1.
Financial statement analysis:
Company and its users use financial analysis as a way to analyse the company’s financial statements to take investment and business decisions. There are four financial statements that any company should produce to its users for analysis. These are income statement,
To prepare: The income statement of the company.
1.
Explanation of Solution
Date | Particulars | Debit ($) | Credit ($) |
a. | Cash Office equipment Computer equipment B.G., Capital (To record investment by owner in form of cash and office equipment.) | 65,000 5,750 30,000 | 100,750 |
b. | Land Cash Notes payable (To record purchase of land by paying cash and issuing notes payable) | 22,000 | 5,000 17,000 |
c. | Building Cash (To record purchase of building for cash.) | 34,500 | 34,500 |
d. | Prepaid insurance Cash (To record payment made towards 2-year prepaid insurance.) | 5,000 | 5,000 |
e. | Cash Fees Earned (To record cash received for services provided.) | 4,600 | 4,600 |
f. | Computer equipment Cash Notes payable (To record purchase of computer equipment by paying cash and issuing notes payable) | 4,500 | 800 3,700 |
g. | Fees Earned (To record amount receivable for services provided.) | 4,250 | 4,250 |
h. | Office equipment Accounts payable (To record purchase of office supplies on credit.) | 950 | 950 |
i. | Accounts receivable Fees Earned (To record amount receivable for services provided.) | 10,200 | 10,200 |
j. | Computer rental expense Accounts payable (To record computer rental expense incurred but is yet to be paid.) | 580 | 580 |
k. | Cash Accounts receivable (To record partial payment received towards accounts receivable.) | 5,100 | 5,100 |
l. | Wages expense Cash (To record cash paid towards wages expense.) | 1,800 | 1,800 |
m. | Accounts payable Cash (To record payment pending towards accounts payable.) | 950 | 950 |
n. | Repairs expense Cash (To record cash paid towards repairs expense.) | 608 | 608 |
o. | B. G., Withdrawals Cash (To record cash withdrawal by owner.) | 6,230 | 6,230 |
p. | Wages expense Cash (To record cash paid towards wages expense.) | 1,800 | 1,800 |
q. | Advertising expense Cash (To record cash paid towards advertising expense.) | 750 | 750 |
2.
Financial statement analysis:
Company and its users use financial analysis as a way to analyse the company’s financial statements to take investment and business decisions. There are four financial statements that any company should produce to its users for analysis. These are income statement, balance sheet, cash flow statement and stockholders’ equity statement.
To prepare: The ledger accounts.
2.
Explanation of Solution
Cash (101)
S. No. | Particulars | Debit ($) | S. No. | Particulars | Credit ($) |
a. | B.G., Capital | 65,000 | b. | Land | 5,000 |
e. | Fees Earned | 4,600 | c. | Building | 34,500 |
k. | Accounts receivable | 5,100 | D | Prepaid insurance | 5,000 |
f. | Computer equipment | 800 | |||
l. | Wages expense | 1,800 | |||
m. | Accounts payable | 950 | |||
n. | Repairs expense | 608 | |||
o. | B.G., Withdrawals | 6,230 | |||
p. | Wages expense | 1,800 | |||
q. | Advertising expense | 750 | |||
Balance c/d | 17,262 | ||||
74,700 | 74,700 |
Accounts receivable (106)
S.No. | Particulars | Debit ($) | S.No. | Particulars | Credit ($) |
g. | Fees Earned | 4,250 | k. | Cash | 5,100 |
i. | Fees Earned | 10,200 | Balance c/d | 9,350 | |
14,450 | 14,450 |
Prepaid Insurance (108)
S.No. | Particulars | Debit ($) | S.No. | Particulars | Credit ($) |
d. | Cash | 5,000 | Balance c/d | 5,000 | |
5,000 | 5,000 |
Office equipment (163)
S.No. | Particulars | Debit ($) | S.No. | Particulars | Credit ($) |
a. | B.G., Capital | 5,750 | Balance c/d | 6,700 | |
h. | Accounts payable | 950 | |||
6,700 | 6,700 |
Accounts payable (201)
S.No. | Particulars | Debit ($) | S.No. | Particulars | Credit ($) |
m. | Cash | 950 | j. | Computer rental expense | 580 |
Balance c/d | 580 | h. | Office equipment | 950 | |
1,530 | 1,530 |
B.G., Capital (301)
S.No. | Particulars | Debit ($) | S.No. | Particulars | Credit ($) |
30-Sep | Balance c/d | 100,750 | a. | Cash | 65,000 |
a. | Office equipment | 5,750 | |||
a. | Computer equipment | 30,000 | |||
100,750 | 100,750 |
B.G., Withdrawals (302)
S.No. | Particulars | Debit ($) | S.No. | Particulars | Credit ($) |
o. | Cash | 6,230 | Balance c/d | 6,230 | |
6,230 | 6,230 |
Fees Earned (402)
S.No. | Particulars | Debit ($) | S.No. | Particulars | Credit ($) |
Balance c/d | 19,050 | e. | Cash | 4,600 | |
g. | Accounts receivable | 4,250 | |||
i. | Accounts receivable | 10,200 | |||
19,050 | 19,050 |
Wages expense (601)
S.No. | Particulars | Debit ($) | S.No. | Particulars | Credit ($) |
l. | Cash | 1,800 | Balance c/d | 3,600 | |
p. | Cash | 1,800 | |||
3,600 | 3,600 |
Advertising expense (603)
S.No. | Particulars | Debit ($) | S.No. | Particulars | Credit ($) |
q. | Cash | 750 | Balance c/d | 750 | |
750 | 750 |
Repairs expense (604)
S.No. | Particulars | Debit ($) | S.No. | Particulars | Credit ($) |
n. | Cash | 608 | Balance c/d | 608 | |
608 | 608 |
Notes payable (250)
S.No. | Particulars | Debit ($) | S.No. | Particulars | Credit ($) |
Balance c/d | 20,700 | b. | Land | 17,000 | |
f. | Computer equipment | 3,700 | |||
20,700 | 20,700 |
Computer equipment (164)
S.No. | Particulars | Debit ($) | S.No. | Particulars | Credit ($) |
a. | B.G., Capital | 30,000 | Balance c/d | 34,500 | |
f. | Cash | 800 | |||
f. | Notes payable | 3,700 | |||
34,500 | 34,500 |
Land (172)
S.No. | Particulars | Debit ($) | S.No. | Particulars | Credit ($) |
b. | Cash | 5,000 | Balance c/d | 22,000 | |
b. | Notes payable | 17,000 | |||
22,000 | 22,000 |
Computer rental expense (602)
S.No. | Particulars | Debit ($) | S.No. | Particulars | Credit ($) |
j. | Accounts payable | 580 | Balance c/d | 580 | |
580 | 580 |
Building (170)
S.No. | Particulars | Debit ($) | S.No. | Particulars | Credit ($) |
c. | Cash | 34,500 | Balance c/d | 34,500 | |
34,500 | 34,500 |
3.
Financial statement analysis:
Company and its users use financial analysis as a way to analyse the company’s financial statements to take investment and business decisions. There are four financial statements that any company should produce to its users for analysis. These are income statement, balance sheet, cash flow statement and stockholders’ equity statement.
To prepare: The
3.
Explanation of Solution
Ledger No. | Particulars | Debit ($) | Credit ($) |
101 | Cash | 17,262 | |
106 | Accounts receivable | 9,350 | |
108 | Prepaid insurance | 5,000 | |
163 | Office equipment | 6,700 | |
164 | Computer equipment | 34,500 | |
170 | Building | 34,500 | |
172 | Land | 22,000 | |
201 | Accounts payable | 580 | |
250 | Notes payable | 20,700 | |
301 | B.G., Capital | 100,750 | |
302 | B.G., Withdrawals | 6,230 | |
402 | Fees Earned | 19,050 | |
601 | Wages expense | 3,600 | |
602 | Computer rental expense | 580 | |
603 | Advertising expense | 750 | |
604 | Repairs expense | 608 | |
Total | 141,080 | 141,080 |
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Chapter 2 Solutions
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