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EXERCISE_4_Solutions

EXERCISE_4_Solutions - EXERCISE 4-2A Sarah was right when...

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EXERCISE 4-2A Sarah was right when she said both students were correct.  Matt was  correct that debits increase account balances and credits decrease  account balances, if he is referring to assets, expenses, or dividends.  However, Allison is correct that credits increase account balances and  debits decrease account balances if she is referring to liability, common  stock or retained earnings accounts. Examples of transactions: 1. Debits increase account balances: Performed services for cash.  Cash is debited and this  increases the asset account Cash. 2. Credits decrease account balances: Paid cash for operating expenses.  Cash is credited and this  decreases the asset account Cash. 3. Credits increase account balances: Performed services for cash.  Service revenue is credited and this  increases the revenue account Service Revenue. 4. Debits decrease account balances: Paid accounts payable.  Accounts payable is debited and this  decreases the liability account Accounts Payable. 4-35 
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EXERCISE 4-5A Event Account Debited Account Credited a. Provided services for cash. Cash Service Revenue b. Paid cash for salaries  expense. Salaries Expense Cash c. Borrowed cash from a local  bank. Cash Notes Payable d. Acquired cash from the issue  of common stock. Cash Common Stock e. Provided services on  account. Accounts  Receivable Service Revenue f. Purchased supplies for cash. Supplies Cash g. Purchased equipment for  cash. Equipment Cash h. Recorded accrued salaries at  the end of the accounting  period. Salaries Expense Salaries Payable EXERCISE 4-10A General Journal Date Account Titles Debit Credit a. Cash 8,000 Unearned Revenue 8,000 b. Supplies 1,200 Cash 1,200 c. Accounts Receivable 25,000 Service Revenue 25,000 4-36 
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d. Equipment 42,000 Cash 8,000 Notes Payable 34,000 e. Repairs Expense 1,200 Accounts Payable 1,200 f. Cash 18,000 Land 15,000 Gain on Sale of Land 3,000 g. Cash 19,000 Accounts Receivable 19,000 h. Accounts Payable 900 Cash 900 i. Prepaid Insurance 4,800 Cash 4,800 j.
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