Gen Combo Loose Leaf Financial Accounting; Connect Access Card
Gen Combo Loose Leaf Financial Accounting; Connect Access Card
18th Edition
ISBN: 9781264094295
Author: williams
Publisher: MCG
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Chapter 3, Problem 5BP

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 August.

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 August as follows:

Gen Combo Loose Leaf Financial Accounting; Connect Access Card, Chapter 3, Problem 5BP , 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 $)
August 1 Cash280,000
Capital stock280,000
(To record the issue of the 1,000 shares of capital stock)
August 4Land60,000
Office Building340,000
     Cash80,000
     Notes Payable  320,000
(To record the purchase of land and office building)
August 9Medical instruments75,000
     Cash75,000
(To record the purchase of computer systems)
August 16Office fixtures and equipment25,000
     Cash10,000
     Accounts Payable15,000
(To record the purchase of office fixtures and equipment)
August 21Office supplies 4,200
     Cash4,200
(To record the purchase of office supplies purchased on account)
August 24Cash1,000
Accounts receivable12,000
     Service revenue13,000
(To record the service revenue earned)
August 27Advertising expense450
     Accounts payable450
(To record the advertising expense incurred)
August 28Cash500
Accounts receivable500
(To record the cash collected from accounts receivable)
 
August 31Salary expense2,200
     Cash2,200
(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:

Gen Combo Loose Leaf Financial Accounting; Connect Access Card, Chapter 3, Problem 5BP , additional homework tip  2

Figure (2)

Gen Combo Loose Leaf Financial Accounting; Connect Access Card, Chapter 3, Problem 5BP , additional homework tip  3

Figure (3)

d.

To determine

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

Dental Clinic
Trial Balance
August  31, Current Year
  Cash$110,100 
  Accounts receivable11,500 
  Office supplies4,200 
  Medical instruments75,000 
  Office fixtures and equipment25,000 
  Land60,000 
  Building340,000 
  Notes payable $320,000
  Accounts payable 15,450
  Capital stock 280,000
  Retained earnings 0
  Veterinary service revenue 13,000
  Advertising expense450 
  Salary expense2,200 
  $628,450$628,450

Table (2)

e.

To determine

Compute total assets, total liabilities, and owners’ equity and identify whether the month August 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$110,100 
  Accounts receivable11,500 
  Office supplies4,200 
  Medical instruments75,000 
  Office fixtures and equipment25,000 
  Land60,000 
  Building340,000 
 Total assets $625,800
   
 Total Liabilities:  
  Notes payable$320,000 
  Accounts payable15,450 
Total liabilities $335,450
   
 Total Owners' Equity:  
  Total assets − Total liabilities ($625,800$335,450)   $290,350

Table (3)

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

 Amount (In $)Amount (In $)
Service revenue 13,000
Less: Advertising expense450 
          Salary expense2,2002,650
Net income (Profit) $10,350

Table (4)

Hence, the month August appeared to be a profitable month.

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Chapter 3 Solutions

Gen Combo Loose Leaf Financial Accounting; Connect Access Card

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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