QS 1-12

Identifying items with financial statements P2

Indicate in which financial statement each item would most likely appear: income statement (I), balance sheet (B), statement of owners equity (E), or statement of cash flows (CF).

______	a.	Assets
______	b.	Cash from operating activities
______	c.	Withdrawals
______	d.	Equipment
______	e.	Expenses
______	f.	Liabilities
______	g.	Net decrease (or increase) in cash
______	h.	Revenues
______	i.	Total liabilities and equity

Exercise 1-7

Identifying accounting principles and assumptions C4

Match each of the numbered descriptions with the principle or assumption it best reflects. Enter the letter for the appropriate principle or assumption in the blank space next to each description.

A.	General accounting principle
B.	Cost principle
C.	Business entity assumption
D.	Specific accounting principle
E.	Matching (expense recognition) principle
F.	Going-concern assumption
G.	Revenue recognition principle
H.	Full disclosure principle

______	1.	A company reports details behind financial statements that would impact users decisions.
______	2.	Financial statements reflect the assumption that the business continues operating.
______	3.	A company records the expenses incurred to generate the revenues reported.
______	4.	Derived from long-used and generally accepted accounting practices.
______	5.	Every business is accounted for separately from its owner or owners.
______	6.	Revenue is recorded only when the earnings process is complete.
______	7.	Usually created by a pronouncement from an authoritative body.
______	8.	Information is based on actual costs incurred in transactions.

Exercise 1-19

Identifying sections of the statement of cash flows P2

Indicate the section where each of the following would appear on the statement of cash flows.

O.	Cash flows from operating activity
I.	Cash flows from investing activity
F.	Cash flows from financing activity

______	1.	Cash purchase of equipment
______	2.	Cash withdrawal by owner
______	3.	Cash paid for advertising
______	4.	Cash paid for wages
______	5.	Cash paid on account payable to supplier
______	6.	Cash received from clients
______	7.	Cash investment by owner
______	8.	Cash paid for rent

Exercise 2-5

Analyzing effects of transactions on accounts

A1

Groro Co. bills a client $62,000 for services provided and agrees to accept the following three items in full payment: (1) $10,000 cash, (2) computer equipment worth $80,000, and (3) to assume responsibility for a $28,000 note payable related to the computer equipment. The entry Groro makes to record this transaction includes which one or more of the following?

a.	$28,000 increase in a liability account
b.	$10,000 increase in the Cash account
c.	$10,000 increase in a revenue account
d.	$62,000 increase in an asset account
e.	$62,000 increase in a revenue account
f.	$62,000 increase in an equity account

Exercise 2-9

Recording effects of transactions in T-accounts

A1

Prepare general journal entries to record the transactions below for Spade Company by using the following accounts: Cash; Accounts Receivable; Office Supplies; Office Equipment; Accounts Payable; K. Spade, Capital; K. Spade, Withdrawals; Fees Earned; and Rent Expense. Use the letters beside each transaction to identify entries. After recording the transactions, post them to T-accounts, which serves as the general ledger for this assignment. Determine the ending balance of each T-account.

a.	Kacy Spade, owner, invested $100,750 cash in the company.
b.	The company purchased office supplies for $1,250 cash.
c.	The company purchased $10,050 of office equipment on credit.
d.	The company received $15,500 cash as fees for services provided to a customer.
e.	The company paid $10,050 cash to settle the payable for the office equipment purchased in transaction c.
f.	The company billed a customer $2,700 as fees for services provided.
g.	The company paid $1,225 cash for the monthly rent.
h.	The company collected $1,125 cash as partial payment for the account receivable created in transaction f.
i.	Kacy Spade withdrew $10,000 cash from the company for personal use.

Check Cash ending balance, $94,850

Exercise 2-12

Analyzing and journalizing revenue transactions

A1 P1

Examine the following transactions and identify those that create revenues for Valdez Services, a company owned by Brina Valdez. Prepare general journal entries to record those revenue transactions and explain why the other transactions did not create revenues.

a.	Brina Valdez invests $39,350 cash in the company.
b.	The company provided $2,300 of services on credit.
c.	The company provided services to a client and immediately received $875 cash.
d.	The company received $10,200 cash from a client in payment for services to be provided next year.
e.	The company received $3,500 cash from a client in partial payment of an account receivable.
f.	The company borrowed $120,000 cash from the bank by signing a promissory note.

QS 3-6

Prepaid (deferred) expenses adjustmentsP1

For each separate case below, follow the 3-step process for adjusting the supplies asset account at December 31. Step 1: Determine what the current account balance equals. Step 2: Determine what the current account balance should equal. Step 3: Record the December 31 adjusting entry to get from step 1 to step 2. Assume no other adjusting entries are made during the year.

a.	Supplies. The Supplies account has a $300 debit balance to start the year. No supplies were purchased during the current year. A December 31 physical count shows $110 of supplies remaining.
b.	Supplies. The Supplies account has an $800 debit balance to start the year. Supplies of $2,100 were purchased during the current year and debited to the Supplies account. A December 31 physical count shows $650 of supplies remaining.
c.	Supplies. The Supplies account has a $4,000 debit balance to start the year. During the current year, supplies of $9,400 were purchased and debited to the Supplies account. The inventory of supplies available at December 31 totaled $2,660.

QS 3-14

Accrued revenues adjustmentsP1

For each separate case below, follow the 3-step process for adjusting the accrued revenue account at December 31. Step 1: Determine what the current account balance equals. Step 2: Determine what the current account balance should equal. Step 3: Record the December 31 adjusting entry to get from step 1 to step 2. Assume no other adjusting entries are made during the year.

a.	Accounts Receivable. At year-end, the Krug Company has completed services of $19,000 for a client, but the client has not yet been billed for those services.
b.	Interest Receivable. At year-end, the company has earned, but not yet recorded, $390 of interest earned from its investments in government bonds.
c.	Accounts Receivable. A painting company collects fees when jobs are complete. The work for one customer, whose job was bid at $1,300, has been completed, but the customer has not yet been billed.

QS 3-17

Interpreting adjusting entries P2

The following information is taken from Camara Companys unadjusted and adjusted trial balances.

Given this information, which of the following is likely included among its adjusting entries?

a.	A $400 debit to Insurance Expense and an $800 debit to Interest Payable.
b.	A $400 debit to Insurance Expense and an $800 debit to Interest Expense.
c.	A $400 credit to Prepaid Insurance and an $800 debit to Interest Payable.

QS 4-2

Applying a work sheet

P1

In preparing a work sheet, indicate the financial statement Debit column to which a normal balance in the following accounts should be extended. Use IS for the Income Statement Debit column and BS for the Balance Sheet and Statement of Owners Equity Debit column.

______	a.	Equipment
______	b.	Owner, Withdrawals
______	c.	Prepaid Rent
______	d.	Depreciation ExpenseEquipment
______	e.	Accounts Receivable
______	f.	Insurance Expense

QS 4-8

Identifying the accounting cycle

C2

List the following steps of the accounting cycle in their proper order.

______	a.	Posting the journal entries.
______	b.	Journalizing and posting adjusting entries
______	c.	Preparing the adjusted trial balance.
______	d.	Journalizing and posting closing entries.
______	e.	Analyzing transactions and events.
______	f.	Preparing the financial statements.
______	g.	Preparing the unadjusted trial balance.
______	h.	Journalizing transactions and events.
______	i.	Preparing the post-closing trial balance.

QS 4-11

Identifying current accounts and computing the current ratio

A1

Compute Chavez Companys current ratio using the following information.

Accounts receivable	$18,000
Accounts payable	11,000
Buildings	45,000
Cash	7,000
Long-term notes payable	$21,000
Office supplies	2,800
Prepaid insurance	3,560
Unearned services revenue	3,000