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Chapter_2_Solutions - Chapter 2 Recording Business...

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Chapter 2 Recording Business Transactions Quick Check Answers: 1. a 3. b 5. d 7. d 9. c 2. c 4. c 6. a 8. a 10. b Explanations: 3. b. Owner’s equity is $130,000 ($50,000 + $60,000 + $200,000 – $80,000 – $100,000). 7. d. Supplies balance is $1,200 ($500 + $700). The payment of accounts payable does not affect supplies. 9. c. Ending equity is $70,000, computed as follows: Beginning owner’s equity…….. $ 50,000 Add: Net income: Revenues……………….. $110,000 Less: Expenses………. (30,000 ) Net income……………... 80,000 Less: Withdrawals……………, (60,000 ) Ending owner’s equity………… $ 70,000 Chapter 2 Recording Business Transactions 63
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Short Exercises (5 min.) S 2-1 Debits are increases for the following types of accounts: Assets Withdrawals Expenses Debits are decreases for these types of accounts: Liabilities Capital Revenues Credits are increases for these types of accounts: Liabilities Capital Revenues Credits are decreases for these types of accounts: Assets Withdrawals Expenses Accounting 7/e Solutions Manual 64
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(5 min.) S 2-2 “The basic summary device in accounting is the account . The left side is calld the debit side, and the right side is called the credit side. We record transactions first in a journal . Then we post (copy the data) to the ledger . It is helpful to list all the accounts with their balances on a trial balance .” Chapter 2 Recording Business Transactions 65
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(10 min.) S 2-3 J 1. Capital A. Record of transactions C 2. Debit B. An asset F 3. Expense C. Left side of an account H 4. Net income D Side of an account where increases are recorded I 5. Ledger E. Copying data from the journal to the ledger E 6. Posting F. Using up assets in the course of operating a business D 7. Normal balance G. Always a liability G 8. Payable H. Revenues Expenses A 9. Journal I. Book of accounts B 10. Receivable J. Owner’s equity Accounting 7/e Solutions Manual 66
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(5 min.) S 2-4 Normal Balance Assets…………………………… .... Debit Liabilities………………………….. Credit Owner’s Equity—overall………... Credit Capital…………………………... Credit Withdrawal……………………… Debit Revenues……………………….. Credit Expenses……………………….. Debit Chapter 2 Recording Business Transactions 67
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(10 min.) S 2-5 Journal DATE ACCOUNTS AND EXPLANATIONS POST. REF. DEBIT CREDIT June 1 Cash 25,000 Mark Brown, Capital 25,000 Received investment from owner. 2 Medical Supplies 10,000 Accounts Payable 10,000 Purchased supplies on account. 2 Rent Expense 4,000 Cash 4,000 Paid office rent. 3 Accounts Receivable 12,000 Service Revenue 12,000 Performed service on account. Accounting 7/e Solutions Manual 68
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(10-15 min.) S 2-6 Req. 1 Journal DATE ACCOUNTS AND EXPLANATIONS POST. REF. DEBIT CREDIT Supplies 1,000 Accounts Payable 1,000 Purchased supplies on account. Accounts Payable 500 Cash ($1,000 × ½) 500 Paid on account.
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