Problem Solving
Problem Solving
Accounting has its own vocabulary and basic relationships. Match the accounting
terms at left with the corresponding definition or meaning at right.
H 1. Debit
A 2. Expense
C 3. Net income
D 4. Ledger
J 5. Posting
I 6. Normal balance
B 7. Payable
F 8. Journal
G 9. Receivable
E 10. Owner's Equity
Problem 2
A friend named by Jay Barlow has asked what effect certain transactions will have on his
company. Time is short, so you cannot apply the detailed procedures of journalizing and posting. Instead
you must analyze the transactions without the use of a journal. Barlow will continue the business only
if he can expect to earn monthly net income of at least $5,000. The following transactions occurred
this month;
a. Barlow deposited $5,000 cash in a business bank account, and the corporation issued ordinary shares
to him
b. Borrowed $5,000 cash from the bank and signed a note payable due within 1 year.
c. Paid $1,300 cash for supplies
d. Purchased advertising in the local newspaper for cash $1,800
e. Purchased office furniture on account, $4,400
f. Paid the following cash expenses for 1 month; employee salary, $2,000; office rent $ 1,200
g. Earned revenue on account, $7,000
h. Earned revenue and received $2,500 cash
i. Collected cash from customers on account, $1,200
j. Paid on account , $1,000
Requirements
1. Set up the following T-accounts: Cash, Accounts Receivable, Supplies, Furniture, Accounts Payable,
Notes Payable, Share Capital, Service Revenue, Salary Expense, Advertising Expense, and Rent Expense
2. Record the transactions directly in the accounts without using a journal. Key each transaction by letter
3. Prepare a trial balance for Barlow Networks, Inc., at the current date. List expenses with the largest
amount first, the next largest amount second, and so on
4. Compute the amount of net income or net loss for the first month of operations. Why or why not
would you recommend that Barlow continue in business?
1. Set up the following T-accounts: Cash, Accounts Receivable, Supplies, Furniture, Accounts Payable,
Notes Payable, Share Capital, Service Revenue, Salary Expense, Advertising Expense, and Rent Expense
ASSETS
Cash
Debit
a. $5,000.00 c.
b. $5,000.00 d.
h. $2,500.00 f.
i. $1,200.00 f.
j.
Bal. $6,400.00
Account Receivable
Debit
g. $7,000.00 i.
Bal. $5,800.00
Supplies
Debit
c. $1,300.00
Bal. $1,300.00
Furniture
Debit
e. $4,400.00
Bal. $4,400.00
Bal.
2. Record the transactions directly in the accounts without using a journal. Key each transaction by letter
cash
explanation
a issuance of common stock
ending balance
accounts Receivable
explanation
g services on account
ending balance
supplies
explanation
c purchased for cash
ending balance
furniture
explanation
e purchased on account
ending balance
accounts payable
explanation
j payment on
notes payable
explanation
common stock
explanation
service revenue
explanation
salary expense
explanation
f paid expense in cash
ending balance
3. Prepare a trial balance for Barlow Networks, Inc., at the current date. List expenses with the largest
amount first, the next largest amount second, and so on
Account Title
Cash
Account Receivable
Supplies
Furniture
Accounts Payable
Notes Payable
Share Capital
Service Revenue
Salary Expense
Advertising Expense
Rent Expense
TOTAL
4. Compute the amount of net income or net loss for the first month of operations. Why or why not
would you recommend that Barlow continue in business?
Cash
Notes Receivable
Accounts Receivable
Office Supplies
Land
Building
Accumulated Depreciation - building
Equipment
Accumulated Depreciation - equipment
accounts Payable
Uneraned Consulting Revenues
K, Capital
K, Withdrawals
Consulting Revenues
Salaries Expense
Repairs Expense
Miscellaneous Expense
Totals
Additional information
a. Office supplies on hand as at Dec. 31, 2020 is 21,000
b. one-third of the unearned revenues has been earned as at Dec 31, 2020
c. Depreciation for the year amounted to 38,000 for the building and 123,000 for the equipment
d. Salaries in the amount of 14,000 have accrued at year-end
e. The notes eceivable were accepted from several customers. The notes were issued on Sept. 1, 2020
and will be settled together with a 20% interest on May 31, 2022
Required:
1. Establish a ledger for each of the account in the unadjusted trial balance
2. Journalize and post the adjusting entries
3. Prepare a worksheet
4. Prepare an income statement, a statement of changes in equity and a balance sheet.
1. Establish a ledger for each of the account in the unadjusted trial balance
SL NO DATE
a Dec-31
b Dec-31
c Dec-31
d Dec-31
e Dec-31
Cash
Notes Receivable
Accounts Receivable
Office Supplies
Land
Building
Accumulated Depreciation - building
Equipment
Accumulated Depreciation - equipment
accounts Payable
Uneraned Consulting Revenues
K, Capital
K, Withdrawals
Consulting Revenues
Salaries Expense
Repairs Expense
Miscellaneous Expense
Office Supplies-expense
depreciation expense building
depreciation expense equipment
salaries payable
interest receivable
interest revenue
3. Prepare a worksheet
Counting revenues
interest revenue
less:
net income
e rent $ 1,200
Accounts Payable
Credit
$1,300.00 j.
$1,800.00 Bal.
$2,000.00
$1,200.00 Notes Payable
$1,000.00
Bal.
Credit
$1,200.00
Credit
Credit
receipt for revenue earned provided 2500 f paid for salary expense
f paid rent expense
receipt of cash on accounts 1200
j payment on account
ending balance 6400
ending balance
Amount
revenue
service revenue 9,500
total revenue 9,500
expenses
salary expense 2,000
advertising expense 1,800
rent expense 1,200
total expenses 5,000
nd a balance sheet.
ref
office supplies expens
office supplies
unearned revenue
consulting revenue
depreciation expense-building
depreciation expense equipment
accumulated depreciation building
accumulated depreciation equipment
salaries expense
salaries payable
interest receivable
interest revenue
Accounts
salaries expense
repairs expense
miscellaneous expense
office supplies expense
depreciation expense building
depreciation expense equipment
nd a balance sheet.
current assets
cash
notes receivable
accounts receivable
interest receivable
unearned consulting revenue
office supplies
total current asset
property plant and equipment
land
building
equipment
accumulated depereciation building
accumulated depereciation equipment
Total property, plant and equipment
total assets
accounts payable
salaries payable
total liabilities
K.capital
net income
total owners equity
less:k withdrawal
net changes in owners equity
Debit . Credit
$1,000.00 e. $4,400.00
$3,400.00
Debit Credit
b. $5,000.00
$5,000.00
credit
1,300
1,800
2,000
1,200
1,000
credit
1,200
credit
credit
credit
4,400
3,400
credit
5000
5000
credit
5,000
5,000
credit
7,000
2,500
9,500
credit
Credit
$3,400.00
$5,000.00
$5,000.00
$9,500.00
$22,900.00
45,000.00
360,000.00
156,000.00
63,000.00
300,000.00
1,590,000.00
254,000.00
2,150,000.00
612,000.00
213,000.00
450,000.00
2,655,000.00
600,000.00
2,108,000.00
875,000.00
116,000.00
37,000.00
6,292,000.00 6,292,000.00
debit credit
42,000
42,000
150,000
150,000
38,000
123,000
38,000
123,000
14,000
14,000
24,000
24,000
2,258,000
24,000 2,282,000
889,000
116,000
37,000
42,000
38,000
123,000 1,245,000
1,037,000
45,000
360,000
156,000
24,000
300,000
21,000
906,000
300,000 300,000
1,590,000
2,150,000 3,740,000
292,000
735,000 1,,027,000
3,013,000
3,919,000
213,000
14,000
227,000
2,655,000
1,037,000 3,692,000
3,919,000
600,000 600,000
3,092,000
+ OWNER'S EQUITY
Share Capital
Debit
Bal. $5,000.00
Service Revenue
Debit
Bal. $9,500.00
Salary Expense
Debit
f. $2,000.00
Bal. $2,000.00
Advertising Expense
Debit
d. $1,800.00
Bal $1,800.00
Rent Expense
Debit
f. $1,200.00
Bal $1,200.00
tion Systems Company
d Trial Balance
Credit
g. $7,000.00
h. $2,500.00
Credit
Credit
Credit
Balance sheet Changes in owners equity
debit credit debit credit
45,000
360,000
156,000
21,000
credit 300,000
1,590,000
292,000
2,150,000
735,000
213,000
300,000
2,655,000 2,655,000
600,000 600,000
2,258,000
889,000
116,000
37,000
42,000
2,258,000 38,000
123,000
14,000
24,000
24,000
5,246,000 4,209,000 1,845,000 4,937,000
1,037,000 3,092,000
5,246,000 5,246,000
24,000
2,282,000
1,037,000