Connect Online Access for Financial Accounting
Connect Online Access for Financial Accounting
18th Edition
ISBN: 9781260706260
Author: Author
Publisher: Mcgraw-hill Higher Education (us)
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Chapter 3, Problem 5AP

a.

To determine

Analyze the effects that each of the given transactions will have on the following six components of the company’s financial statements for the month of May.

a.

Expert Solution
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Explanation of Solution

Income statement:

The financial statement which reports revenues and expenses from business operations and the result of those operations as net income or net loss for a particular time period is referred to as income statement.

Balance sheet:

This financial statement reports a company’s resources (assets) and claims of creditors (liabilities) and stockholders (stockholders’ equity) over those resources. The resources of the company are assets which include money contributed by stockholders and creditors. Hence, the main elements of the balance sheet are assets, liabilities, and stockholders’ equity.

Analyze the effects that each of the given transactions will have on the following six components of the company’s financial statements for the month of May as follows:

Connect Online Access for Financial Accounting, Chapter 3, Problem 5AP , additional homework tip  1

Figure (1)

b.

To determine

Prepare journal entries for each transaction.

b.

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Explanation of Solution

Journal entry:

Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.

Prepare journal entries for each transaction as follows:

DateAccount title and ExplanationPost ref.

Debit

 (in $)

Credit (in $)
May 1 Cash480,000
Capital stock480,000
(To record the issue of the 6,000 shares of capital stock)
May 4Land84,000
Office Building216,000
     Cash120,000
     Notes Payable  180,000
(To record the purchase of land and office building)
May 9Medical instruments156,000
     Cash156,000
(To record the purchase of computer systems)
May 16Office fixtures and equipment60,000
     Cash24,000
     Accounts Payable36,000
(To record the purchase of office fixtures and equipment)
May 21Office supplies 6,000
     Cash6,000
(To record the purchase of office supplies purchased on account)
May 24Cash2,280
Accounts receivable360
     Veterinary service revenue2,640
(To record the veterinary service revenue earned)
May 27Advertising expense480
     Accounts payable480
(To record the advertising expense incurred)
May 28Cash120
Accounts receivable120
(To record the cash collected from accounts receivable)
 
May 31Salary expense3,360
     Cash3,360
(To record the salary expense paid)

Table (1)

c.

To determine

Post each transaction to the appropriate ledger accounts.

c.

Expert Solution
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Explanation of Solution

T-account:

The condensed form of a ledger is referred to as T-account. The left-hand side of this account is known as debit, and the right hand side is known as credit.

Post each transaction to the appropriate ledger accounts as follows:

Connect Online Access for Financial Accounting, Chapter 3, Problem 5AP , additional homework tip  2

Figure (2)

Connect Online Access for Financial Accounting, Chapter 3, Problem 5AP , additional homework tip  3

Figure (3)

d.

To determine

Prepare a trial balance dated May 31, current year.

d.

Expert Solution
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Explanation of Solution

Trial balance:

Trial balance is a summary of all the ledger accounts balances presented in a tabular form with two column, debit and credit. It checks the mathematical accuracy of the ledger postings and helps preparing the final accounts.

Prepare a trial balance dated May 31, current year as follows:

Veterinary Clinic
Trial Balance
May  31, Current Year
  Cash$173,040 
  Accounts receivable                  240  
  Office supplies               6,000 
  Medical instruments            156,000  
  Office fixtures and equipment             60,000  
  Land             84,000  
  Building            216,000  
  Notes payable $180,000
  Accounts payable                36,480
  Capital stock              480,000
  Retained earnings  0
  Veterinary service revenue                  2,640
  Advertising expense                  480 
  Salary expense               3,360 
  $699,120$699,120

Table (2)

e.

To determine

Compute total assets, total liabilities, and owners’ equity and identify whether the month May appeared to be a profitable month.

e.

Expert Solution
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Explanation of Solution

Assets:

These are the resources owned and controlled by business and used to produce benefits for the company. Assets are classified on the balance sheet as current assets, non-current assets, property, plant, and equipment, and intangible assets.

Liabilities:

The claims creditors have over assets or resources of a company are referred to as liabilities. These are the debt obligations owed by company to creditors. Liabilities are classified on the balance sheet as current liabilities and long-term liabilities.

Owners’ equity:

Owner’s equity refers to the right the owner possesses over the resources of the business. Revenues and the expenses are the components of the owner’s equity.

Net income:

The bottom line of income statement which is the result of excess of earnings from operations (revenues) over the costs incurred for earning revenues (expenses) is referred to as net income.

Compute total assets, total liabilities, and owners’ equity as follows:

Total Assets:  
  Cash$173,040 
  Accounts receivable240  
  Office supplies6,000 
  Medical instruments156,000 
  Office fixtures and equipment60,000 
  Land84,000 
  Building216,000 
 Total assets $695,280
   
 Total Liabilities:  
  Notes payable$180,000  
  Accounts payable    36,480  
Total liabilities  $216,480
   
 Total Owners' Equity:   
  Total assets − Total liabilities ($695,280  $216,480)    $478,800

Table (3)

Identify whether the month May appeared to be a profitable month as follows:

 Amount (In $)Amount (In $)
Veterinary service revenue 2,640
Less: Advertising expense480 
          Salary expense3,3603,840
Net Loss $ (1,200)

Table (4)

Hence, the month May did not appear to be a profitable month.

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Chapter 3 Solutions

Connect Online Access for Financial Accounting

Ch. 3 - 3. State briefly the rules of debit and credit as...Ch. 3 - Prob. 4DQCh. 3 - 5. What requirement is imposed by the double-entry...Ch. 3 - Prob. 6DQCh. 3 - Prob. 7DQCh. 3 - Prob. 8DQCh. 3 - Prob. 9DQCh. 3 - 10. When do accountants consider revenue to be...Ch. 3 - Prob. 11DQCh. 3 - Prob. 12DQCh. 3 - Prob. 13DQCh. 3 - 14. How do dividends affect owners’ equity? Are...Ch. 3 - Prob. 15DQCh. 3 - Prob. 1BECh. 3 - BRIEF EXERCISE 3.2 Recording Transactions in a...Ch. 3 - BRIEF EXERCISE 3.3 Recording Transactions Wagner...Ch. 3 - BRIEF EXERCISE 3.4 Debit and Credit Rules Five...Ch. 3 - BRIEF EXERCISE 3.5 Changes in Retained...Ch. 3 - Prob. 6BECh. 3 - BRIEF EXERCISE 3.7 When Is Revenue Realized? The...Ch. 3 - Prob. 8BECh. 3 - Prob. 9BECh. 3 - BRIEF EXERCISE 3.10 Matching Principle Harley...Ch. 3 - Prob. 1ECh. 3 - Prob. 2ECh. 3 - EXERCISE 3.3 Relationship between Journal and...Ch. 3 - EXERCISE 3.4 Preparing a Trial Balance Using the...Ch. 3 - EXERCISE 3.5 Relationship between Net Income and...Ch. 3 - EXERCISE 3.6 Effects of Transactions on the...Ch. 3 - EXERCISE 3.7 Effect of Transactions on the...Ch. 3 - EXERCISE 3.8 Preparing Journal Entries for...Ch. 3 - Prob. 9ECh. 3 - Prob. 10ECh. 3 - Prob. 11ECh. 3 - Prob. 12ECh. 3 - EXERCISE 3.13 Analyzing Transactions Listed as...Ch. 3 - Prob. 14ECh. 3 - Prob. 15ECh. 3 - PROBLEM 3.1A Journalizing Transactions Glenn...Ch. 3 - Prob. 2APCh. 3 - PROBLEM 3.3A Analyzing and Journalizing...Ch. 3 - Prob. 4APCh. 3 - Prob. 5APCh. 3 - Prob. 6APCh. 3 - Prob. 7APCh. 3 - Prob. 8APCh. 3 - Prob. 1BPCh. 3 - Prob. 2BPCh. 3 - Prob. 3BPCh. 3 - Prob. 4BPCh. 3 - Prob. 5BPCh. 3 - Prob. 6BPCh. 3 - Prob. 7BPCh. 3 - PROBLEM 3.8B Analyzing the Effects of Accounting...Ch. 3 - Prob. 1CTCCh. 3 - CASE 3.2 Measuring Income Fairly Kim Morris...Ch. 3 - Prob. 3CTC
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