EX 2-5 Normal entries for accounts

During the month, Iris Labs Co. has a substantial number of transactions affecting each of the following accounts. State for each account whether it is likely to have (a) debit entries only, (b) credit entries only, or (c) both debit and credit entries.

1. Accounts Payable
2. Accounts Receivable
3. Cash
4. Fees Earned
5. Insurance Expense
6. Nicki Swanson, Drawing
7. Utilities Expense

Answer
1. (c) debit and credit
2. (c) debit and credit
3. (c) debit and credit
4. (b) credit only
5. (a) debit only
6. (a) debit only
7. (a) debit only

EX 2-3 Chart of accounts

Alpha School is a newly organized business that teaches people how to inspire and influence others. The list of accounts to be opened in the general ledger is as follows:

Accounts Payable
Accounts Receivable
Cash
Equipment
Fees Earned
Jan Pulver, Capital
Jan Pulver, Drawing
Miscellaneous Expense
Prepaid Insurance
Rent Expense
Supplies
Supplies Expense
Unearned Rent
Wages Expense

List the accounts in the order in which they appear in the ledger of Alpha School and assign account numbers. Each account number is to have two digits: the first digit is to indicate the major classification (1 for assets, etc.), and the second digit is to identify the specific account within each major classification (11 for Cash, etc.).

Answer
1. Assets
11 Cash
12 Accounts Receivable
13 Supplies
14 Prepaid Insurance
15 Equipment

2. Liabilities
21 Accounts Payable
22 Unearned Rent

3. Owner's Equity
31 Jan Pulver, Capital
32 Jan Pulver, Drawing

4. Revenue
41 Fees Earned

5. Expenses
51 Wages Expense
52 Rent Expense
53 Supplies Expense
59 Miscellaneous Expense

EX 2-2 Chart of accounts

Innerscape Interiors is owned and operated by Jean Cartier, an interior decorator. In the ledger of Innerscape Interiors, the first digit of the account number indicates its major account classification (1—assets, 2—liabilities, 3—owner’s equity, 4—revenues, 5— expenses). The second digit of the account number indicates the specific account within each of the preceding major account classifications.

Match each account number with its most likely account in the list below. The account numbers are 11, 12, 13, 21, 31, 32, 41, 51, 52, and 53.

Accounts Payable
Accounts Receivable
Cash
Fees Earned
Jean Cartier, Capital
Jean Cartier, Drawing
Land
Miscellaneous Expense
Supplies Expense
Wages Expense

Answer
Accounts Payable - 21
Accounts Receivable - 12
Cash - 11
Fees Earned - 41
Jean Cartier, Capital - 31
Jean Cartier, Drawing - 32
Land - 13
Miscellaneous Expense - 53
Supplies Expense - 52
Wages Expense - 51

EX 2-1 Chart of accounts

The following accounts appeared in recent financial statements of Continental Airlines:
Accounts Payable
Flight Equipment
Air Traffic Liability
Landing Fees (Expense)
Aircraft Fuel Expense
Passenger Revenue
Cargo and Mail Revenue
Purchase Deposits for Flight Equipment
Commissions (Expense)
Spare Parts and Supplies
Identify each account as either a balance sheet account or an income statement account. For each balance sheet account, identify it as an asset, a liability, or owner’s equity. For each income statement account, identify it as a revenue or an expense.

Answer
Balance Sheet Accounts
Assets
-Flight Equipment
-Purchase Deposits for Flight Equipment
-Spare Parts and Supplies

Liabilities
-Accounts Payable
-Air Traffic Liability

Owner's Equity
None

Income Statement Accounts
Revenue
-Cargo and Mail Revenue
-Passenger Revenue

Expenses
-Aircraft Fuel Expense
-Commissions
-Landing Fees

PE 2-2B Journal entry for asset purchase

Prepare a journal entry for the purchase of office supplies on August 7 for $4,000, paying $1,000 cash and the remainder on account.

Answer
Aug. 7         Office Supplies                   4,000
                               Cash                                              1,000
                               Accounts Payable                         3,000

PE 2-2A Journal entry for asset purchase

Prepare a journal entry for the purchase of office equipment on March 4 for $27,150, paying $5,000 cash and the remainder on account.

Answer
Mar. 4          Office Equipment     27,150
                               Cash                                          5,000
                               Accounts Payable                   22,150

PE 2-1B Rules of debit and credit and normal balances

State for each account whether it is likely to have (a) debit entries only, (b) credit entries only, or (c) both debit and credit entries. Also, indicate its normal balance.
1. Accounts Payable
2. Cash
3. Malissa Wahl, Drawing
4. Miscellaneous Expense
5. Insurance Expense
6. Fees Earned

Answers
1. Debit and credit entries, normal credit balance
2. Debit and credit entries, normal debit balance
3. Debit entries only, normal debit balance
4. Debit entries only, normal debit balance
5. Debit only, normal debit balance
6. Credit entries only, normal credit balance

PE 2-1A Rules of debit and credit and normal balances

State for each account whether it is likely to have (a) debit entries only, (b) credit entries only, or (c) both debit and credit entries. Also, indicate its normal balance.
1.Accounts Receivable
2.Commissions Earned
3.Notes Payable
4.Paul Howe, Capital
5.Rent Revenue
6.Wages Expense

Answers
1. Debit and credit entries, normal debit balance
2. Credit entries only, normal credit balance
3. Debit and credit entries, normal credit balance
4. Credit entries only, normal credit balance
5. Credit entries only, normal credit balance
6. Debit entries only, normal debit balance