LESSON-2

1LESSON2ReviewmaterialReviewquestionsQuestion1NorthCoincurredthefollowingtransactionsduringJuly20X5,itsfirstmonthofoperations:July1Theowner,GregDuggan,invested€10,000cash.10Purchased€5,000worthofequipmentoncredit.12Performedservicesforaclientandreceived€20,000cash.14Paidforexpenses;€7,000.15Completedservicesforaclientandsentabillfor€3,000.31Theownerwithdrew€500cash.Required1.CreateaGeneralLedgerbyopeningthefollowingaccounts:Cash;AccountsReceivable;Equipment;AccountsPayable;GregDuggan,capital;GregDuggan,Withdrawals;Revenue;Expenses.2.JournalizetheJulytransactionsintheGeneralJournal.3.PosttheJulytransactionsfromyourGeneralJournalintoyourGeneralLedgeraccounts.4.PrepareatrialbalancebasedonthebalancesinyourGeneralLedgeraccounts.5.Prepareastatementofcomprehensiveincome,astatementofchangesinowner’sequity,andastatementoffinancialpositionbasedonyourtrialbalance.Source:AdaptedfromLarson,KermitP.,TillyJensonandRaymondF.Carroll,FundamentalAccountingPrinciples,TenthCanadianEdition(Toronto:McGraw-HillRyerson,2002),Exercise3-3,page119andExercise3-5,page119Question2Hay’sTechnologyConsultantsisinitssecondmonthofoperations.YouhavebeengiventhefollowingjournalentriesregardingitsJanuary20X7transactions.Requireda.Openthefollowingaccounts(usingthebalancecolumnformat)enteringtheopeningbalancesbroughtforwardfromtheendoflastmonth,December31,20X6:Cash(101)€1,700;AccountsReceivable(106)€600;Equipment(167)€3,000;AccountsPayable(201)€650;AliceHay,Capital(301)€4,650;AliceHay,Withdrawals(302)€600;FeesEarned(401)€3,600;andSalariesExpense(622)€3,000.FinancialAccountingFundamentalsReviewmaterial22b.Postthejournalentriestotheaccountsandenterthebalanceaftereachposting.HAY’STECHNOLOGYCONSULTANTSGeneralJournalPage1DateAccountTitlesandExplanationsPRDebitCredit20X72Jan1Cash........................................................................7,000AliceHay,Capital............................................7,000Additionalownerinvestment.12AccountsReceivable..............................................18,000FeesEarned.......................................................18,000Performedworkforacustomeronaccount.20Equipment...............................................................24,000Cash..................................................................4,000AccountsPayable.............................................20,000Purchasedequipmentpayingcashandthebalanceoncredit.31Cash........................................................................10,000AccountsReceivable........................................10,000Collectedcashfromcreditcustomer.31SalariesExpense.....................................................6,000Cash..................................................................6,000Paidmonthendsalaries.31AliceHay,Withdrawals.........................................1,500Cash..................................................................1,500AliceHaywithdrewcashforpersonaluse.Source:AdaptedfromLarson10e,Exercise3-13,pages121-122Question3Completethefollowingtablebyfillingintheblanks.Foreachofthelistedpostingerrors:1.Enterincolumn(1)theamountofthedifferencethattheerrorwouldcreatebetweenthetwotrialbalancecolumns(showazeroifthecolumnswouldbalance).2.Identifyiftherewouldbeadifferencebetweenthetwocolumns,identifyincolumn(2)thetrialbalancecolumnthatwouldbelarger.3.Identifytheaccount(s)affectedincolumn(3).4.Identifytheamountbywhichtheaccount(s)isunder-oroverstatedincolumn(4).Theanswerforthefirsterrorisprovidedasanexample.FinancialAccountingFundamentalsReviewmaterial23Description(1)DifferenceBetweenDebitandCreditColumn(2)ColumnwiththeLargerTotal3(3)Identifyaccount(s)incorrectlystated(4)Amountthataccount(s)isoverstatedorunderstateda.A€2,400debittoRentExpensewaspostedasa€1,590debit.€810CreditRentExpenseRentExpenseisunderstatedby€810b.A€42,000debittoMachinerywaspostedasadebittoAccountsPayable.c.A€4,950credittoServicesRevenuewaspostedasa€495credit.d.A€1,440debittoStoreSupplieswasnotpostedatall.e.A€2,250debittoPrepaidInsurancewaspostedasadebittoInsuranceExpense.f.A€4,050credittoCashwaspostedtwiceastwocreditstotheCashaccount.g.A€9,900debittotheowner’swithdrawalsaccountwasdebitedtotheowner’scapitalaccount.Source:AdaptedfromLarson10e,Exercise3-17,page123andExercise3-19,pages124-125Question4CarrieFordopenedanewaccountingpracticecalledCarrieFord,PublicAccountant,and4completedthesetransactionsduringMarch20X5:Mar.1Invested€25,000incashandofficeequipmentthathadafairvalueof€6,000.1Prepaid€1,800cashforthreemonths’rentforanoffice.3Madecreditpurchasesofofficeequipmentfor€3,000andofficesuppliesfor€600.5Completedworkforaclientandimmediatelyreceived€500cash.9Completeda€2,000projectforaclient,whowillpaywithin30days.FinancialAccountingFundamentalsReviewmaterial2411PaidtheaccountpayablecreatedonMarch3.15Paid€1,500cashfortheannualpremiumonaninsurancepolicy.20Received€1,600aspartialpaymentfortheworkcompletedonMarch9.23Completedworkforanotherclientfor€660oncredit.27CarrieFordwithdrew€1,800cashfromthebusinesstopaysomepersonalexpenses.30Purchased€200ofaddit