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Chapter 3- exercises - EXERCISES EXERCISE 31 Transaction 1...

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EXERCISES EXERCISE 3–1 Basic Accounting Equation Transaction Assets = Liabilities + Owners’ Equity 1. Took out school loan Increase (Cash) Increase (School loan) 2. Paid month’s rent Decrease (Cash) Decrease (Increase in expenses) 3. Sold computer Increase (Cash) Decrease (Computer) 4. Received paycheck Increase (Cash) Increase (Increase in revenues) 5. Received interest Increase (Cash) Increase (Increase in revenues) 6. Made car payment Decrease (Cash) Decrease Decrease (Increase (Car loan) in expenses) EXERCISE 3–2 Accounting Elements: Increase/Decrease, Debit/Credit Relationships Item Increased with Transaction Assets Debit entry Purchased equipment on credit. Liabilities Credit entry Took out a bank loan. Owners’ equity Credit entry Recorded net income for year. Capital stock Credit entry Issued new shares of company stock. Retained earnings Credit entry Recorded net income for year. Revenues Credit entry Recorded monthly customer sales. Expenses Debit entry Paid monthly salary expense. Dividends Debit entry Paid cash dividend. EXERCISE 3–3 Expanded Accounting Equation Transaction Assets = Liabilities + Owners’ Equity 1 + (Inventory) + (Accounts Payable) 0 2 + (Cash) 0 + (Revenue) – (Inventory) 0 – (Expense) 3 + (Cash) + (Notes Payable) 0 4 + (Land) + (Notes Payable) 0 – (Cash) 5 + (Cash) 0 + (Capital Stock) 6 – (Cash) 0 – (Expense) 7 – (Cash) – (Accounts Payable) 0 8 + (Cash) 0 0 + (Notes Receivable) – (Building) 9 – (Cash) 0 – (Dividends) 10 – (Cash) 0 – (Expense)
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EXERCISE 3–4 Classification of Accounts 1. A 2. OE—R 3. A 4. OE—E 5. OE—E 6. OE 7. L 8. OE—E 9. OE 10. L 11. L 12. OE—R 13. A 14. A 15. L 16. A 17. A 18. OE—E 19. L 20. OE—E EXERCISE 3–5 Normal Account Balances 1. DR 2. CR 3. DR 4. DR 5. DR 6. CR 7. CR 8. DR 9. CR 10. CR 11. CR 12. CR 13. DR 14. DR 15. CR 16. DR 17. DR 18. DR 19. CR 20. DR EXERCISE 3–6 Journalizing Transactions 1. Cash ................................................................................................ 75,000 Capital Stock ...................................................................................... 75,000 2. Cash ................................................................................................ 35,000 Notes Payable .................................................................................... 35,000 3. Salaries Expense .......................................................................................... 45,500 Rent Expense ................................................................................................ 3,600 Cash ................................................................................................... 49,100 4. Inventory ....................................................................................................... 4,500 Accounts Payable ............................................................................... 4,500 5. Accounts Payable ......................................................................................... 4,500 Cash ................................................................................................... 4,500 6. Accounts Receivable ..................................................................................... 1,350 Sales Revenue ................................................................................... 1,350 Cost of Goods Sold ....................................................................................... 850 Inventory ............................................................................................. 850 7. Cash .................................................................................................. 1,350 Accounts Receivable .......................................................................... 1,350
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EXERCISE 3–7 Journalizing Transactions 1. Building ............................................................................................. 70,000 Cash ........................................................................................ 20,000 Notes Payable ......................................................................... 50,000 2. Inventory ........................................................................................... 15,000 Accounts Payable ................................................................... 15,000 3. Accounts Receivable ........................................................................ 6,000 Sales Revenue ........................................................................ 6,000 Cost of Goods Sold ........................................................................... 5,000 Inventory ................................................................................. 5,000 EXERCISE 3–7 (Concluded) 4. Accounts Payable ............................................................................. 15,000 Cash ........................................................................................ 15,000 5. Cash ..................................................................................... 25,000 Capital Stock ........................................................................... 25,000 6.
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