Chapter 3: The Accounting Information System

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For each transaction, determine the effect on the accounting equation: Issued shares of common stock to investors in exchange for $100,000 in cash

1. ↑ Assets (Cash) 100,000 2. ↑ Equity (Common stock) 100,000

For each transaction, determine the effect on the accounting equation: Received $12,000 cash from customers for contracts billed (performed computer services worth $19,000 on account)

1. ↑ Assets (Cash) 12,000 2. ↓ Assets (Accounts receivable) 12,000

For each transaction, determine the effect on the accounting equation: Received $13,600 cash from a previously billed customer for services performed

1. ↑ Assets (Cash) 13,600 2. ↓ Assets (Accounts receivable) 13,600

For each transaction, determine the effect on the accounting equation: Issued common stock to investors for $138,090 cash

1. ↑ Assets (Cash) 138,090 2. ↑ Equity (Common stock) 138,090

For each transaction, determine the effect on the accounting equation: Received $16,000 from customers for services performed

1. ↑ Assets (Cash) 16,000 2. ↑ Equity (Service revenue) 16,000

For each transaction, determine the effect on the accounting equation: Stockholders invested $40,000 in the business in exchange for common stock of the company

1. ↑ Assets (Cash) 40,000 2. ↑ Equity (Common stock) 40,000

For each transaction, determine the effect on the accounting equation: Borrowed $45,000 by issuing bonds

1. ↑ Assets (Cash) 45,000 2. ↑ Liabilities (Bonds payable) 45,000

For each transaction, determine the effect on the accounting equation: Performed computer services for Wharton Construction Company for $5,000 cash

1. ↑ Assets (Cash) 5,000 2. ↑ Equity (Service revenue) 5,000

For each transaction, determine the effect on the accounting equation: Borrowed $58,500 by issuing bonds

1. ↑ Assets (Cash) 58,500 2. ↑ Liabilities (Bonds payable) 58,500

For each transaction, determine the effect on the accounting equation: Purchased equipment for $297,550 cash

1. ↑ Assets (Equipment) 297,550 2. ↓ Assets (Cash) 297,550

For each transaction, determine the effect on the accounting equation: Purchased computers for office use for $30,000 from Ladd on account

1. ↑ Assets (Equipment) 30,000 2. ↑ Liabilities (Accounts payable) 30,000

For each transaction, determine the effect on the accounting equation: Purchased delivery trucks for $60,000 cash

1. ↑ Assets (Equipment) 60,000 2. ↓ Assets (Cash) 60,000

For each transaction, determine the effect on the accounting equation: Purchased inventory of $72,350 on account

1. ↑ Assets (Inventory) 72,350 2. ↑ Liabilities (Accounts payable) 72,350

For each transaction, determine the effect on the accounting equation: Purchased supplies on account for $4,100

1. ↑ Assets (Supplies) 4,100 2. ↑ Liabilities (Account payable) 4,100

For each transaction, determine the effect on the accounting equation: Purchased supplies for $4,700 on account

1. ↑ Assets (Supplies) 4,700 2. ↑ Liabilities (Accounts payable) 4,700

For each transaction, determine the effect on the accounting equation: Incurred advertising expense for May of $1,300, on account

1. ↓ Equity (Advertising expense) 1,300 2. ↑ Liabilities (Accounts payable) 1,300

For each transaction, determine the effect on the accounting equation: Paid a dividend of $11,000 to shareholders

1. ↓ Equity (Dividend) 11,000 2. ↓ Assets (Cash) 11,000

For each transaction, determine the effect on the accounting equation: Paid $8,560 cash dividend to stockholders

1. ↓ Equity (Dividends) 8,560 2. ↓ Assets (Cash) 8,560

For each transaction, determine the effect on the accounting equation: Paid $4,000 cash for May rent on storage space

1. ↓ Equity (Rent expense) 4,000 2. ↓ Assets (Cash) 4,000

For each transaction, determine the effect on the accounting equation: Paid rent of $5,200

1. ↓ Equity (Rent expense) 5,200 2. ↓ Assets (Cash) 5,200

For each transaction, determine the effect on the accounting equation: Paid salaries of $28,000

1. ↓ Equity (Salaries and wages expense) 28,000 2. ↓ Assets (Cash) 28,000

For each transaction, determine the effect on the accounting equation: Paid Western States Power Co. $8,000 cash for energy usage in May

1. ↓ Equity (Utilities expense) 8,000 2. ↓ Assets (Cash) 8,000

For each transaction, determine the effect on the accounting equation: Paid Ladd for the computers purchased (purchased computers for office use for $30,000 from Ladd on account)

1. ↓ Liabilities (Accounts payable) 30,000 2. ↓ Assets (Cash) 30,000

For each transaction, identify the accounts to be debited and credited: Sends Wil Wheaton a bill for $700 after completing welding work

Account debited: Accounts receivable Accounts credited: Service revenue

For each transaction, identify the accounts to be debited and credited: Issues common stock to investors in exchange for $5,000 cash

Account debited: Cash Account credited: common stock

For each transaction, identify the accounts to be debited and credited: Buys equipment on account for $1,100

Account debited: Equipment Account credited: Accounts payable

For each transaction, identify the accounts to be debited and credited: Pays $740 to landlord for June rent

Account debited: Rent expense Account credited: Cash

[Short answer] Post the transactions 56-61 to T-accounts: Cash

Debit 56 Credit 57, 59-61 Normal balance 11300

[Short answer] Post the transactions 56-61 to T-accounts: Equipment

Debit 57 Normal balance 9000

[Short answer] Post the transactions 56-61 to T-accounts: Accounts receivable

Debit 58 Normal balance 18000

[Short answer] Post the transactions 56-61 to T-accounts: Salaries and wages expense

Debit 59 Normal balance 1200

[Short answer] Post the transactions 56-61 to T-accounts: Accounts payable

Debit 60 Credit 57 Normal balance 2000

[Short answer] Post the transactions 56-61 to T-accounts: Dividends

Debit 61 Normal balance 500

[Short answer] Post the transactions 62-70 to T-accounts: Cash

Debit 62, 67, 68 Credit 64, 69, 70 Normal balance 18,800

[Short answer] Post the transactions 62-70 to T-accounts: Rent expense

Debit 64 Normal balance 900

[Short answer] Post the transactions 62-70 to T-accounts: Supplies

Debit 65 Normal balance 1300

[Short answer] Post the transactions 62-70 to T-accounts: Accounts receivable

Debit 66 Normal balance 1900

[Short answer] Post the transactions 62-70 to T-accounts: Salaries and wages expense

Debit 69 Normal balance 1500

[Short answer] Post the transactions 62-70 to T-accounts: Accounts payable

Debit 70 Credit 65 Normal balance 1000

Journalize the transactions: April 11 Received $700 cash advance from M. Jason to design a new home

1. Debit cash 700 2. Credit unearned service revenue 700

Journalize the transactions: Paid $400 cash dividend to stockholders

1. Debit dividends 400 2. Credit cash 400

Journalize the transactions: September 30 Paid $500 cash dividend

1. Debit dividends 500 2. Credit cash 500

Journalize the transactions: Paid $11,000 cash to buy equipment

1. Debit equipment 11,000 2. Credit cash 11,000

Journalize the transactions: September 5 Purchased equipment for $9,000, paying $3,000 in cash and the balance on account

1. Debit equipment 9,000 2. Credit cash 3,000 3. Credit accounts payable 6,000

Journalize the transactions: Paid income tax, $1,500

1. Debit income tax expense 1,500 2. Credit cash 1,500

Journalize the transactions: Paid $40 of interest on the bank loan obtained (obtained a bank loan of $7,000 by issuing a note payable)

1. Debit interest expense 40 2. Credit cash 40

Journalize the transactions: Paid $1,200 cash for April office rent

1. Debit rent expense 1,200 2. Credit cash 1,200

Journalize the transactions: April 2 Paid office rent for the month $900

1. Debit rent expense 900 2. Credit cash 900

Journalize the transactions: September 14 Paid salaries of $1,200

1. Debit salaries and wages expense 1,200 2. Credit cash 1,200

Journalize the transactions: April 30 Paid secretary-receptionist for the month, $1,500

1. Debit salaries and wages expense 1,500 2. Credit cash 1,500

Journalize the transactions: Paid employees' salaries, $6,400

1. Debit salaries and wages expense 6,400 2. Credit cash 6,400

Journalize the transactions: April 3 Purchased architectural supplies on account from Burmingham Company, $1,300

1. Debit supplies 1,300 2. Credit accounts payable 1,300

Journalize the transactions: Paid $1,450 for supplies

1. Debit supplies 1,450 2. Credit cash 1,450

Journalize the transactions: Paid the utility bill for the month, $2,000

1. Debit utility expense 2,000 2. Credit cash 2,000

Journalize the transactions: April 1 Hired a secretary-receptionist at a salary of $375 per week, payable monthly

1. Not applicable 2. Not applicable

Determine whether the account is current (obtainable within a year) or not: Equipment

No; equipment can not be easily liquefied within a year

Determine whether the account is current (obtainable within a year) or not: Notes payable

No; typically notes payable can not be easily liquefied within a year (e.g., mortgage payable)

In a double-entry system of accounting, each transaction must be recorded in a minimum of [answer] different accounts.

Two

The basic form of an account that aligns information in three parts is called a(n) [answer]

T-account

[Short answer] Post the transactions 56-61 to T-accounts: Common stock

Credit 56 Normal balance 20,000

[Short answer] Post the transactions 56-61 to T-accounts: Service revenue

Credit 58 Normal balance 18000

[Short answer] Post the transactions 62-70 to T-accounts: Common stock

Credit 62 Normal balance 18,000

[Short answer] Post the transactions 62-70 to T-accounts: Service revenue

Credit 66, 68 Normal balance 4700

[Short answer] Post the transactions 62-70 to T-accounts: Unearned service revenue

Credit 67 Normal balance 700

The entire group of accounts maintained by a company is called [answer]

General ledger

Determine whether the account is current (obtainable within a year) or not: Accounts payable

Yes; accounts payable can easily be liquefied within a year

Determine whether the account is current (obtainable within a year) or not: Accounts receivable

Yes; accounts receivable can easily be liquefied within a year

Determine whether the account is current (obtainable within a year) or not: Cash

Yes; cash can easily be liquefied within a year

Determine whether the account is current (obtainable within a year) or not: Prepaid insurance

Yes; prepaid insurance can easily be liquefied within a year

Determine whether the account is current (obtainable within a year) or not: Salaries and wages payable

Yes; salaries and wages payable can easily be liquefied within a year

Journalize the transactions: April 30 Paid $300 to Burmingham Company for accounts payable due

1. Debit accounts payable 300 2. Credit cash 300

Journalize the transactions: September 25 Paid $4,000 cash on balance owed for equipment

1. Debit accounts payable 4,000 2. Credit cash 4,000

Journalize the transactions: Paid "Daily Herald" the amount due (purchased $600 of advertising in the "Daily Herald", on account)

1. Debit accounts payable 600 2. Credit cash 600

Journalize the transactions: April 10 Completed blueprints on a carport and billed client $1,900 for services

1. Debit accounts receivable 1,900 2. Credit service revenue 1,900

Journalize the transactions: September 8 Performed services on account for $18,000

1. Debit accounts receivable 18,000 2. Credit service revenue 18,000

Journalize the transactions: Purchased $600 of advertising in the "Daily Herald", on account

1. Debit advertising expense 600 2. Credit cash 600

Journalize the transactions: Received $12,000 cash from customers billed (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)

1. Debit cash 12,000 2. Credit accounts receivable 12,000

Journalize the transactions: April 1 Stockholders invested $18,000 cash in exchange for common stock of the corporation

1. Debit cash 18,000 2. Credit common stock 18,000

Journalize the transactions: 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

1. Debit cash 2,000 2. Debit accounts receivable 16,000 3. Credit service revenue 18,000

Journalize the transactions: April 20 Received $2,800 cash for services completed and delivered to S. Melvin

1. Debit cash 2,800 2. Credit service revenue 2,800

Journalize the transactions: September 1 Issued common stock in exchange for $20,000 cash received from investors

1. Debit cash 20,000 2. Credit common stock 20,000

Journalize the transactions: Issued common stock for $24,000 cash

1. Debit cash 24,000 2. Credit common stock 24,000

Journalize the transactions: Obtained a bank loan for $7,000 by issuing a note payable

1. Debit cash 7,000 2. Credit notes payable 7,000

For each transaction, determine the effect on the accounting equation: Performed services on account for $10,000

1. ↑ Assets (Accounts receivable) 10,000 2. ↑ Equity (Service revenue) 10,000

For each transaction, determine the effect on the accounting equation: Performed computer services worth $19,000 on account

1. ↑ Assets (Accounts receivable) 19,000 2. ↑ Equity (Service revenue) 19,000

For each of the following accounts, indicate the effect of a debit or a credit on the account and the normal balance: Accounts payable