Principles of Accounting: Volume 1, Financial Accounting( 2.4 Assignment: Spreadsheet Exercises)

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Home>Business & Finance homework help>Accounting homework help>Principles of Accounting: Volume 1, Financial Accounting( 2.4 Assignment: Spreadsheet Exercises)

Example 1

Workshop Two Practice Exercises
Example 1: Identifying Credits and Debits
One of the first steps towards creating financial statements is recording financial transactions. Identify whether the following transactions would be recorded as either debit or credit entries.
Use the space below to create your solution. If you get stuck, or when you are ready to check your answer, go to the next worksheet tab for the solution.
Input / Output area:
Cost of Goods Sold increase
Rental income decrease
Dividends increase
Common Stock increase
Taxes payable decrease
Inventory decrease
Machinery increase
Salaries payable increase
Salaries expense decrease
Long-Term Debt increase
This is the practice problem file, provided in the assignment instructions October 2019

Ex # 1 Solution

Workshop Two Practice Exercises
Example 1: Identifying Credits and Debits
One of the first steps towards creating financial statements is recording financial transactions. Identify whether the following transactions would be recorded as either debit or credit entries.
Check below for a detailed solution to this problem.
The table below is extremely helpful and can be found on page 123 of the Franklin textbook.
Just take it one by one!
It would be worthwhile to print this and have it next to you while you complete your assignments!
Input / Output area:
Cost of Goods Sold increase Debit Cost of Goods sold is an expense (shown on the Income Statement). It increases on the debit side.
Rental income decrease Debit Rental income is a form of revenue (shown on the Income Statement). It decreases on the debit side.
Dividends increase Debit Dividends (shown on the Cash Flow Statement) increases on the debit side.
Common Stock increase Credit Common Stock (shown on the Balance Sheet) increases on the credit side.
Taxes payable decrease Debit Taxes payable (shown on the Balance Sheet) is a liability. Liabilities decrease on the debit side.
Inventory decrease Credit Inventory is an asset (shown on the Balance Sheet). Assets decrease on the credit side.
Machinery increase Debit Machinery is an asset (shown on the Balance Sheet). Assets increase on the debit side.
Salaries payable increase Credit Salaries payable is a liability (shown on the Balance Sheet). Liabilities increase on the credit side.
Salaries expense decrease Credit Salaries paid is an expense (shown on the Income Statement). It decreases on the credit side.
Long-Term Debt increase Credit Long-term debt is a liability (shown on the Balance Sheet). Liabilities increase on the credit side.
This is the practice problem file, provided in the assignment instructions October 2019

Example 2

Workshop Two Practice Exercises
Example 2: Preparing Journal Entries
Prepare Journal Entries to record the 5 transactions shown below. Build a table showing the appropriate credits and debits, accounts, and descriptions.
Date Transaction Amount
January 5 The company purchases machinery on account, with payment due in one month $ 35,000
January 10 Sold products to a customer, who asks to be billed 15,500
January 12 Paid for a local trucking license with cash 350
January 17 Receive cash from a customer for products sold 8,200
January 27 Received cash from the customer who asked to be billed on January 10 15,500
Use the space below to create your solution. If you get stuck, or when you are ready to check your answer, go to the next worksheet tab for the solution.
This is the practice problem file, provided in the assignment instructions October 2019

Ex # 2 Solution

Workshop Two Practice Exercises
Example 2: Preparing Journal Entries
Prepare Journal Entries to record the 5 transactions shown below. Build a table showing the appropriate credits and debits, accounts, and descriptions.
Date Transaction Amount
January 5 The company purchases machinery on account, with payment due in one month $ 35,000
January 10 Sold products to a customer, who asks to be billed 15,500
January 12 Paid for a local trucking license with cash 350
January 17 Receive cash from a customer for products sold 8,200
January 27 Received cash from the customer who asked to be billed on January 10 15,500
Check below for a detailed solution to this problem.
Output area: Note the standardized elements here: Debit first, credit second and indented, followed by a description.
First identify the impacted accounts, then whether they would decrease or increase, then whether it is a credit or debit.
Journal Take these one step at a time. Note the debits and credits must equal.
Date Account Debit Credit
Jan 5 Machinery $ 35,000 Machinery is a long-term asset. Assets increase on the debit side.
Accounts Payable $ 35,000 Purchasing something "on account" (for credit / with a short-term loan) creates Accounts Payable, a liability. Liabilities increase on the credit side.
Purchased machinery on account
Jan 10 Accounts Receivable $ 15,500 Billing a customer creates Accounts Receivable. Accounts Receivable is an asset, which increases on the debit side.
Product Revenue $ 15,500 Selling products creates revenue. Revenue increases on the credit side.
Sold product to a customer on account
Jan 12 License expense (local tax) $ 350 The trucking license is an expense. Expenses increase on the debit side.
Cash $ 350 Cash is an asset. Assets decrease on the credit side.
Paid for local trucking license with cash
Jan 17 Cash $ 8,200 Selling for cash increases cash on hand. Cash is an asset. Assets increase on the debit side.
Product Revenue $ 8,200 Selling products creates revenue. Revenue increases on the credit side.
Jan 27 Cash $ 15,500 Receiving a cash payment increases cash on hand. Cash is an asset. Assets increase on the debit side.
Accounts Receivable $ 15,500 Receiving a payment due decreases Accounts Receivable. Accounts Receivable is an asset, which decreases on the the credit side.
Received payment from customer for Jan 10 purchase
This is the practice problem file, provided in the assignment instructions October 2019

Example 3

Workshop Two Practice Exercises
Example 3: Preparing T-Accounts
Post the following transactions to T-accounts for Accounts Receivable, Accounts Payable, Revenue, Cash, and Inventory, indicating the appropriate credits and debits, as well as the ending balance (assume no beginning balances in these accounts).
A. Provided services to customers on account (credit) $ 28,500
B. Received payment from customers previously billed 8,500
C. Purchased inventory on account (using credit) 16,300
D. Paid for inventory previously purchased 8,200
E. Made sales to customers for cash 1,600
Use the space below to create your solution. If you get stuck, or when you are ready to check your answer, go to the next worksheet tab for the solution.
This is the practice problem file, provided in the assignment instructions October 2019

Ex # 3 Solution

Workshop Two Practice Exercises
Example 3: Preparing T-Accounts
Post the following transactions to T-accounts for Accounts Receivable, Accounts Payable, Revenue, Cash, and Inventory, indicating the appropriate credits and debits, as well as the ending balance (assume no beginning balances in these accounts).
A. Provided services to customers on account (credit) $ 28,500
B. Received payment from customers previously billed 8,500
C. Purchased inventory on account (using credit) 16,300
D. Paid for inventory previously purchased 8,200
E. Made sales to customers for cash 1,600
Check below for a detailed solution to this problem.
Cash Accounts Receivable Start by identifying which accounts are affected by each transaction.
B. $ 8,500 A. $ 28,500 It is always two, and they will balance each other out (one debit and one credit).
D. $ 8,200 B. $ 8,500 Then determine whether the impact on each account is a debit or credit.
E. $ 1,600 It will be a debit to one account and a credit to the other.
$ 1,900 $ 20,000 To find the balances, it helps to know whether the normal balance is a credit or debit.
Note normal balances are always on the increase side.
Revenue Accounts Payable For instance, transaction B is $8500 of cash received for services previously billed.
A. $ 28,500 C. $ 16,300 The two accounts affected are Cash and Accounts Receivable.
E. $ 1,600 D. $ 8,200 Cash will go up with the payment. Cash is an Asset, which increases on the debit side (left side).
Accounts Receivable, the amount owed by customers, will go down with the payment.
$ 30,100 $ 8,100 Accounts Receivable is an Asset, which decreases on the credit side (right side).
Inventory Sum of Debits $ 38,200 You can check your answer by adding the debit and credit balances. They should equal!
C. $ 16,300 Sum of Credits $ 38,200
Check: $ - 0
$ 16,300
This is the practice problem file, provided in the assignment instructions October 2019

Example 4

Workshop Two Practice Exercises
Example 4: Preparing Adjusting Journal Entries
Prepare Journal Entries to record the 5 adjusting transactions shown below. Build a table showing the appropriate credits and debits, accounts, and descriptions.
Date Transaction Amount
January 31 Company has used one month of its lease on its warehouse space. It paid for six months in advance for $30,000 total. $ 5,000
February 8 A customer pays $1,200 in cash to store its products in the company's warehouse for the next four months 1,200
February 15 The company performs distribution services for its customer, which it bills. 800
March 31 An allocation for depreciation is made on the company's equipment for the quarter 3,000
April 30 The company only pays once per month, and the next pay period occurs May 1st. Salaried employees have earned $7300 in April but haven't yet been paid. 7,300
Use the space below to create your solution. If you get stuck, or when you are ready to check your answer, go to the next worksheet tab for the solution.
This is the practice problem file, provided in the assignment instructions October 2019

Ex # 4 Solution

Workshop Two Practice Exercises
Example 4: Preparing Adjusting Journal Entries
Prepare Journal Entries to record the 5 adjusting transactions shown below. Build a table showing the appropriate credits and debits, accounts, and descriptions.
Date Transaction Amount
January 31 Company has used one month of its lease on its warehouse space. It paid for six months in advance for $30,000 total. $ 5,000
February 8 A customer pays $1,200 in cash to store its products in the company's warehouse for the next four months 1,200
February 15 The company performs distribution services for its customer, which it bills. 800
March 31 An allocation for depreciation is made on the company's equipment for the quarter 3,000
April 30 The company only pays once per month, and the next pay period occurs May 1st. Salaried employees have earned $7300 in April but haven't yet been paid. 7,300
Check below for a detailed solution to this problem.
Output area: Note the standardized elements here: Debit first, credit second and indented, followed by a description.
Remember every adjusting entry will have one Income Statement account and one Balance Sheet account.
Journal
Date Account Debit Credit
Jan 31 Lease Expense $ 5,000 Expenses are recorded when they occur, not when the cash flows. Expenses increase on the debit side.
Prepaid Lease $ 5,000 When the company paid its lease in advance, it created an asset for a prepaid expense. Assets decrease on the credit side.
Consumed one month of six-month $30,000 lease
Feb 8 Cash $ 1,200 The customer payment yields cash. Cash is an asset, which increases on the debit side.
Unearned Revenue $ 1,200 Revenue isn't recorded until it is earned. The customer paid in advance, creating a liability for unearned revenue. Liabilities increase on the credit side.
Customer paid cash in advance for warehouse storage
Feb 15 Accounts Receivable $ 800 Money due from a customer is Accoutns Receivables. Receivables are assets, which increases on the debit side.
Service Revenue $ 800 When the service was performed, the revenue was earned, even though cash hasn't been paid. Revenue increases on the credit side.
To recognize distribution service revenue now due
March 31 Depreciation Expense $ 3,000 Depreciation is an expense, shown on the Income Statement. Expenses increase on the debit side.
Accumulated Depreciation $ 3,000 This is often confusing. The Balance Sheet account that is ultimately changing is Fixed (long-term) Assets. It will decrease due the the depreciation of the assets' value.
To recognize depreciation charges for the quarter A decrease in an Asset occurs on the credit side. What confuses students is that we track accumulating depreciation in a separate "contra-asset" account. Don't be concerned… It is still an Asset that is decreasing (a credit).
April 30 Salaries Expense $ 7,300 Expenses increase on the debit side.
Salaries Payable $ 7,300 The salaries due are a liability until they are paid. Liabilities increase on the credit side.
To recognize salaries earned in April but unpaid
This is the practice problem file, provided in the assignment instructions October 2019