2nd Home Work Answers chapter 2 PDF

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Financial accounting...

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M2-2 Term (1) Journal entry (2) A = L + SE, and Debits = Credits (3) Assets = Liabilities + Stockholders’ Equity (4) Liabilities (5) Income statement, balance sheet, statement of retained earnings and statement of cash flows

Matched Definition A. Accounting model. C. The two equalities in accounting that aid in providing accuracy. H. Every transaction has at least two effects. I. Probable debts or obligations to be paid with assets or services. B. Four periodic financial statements.

M2-5 Determining Financial Statement Effects of Several Transactions For each of the following transactions of Pitt Inc. for the month of January 2012, indicate the accounts, amounts, and direction of the effects on the accounting equation. A sample is provided. a. (Sample) Borrowed $20,000 from a local bank. b. Lent $7,000 to an affiliate; accepted a note due in one year. c. Sold additional stock to investors for $1,000 cash. d. Purchased $15,000 of equipment, paying $6,000 cash and the rest on a note due in one year. e. Declared and paid $2,000 in dividends to stockholders.

Assets

=

a.

cash

+20,000

b.

Cash Notes Receivable

-7,000 +7,000

c.

Cash

+1,000

d.

Cash Equipment

- 6,000 15,000

e.

Cash

-2,000

Liabilities Notes Payable +20,000

Notes Payable

+

Stockholders’ Equity

Contributed capital

+1,000

Retained Earnings

-2,000

+9,000

M2-6 Identifying Increase and Decrease Effects on Balance Sheet Elements

Assets Liabilities Stockholders’ equity

Debit increases decreases decreases

Credit decreases decreases increases

E2-4 Determining Financial Statement Effects of Several Transactions The following events occurred for Christensen Company: a. Received investment of $34,000 cash by organizers and distributed stock to them. b. Purchased $8,000 of equipment, paying $1,000 in cash and signing a note for the rest. c . Borrowed $9,000 cash from a bank. d. Loaned $500 to an employee who signed a note. e. Purchased $15,000 of land; paid $4,000 in cash and signed a mortgage note for the balance. Required: For each of the events (a) through (e), perform transaction analysis and indicate the account, amount, and direction of the effect ( + for increase and − for decrease) on the accounting equation. Check that the accounting equation remains in balance after each transaction. Use the following headings:

Event a. b.

Cash

Assets -34,000

Equipm ent Cash

+8,000 -1,000

c.

Cash

+9,000

d.

Cash Receiva ble account

-500 +500

e.

Cash Land

- 4,000 15,000

=

Liabilities

+

Stockholders’ Equity -34,000

Retained Earnings

Notes Payable

+7,000

Notes Payable

+9,000

Notes Payable

+9,000

E2-11 Recording Journal Entries Jefferson Corporation was organized on May 1, 2011. The following events occurred during the first month. a. Received $65,000 cash from the five investors who organized Jefferson Corporation. b. Ordered store fixtures costing $20,000. c. Borrowed $10,000 cash and signed a note due in two years. d. Purchased $13,000 of equipment, paying $1,500 in cash and signing a six-month note for the balance. e. Lent $1,000 to an employee who signed a note to repay the loan in three months. f. Received and paid for the store fixtures ordered in ( b ). Required: Prepare journal entries for each transaction. (Remember that debits go on top and credits go on the bottom, indented.) Be sure to use good referencing and categorize each account as an asset (A), liability (L), or stockholders’ equity (SE). If a transaction does not require a journal entry, explain the reason.

a.

b.

c.

d.

e.

Cash (+A) Contributed Capital (+SE)

Repair Expense (+L) Cash (-A)

Cash (+A) Notes Payable (+L)

Equipment (+A) Cash (-A) Notes Payable (+L)

Accounts Receivable (+A) Cash (-A)

Debit 65,000

Credit 65,000

Debit 20,000

Credit 20,000

Debit 10,000

Credit 10,000

Debit 13,000

Credit 1,500 11,500

Debit 1,000

Credit 1,000

f. Does not require a journal entry because the entry would correspond to Cash (+A) and Cash (-A) i.e. change to the same account category that cancels out.

E2-17 Inferring Typical Investing and Financing Activities in Accounts The following T-accounts indicate the effects of normal business transactions

Required: 1. Describe the typical investing and financing transactions that affect each T-account. That is, what economic events occur to make each of these accounts increase and decrease? 2. For each T-account, compute the missing amounts. Answer 1. purchase

1/1 12/31

Loan

Notes Receivable 150 ? 225 12/31 170 1/1

2. 1/1 12/31

1/1 12/31

Equipment 500 250 650 100

Notes Receivable 150 245 225 170

Notes Payable 100 110 170 190

Equipment 500 250 ? 100

1/1 12/31

Expenses...