Basic Accounting Equations
(You must refer to Chapter 2, Section 2.2, Page 48 to see normal balance and how debit or credit will impact each account. Please read my Hints in parenthesis and mostly underlined for each section of the problem/assignment)
1. Basic concepts. Jean's Marine Supply specializes in the sale of boating equipment and accessories. Identify the items that follow as an asset (A), liability (L), revenue (R), or expense (E) from the firm's viewpoint. (Pages 24, 33-34)
a. The inventory of boating supplies owned by the company. b. Monthly rental charges paid for store space.
c. A loan owed to Citizens Bank.
d. New computer equipment purchased to handle daily record keeping. e. Daily sales made to customers.
f. Amounts due from customers.
g. Land owned by the company to be used as a future store site. h. Weekly salaries paid to salespeople.
2. Basic computations. The following selected balances were extracted from the accounting records of Rossi Enterprises on December 31, 20X3: (Hint: Assets: Cash, A/R, Bldg, Land (add these together), Liabilities: A/P, L/P (add these together), Revenue: Fee, Expenses: I/E, A/E, T/E, U/E, W/E (add all expenses and deduct the total from revenue, the result would be your net income).
Accounts Payable $3,200 Interest Expense $2,500
Accounts Receivable 14,800 Land 18,000
Auto Expense 1,900 Loan Payable 40,000
Building 30,000 Tax Expense 3,300
Cash 7,400 Utilities Expense 4,100
Fee Revenue 56,900 Wage Expense 37,500
a. Determine Rossi’s total assets as of December 31.
b. Determine the company’s total liabilities as of December 31. c. Compute 20X3 net income or loss.
3. Balance sheet preparation. The following data relate to Preston Company as of December 31, 19XX: Hint:
J. Preston Investment
(Hint: Accounts Payable (with ? mark) would be the difference between total Assets and total Liabilities and Owner’s Equity)
J. Preston, Owners Equity65,000Land21,000
Prepare a balance sheet as of December 31, 19XX. (See Exhibit 1.1 and 1.4)
4. Basic transaction processing. On November 1 of the current year, Richard Parker established a sole proprietorship. The following transactions occurred during the month: Hint: Refer to Exhibit 1.5 in Chapter-1, Section 1.4, Page 29 1: Parker invested $19,000 into the business (both Cash and Equity will be increased, list on these columns accordingly). 2: Paid $9,000 to acquire a used minivan. (Cash will decrease and Equipment/Van will increase. Both of these are Assets, , list on these columns accordingly). 3: Purchased $1,800 of office furniture on account. (both Furniture/Assets and Accounts Payable/Liabilities will increase, , list on these columns accordingly). 4: Performed $2,100 of consulting services on account. (both Accounts Receivable/Assets and Revenue/Equity will increase, , list on these columns accordingly). 5: Paid $300 of repair expenses. (Cash/Assets will decrease and Expense/Equity will decrease, , list on these columns accordingly). 6: Received $800 from clients who were previously billed in item 4. (Cash/Assets will increase and Accounts Receivable/Assets will decrease since the customer already made payment, , list on these columns accordingly). 7: Paid $500 on account to the supplier of office furniture in item 3. (both Cash/Assets and Accounts Payable will decrease since made payment on account, , list on these columns accordingly). 8: Received a $150 electric bill, to be paid next month. (Accounts Payable/Liabilities and Expense/Equity will increase, , list on these columns accordingly). 9: Parker withdrew $600 from the...