Chapter 3 - In-Class Problems

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Southern Alberta Institute of Technology *

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2010

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Accounting

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Apr 3, 2024

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Exercise 3.3 You are presented with the following alphabetical list of items, selected from the financial statemen Required: For each of the accounts, identify the following: a) the type of account (assets, liabilities, shareholders' equity ([specify common shares, divide b) the normal balance of the account a) b) c) Account Type Normal Balance Statemen Bank loans payable Buildings Cash Depreciation expense Dividends declared Finance income Income tax expense Income taxes payable Interest expense Inventories Prepaid expenses Receivables Revenues c) on which financial statement (statement of income, statement of changes in equity, or stat Saputo would report the account. Furniture, machinery, and equipment

nts of Saputo Inc. ends, revenues, or expenses]) nt tement of financial position)

Brief Exercise 3.3 Account Classification Debit Credit Accounts Payable Accounts Receivable Cash Common Shares Deferred Revenue Dividends Declared Equipment Income Tax Expense Retained Earnings Service Revenue For each of the following accounts, indicate (a) whether it is an asset, liability, or shareholders’ equity account normal balance of the account; (c) whether a debit will increase or decrease the account; and (d) whether a cr increase or decrease the account. Normal Balance

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t; (b) the redit will

Problem 3.7B During the first month of operations, the following transactions occurred for Astromech Accounting Service May 1 Issued common shares for $20,000 cash. 1 Paid office rent of $950 for the month. 4 Hired a receptionist at a salary of $2,000 per month. She started work the same day. 4 Purchased $750 of supplies on account from Read Supply Corp. 11 Completed an income tax assignment and billed the client $2,725 for services provide 12 Received $3,500 in advance for services to be provided on a management consulting 15 Received $2,350 for services completed for Arnold Corp. 20 Received $1,725 from client for work completed and billed on May 11. 22 Paid one-third of balance due to Read Supply Corp. (See May 4 transaction.) 25 Received a $275 telephone bill for May, to be paid next month. (Hint: Use the Utilitie 29 Paid secretary-receptionist $2,000 salary for the month. 29 Paid monthly income tax instalment, $300. 29 Declared and paid $250 dividend. Required: a) Journalize the transactions b) Set up T accounts, post the journal entries to the general ledger, and determine the May 31 balances for a) Journalize the transactions Date Dr. / Cr. Account Description Debit Credit Date Totals c) After the accountant finished journalizing and posting the above transactions, she complained that this pr more efficient to purchase and use accounting software instead of recording and posting transactions manu idea or not, and why.

c) After the accountant finished journalizing and posting the above transactions, she complained that this She thought it would be more efficient to purchase and use accounting software instead of recording and Explain to the accountant if you think this is a good idea or not, and why.

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es Inc.: ed. g engagement. es Expense account to record telephone services.) each account. b) Set up T accounts, post the journal entries to the general ledger, and determine the May 31 balanc Cash Accounts Receivable Common Shares Dr. Cr. Date Dr. Cr. Date Dr. Cr. Totals Totals Supplies Dividends Declared Date Dr. Cr. Date Dr. Cr. Totals Totals Accounts Payable Service Revenue Date Dr. Cr. Date Dr. Cr. rocess took too much time. She thought it would be ually. Explain to the accountant if you think this is a good

Totals Totals Deferred Revenue Salaries Expense Date Dr. Cr. Date Dr. Cr. Totals Totals s process took too much time. posting transactions manually.

ces for each account. Rent Expense Date Dr. Cr. Totals Utilities Expense Date Dr. Cr. Totals Income Tax Expense Date Dr. Cr.

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Totals

Problem 3.8B Apr. 2 3 Paid advertising expenses, $620. 5 6 Ordered two additional films at $750 each. 15 16 Paid $2,000 of the balance due on the mortgage. Also paid $850 in interest on the mortgage 17 Paid $2,800 of the accounts payable. 19 Received one of the films ordered on April 6 and was billed $750. The film will be shown in A 20 26 Paid salaries, $2,900. 27 Paid $1,000 for the monthly income tax instalment. 30 30 Received $7,300 from customers for admissions for the last half of the month. Required: a) Journalize the April transactions. c) Prepare a trial balance at April 30. On March 31, 2024, Lake Theatre Inc.’s general ledger showed Cash $6,000; Land $100,000; Buildings $ Equipment $25,000; Accounts Payable $5,000; Mortgage Payable $125,000; Common Shares $50,000; Earnings $31,000. During the month of April, the following transactions occurred: Paid film rental fee of $800 on a movie ordered last month. (Hint: Lake Theatre uses the account Rent Expense to record film rentals.) Hired Thoms Limited to operate concession stand. Thoms agrees to pay the Lake Theatre 20 concession receipts, payable monthly, for the right to operate the concession stand. (Hint: L uses the account Concession Revenue to record concession receipts earned.) Received $1,950 from customers for admissions for the first half of the month. (Hint: Lake T the account Fees Earned to record revenue from admissions.) Prepaid $700 rental fee on special film to be run in May. (Hint: Use the account Prepaid Ren rental fees paid in advance.) Received statement from Thoms showing gross concession receipts of $5,600 and the balan Theatre of $1,120 ($5,600 × 20%) for April. Thoms paid half of the balance due and will rem remainder on May 4. b) Set up T accounts, enter the beginning balances in the ledger at March 31, post the April journal entr ledger, and determine the April 30 balances for each account.

a) Journalize the April transactions. Date Dr. / Cr. Account Description Debit Credit e. April. $80,000; and Retained 0% of gross Lake Theatre Theatre uses nt to record nce due to Lake mit the ries to the

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b) Post to Ledger Accounts Cash Buildings Retained Earni Date Dr. Cr. Date Dr. Cr. Date Dr. Totals - - Totals - Equipment Fees Earned Date Dr. Cr. Date Dr. Totals - - Totals - - Totals - Accounts Receivable Accounts Payable Concession Reve Date Dr. Cr. Date Dr. Cr. Date Dr. Totals - - Totals - - Totals - Prepaid Rent Mortgage Payable Salaries Expen Date Dr. Cr. Date Dr. Cr. Date Dr. Totals - - Totals - - Totals - Land Common Shares Rent Expense Date Dr. Cr. Date Dr. Cr. Date Dr. Totals - - Totals - - Totals -

c) Prepare a trial balance at April 30. ings Advertising Expense Lake Theatre Cr. Date Dr. Cr. Trial Balance 30-Apr-24 Account Debit Credit Cash Accounts receivable - Totals - - Prepaid rent Land Buildings d Interest Expense Equipment Cr. Date Dr. Cr. Accounts payable Mortgage payable Common shares Retained earnings Fees earned - Totals - - Concession revenue Salaries expense Rent expense enue Income Tax Expense Advertising expense Cr. Date Dr. Cr. Interest expense Income tax expense - Totals - - Totals - - nse Cr. - e Cr. -

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