Page 105 - Accounting Principles (A Business Perspective)

2. Recording business transactions

a. Capital stock was issued for cash, USD 300,000.
b. Purchased trucks by signing a note bearing no interest, USD 210,000.
c. Earned service revenue on account, USD 4,800.

d. Collected the account receivable resulting from transaction (c), USD 4,800.
e. Paid the note payable for the trucks purchased, USD 210,000.
f. Paid utilities for the month in the amount of USD 1,800.
g. Paid salaries for the month in the amount of USD 7,500.
h. Incurred supplies expenses on account in the amount of USD 1,920.
i. Purchased another truck for cash, USD 48,000.
j. Performed delivery services on account, USD 24,000.

Exercise I Using the data in the previous problem, post the entries to T-accounts. Write the letter of the
transaction in the account before the dollar amount. Determine a balance for each account.
Exercise J Using your answer for the previous exercise, prepare a trial balance. Assume the date of the trial
balance is 2010 March 31.
Exercise K John Adams owns and manages a bowling center called Strike Lanes. He also maintains his own
accounting records and was about to prepare financial statements for the year 2010. When he prepared the trial
balance from the ledger accounts, the total of the debits column was USD 435,000, and the total of the credits
column was USD 425,000. What are the possible reasons why the totals of the debits and credits are out of balance?
How would you normally proceed to find an error if the two trial balance columns do not agree?

Exercise L Refer to the Consolidated Balance Sheets of The Limited in the Annual Report Appendix located in
the back of this text. Perform both horizontal and vertical analysis on each of The Limited's asset accounts, treating
total assets as a significant total for vertical analysis. comment on the results.
Note: While you can certainly do this exercise with a calculator, computer spreadsheets such as Excel are ideal
for this type of analysis.

Problems
Problem A The transactions of Lightning Package Delivery Company for March 2010 follow:
Mar. 1 The company was organized and issued capital stock for USD 300,000 cash.
2 Paid USD 6,000 as the rent for March on a completely furnished building.
5 Paid cash for delivery trucks, USD 180,000.
6 Paid USD 4,000 as the rent for March on two forklift trucks.
9 Paid USD 2,200 for supplies received and used in March.
12 Performed delivery services for customers who promised to pay USD 27,000 at a later date.

20 Collected cash of USD 4,500 from customers on account (see March 12 entry).
21 Received a bill for USD 1,200 for advertising in the local newspaper in March.
27 Paid cash for gas and oil consumed in March, USD 450.
31 Paid USD 2,400 salaries to employees for March.
31 Received an order for services at USD 12,000. The services will be performed in April.
31 Paid cash dividend, USD 1,000.
Prepare the journal entries required to record these transactions in the general journal of the company.

Problem B Economy Laundry Company had the following transactions in August 2010:

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