Financial Account
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Part3.docxExpand Your Critical Thinking 3-7
Saira Morrow operates Dressage Riding Academy, Inc. The academy’s primary sources of revenue are riding fees and lesson fees, which are provided on a cash basis. Saira also boards horses for owners, who are billed monthly for boarding fees. In a few cases, boarders pay in advance of expected use. For its revenue transactions, the academy maintains these accounts: Cash, Accounts Receivable, Unearned Service Revenue, and Service Revenue. The academy owns 10 horses, a stable, a riding corral, riding equipment, and office equipment. These assets are accounted for in the following accounts: Horses, Buildings, and Equipment. The academy employs stable helpers and an office employee, who receive weekly salaries. At the end of each month, the mail usually brings bills for advertising, utilities, and veterinary service. Other expenses include feed for the horses and insurance. For its expenses, the academy maintains the following accounts: Supplies, Prepaid Insurance, Accounts Payable, Salaries and Wages Expense, Advertising Expense, Utilities Expense, Maintenance and Repairs Expense, Supplies Expense, and Insurance Expense. Saira’s sole source of personal income is dividends from the academy. Thus, the corporation declares and pays periodic dividends. To account for stockholders’ equity in the business and dividends, two accounts are maintained: Common Stock and Dividends. During the first month of operations, an inexperienced bookkeeper was employed. Saira asks you to review the following eight entries of the 50 entries made during the month. In each case, the explanation for the entry is correct.
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May 1 |
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Cash |
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12,300 |
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Unearned Service Revenue |
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12,300 |
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(Issued common stock in exchange for $12,300 cash) |
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5 |
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Cash |
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210 |
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Service Revenue |
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210 |
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(Received $210 cash for lesson fees) |
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7 |
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Cash |
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410 |
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Service Revenue |
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410 |
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(Received $410 for boarding of horses beginning June 1) |
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9 |
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Supplies Expense |
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1,230 |
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Cash |
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1,230 |
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(Purchased estimated 5 months’ supply of feed and hay for $1,230 on account) |
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14 |
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Equipment |
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70 |
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Cash |
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700 |
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(Purchased desk and other office equipment for $700 cash) |
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15 |
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Salaries and Wages Expense |
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330 |
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Cash |
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330 |
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(Issued check to Saira for personal use) |
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20 |
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Cash |
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117 |
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Service Revenue |
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126 |
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(Received $126 cash for riding fees) |
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31 |
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Maintenance and Repairs Expense |
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60 |
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Accounts Receivable |
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60 |
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(Received bill of $60 from carpenter for repair services performed) |
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For each journal entry that is correct, so state.
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Date |
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May |
1 |
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select between correct and incorrect
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May |
5 |
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select between correct and incorrect
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May |
7 |
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select between correct and incorrect
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May |
9 |
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select between correct and incorrect
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May |
14 |
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select between correct and incorrect
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May |
15 |
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select between correct and incorrect
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May |
20 |
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select between correct and incorrect
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May |
31 |
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select between correct and incorrect
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For each journal entry that is incorrect, prepare the entry that should have been made by the bookkeeper. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Record journal entries in the order presented in the problem.)
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Date |
Account Titles and Explanation |
Debit |
Credit |
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choose a transaction date
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enter an account title
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enter a debit amount
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enter a credit amount
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enter an account title
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enter a debit amount
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enter a credit amount
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choose a transaction date
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enter an account title
|
enter a debit amount
|
enter a credit amount
|
|
|
enter an account title
|
enter a debit amount
|
enter a credit amount
|
|
choose a transaction date
|
enter an account title
|
enter a debit amount
|
enter a credit amount
|
|
|
enter an account title
|
enter a debit amount
|
enter a credit amount
|
|
choose a transaction date
|
enter an account title
|
enter a debit amount
|
enter a credit amount
|
|
|
enter an account title
|
enter a debit amount
|
enter a credit amount
|
|
choose a transaction date
|
enter an account title
|
enter a debit amount
|
enter a credit amount
|
|
|
enter an account title
|
enter a debit amount
|
enter a credit amount
|
|
choose a transaction date
|
enter an account title
|
enter a debit amount
|
enter a credit amount
|
|
|
enter an account title
|
enter a debit amount
|
enter a credit amount
|
|
choose a transaction date
|
enter an account title
|
enter a debit amount
|
enter a credit amount
|
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|
enter an account title
|
enter a debit amount
|
enter a credit amount
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Will the incorrect entries prevent the trial balance from balancing?
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Date |
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May |
1 |
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select between yes and no
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May |
7 |
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select between yes and no
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May |
9 |
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select between yes and no
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May |
14 |
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select between yes and no
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May |
15 |
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select between yes and no
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May |
20 |
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select between yes and no
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May |
31 |
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select between yes and no
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