Financial Accounting
vzzassdc
assignment_3_1_1.pdf
Assignment 3
PROBLEM 1.
Analyzing and Journalizing Transactions
Weida Surveying, Inc., provides land surveying services. During September, its transactions
included the following:
Sept.
1
Paid rent for the month of September, $4,400.
Sept.
3
Billed Fine Line Homes $5,620 for surveying services. The entire amount is due
on or before September 28. (Weida uses an account entitled Surveying Revenue
when billing clients.)
Sept.
9
Provided surveying services to Sunset Ridge Developments for $2,830. The entire
amount was collected on this date.
Sept.
14
Placed a newspaper advertisement in the Daily Item to be published in the
September 20 issue. The cost of the advertisement was $165. Payment is due in
30 days.
Sept.
25
Received a check for $5,620 from Fine Line Homes for the amount billed on
September 3.
Sept.
26
Provided surveying services to Thompson Excavating Company for $1,890.
Weida collected $400 cash, with the balance due in 30 days.
Sept.
29
Sent a check to the Daily Item in full payment of the liability incurred on
September 14.
Sept.
30
Declared and paid a $7,600 cash dividend to the company’s stockholders.
Page 129
Instructions
a. Analyze the effects that each of these transactions will have on the following six components of the company’s financial statements for the month of September.
Organize your answer in tabular form, using the column headings shown. Use I for
increase, D for decrease, and NE for no effect. The September 1 transaction is provided
for you:
Income Statement Balance sheet
Transaction Revenue
+ Expense
= Net
Income Assets
+ Liabilities + Owners' Equity
Sept 1 NE I D D NE D
b. Prepare a journal entry (including explanation) for each of the above transactions.
c. Three of September’s transactions involve cash payments, yet only one of these
transactions is recorded as an expense. Describe three situations in which a cash
payment would not involve recognition of an expense.
2. The Accounting Cycle: Journalizing, Posting, and Preparing a Trial Balance
Dr. Schekter, DVM, opened a veterinary clinic on May 1, 2015. The business transactions
for May are shown below:
May
1
Dr. Schekter invested $400,000 cash in the business in exchange for 5,000 shares
of capital stock.
May
4
Land and a building were purchased for $250,000. Of this amount, $70,000
applied to the land, and $180,000 to the building. A cash payment of $100,000 was
made at the time of the purchase, and a note payable was issued for the remaining
balance.
May
9
Medical instruments were purchased for $130,000 cash.
May
16
Office fixtures and equipment were purchased for $50,000. Dr. Schekter paid
$20,000 at the time of purchase and agreed to pay the entire remaining balance in
15 days.
May
21
Office supplies expected to last several months were purchased for $5,000 cash.
May
24
Dr. Schekter billed clients $2,200 for services rendered. Of this amount, $1,900
was received in cash, and $300 was billed on account (due in 30 days).
May A $400 invoice was received for several radio advertisements aired in May. The
27 entire amount is due on June 5.
May
28
Received a $100 payment on the $300 account receivable recorded May 24.
May
31
Paid employees $2,800 for salaries earned in May.
A partial list of account titles used by Dr. Schekter includes:
Cash Notes Payable
Accounts Receivable Accounts Payable
Office Supplies Capital Stock
Medical Instruments Veterinary Service Revenue
Office Fixtures and
Equipment
Advertising Expense
Land Salary Expense
Building
Instructions
a. Analyze the effects that each of these transactions will have on the following six components of the company’s financial statements for the month of May. Organize
your answer in tabular form, using the column headings shown below. Use I for
increase, D for decrease, and NE for no effect. The May 1 transaction is provided for
you:
Income Statement Balance sheet
Transaction Revenue + Expense = Net Income Assets = Liabilities + Owners' Equity
May 1 NE NE NE I NE I
b. Prepare journal entries (including explanations) for each transaction. c. Post each transaction to the appropriate ledger accounts d. Prepare a trial balance dated May 31, 2015.
e. Using figures from the trial balance prepared in part d, compute total assets, total
liabilities, and owners’ equity. Did May appear to be a profitable month?
