Chapter 2 (C) Mastery Hide or show questions Mastery Problem Analyzing Transactions KL Company Inc In February, Katie Long formed KL Company Inc Transactions for the month of March have been posted to the T accounts An intern has prepared a trial balance from the T accounts, but there seem to be some errors T accounts Cash Bal 8,000 3 3 2,300 3 25 7,650 3 27 1,250 3 28 5,000 3 29 3,475 3 30 8,125 3 31 1,875 Accounts Receivable Bal 1,950 3 18 9,800 3 30 8,125 Supplies Bal 225 3 7 1,650 Office Equipment 3 2 17,500 Accounts Payable 3 27 1,250 Bal 1,250 3 7 1,650 Notes Payable 3 2 17,500 Common Stock Bal 7,500 3 28 5,000 Retained Earnings Bal 1,425 Dividends 3 31 1,875 Fees Earned 3 18 9,800 3 25 7,650 Rent Expense 3 3 2,300 Wages Expense 3 29 3,475 Required Transactions Descriptions of the transactions for the month of March are provided in the following table Each of the transactions that follow has been posted to the T accounts Referring to the T accounts, select the date on which each transaction occurred, enter the amount of the transaction, and select the account to debit and credit Transaction Date Amount Debit Credit Purchased equipment, giving a note payable for the purchase price 3 2 $fill in the blank defc1bff506200e 2 Office Equipment Notes Payable Paid rent for April 3 3 $fill in the blank defc1bff506200e 6 Rent Expense Cash Purchased supplies on account 3 7 $fill in the blank defc1bff506200e 10 Supplies Accounts Payable Recorded fees earned on account 3 18 $fill in the blank defc1bff506200e 14 Accounts Receivable Fees Earned Received cash for fees earned 3 25 $fill in the blank defc1bff506200e 18 Cash Fees Earned Paid creditors on account 3 27 $fill in the blank defc1bff506200e 22 Accounts Payable Cash KL Company Inc issued additional shares of common stock in exchange for cash 3 28 $fill in the blank defc1bff506200e 26 Cash Common Stock Paid wages 3 29 $fill in the blank defc1bff506200e 30 Wages Expense Cash Received cash from customers on account 3 30 $fill in the blank defc1bff506200e 34 Cash Accounts Receivable KL Company Inc paid dividends to its stockholders 3 31 $fill in the blank defc1bff506200e 38 Retained Earnings Cash Feedback If you are having trouble, try completing the items you are sure of first Then, match up the remaining transactions Trial Balance Unequal Totals The intern has prepared the following trial balance for the month of March KL Company Inc Unadjusted Trial Balance March 31, 20Y3 Account Title Debit Balances Credit Balances Cash 24,475 Accounts Receivable 3,625 Supplies 1,875 Office Equipment 17,500 Accounts Payable 1,650 Notes Payable 17,500 Common Stock 12,500 Retained Earnings 1,425 Dividends 1,875 Fees Earned 9,800 Rent Expense 3,200 Wages Expense 3,475 50,125 48,775 Trial Balance Correct The Trial Balance Unequal Totals was prepared by the intern The intern is puzzled by the unequal totals Prepare a corrected trial balance If an amount box does not require an entry, leave it blank KL Company Inc Unadjusted Trial Balance March 31, 20Y3 Account Title Debit Balances Credit Balances Cash fill in the blank 102d21f95fe8fba 1 fill in the blank 102d21f95fe8fba 2 Accounts Receivable fill in the blank 102d21f95fe8fba 3 fill in the blank 102d21f95fe8fba 4 Supplies fill in the blank 102d21f95fe8fba 5 fill in the blank 102d21f95fe8fba 6 Office Equipment fill in the blank 102d21f95fe8fba 7 fill in the blank 102d21f95fe8fba 8 Accounts Payable fill in the blank 102d21f95fe8fba 9 fill in the blank 102d21f95fe8fba 10 Notes Payable fill in the blank 102d21f95fe8fba 11 fill in the blank 102d21f95fe8fba 12 Common Stock fill in the blank 102d21f95fe8fba 13 fill in the blank 102d21f95fe8fba 14 Retained Earnings fill in the blank 102d21f95fe8fba 15 fill in the blank 102d21f95fe8fba 16 Dividends fill in the blank 102d21f95fe8fba 17 fill in the blank 102d21f95fe8fba 18 Fees Earned fill in the blank 102d21f95fe8fba 19 fill in the blank 102d21f95fe8fba 20 Rent Expense fill in the blank 102d21f95fe8fba 21 fill in the blank 102d21f95fe8fba 22 Wages Expense fill in the blank 102d21f95fe8fba 23 fill in the blank 102d21f95fe8fba 24 fill in the blank 102d21f95fe8fba 25 fill in the blank 102d21f95fe8fba 26 Feedback Compute the account balances in the T accounts first Errors on Trial Balance Compare the trial balance prepared by the intern (Trial Balance Unequal Totals) to the trial balance that you prepared (Trial Balance Correct) In the following table, select the accounts for each type of error Not all accounts contain errors Error Type Cash Accounts Receivable Supplies Office Equipment Accounts Payable Notes Payable Common Stock Retained Earnings Dividends Fees Earned Rent Expense Wages Expense Transposition No Incorrectly reported as a debit No Incorrectly reported as a credit No Balance computed incorrectly Yes Feedback To determine which accounts were incorrectly reported as a debit or credit, think about the normal balance of an account as well as computing the account balance in the T account Accounting Equation The intern is puzzled and asks Are you sure the accounting equation is still in balance Using the corrected trial balance you prepared, prove that the accounting equation is in balance Assets Liabilities Stockholders' Equity $fill in the blank b5e9be064066fda 1 $fill in the blank b5e9be064066fda 2 $fill in the blank b5e9be064066fda 3 Still puzzled, the intern asks Why do none of the amounts in the accounting equation equal the totals on the trial balance a The accounts with debit balances are not all classified in the same element of the accounting equation For example, not all accounts with debit balances are assets b This is because the revenue and expense accounts are part of the stockholders equity element The accounts with debit balances should be part of the total assets c You point out the total of the assets, liabilities and stockholders equity is equal to the sum of the debit and credit totals on the trial balance d The accounts with credit balances are not all classified in the same element of the accounting equation For example, not all accounts with credit balances are liabilities e The accounts that make up the total for stockholders equity have a mix of debit and credit balances

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Chapter 2: (C) Mastery Hide or show questions Mastery Problem: Analyzing Transactions KL Company Inc. In February, Katie Long formed KL Company Inc. Transactions for

Chapter 2: (C) Mastery

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Mastery Problem: Analyzing Transactions

KL Company Inc.

In February, Katie Long formed KL Company Inc. Transactions for the month of March have been posted to the T accounts. An intern has prepared a trial balance from the T accounts, but there seem to be some errors.

T accounts

Cash
Bal.	8,000	3/3	2,300
3/25	7,650	3/27	1,250
3/28	5,000	3/29	3,475
3/30	8,125	3/31	1,875

Accounts Receivable
Bal.	1,950
3/18	9,800	3/30	8,125

Supplies
Bal.	225
3/7	1,650

Office Equipment
3/2	17,500

Accounts Payable
3/27	1,250	Bal.	1,250
		3/7	1,650

Notes Payable
		3/2	17,500

Common Stock
	Bal.	7,500
	3/28	5,000

Retained Earnings
		Bal.	1,425

Dividends
3/31	1,875

Fees Earned
	3/18	9,800
	3/25	7,650

Rent Expense
3/3	2,300

Wages Expense
3/29	3,475

Required:

Transactions

Descriptions of the transactions for the month of March are provided in the following table. Each of the transactions that follow has been posted to the T accounts. Referring to the T accounts, select the date on which each transaction occurred, enter the amount of the transaction, and select the account to debit and credit.

Transaction	Date	Amount	Debit	Credit
Purchased equipment, giving a note payable for the purchase price.	3/2	$fill in the blank defc1bff506200e_2	Office Equipment	Notes Payable
Paid rent for April.	3/3	$fill in the blank defc1bff506200e_6	Rent Expense	Cash
Purchased supplies on account.	3/7	$fill in the blank defc1bff506200e_10	Supplies	Accounts Payable
Recorded fees earned on account.	3/18	$fill in the blank defc1bff506200e_14	Accounts Receivable	Fees Earned
Received cash for fees earned.	3/25	$fill in the blank defc1bff506200e_18	Cash	Fees Earned
Paid creditors on account.	3/27	$fill in the blank defc1bff506200e_22	Accounts Payable	Cash
KL Company Inc. issued additional shares of common stock in exchange for cash.	3/28	$fill in the blank defc1bff506200e_26	Cash	Common Stock
Paid wages.	3/29	$fill in the blank defc1bff506200e_30	Wages Expense	Cash
Received cash from customers on account.	3/30	$fill in the blank defc1bff506200e_34	Cash	Accounts Receivable
KL Company Inc. paid dividends to its stockholders.	3/31	$fill in the blank defc1bff506200e_38	Retained Earnings	Cash

Feedback

If you are having trouble, try completing the items you are sure of first. Then, match up the remaining transactions.

Trial Balance: Unequal Totals

The intern has prepared the following trial balance for the month of March.

KL Company Inc. Unadjusted Trial Balance March 31, 20Y3
Account Title	Debit Balances	Credit Balances
Cash	24,475
Accounts Receivable		3,625
Supplies	1,875
Office Equipment	17,500
Accounts Payable	1,650
Notes Payable		17,500
Common Stock		12,500
Retained Earnings	1,425
Dividends		1,875
Fees Earned		9,800
Rent Expense	3,200
Wages Expense		3,475
	50,125	48,775

Trial Balance: Correct

The Trial Balance: Unequal Totals was prepared by the intern. The intern is puzzled by the unequal totals. Prepare a corrected trial balance. If an amount box does not require an entry, leave it blank.

KL Company Inc. Unadjusted Trial Balance March 31, 20Y3
Account Title	Debit Balances	Credit Balances
Cash	fill in the blank 102d21f95fe8fba_1	fill in the blank 102d21f95fe8fba_2
Accounts Receivable	fill in the blank 102d21f95fe8fba_3	fill in the blank 102d21f95fe8fba_4
Supplies	fill in the blank 102d21f95fe8fba_5	fill in the blank 102d21f95fe8fba_6
Office Equipment	fill in the blank 102d21f95fe8fba_7	fill in the blank 102d21f95fe8fba_8
Accounts Payable	fill in the blank 102d21f95fe8fba_9	fill in the blank 102d21f95fe8fba_10
Notes Payable	fill in the blank 102d21f95fe8fba_11	fill in the blank 102d21f95fe8fba_12
Common Stock	fill in the blank 102d21f95fe8fba_13	fill in the blank 102d21f95fe8fba_14
Retained Earnings	fill in the blank 102d21f95fe8fba_15	fill in the blank 102d21f95fe8fba_16
Dividends	fill in the blank 102d21f95fe8fba_17	fill in the blank 102d21f95fe8fba_18
Fees Earned	fill in the blank 102d21f95fe8fba_19	fill in the blank 102d21f95fe8fba_20
Rent Expense	fill in the blank 102d21f95fe8fba_21	fill in the blank 102d21f95fe8fba_22
Wages Expense	fill in the blank 102d21f95fe8fba_23	fill in the blank 102d21f95fe8fba_24
	fill in the blank 102d21f95fe8fba_25	fill in the blank 102d21f95fe8fba_26

Feedback

Compute the account balances in the T accounts first.

Errors on Trial Balance

Compare the trial balance prepared by the intern (Trial Balance: Unequal Totals) to the trial balance that you prepared (Trial Balance: Correct). In the following table, select the accounts for each type of error. Not all accounts contain errors.

Error Type

Cash

Accounts Receivable

Supplies

Office Equipment

Accounts Payable

Notes Payable

Common Stock

Retained Earnings

Dividends

Fees Earned

Rent Expense

Wages Expense

Transposition

Incorrectly reported as a debit

Incorrectly reported as a credit

Balance computed incorrectly

Yes

Feedback

To determine which accounts were incorrectly reported as a debit or credit, think about the normal balance of an account as well as computing the account balance in the T account.

Accounting Equation

The intern is puzzled and asks "Are you sure the accounting equation is still in balance?" Using the corrected trial balance you prepared, prove that the accounting equation is in balance.

Assets	=	Liabilities	+	Stockholders' Equity
$fill in the blank b5e9be064066fda_1	=	$fill in the blank b5e9be064066fda_2	+	$fill in the blank b5e9be064066fda_3

Still puzzled, the intern asks "Why do none of the amounts in the accounting equation equal the totals on the trial balance?"

a.	The accounts with debit balances are not all classified in the same element of the accounting equation. For example, not all accounts with debit balances are assets.
b.	This is because the revenue and expense accounts are part of the stockholders equity element. The accounts with debit balances should be part of the total assets.
c.	You point out the total of the assets, liabilities and stockholders equity is equal to the sum of the debit and credit totals on the trial balance.
d.	The accounts with credit balances are not all classified in the same element of the accounting equation. For example, not all accounts with credit balances are liabilities.
e.	The accounts that make up the total for stockholders equity have a mix of debit and credit balances.