1.Basic concepts. Jean’s Marine Supply specializes in the sale of boating equipment and accessories. Identify the items that follow as an asset (A), liability (L), revenue (R), or expense (E) from the firm’s viewpoint.
1.The inventory of boating supplies owned by the company.
2.Monthly rental charges paid for store space.
3.A loan owed to Citizens Bank.
4.New computer equipment purchased to handle daily record keeping.
5.Daily sales made to customers.
6.Amounts due from customers.
7.Land owned by the company to be used as a future store site.
8.Weekly salaries paid to salespeople.
2. Analysis of transactions.
Set up the following headings across a piece of paper:
Assets = Liabilities + Owner’s Equity
By using “+” and “-,” indicate the effect of each of the following transactions on total assets, liabilities, and owner’s equity:
1.Processed a $5,000 cash withdrawal for the owner.
2.Recorded the receipt of May’s utility bill, to be paid in June.
3.Provided services to customers on account.
4.Paid the current month’s advertising charges.
5.Purchased a $27,000 delivery truck by paying $5,000 down and securing a loan for the remaining balance.
6.Received $11,000 cash from the owner as an investment in the business.
7.Returned a new computer and printer purchased earlier in the month on account. The bill had not as yet been paid.
8.Paid the utility bill recorded previously in (b).
3. Balance sheet preparation.
The following data relate to Preston Company as of December 31, 19XX:
Building $44,000 Accounts receivable $24,000
Cash 17,000 Loan payable 30,000
J. Preston, capital 65,000 Land 21,000
Accounts payable ?
Prepare a balance sheet in good form as of December 31, 19XX.
4. Statement preparation
The following information is taken from the accounting records of Grimball Cardiology at the close of business on December 31, 19X1:
All equipment was acquired just prior to year-end. Conversations with the practice’s bookkeeper revealed the data that follow.
Rose Grimball, capital (January 1, 19X1) $300,000
19X1 owner investments 2,000
19X1 owner withdrawals 22,000
1.Prepare the income statement for Grimball Cardiology in good form.
2.Prepare a statement of owner’s equity in good form.
3.Prepare Grimball’s balance sheet in good form.
5. Recognition of normal balances
The following items appeared in the accounting records of Triguero’s, a retail music store that also sponsors concerts. Classify each of the items as an asset, liability; revenue; or expense from the company’s viewpoint. Also indicate the normal account balance of each item.
1.The albums, tapes, and CDs held for sale to customers.
2.A long-term loan owed to Citizens Bank.
3.Promotional costs to publicize a concert.
4.Daily receipts for merchandise sold,
5.Amounts due from customers,
6.Land held as an investment,
7.A new fax machine purchased for office use.
8.Amounts to be paid in 10 days to suppliers,
9.Amounts paid to a mall for rent.
6. Basic journal entries
The following transactions pertain to the Jennifer Royall Company:
Received cash of $15,000 and land valued at $10,000 from
Jennifer Royall as an investment in the business.
5 Provided $1,200 of services to Jason Ratchford, a client.
Ratchford agreed to pay $800 in 15 days and the remaining amount in May.
9 Paid $250 of salaries to an employee.
14 Acquired a new computer for $3,200; Royall will pay the dealer in May.
20 Collected $800 from Jason Ratchford for services provided on April 5.
24 Borrowed $7,500 from BestBanc by securing a six-month loan.
Prepare journal entries (and explanations) to record the preceding transactions and events.
7. Journal entry preparation
On January 1 of the current year, MuniServ began operations with $100,000 cash. The cash was obtained from an owner investment by Peter Houston of $70,000 and a $30,000 bank loan. Shortly thereafter, the company acquired selected assets of a bankrupt competitor. The acquisition included land ($15,000), a building ($40,000), and vehicles ($10,000). MuniServ paid $45,000 at the time of the transaction and agreed to remit the remaining balance due of $20,000 (an account payable) by February 15.
During January, the company had additional cash outlays for the following items:
Purchases of store equipment
Loan payment, including $100 interest
The January utilities bill of $200 was received on January 31 and will be paid on February 10. MuniServ rendered services to clients on account amounting to $9,400. All customers have been billed; by month-end, $3,700 had been received in settlement of account balances.
1.Present journal entries that reflect MuniServ’s January transactions, including the $100,000 raised from the owner investment and loan.
2.Compute the total debits, total credits, and ending balance that would be found in the company’s Cash account.
3.Determine the amount that would be shown on the January 31 trial balance for Accounts Payable. Is the balance a debit or a credit?
8. Balance Sheet Review – Select a public company and down a copy of the company’s most recent annual report. You will use these financial statements throughout the rest of this course. As you are aware of the Balance Sheet lists the assets, liabilities, and owner’s equity of the company. Review the company’s balance sheet over a period of three years. Based on your review, what account experienced the largest increase? What account experienced the largest decrease? As a potential investor would either the increase or decrease be considered a positive or negative? Write a 150-200 word summary of the results of your balance sheet analysis.