Accounting Homework

1

Selected transactions for Warner Advertising Company, Inc., are listed here.

1. Issued common stock to investors in exchange for cash received from investors.

2. Paid monthly rent.

3. Received cash from customers when service was performed.

4. Billed customers for services performed.

5. Paid dividend to stockholders.

6. Incurred advertising expense on account.

7. Received cash from customers billed in (4).

8. Purchased additional equipment for cash.

9. Purchased equipment on account.

Instructions:

Describe the effect of each transaction on assets, liabilities, and stockholders’ equity. For example, the first answer is (1) Increase in assets and increase in stockholders’ equity.

2

Selected transactions for Home Place, an interior decorator corporation, in its first month of business, are as follows.

1. Issued stock to investors for $15,000 in cash.

2. Purchased used car for $10,000 cash for use in business.

3. Purchased supplies on account for $300.

4. Billed customers $3,700 for services performed.

5. Paid $200 cash for advertising start of the business.

6. Received $1,100 cash from customers billed in transaction (4).

7. Paid creditor $300 cash on account.

8. Paid dividends of $400 cash to stockholders.

Instructions:

(a) For each transaction indicate (a) the basic type of account debited and credited (asset, liability, stockholders’ equity); (b) the specific account debited and credited (Cash, Rent Expense, Service Revenue, etc.); (c) whether the specific account is increased or decreased; and (d) the normal balance of the specific account. Use the following format, in which transaction 1 is given as an example.

Account Debited	Account Credited
	(a)	(b)	(c)	(d)	(a)	(b)	(c)	(d)
Trans-action	Basic Type	Specific Account	Effect	Normal Balance	Basic Type	Specific Account	Effect	Normal Balance
1	Asset	Cash	Increase	Debit	Stock-holders’ equity	Common Stock	Increase	Credit

(b) Journalize the transactions. Do not provide explanations.

3

The bookkeeper for Willingham Corporation made these errors in journalizing and posting.

1. A credit posting of $400 to Accounts Receivable was omitted.

2. A debit posting of $750 for Prepaid Insurance was debited to Insurance Expense.

3. A collection on account of $100 was journalized and posted as a debit to Cash $100 and a credit to Accounts Payable $100.

4. A credit posting of $300 to Income Taxes Payable was made twice.

5. A cash purchase of supplies for $250 was journalized and posted as a debit to Supplies $25 and a credit to Cash $25.

6. A debit of $395 to Advertising Expense was posted as $359.

Instructions:

For each error, indicate (a) whether the trial balance will balance; if the trial balance will not balance, indicate (b) the amount of the difference and (c) the trial balance column that will have the larger total. Consider each error separately. Use the following form, in which error 1 is given as an example.

	(a)	(b)	(c)
Error	In Balance	Difference	Larger Column
1	No	$400	Debit

4

The ledger of Beckett Rental Agency on March 31 of the current year includes the selected accounts below before adjusting entries have been prepared.

	Debit	Credit
Supplies	$ 3,000
Prepaid Insurance	3,600
Equipment	25,000
Accumulated Depreciation—Equipment		$ 8,400
Notes Payable		20,000
Unearned Rent Revenue		12,400
Rent Revenue		60,000
Interest Expense	0
Salaries and Wages Expense	14,000

An analysis of the accounts shows the following.

1. The equipment depreciates $280 per month.

2. Half of the unearned rent revenue was earned during the quarter.

3. Interest of $400 is accrued on the notes payable.

4. Supplies on hand total $850.

5. Insurance expires at the rate of $400 per month.

Instructions:

Prepare the adjusting entries at March 31, assuming that adjusting entries are made quarterly. Additional accounts are Depreciation Expense, Insurance Expense, Interest Payable, and Supplies Expense.