Pay cash for future insurance coverage 1 identify

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Chapter 1 / Exercise EX1-8
Accounting
Reeve/Warren
Expert Verified
13. Pay Cash for Future Insurance Coverage1 IdentifyFastForward pays $2,400 cash (insurance premium) for a 24-month insurance policy. Coverage begins on December 1.2 AnalyzeChanges the composition of assets from cash to prepaid insurance. Expense is incurred as insur-ance coverage expires.(13) 2,400Prepaid Insurance 128(1) 30,000 (2) 2,500(5) 4,200 (3) 26,000(9) 1,900 (6) 1,000(12) 3,000 (7) (10) 900(11) 200(13) 2,400Cash 1014 PostAssets 5Liabilities 1EquityPrepaid Cash Insurance 22,400 12,400 50
70010
14. Purchase Supplies for Cash1 IdentifyFastForward pays $120 cash for supplies.4 Post2 Analyze3 Record(14) Supplies 126 120Cash 101 120(2) 2,500(4) 7,100(14) 120Supplies 126(1) 30,000 (2) 2,500(5) 4,200 (3) 26,000(9) 1,900 (6) 1,000(12) 3,000 (7) 700(10) 900(11) 200(13) 2,400(14) 120Cash 101Assets 5Liabilities 1EquityCash Supplies2120 1120 50 10Date Account Titles and Explanation PR Debit Credit
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Chapter 1 / Exercise EX1-8
Accounting
Reeve/Warren
Expert Verified
Chapter 2 Analyzing and Recording Transactions 65Accounting Equation AnalysisExhibit 2.13 shows the ledger accounts (in T-account form) of FastForward after all 16 transac-tions are recorded and posted and the balances computed. The accounts are grouped into three major columns corresponding to the accounting equation: assets, liabilities, and equity. Note several important points. First, as with each transaction, the totals for the three columns must obey the accounting equation. Specifically, assets equal $42,470 ($4,350 1$0 1$9,720 1$2,400 1$26,000); liabilities equal $9,200 ($6,200 1$3,000); and equity equals $33,270 ($30,000 2$200 1$5,800 1$300 2$1,400 2$1,000 2$230). These numbers prove the ac-counting equation: Assets of $42,470 5Liabilities of $9,200 1Equity of $33,270. Second, the common stock, dividends, revenue, and expense accounts reflect the transactions that change equity. The latter three account categories underlie the statement of retained earnings. Third, the revenue and expense account balances will be summarized and reported in the income state-ment. Fourth, increases and decreases in the cash account make up the elements reported in the statement of cash flows.Point:Technology does not provide the judgment required to analyze most business transactions. Analysis requires the expertise of skilled and ethical professionals.Debit and Credit RulesIncrease Accounts (normal bal.) DecreaseAsset . . . . . . . . . . . . . Debit CreditLiability . . . . . . . . . . . Credit DebitCommon Stock . . . . . Credit DebitDividends . . . . . . . . . Debit CreditRevenue . . . . . . . . . . Credit DebitExpense . . . . . . . . . . . Debit Credit15. Payment of Expense in Cash1 IdentifyFastForward pays $230 cash for December utili-ties expense.3 Record(15) Utilities Expense 690 230Cash 101 230(15) 230Utilities Expense 690(1) 30,000 (2) 2,500(5) 4,200 (3) 26,000(9) 1,900 (6) 1,000(12) 3,000 (7) 700(10) 900(11) 200(13) 2,400(14) 120(15) 230Cash 1014 Post2 AnalyzeAssets 5Liabilities 1EquityUtilities Cash Expense2230 50 2230Date Account Titles and Explanation PR Debit Credit16. Payment of Expense in Cash2 AnalyzeAssets 5Liabilities 1EquityCash Salaries Expense270050 27001 IdentifyFastForward pays $700 cash in employee salary for work performed in the latter part of December.

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