chapter2 - SOLUTIONS TO BRIEF EXERCISES BRIEF EXERCISE 2-1...

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Unformatted text preview: SOLUTIONS TO BRIEF EXERCISES BRIEF EXERCISE 2-1 (a) Debit Effect (a) Credit Effect (b) Normal Balance 1. 2. 3. 4. 5. 6. Accounts Payable Advertising Expense Service Revenue Accounts Receivable Common Stock Dividends Decrease Increase Decrease Increase Decrease Increase Increase Decrease Increase Decrease Increase Decrease Credit Debit Credit Debit Credit Debit BRIEF EXERCISE 2-2 Account Debited Account Credited June 1 2 3 12 Cash Equipment Rent Expense Accounts Receivable Common Stock Accounts Payable Cash Service Revenue BRIEF EXERCISE 2-3 June 1 Cash ....................................................................................12,000 Common Stock..................................................................... 12,000 2 Equipment....................................................................................... 7,500 Accounts Payable................................................................. 7,500 3 Rent Expense................................................................................... 800 Cash...................................................................................... 800 12 Accounts Receivable....................................................................... 400 Service Revenue................................................................... 400 BRIEF EXERCISE 2-4 The basic steps in the recording process are: 1. Analyze each transaction. In this step, business documents are examined to determine the effects of the transaction on the accounts. 2. Enter each transaction in a journal. This step is called journalizing and it results in making a chronological record of the transactions. 3. Transfer journal information to ledger accounts. This step is called posting. Posting makes it possible to accumulate the effects of journalized transactions on individual accounts. 2-1 BRIEF EXERCISE 2-5 (a) Basic Analysis (b) Debit-Credit Analysis Aug. 1 The asset Cash is increased; the stockholders’ equity account Common Stock is increased. Debits increase assets: debit Cash $15,000. Credits increase stockholders’ equity: credit Common Stock $15,000. 4 The asset Prepaid Insurance is increased; the asset Cash is decreased. Debits increase assets: debit Prepaid Insurance $2,100. Credits decrease assets: credit Cash $2,100. 16 The asset Cash is increased; the revenue Fees Earned is increased. Debits increase assets: debit Cash $1,000. Credits increase revenues: credit Service Revenue $1,000. 27 The expense Salaries Expense is increased; the asset Cash is decreased. Debits increase expenses: debit Salaries Expense $900. Credits decrease assets: credit Cash $900. BRIEF EXERCISE 2-6 Aug. 1Cash 15,000 Common Stock...................................................................... 15,000 4 Prepaid Insurance........................................................................... 2,100 Cash....................................................................................... 2,100 16 Cash ..................................................................................... 1,000Cash ....
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This note was uploaded on 01/25/2011 for the course AC 215 taught by Professor Don during the Winter '10 term at City University of Seattle.

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chapter2 - SOLUTIONS TO BRIEF EXERCISES BRIEF EXERCISE 2-1...

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