Question 1: Karla Tanner opened a Web consulting business called Linkworks
and completed the following transactions in its first month of operations.
April 1 Tanner invested $140,000 cash along with office
equipment valued at $33,600 in the company in exchange
for common stock.
April 2 The company prepaid $7,200 cash for 12 months’ rent for
office space. Debit Prepaid Rent for $7,200.Hint:
April 3 The company made credit purchases for $16,800 in office
equipment and $3,360 in office supplies. Payment is due
within 10 days.
April 6 The company completed services for a client and
immediately received $2,000 cash.
April 9 The company completed a $11,200 project for a client,
who must pay within 30 days.
April 13 The company paid $20,160 cash to settle the account
payable created on April 3.
April 19 The company paid $6,000 cash for the premium on a 12-
month prepaid insurance policy. Debit Prepaid Hint:
Insurance for $6,000.
April 22 The company received $8,960 cash as partial payment for
the work completed on April 9.
April 25 The company completed work for another client for
$2,640 on credit.
April 28 The company paid a $6,200 cash dividend.
April 29 The company purchased $1,120 of additional office
supplies on credit.
April 30 The company paid $700 cash for this month’s utility
bill.
Required:
1. Prepare general journal entries to record these transactions using the
following titles: Cash (101); Accounts Receivable (106); Office Supplies (124);
Prepaid Insurance (128); Prepaid Rent (131); Office Equipment (163);
Accounts Payable (201); Common Stock (307); Dividends (319); Services
Revenue (403); and Utilities Expense (690).
2. Post the journal entries from part 1 to the ledger accounts.
3. Prepare a trial balance as of April 30.
Required 1
Number 1 April 01 Cash 140,000 - Office equipment 33,600 - Common stock 173,600
2 April 02 Prepaid rent 7,200 - Cash7,200
3 April 03 Office equipment 16,800 - Office supplies 3,360 - Accounts payable 20,160
4 April 06 Cash 2,000 - Services revenue 2,000
5 April 09 Accounts receivable 11,200 - Services revenue 11,200
6 April 13 Accounts payable 20,160 – Cash 20,160
7 April 19 Prepaid insurance 6,000 – Cash 6,000
8 April 22 Cash 8,960 - Accounts receivable 8,960
9 April 25 Accounts receivable 2,640 - Services revenue 2,640
10 April 28 Dividends 6,200 – Cash 6,200
11 April 29 Office supplies 1,120 - Accounts payable 1,120
12 April 30 Utilities expense 700 – Cash 700
Required 2
101: Cash 106: Accounts Receivable
Date Debit Credit Balance Date Debit Credit
April 01 140,000 140,000 April 09 11,200
April 02 7,200 132,800 April 22 8,960
April 06 2,000 134,800 April 25 2,640
April 13 20,160 114,640
April 19 6,000 108,640
April 22 8,960 117,600
April 28 6,200 111,400
April 30 700 110,700
124: Office Supplies 128: Prepaid Insurance
Date Debit Credit Balance Date Debit Credit
April 03 3,360 3,360 April 19 6,000
April 29 1,120 4,480
131: Prepaid Rent 163: Office Equipment
Date Debit Credit Balance Date Debit Credit
April 02 7,200 April 017,200 33,600
April 03 16,800
201: Accounts Payable 307: Common Stock
Date Debit Credit Balance Date Debit Credit
April 03 20,160 20,160 April 01 173,600
April 13 020,160
April 29 1,120 1,120
319: Dividends 403: Services Revenue
Date Debit Credit Balance Date Debit Credit
April 28 6,200 April 06 2,0006,200
April 09 11,200
April 25 2,640
Required 3
LINKWORKS
Trial Balance
April 30
Debit Credit
Cash $110,700
Accounts receivable 4,880
Office supplies 4,480
Prepaid insurance 6,000
Prepaid rent 7,200
Office equipment 50,400
Accounts payable $1,120
Common stock 173,600
Dividends 6,200
Services revenue 15,840
Utilities expense 700
Total $190,560 $190,560
Question 2
Aracel Engineering completed the following transactions in the month of June.
a. J. Aracel, the owner, invested $195,000 cash, office equipment with a
value of $6,100, and $66,000 of drafting equipment to launch the
company in exchange for common stock.
b. The company purchased land worth $54,000 for an office by paying
$8,800 cash and signing a note payable for $45,200.
c. The company purchased a portable building with $53,000 cash and
moved it onto the land acquired in .b
d. The company paid $3,300 cash for the premium on an 18-month
insurance policy.
e. The company provided services to a client and collected $6,100 cash.
f. The company purchased $30,000 of additional drafting equipment by
paying $10,700 cash and signing a note payable for $19,300.
g. The company completed $17,000 of services for a client. This amount
is to be received in 30 days.
h. The company purchased $1,700 of additional office equipment on
credit.
i. The company completed $29,000 of services for a customer on credit.
j. The company purchased $1,634 of TV advertising on credit.
k. The company collected $8,000 cash in partial payment from the client
described in transaction .g
l. The company paid $1,200 cash for employee wages.
m. The company paid $1,700 cash to settle the account payable created
in transaction .h
n. The company paid $1,150 cash for repairs.
o. The company paid a $10,240 cash dividend.
p. The company paid $2,400 cash for employee wages.
q. The company paid $3,600 cash for advertisements on the Web during
June.
Required:
1. Prepare general journal entries to record these transactions using the following titles: Cash
(101); Accounts Receivable (106); Prepaid Insurance (108); Office Equipment (163); Drafting
Equipment (164); Building (170); Land (172); Accounts Payable (201); Notes Payable (250);
Common Stock (307); Dividends (319); Services Revenue (403); Wages Expense (601);
Advertising Expense (603); and Repairs Expense (604).
2. Post the journal entries from part 1 to the ledger accounts.
3. Prepare a trial balance as of the end of June.
Required 1
No Tranasaction Account Title Debit Credit
1 a Cash 195,000
Office equipment 6,100
Drafting equipment 66,000
Common stock 267
2 b Land 54,000
Cash 8
Notes payable 45
3 c Building 53,000
Cash 53
4 d Prepaid insurance 3,300
Cash 3
5 e Cash 6,100
Services revenue 6
6 f Drafting equipment 30,000
Cash 10
Notes payable 19
7 g Accounts receivable 17,000
Services revenue 17
8 h Office equipment 1,700
Accounts payable 1
9 i Accounts receivable 29,000
Services revenue 29
10 j Advertising expense 1,634
Accounts payable 1
11 k Cash 8,000
Accounts receivable 8
12 l Wages expense 1,200
Cash 1
13 m Accounts payable 1,700
Cash 1
14 n Repairs expense 1,150
Cash 1
15 o Dividends 10,240
Cash 10
16 p Wages expense 2,400
Cash 2
17 q Advertising expense 3,600
Cash 3
Required 2
101: Cash 106: Accounts Receivable
Transaction Debit Credit Balance Transaction Debit Credit
a. 195,000 195,000 g. 17,000
b. 8,800 186,200 i. 29,000
c. 53,000 133,200 k. 8,000
d. 3,300 129,900
e. 6,100 136,000
f. 10,700 125,300
k. 8,000 133,300
l. 1,200 132,100
m. 1,700 130,400
n. 1,150 129,250
o. 10,240 119,010
p. 2,400 116,610
q. 3,600 113,010
108: Prepaid Insurance 163: Office Equipment
Transaction Debit Credit Balance Transaction Debit Credit
d. 3,300 3,300 a. 6,100
h. 1,700
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164: Drafting Equipment 170: Building
Transaction Debit Credit Balance Transaction Debit Credit
a. 66,000 66,000 c. 53,000
f. 30,000 96,000
172: Land 201: Accounts Payable
Transaction Debit Credit Balance Transaction Debit Credit
b. 54,000 54,000 h. 1,700
j. 1,634
m. 1,700
250: Notes Payable 307: Common Stock
Transaction Debit Credit Balance Transaction Debit Credit
b. 45,200 45,200 a. 267,100
f. 19,300 64,500
319: Dividends 403: Services Revenue
Transaction Debit Credit Balance Transaction Debit Credit
o. 10,240 10,240 e. 6,100
g. 17,000
i. 29,000
601: Wages Expense 603: Advertising Expense
Transaction Debit Credit Balance Transaction Debit Credit
l. 1,200 1,200 j. 1,634
p. 2,400 3,600 q. 3,600
604: Repairs Expense
Transaction Debit Credit Balance
n. 1,150 1,150
Required 3
ARACEL ENGINEERING
Trial Balance
June 30
Debit Credit
Cash $113,010
Accounts receivable 38,000
Prepaid insurance 3,300
Office equipment 7,800
Drafting equipment 96,000
Building 53,000
Land 54,000
Accounts payable $1,634
Notes payable 64,500
Common stock 267,100
Dividends 10,240
Services revenue 52,100
Wages expense 3,600
Advertising expense 5,234
Repairs expense 1,150
Totals $385,334 $385,334
Question 3
Business transactions completed by Hannah Venedict during the month of September are as
follows.
a. Venedict invested $82,000 cash along with office equipment valued at
$21,000 in a new business named HV Consulting in exchange for
common stock.
b. The company purchased land valued at $45,000 and a building valued
at $160,000. The purchase is paid with $30,000 cash and a note
payable for $175,000.
c. The company purchased $2,000 of office supplies on credit.
d. Venedict invested an automobile in the company in exchange for more
common stock. The automobile has a value of $16,300.
e. The company purchased $5,200 of additional office equipment on
credit.
f. The company paid $2,000 cash salary to an assistant.
g. The company provided services to a client and collected $7,200 cash.
h. The company paid $640 cash for this month’s utilities.
i. The company paid $2,000 cash to settle the account payable created
in transaction .c
j. The company purchased $20,300 of new office equipment by paying
$20,300 cash.
k. The company completed $6,750 of services on credit for a client, who
must pay within 30 days.
l. The company paid $1,800 cash salary to an assistant.
m. The company received $4,000 cash in partial payment on the
receivable created in transaction .k
n. The company paid a $3,000 cash dividend.
Required:
1. Prepare general journal entries to record these transactions using the following titles: Cash
(101); Accounts Receivable (106); Office Supplies (108); Office Equipment (163); Automobiles
(164); Building (170); Land (172); Accounts Payable (201); Notes Payable (250); Common
Stock (307); Dividends (319); Consulting Revenue (403); Salaries Expense (601); and Utilities
Expense (602).
2. Post the journal entries from part 1 to the ledger accounts.
3. Prepare a trial balance as of the end of September.
Required 1
No Tranasaction Account Title Debit Credi
1 a Cash 82,000
Office equipment 21,000
Common stock 10
2 b Land 45,000
Building 160,000
Cash 3
Notes payable 17
3 c Office supplies 2,000
Accounts payable
4 d Automobiles 16,300
Common stock 1
5 e Office equipment 5,200
Accounts payable
6 f Salaries expense 2,000
Cash
7 g Cash 7,200
Consulting revenue
8 h Utilities expense 640
Cash
9 i Accounts payable 2,000
Cash
10 j Office equipment 20,300
Cash 2
11 k Accounts receivable 6,750
Consulting revenue
12 l Salaries expense 1,800
Cash
13 m Cash 4,000
Accounts receivable
14 n Dividends 3,000
Cash
Required 2
101: Cash 106: Accounts Receivable
Transaction Debit Credit Balance Transaction Debit Credit
a. 82,000 82,000 k. 6,750
b. 30,000 52,000 m. 4,000
f. 2,000 50,000
g. 7,200 57,200
h. 640 56,560
i. 2,000 54,560
j. 20,300 34,260
l. 1,800 32,460
m. 4,000 36,460
n. 3,000 33,460
108: Office Supplies 163: Office Equipment
Transaction Debit Credit Balance Transaction Debit Credit
c. 2,000 2,000 a. 21,000
e. 5,200
j. 20,300
164: Automobiles 170: Building
Transaction Debit Credit Balance Transaction Debit Credit
d. 16,300 16,300 b. 160,000
172: Land 201: Accounts Payable
Transaction Debit Credit Balance Transaction Debit Credit
b. 45,000 45,000 c. 2,000
e. 5,200
i. 2,000
250: Notes Payable 307: Common Stock
Transaction Debit Credit Balance Transaction Debit Credit
b. 175,000 175,000 a. 103,000
d. 16,300
319: Dividends 403: Consulting Revenue
Transaction Debit Credit Balance Transaction Debit Credit
n. 3,000 3,000 g. 7,200
k. 6,750
601: Salaries Expense 602: Utilities Expense
Transaction Debit Credit Balance Transaction Debit Credit
f. 2,000 2,000 h. 640
l. 1,800 3,800
Required 3
HV CONSULTING
Trial Balance
September 30
Debit Credit
Cash $33,460
Accounts receivable 2,750
Office supplies 2,000
Office equipment 46,500
Automobiles 16,300
Building 160,000
Land 45,000
Accounts payable $5,200
Notes payable 175,000
Common stock 119,300
Dividends 3,000
Consulting revenue 13,950
Salaries expense 3,800
Utilities expense 640
Totals $313,450 $313,450
Question 4
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The accounting records of Nettle Distribution show the following assets and
liabilities as of December 31 for Year 1 and Year 2.
December 31 Year 1 Year 2
Cash $ 54,395 $ 10,494
Accounts
receivable 29,526 23,149
Office supplies 4,658 3,411
Office equipment 142,974 152,294
Trucks 55,947 64,947
Building 0 186,505
Land 0 46,541
Accounts payable 77,625 38,500
Note payable 0 133,046
Required:
1. Prepare balance sheets for the business as of December 31 for Year 1 and
for Year 2. Report only total equity on the balance sheet and remember Hint:
that total equity equals the difference between assets and liabilities.
Year 1
NETTLE DISTRIBUTION
Balance Sheet
December 31, Year 1
Assets Liabilities
Cash $54,395 Accounts payable $77,625
Accounts receivable 29,526
Office supplies 4,658
Trucks 55,947 Total liabilities $77,625
Office equipment 142,974 Equity
Total equity 209,875
Total assets $287,500 Total liabilities and equity $287,500
Year 2
NETTLE DISTRIBUTION
Balance Sheet
December 31, Year 2
Assets Liabilities
Cash $10,494 Accounts payable $38,500
Accounts receivable 23,149 Notes payable 133,046
Office supplies 3,411
Trucks 64,947
Office equipment 152,294 Total liabilities $171,546
Building 186,505 Equity
Land 46,541 Total equity 315,795
Total assets $487,341 Total liabilities and equity $487,341
Question 5
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The accounting records of Nettle Distribution show the following assets and
liabilities as of December 31 for Year 1 and Year 2.
December 31 Year 1 Year 2
Cash $ 54,395 $ 10,494
Accounts
receivable 29,526 23,149
Office supplies 4,658 3,411
Office equipment 142,974 152,294
Trucks 55,947 64,947
Building 0 186,505
Land 0 46,541
Accounts payable 77,625 38,500
Note payable 0 133,046
2. Compute net income for Year 2 by comparing total equity amounts for
these two years and using the following information: During Year 2, the owner
invested $33,000 additional cash in the business in exchange for common
stock, and the company paid a $27,600 cash dividend.
Equity, December 31, Year 1 $209,875
Add: Owner's investment 33,000
Add: Net income 100,520
343,395
Less: Dividends (27,600)
Equity, December 31, Year 2 $315,795
Explanation
2.
Net income = ($105,920 + $27,600 – $33,000) = $100,520
NETTLE DISTRIBUTION
Balance Sheet
December 31, Year 1
Assets
Cash $ 54,395
Accounts receivable 29,526
Office supplies 4,658
Trucks 55,947
Office equipment 142,974
Total Assets $ 287,500
Liabilities
Accounts payable $ 77,625
Equity
Total equity $ 209,875
Total Liabilities & Equity $ 287,500
NETTLE DISTRIBUTION
Balance Sheet
December 31, Year 2
Assets
Cash $ 10,494
Accounts receivable 23,149
Office supplies 3,411
Trucks 64,947
Office equipment 152,294
Building 186,505
Land 46,541
Total Assets $ 487,341
Liabilities
Accounts payable $ 38,500
Note payable 133,046
Total Liabilities $ 171,546
Equity
Total Equity 315,795
Total Liabilities & Equity $ 487,341
Question 6
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The accounting records of Nettle Distribution show the following assets and
liabilities as of December 31 for Year 1 and Year 2.
December 31 Year 1 Year 2
Cash $ 54,395 $ 10,494
Accounts
receivable 29,526 23,149
Office supplies 4,658 3,411
Office equipment 142,974 152,294
Trucks 55,947 64,947
Building 0 186,505
Land 0 46,541
Accounts payable 77,625 38,500
Note payable 0 133,046
3. Compute the Year 2 year-end debt ratio.
Debt Ratio
Numerator: / Denominator: = Debt Ratio
Total liabilities / Total assets = Debt ratio
$171,546 / $487,341 = 35.20%
Explanation
3.
Debt ratio = $171,546 / $487,341 = 35.20%
Question 7
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Yi Min started an engineering firm called Min Engineering. He began
operations and completed seven transactions in May, which included his initial
investment of $18,000 cash. After those seven transactions, the ledger
included the following accounts with normal balances.
Cash $ 37,810
Office supplies 970
Prepaid insurance 5,000
Office equipment 11,600
Accounts payable 11,600
Common stock 18,000
Dividends 4,170
Services revenue 39,000
Rent expense 9,050
Required:
1. Prepare a trial balance for this business as of the end of May.
MIN ENGINEERING
Trial Balance
May 31
Debit Credit
Cash $37,810
Office supplies 970
Prepaid insurance 5,000
Office equipment 11,600
Accounts payable $11,600
Common stock 18,000
Dividends 4,170
Services revenue 39,000
Rent expense 9,050
Totals $68,600 $68,600
Question 8
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Yi Min started an engineering firm called Min Engineering. He began
operations and completed seven transactions in May, which included his initial
investment of $18,000 cash. After those seven transactions, the ledger
included the following accounts with normal balances.
Cash $ 37,810
Office supplies 970
Prepaid insurance 5,000
Office equipment 11,600
Accounts payable 11,600
Common stock 18,000
Dividends 4,170
Services revenue 39,000
Rent expense 9,050
The following seven transactions produced the account balances shown
above.
a. Y. Min invested $18,000 cash in the business in exchange for
common stock.
b. Paid $9,050 cash for monthly rent expense for May.
c. Paid $5,000 cash in advance for the annual insurance premium
beginning the next period.
d. Purchased office supplies for $970 cash.
e. Purchased $11,600 of office equipment on credit (with
accounts payable).
f. Received $39,000 cash for services provided in May.
g. The company paid a $4,170 cash dividend.
2. Prepare a Cash T-account for the above transactions, and compute the
ending Cash balance. Code each entry with one of the transaction
codes through .a g
Cash
Beginning Balance 0
a. 18,000 9,050 b.
f. 39,000 5,000 c.
970 d.
4,170 g.
Ending Balance 37,810
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