会计英语课后题答案Answer for lesson 1

Exercise answer for Lesson 1

1.1 Select the best answer for each of the following unrelated items

1.d

2. d

3. b

4. d

5. c

6. c

7.d

8.a

9.b 10.b

11c 12b 13c 14d 15 a

1.2 SHORT-ANSWER ESSAY QUESTIONS

1.Accounting cycle is an important concept for accounting. Briefly explain the steps for accounting cycle.

Solution: (1)Analyze transactions; (2) Journalize transactions; (3) Post to ledger;(4) Prepare unadjusted trial balance ;(5) Journalize & post adjustments; (6) Prepare adjusted trial balance; (7) Prepare financial statements; (8) Journalize and post closing entries; (9) Prepare post-closing trial balance

2 Your roommate, a marketing major, thinks that debit means decrease and credit means increase. And, that every account can be debited and credited and as result, every account can have both a debit and a credit balance. Explain to your roommate (1) the meaning of debit and credit; (2) which accounts can only be debited, which can only be credited, and which can be both debited and credited; and (3) which accounts normally have debit balances and which credit balances.

Solution: The terms debit and credit mean the left and right side, respectively, of every account. Some accounts such as Dividends and Expenses are only debited; other accounts such as Share Capital-Ordinary and Revenues are only credited; and finally, some accounts such as Cash, Accounts Receivable, and Accounts Payable can be debited and credited. Accounts with debit balances include Assets, Dividends, and Expenses. Accounts with credit balances include Share Capital-Ordinary and Revenues.

3 A fellow classmate is confused about how debits and credits relate to the basic accounting equation. State the basic accounting equation, convert it into the expanded accounting equation, and then explain how it ties into the rules for debits and credits.

Solution:

The basic accounting equation is:

Assets = Liabilities + Equity

The expanded equation divides Equity into its various parts, reflecting the shareholders' investment, dividends, revenues, and expenses:

Assets = Liabilities + Share Capital-Ordinary + Retained Earnings – Dividends + Revenues – Expenses

This expanded equation can then be re-arranged to explain why certain accounts have debit (left-hand) balances, while other accounts have credit (right-hand) balances, as follows:

Assets + Dividends + Expenses = Liabilities + Share Capital-Ordinary + Retained Earnings + Revenues

The accounts on the left-hand side of the equation have left-hand, or debit balances, while the accounts on the

right-hand side of the equation have right-hand, or credit balances. Accounts with debit balances are increased with debits and decreased with credits, while accounts with credit balances are increased with credits and decreased with debits.

4 John Dough, a fellow employee, wants to understand the basic steps in the recording process. Identify and briefly explain the steps in the order in which they occur.

Solution

The basic steps in the recording process are:

1. Analyze each transaction. In this step, business documents are examined to determine the effects of the transaction

on the accounts.

2. Enter each transaction in a journal. This step is called journalizing and it results in making a chronological record of

the transactions.

3. Transfer journal information to ledger accounts. This step is called posting. Posting makes it possible to accumulate

the effects of journalized transactions on individual accounts.

5 The process of transferring the information in the journal to the general ledger is called posting. Explain the posting process, including the importance of the journal page number and the account numbers.

Solution

The posting process begins with locating the account(s) being debited in the general ledger. Then entering the date of the entry, the journal page number where the entry originated and debit portion of the entry in the date, reference and debit columns, respectively. Once this done, the account number(s) of the account(s) being debited is (are) entered in the reference column in the journal. Next, the credit portion of the journal entry is posted to the appropriate accounts in the ledger following the same steps as noted for the debit portion.

The importance of the journal page number, in the reference column of each account in the general ledger accounts, is to indicate where to find the original entry. And, the general ledger account numbers, in the reference column of the journal, indicate that the entry has been posted.

1.3 The effects of transactions on the accounting equation

Linda Champion began a professional accounting practice on May 1 and plans to prepare financial statements at the end of each month. During May, Champion completed these transactions:

a. Invested €50,000 cash and equipment that had a€10,000 fair market (cash equivalent) value.

b. Paid €1,600 rent for office space for the month.

c. Purchased €12,000 of additional equipment on credit.

d. Completed work for a client and immediately collected €2,000 cash.

e. Completed work for a client a nd sent a bill for €7,000 to be paid within 30 days.

f. Purchased €8,000 of additional equipment for cash.

g. Paid an assistant €2,400 as wages for the month.

h. Collected €5,000 of the amount owed by the client described in transaction (e).

i. Paid for the equipment purchased in transaction (c).

j. Withdrew €500 for personal use.

Enquired:

Using the information presented in (a) through (j) above, Linda Champion, the owner, first creates a table like the one shown below. She then uses the results to calculate net income earned during the month of May, her first month of operations.

Solutions:

Notice how Assets of €64,500 = Liabilities + Owner’s equity of €64,500. From this schedule you can

calculate the firm’s net income by summarizing the revenues and expenses as follows: Net income =

Revenues – Expenses

= (€2,000 + €7,000) –(€1,600 + €2,400)

= €5,000

1.4 Preparing a statement of comprehensive income and a statement of financial position

During June through August of 20X5, Lin Yan earned money doing computer consulting work. She went around the city and obtained several contracts for small jobs. Lin then withdrew €3,000 from her personal savings account and deposited it in a separate account for the business. At the end of the summer, Lin tried to figure out how well her business had done.

Lin’s business records showed the following transactions:

a. Deposited €12,500 (from customers’ payments).

b. Issued cheques:

?car and equipment rental, €2,000;

?gas, €900;

?supplies purchased and used, €100;

? hir ed help, €4,800;

?payroll taxes, €600;

?insurance, €180;

?telephone, €120.

c. Transferred €2,000 cash from the business bank account to personal savings account.

d. Owed €500 by customers.

e. Owed €150 for gas.

Required

1. Show the effect of each transaction, including the initial cash deposit, on the accounting equation.

2. Prepare a statement of comprehensive income for Lin’s summer business.

3. Prepare a statement of financial position for Lin at the end of the summer.

Solution:

1. To show the effect of each transaction on the accounting equation, construct a worksheet with four columns using the following headings: item, assets, liabilities, and owner’s equity. Recall that revenues increase owner’s equity and expenses decrease owner’s equity.

会计英语课后题答案Answer for lesson 1

2. Re venues originated from two sources: customers’ payments (€12,500) and from amounts yet to be paid by customers (€500). Total expenses included car and equipment rental (€2,000), car expenses (€900 paid + €150 unpaid), supplies (€100), helpers (€4,800), payroll taxes (€600), insurance (€180), and telephone (€120). Net income is determined from the difference of total revenues and total expenses. Based on this information, the following income statement is prepared.

Solutions:

3. From the effect of the transactions prepared in part 1, you can generate the following statement of financial

position for the end of the summer.

The cash balance can be determined as follows:

The cash balance excludes two amounts: the €500 still owed to Lin by customers and €150 she owes for car gas invoices not yet paid. If she receives the money owed her and she pays her debt, then she will have an additional €350 (€500 –€150), making a total cash balance of €5,150 (€4,800 + €350) for the summer. Note that the €2,000 personal withdrawal was not included as an expense on the statement of comprehensive income. The withdrawal is considered a distribution of income (owner’s profits) rather than an expense. The owner’s equity of €5,150 on the balance sheet includes the initial investment plus net income less the withdrawal (€3,000 + €4,150 –€2,000).

1.5Increases, decreases, and normal balances of accounts

Enquired: Complete the following table by

1. Identifying the type of account listed on each line.

2. Entering debit or credit in the blank spaces to identify the kind of entry that would increase or decrease the account balance.

3. Identifying the normal balance of the account.

会计英语课后题答案Answer for lesson 1

会计英语课后题答案Answer for lesson 1

1.6 Analyzing transactions using T-accounts

Open the following T-accounts: Cash; Accounts Receivable; Office Supplies; Office Equipment; Accounts Payable; Steve Moore, Capital; Steve Moore, Withdrawals; Fees Earned; and Rent Expense. Next, record these transactions of the Moore Company by recording the debit and credit entries directly in the T-accounts. Use the letters beside each transaction to identify the entries.

a. Steve Moore invested €12,750 cash in the business.

b. Purchased €375 of office supplies for cash.

c. Purchased €7,050 of office equipment on credit.

d. Received €1,500 cash as fees for services provided to a customer.

e. Paid for the office equipment purchased in transaction (c).

f. Billed a customer €2,700 as fees for services.

g. Paid the monthly rent with €525 cash.

h. Collected €1,125 of the account receivable created in transaction (f).

i. Steve Moore withdrew €1,000 cash from the business.

Enquired:

1. Record these transactions of the Moore Company in journal.

2. Open the following T-accounts: Cash; Accounts Receivable; Office Supplies; Office Equipment; Accounts Payable; Steve Moore, Capital; Steve Moore, Withdrawals; Fees Earned; and Rent Expense. Next, post the entries in the

T-accounts. Use the letters beside each transaction to identify the entries.

Solution:

a. Steve Moore invested €12,750 cash in the business:

会计英语课后题答案Answer for lesson 1

b. Purchased €375 of office supplies for cash:

c. Purchased €7,050 of office equipment on credit:

d. Received €1,500 cash as fees for services provided to a customer:

会计英语课后题答案Answer for lesson 1

e. Paid for the office equipment purchased in transaction (c):

f. Billed a customer €2,700 as fees for services:

g. Paid the monthly rent with €525 cash:

h. Collected €1,125 of the account receivable created in transaction (f):

i. Steve Moore withdrew €1,000 cash from the bu siness:

会计英语课后题答案Answer for lesson 1

1.7 Correct the error

Betty Wright, CPA, was asked by the controller of Gore Company to review the accounting records before financial statements are prepared. Betty reviewed the records and found three errors.

1.Cash paid on accounts payable for $930 was recorded as a debit to Accounts Payable $390 and a credit to Cash $390.

2.The purchase of supplies on account for $500 was debited to Equipment $500 and credited to Accounts Payable $500.

3.The company paid dividends $1,200. The bookkeeper debited Accounts Receivable for $120 and credited Cash $120. Enquired:

Prepare an analysis of each error showing the

(a) incorrect entry.

(b) correct entry.

(c) correcting entry.

Solution:

1. (a) Incorrect Entry

Accounts Payable (390)

Cash (390)

(b) Correct Entry

Accounts Payable (930)

Cash (930)

(c) Correcting Entry

Accounts Payable (540)

Cash (540)

2. (a) Incorrect Entry

Equipment (500)

Accounts Payable (500)

(b) Correct Entry

Supplies (500)

Accounts Payable (500)

(c) Correcting Entry

Supplies (500)

Equipment (500)

3. (a) Incorrect Entry

Accounts Receivable (120)

Cash (120)

(b) Correct Entry

Dividends ......................................................................................... 1,200

Cash ....................................................................................... 1,200

(c) Correcting Entry

Dividends ......................................................................................... 1,200

Accounts Receivable (120)

Cash ....................................................................................... 1,080

1.8 Ben Cartwright Pest Control has the following balances in selected accounts on December 31, 2011.

Accounts Receivable € 0

Accumulated Depreciation – Equipment 0

Spraying Equipment 6,650

Interest Payable 0

Notes Payable 20,000

Prepaid Insurance 2,400

Salaries Payable 0

Supplies 2,940

Unearned Spraying Revenues 36,000

All of the accounts have normal balances. The information below has been gathered at December 31, 2011.

1. Depreciation on the equipment for 2011 is €1,250.

2. Ben Cartwright Pest Control borrowed €20,000 by signing a 10%, one-year note on July 1, 2011.

3. Ben Cartwright Pest Control paid €2,400 for 12 months of insurance coverage on October 1, 2011.

4. Ben Cartwright Pest Control pays its employees total salaries of €10,000 every Monday for the preceding 5-day week (Monday-Friday). On Monday, December 27, 2011, employees were paid for the week ending December 24, 2011. All employees worked the five days ending December 31, 2011.

5. Ben Cartwright Pest Control performed disinfecting services for a client in December 2011. The client will be billed €3,000.

6. On December 1, 2011, Ben Cartwright Pest Control collected €36,000 for disinfecting processes to be performed from December 1, 2011, through May 31, 2011.

7. A count of supplies on December 31, 2011, indicates that supplies of €950 are on hand.

Enquired:

Prepare in journal form with explanations, the adjusting entries for the seven items listed for Ben Cartwright Pest Control.

Solutions:

(1) Depreciation Expense - Equipment ............................................................... 1,250

Accumulated Depreciation - Equipment................................................. 1,250 (To record depreciation for the period)

(2) Interest Expense ............................................................................................ 1,000

Interest Payable....................................................................................... 1,000 (To record accrued interest on note payable)

[€20,000 * 10% * (6/12) = €1,000]

(3) Insurance Expense (600)

Prepaid Insurance (600)

(To recognize period insurance expense)

[(€2,400 / 12) * 3 = €600]

(4) Wages Expense .............................................................................................. 10,000

Wages Payable ........................................................................................ 10,000 (To record wages for the week)

(5) Accounts Receivable ..................................................................................... 3,000

Spraying Revenues ................................................................................. 3,000 (To record revenue earned but not yet received)

(6) Unearned Spraying Revenues ........................................................................ 6,000

Spraying Revenues ................................................................................. 6,000 (To record revenue earned with prior payment)

(7) Supplies Expense ........................................................................................... 1,990

Supplies .................................................................................................. 1,990 (To record supplies expense)

[€2,940 - €950 = €1,990]

1.9 Complete the worksheet for adjusted trial balance

The worksheet for Boone Mailing Center appears below.

BOONE MAILING CENTER

Worksheet

For the Month Ended August 31, 2011

会计英语课后题答案Answer for lesson 1

Using the adjustment data below, complete the worksheet. Add any accounts that are necessary. Adjustment data:

(a) Prepaid rent expired during August, $2.

(b) Depreciation expense on equipment for the month of August, $8.

(c) Supplies on hand on August 31 amounted to $6.

(d) Salaries expense incurred at August 31 but not yet paid amounted to $10

Solution

BOONE MAILING CENTER

Worksheet

For the Month Ended August 31, 2011

会计英语课后题答案Answer for lesson 1

会计英语课后题答案Answer for lesson 1

会计英语课后题答案Answer for lesson 1

会计英语课后题答案Answer for lesson 1

会计英语课后题答案Answer for lesson 1

1.10Preparing and posting closing entries

Use the information provided in the T-accounts below to prepare closing journal entries at December 31, 20X5.

Rent Expense

Salary Expense

Solution:

20X5

(1) Dec 31 Services Revenue................................................ 73,000

Income Summary ......................................... 73,000

To close the revenue account and open Income Summary.

(2) 31 Income Summary....................................................... 48,100

Rent Expense ............................................... 8,600 Salaries Expense .......................................... 20,000 Insurance Expense ....................................... 3,500 Depreciation Expense .................................. 16,000

To close the expense accounts.

(3) 31 Income Summary....................................................... 24,900

Marcy Jones, Capital ................................... 24,900

To close Income Summary.

(4) 31 Marcy Jones, Capital ................................................ 24,000

Marcy Jones, Withdrawals........................... 24,000

To close the withdrawals account.

会计英语课后题答案Answer for lesson 1

Post the closing entries prepared in part (a) above to the T-accounts.

1.11 Prepare closing entries and a post-closing trial balance

Latitudes Company had the following adjusted trial balance.

LATITUDES COMPANY Adjusted Trial Balance

For the month ended June 30, 20X1

会计英语课后题答案Answer for lesson 1

会计英语课后题答案Answer for lesson 1

会计英语课后题答案Answer for lesson 1

会计英语课后题答案Answer for lesson 1

会计英语课后题答案Answer for lesson 1

Insure Expense

会计英语课后题答案Answer for lesson 1

Enquired:

(a) Prepare closing entries at June 30, 20X1.

(b) Prepare a post-closing trial balance.

Solution:

(a)

Service Revenue ...................................................................................................... 4,100

Income Summary ....................................................................................... 4,100 Income Summary ..................................................................................................... 3,900

Supplies Expense ....................................................................................... 2,300

Miscellaneous Expense .............................................................................. 300 Salaries Expense ................................................................................................................... 1,300

Income Summary (200)

Retained Earnings (200)

Retained Earnings (300)

Dividends (300)

(b)

LATITUDES COMPANY

Post-closing Trial Balance

For the month ended June 30, 20X1

Account titles Debits Credits

Cash $ 3,700

Accounts Receivable 3,900

Supplies 500

Accounts Payable $ 1,800

Unearned Revenue 200

Share Capital-Ordinary 5,000

Retained Earnings 700

Dividends

Service Revenue

Salaries Expense

Miscellaneous Expense

Supplies Expense

Salary Payable 400

$8,100 $8,100

1.12 Preparation of a classified statement of financial position

The adjusted trial balance for Alpine Climbing Adventures has been alphabetized as follows:

ALPINE CLIMBING ADVENTURES

Adjusted trial Balance

March 31, 20X7

Accounts payable..................................................................... € 2,400

Accounts receivable................................................................. € 6,000

Accumulated depreciation, equipment..................................... 14,000

Amy Rooniak, capital .............................................................. 36,700

Amy Rooniak, withdrawals ..................................................... 47,000

Cash ......................................................................................... 15,000

Depreciation expense, equipment ............................................ 1,400 Equipment................................................................................ 41,000

Insurance expense.................................................................... 3,900

Interest expense (660)

Long-term notes payable ......................................................... 11,000

Rent expense............................................................................ 15,000 Revenues.................................................................................. 122,000

Supplies (540)

Supplies expense...................................................................... 3,600

Telephone expense................................................................... 4,200

Unearned revenues................................................................... 22,000

Utilities expense....................................................................... 1,800

Wages expense......................................................................... 68,000 _______

Totals ....................................................................................... €208,100 €208,100

Required

1. Journalize the closing entries.

2. Prepare a statement of comprehensive income and a statement of change in owner’s equity for the year ended March 31, 20X7, and a classified statement of financial position at March 31, 20X7. The owner made an additional investment during the year of €5,000. A €6,000 payment on the long-term notes payable will be made during the year ended March 31, 20X7.

Solution:

20X7 Closing entries:

March 31 Revenues............................................................... 122,000

Income Summary ........................................... 122,000

To close the revenue account.

31 Income Summary .................................................. 98,560

Depreciation Expense, Equipment ................. 1,400

Insurance Expense.......................................... 3,900

Interest Expense (660)

Rent Expense.................................................. 15,000

Supplies Expense ........................................... 3,600

Telephone Expense ........................................ 4,200

Utilities Expense ............................................ 1,800

Wages Expense .............................................. 68,000

To close expense accounts.

31 Income Summary ................................................. 23,440

Amy Rooniak, Capital................................... 23,440

To close the income summary to capital.

31 Amy Rooniak, Capital.......................................... 47,000

Amy Rooniak, Withdrawals.......................... 47,000

To close withdrawals to capital.

会计英语课后题答案Answer for lesson 1

会计英语课后题答案Answer for lesson 1

会计英语课后题答案Answer for lesson 1

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