Course: Financial Accounting

Chart of Accounts The following accounts appeared in recent financial statements of Delta Air Lines (DAL). Identify each account as either a balance sheet account or an income statement account. For each balance sheet account, identify it as an asset, a liability, or stockholders' equity. For each income statement account, identify it as a revenue or an expense. Item Financial Statement Type of Account Accounts Payable Balance Sheet Liability Advanced Payments for Equipment Balance Sheet Asset Air Traffic Liability Balance Sheet Liability Aircraft Fuel (Expense) Income Statement Expense Aircraft Maintenance (Expense) Income Statement Expense Aircraft Rent (Expense) Income Statement Expense Cargo Revenue Income Statement Revenue Cash Balance Sheet Asset Contract Carrier Arrangements (Expense) Income Statement Expense Flight Equipment Balance Sheet Asset Frequent Flyer (Obligations) Balance Sheet Liability Fuel Inventory Balance Sheet Asset Landing Fees (Expense) Income Statement Expense Parts and Supplies Inventories Balance Sheet Asset Passenger Commissions (Expense) Income Statement Expense Passenger Revenue Income Statement Revenue Prepaid Expenses Balance Sheet Asset Taxes Payable Balance Sheet Liability Chart of Accounts Superior Interiors is owned and operated by Ken Lopez, an interior decorator. In the ledger of Superior Interiors, the first digit of the account number indicates its major account classification (1-assets, 2liabilities, 3-stockholders' equity, 4- revenues, 5-expenses). The second digit of the account number indicates the specific account within each of the preceding major account classifications. Match each account number with its most likely account in the list that follows. The account numbers are 11, 12, 13, 21, 31, 32, 33, 41, 51, 52, and 53. Account Account Number Accounts Payable 21 Accounts Receivable 12 Cash 11 Common Stock 31 Dividends 33 Fees Earned 41 Land 13 Miscellaneous Expense 53 Retained Earnings 32 Supplies Expense 52 Wages Expense 51 Chart of Accounts LeadCo School is a newly organized business that teaches people how to inspire and influence others. The list of accounts to be opened in the general ledger is as follows: Accounts Payable Prepaid Insurance Accounts Receivable Rent Expense Cash Retained Earnings Common Stock Supplies Dividends Supplies Expense Unearned Rent Equipment Fees Earned Wages Expense Miscellaneous Expense List the accounts in the order in which they should appear in the ledger of LeadCo School and assign account numbers. Each account number is to have two digits: the first digit is to indicate the major classification (1 for assets, etc.), and the second digit is to identify the specific account within each major classification (11 for Cash, etc.). When entering assets, enter them in order of liquidity: quickness to cash, with cash listed first. Account Number Accounts Assets 11 Cash 12 Accounts Receivable 13 Supplies 14 Prepaid Insurance 15 Equipment Liabilities 21 Accounts Payable 22 Unearned Rent Stockholders' equity 31 Common Stock 32 Retained Earnings 33 Dividends Revenues 41 Fees Earned Expenses 51 Wages Expense 52 Rent Expense 53 Supplies Expense 59 Miscellaneous Expense Rules of Debit and Credit The following table summarizes the rules of debit and credit. Indicate whether the proper answer is a debit or a credit. Increase Decrease Normal Balance Balance sheet accounts: Asset Debit Credit Debit Liability Credit Debit Credit Stockholders' equity: Common Stock Credit Debit Credit Retained Earnings Credit Debit Credit Dividends Debit Credit Debit Income statement accounts: Revenue Credit Debit Credit Expense Debit Credit Debit Normal Entries for Accounts During the month, Gates Labs Co. has a substantial number of transactions affecting each of the following accounts. State for each account whether it is likely to have debit entries only, credit entries only, or both debit and credit entries. 1. Accounts Payable debit and credit 2. Accounts Receivable debit and credit 3. Cash debit and credit 4. Fees Earned credit only 5. Insurance Expense debit only 6. Dividends debit only 7. Utilities Expense debit only Normal Balances of Accounts Identify each of the following accounts of Liken Services Co. as asset, liability, stockholders' equity, revenue, or expense, and state in each case whether the normal balance is a debit or a credit. Item Type of Account Debit or Credit a. Accounts Payable Liability Credit b. Accounts Receivable Asset Debit C. Cash Asset Debit d. Common Stock Stockholders' equity Credit e. Dividends Stockholders' equity Debit f. Fees Earned Revenue Credit g. Land Asset Debit h. Rent Expense Expense Debit i. Supplies Asset Debit j. Utilities Expense Expense Debit Transactions Innovative Consulting Co. has the following accounts in its ledger: Cash, Accounts Receivable, Supplies, Office Equipment, Accounts Payable, Common Stock, Retained Earnings, Dividends, Fees Earned, Rent Expense, Advertising Expense, Utilities Expense, Miscellaneous Expense. Journalize the following selected transactions for October 20Y2 in a two-column journal. Journal entry explanations may be omitted. If an amount box does not require an entry, leave it blank. Oct. 1. Paid rent for the month, $4,800. 3. Paid advertising expense, $3,040. 5. Paid cash for supplies, $1,300. 6. Purchased office equipment on account, $20,000. 12. Received cash from customers on account, $6,510. 20. Paid creditor on account, $1,910. 27. Paid cash for miscellaneous expenses, $820. 30. Paid telephone bill for the month, $300. 31. Fees earned and billed to customers for the month, $43,400. 31. Paid electricity bill for the month, $520. 31. Paid dividends, $3,300. 20Y2 Oct. 1 Rent Expense Cash Oct. 3 Advertising Expense Cash II II II II II II II II Oct. 5 Supplies Cash Office Equipment Oct. 6 Accounts Payable Oct. 12 Cash Accounts Receivable Oct. 20 Accounts Payable Cash Miscellaneous Expense Oct. 27 Cash Oct. 30 Utilities Expense Cash II II II II II II II II II II II Oct. 31 Accounts Receivable Fees Earned Oct. 31 Utilities Expense Cash Oct. 31 Dividends Cash Journalizing and Posting On February 11, 2049, Quick Fix Company purchased $4,270 of supplies account. In Quick Fix's chart of accounts, the supplies account is No. 15, and the accounts payable account is No. 21. a. Journalize and insert the posting reference for the February 11, 2049, transaction on page 73 of Quick Fix Company's two-column journal. If an amount box does not require an entry, leave it blank. Page: 73 DATE POST. ACCOUNT TITLE DEBIT CREDIT REF. 1 2/11/2049 Supplies 2 Accounts Payable 2 Feedback b. & d. Enter a debit balance of $2,050 as of February 1, 2049. Place a check mark (V) in the Posting Reference column. Post and insert the posting reference for the February 11, 2019, transaction to the account. If an amount box does not require an entry, leave it blank. GENERAL LEDGER Account : Supplies Account No. 15 BALANCE DEBIT CREDIT DATE POST. REF. ITEM DEBIT CREDIT 2/1/2019 Balance 0 10 2/11/2019 c. & d. Enter a credit balance of $30,400 as of February 1, 2049. Place a check mark (V) in the Posting Reference column. Post and insert the posting reference for the February 11, 2089, transaction to the account. If an amount box does not require an entry, leave it blank. GENERAL LEDGER Account : Accounts Payable Account No. 21 POST. BALANCE DATE ITEM DEBIT CREDIT REF. DEBIT CREDIT 2/1/2019 Balance O 2/11/20Y9 Feedback e. Do the rules of debit and credit apply to all companies? Yes Transactions and Accounts The following selected transactions were completed during July of the current year: 1. Billed customers for fees earned, $62,340. 2. Purchased supplies on account, $2,680. 3. Received cash from customers on account, $58,600. 4. Paid creditors on account, $1,620. a. Journalize these transactions in a two-column journal, using the appropriate number to identify the transactions. If an amount box does not require an entry, leave it blank. (1) Accounts Receivable Fees Earned (2) Supplies Accounts Payable II II II IO II II II II (3) Cash Accounts Receivable (4) Accounts Payable Cash b. Post the entries prepared in (a) to the following T accounts: Cash, Supplies, Accounts Receivable, Accounts Payable, Fees Earned. To the left of each amount posted in the accounts, select the appropriate number to identify the transaction. Cash (3) (4) Accounts Payable (4) (2) Supplies (2) Fees Earned (1) Accounts Receivable (1) (3) C. Assume that the unadjusted trial balance on July 31 shows a credit balance for Accounts Receivable. Does this credit balance mean an error has occurred? No Cash Account Balance During the month, Bavarian Auto Co. received $312,450 in cash and paid out $263,700 in cash. a. Does this information indicate that Bavarian Auto Co. had net income of $48,750 during the month? No Net income is the net change in all assets and liabilities from operating (revenue and expense) transactions. b. If the balance of the cash account is $70,600 at the end of the month, what was the cash balance at the beginning of the month? Account Balances a. During February, $77,940 was paid to creditors on account, and purchases on account were $99,760. Assuming the February 28 balance of Accounts Payable was $33,510, determine the account balance on February 1. $ b. On October 1, the accounts receivable account balance was $45,800. During October, $398,500 was collected from customers on account. Assuming the October 31 balance was $52,700, determine the fees billed to customers on account during October c. On April 1, the cash account balance was $16,330. During April, cash receipts totaled $248,220 and the April 30 balance was $11,760. Determine the cash payments made during April. Retained Earnings Account Balance As of January 1, Retained Earnings had a credit balance of $36,800. During the year, dividends totaled $1,000, and the business incurred a net loss of $51,500. a. Compute the balance of Retained Earnings as of the end of the year. Debit (negative) balance b. Assuming that there have been no recording errors, will the balance sheet prepared at December 31 balance? Yes