会计英语课后题答案Answer for lesson 1

PAGE

98

Lesson1 FinancialAccountingI

PAGE

14

Lesson1 FinancialAccountingI

ExerciseanswerforLesson1

1.1Selectthebestanswerforeachofthefollowingunrelateditems

1.d 2.d 3.b 4.d 5.c 6.c7.d8.a9.b10.b

11c12b13c14d15a

1.2SHORT-ANSWERESSAYQUESTIONS

1.Accountingcycleisanimportantconceptforaccounting.Brieflyexplainthestepsforaccountingcycle.

Solution:(1)Analyzetransactions;(2) Journalizetransactions;(3)Posttoledger;(4) Prepareunadjustedtrialbalance;(5)Journalize&postadjustments;(6)Prepareadjustedtrialbalance;(7)Preparefinancialstatements;(8)Journalizeandpostclosingentries;(9)Preparepost-closingtrialbalance

2Yourroommate,amarketingmajor,thinksthatdebitmeansdecreaseandcreditmeansincrease.And,thateveryaccountcanbedebitedandcreditedandasresult,everyaccountcanhavebothadebitandacreditbalance.Explaintoyourroommate(1)themeaningofdebitandcredit;(2)whichaccountscanonlybedebited,whichcanonlybecredited,andwhichcanbebothdebitedandcredited;and(3)whichaccountsnormallyhavedebitbalancesandwhichcreditbalances.

Solution:Thetermsdebitandcreditmeantheleftandrightside,respectively,ofeveryaccount.SomeaccountssuchasDividendsandExpensesareonlydebited;otheraccountssuchasShareCapital-OrdinaryandRevenuesareonlycredited;andfinally,someaccountssuchasCash,AccountsReceivable,andAccountsPayablecanbedebitedandcredited.AccountswithdebitbalancesincludeAssets,Dividends,andExpenses.AccountswithcreditbalancesincludeShareCapital-OrdinaryandRevenues.

3Afellowclassmateisconfusedabouthowdebitsandcreditsrelatetothebasicaccountingequation.Statethebasicaccountingequation,convertitintotheexpandedaccountingequation,andthenexplainhowittiesintotherulesfordebitsandcredits.

Solution:

Thebasicaccountingequationis:

Assets=Liabilities+Equity

TheexpandedequationdividesEquityintoitsvariousparts,reflectingtheshareholders'investment,dividends,revenues,andexpenses:

Assets=Liabilities+ShareCapital-Ordinary+RetainedEarnings–Dividends+Revenues–Expenses

Thisexpandedequationcanthenbere-arrangedtoexplainwhycertainaccountshavedebit(left-hand)balances,whileotheraccountshavecredit(right-hand)balances,asfollows:

Assets+Dividends+Expenses=Liabilities+ShareCapital-Ordinary+RetainedEarnings+Revenues

Theaccountsontheleft-handsideoftheequationhaveleft-hand,ordebitbalances,whiletheaccountsontheright-handsideoftheequationhaveright-hand,orcreditbalances.Accountswithdebitbalancesareincreasedwithdebitsanddecreasedwithcredits,whileaccountswithcreditbalancesareincreasedwithcreditsanddecreasedwithdebits.

4JohnDough,afellowemployee,wantstounderstandthebasicstepsintherecordingprocess.Identifyandbrieflyexplainthestepsintheorderinwhichtheyoccur.

Solution

Thebasicstepsintherecordingprocessare:

1. Analyzeeachtransaction.Inthisstep,businessdocumentsareexaminedtodeterminetheeffectsofthetransactionontheaccounts.

2. Entereachtransactioninajournal.Thisstepiscalledjournalizinganditresultsinmakingachronologicalrecordofthetransactions.

3. Transferjournalinformationtoledgeraccounts.Thisstepiscalledposting.Postingmakesitpossibletoaccumulatetheeffectsofjournalizedtransactionsonindividualaccounts.

5Theprocessoftransferringtheinformationinthejournaltothegeneralledgeriscalledposting.Explainthepostingprocess,includingtheimportanceofthejournalpagenumberandtheaccountnumbers.

Solution

Thepostingprocessbeginswithlocatingtheaccount(s)beingdebitedinthegeneralledger.Thenenteringthedateoftheentry,thejournalpagenumberwheretheentryoriginatedanddebitportionoftheentryinthedate,referenceanddebitcolumns,respectively.Oncethisdone,theaccountnumber(s)oftheaccount(s)beingdebitedis(are)enteredinthereferencecolumninthejournal.Next,thecreditportionofthejournalentryispostedtotheappropriateaccountsintheledgerfollowingthesamestepsasnotedforthedebitportion.

Theimportanceofthejournalpagenumber,inthereferencecolumnofeachaccountinthegeneralledgeraccounts,istoindicatewheretofindtheoriginalentry.And,thegeneralledgeraccountnumbers,inthereferencecolumnofthejournal,indicatethattheentryhasbeenposted.

1.3Theeffectsoftransactionsontheaccountingequation

LindaChampionbeganaprofessionalaccountingpracticeonMay1andplanstopreparefinancialstatementsattheendofeachmonth.DuringMay,Championcompletedthesetransactions:

a.Invested€50,000cashandequipmentthathada€10,000fairmarket(cashequivalent)value.

b.Paid€1,600rentforofficespaceforthemonth.

c.Purchased€12,000ofadditionalequipmentoncredit.

d.Completedworkforaclientandimmediatelycollected€2,000cash.

e.Completedworkforaclientandsentabillfor€7,000tobepaidwithin30days.

f.Purchased€8,000ofadditionalequipmentforcash.

g.Paidanassistant€2,400aswagesforthemonth.

h.Collected€5,000oftheamountowedbytheclientdescribedintransaction(e).

i.Paidfortheequipmentpurchasedintransaction(c).

j.Withdrew€500forpersonaluse.

Enquired:

Usingtheinformationpresentedin(a)through(j)above,LindaChampion,theowner,firstcreatesatableliketheoneshownbelow.ShethenusestheresultstocalculatenetincomeearnedduringthemonthofMay,herfirstmonthofoperations.

Solutions:

NoticehowAssetsof€64,500=Liabilities+Owner’sequityof€64,500.Fromthisscheduleyoucancalculatethefirm’snetincomebysummarizingtherevenuesandexpensesasfollows:Netincome=Revenues–Expenses

=(€2,000+€7,000)–(€1,600+€2,400)

=€5,000

1.4Preparingastatementofcomprehensiveincomeandastatementoffinancialposition

DuringJunethroughAugustof20X5,LinYanearnedmoneydoingcomputerconsultingwork.Shewentaroundthecityandobtainedseveralcontractsforsmalljobs.Linthenwithdrew€3,000fromherpersonalsavingsaccountanddepositeditinaseparateaccountforthebusiness.Attheendofthesummer,Lintriedtofigureouthowwellherbusinesshaddone.

Lin’sbusinessrecordsshowedthefollowingtransactions:

a.Deposited€12,500(fromcustomers’payments).

b.Issuedcheques:

−carandequipmentrental,€2,000;

−gas,€900;

−suppliespurchasedandused,€100;

−hiredhelp,€4,800;

−payrolltaxes,€600;

−insurance,€180;

−telephone,€120.

c.Transferred€2,000cashfromthebusinessbankaccounttopersonalsavingsaccount.

d.Owed€500bycustomers.

e.Owed€150forgas.

Required

1.Showtheeffectofeachtransaction,includingtheinitialcashdeposit,ontheaccountingequation.

2.PrepareastatementofcomprehensiveincomeforLin’ssummerbusiness.

3.PrepareastatementoffinancialpositionforLinattheendofthesummer.

Solution:

1.Toshowtheeffectofeachtransactionontheaccountingequation,constructaworksheetwithfourcolumnsusingthefollowingheadings:item,assets,liabilities,andowner’sequity.Recallthatrevenuesincreaseowner’sequityandexpensesdecreaseowner’sequity.

2.Revenuesoriginatedfromtwosources:customers’payments(€12,500)andfromamountsyettobepaidbycustomers(€500).Totalexpensesincludedcarandequipmentrental(€2,000),carexpenses(€900paid+€150unpaid),supplies(€100),helpers(€4,800),payrolltaxes(€600),insurance(€180),andtelephone(€120).Netincomeisdeterminedfromthedifferenceoftotalrevenuesandtotalexpenses.Basedonthisinformation,thefollowingincomestatementisprepared.

Solutions:

3.Fromtheeffectofthetransactionspreparedinpart1,youcangeneratethefollowingstatementoffinancialpositionfortheendofthesummer.

Thecashbalancecanbedeterminedasfollows:

Thecashbalanceexcludestwoamounts:the€500stillowedtoLinbycustomersand€150sheowesforcargasinvoicesnotyetpaid.Ifshereceivesthemoneyowedherandshepaysherdebt,thenshewillhaveanadditional€350(€500–€150),makingatotalcashbalanceof€5,150(€4,800+€350)forthesummer.Notethatthe€2,000personalwithdrawalwasnotincludedasanexpenseonthestatementofcomprehensiveincome.Thewithdrawalisconsideredadistributionofincome(owner’sprofits)ratherthananexpense.Theowner’sequityof€5,150onthebalancesheetincludestheinitialinvestmentplusnetincomelessthewithdrawal(€3,000+€4,150–€2,000).

1.5Increases,decreases,andnormalbalancesofaccounts

Enquired:Completethefollowingtableby

1.Identifyingthetypeofaccountlistedoneachline.

2.Enteringdebitorcreditintheblankspacestoidentifythekindofentrythatwouldincreaseordecreasetheaccountbalance.

3.Identifyingthenormalbalanceoftheaccount.

Account

Typesofaccount

Increase

Decrease

Normalbalance

Land

HaroldCooper,Capital

Accountreceivable

HaroldCooper,Withdrawal

Cash

Equipment

Unearnedrevenue

Accountpayable

Postageexpense

Prepaidexpense

Wagesexpense

Feesearned

Solution:

1.6AnalyzingtransactionsusingT-accounts

OpenthefollowingT-accounts:Cash;AccountsReceivable;OfficeSupplies;OfficeEquipment;AccountsPayable;SteveMoore,Capital;SteveMoore,Withdrawals;FeesEarned;andRentExpense.Next,recordthesetransactionsoftheMooreCompanybyrecordingthedebitandcreditentriesdirectlyintheT-accounts.Usethelettersbesideeachtransactiontoidentifytheentries.

a.SteveMooreinvested€12,750cashinthebusiness.

b.Purchased€375ofofficesuppliesforcash.

c.Purchased€7,050ofofficeequipmentoncredit.

d.Received€1,500cashasfeesforservicesprovidedtoacustomer.

e.Paidfortheofficeequipmentpurchasedintransaction(c).

f.Billedacustomer€2,700asfeesforservices.

g.Paidthemonthlyrentwith€525cash.

h.Collected€1,125oftheaccountreceivablecreatedintransaction(f).

i.SteveMoorewithdrew€1,000cashfromthebusiness.

Enquired:

1.RecordthesetransactionsoftheMooreCompanyinjournal.

2.OpenthefollowingT-accounts:Cash;AccountsReceivable;OfficeSupplies;OfficeEquipment;AccountsPayable;SteveMoore,Capital;SteveMoore,Withdrawals;FeesEarned;andRentExpense.Next,posttheentriesintheT-accounts.Usethelettersbesideeachtransactiontoidentifytheentries.

Solution:

a.SteveMooreinvested€12,750cashinthebusiness:

b.Purchased€375ofofficesuppliesforcash:

c.Purchased€7,050ofofficeequipmentoncredit:

d.Received€1,500cashasfeesforservicesprovidedtoacustomer:

e.Paidfortheofficeequipmentpurchasedintransaction(c):

f.Billedacustomer€2,700asfeesforservices:

g.Paidthemonthlyrentwith€525cash:

h.Collected€1,125oftheaccountreceivablecreatedintransaction(f):

i.SteveMoorewithdrew€1,000cashfromthebusiness:

1.7Correcttheerror

BettyWright,CPA,wasaskedbythecontrollerofGoreCompanytoreviewtheaccountingrecordsbeforefinancialstatementsareprepared.Bettyreviewedtherecordsandfoundthreeerrors.

1.Cashpaidonaccountspayablefor$930wasrecordedasadebittoAccountsPayable$390andacredittoCash$390.

2.Thepurchaseofsuppliesonaccountfor$500wasdebitedtoEquipment$500andcreditedtoAccountsPayable$500.

3.Thecompanypaiddividends$1,200.ThebookkeeperdebitedAccountsReceivablefor$120andcreditedCash$120.

Enquired:

Prepareananalysisofeacherrorshowingthe

(a) incorrectentry.

(b) correctentry.

(c) correctingentry.

Solution:

1. (a) IncorrectEntry

AccountsPayable 390

Cash 390

(b) CorrectEntry

AccountsPayable 930

Cash 930

(c) CorrectingEntry

AccountsPayable 540

Cash 540

2. (a) IncorrectEntry

Equipment 500

AccountsPayable 500

(b) CorrectEntry

Supplies 500

AccountsPayable 500

(c) CorrectingEntry

Supplies 500

Equipment 500

3. (a) IncorrectEntry

AccountsReceivable 120

Cash 120

(b) CorrectEntry

Dividends 1,200

Cash 1,200

(c) CorrectingEntry

Dividends 1,200

AccountsReceivable 120

Cash 1,080

1.8BenCartwrightPestControlhasthefollowingbalancesinselectedaccountsonDecember31,2011.

AccountsReceivable €0

AccumulatedDepreciation–Equipment 0

SprayingEquipment 6,650

InterestPayable 0

NotesPayable 20,000

PrepaidInsurance 2,400

SalariesPayable 0

Supplies 2,940

UnearnedSprayingRevenues 36,000

Alloftheaccountshavenormalbalances.TheinformationbelowhasbeengatheredatDecember31,2011.

1. Depreciationontheequipmentfor2011is€1,250.

2. BenCartwrightPestControlborrowed€20,000bysigninga10%,one-yearnoteonJuly1,2011.

3. BenCartwrightPestControlpaid€2,400for12monthsofinsurancecoverageonOctober1,2011.

4. BenCartwrightPestControlpaysitsemployeestotalsalariesof€10,000everyMondayforthepreceding5-dayweek(Monday-Friday).OnMonday,December27,2011,employeeswerepaidfortheweekendingDecember24,2011.AllemployeesworkedthefivedaysendingDecember31,2011.

5. BenCartwrightPestControlperformeddisinfectingservicesforaclientinDecember2011.Theclientwillbebilled€3,000.

6. OnDecember1,2011,BenCartwrightPestControlcollected€36,000fordisinfectingprocessestobeperformedfromDecember1,2011,throughMay31,2011.

7. AcountofsuppliesonDecember31,2011,indicatesthatsuppliesof€950areonhand.

Enquired:

Prepareinjournalformwithexplanations,theadjustingentriesforthesevenitemslistedforBenCartwrightPestControl.

Solutions:

(1) DepreciationExpense-Equipment 1,250

AccumulatedDepreciation-Equipment 1,250

(Torecorddepreciationfortheperiod)

(2) InterestExpense 1,000

InterestPayable 1,000

(Torecordaccruedinterestonnotepayable)

[€20,000*10%*(6/12)=€1,000]

(3) InsuranceExpense 600

PrepaidInsurance 600

(Torecognizeperiodinsuranceexpense)

[(€2,400/12)*3=€600]

(4) WagesExpense 10,000

WagesPayable 10,000

(Torecordwagesfortheweek)

(5) AccountsReceivable 3,000

SprayingRevenues 3,000

(Torecordrevenueearnedbutnotyetreceived)

(6) UnearnedSprayingRevenues 6,000

SprayingRevenues 6,000

(Torecordrevenueearnedwithpriorpayment)

(7) SuppliesExpense 1,990

Supplies 1,990

(Torecordsuppliesexpense)

[€2,940-€950=€1,990]

1.9Completetheworksheetforadjustedtrialbalance

TheworksheetforBooneMailingCenterappearsbelow.

BOONEMAILINGCENTER

Worksheet

FortheMonthEndedAugust31,2011

TrialBalance

Adjustments

Adjusted

TrialBalance

IncomeStatement

Statementof

FinancialPosition

AccountTitles

Debit

Credit

Debit

Credit

Debit

Credit

Debit

Credit

Debit

Credit

Cash

20

AccountsReceivable

12

PrepaidRent

8

Supplies

10

OfficeEquipment

50

Accum.Depreciation—Equipment

10

AccountsPayable

20

Sharecapital-ordinary

15

Dividends

2

Revenue

77

DepreciationExpense

6

RentExpense

RetainedEarnings

4

10

SalariesExpense

20

Totals

132

132

SuppliesExpense

SalariesPayable

Totals

NetIncome

Totals

Enquired:

Usingtheadjustmentdatabelow,completetheworksheet.Addanyaccountsthatarenecessary.

Adjustmentdata:

(a) PrepaidrentexpiredduringAugust,$2.

(b) DepreciationexpenseonequipmentforthemonthofAugust,$8.

(c) SuppliesonhandonAugust31amountedto$6.

(d) SalariesexpenseincurredatAugust31butnotyetpaidamountedto$10

Solution

BOONEMAILINGCENTER

Worksheet

FortheMonthEndedAugust31,2011

TrialBalance

Adjustments

Adjusted

TrialBalance

IncomeStatement

Statementof

FinancialPosition

AccountTitles

Debit

Credit

Debit

Credit

Debit

Credit

Debit

Credit

Debit

Credit

Cash

20

20

20

AccountsReceivable

12

12

12

PrepaidRent

8

(a)2

6

6

Supplies

10

(c)4

6

6

OfficeEquipment

50

50

50

Accum.Depreciation—Equipment

10

(b)8

18

18

AccountsPayable

20

20

20

Sharecapital-ordinary

15

15

15

Dividends

2

2

2

Revenue

77

77

77

DepreciationExpense

6

(b)8

14

14

RentExpense

RetainedEarnings

4

10

(a)2

6

10

6

10

SalariesExpense

20

(d)10

30

30

Totals

132

132

SuppliesExpense

(c)4

4

4

SalariesPayable

(d)10

10

10

Totals

24

24

150

150

54

77

96

73

NetIncome

23

23

Totals

77

77

96

96

1.10Preparingandpostingclosingentries

UsetheinformationprovidedintheT-accountsbelowtoprepareclosingjournalentriesatDecember31,20X5.

MarcyJones,Capital

Dec.31

41000

RentExpense

Dec.31

8600

MarcyJones,Withdrawals

Dec.3124000

SalaryExpense

Dec.3120000

ServiceRevenue

Dec.31

73000

InsureExpense

Dec.31

3500

IncomeSummary

DepreciationExpense

Dec.3116000

Solution:

20X5

(1)Dec31ServicesRevenue73,000

IncomeSummary73,000

ToclosetherevenueaccountandopenIncomeSummary.

(2)31IncomeSummary48,100

RentExpense8,600

SalariesExpense20,000

InsuranceExpense3,500

DepreciationExpense16,000

Toclosetheexpenseaccounts.

(3)31IncomeSummary24,900

MarcyJones,Capital24,900

TocloseIncomeSummary.

(4)31MarcyJones,Capital24,000

MarcyJones,Withdrawals24,000

Toclosethewithdrawalsaccount.

Posttheclosingentriespreparedinpart(a)abovetotheT-accounts.

1.11Prepareclosingentriesandapost-closingtrialbalance

LatitudesCompanyhadthefollowingadjustedtrialbalance.

LATITUDESCOMPANY

AdjustedTrialBalance

ForthemonthendedJune30,20X1

Accounttitles

Debits

Credits

Cash

$3,700

AccountsReceivable

3,900

Supplies

500

AccountsPayable

$1,800

UnearnedRevenue

200

ShareCapital-Ordinary

5,000

RetainedEarnings

800

Dividends

300

ServiceRevenue

4,100

SalariesExpense

1,300

MiscellaneousExpense

300

SuppliesExpense

2,300

SalaryPayable

400

$12,300

$12,300

Enquired:

(a)PrepareclosingentriesatJune30,20X1.

(b)Prepareapost-closingtrialbalance.

Solution:

(a)

ServiceRevenue 4,100

IncomeSummary 4,100

IncomeSummary 3,900

SuppliesExpense 2,300

MiscellaneousExpense 300 SalariesExpense 1,300

IncomeSummary 200

RetainedEarnings 200

RetainedEarnings 300

Dividends 300

(b)

LATITUDESCOMPANY

Post-closingTrialBalance

ForthemonthendedJune30,20X1

Accounttitles

Debits

Credits

Cash

$3,700

AccountsReceivable

3,900

Supplies

500

AccountsPayable

$1,800

U