Roxy Theater Inc. was recently formed. All facilities were completed on March 31. On April 1, the ledger showed: Cash $6,300; Land$10,000; Buildings (concession stand, projection room, ticket booth, and screen) $58,000; Equipment$6,000; Accounts Payable $2,300; Mortgage Payable$38,000; and Common Stock $40,000. During April, the following events and transactions occurred.

Apr. 2 Paid film rental fee of$1,800 on first movie.
     3 Ordered two additional films at $750 each.
     9 Received$5,700 cash from admissions.
    10 Paid $2,000 of mortgage payable and$1,200 of accounts payable.
    11 Roxy Theater contracted with M. Gavin to operate the concession stand. Gavin agrees to pay Roxy Theater 17% of gross receipts, payable monthly.
    12 Paid advertising expenses $410.
    20 Received one of the films ordered on April 3 and was billed$750. The film will be shown in April.
    25 Received $3,000 cash from customers for admissions.
    29 Paid salaries$1,900.
    30 Received statement from M. Gavin showing gross receipts of $2,000 and the balance due to Roxy Theater of$340 ($2,000 x .17) for April. Gavin paid half of the balance due and will remit the remainder on May 5.
    30 Prepaid$1,200 rental fee on special fi lm to be run in May.

In addition to the accounts identified above, the chart of accounts shows Accounts Receivable, Prepaid Rent, Service Revenue, Rent Revenue, Advertising Expense, Rent Expense, Salaries and Wages Expense.

Instructions

(a) Enter the beginning balances in the ledger T-accounts as of April 1.

Jennifer VanPelt is the assistant chief accountant at BIT Company, a manufacturer of computer chips and cellular phones. The company presently has total sales of $20 million. It is the end of the first quarter and Jennifer is hurriedly trying to prepare a trial balance so that quarterly financial statements can be prepared and released to management and the regulatory agencies. The total credits on the trial balance exceed the debits by$1,000.

In order to meet the 4 P.M. deadline, Jennifer decides to force the debits and credits into balance by adding the amount of the difference to the Equipment account. She chose Equipment because it is one of the larger account balances; percentage-wise it will be the least misstated. Jennifer plugs the difference! She believes that the difference is quite small and will not affect anyone’s decisions. She wishes that she had another few days to find the error but realizes that the financial statements are already late.

Instructions

(a) Who are the stakeholders in this situation?

(b) What ethical issues are involved?

This trial balance of Lindbergh Company does not balance.

$$\begin{array}{c} &\textbf{LINDBERGH COMPANY}\\ &\textbf{Trial Balance}\\ &\textbf{May 31, 2014}\\ \end{array}$$

$$\begin{array}{lcc} &\underline{\textbf{Debit}}&\underline{\textbf{Credit}}\\[3pt] \text{Cash}&\text{\$\hspace{5pt}5,340}\\ \text{Accounts Receivable}&&\text{\$\hspace{5pt}2,750}\\ \text{Prepaid Insurance}&\text{\hspace{18pt}700}\\ \text{Equipment}&\text{\hspace{10pt}9,000}\\ \text{Accounts Payable}&&\text{\hspace{10pt}4,100}\\ \text{Income Taxes Payable}&\text{\hspace{18pt}850}\\ \text{Common Stock}&&\text{\hspace{10pt}5,700}\\ \text{Retained Earnings}&&\text{\hspace{10pt}6,000}\\ \text{Service Revenue}&\text{\hspace{10pt}7,690}\\ \text{Salaries and Wages Expense}&\text{\hspace{10pt}4,200}\\ \text{Advertising Expense}&&\text{\hspace{10pt}1,100}\\ \text{Income Tax Expense}&\underline{\hspace{18pt}900}&\underline{\text{\hspace{34pt}}}\\ &\underline{\underline{\text{\$\hspace{1pt}28,680}}}&\underline{\underline{\text{\$\hspace{1pt}19,650}}}\\ \end{array}$$

Your review of the ledger reveals that each account has a normal balance. You also discover the following errors.

 1. The totals of the debit sides of Prepaid Insurance, Accounts Payable, and Income Tax Expense were each understated $100.
 2. Transposition errors were made in Accounts Receivable and Service Revenue. Based on postings made, the correct balances were$2,570 and $7,960, respectively.
 3. A debit posting to Salaries and Wages Expense of$500 was omitted.
 4. A $600 cash dividend was debited to Common Stock for$600 and credited to Cash for $600.
 5. A$350 purchase of supplies on account was debited to Equipment for $350 and credited to Cash for$350.
 6. A cash payment of $490 for advertising was debited to Advertising Expense for$49 and credited to Cash for $49.
 7. A collection from a customer for$240 was debited to Cash for $240 and credited to Accounts Payable for$240.

Instructions

Prepare the correct trial balance, assuming all accounts have normal balances. (Note: The chart of accounts also includes the following: Dividends and Supplies.)

Misty Reno, a beginning accounting student, believes debit balances are favorable and credit balances are unfavorable. Is Misty correct? Discuss.

This trial balance of Lindbergh Company does not balance.

$$\begin{array}{c} &\textbf{LINDBERGH COMPANY}\\ &\textbf{Trial Balance}\\ &\textbf{May 31, 2014}\\ \end{array}$$

$$\begin{array}{lcc} &\underline{\textbf{Debit}}&\underline{\textbf{Credit}}\\[3pt] \text{Cash}&\text{\$\hspace{5pt}5,340}\\ \text{Accounts Receivable}&&\text{\$\hspace{5pt}2,750}\\ \text{Prepaid Insurance}&\text{\hspace{18pt}700}\\ \text{Equipment}&\text{\hspace{10pt}9,000}\\ \text{Accounts Payable}&&\text{\hspace{10pt}4,100}\\ \text{Income Taxes Payable}&\text{\hspace{18pt}850}\\ \text{Common Stock}&&\text{\hspace{10pt}5,700}\\ \text{Retained Earnings}&&\text{\hspace{10pt}6,000}\\ \text{Service Revenue}&\text{\hspace{10pt}7,690}\\ \text{Salaries and Wages Expense}&\text{\hspace{10pt}4,200}\\ \text{Advertising Expense}&&\text{\hspace{10pt}1,100}\\ \text{Income Tax Expense}&\underline{\hspace{18pt}900}&\underline{\text{\hspace{34pt}}}\\ &\underline{\underline{\text{\$\hspace{1pt}28,680}}}&\underline{\underline{\text{\$\hspace{1pt}19,650}}}\\ \end{array}$$

Your review of the ledger reveals that each account has a normal balance. You also discover the following errors.

 1. The totals of the debit sides of Prepaid Insurance, Accounts Payable, and Income Tax Expense were each understated $100.
 2. Transposition errors were made in Accounts Receivable and Service Revenue. Based on postings made, the correct balances were$2,570 and $7,960, respectively.
 3. A debit posting to Salaries and Wages Expense of$500 was omitted.
 4. A $600 cash dividend was debited to Common Stock for$600 and credited to Cash for $600.
 5. A$350 purchase of supplies on account was debited to Equipment for $350 and credited to Cash for$350.
 6. A cash payment of $490 for advertising was debited to Advertising Expense for$49 and credited to Cash for $49.
 7. A collection from a customer for$240 was debited to Cash for $240 and credited to Accounts Payable for$240.

Instructions

Prepare the correct trial balance, assuming all accounts have normal balances. (Note: The chart of accounts also includes the following: Dividends and Supplies.)

This trial balance of Swisher Co. does not balance.

$$\begin{array}{c} &\textbf{SWISHER CO.}\\ &\textbf{Trial Balance}\\ &\textbf{June 30, 2014}\\ \end{array}$$

$$\begin{array}{lcc} &\underline{\textbf{Debit}}&\underline{\textbf{Credit}}\\[3pt] \text{Cash}&&\text{\$\hspace{5pt}3,090}\\ \text{Accounts Receivable}&\text{\$\hspace{5pt}3,190}\\ \text{Supplies}&\text{\hspace{18pt}800}\\ \text{Equipment}&\text{\hspace{10pt}3,000}\\ \text{Accounts Payable}&&\text{\hspace{10pt}3,686}\\ \text{Unearned Service Revenue}&\text{\hspace{10pt}1,200}\\ \text{Common Stock}&&\text{\hspace{10pt}9,000}\\ \text{Dividends}&\text{\hspace{18pt}800}\\ \text{Service Revenue}&&\text{\hspace{10pt}3,480}\\ \text{Salaries and Wages Expense}&\text{\hspace{10pt}3,600}\\ \text{Utilities Expense}&\underline{\hspace{18pt}910}&\underline{\text{\hspace{34pt}}}\\ &\underline{\underline{\text{\$\hspace{1pt}13,500}}}&\underline{\underline{\text{\$\hspace{1pt}19,256}}}\\ \end{array}$$

Each of the listed accounts has a normal balance per the general ledger. An examination of the ledger and journal reveals the following errors:

 1. Cash received from a customer on account was debited for $780, and Accounts Receivable was credited for the same amount. The actual collection was for$870.
 2. The purchase of a printer on account for $340 was recorded as a debit to Supplies for$340 and a credit to Accounts Payable for $340.
 3. Services were performed on account for a client for$900. Accounts Receivable was debited for $90 and Service Revenue was credited for$900.
 4. A debit posting to Salaries and Wages Expense of $700 was omitted.
 5. A payment on account for$206 was credited to Cash for $206 and credited to Accounts Payable for$260.
 6. Payment of a $600 cash dividend to Swisher’s stockholders was debited to Salaries and Wages Expense for$600 and credited to Cash for $600.

Instructions

Prepare the correct trial balance. (Hint: All accounts have normal balances.)

Terry Rabas, a fellow student, contends that the double entry system means each transaction must be recorded twice. Is Terry correct? Explain.

Rachelle Mohling, a fellow student, is unclear about the basic steps in the recording process. Identify and briefly explain the steps in the order in which they occur.

Clean Sweep Company offers home cleaning service. Two recurring transactions for the company are billing customers for services performed and paying employee salaries. For example, on March 15 bills totaling $6,000 were sent to customers, and$2,000 was paid in salaries to employees.

Instructions

Write a memorandum to your instructor that explains and illustrates the steps in the recording process for each of the March 15 transactions. Use the format illustrated in the textbook under the heading “The Recording Process Illustrated” (pp. 121–126).

This information relates to Crofoot Real Estate Agency.

Oct.    1 Stockholders invest $30,000 in exchange for common stock of the corporation.
        2  Hires an administrative assistant at an annual salary of$36,000.
        3 Buys offi ce furniture for $3,800, on account.
        6 Sells a house and lot for M.E. Graves; commissions due from Graves,$10,800 (not paid by Graves at this time).
       10 Receives cash of $140 as commission for acting as rental agent renting an apartment.
       27 Pays$700 on account for the offi ce furniture purchased on October 3.
       30 Pays the administrative assistant $3,000 in salary for October.

Instructions

Prepare the debit–credit analysis for each transaction, as illustrated on pages 121–126.

The trial balance of American Dry Cleaners on June 30 is given here.

$$\begin{array}{c} &\textbf{AMERICAN DRY CLEANERS}\\ &\textbf{Trial Balance}\\ &\textbf{June 30, 2014}\\ \end{array}$$

$$\begin{array}{lcc} &\underline{\textbf{Debit}}&\underline{\textbf{Credit}}\\[3pt] \text{Cash}&\text{\$\hspace{1pt}15,532}\\ \text{Accounts Receivable}&\text{\hspace{5pt}10,536}\\ \text{Supplies}&\text{\hspace{10pt}3,592}\\ \text{Equipment}&\text{\hspace{5pt}25,950}\\ \text{Accounts Payable}&&\text{\$\hspace{1pt}15,800}\\ \text{Unearned Service Revenue}&&\text{\hspace{10pt}1,810}\\ \text{Common Stock}&&\text{\hspace{5pt}25,000}\\ \text{Retained Earnings}&\underline{\hspace{34pt}}&\underline{\text{\hspace{5pt}13,000}}\\ &\underline{\underline{\text{\$\hspace{1pt}55,610}}}&\underline{\underline{\text{\$\hspace{1pt}55,610}}}\\ \end{array}$$

The July transactions were as follows.

July  8 Received $10,189 in cash on June 30 accounts receivable.
      9 Paid employee salaries$2,100.
     11 Received $7,320 in cash for services performed.
     14 Paid creditors$4,810 of accounts payable.
     17 Purchased supplies on account $720.
     22 Billed customers for services performed$4,700.
     30 Paid employee salaries $3,114, utilities$1,767, and repairs $386.
     31 Paid$400 cash dividend.

Instructions

(d) Prepare a trial balance on July 31, 2014.

The trial balance of American Dry Cleaners on June 30 is given here.

$$\begin{array}{c} &\textbf{AMERICAN DRY CLEANERS}\\ &\textbf{Trial Balance}\\ &\textbf{June 30, 2014}\\ \end{array}$$

$$\begin{array}{lcc} &\underline{\textbf{Debit}}&\underline{\textbf{Credit}}\\[3pt] \text{Cash}&\text{\$\hspace{1pt}15,532}\\ \text{Accounts Receivable}&\text{\hspace{5pt}10,536}\\ \text{Supplies}&\text{\hspace{10pt}3,592}\\ \text{Equipment}&\text{\hspace{5pt}25,950}\\ \text{Accounts Payable}&&\text{\$\hspace{1pt}15,800}\\ \text{Unearned Service Revenue}&&\text{\hspace{10pt}1,810}\\ \text{Common Stock}&&\text{\hspace{5pt}25,000}\\ \text{Retained Earnings}&\underline{\hspace{34pt}}&\underline{\text{\hspace{5pt}13,000}}\\ &\underline{\underline{\text{\$\hspace{1pt}55,610}}}&\underline{\underline{\text{\$\hspace{1pt}55,610}}}\\ \end{array}$$

The July transactions were as follows.

July  8 Received $10,189 in cash on June 30 accounts receivable.
      9 Paid employee salaries$2,100.
     11 Received $7,320 in cash for services performed.
     14 Paid creditors$4,810 of accounts payable.
     17 Purchased supplies on account $720.
     22 Billed customers for services performed$4,700.
     30 Paid employee salaries $3,114, utilities$1,767, and repairs $386.
     31 Paid$400 cash dividend.

Instructions

(c) Post to the ledger accounts.

Selected transactions for Home Place, an interior decorator corporation, in its first month of business, are as follows.

1. Issued stock to investors for $15,000 in cash.
2. Purchased used car for$10,000 cash for use in business.
3. Purchased supplies on account for $300.
4. Billed customers$3,700 for services performed.
5. Paid $200 cash for advertising start of the business.
6. Received$1,100 cash from customers billed in transaction (4).
7. Paid creditor $300 cash on account.
8. Paid dividends of$400 cash to stockholders.

Instructions

(b) Journalize the transactions. Do not provide explanations.

The trial balance of American Dry Cleaners on June 30 is given here.

$$\begin{array}{c} &\textbf{AMERICAN DRY CLEANERS}\\ &\textbf{Trial Balance}\\ &\textbf{June 30, 2014}\\ \end{array}$$

$$\begin{array}{lcc} &\underline{\textbf{Debit}}&\underline{\textbf{Credit}}\\[3pt] \text{Cash}&\text{\$\hspace{1pt}15,532}\\ \text{Accounts Receivable}&\text{\hspace{5pt}10,536}\\ \text{Supplies}&\text{\hspace{10pt}3,592}\\ \text{Equipment}&\text{\hspace{5pt}25,950}\\ \text{Accounts Payable}&&\text{\$\hspace{1pt}15,800}\\ \text{Unearned Service Revenue}&&\text{\hspace{10pt}1,810}\\ \text{Common Stock}&&\text{\hspace{5pt}25,000}\\ \text{Retained Earnings}&\underline{\hspace{34pt}}&\underline{\text{\hspace{5pt}13,000}}\\ &\underline{\underline{\text{\$\hspace{1pt}55,610}}}&\underline{\underline{\text{\$\hspace{1pt}55,610}}}\\ \end{array}$$

The July transactions were as follows.

July  8 Received $10,189 in cash on June 30 accounts receivable.
      9 Paid employee salaries$2,100.
     11 Received $7,320 in cash for services performed.
     14 Paid creditors$4,810 of accounts payable.
     17 Purchased supplies on account $720.
     22 Billed customers for services performed$4,700.
     30 Paid employee salaries $3,114, utilities$1,767, and repairs $386.
     31 Paid$400 cash dividend.

Instructions

(b) Journalize the transactions, including explanations.