CH2 Solutions

CH2 Solutions - 306-310 ENGINEERING ECONOMY SOLUTIONS TO...

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1 3 0 6 - 3 1 0 E N G I N E E R I N G E C O N O M Y SOLUTIONS TO PROBLEM SET #2 – PRINCIPLES OF ACCOUNTING 1. i) The 14 transactions, identified by their reference number, are first recorded in the T ac- counts of Western Lumber Equipment Ltd. as shown below. Then, the debits and credits in each account are summed to determine the closing balance (either a debit or a credit). Cash Accounts Receivable Parts & Supplies 1) 90 000 2) 900 11) 500 4) 1950 12) 1125 5) 14 400 3) 250 bal. 825 11) 130 6) 12 000 7) 5 000 Capital Stock Land 8) 950 1) 90 000 6) 30 000 9) 11 500 10) 1 800 13) 240 Prepaid Insurance Notes Payable 14) 800 10) 1800 6) 18 000 104 530 33 440 bal. 71 090 Tools & Equipment Rental Expenses (tools & equipment) Rental Expenses (building) 9) 11 500 3) 250 2) 900 Accounts Payable Salary Expenses Dividends 8) 950 4) 1950 7) 5000 14) 800 bal. 1000 Sales Electricity and Water Expenses Parts & Supplies Expenses 5) 14 400 13) 240 12) 1125 11) 630 bal. 15 030 Notes : The $900 and $250 transactions relative to the rental of a temporary building and tools and equipment, respectively, would first be recorded as prepaid rent at the time of the transac- tion, and then converted to rental expenses at the end of the month. As information regarding the depreciation of tools and equipment and income taxes payable is not given, appropriate adjust- ments cannot be made at this time. Therefore, these items are omitted from the T accounts and financial statements. The credit and debit balances of the above accounts are used to construct the trial balance state- ment shown below:
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2 W e s t e r n L u m b e r E q u i p m e n t L i m i t e d Trial Balance as of 30 June, 1987 Account Debit Credit Cash 71 090 Accounts Receivable 500 Parts & Supplies 825 Prepaid Insurance 1 800 Land 30 000 Tools & Equipment 11 500 Accounts Payable 1 000 Notes Payable 18 000 Capital Stock 90 000 Dividends 800 Sales 15 030 Rental Expenses (building) 900 Rental Expenses (tools & equipment) 250 Salary Expenses 5 000 Electricity and Water Expenses 240 Parts & Supplies Expenses 1 125 $124 030 $124 030 ii) Using the appropriate accounts, the following income statement is obtained: W e s t e r n L u m b e r E q u i p m e n t L i m i t e d Income Statement For the month ended 30 June, 1997 Sales 15 030 Less Expenses: Rental expenses (building) 900 Rental expenses (tools and equipment) 250 Salary expenses 5 000 Electricity & Water 240 Parts & Supplies 1 125 7 515 Net Income (before taxes) 7 515
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CH2 Solutions - 306-310 ENGINEERING ECONOMY SOLUTIONS TO...

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