1 / 26

Review Exercise

Review Exercise. Chapter. 1-3. Exercise 1: Business Entity (Chap 1). Sole proprietorship, Partnership, or Corporation? Ownership of Spirit Company is divided into 1,000 shares of stock. Delta is owned by Sarah Gomez, who is personally liable for the debts of the business.

estevan-gutierrez
Download Presentation

Review Exercise

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Review Exercise Chapter 1-3

  2. Exercise 1: Business Entity (Chap 1) Sole proprietorship, Partnership, or Corporation? • Ownership of Spirit Company is divided into 1,000 shares of stock. • Delta is owned by Sarah Gomez, who is personally liable for the debts of the business. • Jo Chen and Al Fitch own Financial Services, a financial services provider. Neither Chen nor Fitch has personal responsibility for the debts of Financial Services. • Sung Kwon and Frank Heflin own Get-It-There, a courier service. Both are personally liable for the debts of the business. • XLT Services does not have separate legal existence apart from the one person who owns it. • BioProducts does not pay income taxes and has one owner. • Tampa Biz pays its own income taxes and has two owners.

  3. Exercise 1: Business Entity (Chap 1) Sole proprietorship, Partnership, or Corporation? • Ownership of Spirit Company is divided into 1,000 shares of stock. • Delta is owned by Sarah Gomez, who is personally liable for the debts of the business. • Jo Chen and Al Fitch own Financial Services, a financial services provider. Neither Chen nor Fitch has personal responsibility for the debts of Financial Services. • Sung Kwon and Frank Heflin own Get-It-There, a courier service. Both are personally liable for the debts of the business. • XLT Services does not have separate legal existence apart from the one person who owns it. • BioProducts does not pay income taxes and has one owner. • Tampa Biz pays its own income taxes and has two owners.

  4. Exercise 1: Business Entity (Chap 1) Sole proprietorship, Partnership, or Corporation? • Ownership of Spirit Company is divided into 1,000 shares of stock. (Corporation) • Delta is owned by Sarah Gomez, who is personally liable for the debts of the business. (Sole proprietorship ) • Jo Chen and Al Fitch own Financial Services, a financial services provider. Neither Chen nor Fitch has personal responsibility for the debts of Financial Services. (Corporation, Limited Liability) • Sung Kwon and Frank Heflin own Get-It-There, a courier service. Both are personally liable for the debts of the business. (Partnership, Unlimited Liability) • XLT Services does not have separate legal existence apart from the one person who owns it. (Sole proprietorship, not a legal entity ) • BioProducts does not pay income taxes and has one owner. (Sole proprietorship, Income not taxed ) • Tampa Biz pays its own income taxes and has two owners.(Corporation,Income taxed)

  5. Exercise 2: Accounting Equation & F/S (Chap 2) What is the number for ‘?’

  6. = + Assets Liabilities Equity Exercise 2: Accounting Equation & F/S (Chap 2)

  7. Exercise 2: Accounting Equation & F/S (Chap 2)

  8. Exercise 2: Accounting Equation & F/S (Chap 2)

  9. Exercise 3: Account Type (Chap 2) • Type of account as an asset, liability, equity, revenue, or expense? • debit (Dr.) or credit (Cr.) when account increase? • Normal balance of the account?

  10. Asset Accounts Cash Accounts Receivable Land AssetAccounts Notes Receivable Buildings Prepaid Accounts Equipment Supplies

  11. Asset account • Cash: reflects a company’s cash balance. • Account receivable: held by a seller and refer to promises of payment from customers to sellers. (credit sales or sales on account) • Note receivable: a written promise of another entity to pay a definite sum of money on a specified future date to the holder of the note. • Prepaid account: represent prepayments of future expenses. (ex. prepaid insurance)

  12. Asset account • Supplies: belong to asset until they are used. When they are used, their costs are transferred from the asset accounts to expense accounts. • Equipment: When it is used and gets worn down its cost is gradually reported as an expense (called depreciation).

  13. Liability Accounts Accounts Payable Notes Payable LiabilityAccounts Unearned Revenues Accrued Liabilities

  14. Liability accounts • Accounts payable: oral or implied promises to pay later, commonly arise from purchases of merchandise. • Note payable: a formal promise, usually denoted by the signing of a promissory note, to pay a future amount. • Accrued liabilities: They are amounts owed that are not yet paid (ex. Wages payable, taxes payable).

  15. Liability accounts • Unearned revenue: a liability that is settled in the future when a company delivers its products or services. When customers pay in advance for products or services (before revenue is earned), the revenue recognition principle requires that the seller consider this payment as unearned revenue (ex. Unearned ticket revenue).

  16. Equity Accounts Owner’s Capital Owner’s Withdrawals EquityAccounts Revenues Expenses

  17. – – + + Owner’s Capital Owner’s Withdrawals Revenues Expenses Equity Accounts = + Assets Liabilities Equity

  18. Equity accounts • Revenues: gross increase in equity from a company’s earnings activities. • Expenses: the cost of assets or services used to earn revenue. Expenses decrease owner’s equity. • Owner investments: the amounts an owner puts into the company. • Owner withdrawals: the amounts take away from the company for personal use.

  19. Exercise 3: Accounting Type (Chap 2) • Type of account as an asset, liability, equity, revenue, or expense, • debit (Dr.) or credit (Cr.) when account increase • Normal balance of the account.

  20. Exercise 4: T-Account, Debit & Credit (Chap 2) • Use the information in each of the following separate cases to calculate the unknown amount: • During October, Shandra Company had $97,500 of cash receipts and $101,250 of cash disbursements. The October 31 Cash balance was $16,800. What is the cash balance on September 30. • On September 30, Li Ming Co. had a $97,500 balance in Accounts Receivable. During October, the company collected $88,950 from its credit customers. The October 31 balance in Accounts Receivable was $100,500. Determine the amount of sales on account that occurred in October. • Nasser Co. had $147,000 of accounts payable on September 30 and $136,500 on October 31. Total purchases on account during October were $270,000. how much cash was paid on accounts payable during October.

  21. Exercise 4: T-Account, Debit & Credit (Chap 2) • During October, Shandra Company had $97,500 of cash receipts and $101,250 of cash disbursements. The October 31 Cash balance was $16,800. What is the cash balance on September 30. • On September 30, Li Ming Co. had a $97,500 balance in Accounts Receivable. During October, the company collected $88,950 from its credit customers. The October 31 balance in Accounts Receivable was $100,500. Determine the amount of sales on account that occurred in October. • Nasser Co. had $147,000 of accounts payable on September 30 and $136,500 on October 31. Total purchases on account during October were $270,000. how much cash was paid on accounts payable during October.

  22. Exercise 5: Journal Entry, Posting, & Trial Balance (Chap 2) Roberto Ricci opens a computer consulting business called Viva Consultants and completes the following transactions in its first month of operations: Apr. 1: Ricci invests $100,000 cash along with office equipment valued at $24,000 in the business. Apr. 2: Prepaid $7,200 cash for twelve months' rent for office space. Apr. 3: Made credit purchases for $12,000 in office equipment and $2,400 in office supplies. Payment is due within 10 days. Apr. 6: Completed services for a client and immediately received $2,000 cash. Apr. 9: Completed an $8,000 project for a client, who must pay within 30 days. Apr. 13: Paid $14,400 cash to settle the account payable created on April 3. Apr. 19: Paid $6,000 cash for the premium on a 12-month insurance policy. Apr. 22: Received $6,400 cash as partial payment for the work completed on April 9. Apr. 25: Completed work for another client for $2,640 on credit. Apr. 28: Ricci withdrew $6,200 cash for personal use. Apr. 29: Purchased $800 of additional office supplies on credit. Apr. 30: Paid $700 cash for this month's utility bill.

  23. Exercise 5: Journal Entry, Posting, & Trial Balance (Chap 2)

  24. Exercise 6: Adjusting Journal Entry (Chap 3) • Prepare Adjusting Journal Entry for year ended at 12/31/2005 • Depreciation on equipment for 2005 is $16,000 • Prepaid Insurance had $7,000 at 12/31/2005 before adjustment. An analysis show only $1,040 unexpired • Office supply had $300 debit balance on 12/31/204, during 2005, $2,680 supplies was purchased. On 12/31/2005, physical count show $345 supplies remain. • Half of work related to$10,000 cash received in advance was performed in 2005. • Prepaid insurance had debit balance of $5,600 before adjustment. An analysis show that $4,600 coverage had expired. • Wage expense of $4,000 have been incurred but are not paid yet as on 12/31/2005

  25. Exercise 6: Adjusting Journal Entry (Chap 3) • Prepare Adjusting Journal Entry for year ended at 12/31/2005 • Depreciation on equipment for 2005 is $16,000 • 12/31/2005 Dr. Depreciation Expense $16,000 • Cr. Accumulated Depreciation – Equipment $16,000 • To record depreciation expense for the year. • Prepaid Insurance had $7,000 at 12/31/2005 before adjustment. An analysis show only $1,040 unexpired • 12/31/2005 Dr. Insurance Expense $5,960 • Cr. Prepaid Insurance $5,960 • To record insurance coverage that expired ($7,000 - $1,040). • Office supply had $300 debit balance on 12/31/204, during 2005, $2,680 supplies was purchased. On 12/31/2005, physical count show $354 supplies remain. • 12/31/2005 Dr. Supplies Expense $2,626 • Cr. Supplies $2,626 • To record office supplies used ($300 + $2,680 - $354).

  26. Exercise 6: Adjusting Journal Entry (Chap 3) • Prepare Adjusting Journal Entry for year ended at 12/31/2005 • Half of work related to$10,000 cash received in advance was performed in 2005. • 12/31/2005 Dr. Unearned Fee Revenue $5,000 • Cr. Fee Revenue $5,000 • To record earned portion of fee received in advance ($10,000 x 1/2). • Prepaid insurance had debit balance of $5,600 before adjustment. An analysis show that $4,600 coverage had expired. • 12/31/2005 Dr. Insurance Expense $4,600 • Cr. Prepaid Insurance $4,600 • To record insurance coverage that expired. • Wage expense of $4,000 have been incurred but are not paid yet as on 12/31/2005 • 12/31/2005 Dr. Wage Expense $4,000 • Cr. Wage Payable $4,000 • To record wages accrued but not yet paid.

More Related