MyAccounting Lab

Create a chart of accounts for Raymond Autobody Shop using the standard numbering system. Each account is separated by a factor of 10. For​ example, the first asset account will be 100 and the next asset account will 110. ​(Use the first available line under each​ section, Asset,​ Liabilities, etc., when selecting the accounts. If a box is not​ used, leave the box​ empty; do not select any​ labels.)

 

Accounts Payable Service Revenue
Cash Equipment
Utilities Expense Common Stock
Automotive Supplies Advertising Expense
Dividends Unearned Revenue
Retained Earnings

 

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Balance Sheet Accounts
Assets Liabilities Equity
100 Cash 200 Accounts Payable 300 Dividends
110 Equipment 210 Unearned Revenue 310 Common Stock
120 Automotive Supplies     320 Retained Earnings
           
    Income Statement Accounts
    (Part of Equity)
    Revenues Expenses
    400 Service Revenue 500 Utilities Expense
        510 Advertising Expense
           

 

a. The business received $20,000 cash and issued common stock to stockholders. Bank deposit slip
b. Purchased office supplies on account, $500. Purchase invoice
c. Recorded $1,000 revenue for services rendered to customers. Sales invoice

 

Journalize the transactions of Laughton Engineering. Include an explanation with each journal entry. Use the following​ accounts: Cash; Accounts​ Receivable; Office​ Supplies; Equipment; Accounts​ Payable; Notes​ Payable; Common​ Stock; Dividends; Service​ Revenue; Utilities Expense. ​(Record debits​ first, then

credits. Select the explanation on the last line of the journal entry​ table.)

 

July 2: Received $10,000 contribution from Sam Laughton in exchange for common stock.

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Date Accounts and Explanation Debit Credit
Jul. 2 Cash 10,000  
  Common Stock   10,000
       
       
  Issued common stock for cash.    

July 4: Paid utilities expense of $390.

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Date Accounts and Explanation Debit Credit
Jul. 4 Utilities Expense 390  
  Cash   390
       
       
  Paid cash expenses.    

July 5: Purchased equipment on​ account, $2,100.

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Date Accounts and Explanation Debit Credit
Jul. 5 Equipment 2,100  
  Accounts Payable   2,100
       
       
  Purchase of equipment on account.    

July 10: Performed services for a client on​ account, $3,200.

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Date Accounts and Explanation Debit Credit
Jul. 10 Accounts Receivable 3,200  
  Service Revenue   3,200
       
       
  Performed services on account.    

July 12: Borrowed $6,900 cash, signing a notes payable.

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Date Accounts and Explanation Debit Credit
Jul. 12 Cash 6,900  
  Notes Payable   6,900
       
       
  Borrowed cash by signing note.    

July 19: Cash dividends of $400 were paid to stockholders.

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Date Accounts and Explanation Debit Credit
Jul. 19 Dividends 400  
  Cash   400
       
       
  Paid cash dividends.    

July 21: Purchased office supplies for $840 and paid cash.

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Date Accounts and Explanation Debit Credit
Jul. 21 Office Supplies 840  
  Cash   840
       
       
  Purchase of office supplies with cash.    

July 27: Paid the liability from July 5.

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  Accounts and Explanation Debit Credit
Jul. 27 Accounts Payable 2,100  
  Cash   2,100
       
       
  Paid cash on account.    

 

 

Requirement 1. Post the transactions to the​ T-accounts. Use the dates as posting references in the​ T-accounts. We will post to the accounts one transaction at a time. Begin by posting the event from the 2nd. Received $14,000 contribution from Bill Lexington in exchange for common stock.

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Cash   Accounts Payable   Service Revenue
Jul. 2 14,000                    
           
Accounts Receivable   Notes Payable   Utilities Expense
                       
           
Office Supplies   Common Stock    
            14,000 Jul. 2        
           
Equipment   Dividends    
                       

July 4: Paid utilities expense of $410.

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Cash   Accounts Payable   Service Revenue
Jul. 2 14,000 410 Jul. 4                
                       
           
Accounts Receivable   Notes Payable   Utilities Expense
                Jul. 4 410    
           
Office Supplies   Common Stock    
            14,000 Jul. 2        
                 
           
Equipment   Dividends    
                       

July 5: Purchased equipment on​ account, $1,500.

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Cash   Accounts Payable   Service Revenue
Jul. 2 14,000 410 Jul. 4     1,500 Jul. 5        
                       
           
Accounts Receivable   Notes Payable   Utilities Expense
                Jul. 4 410    
                       
           
Office Supplies   Common Stock    
            14,000 Jul. 2        
                 
           
Equipment   Dividends    
Jul. 5 1,500                    

July 10: Performed services for a client on​ account, $3,300.

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Cash   Accounts Payable   Service Revenue
Jul. 2 14,000 410 Jul. 4     1,500 Jul. 5     3,300 Jul. 10
                       
           
Accounts Receivable   Notes Payable   Utilities Expense
Jul. 10 3,300             Jul. 4 410    
                       
           
Office Supplies   Common Stock    
            14,000 Jul. 2        
                 
           
Equipment   Dividends    
Jul. 5 1,500                    
               

July 12: Borrowed $6,900 cash, signing a note payable.

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Cash   Accounts Payable   Service Revenue
Jul. 2 14,000 410 Jul. 4     1,500 Jul. 5     3,300 Jul. 10
Jul. 12 6,900                    
           
Accounts Receivable   Notes Payable   Utilities Expense
Jul. 10 3,300         6,900 Jul. 12 Jul. 4 410    
                       
           
Office Supplies   Common Stock    
            14,000 Jul. 2        
                 
           
Equipment   Dividends    
Jul. 5 1,500                    
               

July 19: Cash dividends of $700 were paid to stockholders.

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Cash   Accounts Payable   Service Revenue
Jul. 2 14,000 410 Jul. 4     1,500 Jul. 5     3,300 Jul. 10
Jul. 12 6,900 700 Jul. 19                
                   
           
Accounts Receivable   Notes Payable   Utilities Expense
Jul. 10 3,300         6,900 Jul. 12 Jul. 4 410    
                       
           
Office Supplies   Common Stock    
            14,000 Jul. 2        
                 
           
Equipment   Dividends    
Jul. 5 1,500     Jul. 19 700            
               

July 21: Purchased office supplies for $860 and paid cash.

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Cash   Accounts Payable   Service Revenue
Jul. 2 14,000 410 Jul. 4     1,500 Jul. 5     3,300 Jul. 10
Jul. 12 6,900 700 Jul. 19                
    860 Jul. 21            
           
Accounts Receivable   Notes Payable   Utilities Expense
Jul. 10 3,300         6,900 Jul. 12 Jul. 4 410    
                       
           
Office Supplies   Common Stock    
Jul. 21 860         14,000 Jul. 2        
                 
           
Equipment   Dividends    
Jul. 5 1,500     Jul. 19 700            
                   

July 27: Paid the liability from July 5.

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Cash   Accounts Payable   Service Revenue
Jul. 2 14,000 410 Jul. 4 Jul. 27 1,500 1,500 Jul. 5     3,300 Jul. 10
Jul. 12 6,900 700 Jul. 19                
    860 Jul. 21            
    1,500 Jul. 27    
           
Accounts Receivable   Notes Payable   Utilities Expense
Jul. 10 3,300         6,900 Jul. 12 Jul. 4 410    
                       
           
Office Supplies   Common Stock    
Jul. 21 860         14,000 Jul. 2        
                 
           
Equipment   Dividends    
Jul. 5 1,500     Jul. 19 700            
                   

Requirement 2. Compute the July 31 balance for each account. Use a​ “Bal.” posting reference on the proper side of each account to show the ending balances of the accounts. ​(For accounts with a​ $0 balance, make sure to enter​ “0” in the appropriate cell on the normal side of the​ account.)

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Cash   Accounts Payable   Service Revenue
Jul. 2 14,000 410 Jul. 4 Jul. 27 1,500 1,500 Jul. 5     3,300 Jul. 10
Jul. 12 6,900 700 Jul. 19     0 Bal.     3,300 Bal.
    860 Jul. 21            
    1,500 Jul. 27
Bal. 17,430    
           
Accounts Receivable   Notes Payable   Utilities Expense
Jul. 10 3,300         6,900 Jul. 12 Jul. 4 410    
Bal. 3,300         6,900 Bal. Bal. 410    
           
Office Supplies   Common Stock    
Jul. 21 860         14,000 Jul. 2        
Bal. 860         14,000 Bal.      
           
Equipment   Dividends    
Jul. 5 1,500     Jul. 19 700            
Bal. 1,500     Bal. 700

 

 

May 1: The business received cash of $86,000 and issued common stock to Adam Watson.

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Date Accounts and Explanation Debit Credit
May 1 Cash 86,000  
  Common Stock   86,000
       
       
  Issued common stock in exchange for cash.    

May 2: Purchased office supplies on​ account, $780.

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Date Accounts and Explanation Debit Credit
May 2 Office Supplies 780  
  Accounts Payable   780
       
       
  Purchased office supplies on account.    

May 4: Paid $52,000 cash for building and land. The building had a fair market value of $46,000.

Prepare a compound entry.

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Date Accounts and Explanation Debit Credit
May 4 Building 46,000  
  Land 6,000  
  Cash   52,000
       
  Paid cash for building and land.    

May 6: Performed services for customers and received​ cash, 2,000.

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Date Accounts and Explanation Debit Credit
May 6 Cash 2,000  
  Service Revenue   2,000
       
       
  Performed services and received cash.    

May 9: Paid $530 on accounts payable.

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Date Accounts and Explanation Debit Credit
May 9 Accounts Payable 530  
  Cash   530
       
       
  Paid cash on account.    

May 17: Performed services for customers on​ account, $2,900.

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Date Accounts and Explanation Debit Credit
May 17 Accounts Receivable 2,900  
  Service Revenue   2,900
       
       
  Performed services on account.    

May 19: Paid rent expense for the​ month, $1,000.

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Date Accounts and Explanation Debit Credit
May 19 Rent Expense 1,000  
  Cash   1,000
       
       
  Paid cash expenses.    

May 20: Received $2,100 from customers for services to be performed next month.

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  Accounts and Explanation Debit Credit
May 20 Cash 2,100  
  Unearned Revenue   2,100
       
       
  Collected cash for future services.    

May 21: Paid $700 for advertising in next​ month’s IT Technology magazine.

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Date Accounts and Explanation Debit Credit
May 21 Prepaid Advertising 700  
  Cash   700
       
       
  Paid advertising in advance.    

May 23: Received $2,500 cash on account from a customer.

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Date Accounts and Explanation Debit Credit
May 23 Cash 2,500  
  Accounts Receivable   2,500
       
       
  Received cash on account.    

May 31​: Incurred and paid​ salaries, $1,600.

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Date Accounts and Explanation Debit Credit
May 31 Salaries Expense 1,600  
  Cash   1,600
       
       
  Paid cash expenses.    

 

Alston Moving Company
Trial Balance
August 31, 2016
    Balance
  Account Title Debit Credit
  Common Stock   36,700
  Insurance Expense 800  
  Accounts Payable   4,200
  Service Revenue   93,000
  Building 43,000  
  Advertising Expense 400  
  Salaries Expense 6,000  
  Cash 5,000  
  Trucks 121,000  
  Fuel Expense 3,000  
  Dividends 6,100  
  Utilities Expense 500  
  Accounts Receivable 8,800  
  Notes Payable   61,000
  Office Supplies 300  
  Total $194,900 $194,900

 

 

 

Geena Lunger has trouble keeping her debits and credits equal. During a recent​ month, Geena made the following accounting​ errors:

a. In preparing the trial​ balance, Geena omitted a $7,000 Notes Receivable. The credit to Cash was correct.
b. Geena posted a 1,000 Utilities Expense as 100. The credit to Cash was correct.
c. In recording a $700 payment on​ account, Geena debited Furniture instead of Accounts Payable.
d. In journalizing a receipt of cash for service​ revenue, Geena debited Cash for $600 instead of the correct amount of $60. The credit was correct.
e. Geena recorded a $130 purchase of office supplies on account by debiting Office Supplies and crediting Accounts Payable for $310.

Requirements

1. For each of these​ errors, state whether total debits equal total credits on the trial balance.
2. Identify each account that has an incorrect​ balance, and the amount and direction of the error​ (such as​ “Accounts Receivable​ $500 too​ high”).

Requirement 1. For each of these​ errors, state whether total debits equal total credits on the trial balance.

For each error determine whether total debits are​ “Greater than”​ (>), “Equal​ to” (=), or​ “Less than”​ (<) total credits.

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a. Total debits < Total credits
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b. Total debits < Total credits

 

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c. Total debits = Total credits
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d. Total debits > Total credits

 

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e. Total debits = Total credits

Requirement 2. Identify each account that has an incorrect​ balance, and the amount and direction of the error​ (such as​ “Accounts Receivable​ $500 too​ high”).

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  Account Amount Direction of Error
a. Notes Receivable $7,000 Too low
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b. Utilities Expense 900 Too low

 

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c. Furniture 700 Too high
Accounts Payable 700 Too high
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d. Cash 540 Too high

 

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e. Office Supplies 180 Too high
Accounts Payable 180 Too high

 

 

 

 

 

 

 

 

 

The debt ratio shows the proportion of assets financed with debt and is calculated by dividing total liabilities by total assets. It can be used to evaluate a​ business’s ability to pay its debts.

Think about the accounting equation​ (Assets = Liabilities​ + Equity). The equation shows who can claim the assets. The liabilities represent the claims of the creditors and the equity represents the claims of the owners​ (referred to as stockholders or​ shareholders). Companies that have a high percentage of liabilities are at greater risk. If they are unable to pay their creditors as the amounts become​ due, the creditors have the right to claim the assets. In other​ words, the creditors can repossess the​ company’s assets. The debt ratio calculates the percentage of assets that are financed with liabilities.

 

Begin by calculating the total assets. Recall that an asset is an economic resource that is expected to benefit the business in the future. Assets are something the business owns or has control of that has value. Use the following table to calculate the total assets of Jake Hill comma M.D.Jake Hill, M.D.

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Cash $40,000
Accounts Receivable 7,400
Office Supplies 3,000
Office Equipment 25,000
Building 80,000
Land 22,000
Total assets $177,400
   

Now calculate the total liabilities. Liabilities are debts that are owed to creditors. Liabilities are something the business owes and represent the​ creditors’ claims on the​ business’s assets. Many liabilities have the word payable in their titles. Use the following table to calculate the total liabilities of Jake Hill comma M.D.Jake Hill, M.D.

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Accounts Payable $1,500
Utilities Payable 400
Unearned Revenue 20,896
Notes Payable 73,000
Total liabilities $95,796

​Finally, calculate the debt ratio. ​(Round the percentage to the nearest whole​ percent.)

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Total liabilities / Total assets = Debt ratio
$95,796 / $177,400 = 54 %
Jake Hill, M.D.  
Trial Balance  
September 30, 2016  
    Balance  
  Account Title Debit Credit  
  Cash $40,000    
  Accounts Receivable 7,400    
  Office Supplies 3,000    
  Office Equipment 25,000    
  Building 80,000    
  Land 22,000    
  Accounts Payable   $1,500  
  Utilities Payable   400  
  Unearned Revenue   20,896  
  Notes Payable   73,000  
  Common Stock   110,000  
  Dividends 52,000    
  Service Revenue   48,904  
  Salaries Expense 23,300    
  Utilities Expense 1,100    
  Advertising Expense 900    
  Total $254,700 $254,700