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Excercise Chapter 2

The document contains 3 exercises describing transactions for various businesses throughout April and August. Exercise 1 provides transactions for Vinnie's Travel Agency in April, with instructions to prepare a tabular analysis and calculate net income/loss for the month. Exercise 2 gives transactions for Jenny Brown's law office in August, including beginning balances from July 31, with instructions to prepare a tabular analysis, income statement, retained earnings statement, and balance sheet. Exercise 3 outlines transactions for Nile & Co. in August and instructions to describe each transaction, calculate the increase in stockholders' equity, compute net income, and prepare financial statements.

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125 views2 pages

Excercise Chapter 2

The document contains 3 exercises describing transactions for various businesses throughout April and August. Exercise 1 provides transactions for Vinnie's Travel Agency in April, with instructions to prepare a tabular analysis and calculate net income/loss for the month. Exercise 2 gives transactions for Jenny Brown's law office in August, including beginning balances from July 31, with instructions to prepare a tabular analysis, income statement, retained earnings statement, and balance sheet. Exercise 3 outlines transactions for Nile & Co. in August and instructions to describe each transaction, calculate the increase in stockholders' equity, compute net income, and prepare financial statements.

Uploaded by

Loan Vũ
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Excercise 1:

On April 1, Vinnie’s Travel Agency was established. The following transactions were
completed during the month.
1. Stockholders invested $15,000 cash to start the agency.
2. Paid $600 cash for April office rent.
3. Purchased office equipment for $3,000 cash.
4. Incurred $700 of advertising costs in the Chicago Tribune, on account.
5. Paid $800 cash for office supplies.
6. Earned $11,000 for services rendered: $3,000 cash is received from customers, and
the balance of $8,000 is billed to customers on account.
7. Paid a $500 cash dividend.
8. Paid Chicago Tribune amount due in transaction (4).
9. Paid employees’ salaries $2,200.
10. Received $4,000 in cash from customers who have previously been billed in
transaction (6).

Instructions
(a) Prepare a tabular analysis of the transactions using the following column headings:
Cash, Accounts Receivable, Supplies, Office Equipment, Accounts Payable, Common
Stock, and Retained Earnings.
(b) From an analysis of the column Retained Earnings, compute the net income or net
loss for April.

Excercise 2:

Jenny Brown opened a law office Jenny Brown, Attorney at Law, on July 1, 2008. On
July 31, the balance sheet showed Cash $5,000, Accounts Receivable $1,500,
Supplies $500, Office Equipment $6,000, Accounts Payable $4,200, Common Stock
$5,000, and Retained Earnings $3,800. During August the following transactions
occurred.

1. Collected $1,200 of accounts receivable.


2. Paid $2,800 cash on accounts payable.
3. Earned revenue of $8,000 of which $3,000 is collected in cash and the balance is
due in September.
4. Purchased additional office equipment for $2,000, paying $400 in cash and the
balance on account.
5. Paid salaries $2,500, rent for August $900, and advertising expenses $400.
6. Paid a $700 cash dividend.
7. Received $1,500 from Standard Federal Bank—money borrowed on a note payable.
8. Incurred utility expenses for month on account $220.
Instructions
(a) Prepare a tabular analysis of the August transactions beginning with July 31
balances. The column headings should be as follows: Cash, Accounts Receivable,
Supplies, Office Equipment, Notes Payable, Accounts Payable, Common Stock,
Retained Earnings.
(b) Prepare an income statement for August, a retained earnings statement for August,
and a balance sheet at August 31.

Excercise 3:

An analysis of the transactions made by Nile & Co., a certified public accounting
firm, for the month of August is shown on the next page. Each increase and decrease
in stockholders’ equity is explained.

Instructions

(a) Describe each transaction that occurred for the month.


(b) Determine how much stockholders’ equity increased for the month.
(c) Compute the amount of net income for the month.
(d) Prepare an income statement and a retained earnings statement for August and a
balance sheet at August 31, 2008.

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