parents会计英语课后题答案Answer for lesson 1

1.1 Select the best answer for each of the following unrelated items

1.d

2. d

3. b

4. d

5. c

6. c

7.d

8.a

9.b

10.b

11c

12b

13c

14d

15 a

Exercise answer for Lesson 1

1.2 SHORT- ANSWER ESSAY QUESTIONS

ting cycle is an important concept for accounting. Briefly explain the steps for accounting cycle.

Solution:

(1)Analyze transactions; (2)

Journalize transactions; (3) Post to ledger;(4)

Prepare

unadjusted

trial

balance

;(5)

Journalize

&

post

adjustments;

(6)

Prepare

adjusted

trial

balance;

(7)

Prepare

financial

statements;

(8)

Journalize and post closing entries; (9) Prepare post-closing trial balance

2

Your

roommate,

a

marketing

major,

thinks

that

debit

means

decrease

and

credit

means

increase.

And,

that

every

account can be debited and credited and as result, every account can have both a debit and a credit balance. Explain to

your roommate (1) the meaning of debit and credit; (2) which accounts can only be debited, which can only be credited,

and which can be both debited and credited; and (3) which accounts normally have debit balances and which credit

balances.

Solution:

The terms debit and credit mean the left and right side, respectively, of every account. Some accounts such as

Dividends and Expenses are only debited; other accounts such as Share Capital- Ordinary and Revenues are only

credited; and finally, some accounts such as Cash, Accounts Receivable, and Accounts Payable can be debited and

credited. Accounts with debit balances include Assets, Dividends, and Expenses. Accounts with credit balances include

Share Capital-Ordinary and Revenues.

3 A fellow classmate is confused about how debits and credits relate to the basic accounting equation. State the basic

accounting equation, convert it into the expanded accounting equation, and then explain how it ties into the rules for

debits and credits.

Solution:

The basic accounting equation is:

Assets = Liabilities + Equity

The expanded equation divides Equity into its various parts, reflecting the shareholders' investment, dividends,

revenues, and expenses:

Assets = Liabilities + Share Capital- Ordinary + Retained Earnings

–

Dividends + Revenues

–

Expenses

This expanded equation can then be re-arranged to explain why certain accounts have debit (left- hand) balances, while

other accounts have credit (right-hand) balances, as follows:

Assets + Dividends + Expenses = Liabilities + Share Capital-Ordinary + Retained Earnings + Revenues

The accounts on the left-hand side of the equation have left-hand, or debit balances, while the accounts on the

right-hand side of the equation have right-hand, or credit balances. Accounts with debit balances are increased with

debits and decreased with credits, while accounts with credit balances are increased with credits and decreased with

debits.

4 John Dough, a fellow employee, wants to understand the basic steps in the recording process. Identify and briefly

explain the steps in the order in which they occur.

Solution

The basic steps in the recording process are:

1.

Analyze each transaction. In this step, business documents are examined to determine the effects of the transaction

on the accounts.

2.

Enter each transaction in a journal. This step is called journalizing and it results in making a chronological record of

the transactions.

3.

Transfer journal information to ledger accounts. This step is called posting. Posting makes it possible to accumulate

the effects of journalized transactions on individual accounts.

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Lesson 1

Financial Accounting I

5 The process of transferring the information in the journal to the general ledger is called posting. Explain the posting

process, including the importance of the journal page number and the account numbers.

Solution

The posting process begins with locating the account(s) being debited in the general ledger. Then entering the date of

the entry, the journal page number where the entry originated and debit portion of the entry in the date, reference and

debit columns, respectively. Once this done, the account number(s) of the account(s) being debited is (are) entered in

the reference column in the journal. Next, the credit portion of the journal entry is posted to the appropriate accounts in

the ledger following the same steps as noted for the debit portion.

The importance of the journal page number, in the reference column of each account in the general ledger accounts, is

to indicate where to find the original entry. And, the general ledger account numbers, in the reference column of the

journal, indicate that the entry has been posted.

1.3 The effects of transactions on the accounting equation

Linda Champion began a professional accounting practice on May 1 and plans to prepare financial statements at the

end of each month. During May, Champion completed these transactions:

a. Invested ?50,000 cash and equipment that had a

?10,000 fair market (cash equivalent) value.

b. Paid ?1,600 rent for office space for the month.

c. Purchased ?12,000 of additional equipment on credit.

d. Completed work for a client and immediately collected ?2,000 cash.

e. Completed work for a client a

nd sent a bill for ?7,000 to be paid within 30 days.

f. Purchased ?8,000 of additional equipment for cash.

g. Paid an assistant ?2,400 as wages for the month.

h. Collected ?5,000 of the amount owed by the client described in transaction (e).

i. Paid for the equipment purchased in transaction (c).

j. Withdrew ?500 for personal use.

Enquired:

Using the information presented in (a) through (j) above, Linda Champion, the owner, first creates a table like the one

shown below. She then uses the results to calculate net income earned during the month of May, her first month of

operations.

Solutions:

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Lesson 1

Financial Accounting I

Notice how Assets of ?64,500 = Liabilities + Owner’s equity of ?64,500. From this schedule you can

calculate the firm’s net income by summarizing the revenues and

expenses as follows: Net income =

Revenues

–

Expenses

= (?2,000 + ?7,000) –

(?1,600 + ?2,400)

= ?5,000

1.4 Preparing a statement of comprehensive income and a statement of financial position

During June through August of 20X5, Lin Yan earned money doing computer consulting work. She went around the

city and obtained several contracts for small jobs. Lin then withdrew ?3,000 from her personal savings account and

deposited it in a separate account for the business. At the end of the summer, Lin tried to figure out how well her

business had done.

Lin’s business records showed the following transactions:

a. Deposited ?12,500 (from customers’ payments).

b. Issued cheques:

?

car and equipment rental, ?2,000;

?

gas, ?900;

?

supplies purchased and used, ?100;

?

hir

ed help, ?4,800;

?

payroll taxes, ?600;

?

insurance, ?180;

?

telephone, ?120.

c. Transferred ?2,000 cash from the business bank account to personal savings account.

d. Owed ?500 by customers.

e. Owed ?150 for gas.

Required

1. Show the effect of each transaction, including the initial cash deposit, on the accounting equation.

2. Prepare a statement of comprehensive income for Lin’s summer business.

3. Prepare a statement of financial position for Lin at the end of the summer.

Solution:

1. To show the effect of each transaction on the accounting equation, construct a worksheet with four columns using

the following headings: item, assets, liabilities, and owner’s equity. Recall that revenues

increase

owner’s equity and

expenses

decrease

owner’s equity.

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Lesson 1

Financial Accounting I

2. Re

venues originated from two sources: customers’ payments (?12,500) and from amounts yet to be paid by

customers (?500). Total expenses included car and equipment rental (?2,000), car expenses (?900 paid + ?150 unpaid),

supplies (?100), helpers (?4,800), payroll taxes (?600), insurance (?180), and telephone (?120). Net income is

determined from the difference of total revenues and total expenses. Based on this information, the following income

statement is prepared.

Solutions:

3. From the effect of the transactions prepared in part 1, you can generate the following statement of financial

position for the end of the summer.

The cash balance can be determined as follows:

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Lesson 1

Financial Accounting I

The cash balance

excludes

two amounts: the ?500 still owed to Lin by customers and ?15

0 she owes for car gas

invoices not yet paid. If she receives the money owed her and she pays her debt, then she will have an additional ?350

(?500 –

?150), making a total cash balance of ?5,150 (?4,800 + ?350) for the summer. Note that the ?2,000 personal

withdrawal was not included as an expense on the statement of comprehensive income. The withdrawal is considered a

distribution of income (owner’s profits) rather than an expense. The owner’s equity of ?5,150 on the balance sheet

includes the initial investment

plus

net income

less

the withdrawal (?3,000 + ?4,150 –

?2,000).

1.5

Increases, decreases, and normal balances of accounts

Enquired:

Complete the following table by

1. Identifying the type of account listed on each line.

2. Entering debit or credit in the blank spaces to identify the kind of entry that would increase or decrease the account

balance.

3. Identifying the normal balance of the account.

Account

Types of

Increase

Decrease

Normal

account

balance

Land

Harold Cooper, Capital

Account receivable

Harold Cooper, Withdrawal

Cash

Equipment

Unearned revenue

Account payable

Postage expense

Prepaid expense

Wages expense

Fees earned

Solution:

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Lesson 1

Financial Accounting I

1.6

Analyzing transactions using T-accounts

Open the following T-accounts: Cash; Accounts Receivable; Office Supplies; Office Equipment; Accounts Payable;

Steve Moore, Capital; Steve Moore, Withdrawals; Fees Earned; and Rent Expense. Next, record these transactions of

the Moore Company by recording the debit and credit entries directly in the T-accounts. Use the letters beside each

transaction to identify the entries.

a. Steve Moore invested ?12,750 cash in the business.

b. Purchased ?375 of office supplies for cash.

c. Purchased ?7,050 of office equipment on credit.

d. Received ?1,500 cash as fees for services provided to a customer.

e. Paid for the office equipment purchased in transaction (c).

f. Billed a customer ?2,700 as fees for services.

g. Paid the monthly rent with ?525 cash.

h. Collected ?1,125 of the account receivable created in transaction (f).

i. Steve Moore withdrew ?1,000 cash from the business.

Enquired:

1. Record these transactions of the Moore Company in journal.

2. Open the following T-accounts: Cash; Accounts Receivable; Office Supplies; Office Equipment; Accounts Payable;

Steve Moore, Capital; Steve Moore, Withdrawals; Fees Earned; and Rent Expense. Next, post the entries in the

T-accounts. Use the letters beside each transaction to identify the entries.

Solution:

a. Steve Moore invested ?12,750 cash in the business:

b. Purchased ?375 of office supplies for cash:

c. Purchased ?7,050 of office equipment on credit:

d. Received ?1,500 cash as fees for services provided to a customer:

6

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Lesson 1

Financial Accounting I

e. Paid for the office equipment purchased in transaction (c):

f. Billed a customer ?2,700 as fees for services:

g. Paid the monthly rent with ?525 cash:

h. Collected ?1,125 of the account receivable created in transaction (f):

i. Steve Moore withdrew ?1,000 cash from the bu

siness:

1.7 Correct the error

Betty Wright, CPA, was asked by the controller of Gore Company to review the accounting records before

financial

statements are prepared. Betty reviewed the records and found three errors.

paid on accounts payable for $$930 was recorded as a debit to Accounts Payable $$390 and a credit to Cash $$390.

purchase

of

supplies

on

account

for

$$500

was

debited

to

Equipment

$$500

and

credited

to

Accounts

Payable

$$500.

company paid dividends $$1,200. The bookkeeper debited Accounts Receivable for $$120 and credited Cash $$120.

Enquired:

Prepare an analysis of each error showing the

(a)

incorrect entry.

(b)

correct entry.

(c)

correcting entry.

Solution:

1.

(a)

Incorrect Entry

Accounts Payable

.

................................................. ...........................

Cash

....................... .................................................. ..............

2.

(b)

(c)

(a)

(b)

Correct Entry

Accounts Payable

.

................................................. ...........................

Cash

........... .................................................. ..........................

Correcting Entry

Accounts Payable

.

............................... .............................................

Cash

................................................. ......................................

Incorrect Entry

Equipment

.

...... .................................................. ...............................

Accounts Payable .......... .................................................. ......

Correct Entry

Supplies..................................... .................................................. .....

Accounts Payable .......................................... ........................

390

930

540

500

500

390

930

540

500

500

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Lesson 1

Financial Accounting I