Speedy Appliance Repair, owned by R. Lewis, uses the following accounts:

$$\begin{matrix} \text{General Ledger}\\ \hline \text{Cash in Bank}\\ \text{Accounts Receivable}\\ \text{Office Equipment}\\ \text{Accounts Payable}\\ \text{R. Lewis, Capital}\\ \end{matrix}$$

In the form provided in your working papers: 1. Classify each account as an asset, liability, or owner’s capital account. 2. Indicate whether the increase side is a debit or a credit. 3. Indicate whether the decrease side is a debit or credit. 4. Indicate whether the normal balance for the account is a debit or credit balance. The Cash in Bank account is completed as an example.

$$\begin{matrix} \text{Account} & \text{Account} & \text{Increase} & \text{Decrease} & \text{Normal}\\ \text{Name} & \text{Classification} & \text{Side} & \text{Side} & \text{Balance}\\ \hline \text{Cash in Bank} & \text{Asset} & \text{Debit} & \text{Credit} & \text{Debit}\\ \end{matrix}$$

John Albers uses the following accounts in his business.

$$\begin{matrix} \text{General Ledger} & \text{ } & \text{ }\\ \hline \text{Cash in Bank} & \text{John Albers, Capital} & \text{Advertising Expense}\\ \text{Accounts Receivable} & \text{John Albers, Withdrawals} & \text{Rent Expense}\\ \text{Office Equipment} & \text{Service Fees} & \text{Utilities Expense}\\ \text{Accounts Payable} & \text{ } & \text{ }\\ \end{matrix}$$

In your working papers: 1. Identify the two accounts affected by each of the following transactions. 2. Indicate whether each account is debited or credited.

$$\begin{array}{rl} \text{Date} & \text{Transactions}\\ \hline \text{July 1} & \text{1. Issued Check 543 to pay the electric bill for the month.}\\ \text{3} & \text{2. Billed a customer for services provided on account.}\\ \text{10} & \text{3. John Albers took cash from the business for his personal use.}\\ \text{17} & \text{4. Issued Check 544 to pay for an advertisement.}\\ \end{array}$$

Caroline Palmer uses the following accounts in her San Francisco–Los Angeles commuter shuttle service.

$$\begin{matrix} \text{General Ledger} & \text{ }\\ \hline \text{Cash in Bank} & \text{Caroline Palmer, Capital}\\ \text{Advertising Expense} & \text{Accounts Receivable}\\ \text{Caroline Palmer, Withdrawals} & \text{Food Expense}\\ \text{Airplanes} & \text{Flying Fees}\\ \text{Fuel and Oil Expense} & \text{Accounts Payable}\\ \text{Repairs Expense} & \text{ }\\ \end{matrix}$$

In the form provided in your working papers, provide the following information for each account. The first account is completed as an example. 1. Classify the account as an asset, liability, owner’s equity, revenue, or expense account. 2. Indicate whether the increase side is a debit or a credit. 3. Indicate whether the decrease side is a debit or a credit. 4. Indicate whether the account has a normal debit balance or a normal credit balance.

$$\begin{matrix} \text{Account} & \text{Account} & \text{Increase} & \text{Decrease} & \text{Normal}\\ \text{Name} & \text{Classification} & \text{Side} & \text{Side} & \text{Balance}\\ \hline \text{Cash in Bank} & \text{Asset} & \text{Debit} & \text{Credit} & \text{Debit}\\ \end{matrix}$$

Ronald Hicks uses these accounts in his business, Wilderness Rentals.

$$\begin{matrix} \text{General Ledger} & \text{ }\\ \hline \text{101 Cash in Bank} & \text{301 Ronald Hicks, Capital}\\ \text{105 Accounts Receivable—} & \text{305 Ronald Hicks, Withdrawals}\\ \text{Helen Katz} & \text{401 Equipment Rental Revenue}\\ \text{120 Office Equipment} & \text{505 Maintenance Expense}\\ \text{125 Camping Equipment} & \text{525 Utilities Expense}\\ \end{matrix}$$

Analyze each of the following trans actions using the format shown in the example. Record your answers in your working papers. a. Explain the debit. b. Explain the credit. On Jan. 2 Ronald Hicks paid the bill for office cleaning, $100. a. The expense account 505 Maintenance Expense is increased. Increases in expenses are recorded as debits. b. The asset account 101 Cash in Bank is decreased. Decreases in assets are recorded as credits.$

$$\begin{array}{rl} \text{Date} & \text{Transactions}\\ \hline \text{Jan. 3} & \text{1. Ronald Hicks withdrew $\$500$ from his business for his own use, Check 225.}\\ \text{8} & \text{2. The business received $\$1,200$ cash in rental fees from various customers. }\\ \text{12} & \text{3. The business paid a telephone bill of $\$85$, Check 226.}\\ \end{array}$$

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Sombrero Co., a furniture wholesaler, sells merchandise to Belarus Co. on account, $64,300, terms 2/10, n/30. The cost of the merchandise sold is$38,000. Sombrero Co. issues a credit memo for $13,300 for merchandise returned and subsequently receives the amount due within the discount period. The cost of the merchandise returned is$8,000. Journalize Sombrero Co.’s entries for

(b) the credit memo, including the cost of the returned merchandise.

Peachtree Company uses a sales journal, purchases journal, cash receipts journal, cash payments journal, and general journal. Prepare a purchases journal like the one in Exhibit 7.9. Journalize the following transactions that should be recorded in the purchases journal.

May 1 - Purchased $10,100 of merchandise on credit from Krause, Inc., terms n/30.

8 - Sold merchandise costing$900 to G. Seles for $1,500 on credit subject to a$30 sales discount if paid by the end of the month.

14 - Purchased $240 of store supplies from Chang Company on credit, terms n/30.

17 - Purchased$260 of office supplies on credit from Monder Company, terms n/30.

24 - Sold merchandise costing $400 to D. Air for$650 cash.

28 - Purchased store supplies from Porter’s for $90 cash.

29 - Paid Krause, Inc.,$10,100 cash for the merchandise purchased on May 1.

The Rural Assistance Agency operates three major programs as responsibility centers—the Food Bank, Housing Services, and Credit Counseling. Clients pay a fee for services on a sliding scale based on income. The following information is drawn from the accounting records of the agency for the year ended September 30, 2020. Earned revenue from the three programs was as follows: Food Bank, $2,611,900; Housing Services,$1,237,400; and Credit Counseling, $87,000. Costs for the same period were Food Bank,$9,632,800; Housing Services, $7,438,500; and Credit Counseling,$2,391,000.

Required

Prepare a statement of net cost for the Rural Assistance Agency for the year ended September 30, 2020.

Megan is making bracelets to sell to earn money for the local animal shelter. It takes her $\frac{1}{4}$ hour to pick out all the beads and $\frac{1}{10}$ hour to string them. This week, she only has $5\frac{1}{4}$ hours to make bracelets. How many bracelets will Megan be able to make?

a. 10 bracelets

b. 12 bracelets

c. 15 bracelets

d. 21 bracelets

Complete a table to provide an easy reference tool to help new accounting clerks accurately record journal entries and calculate general ledger balances. For each account, enter "+" (for an increase) or "-" (for a decrease) in the appropriate Debit and Credit column to show the impact of a debit or credit to each account's balance. Enter Dr. or Cr. in the last column to indicate the normal balance for each account. Use the table in the Working Papers to complete this problem. The Cash account is provided as an example.

$$\begin{array}{|l|c|c|c|} \hline \text{Account Title} & \text{Debit} & \text{Credit} & \text{Normal Balance} \\ \hline \text{Cash} & + & - & Dr. \\ \hline \end{array}$$

Use T-accounts to record each of the transactions under the periodic inventory system.

a. Purchased merchandise on credit, terms n/30, FOB shipping point, $5,000.

b. Paid freight on the shipment in transaction a,$270.

c. Purchased merchandise on credit, terms n/30, FOB destination, $2,800.

d. Purchased merchandise on credit, terms n/30, FOB shipping point,$5,200, which includes freight paid by the supplier of $400.

e. Returned part of the merchandise purchased in transaction c,$1,000.

f. Paid the amount owed on the purchase in transaction a.

g. Paid the amount owed on the purchase in transaction d.

h. Paid the amount owed on the purchase in transaction c less the return in e.

Information related to Mingenback Company for 2017 is shown below.

Instructions
Assume that Mingenback Company estimates its bad debt expense based on 6% of accounts receivable. What amount of bad debt expense will Mingenback record if it has an Allowance for Doubtful Accounts credit balance of$3,000?

Prepare journal entries to record each of the following sales transactions of a merchandising company. The company uses a perpetual inventory system and the gross method.

Apr. 1 Sold merchandise for S3,000, with credit terms n/30; invoice dated April 1. The cost of the merchandise is $1,800.
     4 The customer in the April 1 sale returned$300 of merchandise for full credit. The merchandise, which had cost $180, is returned to inventory.
     8 Sold merchandise for$1,000, with credit terms of 1/10, n/30; invoice dated April 8. Cost of the merchandise is $700. 
    11 Received payment for the amount due From the April 1 sale Jess the return on April 4.

Martin Electronics has an accounts receivable turnover equal to 15 times. If accounts receivable are equal to $80,000, what is the value for average daily credit sales?

A bank offers your firm a revolving credit arrangement for up to $70 million at an interest rate of 1.45 percent per quarter. The bank also needs you to maintain a compensating balance of 5 percent against the unused portion of the credit line, to be deposited in a non-interest-bearing account. Assume you have a short-term investment account at the bank that pays .85 percent per quarter, and assume that the bank uses compound interest on its revolving credit loans.

a. What is your effective annual interest rate (an opportunity cost) on the revolving credit arrangement if your firm does not use it during the year?
b. What is your effective annual interest rate on the lending arrangement if you borrow$45 million immediately and repay it in one year?
c. What is your effective annual interest rate if you borrow $70 million immediately and repay it in one year?