CHAPTER 4. THE RECORDING PROCESS (GROUP 6.

1)
Tên thành viên nhóm 6.1
Trung Khải Lam
Nguyễn Đức Anh Tú
Ngô Nguyễn Bảo Trân
Huỳnh Công Thành
Nguyễn Phương Quỳnh

I. MULTIPLE CHOICES
1. (LO 1) K Which of the following statements about an account is true?
a. The left side of an account is the credit or decrease side.
b. An account is an individual accounting record of increases and decreases in specifi c asset,
liability, and owner’s equity items.
c. There are separate accounts for specific assets and liabilities but only one account for
owner’s equity items.
d. The right side of an account is the debit or increase side.

2. (LO 1) K Credits:
a. increase both assets and liabilities.
b. decrease both assets and liabilities.
c. increase assets and decrease liabilities.
d. decrease assets and increase liabilities.

3. (LO 1) K Accounts that normally have debit balances are:

a. assets, expenses, and revenues.
b. assets, expenses, and owner’s capital.
c. assets, liabilities, and drawings.
d. assets, expenses, and drawings.

4. (LO 2) K What is the correct sequence of steps in the recording process?

a. Analyzing transactions; preparing a trial balance
b. Analyzing transactions; entering transactions in a journal; posting transactions
c. Entering transactions in a journal; posting transactions; preparing a trial balance
d. Entering transactions in a journal; posting transactions; analyzing transactions

5. (LO 2) AP Performing services for a customer on account should

result in:
a. a decrease in the liability account Accounts Payable and an increase in the revenue account
Service Revenue.
b. an increase in the asset account Cash and a decrease in the asset account Accounts
Receivable.
c. an increase in the asset account Accounts Receivable and an increase in the liability
account Unearned Revenue.
d. an increase in the asset account Accounts Receivable and an increase in the revenue
account Service Revenue.

6. (LO 2) AP The purchase of equipment on account should result in:

a. a debit to Equipment and a credit to Accounts Payable.
b. a debit to Equipment Expense and a credit to Accounts Payable.
c. a debit to Equipment and a credit to Cash.
d. a debit to Accounts Receivable and a credit to Equipment.

7. (LO 3) K A ledger:
a. contains only asset and liability accounts.
b. should show accounts in alphabetical order.
c. is a collection of the entire group of accounts maintained by a company.
d. is a book of original entry.

8. (LO 3) K Posting:
a. is normally done before journalizing.
b. transfers ledger transaction data to the journal. Brief Exercises 2-31
c. is an optional step in the recording process.
d. transfers journal entries to ledger accounts.

9. (LO 4) K A trial balance:

a. is a list of accounts with their balances at a specific time.
b. proves that journalized transactions are accurate.
c. will not balance if a correct journal entry is posted twice.
d. proves that all transactions have been recorded.

10. (LO 4) AP A trial balance will not balance if:

a. the collection of an account receivable is posted twice.
b. the purchase of supplies on account is debited to Supplies and credited to Cash.
c. a $100 cash drawing by the owner is debited to Drawings for $1,000 and credited to Cash
for $100.
d. a $450 payment on account is debited to Accounts Payable for $45 and credited to Cash
for $45.

II. EXERCISES

BE2.2 (LO 1) K Identify the normal balance for the following accounts:
1. Prepaid Insurance 5. Utilities Expense 9. Supplies
2. Accounts Payable 6. Owner’s Capital 10. Unearned Revenue
3. Land 7. Equipment
4. Service Revenue 8. Salaries Expense
 Answer

Credit Debit

1. Prepaid Insurance
3. Land 9. Supplies
4. Service Revenue 7. Equipment
6. Owner’s Capital 5. Utilities Expense
2. Accounts Payable 8. Salaries Expense
10. Unearned Revenue

BE2.3 (LO 1) K For each the following accounts, indicate (a) if the account is an asset,
liability, or owner’s equity account; and (b) whether the account would have a normal debit
or credit balance.
1. Accounts Receivable 4. Supplies 7. Prepaid Insurance
2. Rent Expense 5. Unearned Revenue 8. Notes Payable
3. B. Damji, Drawings 6. Service Revenue

 Answer:
1. Accounts Receivable (a) 4. Supplies (b) 7. Prepaid Insurance (b)
2. Rent Expense (b) 5. Unearned Revenue (b) 8. Notes Payable (a)
3. B. Damji, Drawings (b) 6. Service Revenue (b)

BE2.4 (LO 1) K Calculate the account balance for the following accounts:

 Answer:
Balance of Cash = 500 – 8,720 + 800 – 495 + 8,920 – 6,750 + 5,355 + 10,435 = 10,045
Balance of Service Revenue = 9,500 + 3,200 + 4,500 + 1,050 = 18,250
Balance of Accounts Payable = -1,720 + 6,740 – 495 + 2500 – 6,750 = 275
Balance of Salaries Expense = 4,550 + 550 + 3,750 + 425 = 9,275

BE2.5 (LO 1) K For each of the following accounts, indicate (a) the normal balance, (b) the
effect of a debit on the account, and (c) the effect of a credit on the account:
1. Accounts Payable 4. J. Takamoto, Drawings 7. Service Revenue
2. Supplies 5. Prepaid Rent 8. Unearned Revenue
3. J. Takamoto, Capital 6. Utilities Expense

 Answer:
1. Accounts Payable
(a) Normal Balance: Credit
(b) Effect of a Debit: Decreases the account
(c) Effect of a Credit: Increases the account

2. Supplies
(a) Normal Balance: Debit
(b) Effect of a Debit: Increases the account
(c) Effect of a Credit: Decreases the account

3. J. Takamoto, Capital
(a) Normal Balance: Credit
(b) Effect of a Debit: Decreases the account
(c) Effect of a Credit: Increases the account

4. J. Takamoto, Drawings
(a) Normal Balance: Debit
(b) Effect of a Debit: Increases the account
(c) Effect of a Credit: Decreases the account

5. Prepaid Rent
(a) Normal Balance: Debit
(b) Effect of a Debit: Increases the account
(c) Effect of a Credit: Decreases the account

6. Utilities Expense
(a) Normal Balance: Debit
(b) Effect of a Debit: Increases the account
(c) Effect of a Credit: Decreases the account

7. Service Revenue
(a) Normal Balance: Credit
(b) Effect of a Debit: Decreases the account
(c) Effect of a Credit: Increases the account

8. Unearned Revenue
(a) Normal Balance: Credit
(b) Effect of a Debit: Decreases the account
(c) Effect of a Credit: Increases the account

BE2.6 (LO 2) K For each of the following, indicate (a) if the account is an asset, liability, or
owner’s equity account; and (b) whether you would use a debit or credit to record the change:
1. Increase in D. Parmelee, Capital 5. Increase in D. Parmelee, Drawings
2. Decrease in Cash 6. Increase in Equipment
3. Decrease in Notes Payable 7. Increase in Accounts Payable
4. Increase in Rent Expense 8. Increase in Service Revenue

 Answer:

1. Increase in D. Parmelee, Capital

(a) Account Type: Owner’s Equity (b) Record Change: Credit

2. Decrease in Cash
(a) Account Type: Asset (b) Record Change: Credit

3. Decrease in Notes Payable

(a) Account Type: Liability (b) Record Change: Debit

4. Increase in Rent Expense

(a) Account Type: Expense (Owner's Equity) (b) Record Change: Debit

5. Increase in D. Parmelee, Drawings

(a) Account Type: Owner’s Equity (Drawings) (b) Record Change: Debit

6. Increase in Equipment
(a) Account Type: Asset (b) Record Change: Debit

7. Increase in Accounts Payable

(a) Account Type: Liability (b) Record Change: Credit

8. Increase in Service Revenue

(a) Account Type: Revenue (Owner's Equity) (b) Record Change: Credit

BE2.7 (LO 2) C Levine Legal Services had the following transactions:

1. Cash is paid for the purchase of $439 of office supplies.
2. Customer is billed $1,020 for services provided that day.
3. Equipment with a cost of $2,230 is purchased on account.
4. The current month’s utility bill of $293 is paid in cash.
5. Cash of $750 is received for services provided that day.
6. Cash of $7,100 is received for services to be provided in the next month.
For each transaction, prepare a basic analysis and a debit/credit analysis. Use the following
format, in which the first one has been done for you as an example:
 The asset account Cash is decreased by $439. The asset account
Basic Analysis
Supplies is increased by $439.
Debit/Credit Debits increase assets: debit Supplies $439.
Analysis Credits decrease assets: credit Cash $439.
 Answer:
1. Cash is paid for the purchase of $439 of office supplies.
The asset account Cash is decreased by $439. The asset account
Basic Analysis
Supplies is increased by $439.
Debit/Credit Debits increase assets: debit Supplies $439.
Analysis Credits decrease assets: credit Cash $439.

2. Customer is billed $1,020 for services provided that day.

The asset account Account Receivable is increased by $1,020. The
Basic Analysis
OE account Revenue is increased by $1,020.
Debit/Credit Debits increase assets: debit Account Receivable $1,020.
Analysis Credits increase OE: credit Revenue $1,020.

3.Equipment with a cost of $2,230 is purchased on account.

The liabilities account Account Payable is increased by $2,230. The
Basic Analysis
asset account Equipment is increased by $2,230.
Debit/Credit Debits increase assets: debit Equipment $2,230.
Analysis Credits increase liabilities: credit Account Payable $2,230.

4. The current month’s utility bill of $293 is paid in cash.

The asset account Cash is decreased by $293. The OE account Utility
Basic Analysis
Expense is increased by $293.
Debit/Credit Debits decrease OE: debit Utility Expense $293.
Analysis Credits decrease assets: credit Cash $293.

5. Cash of $750 is received for services provided that day.

The asset account Cash is increased by $750. The OE account
Basic Analysis
Revenue is increased by $750.
Debit/Credit Debits increase assets: debit Cash $750.
Analysis Credits increase OE: credit Revenue $750.

6. Cash of $7,100 is received for services to be provided in the next month.

The asset account Cash is increased by $7,100. The liabilities account
Basic Analysis
Uneared Revenue is increased by $7,100.
Debit/Credit Debits increase assets: debit Cash $7,100.
Analysis Credits increase liability: credit Unearned Revenue $7,100.
BE2.8 (LO 2) C Fleming’s Logistics Consulting has the following transactions during
August.
Aug.1 Received $17,970 cash from the company’s owner, Barbara Fleming.
4 Paid rent in advance for three months, $4,720.
5 Purchased $625 of office supplies on account.
6 Received $560 from clients for services provided.
17 Billed clients $1,210 for services provided.
27 Paid secretary $980 salary.
29 Paid the company’s owner, Barbara Fleming, $720 cash for personal use.

For each transaction, indicate (a) the basic type of account to be debited and credited (asset,
liability, owner’s equity); (b) the specific accounts to debit and credit (for example, Cash,
Service Revenue, Accounts Payable); and (c) whether each account is increased (+) or
decreased (-), and by what amount. Use the following format, in which the first one has been
done for you as an example:

4 Asset Prepaid Rent +$4,720 Asset Cash - $4,720

5 Asset Supplies +625 Liabilities AP +$625
6 Asset Cash +560 OE Revenue +$560
17 Asset Accounts +1,210 OE Revenue +$1,210
Receivable
27 OE Salaries Exp +$980 Asset Cash -$980
29 OE Drawings +$720 Asset Cash -$720

BE2.9 (LO 2) AP Pridham Welding Company had the following transactions for June.
June 1 Tyler Pridham invested $8,430 cash in a small welding business.
2 Bought used welding equipment on account for $2,620.
5 Hired an employee to start work on July 15. Agreed on a salary of $3,760 per month.
17 Billed R. Windl $2,500 for welding work done.
27 Received $1,190 cash from R. Windl for work billed on June 17.
For each transaction, prepare a basic analysis and a debit/credit analysis, and journalize the
transaction. Use the following format, in which the first one has been done for you as an
example:
June 1 transaction
The asset account Cash is increased by $8,430. The owner’s equity
Basic Analysis
account T. Pridham, Capital is increased by $8,430.
Debit/Credit Debits increase assets: debit Cash $8,430.
Analysis Credits increase owner’s equity: credit T. Pridham, Capital $8,430.
June 1 Cash 8,430
Journal Entry T. Pridham, Capital 8,430
Invested cash in business.

 Answer:
2. Bought used welding equipment on account for $2,620.

The asset account Equipment is increased by $2,620. Liabilities

Basic Analysis
Accounts Payable increased by $2,620
 Debit/Credit Debits increase assets: debit Cash $2,620.
Analysis Credits increase liabilities: credit T. Pridham, Capital $2,620.
June 2 Cash 2,620
Journal Entry
Accounts Payable 2,620

5. Hired an employee to start work on July 15. Agreed on a salary of $3,760 per month.
Basic Analysis No effect
Debit/Credit
No effect
Analysis
Journal Entry No effect

17. Billed R. Windl $2,500 for welding work done.

The asset account Accounts Receivable is increased by 2,500

Basic Analysis
Owner’s equity Service Revenue increased by $2,500
Debit/Credit Debits increase assets: debit Accounts Receivable $2,620.
Analysis Credits increase OE: credit Service Revenue $2,620.
June 17 Cash 2,500
Journal Entry
Service Revenue 2,500

27. Received $1,190 cash from R. Windl for work billed on June 17.

The asset account Cash is increased by $1,190

Basic Analysis
The asset Accounts Receivable decreased by $1,190
Debit/Credit Debits increase assets: debit Cash $1,190.
Analysis Credits decrease asetss: credit Accounts Receivable $1,190.
June 27 Cash 1,190
Journal Entry
Accounts Receivable 1,190

BE2.10 (LO 2) AP Presented below is information related to Berge Real Estate Agency:
Oct. 1 Lia Berge begins business as a real estate agent with a cash investment of $30,000.
2 Pays rent, $700, on office space.
3 Purchases office equipment for $2,800, on account.
6 Sells a house and lot for Hal Smith; bills Hal Smith $4,400 for realty services
performed.
27 Pays $1,100 on the balance related to the transaction of October 3.
30 Receives bill for October utilities, $130 (not paid at this time).
Journalize the transactions.
 Answer:
Date Account Debit Credit
Oct. 1 Cash $30,000
Capital $30,000
2 Rent expense $700
Cash $700
3 Equipment $2,800
Account Payable $2,800
6 Cash $4,400
Revenue $4,400
27 Accounts Payable $1,100
Cash $1,100
30 NE NE NE
BE2.11 (LO 2) AP Using the data in BE2.7 for Levine Legal Services, journalize the
transactions. Assume all of the transactions occurred on August 31.

 Answer:
Date Account Debit Credit
Aug 31 Supplies $439
Cash $439
Account Receivable $1,020
Revenue $1,020
Equipment $2,230
Account Payable $2,230
Utility Expense $293
Cash $293
Cash $750
Revenue $750
Cash $7,100
Unearned Revenue $7,100
Total $11,832 $11,832

BE2.13 (LO 2) AP Journalize the following transactions of M. Acosta, interior designer, in

her first month of business.
Jan. 2 Invested $10,000 cash in business.
3 Purchased a used car for $3,000 cash for use in the business.
9 Purchased supplies on account for $600.
11 Billed customers $2,400 for services performed.
16 Paid $350 cash for advertising.
20 Received $900 cash from customers billed on January 11.
28 Withdrew $1,000 cash for personal use by owner.

 Answer:
Date Account Debit Credit
Jan 2 Cash $10,000
Capital $10,000
Jan 3 Vehicle $3,000
Cash $3,000
Jan 9 Supplies $600
Account Payable $600
Jan 11 Account Receivable $2,400
Service Revenue $2,400
Jan 16 Ads Expense $350
Cash $350
Jan 20 Cash $900
Account Receivable $900
Jan 28 Drawings $1,000
Cash $1,000
Total $18,250 $18,250
BE2.14 (LO 3) AP Tom Rast recorded the following transactions during the month of April:
April 3 Cash 3,400
Service Revenue 3,400
16 Rent Expense 700
Cash 700
20 Salaries Expense 250
Cash 250
Post these entries to the Cash T account of the general ledger to determine the ending balance
in cash. The beginning balance in cash on April 1 was $1,600.

 Answer
Debit Credit

Bal: 1,600

(3) 3,400

(16) 700

(20) 250

3400 950

Bal: 4,050

BE2.15 (LO 3) AP Using T accounts, post the following journal entries to the general ledger
and calculate ending balances.

General Journal

Date Account titles Debit Credit

Sept. 2 Accounts Receivable 4,400

Service Revenue 4,400

4 Cash 2,400

Accounts Receivable 2,400

10 Cash 3,000

Service Revenue 3,000

28 Cash 1,325

Accounts Receivable 1,325

 Answer
Cash
Debit Credit

(4) 2,400
 (10) 3,000

(28) 1,325

Bal: 6,725

Accounts Receivable
Debit Credit

(2) 4,400

(4) 2,400

(28) 1,325

4,400 3,725

Bal: 674

Service Revenue
Debit Credit

(2) 4,400

(10) 3,000

Bal. 7,400

BE2.16 (LO 4) AP From the ledger balances given below, prepare a trial balance for Amaro
Company at June 30, 2021. All account balances are normal.
Accounts Payable $8,100, Cash $5,800, Owner’s Capital $15,000, Owner’s Drawings $1,200,
Equipment $17,000, Service Revenue $10,000, Accounts Receivable $3,000, Salaries
Expense $5,100, and Rent Expense $1,000.

 Answer
Amaro Company
Trial Balance
June 30, 2021
Account Debit Credit
Cash 5,800
Accounts Receivable 3,000
Equipment 17,000
Salaries Expense 5,100
Rent Expense 1,000
Owner's Drawings 1,200
Accounts Payable 8,100
Owner's Capital 15,000
Service Revenue 10,000
Total 33,100 33,100
BE2.17 (LO 4) AP Use the ledger balances that follow to prepare a trial balance for Pettipas
Company at April 30, 2021. All account balances are normal.
Accounts payable $ 3,300 Prepaid rent $ 800
Accounts receivable 5,000 Rent expense 4,500
C. Pettipas, capital 22,500 Salaries expense 1,000
C. Pettipas, drawings 1,100 Service revenue 8,000
Cash 6,400 Supplies 650
Equipment 14,600 Unearned revenue 250

 Answer
Pettipas Company
Trial Balance
April 30, 2021
Account Debit Credit
Cash 6,400
Accounts Receivable 5,000
Prepaid Rent 800
Supplies 650
Equipment 14,600
Rent Expense 4,500
Salaries Expense 1,000
C. Pettipas, Drawings 1,100
Accounts Payable 3,300
Unearned Revenue 250
C. Pettipas, Capital 22,500
Service Revenue 8,000

Total 34,050 34,050

 Answer:
1. Prepaid insurance sai tài khoản  Prepaid insurance là assets
2. Tài khoản L, Bourque capital là 1600$
P2.8B (LO 2, 3, 4) AP Lena Kuznetsova provides coaching and mentoring services to
individuals and companies. She operates the business as a proprietorship, under the name
LVK Coaching Services, which has a December 31 year end. On November 30, 2021, the
company’s general ledger included the following accounts (all accounts have normal
balances):
Accounts payable $4,245 $31,190
L. Kuznetsova, drawings
Accounts receivable 2,110 5,775
Rent expense
Advertising expense 1,265 6,310
Salaries expense
Cash 3,165 47,963
Service revenue
Equipment 17,730 1,340
Supplies
Insurance expense 3,388 765
Unearned revenue
L. Kuznetsova, capital 19,300

December transactions were as follows:

Dec.1 Paid December rent on her office space, $525.
1 Purchased additional equipment with a manufacturer’s suggested price of $3,270.
After negotiations with the retailer, paid $1,270 cash and signed a note payable for
$2,000.
4 Collected $1,880 from customers in payment of their accounts.
7 Paid the $308 monthly insurance premium.
8 Purchased $135 of supplies on account.
10 Paid $2,140 of the accounts payable from November.
12 Finished a coaching contract with a client for $765. The client had paid her in
November.
(Hint: In November, Lena had recorded the $765 as a liability, Unearned Revenue. By
finishing the coaching contract, she has “paid” this obligation.)
20 Received $3,480 cash from clients for services provided in December.
21 Paid office expenses of $115.
24 Withdrew $2,860 for personal use.
28 Billed clients $2,280 for coaching services provided in December. These clients will
pay
in January.
29 Received $560 cash advance from a client for a coaching contract that will start in
January.
30 Paid part-time office assistant $655 cash.
31 Made a $170 payment on the note payable. Of this amount, $10 is interest and the
remainder is a principal payment on the note payable.
Instructions
a. Using T accounts, enter the November 30 balances in the ledger accounts.
b. Journalize the December transactions.
c. Prepare a trial balance at December 31, 2021.
d. Prepare an income statement for the month.
e. Prepare a statement of owner’s equity for the month.
f. Prepare a balance sheet as at December 31, 2021.

 Answer:
a.
Dr Cash Cr
Beg. Bal. $3,165
(1) $525
(1) $1,270
(4) $1,880
(7) $308
(10) $2,140
(20) $3,480
(21) $115
(24) $2,860
(29) $560
(30) $655
(31) $170
Bal. $1,042

Dr Note payable Cr
Beg. Bal. 0
(1) 2,000
(31) $160
Bal. $1,840

Dr Accounts payable Cr
Beg. Bal. $4,245
(8) $135
(10) $2,140
Bal. $2,240

Dr Accounts receivable Cr
Beg. Bal. $2,110
(4) $1,880
(28) $2,280
Bal. $2,510

Dr Supplies Cr
Beg. Bal. $1,340
(8) $135
Bal. $1,475

Dr Capital Cr
Beg. Bal. $19,300
Bal. $19,300

Dr Drawings Cr
Beg. Bal. $31,190
(24) $2,860
Bal. $34,050

Dr Prepaid insurance Cr
Beg. Bal. 0
(3) $308
Bal. $308

Dr Prepaid Rent Cr
Beg. Bal. 0
(3) $525
Bal. $525

Dr Equipment Cr
Beg. Bal. $17,730
(1) $3,270
Bal. $21,000

Dr Office expense Cr
Beg. Bal. 0
(21) $115
Bal. $115

Dr Salaries expense Cr
Beg. Bal. $6,310
(3) $655
Bal. $6,965

Dr Interest expense Cr
Beg. Bal. 0
(3) $10
Bal. $10
 Dr Rent expense Cr
Beg. Bal. $5,755
Bal. $5,755

Dr Insurance expense Cr
BegBal. $3,388
Bal. $3,388

Dr Advertising expense Cr
BegBal. $1,265
Bal. $1,265

Dr Unearned Revenue Cr
Beg. Bal. 0
(10) $765
Bal. $765

Dr Service Revenue Cr
Beg. Bal. $47,963
(10) $765
(20) $3,480
(28) $2,280
(29) $560

Bal. $55,048

b. Journalize the December transactions.

Date Accounts Title Dr Cr

December 1 Prepaid Rent $525

Cash $525
1 Equipment $3,270
Cash $1,270
Note payable $2,000
4 Cash $1,880
Accounts Receivable $1,880
7 Prepaid Insurance $308
Cash $308
8 Supplies $135
Accounts Payable $135
10 Accounts Payable $2,140
Cash $2,140
Unearned Revenue $765
Service Revenue $765
20 Cash $3,480
Service Revenue $3,480
21 Office Expense $115
 Cash $115
24 Drawings $2,860
Cash $2,860
28 Accounts Receivable $2,280
Service Revenue $2,280
29 Cash $560
Service Revenue $560
30 Salaries Expense $655
Cash $655
31 Interest Expense $10
Note payable $160
Cash $170
Total $19,143 $19,143

c. Prepare a trial balance at December 31, 2021.

LVK Coaching Services
Trial Balance
December 31, 2021
Dr Cr
Cash $1,042
Notes payable $1,840
Accounts payable $2,240
L. Kuznetsova, capital $19,300
Drawings $34,050
Accounts Receivable $2,510
Supplies $1,475
Prepaid Insurance $308
Prepaid Rent $525
Equipment $21,000
Office Expense $115
Advertising Expense $1,265
Salaries Expense $6,965
Interest Expense $10
Insurance Expense $3,388
Rent Expense $5,755
Unearned Revenue $765
Service Revenue $55,048
Totals $79,173 $78,428

d. Prepare an income statement for the month.

LVK Coaching Services
Income Statement
For the year ended December 31, 2021

Revenue $55,048
Expenses:
Office Expense $115
Advertising Expense $1,265
Salaries Expense $6,965
Interest Expense $10
Insurance Expense $3,388
Rent Expense $5,755
 Total expenses: $17,498
Retained earnings $37,550

e. Prepare a statement of owner’s equity for the month.

LVK Coaching Services
Statement of Owner’s Equity
For the year ended December 31, 2021

H. Nolan, Capital, beginning February 1 $19,300

Add: Retained earnings $37,550
Less: Drawings $34,050
Owner’s of Equity at February 28 $22,800

f. Prepare a balance sheet as at December 31, 2021.

LVK Coaching Services
Balance Sheet
For the year ended December 31, 2021

Assets $26,860 Liabilities

Cash $1,042 Notes payable $1,840
Accounts Receivable $2,510 Accounts payable $2,240
Prepaid Insurance $308 Unearned Revenue 765
Prepaid Rent $525 Owner’s Equity at $22,800
February 28, 2021
Supplies $1,475
Equipment $21,000 Total L + OE $27,645

P2.11B (LO 2, 3, 4) AP Hobson Nolan is a human resources professional who operates a

consulting practice under the name HN Consulting. The company had the following balances
in its general ledger at February 28, 2021:
Cash $3,500,
Accounts Receivable $14,450,
Equipment $15,100,
Accounts Payable $18,750, and
H. Nolan, Capital $14,300.
The following events and transactions occurred during March 2021.
Mar.1 Borrowed $12,000 cash from the bank, signing a note payable.
2 Paid $13,000 to creditors on account.
3 Paid the monthly insurance premium of $145.
10 Paid the monthly utilities of $550.
16 Collected accounts receivable of $8,000.
 18 Paid an additional $5,000 to creditors on account.
30 Office expenses were paid in cash, $580.
31 Consulting services provided in March were for $2,000 cash and $5,000 on account.
31 Paid salaries, $1,650.
31 Paid the bank $555 on the note payable, of which $55 is interest and $500 is a partial
payment of the note.
31 Paid March and April’s rent, which totaled $1,900 ($950 per month).
31 Withdrew $1,000 cash for personal use.
Instructions
a. Prepare journal entries to record each of the March transactions.
b. Using T accounts, open the required ledger accounts for the transactions that were
journalized, and enter February 28, 2021, balances.
c. Post the journal entries to the accounts in the ledger.
d. Prepare a trial balance as at the end of March.
e. Prepare an income statement for the month.
f. Prepare a statement of owner’s equity for the month.
g. Prepare a balance sheet as at March 31, 2021

 Answer:
a. Prepare journal entries to record each of the March transactions

Date Account Title Dr Cr

March 1 Cash $12,000

Note payable $12,000

2 Accounts payable $13,000

Cash $13,000

3 Prepaid insurance $145

Cash $145

10 Utilities expense $550

Cash $550

16 Cash $8,000

Accounts receivable $8,000

18 Accounts payable $5,000

Cash $5,000
 30 Office expense $580

Cash $580

31 Cash $2,000

Service Revenue $2,000

Accounts Receivable $5,000

Service Revenue $5,000

31 Salaries expense $1,650

Cash $1,650

31 Interest Expense $55

Note payable $500

Cash $555

31 Rent expense $950

Prepaid rent $950

Cash $1,900

31 Drawings $1,000

Cash $1,000

Total $51,380 $51,380

b. Using T accounts, open the required ledger accounts for the transactions that were
journalized, and enter February 28, 2021, balances
Dr Cash Cr
Beg. Bal. $3,500
(1) 12,000
(2) $13,000
(3) $145
(10) $550
(16) $8,000
(18) $5,000
(30) $580
(31) $2,000
(31) $1,650
(31) $555
(31) $1,900
(31) $1,000
Bal. $1,120

Dr Note payable Cr
Beg. Bal. 0
 (1) 12,000
(31) $500
Bal. $11,500

Dr Accounts payable Cr
Beg. Bal. $18,750
(2) $13,000
(18) $5,000
Bal. $ 750

Dr Accounts receivable Cr
Beg. Bal. $14,450
(16) $8,000
(31) $5,000
Bal. $11,450

Dr Capital Cr
Beg. Bal. $14,300
(31) $1,000
Bal. $13,300

Dr Prepaid insurance Cr
Beg. Bal. 0
(3) $145
Bal. $145

Dr Prepaid Rent Cr
Beg. Bal. 0
(3) $950
Bal. $ 950

Dr Equipment Cr
Beg. Bal. $15,100
Bal. $ 15,100

Dr Utilities expense Cr
Beg. Bal. 0
(3) $550
Bal. $ 550

Dr Office expense Cr
Beg. Bal. 0
(3) $580
Bal. $580
 Dr Salaries expense Cr
Beg. Bal. 0
(3) $1,650
Bal. $1,650

Dr Interest expense Cr
Beg. Bal. 0
(3) $55
Bal. $55

Dr Rent expense Cr
Beg. Bal. 0
(3) $950
Bal. $950

Dr Drawings Cr
Beg. Bal. 0
(31) $1,000
Bal. $1,000

Dr Service Revenue Cr
Beg. Bal. 0
(1) 7,000

Bal. $7,000

d. Prepare a trial balance as at the end of March.

HN Consulting
Trial Balance
February 28, 2021
Dr Cr
Cash $1,120
Note payable $11,500
Accounts payable $750
H. Nolan, Capital $13,300
Accounts Receivable $11,450
Prepaid Insurance $145
Prepaid Rent $950
Equipment $15,100
Utilities Expense $550
Salaries Expense $1,650
Interest Expense $55
Rent Expense $950
Service Revenue $7,000
Totals $26,970 $32,550
e. Prepare an income statement for the month.
HN Consulting
Income Statement
For the month ended February 28, 2021

Revenue $7,000
Expenses:
Utilities expense $550
Office expense $580
Salaries expense $1,650
Interest expense $55
Rent expense $950
Total expenses: $3,785
Retained earnings $3,215

f. Prepare a statement of owner’s equity for the month.

HN Consulting
Statement of Owner’s Equity
For the month ended February 28, 2021

H. Nolan, Capital, beginning February 1 $14,300

Add: Retained earnings $3,215
Less: Drawings $1,000
Owner’s of Equity at February 28 $16,515

g. Prepare a balance sheet as at March 31, 2021

HN Consulting
Balance Sheet
For the month ended February 28, 2021

Assets $28,765 Liabilities

Cash $1,120 Notes payable $11,500
Accounts Receivable $11,450 Accounts payable $750
Prepaid Insurance $145 Owner’s Equity at $16,515
February 28, 2021
Prepaid Rent $950 Total L + OE $28,765
Equipment $15,100