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HomeSolution Manual Solution Manual For Accounting, Volume 1, Ninth Canadian Edition Plus MyAccountingCourse With Pearson EText — Access Card Package, 9/E 9th Edition by Charles T. Horngren, Stanford University Walter T. Harrison, Jr., Baylor University Jo-Ann L. Johnston, British Columbia Institute of Technology Carol A. Meissner, Georgian College Peter R. Norwood, Langara College
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Solution Manual For Accounting, Volume 2, Ninth Canadian Edition Plus MyAccountingLab With Pearson EText — Access Card Package, 9/E 9th Edition by Charles T. Horngren, Stanford University Walter T. Harrison, Jr., Baylor University Jo-Ann L. Johnston, British Columbia Institute of Technology Carol A. Meissner, Georgian College Peter R. Norwood, Langara College $35.00
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Solution Manual For Accounting, Volume 1, Canadian Eighth Edition Plus MyAccountingLab With Pearson EText — Access Card Package, 8/E 8th Edition by Charles T. Horngren, Stanford University Walter T. Harrison, Jr., Baylor University M. Suzanne Oliver, University of West Florida Peter R. Norwood, Langara College Jo-Ann L. Johnston, British Columbia Institute of Technology $35.00

Solution Manual For Accounting, Volume 1, Ninth Canadian Edition Plus MyAccountingCourse With Pearson EText — Access Card Package, 9/E 9th Edition by Charles T. Horngren, Stanford University Walter T. Harrison, Jr., Baylor University Jo-Ann L. Johnston, British Columbia Institute of Technology Carol A. Meissner, Georgian College Peter R. Norwood, Langara College

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Category: Solution Manual Tags: 9/E 9th Edition by Charles T. Horngren, Accounting, Baylor University Jo-Ann L. Johnston, British Columbia Institute of Technology Carol A. Meissner, Georgian College Peter R. Norwood, Jr., Langara College, Ninth Canadian Edition Plus MyAccountingCourse With Pearson EText — Access Card Package, Stanford University Walter T. Harrison, Volume 1
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Chapter 2

Recording Business Transactions

Questions

  1. The basic shortcut device of accounting is the T-account. It resembles the letter T, and its left side is called the debit side and its right side the credit side.
  2. The statement is false because debit means left and credit means right. Debits and credits are used to record increases and decreases in accounts, so debits can be increases or decreases depending on the type of account involved and likewise for credits.
  3. Examples:
    1. A debit to an asset account indicates an increase in the asset.
    2. To record a decrease in a liability, the accountant should record a debit.
    3. Debit all asset accounts to record increases in them.
    4. The accountant should debit Cash to record a receipt of cash.
    5. The debit side of an account is the left side.
    6. It is customary to record the debit side of a journal entry before recording the credit side of the entry.
  4. The three basic types of accounts are ASSETS, LIABILITIES, and OWNER’S EQUITY. Two additional types of accounts are REVENUES and EXPENSES.

They are part of owner’s equity; revenues increase owner’s equity and expenses decrease owner’s equity.

  1. The dual effects of an owner’s investment in her business are (1) an increase in the entity’s cash and (2) an increase in the owner’s equity.
  2. Business Transaction    Entry in           Posting to         Trial

Creates Source Document                 Journal             Ledger      Balance

  1. The normal balance of an account is the side of the account—debit or credit— that records increases. Also, an account’s normal balance is the side of the account that usually has the account’s balance.
  2. Account Type Normal Balance

Assets                                           Debit              

Liabilities                                     Credit             

Owner’s equity                             Credit             

Revenues                                      Credit             

Expenses                                      Debit              

  1. Posting transfers amounts from the journal to the ledger. This is important because the transaction entries in the journal do not accumulate all the information related to each account. The accounts in the ledger hold that information. The ledger groups together transactions that are similar. For example, all cash transaction from the journal are grouped together in the ledger. Therefore, the transfer of data to the accounts in the ledger—that is, posting from the journal to the ledger—makes it possible to determine the balance in each account. Posting comes after journalizing.
  2. + Investment by owner             0  e. Cash payment on account

 +  b. Invoice customer for services       –  f. Withdrawal of cash by owner

 0  c. Purchase of supplies on credit  0  g. Borrowing money on a note payable

 –  d. Pay expenses with cash               +  h. Sale of services on account

  1. Posting’s four steps are (1) copy the date of a transaction from the journal to the ledger, (2) copy the journal page number from the journal to the ledger, (3) copy (post) the dollar amounts of the debit and the credit from the journal to the ledger, and (4) copy the account numbers from the ledger back to the journal to indicate that the transaction amount has been posted to the ledger. Step 3, transferring the transaction amount to the account, is the fundamental purpose of posting.
  2. Cash Sam Westman, Capital

Accounts Receivable                        Sales Revenue

Note Payable                                    Salary Expense

  1. ―Accounts Payable has a credit balance of $2,800‖ means that the entity owes $2,800 to its creditors on a debt that is not evidenced by a formal note payable.
  2. The two business transactions are (1) Spiffy Cleaners providing laundry service and earning revenue and (2) Bobby Ng paying cash to Spiffy Cleaners. The business’s earning of the revenue increases the owner’s equity in the company, and Ng’s payment of cash increases the business’s cash.
  3. The ledger is the group of actual accounts in use that contain a record of activity in those accounts. The chart of accounts is a list of all the accounts set up in the ledger with their account numbers.
  4. Accountants prepare a trial balance to check the accuracy of postings to accounts and determine whether the total debits equal the total credits. It is a useful summary of all the accounts and their balances and serves as an early error-detection tool.
  5. A compound journal entry is one that affects more than two accounts.
  6. This error does not cause the trial balance to be out of balance because both the total debits and the total credits are overstated by the same amount, $5,400 ($6,000 – $600).
  7. Collecting cash on account has no effect on total assets because the increase in cash, which increases total assets, is offset by the decrease in accounts receivable, which decreases total assets.
  8. Both systems depend on the accuracy of the initial analysis of the transaction and require that the journal entry be recorded correctly. Thereafter, a number of errors could occur in a manual system (such as slides, transpositions, errors in calculating account balances); these errors will affect a manual trial balance. Most computerized systems will not allow you to post a journal entry if it does not balance. Once the journal entry has been correctly recorded, the computerized accounting system performs much the same actions as accountants do in a manual system. These routine tasks are accomplished faster

and with less risk of error with a computer. The computer does not recognize debits and credits, only increases and decreases by account type.

Starters

 (5 min.) S 2-1

 

―The basic summary device in accounting is the account. The left side is called the debit side, and the right side is called the credit side. We record transactions first in a journal. Then we post (copy the data) to the ledger. It is helpful to list all the accounts with their balances on a trial balance.‖

 

 

 

 

 

(10 min.) S 2-2

  • Credit A.        Record of transactions
  • Normal balance B.        Always an asset

G         3. Payable                                      C.     Right side of an account

  • Journal D.        Side of an account where

increases are recorded

  • Receivable E.         Copying data from the

journal to the ledger

J          6. Capital                                       F.      Increases in equity from

providing goods and services

  • Posting G.        Always a liability
  • Revenue H.        Revenues – Expenses

(where expenses exceed revenues)

  • Net loss I.          Grouping of accounts
  • Ledger J.          Owner’s equity in the

business

 

 

(5-10 min.) S 2-3

Credits are increases in these types of accounts:

  • Liabilities
  • Capital
  • Revenues

 

Credits are decreases in these types of accounts:

  • Assets
  • Withdrawals
  • Expenses

 

Debits are increases in these types of accounts:

  • Assets
  • Withdrawals
  • Expenses

 

Debits are decreases in these types of accounts:

  • Liabilities
  • Capital
  • Revenues

 

(5-10 min.) S 2-4

 

 

 

a. To decrease Accounts Payable: debit g. To increase Rent Expense: debit  
b. To increase Cash: debit h. To increase Equipment: debit
c. To increase Notes Payable: credit i. To increase Accounts Payable: credit
d. To increase Owner, Withdrawals: debit j. To increase Land: debit
e. To increase Service Revenue: credit k. To increase Office Expense: debit
f.  To increase Office Supplies: debit l. To increase Owner, Capital: credit
 

(10 min.) S 2-5

 

  Journal      
DATE ACCOUNT TITLES AND EXPLANATIONS POST. REF. DEBIT CREDIT
Sept. 1 Cash   32,000  
    Taylor Moffat, Capital     32,000
    Received investment from owner.      
           
  2 Medical Supplies   9,500  
    Accounts Payable     9,500
    Purchased supplies on account.      
           
  2 Rent Expense   4,100  
    Cash     4,100
    Paid office rent for September.      
           
  3 Accounts Receivable   6,800  
    Service Revenue     6800
    Performed service for patients on account.      
             

 

(10 min.) S 2-6

 

  Journal      
DATE ACCOUNT TITLES AND EXPLANATIONS POST. REF. DEBIT CREDIT
Oct. 22 Accounts Receivable   6,000  
    Service Revenue     6,000
    Performed service on account.      
           
  30 Cash   4,500  
    Accounts Receivable     4,500
    Received cash on account.      
           
  31 Telephone Expense   150  
    Accounts Payable     150
    Received telephone bill.      
           
  31 Advertising Expense   900  
    Cash     900
    Paid advertising expense.      
           
  31 Salary Expense   3,900  
    Cash     3,900
    Paid salary expense for the month.      
             

(10-15 min.) S 2-7

Req. 1

 

  Journal      
DA TE ACCOUNT TITLES AND EXPLANATIONS POST. REF. DEBIT CREDIT
    Supplies   10,000  
    Accounts Payable     10,000
    Purchased supplies on account.      
           
    Accounts Payable   5,000  
    Cash     5,000
    Paid cash on account. ($10,000½)      

 

Req. 2

 

Accounts Payable

(10-15 min.) S 2-8

Req. 1

 

  Journal    
DA TE ACCOUNT TITLES AND EXPLANATIONS POST. REF. DEBIT CREDIT
    Accounts Receivable   12,000  
    Service Revenue     12,000
    Performed service on account.      
           
    Cash   5,500  
    Accounts Receivable     5,500
    Received cash on account.      

 

Req. 2

 

Cash                                  Accounts Receivable                        Service Revenue

Req. 3

 

  1. The business earned $12,000:          Service Revenue
  2.                                              Total assets     $12,000:           Cash   $5,500                            Accounts receivable     6,500

Total assets                                $12,000

 

(10-15 min.) S 2-9 

  Balzy Indoor Tennis Club

Trial Balance

November 30, 2014

 
NUMBER ACCOUNT DEBIT CREDIT
10002 Cash $23,040  
17500 Furniture 5,500  
20001 Accounts Payable   $3,740
30001 Stan Balzy, Capital   27,000
30002 Stan Balzy, Withdrawals 1,200  
40001 Sales Revenue   5,500
51200 Supplies Expense 2,500  
53200 Rent Expense 4,000  
       Total $36,240 $36,240

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(10-15 min.) S 2-10

Reqs. 1 and 2

 

Cash                                                             Accounts Receivable

 

6,800  
Bal. 6,800  
32,000   4,100
Bal. 27,900

 

 

 

Medical Supplies

 

 

9,500    
Bal. 9,500

 

 

Taylor Moffat, Capital

 
    32,000
 

 

 

Rent Expense

Bal. 32,000
4,100    
  9,500
  Bal. 9,500
  6,800
  Bal. 6,800

Accounts Payable

Service Revenue

 

 

Bal. 4,100

 

 

 

(continued) S 2-10

Req. 3

 

 

 

 

 

 

 

 

 

(10 min.) S 2-11

 

 

 

 

 

(10 min.) S 2-12

Incorrect Trial Balance

 

 

 

To correct this error,

 

  1. Take the difference between total debits and total credits:

$557,000 – $57,000 = $500,000

 

  1. Divide the error by 2:

$500,000 ÷ 2 = $250,000

 

  1. Locate $250,000 on the trial balance. This matched the balance in the Capital account. The Capital account should have a credit balance.

(10 min.) S 2-13

Incorrect Trial Balance

 

 

 

To correct this error,

 

  1. Take the difference between total debits and total credits:

$305,650 – $307,000 = $1,350

 

  1. Divide the error by 9:

$1,350 ÷ 9 = $150

 

  1. Locate $150 on the trial balance. Utilities expense, at $150, includes the error. Trace the utilities’ balance back to the ledger account, which shows the correct amount.

Exercises

(10-15 min.) E 2-1

TO:           Office Manager

FROM:     Student Name

Each time Prairie Tours received cash, accountants recorded the transaction in the journal by debiting the Cash account. Accountants recorded cash payments by making a journal entry that included a credit to Cash. Debits in the journal were posted as debits to the Cash account in the ledger and credits were posted as credits. At the end of the period, accountants listed each account, along with its balance, on the trial balance. Cash had a balance of $57,800.

Instructional Note: Student responses may vary considerably.

 

 

           (15 min.) E 2-2

 

 

 

 

 

 

           (10-15 min.) E 2-3

 

Req. 1

       
           Debit   Credit   Credit
        ASSETS = LIABILITIES + OWNER’S EQUITY
         $75,500 = $46,300 + $28,500

($31,200 + $4,000

+ $300 + $40,000)             ($1,300 + $45,000)

 

This accounting equation is out of balance because the complete equity balances are not shown. Net income or loss and withdrawals balances should be included in the equation.

 

Req. 2

Credit                                  Debit                                    Net Credit

REVENUES         –            EXPENSES             =           NET INCOME

$7,600              –                 $5,100                 =                  $2,500

($400 + $1,500 + $3,000 + $200)

NET INCOME would represent a net credit because revenues (credit amounts) would exceed expenses (debit amounts).

NET LOSS would represent a net debit because expenses (debit amounts) would exceed revenues (credit amounts).

 

Req. 3

Jim Aylmer withdrew $1,800 during the month.

Withdrawals are a debit amount.

(continued) E 2-3

Req. 4

Increase in owner’s equity (credit amount)

Net income                                                          $2,500

Decrease in owner’s equity (debit amount)

Withdrawals                                                          1,800

Net increase in owner’s equity (credit amount)         $   700

        (10-20 min.) E 2-4
Date     Analysis of Transactions and Journal Entries    
Dec.   4 The asset Cash is increased; therefore, debit Cash.    
      The liability Note Payable is increased; therefore,    
              credit Note Payable.    
      Cash ………………………………………………………………… 20,000  
              Note Payable ……………………………………………..   20,000
    8 The asset Equipment is increased; therefore,    
              debit Equipment.    
      The liability Accounts Payable is increased; therefore,    
               credit Accounts Payable.    
      Equipment………………………………………………………… 4,000  
              Accounts Payable ……………………………………….   4,000
    12 The asset Accounts Receivable is increased; therefore,    
               debit Accounts Receivable.    
      The revenue Service Revenue is increased; therefore,    
              credit Service Revenue.    
      Accounts Receivable …………………………………………. 6,000  
              Service Revenue …………………………………………   6,000
    19 The asset Cash is increased; therefore, debit Cash.    
      The asset Land is decreased; therefore, credit Land.    
      Cash ………………………………………………………………… 24,000  
              Land ………………………………………………………….   24,000
    22 The asset Supplies is increased; therefore, debit    
               Supplies.    
      The asset Cash is decreased; therefore,    
              credit Cash.    
      Supplies  …………………………………………………………. 1,200  
              Cash ………………………………………………………….   1,200
    27 The liability Accounts Payable is decreased; therefore,    
              debit Accounts Payable.    
      The asset Cash is decreased; therefore, credit Cash.    
      Accounts Payable ……………………………………………… 4,000  
              Cash ………………………………………………………….   4,000

 

  Req. 1 and 2

 

 

    (10-20 min.) -5  
    Cash   Accounts Receivable    
 

Dec.

 

1

 

6,000

 

Dec.

 

1

 

200

 

  4

19

20,000

24,000

  22

27

1,200

4,000

Dec. 31 44,600      
 

Dec. 1 0  
 

 

12

 

6,000

 

 
Dec. 31 6,000  

 

 

Req. 3

Total debits =      Total credits

$56,000          =    $56,000

 

(10-25 min.)           -6

  Journal    
DATE 2014 ACCOUNT TITLES AND EXPLANATIONS POST. REF. DEBIT CREDIT
Mar. 1 Cash   15,000  
         Yula Gregore, Capital     15,000
    Investment by owner.      
           
  1 Rent Expense   4,000  
         Cash     4,000
    Paid rent for yoga studio.      
           
  4 Studio Supplies   4,000  
         Accounts Payable     4,000
    Purchased studio supplies on account.      
           
  6 Cash   3,000  
         Service Revenue     3,000
    Performed services for cash.      
           
  9 Accounts Payable   1,000  
         Cash     1,000
    Paid cash on account.      
           
  17 Accounts Receivable   800  
         Service Revenue     800
    Performed service on account.      
           
           

 

Req. 1                                                                                                       (20-30 min.)          -7

Yula’s Yoga

 

Cash                                                             Accounts Receivable

 

Mar. 1 15,000 Mar. 1 4,000
  3,000   9 1,000
Mar.

 

 

13,000  Studio Supplies    
Mar. 4 4,000      
 

Mar. 17 800      
Mar.

 

31

 

800

 

Account

 

 

s Payable

 

 

 

 

 

Mar. 9 1,000 Mar. 4 4,000

Mar.     31        4,000                                                                                  Mar.      31          3,000

 

 

Yula Gregore, Capital                                                    Service Revenue

 

Rent Expense

Mar. 1 4,000  
Mar. 31 4,000  

 

 

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