1. Chapter 02 Demonstration Problems Recording Business Transactions Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall2-1

2. Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall 2-2 The following transactions occurred for Mission Cable Services. E2-16D July 2Received $20,000 contribution from Thomas in exchange for Common Stock 4Paid utilities expense of $800. 5Purchased equipment on account, $4,200. 10Performed services for a client on account, $4,000. 12Borrowed $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 1. Journalize the transactions of Mission Cable Services. Include an explanation. 2. Open T-accounts for Mission Cable Services. 3. Compute the July 31 balance for each account.

3. Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall 2-3 E2-16D—Req.1 and 2 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.

4. Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall 2-4 July 4 Paid utilities expense of $800. E2-16D—Req.1 and 2 Date Accounts and ExplanationDebitCredit Jul. 4Utilities Expense800 Cash800 Paid utility expense. Cash Jul. 220,000800Jul. 4 Utilities Expense Jul. 4800

5. Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall 2-5 July 5 Purchased equipment on account, $4,200. E2-16D—Req.1 and 2 Date Accounts and ExplanationDebitCredit Jul. 5Equipment4,200 Accounts Payable4,200 Purchased equipment on account. Equipment Jul. 54,200 Accounts Payable 4,200Jul. 5

6. Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall 2-6 July 10 Performed services for a client on account, $4,000. E2-16D—Req.1 and 2 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

7. Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall 2-7 July 12 Borrowed $14,000 cash, signing a notes payable. E2-16D—Req.1 and 2 Date Accounts and ExplanationDebitCredit Jul. 12Cash14,000 Notes Payable14,000 Borrowed cash by signing note. Cash Jul. 220,000800Jul. 4 1214,000 Notes Payable 14,000Jul. 12

8. Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall 2-8 July 19 Cash dividends of $1,000 were paid to stockholders. E2-16D—Req.1 and 2 Date Accounts and ExplanationDebitCredit Jul. 19Dividends1,000 Cash1,000 Paid cash dividends. Cash Jul. 220,000800Jul. 4 1214,0001,000 19 Dividends Jul. 191,000

9. Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall 2-9 July 21 Purchased office supplies for $1,600 and paid cash. E2-16D—Req.1 and 2 Date Accounts and ExplanationDebitCredit Jul. 21Office Supplies1,600 Cash1,600 Purchased office supplies with cash. Cash Jul. 220,000800Jul. 4 1214,0001,000 19 1,600 21 Office Supplies Jul. 211,600

10. Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall 2-10 July 27 Paid the liability from July 5. E2-16D—Req.1 and 2 Date Accounts and ExplanationDebitCredit Jul. 21Accounts Payable4,200 Cash4,200 Paid cash on account. Cash Jul. 220,000800Jul. 4 1214,0001,000 19 1,600 21 4,200 27 Accounts Payable Jul. 274,200 Jul. 5

11. Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall2-11 E2-16D—Req.3 Cash Jul. 220,000800Jul. 4 1214,0001,000 19 1,600 21 4,200 27 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

12. Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall2-12 E2-16D—Req.3 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

13. Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall2-13 E2-16D—Req.3 Service Revenue 4,000Jul.10 4,000Bal. Utilities Expense Jul. 4800 Bal.800

14. Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall 2-14 The following trial balance of Luxury Tours and Travels Service as of Mar 31, 2014, does not balance. E2-27D LUXURY TOURS AND TRAVELS SERVICES Trial Balance March 31, 2014 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

15. Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall 2-15 E2-27D 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. d. Understated Common Stock by $1,000. Requirement Prepare the corrected trial balance as of March 31, 2014, complete with a heading; journal entries are not required.

16. Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall 2-16 E2-27D LUXURY TOURS AND TRAVELS SERVICES Trial Balance March 31, 2014 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.

17. Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall 2-17 E2-27D LUXURY TOURS AND TRAVELS SERVICES Trial Balance March 31, 2014 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

18. Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall 2-18 E2-27D LUXURY TOURS AND TRAVELS SERVICES Trial Balance March 31, 2014 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 400 300 700 Utilities Expense600 300 900 c. Did not record Utilities Expense or the related Utilities Payable in the amount of $300.

19. Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall 2-19 E2-27D LUXURY TOURS AND TRAVELS SERVICES Trial Balance March 31, 2014 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 400 300 700 Common Stock 12,000 1,000 13,000 Utilities Expense600 300 900 d. Understated Common Stock by $1,000.

20. Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall 2-20 E2-27D LUXURY TOURS AND TRAVELS SERVICES Trial Balance March 31, 2014 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 400 300 700 Common Stock 12,000 1,000 13,000 Dividends8,000 Service Revenue 9,000 Salaries Expense1,500 Rent Expenses500 Utilities Expense600 300 900 Total$34,400$31,400 $34,700

21. Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall 2-21 Peter Scott, M.D. reported the following trial balance as of June 30, 2015. E2-28D

22. Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall 2-22 E2-28D PETER SCOTT, M.D. Trial Balance 30-June-15 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 Calculate the debt equity ratio for Peter Scott, M.D..

23. Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall 2-23 E2-28D 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

24. Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall 2-24 E2-28D 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

25. Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall 2-25 E2-28D 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

26. Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall 2-26 E2-28D 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

27. Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall 2-27 E2-28D Debt ratio═Total liabilities ∕ Total assets ═$105,000 ∕ $209,000 Total Assets$209,000 Total Liabilities$105,500

28. Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall 2-28 E2-28D Debt ratio═Total liabilities ∕ Total assets ═$105,000 ∕ $209,000 ═0.50 or 50% Total Assets$209,000 Total Liabilities$105,500

29. End of Chapter 2 2-29Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall