Chapter 6: Business Transactions And Their Analysis PDF

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Chapter 6Business Transactions and theirAnalysisPROBLEM 1: TRUE OR FALSE1. TRUE2. TRUE3. FALSE4. TRUE FALSE – purchase order TRUE FALSE TRUE FALSE – also ‘cash’ TRUE PROBLEM 2: FOR CLASSROOM DISCUSSION1. A2. A3. D4. D5. B Journal entries Oct. 1, 20x Cash Owner’s equity to record the owner’s investme...

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Chapter 6 Business Transactions and their Analysis PROBLEM 1: TRUE OR FALSE 1. TRUE 2. TRUE 3. FALSE 4. TRUE 5. FALSE – purchase order 6. TRUE 7. FALSE 8. TRUE 9. FALSE – also ‘cash’ 10. TRUE

PROBLEM 2: FOR CLASSROOM DISCUSSION 1. A 2. A 3. D 4. D 5. B 6. Journal entries Oct. Cash 800,000 1, Owner’s equity 20x1

800,000

to record the owner’s investment to the business

Oct. 3

Inventory Cash

100,000 100,000

to record purchase of inventory for cash

Oct. 4

Inventory Accounts payable to record purchase of inventory on account

400,000 400,000

Oct. 8

Cash Sales

300,000 300,000

to record cash sale

Cost of sales Inventory

120,000 120,000

to charge the cost of the goods sold as expense

Oct. 12

Accounts receivable Sales

700,000 700,000

to record sale on account

Cost of sales Inventory

280,000 280,000

to record the cost of the goods sold as expense

Oct. 15

Accounts payable Cash

400,000 400,000

to record payment of accounts payable

Oct. 17

Cash Accounts receivable

700,000 700,000

to record collection of accounts receivable

Oct. 18

Equipment Cash

280,000 280,000

to record the purchase of equipment

Oct. 22

Owner’s drawings Cash

20,000 20,000

to record the owner’s drawings from the business

Oct. 31

Salaries expense Cash to record payment of salaries

50,000 50,000

PROBLEM 3: IDENTIFYING THE ACCOUNTS AFFECTED TRANSACTIONS ACCOUNT TITLES AFFECTED Owner’s Cash 1. Owner’s investment to the business equity Equipment Cash 2. Purchase of equipment on cash basis 3. Sale of goods on cash basis Cash Sales (disregard cost of sales) 4. Charging the cost of the goods Cost of sales/ Inventory sold in #3 above as expense Cost of goods sold 5. Purchase of inventory for cash Inventory Cash 6. Payment of utilities expense Utilities Cash expense Inventory Cash 7. Purchase of inventory on cash basis Cash 8. Payment of various small Miscellaneous expense expenses that do not warrant separate presentation Taxes and Cash 9. Payment of local taxes licenses Cash 10. Payment of taxi fare of Transportation expense/ employees working night shift Transportation and travel expense

PROBLEM 4: IDENTIFYING THE ACCOUNTS AFFECTED TRANSACTIONS 1. Sale of inventory on account (disregard cost of sales) 2. Charging of the cost of the inventory sold in #1 above as expense 3. Collection of accounts receivable 4. Purchase of inventory on account 5. Obtaining a loan 6. Payment of accounts payable 7. Provision of additional capital to the business by the owner

8. Payment of the loan obtained in #5 above 9. Payment of interest expense 10. Drawings of the owner from the business

ACCOUNT TITLES AFFECTED Accounts Sales receivable Cost of Inventory sales/ Cost of goods sold Cash Accounts receivable Inventory Accounts payable Cash Notes payable Accounts Cash payable Owner’s Cash equity/ Owner’s capital Notes Cash payable Interest Cash expense Owner’s Cash drawings

PROBLEM 5: IDENTIFYING THE EFFECTS ON ACCOUNTS

Example: Payment of advertising expense 1. Owner’s contribution to the business 2. Purchase of inventory for cash 3. Sale on cash basis and the charging of the cost of the goods sold as expense

4. Purchase of equipment for cash 5. Payment of interest expense

ACCOUNTS Advertising expense Cash Cash Owner’s equity Inventory Cash Cash Sales Cost of sales/ Cost of goods sold Inventory Equipment Cash Interest expense Cash

EFFECTS INCREASE DECREASE INCREASE INCREASE INCREASE DECREASE INCREASE INCREASE INCREASE

DECREASE INCREASE DECREASE INCREASE DECREASE

PROBLEM 6: IDENTIFYING THE ACCOUNTS AFFECTED

1. Owner’s withdrawals the business

from

2. Sale on account and the charging of the cost of the goods sold as expense

3. Collection of accounts receivable 4. Obtaining a loan 5. Payment of the loan in #4 above 6. Payment of salaries expense

7. Purchase of inventory on account 8. Payment of accounts payable

9. Payments of various small expenditures which do not warrant separate presentation 10. The dog of the business owner won 1st prize in an accounting quiz bee.

ACCOUNTS Owner’s drawings Cash Accounts receivable Sales Cost of sales Inventory Cash Accounts receivable Cash Notes payable Notes payable Cash Salaries expense Cash Inventory Accounts payable Accounts payable Inventory Miscellaneous expense Cash NONE NONE

EFFECTS INCREASE DECREASE INCREASE INCREASE INCREASE DECREASE INCREASE DECREASE INCREASE INCREASE DECREASE DECREASE INCREASE DECREASE INCREASE INCREASE DECREASE DECREASE INCREASE DECREASE NONE NONE

PROBLEM 7: JOURNAL ENTRIES 1. Cash Owner’s equity

100,000 100,000

2. Cash Notes payable

800,000

3. Equipment Cash

200,000

4. Inventory Cash

500,000

5. Cash Sales

120,000

Cost of sales Inventory

800,000

200,000

500,000

120,000 50,000 50,000

6. Prepaid rent Cash

60,000

7. Notes payable Cash

400,000

8. Interest expense Cash

80,000

9. Utilities expense Cash

10,000

10. Salaries expense Cash

32,000

60,000

400,000

80,000

10,000

32,000

PROBLEM 8: JOURNAL ENTRIES 1. Cash Owner’s equity

1,000,000

2. Taxes and licenses Cash

30,000

3. Advertising expense Cash

200,000

4. Inventory Accounts payable

600,000

5. Accounts receivable Sales

800,000

Cost of sales Inventory

1,000,000

30,000

200,000

600,000

800,000 500,000 500,000

6. Cash Accounts receivable

700,000

7. Accounts payable Cash

300,000

8. Rent expense Cash

70,000

9. Utilities expense Cash

8,000

10. Owner’s drawings Cash

20,000

700,000

300,000

70,000

8,000

20,000

PROBLEM 9: JOURNAL ENTRIES & ACCTG. EQUATION 1st requirement: Journal entries 1. Cash Owner’s equity

100,000 100,000

2. Taxes and licenses Cash

10,000

3. Advertising expense Cash

20,000

4. Prepaid supplies Cash

1,000

5. Inventory Cash

40,000

6. Accounts receivable Sales

70,000

Cost of sales Inventory

10,000

20,000

1,000

40,000

70,000 30,000 30,000

7. Freight-out Cash

10,000

8. Cash Accounts receivable

50,000

9. Salaries expense Cash

8,000

10. Utilities expense Cash

12,000

10,000

50,000

8,000

12,000

2nd requirement: Journal entries ASSETS

LIABILITIES

1. Cash 2. Cash

100,000 (10,000)

3. Cash 4. Prepaid supplies Cash 5. Inventory Cash 6. Accounts receivable Inventory 7. Cash 8. Cash Accounts receivable 9. Cash 10. Cash TOTALS

(20,000) 1,000 (1,000) 40,000 (40,000) 70,000 (30,000) (10,000) 50,000 (50,000) (8,000) (12,000) 80,000

0

EQUITY Owner's equity Taxes and licenses Advertising expense

(10,000) (20,000)

Sales Cost of sales Freight-out

70,000 (30,000) (10,000)

Salaries expense Utilities expense

(8,000) (12,000) 80,000

100,000

PROBLEM 10: JOURNAL ENTRIES & ACCTG. EQUATION 1st requirement: Journal entries 1. Cash Owner’s equity

200,000 200,000

2. Cash Notes payable

600,000

3. Equipment Cash

450,000

4. Prepaid rent Cash

20,000

5. Inventory Accounts payable

500,000

6. Cash Sales

200,000

Cost of sales Inventory 7. Accounts receivable Sales

600,000

450,000

20,000

500,000

200,000 80,000 80,000 900,000 900,000

Cost of sales Inventory

400,000

8. Accounts payable Cash

400,000

9. Owner’s drawings Cash

10,000

10. Interest expense Cash

15,000

400,000

400,000

10,000

15,000

2nd requirement: Journal entries ASSETS 1. Cash 2. Cash 3. Equipment Cash 4. Prepaid rent Cash 5. Inventory 6. Cash Inventory 7. Accounts receivable Inventory 8. Cash 9. Cash 10. Cash TOTALS

LIABILITIES 200,000 600,000

Notes payable

450,000 (450,000) 20,000 (20,000) 500,000 Accounts payable 200,000 (80,000) 900,000 (400,000) (400,000) Accounts payable (10,000) (15,000) 1,495,000

EQUITY Owner's equity

200,000

600,000

500,000 Sales Cost of sales Sales Cost of sales

200,000 (80,000) 900,000 (400,000)

(400,000) Owner’s drawings Interest expense 700,000

(10,000) (15,000) 795,000

PROBLEM 11: JOURNAL ENTRIES 1. Cash 35,000 Owner’s capital

35,000

2. Supplies expense Cash

15,000 15,000

3. Rent expense Cash

5,000

4. Utilities expense Cash

2,000

5. Cash Notes payable

10,000

6. Accounts receivable Service fees

75,000

7. Interest expense Cash

500

8. Cash Accounts receivable

50,000

9. Owner’s drawings Cash

20,000

10. Salaries expense Cash

10,000

5,000

2,000

10,000

75,000

500

50,000

20,000

10,000

PROBLEM 12: MULTIPLE CHOICE 1. C 2. B 3. D 4. B 5. D 6. D 7. C 8. D 9. D 10. D

PROBLEM 13: CLASSROOM ACTIVITY JOURNAL ENTRIES: A Company 1. Cash 5 Owner’s capital 2. 3. Cash 5 Notes payable 4. Equipment 6 Cash 5. Inventory 3 Cash 6. Cash 5 Accounts receivable 10 Sales Cost of sales Inventory 7.

B Company 5 Cash 7 Owner’s capital

7

5 6 3

15

Inventory 15 Cash Accounts payable

3 3 Cash

9 Sales

Cost of sales Inventory 8.

5 10

9 5 5

Accounts receivable 10 Sales Cost of sales Inventory

10

5 5

9. Cash 5 Accounts receivable

10.

Cash 5

3 Accounts receivable

Accounts payable Cash

5

Salaries expense Cash

1

3

5

1

ANSWERS TO QUESTIONS: a. Answers: A Company = ₱11; B Company = ₱8; Side = ₱1 b. Answers: A Company = 0; B Company = 1 stuff; Side = 2 stuffs c.

Answer: ₱5

d. Answer: ₱7 e. Answer: ₱5...