue Bal 11,700 Accounts Payable Rent Expense Bal 8,100 Advertising Expense Now post transactions​ (b) through​ (h) to the​ T-accounts. Remember, a debit in the journal entries is recorded on the left side of the​ T-accounts and a credit in the journal entries is recorded on the right side of the​ T-accounts. Be sure to label each transaction with the appropriate posting reference. Review journal entries (b) through (h) from Requirement 1.LOADING... Cash Common Stock 2,150 6,200 (a) 4,000 (c) 4,600 (a) 4,000 (b) 6,100 (g) 2,750 (e) 1,800 (h) 3,300 Accounts Receivable Retained Earnings 3,400 2,950 (f) 4,900 (e) 1,800 Supplies Dividends (d) 1,400 (h) 3,300 Equipment Service Revenue 11,700 (b) 6,100 (f) 4,900 Accounts Payable Rent Expense 8,100 (c) 4,600 (d) 1,400 (g) 2,000 Advertising Expense (g) 750 Requirement 3. Compute the balance in each account. Now we can complete the​ T-accounts by calculating the ending balances. Select the​ "Bal" label on the normal balance side of the account and enter the ending balances. Cash Common Stock Bal 2,150 (c) 4,600 Bal 6,200 (a) 4,000 (g) 2,750 (a) 4,000 (b) 6,100 (h) 3,300 (e) 1,800 Bal 3,400 Bal 10,200 Accounts Receivable Retained Earnings Bal 3,400 (e) 1,800 Bal 2,950 (f) 4,900 Bal 6,500 Bal 2,950 Supplies Dividends (d) 1,400 (h) 3,300 Bal 1,400 Bal 3,300 Equipment Service Revenue Bal 11,700 (b) 6,100 (f) 4,900 Bal 11,700 Bal 11,000 Accounts Payable Rent Expense (c) 4,600 Bal 8,100 (g) 2,000 (d) 1,400 Bal 4,900 Bal 2,000 Advertising Expense (g) 750 Bal 750

To be​ useful, information must have which of the following fundamental qualitative​ characteristics? A. Relevance and faithful representation Your answer is correct. B. Expediency and relevance C. Faithful representation and diversity D. Timeliness and affordability

A. Relevance and faithful representation

Revenues are A. increases in retained earnings resulting from selling products or performing services. Your answer is correct. B. increases in​ paid-in capital resulting from the owners investing in the business. C. decreases in liabilities resulting from paying off loans. D. all of the above.

A. increases in retained earnings resulting from selling products or performing services.

Rembrandt AdvertisingRembrandt Advertising ​creates, plans, and handles advertising campaign in a​three-state area.​Recently, RembrandtRembrandt had to replace an inexperienced office worker in charge of bookkeeping because of some serious mistakes that had been uncovered in the accounting records. You have been hired to review these transactions to determine any corrections that might be necessary. In all​cases, the bookkeeper made an accurate description of the transaction.

Accounting errors can occur even in computerized systems. Input data may be​ wrong, or they may be entered twice or not at all. A debit may be entered as a​ credit, and vice versa. In our​ case, we must review a list of journal entries and determine what​ errors, if​ any, have been​ made, and determine the​ error's impact on​ cash, total​ assets, and net income. Requirement 1. For each of the preceding​ entries, indicate the effect of the error on​ cash, total​ assets, and net income. The answer for the first transaction has been provided as an example. ​Let's begin with the first journal entry on MayMay 1. Review the journal entryLOADING... and note the​ error(s) made by the previous bookkeeper. Recall that collection on an accounts receivable increases​ (or debits) the Cash account and decreases​ (or credits) the Accounts Receivable account. The correct entry is shown below as an example. Journal Entry Date Accounts and Explanations Debit Credit May 1 Cash 1,700 Accounts Receivable 1,700 Collected an account receivable. ​Now, compare the two MayMay 1 entries.​ Let's evaluate the effect on each error​ individually: Effect on​ cash: The correct entry to record the collection of accounts receivable includes an increase to​ Cash, and a decrease to Accounts​ Receivable, both assets.​ Therefore, as Cash should have been increased in the original​ entry, but was​ not, the Cash balance is too low as a result of this error by 1 comma 7001,700. Effect on total​ assets: We can see that in both the correct and the incorrect journal​ entry, the account debited was an asset account.​ Therefore, the debit side of the entry has no effect on total assets. We can determine the effect on total assets by comparing the credit side of the entries. The correct entry shows that Accounts Receivable​ (an asset) should have been reduced.​ Therefore, the total assets were too high as a result of this error. Effect on net​ income:​ Finally, notice that in the original journal​ entry, the previous bookkeeper credited​ (increased) Service​ Revenue, when, in​ fact, Service Revenue was not affected by this transaction.​ Therefore, net income is too high by 1 comma 7001,700. Based on the above​ analysis, the table can be completed as follows. Date Effect on Cash Effect on Total Assets Effect on Net Income May 1 Understated $1,700 Overstated $1,700 Overstated $1,700 ​Next, review the journal entryLOADING... from MayMay 2. The rent paid was ​$400400​; ​however, the journal entry records a payment of 4 comma 0004,000. Show the correct journal entry below. ​(Record debits​ first, then credits. Explanations are​ provided.) Journal Entry Date Accounts and Explanations Debit Credit May 2 Rent Expense 400 Cash 400 Paid monthly rent, $400. ​Now, compare the two MayMay 2 entries.​ Let's evaluate the effect on each error​ individually: Effect on​ cash: The incorrect entry reduces cash by 4 comma 0004,000​, but the correct entry reduces cash by only ​$400400. ​Therefore, the Cash balance is too low by the difference between the correct and incorrect amounts. Effect on total​ assets: The effect on Cash​ (an asset) is identical to the effect on total assets. Total assets are too low by the difference between the correct and incorrect amounts. Effect on net​ income:​ Now, let's review the debit side of the entries. Notice that both the correct and incorrect entries debited​ (increased) Rent Expense.​ However, the incorrect entry erroneously increased Rent Expense by 4 comma 0004,000​, significantly more than the actual rent of ​$400400. ​Therefore, expenses are too high by the difference between the correct and incorrect amounts. Recall that expenses have an inverse relationship with net income. If expenses are too​ high, then net income must be too low. Based on the above​ analysis, complete the table to indicate the effect of the error on​ cash, total​ assets, and net income. ​(If the error has no​ effect, select​ "Correct" and leave the amount cell​ blank.) Date Effect on Cash Effect on Total Assets Effect on Net Income 2 Understated $3,600 Understated $3,600 Understated $3,600 Review the journal entryLOADING... from MayMay 5 and determine the​ error(s) made by the previous bookkeeper. To record the cash​ receipt, Rembrandt AdvertisingRembrandt Advertising will increase​ (or debit) the Cash​ account, and increase​ (or credit) the Service Revenue account for the services performed. Show the correct journal entry below. ​(Record debits​ first, then credits. Explanations are​ provided.) Journal Entry Date Accounts and Explanations Debit Credit May 5 Cash 3,200 Service Revenue 3,200 Collected cash for services provided. ​Now, compare the two MayMay 5 entries.​ Let's evaluate the effect on each error​ individually: Effect on​ cash: Both the incorrect and correct journal entries are correctly debiting cash.​ Therefore, the error has no effect on cash. Effect on total​ assets: We can determine the effect on total assets by comparing the credit side of the entries. The correct entry shows that Service​ Revenue, not Accounts​ Receivable, should have been credited.​ Therefore, the total assets are too low as a result of this error. Effect on net​ income: Notice that the previous bookkeeper should have credited​ (increased) Service​ Revenue, not Accounts Receivable.​ Therefore, net income is too low by 3 comma 2003,200. Based on the above​ analysis, complete the table to indicate the effect of the error on​ cash, total​ assets, and net income. ​(If the error has no​ effect, select​ "Correct" and leave the amount cell​ blank.) Date Effect on Cash Effect on Total Assets Effect on Net Income 5 Correct Understated $3,200 Understated $3,200 Review the journal entryLOADING... from MayMay 10 and determine the​ error(s) made by the previous bookkeeper. While the amount of the purchase is​ correct, the bookkeeper debited an incorrect asset​ account, Supplies, instead of Office Equipment. Show the correct journal entry below. ​(Record debits​ first, then credits. Explanations are​ provided.) Journal Entry Date Accounts and Explanations Debit Credit May 10 Office Equipment 4,100 Accounts Payable 4,100 Purchased office equipment on account. ​Now, compare the two MayMay 10 entries.​ Let's evaluate the effect on each error​ individually: Effect on​ cash: Neither the correct nor the incorrect journal entry involves cash.​ Therefore, cash is not affected by this error. Effect on total​ assets: We can see that in both​ cases, the account debited is an asset account.​ Therefore, total assets are not affected by this error. Effect on net​ income: Neither the correct nor the incorrect journal entry involves revenue or expense accounts.​ Therefore, net income is not affected by this error. Complete the table to indicate the effect of the error on​ cash, total​ assets, and net income. ​(If the error has no​ effect, select​ "Correct" and leave the amount cell​ blank.) Date Effect on Cash Effect on Total Assets Effect on Net Income 10 Correct Correct Correct Review the journal entryLOADING... on MayMay 16 and determine the​ error(s) made by the previous bookkeeper. Once​ again, the bookkeeper debited the incorrect​ account, Dividends, instead of Salaries Expense. Show the correct journal entry below. ​(Record debits​ first, then credits. Explanations are​ provided.) Journal Entry Date Accounts and Explanations Debit Credit May 16 Salaries Expense 5,100 Cash 5,100 Paid salaries. ​Now, compare the two MayMay 16 entries.​ Let's evaluate the effect on each error​ individually: Effect on​ cash: Cash was properly credited in both entries.​ Therefore, cash is not affected by this error. Effect on total​ assets: Notice that in both​ entries, the only asset account involved is​ Cash, which we observed was not affected by the error.​ Therefore, there is no effect on total assets either. Effect on net​ income: Compare the accounts debited in both entries. Dividends is a balance sheet​ account, while Salaries Expense is an income statement account. As the incorrect entry failed to increase Salaries​ Expense, expenses are too low. ​Therefore, net income is too high as a result of this error. Complete the table to indicate the effect of the error on​ cash, total​ assets, and net income. ​(If the error has no​ effect, select​ "Correct" and leave the amount cell​ blank.) Date Effect on Cash Effect on Total Assets Effect on Net Income 16 Correct Correct Overstated $5,100 Review the journal entryLOADING... on MayMay 25 and determine the​ error(s) made by the previous bookkeeper. The business paid 5 comma 0005,000 for supplies purchased on account. Recall that​ "on account" means that you pay later. The Cash account was properly decreased​ (or credited) for the​ payment, but the bookkeeper should have decreased​ (or debited) the Accounts Payable account for the amount of the payment. Show the correct journal entry below. ​(Record debits​ first, then credits. Explanations are​ provided.) Journal Entry Date Accounts and Explanations Debit Credit May 25 Accounts Payable 5,000 Cash 5,000 Paid for supplies purchased earlier on account. ​Now, compare the two MayMay 25 entries.​ Let's evaluate the effect on each error​ individually: Effect on​ cash: Cash was properly credited in both entries.​ Therefore, cash is not affected by this error. Effect on total​ assets: ​Let's review the debit side of both entries. In the incorrect​ entry, Accounts​ Receivable, an​ asset, was debited​ (increased), while in the correct​ entry, Accounts​ Payable, a​ liability, was debited​ (decreased). As Accounts Receivable was debited​ erroneously, total assets are too high. Effect on net​ income: Neither the correct nor the incorrect journal entry involves revenue or expense accounts.​ Therefore, net income is not affected by this error. Complete the table to indicate the effect of the error on​ cash, total​ assets, and net income. ​(If the error has no​ effect, select​ "Correct" and leave the amount cell​ blank.) Date Effect on Cash Effect on Total Assets Effect on Net Income 25 Correct Overstated $5,000 Correct Requirement 2. What is the correct balance of cash if the balance of cash on the books before correcting the preceding transactions was $ 6 comma 500$6,500. Use the table to calculate the correct cash balance. The effects of the errors on cash you calculated previously have been entered for you. Cash balance $6,500 May 1 1,700 May 2 3,600 May 5 0 May 10 0 May 16 0 May 25 0 Corrected cash balance $11,800 Requirement 3. What is the correct amount of total assets if the total assets on the books before correcting the preceding transactions was $ 21 comma 000$21,000​? Use the table to calculate the correct amount of total assets. The effects of the errors on assets you calculated previously have been entered for you. Total assets $21,000 May 1 (1,700) May 2 3,600 May 5 3,200 May 10 0 May 16 0 May 25 (5,000) Corrected total assets $21,100 Requirement 4. What is the correct net income for MayMay if the reported income before correcting the preceding transactions was $ 10 comma 000$10,000​? Use the table to calculate the correct net income. The effects of the errors on net income you calculated previously have been entered for you. Net income $10,000 May 1 (1,700) May 2 3,600 May 5 3,200 May 10 0 May 16 (5,100) May 25 0 Corrected net income $10,000

Accounting equation

Assets = Liabilities + Stockholders' Equity

Assets

Assets are economic resources that are expected to produce a benefit in the future. Cash Accounts Receivable Inventory Land Office Supplies Equipment

PrestigePrestige Corporation holds cash of $ 8 comma 000$8,000 and owes $ 26 comma 000$26,000 on accounts payable. PrestigePrestige has accounts receivable of $ 48 comma 000 comma$48,000, inventory of $ 36 comma 000$36,000​, and land that cost $ 60 comma 000$60,000. How much are PrestigePrestige​'s total assets and​ liabilities? Total assets Liabilities A. $ 116 comma 000$116,000 $ 62 comma 000$62,000 B. $ 152 comma 000$152,000 $ 26 comma 000$26,000 Your answer is correct. C. $ 92 comma 000$92,000 $ 86 comma 000$86,000 D. $ 152 comma 000$152,000 $ 62 comma 000

B. $ 152 comma 000$152,000 $ 26 comma 000

NoonNoon Enterprises buys a warehouse for $ 600 comma 000$600,000 to use for its East Coast distribution operations. On the date of the​ purchase, a professional appraisal shows a value of $ 610 comma 000$610,000 for the warehouse. The seller had originally purchased the building for $ 520 comma 000$520,000. NoonNoon has a similar warehouse on the West Coast that has a book value of $ 611 comma 000$611,000. Under the historical cost​ principle, NoonNoon should record the building for A. $ 520 comma 000$520,000. B. $ 600 comma 000$600,000. Your answer is correct. C. $ 610 comma 000$610,000. D. $ 611 comma 000$611,000.

B. $ 600 comma 000$600,000.

Which statement is​ false? A. A trial balance lists all the accounts with their current balances. B. A trial balance is the same as a balance sheet. C. A trial balance can be taken at any time. D. A trial balance can verify the equality of debits and credits.

B. A trial balance is the same as a balance sheet.

Which of the following transactions will increase an asset and increase a​ liability? A. Paying an account payable B. Buying equipment on account C. Issuing stock D. Purchasing office equipment for cash

B. Buying equipment on account

Identify the asset from the following list of​ accounts: A. Common Stock B. Inventory C. Notes Payable D. Retained Earnings

B. Inventory

Income Statement formula

COGS + Other expenses + Income before income tax = Revenues

Financial statements can be used by which of the following​ groups? A. Regulatory bodies B. Investors and creditors C. Individuals D. All of the above.

D. All of the above.

Thompson Company had the following on the dates​ indicated: Total assets: 12/31/18: $570,000 12/31/17: $38,000 Total liabilities: 12/31/18: $34,000 12/31/17: $29,000 Thompson had no stock transactions in 2018​, so the change in​ stockholders' equity for 2018 was due to net income and dividends. If dividends were $80,000​, how much was Thompson​'s net income for 2018? Use the accounting equation and the statement of retained earnings. A. $527,000 B. $687,000 C. $447,000 D. $ 607,000 Use accounting equation to determine the stockholders' equity for beginning stockholders' equity 2017 and ending stockholders' equity 2018. Plug numbers in to Retained earnings formula to calculate the net income.

D. 607,000

How to create balance sheet

Data given: Payments of cash: Acquisition of equipment: $203,100 Dividends: $2,000 Retained earning: August 1, 2019: 0 August 31, 2019: $189,400 Utilities expense: $5,400 Adjustments to reconcile net income to net cash provided by operations: $1,200 Cash balance, August 1, 2019: $0 Cash balance, August 31, 2019: $5,600 Cash receipts: Issuance (sale) of stock to owners: $18,100 Rent expense: $1,600 common stock: $18,100 Equipment: $203,100 Office supplies: $7,500 Accounts payable: $8,700 Header: Company name, what form you a filling out, date you are filling out for Assets: list and add assets List and add liabilities List and add stockholders' equity Add together liabilities and stockholders; equity. Number should equal assets.

Income taxes

Income before taxes * Income tax rate = income tax

Net income

Income before taxes - income tax = net income

Liabilities

Liabilities are​ "outsider claims". They are debts that are payable to​ outsiders, called creditors. Accounts Payable

Stock holders' Equity

Represents the insider claims of a business, the claims to the assets held by the owners of the business. Retained earnings Common Stock

Retained earnings

Retained earnings means exactly what the term implies. It is that portion of net income the company has​ retained, or​ kept, over a period of​ years, after making deductions for dividends to shareholders.

Cost of Goods Sold (COGS)

Revenues - Income before income tax- other expenses = COGS

Balance Sheet

The balance sheet presents the​ company's assets,​ liabilities, and​ stockholders' equity as of a specific date. It follows the accounting equation. The first step in preparing any financial statement is to prepare a properly-formatted heading. The balance sheet is prepared as of a certain​ date, similar to a​ snap-shot in time.

Journal (or book of original entry)

The first accounting record in which an organization records daily financial transactions. Journal entries are used to record accounting transactions. A journal entry includes the account to be​ debited, which is listed​ first, and an account to be​ credited, which is listed second. The journalizing process follows three​ steps: 1. Specify each account affected by the transaction and classify each account by type​ (asset, liability,​ stockholders' equity,​ revenue, or​ expense). 2. Determine whether each account is increased or decreased by the transaction. Use the rules of debit and credit to increase or decrease each account. 3. Record the transaction in the​ journal, including a brief explanation. The debit side is entered on the left​ margin, and the credit side is indented to the right. Please note that we are told to exclude explanations from the journal entries in this problem.

Long-term Assets

are the​ non-liquid assets that are required for the​ company's day-to-day operations. They usually are in service for over one year. Most current assets or liabilities are listed first and then followed by​ long-term assets or liabilities.

Current Assests

assets that are expected to be converted to cash, sold, or consumed during the next 12 months or within the operating cycle if longer than a year.

cash flow to cash flow

beginning of year=end of previous yr

Retained earnings formula

beginning retained earnings + net income - dividends = ending retained earnings.

Long-term Liabilities

debts payable after 1 year.

Current Liabilities

debts payable within 1 year or withing a company's operating cycle if longer than a year.

retained earnings to balance sheet

ending balance= retained earnings for same year

rules of debit and credit

illustrate how increases and decreases affect an account. An​ account's normal balance falls on the side of the​ account, debit or​ credit, where increases are recorded. Increases in assets are recorded on the left​ (debit) side of the account. Decreases in assets are recorded on the right​ (credit) side.​ Conversely, increases in liabilities and ​stockholders' equity are recorded by credits. Decreases in liabilities and ​stockholders' equity are recorded by debits.

financial statement order

income, retained earnings, balance, cash flow

Income to retained earnings

income: net income = retained earnings: net income

Net income

or net loss is calculated on the income statement. There is a net income if revenues are greater than expenses and a net loss if expenses are greater than revenues. Net income is one the measures used to assess the operating performance of a company.