Accounting Cycle Homework

Problem $1$

Use this information to answer the following questions:

The account titles to be responded to are provided in no particular order. Assume that all accounts have normal balances according to whether the account is increased by a debit or increased by a credit.

Required:

In column A$,$ indicate whether a debit will:

$1.$ Increase the account balance, or

$2.$ Decrease the account balance.

In column B$,$ classify each account according to the following scheme. For contra accounts, indicate the classification of the account to which it relates.

$1.$ A current asset in the balance sheet.

$2.$ A noncurrent asset in the balance sheet.

$3.$ A current liability in the balance sheet.

$4.$ A long$-$term liability in the balance sheet.

$5.$ A permanent equity account in the balance sheet.

$6.$ A revenue account in the income statement.

$7.$ An expense account shown in the income statement.

$8.$ Account does not appear in either the balance sheet or the income statement.

Account Title Effect of a Debit Classification

Advertising Expense Decrease Expense

Buildings and Equipment Increase Noncurrent asset

$1-$year Notes Payable Decrease Long$-$term liability

Cost of Goods Sold Decrease Expense

Accounts Receivable Increase Current asset

Inventory Increase Current asset

Deferred Revenue Decrease Current liability

Bonds Payable Decrease Long$-$term liability

Retained Earnings Decrease Permanent equity account

Interest Revenue Increase Revenue

Supplied Expense Decrease Expense

Prepaid Rent Increase Current asset

Common Stock Decrease Permanent equity account

Problem $2$

Below are the transactions for Cleaning Racer, Inc. for April, the first month of operations.

April $1$ Borrow$$50,000$ from the bank by signing a note.

April $2$ Issue common stock in exchange for cash of $$20,000.$

April $7$ Purchase equipment for $$40,000$ cash.

April $10$ Purchase cleaning supplies of $$4,000$ on account.

April $12$ Provide services of $$5,000$ for cash.

April $16$ Pay employees $$1,200$ for work performed.

April $19$ Pay for advertising in a local newspaper, costing $$500.$

April $23$ Provide services of $$7,000$ on account.

April $29$ Pay employees $$1,500$ for work performed.

April $30$ A utility bill of $$1,200$ for the current month is paid.

April $30$ Pay dividends of $$700$ to stockholders.

Required:

$1.$ Record each transaction.

$2.$ Post each transaction to the appropriate T$-$accounts.

$3.$ Calculate the balance of each account.

$4.$ Prepare a trial balance for June.

Racer uses the following accounts: Cash, Accounts Receivable, Supplies, Equipment, Accounts Payable, Notes Payable, Common Stock, Dividends, Service Revenue, Salaries Expense, Advertising Expense, and Utilities Expense.

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Requirement $1($Journal$)$

April $1$ Notes Payable $$50,000$

April $2$ Common Stock $$20,000$

April $7$ Equipment $$40,000$

April $10$ Supplies $$4,000$

April $12$ Cash $$5,000$

April $16$ Salaries Expense $$1,200$

April $19$ Advertising Expense $$500$

April $23$ Accounts Receivable $$7,000$

April $29$ Salaries Expense $$1,500$

April $30$ Utilities Expense $$1,200$

April $30$ Dividends $$700$

$$

Requirements $2$ and $3($T accts and balances$)$

Cash Accounts Receivable Supplies

Equipment Accounts Payable Notes Payable

Common Stock Dividends Service Revenue

Salaries Expense Advertising Expense Utility Expense

$$

Requirement $4$

Cleaning Racer Inc.

Trial Balance

June $30$

Account Title Debit Credit

Cash

Accounts Receivable

Supplies

Equipment

Accounts Payable

Notes Payable

Common Stock

Dividends

Service Revenue

Salaries Expense

Advertising Expense

Utilities Expense