Accounting 25th Edition Warren Solutions Manual
By Carl S. Warren,James M. Reeve,Jonathan
Duchac | ISBN-13-978-1285069609
, CHAPTER 2 ANALYZING
TRANSACTIONS
DISCUSSION QUESTIONS
1. An account is a form designed to record changes in a particular asset,
liability, owner’s equity, revenue, or expense. A ledger is a group of
related accounts.
2. The terms debit and credit may signify either an increase or a decrease,
depending upon the nature of the account. For example, debits signify an
increase in asset and expense accounts but a decrease in liability, owner’s
capital, and revenue accounts.
3. a. Assuming no errors have occurred, the credit balance in the cash account
resulted from drawing checks for $1,850 in excess of the amount of cash
on deposit.
b. The $1,850 credit balance in the cash account as of December 31 is a
liability owed to the bank. It is usually referred to as an “overdraft” and
should be classified on the balance sheet as a liability.
4. a. The revenue was earned in October.
b. (1) Debit Accounts Receivable and credit Fees Earned or another
appropriately titled revenue account in October.
(2) Debit Cash and credit Accounts Receivable in November.
5. No. Errors may have been made that had the same erroneous effect on both
debits and credits, such as failure to record and/or post a transaction,
recording the same transaction more than once, and posting a transaction
correctly but to the wrong account.
6. The listing of $9,800 is a transposition; the listing of $100 is a slide.
7. a. No. Because the same error occurred on both the debit side and the
credit side of the trial balance, the trial balance would not be out of
, balance.
b. Yes. The trial balance would not balance. The error would cause the debit
total of the trial balance to exceed the credit total by $90.
8. a. The equality of the trial balance would not be affected.
b. On the income statement, total operating expenses (salary expense) would be
overstated by
$7,500, and net income would be understated by $7,500. On the
statement of owner’s equity, the beginning and ending capital would be
correct. However, net income and withdrawals would be understated by
$7,500. These understatements offset one another, and, thus, ending
owner’s equity is correct. The balance sheet is not affected by the error.
9. a. The equality of the trial balance would not be affected.
b. On the income statement, revenues (fees earned) would be overstated
by $300,000, and net income would be overstated by $300,000. On the
statement of owner’s equity, the beginning capital would be correct.
However, net income and ending capital would be overstated by
$300,000. The balance sheet total assets is correct. However, liabilities
(notes payable) is understated by $300,000, and owner’s equity is
overstated by $300,000. The understatement of liabilities is offset by the
overstatement of owner’s equity, and, thus, total liabilities and owner’s
equity is correct.
10. a. From the viewpoint of Surety Storage, the balance of the checking account
represents an asset.
b. From the viewpoint of Ada Savings Bank, the balance of the checking
account represents a liability.
2-1
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or
duplicated, or posted to a publicly accessible website, in whole or in part.
Visit TestBankDeal.com to get complete for all chapters
, CHAPTER 2 Analyzing Transactions
PRACTICE EXERCISES
PE 2–1A
1. Debit and credit entries, normal debit balance
2. Credit entries only, normal credit balance
3. Debit and credit entries, normal credit balance
4. Credit entries only, normal credit balance
5. Credit entries only, normal credit balance
6. Debit entries only, normal debit balance
PE 2–1B
1. Debit and credit entries, normal credit balance
2. Debit and credit entries, normal debit balance
3. Debit entries only, normal debit balance
4. Debit entries only, normal debit balance
5. Debit entries only, normal debit balance
6. Credit entries only, normal credit balance
PE 2–2A
Feb. 1 Office Equipment 18,00
2 0
Cash 7,000
2-2
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
By Carl S. Warren,James M. Reeve,Jonathan
Duchac | ISBN-13-978-1285069609
, CHAPTER 2 ANALYZING
TRANSACTIONS
DISCUSSION QUESTIONS
1. An account is a form designed to record changes in a particular asset,
liability, owner’s equity, revenue, or expense. A ledger is a group of
related accounts.
2. The terms debit and credit may signify either an increase or a decrease,
depending upon the nature of the account. For example, debits signify an
increase in asset and expense accounts but a decrease in liability, owner’s
capital, and revenue accounts.
3. a. Assuming no errors have occurred, the credit balance in the cash account
resulted from drawing checks for $1,850 in excess of the amount of cash
on deposit.
b. The $1,850 credit balance in the cash account as of December 31 is a
liability owed to the bank. It is usually referred to as an “overdraft” and
should be classified on the balance sheet as a liability.
4. a. The revenue was earned in October.
b. (1) Debit Accounts Receivable and credit Fees Earned or another
appropriately titled revenue account in October.
(2) Debit Cash and credit Accounts Receivable in November.
5. No. Errors may have been made that had the same erroneous effect on both
debits and credits, such as failure to record and/or post a transaction,
recording the same transaction more than once, and posting a transaction
correctly but to the wrong account.
6. The listing of $9,800 is a transposition; the listing of $100 is a slide.
7. a. No. Because the same error occurred on both the debit side and the
credit side of the trial balance, the trial balance would not be out of
, balance.
b. Yes. The trial balance would not balance. The error would cause the debit
total of the trial balance to exceed the credit total by $90.
8. a. The equality of the trial balance would not be affected.
b. On the income statement, total operating expenses (salary expense) would be
overstated by
$7,500, and net income would be understated by $7,500. On the
statement of owner’s equity, the beginning and ending capital would be
correct. However, net income and withdrawals would be understated by
$7,500. These understatements offset one another, and, thus, ending
owner’s equity is correct. The balance sheet is not affected by the error.
9. a. The equality of the trial balance would not be affected.
b. On the income statement, revenues (fees earned) would be overstated
by $300,000, and net income would be overstated by $300,000. On the
statement of owner’s equity, the beginning capital would be correct.
However, net income and ending capital would be overstated by
$300,000. The balance sheet total assets is correct. However, liabilities
(notes payable) is understated by $300,000, and owner’s equity is
overstated by $300,000. The understatement of liabilities is offset by the
overstatement of owner’s equity, and, thus, total liabilities and owner’s
equity is correct.
10. a. From the viewpoint of Surety Storage, the balance of the checking account
represents an asset.
b. From the viewpoint of Ada Savings Bank, the balance of the checking
account represents a liability.
2-1
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or
duplicated, or posted to a publicly accessible website, in whole or in part.
Visit TestBankDeal.com to get complete for all chapters
, CHAPTER 2 Analyzing Transactions
PRACTICE EXERCISES
PE 2–1A
1. Debit and credit entries, normal debit balance
2. Credit entries only, normal credit balance
3. Debit and credit entries, normal credit balance
4. Credit entries only, normal credit balance
5. Credit entries only, normal credit balance
6. Debit entries only, normal debit balance
PE 2–1B
1. Debit and credit entries, normal credit balance
2. Debit and credit entries, normal debit balance
3. Debit entries only, normal debit balance
4. Debit entries only, normal debit balance
5. Debit entries only, normal debit balance
6. Credit entries only, normal credit balance
PE 2–2A
Feb. 1 Office Equipment 18,00
2 0
Cash 7,000
2-2
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
