3 - SOLUTIONS TO EXERCISES - SERIES A CHAPTER 4 EXERCISE...

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SOLUTIONS TO EXERCISES - SERIES A – CHAPTER 4 EXERCISE 4-1A Account Category Used to Increase  This Account Used to Decrease  This Account Accounts Receivable Debit Credit Accounts Payable Credit Debit Common Stock Credit Debit Land Debit Credit Interest Expense Debit Credit Accumulated  Depreciation Credit Debit Unearned Revenue Credit Debit Service Revenue Credit Debit Retained Earnings Credit Debit Insurance Expense Debit Credit 4-4
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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. 4-5
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EXERCISE 4-3A Account Normal Balance a. Unearned Revenue  Credit b. Service Revenue  Credit c. Dividends  Debit d. Land  Debit e. Accounts Receivable  Debit f. Cash Debit g. Interest Expense Debit h. Depreciation Expense Debit i. Accumulated Depreciation Credit j. Accounts Payable Credit 4-6
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EXERCISE 4-4A Assets = Liabilities + Stockholders’ Equity Debit Credit Debit Credit Debit Credit Increase Decrease Decrease Increase Decrease Increase Contra Assets Revenue Debit Credit Debit Credit Decrease Increase Decrease Increase Expense Debit Credit Increase Decrease 4-7
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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
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This note was uploaded on 04/10/2008 for the course ACCOUNTING 221 taught by Professor West during the Spring '08 term at UMass (Amherst).

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3 - SOLUTIONS TO EXERCISES - SERIES A CHAPTER 4 EXERCISE...

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