B paid 3600 cash in advance for insurance coverage c

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Accounting
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Chapter 4 / Exercise 4-5
Accounting
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b. Paid $3,600 cash in advance for insurance coverage. c. Paid $600 cash for office supplies. d. Purchased $200 of office supplies and $9,400 of equipment on credit. e. Received $2,500 cash for delivery services provided. f. Paid $2,400 cash towards accounts payable. g. Paid $700 cash for gas and oil. 2-16
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Accounting
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Chapter 4 / Exercise 4-5
Accounting
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Chapter 2 - Accounting for Transactions Exercise 2-19 (30 minutes) a. Cash .......................................................................... 7,000 Equipment ................................................................ 5,600 Automobiles ............................................................. 11,000 Common Stock ................................................. 23,600 Owner invested in the business in exchange for common stock. b. Prepaid Insurance .................................................... 3,600 Cash .................................................................. 3,600 Purchased insurance coverage. c. Office Supplies ......................................................... 600 Cash .................................................................. 600 Purchased supplies with cash. d. Office Supplies ......................................................... 200 Equipment ................................................................ 9,400 Accounts Payable ............................................. 9,600 Purchased supplies and equipment on credit. e. Cash .......................................................................... 2,500 Delivery Services Revenue .............................. 2,500 Received cash from customer. f. Accounts Payable .................................................... 2,400 Cash .................................................................. 2,400 Made payment on payables. g. Gas and Oil Expense ............................................... 700 Cash .................................................................. 700 Paid for gas and oil. 2-17
Chapter 2 - Accounting for Transactions Exercise 2-20 (20 minutes) Description (1) Difference between Debit and Credit Columns (2) Column with the Larger Total (3) Identify account(s) incorrectly stated (4) Amount that account(s) is overstated or understated a. $2,400 debit to Rent Expense is posted as a $1,590 debit. $810 credit Rent Expense Rent Expense is understated by $810 b. $4,050 credit to Cash is posted twice as two credits to Cash. $4,050 credit Cash Cash is understated by $4,050 c. $9,900 debit to the Dividends account is debited to Common Stock. $0 –– Common Stock Dividends Common Stock account is understated by $9,900 Dividends is understated by $9,900 d. $2,250 debit to Prepaid Insurance is posted as a debit to Insurance Expense. $0 –– Prepaid Insurance Insurance Expense Prepaid Insurance is understated by $2,250 and Insurance Expense is overstated by $2,250 e. $42,000 debit to Machinery is posted as a debit to Accounts Payable. $0 –– Machinery Accounts Payable Machinery is understated by $42,000 and Accounts Payable is understated by $42,000 f. $4,950 credit to Services Revenue is posted as a $495 credit. $4,455 debit Services Revenue Services Revenue is understated by $4,455 g. $1,440 debit to Store Supplies is not posted. $1,440 credit Store Supplies Store Supplies is understated by $1,440 2-18
Chapter 2 - Accounting for Transactions Exercise 2-21 (15 minutes) a. The debit column is correctly stated because the erroneous debit (to Accounts Payable) is deducted from an account with a (larger assumed) credit balance. b. The credit column is understated by $33,900 because of the error in debiting the Accounts Payable account — it should have been credited. c. The Office Equipment account is correctly stated. d. The Accounts Payable account is understated by $33,900. It should have been increased (credited) by $16,950 but the posting error decreased (debited) it by $16,950. e. The credit column is $33,900 less than the debit column, or $326,100 in total ($360,000 - $33,900). Exercise 2-22 (15 minutes) a. Co. Liabilities / Assets = Debt Ratio Net Income / Average Assets = ROA 1 $56,000 $147,000 0.38 $21,000 $200,000 0.105 2 51,500 104,500 0.49 12,000 70,000 0.171 3 12,000 90,500 0.13 20,000 100,000 0.200 4 31,000 92,000 0.34 7,500 40,000 0.188 5 47,000 64,000 0.73 3,800 40,000 0.095 6 26,500 32,500 0.82 660 50,000 0.013 b. Company 6 relies most heavily on creditor (non-owner) financing with 82% of its assets financed by liabilities.

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