Demonstration Problems Chapter 02 Recording Business Transactions 2-1 © 2016 Pearson Education, Inc.

2-2 The following transactions occurred for Mission Cable Services. Demonstration of E2-16 & E2-17 July 2Received $20,000 contribution from Thomas in exchange for Common Stock 4Paid utilities expense of $800. 5Purchased equipment on account, $4, Performed services for a client on account, $4, Borrowed $14,000 cash, signing a notes payable. 19 Cash dividends of $1,000 were paid to stockholders. 21Purchased office supplies for $1,600 and paid cash. 27Paid the liability from July 5. Requirements E2-16. E2-17. Journalize the transactions of Mission Cable Services. Include an explanation. 1. Open T-accounts for Mission Cable Services. 2. Compute the July 31 balance for each account.

© 2016 Pearson Education, Inc. 2-3 Demonstration of E2-16 & E2-17-Req. 1 Date Accounts and ExplanationDebitCredit Jul. 2Cash20,000 Common Stock20,000 Issued common stock in exchange for cash. Cash Jul. 220,000 Common Stock 20,000Jul. 2 July 2 Received $20,000 contribution from Thomas in exchange for common stock.

© 2016 Pearson Education, Inc. 2-4 July 4 Paid utilities expense of $800. Demonstration of E2-16 & E2-17-Req. 1 Date Accounts and ExplanationDebitCredit Jul. 4Utilities Expense800 Cash800 Paid utility expense. Cash Jul. 220,000800Jul. 4 Utilities Expense Jul. 4800

© 2016 Pearson Education, Inc. 2-5 July 5 Purchased equipment on account, $4,200. Demonstration of E2-16 & E2-17-Req. 1 Date Accounts and ExplanationDebitCredit Jul. 5Equipment4,200 Accounts Payable4,200 Purchased equipment on account. Equipment Jul. 54,200 Accounts Payable 4,200Jul. 5

© 2016 Pearson Education, Inc. 2-6 July 10 Performed services for a client on account, $4,000. Demonstration of E2-16 & E2-17-Req. 1 Date Accounts and ExplanationDebitCredit Jul. 10Accounts Receivable4,000 Service Revenue4,000 Performed services for client on account. Accounts Receivable Jul. 104,000 Service Revenue 4,000Jul. 10

© 2016 Pearson Education, Inc. 2-7 July 12 Borrowed $14,000 cash, signing a notes payable. Demonstration of E2-16 & E2-17-Req. 1 Date Accounts and ExplanationDebitCredit Jul. 12Cash14,000 Notes Payable14,000 Borrowed cash by signing note. Cash Jul. 220,000800Jul ,000 Notes Payable 14,000Jul. 12

© 2016 Pearson Education, Inc. 2-8 July 19 Cash dividends of $1,000 were paid to stockholders. Demonstration of E2-16 & E2-17-Req. 1 Date Accounts and ExplanationDebitCredit Jul. 19Dividends1,000 Cash1,000 Paid cash dividends. Cash Jul. 220,000800Jul ,0001, Dividends Jul. 191,000

© 2016 Pearson Education, Inc. 2-9 July 21 Purchased office supplies for $1,600 and paid cash. Demonstration of E2-16 & E2-17-Req. 1 Date Accounts and ExplanationDebitCredit Jul. 21Office Supplies1,600 Cash1,600 Purchased office supplies with cash. Cash Jul. 220,000800Jul ,0001, , Office Supplies Jul. 211,600

© 2016 Pearson Education, Inc July 27 Paid the liability from July 5. Demonstration of E2-16 & E2-17-Req. 1 Date Accounts and ExplanationDebitCredit Jul. 21Accounts Payable4,200 Cash4,200 Paid cash on account. Cash Jul. 220,000800Jul ,0001, , , Accounts Payable Jul. 274,200 Jul. 5

© 2016 Pearson Education, Inc Demonstration of E2-17-Req. 2 Cash Jul. 220,000800Jul ,0001, , , Bal.26,400 Accounts Receivable Jul. 104,000 Bal.4,000 Office Supplies Jul. 211,600 Bal.1,600 Equipment Jul. 54,200 Bal.4,200

© 2016 Pearson Education, Inc Demonstration of E2-17-Req. 2 Accounts Payable Jul. 274,200 Jul. 5 0Bal. Notes Payable 14,000Jul.12 14,000Bal. Common Stock 20,000Jul. 2 20,000Bal. Dividends Jul. 191,000 Bal.1,000

© 2016 Pearson Education, Inc Demonstration of E2-17-Req. 2 Service Revenue 4,000Jul.10 4,000Bal. Utilities Expense Jul Bal.800

© 2016 Pearson Education, Inc The following trial balance of Luxury Tours and Travels Service as of Mar 31, 2016, does not balance. Demonstration of E2-27 LUXURY TOURS AND TRAVELS SERVICES Trial Balance March 31, 2016 Balance Account Title Debit Credit Cash$5,000 Accounts Receivable3,000 Office Supplies1,000 Computer Equipment15,000 Accounts Payable $10,000 Utilities Payable 400 Common Stock 12,000 Dividends8,000 Service Revenue 9,000 Salaries Expense1,500 Rent Expenses500 Utilities Expense600 Total$34,600$31,400

© 2016 Pearson Education, Inc Demonstration of E2-27 Investigation of the accounting records reveals that the bookkeeper: a.Recorded a $200 cash revenue transaction by debiting Accounts Receivable. The credit entry was correct. b.Posted a $2,250 credit to Accounts Payable as $250. c. Did not record Utilities Expense or the related Utilities Payable in the amount of $300. d. Understated Common Stock by $1,000. Requirement Prepare the corrected trial balance as of March 31, 2016, complete with a heading; journal entries are not required.

© 2016 Pearson Education, Inc Demonstration of E2-27 LUXURY TOURS AND TRAVELS SERVICES Trial Balance March 31, 2016 Balance Correction Corrected Balance Account Title Debit Credit Debit Credit Debit Credit Cash$5,000 $200 $5,200 Accounts Receivable3,000 $2002,800 a. Recorded a $200 cash revenue transaction by debiting Accounts Receivable. The credit entry was correct.

© 2016 Pearson Education, Inc Demonstration of E2-27 LUXURY TOURS AND TRAVELS SERVICES Trial Balance March 31, 2016 Balance Correction Corrected Balance Account Title Debit Credit Debit Credit Debit Credit Cash$5,000 $200 $5,200 Accounts Receivable3,000 $2002,800 Accounts Payable $10,000 2,000 $12,000 b. Posted a $2,250 credit to Accounts Payable as $250

© 2016 Pearson Education, Inc Demonstration of E2-27 LUXURY TOURS AND TRAVELS SERVICES Trial Balance March 31, 2016 Balance Correction Corrected Balance Account Title Debit Credit Debit Credit Debit Credit Cash$5,000 $200 $5,200 Accounts Receivable3,000 $2002,800 Accounts Payable $10,000 2,000 $12,000 Utilities Payable Utilities Expense c. Did not record Utilities Expense or the related Utilities Payable in the amount of $300.

© 2016 Pearson Education, Inc Demonstration of E2-27 LUXURY TOURS AND TRAVELS SERVICES Trial Balance March 31, 2016 Balance Correction Corrected Balance Account Title Debit Credit Debit Credit Debit Credit Cash$5,000 $200 $5,200 Accounts Receivable3,000 $2002,800 Accounts Payable $10,000 2,000 $12,000 Utilities Payable Common Stock 12,000 1,000 13,000 Utilities Expense d. Understated Common Stock by $1,000.

© 2016 Pearson Education, Inc Demonstration of E2-27 LUXURY TOURS AND TRAVELS SERVICES Trial Balance March 31, 2016 Balance Correction Corrected Balance Account Title Debit Credit Debit Credit Debit Credit Cash$5,000 $200 $5,200 Accounts Receivable3,000 $2002,800 Office Supplies800 Computer Equipment15,000 Accounts Payable $10,000 2,000 $12,000 Utilities Payable Common Stock 12,000 1,000 13,000 Dividends8,000 Service Revenue 9,000 Salaries Expense1,500 Rent Expenses500 Utilities Expense Total$34,400$31,400 $34,700

© 2016 Pearson Education, Inc Demonstration of E2-28 PETER SCOTT, M.D. Trial Balance 30-June-16 Balance Account Title Debit Credit Cash 50,000 Accounts Receivable 10,000 Office Supplies 4,000 Office Equipment 15,000 Building 100,000 Land 30,000 Accounts Payable 4,000 Utilities Payable 1,500 Unearned Revenue 20,000 Notes Payable 80,000 Common Stock 140,000 Dividends 75,000 Service Revenue 70,000 Salaries Expense 30,000 Utilities Expense 1,000 Advertising Expense 500 Total $315,500 Requirement Calculate the debt equity ratio for Peter Scott, M.D.. Peter Scott, M.D. reported the following trial balance as of June 30, 2016.

© 2016 Pearson Education, Inc Demonstration of E2-28 Accounts Payable $4,000 Accounts Receivable $10,000 Utilities Payable 1,500 Office Supplies 4,000 Unearned Revenue 20,000 Office Equipment 15,000 Notes Payable 80,000 Building 100,000 Cash 50,000 Land 30,000 Debt ratio ═ Total liabilities ∕ Total assets

© 2016 Pearson Education, Inc Demonstration of E2-28 Accounts Payable $4,000 Accounts Receivable $10,000 Utilities Payable 1,500 Office Supplies 4,000 Unearned Revenue 20,000 Office Equipment 15,000 Notes Payable 80,000 Building 100,000 Cash 50,000 Land 30,000 LiabilitiesAssets Accounts Payable $4,000 Utilities Payable 1,500 Unearned Revenue 20,000 Notes Payable 80,000

© 2016 Pearson Education, Inc Demonstration of E2-28 Accounts Payable $4,000 Accounts Receivable $10,000 Utilities Payable 1,500 Office Supplies 4,000 Unearned Revenue 20,000 Office Equipment 15,000 Notes Payable 80,000 Building 100,000 Cash 50,000 Land 30,000 LiabilitiesAssets Accounts Payable $4,000 Cash $50,000 Utilities Payable 1,500 Accounts Receivable 10,000 Unearned Revenue 20,000 Office Supplies 4,000 Notes Payable 80,000 Office Equipment 15,000 Building 100,000 Land 30,000

© 2016 Pearson Education, Inc Demonstration of E2-28 Accounts Payable $4,000 Accounts Receivable $10,000 Utilities Payable 1,500 Office Supplies 4,000 Unearned Revenue 20,000 Office Equipment 15,000 Notes Payable 80,000 Building 100,000 Cash 50,000 Land 30,000 LiabilitiesAssets Accounts Payable $4,000 Cash $50,000 Utilities Payable 1,500 Accounts Receivable 10,000 Unearned Revenue 20,000 Office Supplies 4,000 Notes Payable 80,000 Office Equipment 15,000 Building 100,000 Land 30,000 Total liabilities$105,500 Total assets $209,000

© 2016 Pearson Education, Inc Demonstration of E2-28 Debt ratio═Total liabilities ∕ Total assets ═$105,500 ∕ $209,000 Total Assets$209,000 Total Liabilities$105,500

© 2016 Pearson Education, Inc Demonstration of E2-28 Debt ratio═Total liabilities ∕ Total assets ═$105,500 ∕ $209,000 ═0.50 or 50% Total Assets$209,000 Total Liabilities$105,500

End of Chapter © 2016 Pearson Education, Inc.