Accounting Unit 1

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S1-1

S1-1
For each user of accounting information, identify if the user would use financial accounting (FA) or managerial accounting (MA).
Solution:
a. investor
b. banker
c. Internal Revenue Service
d. manager of the business
e. owner
f. stockholder
g. human resources director
h. creditor
&L&"Arial,Bold"&12ACCOUNTING - Tenth Edition&R&"Arial,Bold"&12Solutions Manual
&L&"Arial,Bold"&10Chapter 1: Accouting and the Business Environment&R&"Arial,Bold"&10Page &P of &N

E1-21

E1-21
For each of the following situations with regard to owner's contributions and withdrawals of the business, compute the amount of net income or net loss during June 2016.
a. The owner contributed $7,500 to the business and made no withdrawals.
b. The owner made no contributions. The owner withdrew cash of $13,000.
c. The owner made contributions of $20,000 and withdrew cash of $18,000.
Solution:
a. b. c.
&L&"Arial,Bold"&12HORNGREN'S ACCOUNTING - Eleventh Edition&R&"Arial,Bold"&12
&L&"Arial,Bold"&10Chapter 1: Accouting and the Business Environment&R&"Arial,Bold"&10Page &P of &N

E1-23

E1-23
Requirements
1. Compute Peaceful River Spa’s net income for 2016.
2. Did Peaceful River Spa’s owner's equity increase or decrease during 2016? By how much? By how much?
Solution:
Requirement 1
Requirement 2
&L&"Arial,Bold"&12HORNGREN'S ACCOUNTING - Eleventh Edition&R&"Arial,Bold"&12
&L&"Arial,Bold"&10Chapter 1: Accouting and the Business Environment&R&"Arial,Bold"&10Page &P of &N

P1-41A

P1-41A
Analyze the effects of the transaction on the accounting equations of Turnbull Gymnastics.
Solution:
&L&"Arial,Bold"&12HORNGREN'S ACCOUNTING - Eleventh Edition&R&"Arial,Bold"&12
&L&"Arial,Bold"&10Chapter 1: Accouting and the Business Environment&R&"Arial,Bold"&10Page &P of &N

Decision Case 1-1

Decision Case 1-1
Requirements
1. Which business has more assets?
2. Which business owes more to creditors?
3. Which business has more owner's equity at the end of the year?
4. Which business brought in more revenue?
5. Which business is more profitable?
6. Which of the foregoing questions do you think is most important for evaluating these two businesses? Why?
7. Which business looks better from a financial standpoint?
Solution:
Requirement 1
Requirement 2
Requirement 3
Requirement 4
Requirement 5
Requirement 6
Requirement 7
&L&"Arial,Bold"&12HORNGREN'S ACCOUNTING - Eleventh Edition&R&"Arial,Bold"&12
&L&"Arial,Bold"&10Chapter 1: Accouting and the Business Environment&R&"Arial,Bold"&10Page &P of &N

E2-16

E2-16
Journalize the transactions of London Engineering. Include an explanation with each journal entry.
Solution:
Date Accounts and Explanation Debit Credit
&L&"Arial,Bold"&12HORNGREN'S ACCOUNTING - Eleventh Edition
&L&"Arial,Bold"Chapter 2: Recording Business Transactions&R&"Arial,Bold"Page &P of &N

E2-17

E2-17
Requirements
1. Open the following T-accounts for London Engineering: Cash; Accounts
Receivable; Office Supplies; Equipment; Accounts Payable; Notes Payable;
London, Capital; London, Withdrawals; Service Revenue; Utilities Expense.
2. Post the journal entries to the T-accounts. Also transfer the dates to the T-accounts.
3. Compute the July 31 balance for each account.
Solution:
Requirements 1, 2, and 3
Cash Accounts Payable
Accounts Receivable Notes Payable
Office Supplies London, Capital
Equipment London, Withdrawals
Service Revenue Utilities Expense
&L&"Arial,Bold"&12HORNGREN'S ACCOUNTING - Eleventh Edition
&L&"Arial,Bold"Chapter 2: Recording Business Transactions&R&"Arial,Bold"Page &P of &N

E2-22

E2-22
Prepare Aker's trial balance as of August 31, 2016.
Solution:
AKER MOVING COMPANY
Trial Balance
August 31, 2016
Account Title Balance
Debit Credit
&L&"Arial,Bold"&12HORNGREN'S ACCOUNTING - Eleventh Edition
&L&"Arial,Bold"Chapter 2: Recording Business Transactions&R&"Arial,Bold"Page &P of &N

P2-30A

P2-30A
Requirements
1. Record each transaction in the journal using the following account titles: Cash;
Accounts Receivable; Office Supplies; Prepaid Insurance; Furniture; Land;
Accounts Payable; Utilities Payable; Unearned Revenue; Stann, Capital;
Stann, Withdrawals; Service Revenue; Salaries Expense; Rent Expense; Utilities Expense.
Explanations are not required.
2. Open a T-account for each of the accounts.
3. Post the journal entries to the T-accounts, using transaction dates as posting references in the ledger accounts. Label the balance of each account Bal.
4. Prepare the trial balance of Doris Stann, Designer, as of September 30, 2017.
Solution:
Requirement 1
Date Accounts and Explanation Posting Ref. Debit Credit
Date Accounts and Explanation Posting Ref. Debit Credit
Requirements 2 and 3
Cash Accounts Payable
Utilities Payable
Accounts Receivable Unearned Revenue
Office Supplies Stann, Capital
Prepaid Insurance Stann, Withdrawals
Land Service Revenue
Furniture Utilities Expense
Salaries Expense Rent Expense
Requirement 4
DORIS STANN, DESIGNER
Trial Balance
September 30, 2017.
Account Title Balance
Debit Credit
&L&"Arial,Bold"&12HORNGREN'S ACCOUNTING - Eleventh Edition
&L&"Arial,Bold"Chapter 2: Recording Business Transactions&R&"Arial,Bold"Page &P of &N

P2-34A

P2-34A
Requirements
1. Prepare the income statement for the month ended July 31, 2017.
2. Prepare the statement of owner's equity for the month ended July 31, 2017. The beginning balance of capital was $0 and the owner contributed $24,000.
3. Prepare the balance sheet as of July 31, 2017.
4. Calculate the debt ratio as of July 31, 2017.
Solution:
Requirement 1
SANDRA SOUSA, REGISTERED DIETICIAN
Income Statement
Month Ended July 31, 2017
Requirement 2
SANDRA SOUSA, REGISTERED DIETICIAN
Statement of Owner’s Equity
Month Ended July 31, 2017
Requirements 3
SANDRA SOUSA, REGISTERED DIETICIAN
Balance Sheet
July 31, 2017
Assets Liabilities
Owner's Equity
Requirements 4
&L&"Arial,Bold"&12HORNGREN'S ACCOUNTING - Eleventh Edition
&L&"Arial,Bold"Chapter 2: Recording Business Transactions&R&"Arial,Bold"Page &P of &N

Decision Case 2-1

Decision Case 2-1
Requirements
1. Open the following T-accounts: Cash; Accounts Receivable; Office Supplies;
Accounts Payable; McChesney, Capital; Service Revenue; Salaries Expense; Rent
Expense; and Advertising Expense.
2. Post the transactions directly to the accounts without using a journal. Record each transaction by letter. Calculate account balances.
3. Prepare a trial balance at June 30, 2016.
4. Compute the amount of net income or net loss for this first month of operations. Would you recommend that McChesney continue in business?
Solution:
Requirements 1 and 2
Cash Accounts Payable
Accounts Receivable McChesney, Capital
Office Supplies Service Revenue
Rent Expense Salaries Expense
Advertising Expense
Requirement 3
A-PLUS TRAVEL PLANNERS
Trial Balance
June 30, 2016
Account Title Balance
Debit Credit
Requirement 4
&L&"Arial,Bold"&12HORNGREN'S ACCOUNTING - Eleventh Edition
&L&"Arial,Bold"Chapter 2: Recording Business Transactions&R&"Arial,Bold"Page &P of &N

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