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EXERCISES CHAPTER 3
- There are 3 broad categories of accounts: assets, liabilities and owners’ equity
- Give a short synonym for an asset and a liability. Then list several individual assets and several specific liabilities
- Identify 2 categories of transactions that increase owners’ equity and 2 categories that decrease it
Accounting has its own vocabulary and basic relationships. Match the accounting terms at left with the corresponding definition or meaning at right:
- Antonio Sevilla opened a medical practice. The business completed the following transactions: - Sevilla invested $64,000 cash to start his medical practice. The business issued stock to Sevilla - Purchased medical supplies on account for $9,000 and paid monthly office rent of $4, - Recorded $5,000 revenue for service rendered to patients. Received cash of $2,000 and sent bills to patients for the remainder
After these transactions, how much cash and how much in accounts receivable has the business?
- Jacob Marr opened a medical practice. During the first month of operation (February), his business, JM & Co., experienced the following events:
A. Using up assets in the course of operating a business B. Distribution of earnings C. Always a liability D. Revenues – Expenses E. Always an asset F. Assets – Liabilities
- Receivable
- Owners‘ Equity
- Expense
- Net Income
- Payable
- Dividends
a. Dec. 6: Marr invested $25,000 in the business, which in turn issued its common stock to him b. Dec. 9: the business paid cash for land costing $15,000. Marr plans to build an office building on the land c. Dec. 12: the business purchased medical supplies for $2, on account d. Dec. 15: JM & Co. officially opened for business e. Dec. 15-28: during the rest of the month, Marr treated patients and earned service revenue of $8,000, receiving cash for half the revenue earned f. Dec. 15-28: the business paid cash expenses: employee salaries, $1,400; office rent, $1,000; utilities, $ g. Dec. 28:
- The business sold supplies to another physician for cost of $500, receiving cash
- The business borrowed $10,000, signing a note payable to the bank
- The business paid $1,500 on account
- Analyze the effects of these events on the accounting equation of the medical practice of JM & Co. Use headings for Cash, Accounts Receivable, Medical Supplies, Land, Accounts Payable, Notes Payable, Common Stock, and Retained Earnings
- After completing the analysis, answer these questions about the business:
- How much are total assets?
- (^) How much does the business expect to collect from patients?
- How much does the business owe in total?
- How much net income or net loss did the business experience during its first month of operations?
- Donna Schulz Professional Corporation, completed these transactions during the month of December:
a. Dec. 2: received $7,000 cash from Schulz. Issued common stock to her b. Dec. 2: paid monthly office rent, $ c. Dec. 3: paid cash for a Dell computer, $3,000. The computer is expected to remain in service for five years d. Dec. 4: purchased office furniture on account, $3,600. The furniture should last for five years e. Dec. 5: purchased supplies on account, $ f. Dec. 9: performed tax service for a client and received cash for the full amount of $ g. Dec. 12: paid utility expenses, $ h. Dec. 18: performed consulting service for a client on account, $1,
a. Sep. 3: Larson transferred $20,000 cash from his personal bank account to a business account entitled Kermit Larson Corporation. The company issued common stock to Larson b. Sep. 4: purchased supplies, $200, and furniture, $1,800, on account c. Sep. 6: performed legal services for a client and received $1,000 cash d. Sep. 7: paid $15,000 cash to acquire land for an office site e. Sep. 10: defended a client in court, billed the client, and received his promise to pay the $600 within one week f. Sep. 14: paid for the furniture purchased September 4 on account g. Sep. 16: paid the telephone bill, $ h. Sep. 17: received partial payment from client on account, $ i. Sep. 24: paid the water and electricity bills, $ j. Sep. 28: received $1,500 cash for helping a client sell real estate k. Sep. 30: paid secretary's salary, $1, l. Sep. 30: declared and paid dividends of $2,
- Set up the following T-accounts: Cash, Accounts Receivable, Supplies, Furniture, Land, Accounts Payable, Common Stock, Dividends, Service Revenue, Salary Expense, and Utilities Expense - Record each transaction in the journal , using the account titles given. Key each transaction by date - Using transaction dates as posting references, post the transactions to the T-accounts. Label the ending balance of each account Bal.
- (^) Refer to the data in the preceding Exercise 3-10 regarding Kermit Larson Corporation Prepare the trial balance of Kermit Larson at September 30
