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PROBLEM SET NO.

1
Problem 2.2
(a) Purchased equipment for cash at a cost of $3,200. Fully paid.
(b) Received cash payment for services amounting to $900 previously rendered,
but were not paid for at the time.
(c) Purchased equipment costing $13,500, cash downpayment of $3,500 and
balance of $10,000 to be paid at a later date.
(d) Made a cash payment of $14,500 towards payment owned.
(e) Ownder P. Youngblood made additional investment of $15,000, increasing
cash.
(f) Purchased equipment for $2,100, entire amount to be paid at a later date.
Problem 3.4 (A)
1. a. Rent is an operating expense. Expenses recorded by debits.
Debit Rent Expense, $4,400.
b. The asset cash was decreased. Decreases in assets are recorded by
credits.
Credit Cash, $4,400.
2. a. Asset Accounts Receivable is acquired, services completely rendered,
obligation fulfilled. Increases in assets are recorded by debits.
Debit Accounts Receivable by $5,620.
b. Revenue has been earned. Revenue increases owners equity and is
recorded by a credit.
Credit Repair Service Revenue by $5,620.
3. a. The asset Cash was increased. Increases in assets are recorded by debits.
Debit Cash, $2,830
b. Revenue has been earned. Revenue increases owners equity and is
recorded by a credit.
Credit Repair Service Revenue by $2,830
4. a. The cost of advertising is an expense. Expenses are recorded by debits,
and decrease owners equity.
Debit Advertising Expense, $165
b. The liability Accounts Payable is incurred. Increases in liabilities are
recorded by credits.
Credit Accounts Payable, $165
5. a. The asset Cash is increased. Increases in assets are recorded by debits.
Debit Cash, $5,620
b. The asset Accounts Receivable is decreased. Decreases in assets are
recorded by credits.
Credit Accounts Receivable, $5,620
6. a. The asset Cash is increased. Increases in assets are recorded by debits.

Debit Cash, $400


b. The asset Accounts Receivable is increased. Increases in assets are
recorded by debits.
Debit Accounts Receivable, $1,490
c. Revenue has been earned. Revenue increases owners equity and is
recorded by a credit.
Credit Repair Service Revenue by $1,890
7. a. The liability Accounts Payable is decreased. Decreases in liabilities are
recorded by debits.
Debit Accounts Payable, $165
b. The asset Cash is decreased. Decreases in assets are recorded by credits.
Credit Cash, $165
8. a. The asset Cash is decreased. Decreases in assets are recorded by credits.
Credit Cash, $7,600
Problem 3.5
(A. Recording)
CAMPBELL CROP DUSTING
Entries for June 2001
Date
01 June

Debit
Credit
Cash
$60,000
Pat Campbell, Capital
$60,000
Campbell deposited $60,000 cash in a bank account in the name of
the business.
02 June

Aircraft

$220,000
Cash
$40,000
Notes Payable
$180,000
Purchased a crop-dusting aircraft from Utility Aircraft for $220,000.
Made a $40,000 cash down payment and issued a note payable for
$180,000.

04 June

Rent Expense
$2,500
Cash
$2,500
Paid Woodrow Airport $2,500 to rent office and hangar space for the

month.
15 June

Accounts Receivable
$8,320
Crop-Dusting Revenue
$8,320
Billed customers $8,320 for crop-dusting services rendered during the
first half of June.
Salaries Expense
$5,880
Cash
$5,880

Paid $5,880 salaries to employees for services rendered during the


first half of June.
18 June

Maintenance Expense
$1,890
Cash
$1,890
Paid Hannigans Hangar $1,890 for maintenance and repair services.

25 June

Cash

$4,910
Accounts Receivable
$4,910
Collected $4,910 of the amounts billed to customers on June 15.

30 June

Accounts Receivable
$16,450
Crop-Dusting Revenue
$16,450
Billed customers $16,450 for crop-dusting services rendered during the
second half of the month.
Salaries Expense
$6,000
Cash
$6,000
Paid $6,000 in salaries to employees for services rendered during the
second half of June.
Fuel Expense
$2,510
Accounts Payable
$2,510
Received a fuel bill from Henrys Feed & Fuel for $2,510 of aircraft fuel
purchased during June. This amount is due by July 10.
Pat Campbell, Capital
$2,000
Pat Campbell, Drawing
$2,000
Campbell withdrew $2,000 cash from the business for personal use.
(B. Posting)

Date
01
June
02
June
04
June
15
June
18
June
25
June

CASH
Debit
$60,000

CAMPBELL CROP DUSTING


T-Accounts for June 2001
30
June
Credit
TOTAL
$8,640

$40,000
$2,500
$5,880
$1,890
$4,910

$6,000

PAT CAMPBELL, CAPITAL


Date
Debit
Credit
01
$60,000
June
30
$2,000
June
TOTAL
$58,000
Date
02
June

AIRCRAFT
Debit
$220,000

Credit

TOTAL
Date
02
June
TOTAL
Date
30
June
TOTAL

$220,000
NOTES PAYABLE
Debit
Credit
$180,000
$180,000
ACCOUNTS PAYABLE
Debit
Credit
$2,510
$2,510

ACCOUNTS RECEIVABLE
Date
Debit
Credit
15
$8,320
June
25
$4,910
June
30
$16,450
June
TOTAL
$19,860
Date
04
June
TOTAL

RENT EXPENSE
Debit
Credit
$2,500

June
30
June
TOTAL

$6,000
$11,880

MAINTENANCE EXPENSE
Date
Debit
Credit
18
$1,890
June
TOTAL
$1,890
Date
30
June
TOTAL

FUEL EXPENSE
Debit
Credit
$2,510

CROP-DUSTING REVENUE
Date
Debit
Credit
15
$8,320
June
30
$16,450
June
TOTAL
$24,770
PAT CAMPBELL, DRAWING
Date
Debit
Credit
30
$2,000
June
TOTAL
$2,000

$2,500
Date
15

$2,510

SALARIES EXPENSE
Debit
Credit
$5,880

(C. Trial Balance)


CAMPBELL CROP DUSTING
Trial Balance for June 2001

D.

Total
+

$19,860

Total
Payable
Payable

TRIAL BALANCE
Debit
Cash
$8,640
Aircraft
$220,000
Accounts Receivable
$19,860
Rent Expense
$2,500
Salaries Expense
$11,880
Maintenance Expense
$1,890
Fuel Expense
$2,510
Pat Campbell, Capital
Accounts Payable
Notes Payable
Crop-Dusting Revenue
Pat Campbell, Drawing
TOTAL
$267,280

Credit

$58,000
$2,510
$180,000
$24,770
$2,000
$267,280

Assets = Cash
Aircraft +
Accounts
Receivable
= $8,640 +
$220,000 +
= $248,500
Liabilities =
Accounts
+ Notes

= $2,510 +
$180,000
= $182,510
Total Equities = Rent Expense + Salaries Expense Maintenance Expense +
Fuel Expense
+ Pat Campbell, Capital + Crop-Dusting Revenue + Pat
Campbell, Drawing
= (-$2,500) + (-$11,880) + (-$1,890) + (-$2,510) + $58,000 +
$24,770 + (-$2,000)
= $65,990
Total Assets = Total Liabilities + Total Equities
$248,500 =
$182,510
+
$65,990
$248,500 = $248,500

Yes, the figures for total assets, total liabilities, and total owners equity will
be reported in the balance sheet at June 30, 2001. Based on the solution above, the
figures adhere to the accounting equation, which states that the total assets must
be equal to the sum of the total liabilities and the total owners equity at all times.
This proves that all finances that went in and out of the company were accounted
for.
Problem 4.3
a.) Applying the Apportioning Recorded Costs Adjusting Entry
Answer:
Rental Expense
Prepaid Rent

$ 300,000
$ 300,000

To compute for the prepaid rent: $1,500,000 / 5 months = $300,000


b.) Applying the Apportioning Unearned Revenues
Answer:

Unearned Revenue
Revenue

$ 2,560,000
$ 2,560,000

The Outlaws
Adjusting Entries
08/01
Rental Expense
Prepaid Rent
Unearned Revenue
Revenue

$ 1,500,000
$ 1,500,000
$ 2,560,000
$ 2,560,000

Problem 4.4
DALE & CLARK LAW FIRM
Accrued Salary
Date
15 December

Debit
Salaries Expense
Salaries Payable

Credit
$17800
$17800

Adjusting entry for accrued salaries due to employees on every 15 th of each


month

31 December
of

Salaries Expense
Salaries Payable

$17800
$17800

Adjusting entry for accrued salary expense due to employees required on 31 st


December

Accounts Receivable
Service Revenue

$18900
$18900

Adjusting entry for accrued legal fees revenue required on 31st of December
that has not yet been
billed to Stone

15 January Salaries Expense


Salaries Payable

$17200
$17200

Adjusting entry for accrued salary expense accounted for the 15th of January
assuming that the
salaries paid to the staff amounts to $35000

b. Since the $17,800 of the 35,000 was recorded already, the salary expense will be
$17,200 for January
c. $42000, because the $18900 has already been accounted for.