Chapter Two

Challenge Exercise 1 Expands on: E2-2 LO: 2 Wunderkind Photography entered into the following transactions during February 2 !"# !# $tockholders in%ested &'( in the business# 2# )ought photography e*uip+ent for a cash pay+ent of &!( # ,# )ought +ore photography e*uip+ent by signing a &' note payable# "# Perfor+ed photography ser%ices for &" cash# '# Perfor+ed photography ser%ices( and billed the custo+er &- on account# .# /ollected &- fro+ the custo+er in ite+ '# 0# Paid for February de%eloping and printing( &!' # 1# 2d%ertised the business in the Platte%ille 3ournal# 4he &! cost will be billed to Wunderkind# -# Paid the ad%ertising bill fro+ ite+ 1# ! # Paid &2 for photography supplies# !!# 5ecei%ed &, cash ad%ance pay+ent fro+ a custo+er for a photography 6ob to be perfor+ed in 2pril# !2# Paid &2' di%idend to the stockholders# 7nstructions: For each transaction indicate the following: 8a9 4he basic type of account debited and credited 8asset( liability( stockholder:s e*uity9# 8b9 4he specific account debited and credited 8cash( rent expense( ser%ice re%enue( etc#9# 8c9 Whether the specific account is increased or decreased# 8d9 4he nor+al balance of each specific account# ;se the following for+at( in which the first transaction is gi%en as an exa+ple# 2ccount <ebited 2ccount /redited 8a9 8b9 8c9 8d9 8a9 8b9 8c9 )asic $pecific =or+al )asic $pecific =or+al =o# 4ype 2ccount Effect )alance 4ype 2ccount )alance

8d9

Effect

Challenge Exercise 2 Expands on: E2-,

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Weygandt, Financial and Managerial Acco nting, Challenge !"ercises

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LO: " <ata for Wunderkind Photography are presented in /hallenge Exercise 2-2# 7nstructions: 3ournali>e the transactions using 6ournal page 3!# 8?ou +ay o+it explanations9#

Challenge Exercise 3 Expands on: E2-' LO: " Presented below is infor+ation related to $hawshank 5eal Estate 2gency#

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Weygandt, Financial and Managerial Acco nting, Challenge !"ercises

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Oct# ! Pete $hawshank begins business as a real estate agent with a cash in%est+ent of &2'( in exchange for co++on stock# 2 @ires an ad+inistrati%e assistant# , Purchases office furniture for &2(- ( by paying &0 cash with the balance on account# . $ells a house and lot for =# Aid+an( earning a fee of &,(. ( with &. collected in cash and the balance billed to =# Aid+an# 20 Pays &- on the balance related to the transaction of October ,# , Pays the ad+inistrati%e assistant &2(, in salary for October# ,! /ollects &!(2 of the balance owed by =# Aid+an# 7nstructions: !# 3ournali>e the transactions# 8?ou +ay o+it explanations#9 2# What balance would $hawshank 5eal Estate 2gency report for 2ccounts Payable in its October ,! financial state+entsB 7n which category of which financial state+ents would it be foundB ,# What balance would $hawshank 5eal Estate 2gency report for 2ccounts 5ecei%able in its October ,! financial state+entsB 7n which category of which financial state+ents would it be foundB

Challenge Exercise 4 Expands on: E2-!2 LO: "( . $elected transactions for 4ina Louise /o+pany during its first +onth in business are presented below# $ept# ! 7n%ested &2 ( cash in the business in exchange for co++on stock# ' Purchased e*uip+ent for &!0( paying &.( in cash and the balance on account# !! Perfor+ed &,(- of ser%ices for clients( collecting &!( cash and billing the+ for the re+ainder#
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Weygandt, Financial and Managerial Acco nting, Challenge !"ercises

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2' Paid &0( cash on balance owed for e*uip+ent# 2- <eclared and paid a &. cash di%idend# , /ollected &!(' fro+ the clients fro+ the $epte+ber !! transactions# 4he chart of accounts shows: =o# ! ! /ash( =o# !!2 2ccounts 5ecei%able( =o# !'0 E*uip+ent( =o# 2 ! 2ccounts Payable( =o# ,!! /o++on $tock( =o# ,,2 <i%idends( and =o# " $er%ice 5e%enue# 7nstructions: 8a9 3ournali>e the transactions on page 3! of the 6ournal# 8b9 Post the transactions using the standard account for+# 8c9 )ased only on these transactions( what a+ount would 4ina Louise report as total assets in the $epte+ber , balance sheetB 8d9 )ased only on these transactions( what a+ount would 4ina Louise report as total liabilities in the $epte+ber , balance sheetB

Challenge Exercise 5 Expands on: E2-!" LO: 2( 0 4he accounts in the ledger of $un <eli%ery $er%ice contain the following balances on 3uly ,!( 2 !"# 2ccounts 5ecei%able & 1( Prepaid 7nsurance &2( 2ccounts Payable 0(5etained Earnings '( /ash B $er%ice 5e%enue !!( /o++on $tock "2( $alaries and Wages Expense B <i%idends $alaries and Wages Payable !(
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Weygandt, Financial and Managerial Acco nting, Challenge !"ercises

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E*uip+ent Casoline and Oil Expense 7nsurance Expense Daintenance and 5epair Expense =otes Payable

' ( 1 . !(! !-(

$upplies ;nearned $er%ice 5e%enue

,( 2('

7nstructions: Prepare a trial balance with the accounts arranged as illustrated in the chapter and fill in the +issing a+ounts for /ash and $alaries Expense# 2ssu+e net inco+e for the period is &,('

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Weygandt, Financial and Managerial Acco nting, Challenge !"ercises

'age 2(+