Question

1. E2-29B. (Learning Objective 4: Analyze the impact of business transactions on accounts) The following selected events were experienced by either Bishop Industries, Inc., a corporation, or Kate Bishop, the major stockholder. State whether each event (1) increased, (2) decreased, or (3) had no effect on the total assets of the business. Identify any specific asset affected. a. Sold land and received a note receivable of $43,000 (the land was carried on the company’s books at $43,000). b. Received $140,000 cash and issued stock to a stockholder. c. Purchased equipment for the business for $81,000 cash. d. Received $37,000 cash from customers for services performed. e. Purchased land for a building site for the business and signed a $98,000 promissory note to the bank. f. Earned $15,000 in revenue for services performed. The customer promises to pay Bishop Industries in one month. g. Paid $12,000 cash on accounts payable. h. Purchased supplies on account for $4,000. i. Bishop used personal funds to purchase a pool table for her home. j. The business paid Bishop a cash dividend of $4,500 .

2. E2-33B. (Learning Objectives 1, 4, 5: Explain what a transaction is; analyze the impact of business transactions on accounts; record [journalize] transactions in the books) The first seven transactions of Big Horn Advertising, Inc., have been posted to the company’s accounts:
Cash 8,600 7,500 70.

3. E2-36B. (Learning Objective 4: Analyze the impact of business transactions on accounts) Set up the following T-accounts: Cash, Accounts Receivable, Office Supplies, Office Furniture, Accounts Payable, Common Stock, Dividends, Service Revenue, Salary Expense, and Rent Expense. Record the following transactions directly in the T-accounts without using a journal. Use the letters to identify the transactions. a. Eric Newton opened a law firm by investing $23,000 cash and office furniture with a fair value of $9,400. Organized as a professional corporation, the business issued common stock to Newton. b. Paid monthly rent of $1,000. c. Purchased office supplies on account, $700. d. Paid employee salaries of $2,500. e. Paid $150 of the accounts payable created in transaction c. f. Performed legal service on account, $10,900. g. Declared and paid dividends of $2,000.

(1) (2) (5)
Supplies (5) 70
Land (4) 36,0007,000 230 3,500
(4) (6) (7)
(3) 800
Equipment (7) 3,500
Accounts Payable (3) 800(6) 230
Note Payable (2) (4)
7,500 29,000
Common Stock (1) 8,600
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Transaction Analysis    105
Requirement 1. Prepare the journal entries that served as the sources for the seven transactions. Include an explanation for each entry. As Big Horn moves into the next period, how much cash does the business have? How much does Big Horn owe in total liabilities?

4. P2-68B. (Learning Objectives 4, 5, 6: Analyze the impact of business transactions on accounts; record [journalize and post] transactions in the books; construct and use a trial balance) During the first month of operations, Gagne Services, Inc., completed the following transactions:
M02_HARR7620_11_SE_C02_060-120.indd   112 11/13/15   5:26 PM
Transaction Analysis    113
Jul 2 Gagne received $62,000 cash and issued common stock to the stockholders. 3 Purchased supplies, $800, and equipment, $12,100, on account. 4 Performed services for a customer and received cash, $5,600. 7 Paid cash to acquire land, $39,000. 11 Performed services for a customer and billed the customer, $2,900.
16 Paid for the equipment purchased July 3 on account. 17 Received and paid the telephone bill, $590. 18 Received partial payment from customer on account, $800. 22 Received and paid the water and electricity bills, $420. 29 Received $2,300 cash for servicing the heating unit of a customer. 30 Paid employee salaries, $2,500. 30 Declared and paid dividends of $2,000. Gagne expects to collect within one month.
Requirements 1. Record each transaction in the journal. Be sure to record the date in each entry. Explanations are not required. 2. Post the transactions to the T-accounts, using transaction dates as posting references. 3. Prepare the trial balance of Gagne Services, Inc., at July 31 of the current year. 4. John Gagne, the manager, asks you how much in total resources the business has to work with, how much it owes, and whether July was profitable (and by how much).

5. P2-69B. (Learning Objectives 4, 6: Analyze the impact of business transactions on
accounts; construct and use a trial balance) During the first month of operations (May 2016), Spahr Music Corporation completed the following selected transactions: a. The business received cash of $50,000 and a building with a fair value of $106,000. The corporation issued common stock to the stockholders. b. Borrowed $63,000 from the bank; signed a note payable. c. Paid $44,000 for music equipment. d. Purchased supplies on account, $210. e. Paid employees’ salaries, $5,900. f. Received $3,700 for music service performed for customers. g. Performed service for customers on account, $13,100. h. Paid $200 of the account payable created in transaction d. i. Received a $600 bill for utilities expense that will be paid in the near future. j. Received cash on account, $1,700. k. Paid the following cash expenses: (1) rent, $1,200; (2) advertising, $300.

Answer 1

E2-29B :

a. No effect (one asset is replaced by another)

b. Increased (Cash is added for increase in equity)

c. No effect (one asset is replaced by another)

d. Increased ( Cash is added against revenue)

e. Increased (Land is added for increase in liability)

f. Increased (Accounts receivable added for sale)

g. Decreased (Cash decreased for decrease in liability)

h. Increased (Suppleis added for increase in liability)

i. No effect (personal spednign by the owner)

j. Decreased (Cash decreased for decrease in equity)

E2-36B

Cash

Accounts Receivable

Office Supplies

Ref

Debit

Ref

Credit

Ref

Debit

Ref

Credit

Ref

Debit

Ref

Credit

a

23000

b

1000

f

10900

c

700

d

2500

e

150

f

2000

Office Furniture

Accounts Payable

Dividend

Ref

Debit

Ref

Credit

Ref

Debit

Ref

Credit

Ref

Debit

Ref

Credit

a

9400

e

150

c

700

f

2000

Common Stock

Service Revenue

Salary Expense

Ref

Debit

Ref

Credit

Ref

Debit

Ref

Credit

Ref

Debit

Ref

Credit

a

32400

f

10900

d

2500

Rent Expense

Ref

Debit

Ref

Credit

b

1000

P2-68B John Gagne General Journal for the month of July Date Account Title Debit Credit July.2 Cash 62000 Common Stock 62000 July.3 Supplies 800 Equipment 12100 Accounts Payable 12900 July.4 Cash 5600 Service Revenue 5600 July.7 Land 39000 Cash 39000 July.11 Accounts Receivable 2900 Service Revenue 2900 July.16 Accounts Payable 12100 Cash 12100 July.17 Telephone Expense 590 Cash 590 July.18 Cash 800 Accounts Receivable 800 July.22 Utility Expense 420 Cash 420 July.29 Cash 2300 Service Revenue 2300 July.30 Salary Expense 2500 Cash 2500 July.30 Dividend 2000 Cash 2000 Cash Accounts Receivable Office Supplies Date Debit Date Credit Date Debit Date Credit Date Debit Date Credit July.2 62000 July.7 39000 July.11 2900 July.18 800 July.3 800 July.4 5600 July.16 12100 July.18 800 July.17 590 2900 800 800 0 July.29 2300 July.22 420 End.Bal. 2100 End.Bal. 800 July.30 2500 July.30 2000 70700 56610 End.Bal. 14090 Equipment Accounts Payable Land Date Debit Date Credit Date Debit Date Credit Date Debit Date Credit July.3 12100 July.16 12100 July.3 12900 July.7 39000 12100 0 12100 12900 39000 0 End.Bal. 12100 End.Bal. 800 End.Bal. 39000 Common Stock Service Revenue Telephone expense Date Debit Date Credit Date Debit Date Credit Date Debit Date Credit July.2 62000 July.4 5600 July.17 590 July.11 2900 0 62000 July.29 2300 590 0 End.Bal. 62000 0 10800 End.Bal. 590 Utility Expense End.Bal. 10800 Date Debit Date Credit Salary Expense Dividend July.22 420 Date Debit Date Credit Date Debit Date Credit July.30 2500 July.30 2000 420 0 End.Bal. 420 2500 0 2000 0 End.Bal. 2500 End.Bal. 2000

John Gagne
Trial balance as at July 31
Account	Debit	Credit
Cash	14090
Accounts Receivable	2100
Supplies	800
Equipment	12100
Land	39000
Accounts Payable		800
Common Stock		62000
Dividend	2000
Service Revenue		10800
Salary Expense	2500
Telephone Expense	590
Utility Expense	420
	73600	73600

John Gagne
Trial balance as at July 31
Account	Debit	Credit
Cash	14090
Accounts Receivable	2100
Supplies	800
Equipment	12100
Land	39000
Accounts Payable		800
Common Stock		62000
Dividend	2000
Service Revenue		10800
Salary Expense	2500
Telephone Expense	590
Utility Expense	420
	73600	73600
John Gagne
Income Statement for July
Service Revenue		10800
Expenses:
Salary Expense		2500
Telephone Expense		590
Utility Expense		420
Total Expenses		3510
Net income		7290
John Gagne
Balance Sheet as at July 31
Assets
Cash		14090
Accounts Receivable		2100
Supplies		800
Equipment		12100
Land		39000
Total Assets		68090
Liabilities and equity
Accounts Payable		800
Onwer's equity
Common stock	62000
Net income	7290
Dividend	-2000	67290
Liabilities and equity		68090