1.

IndicatewhethereachofthefollowingstatementsistrueorfalsebyenteringTfortrueand
Fforfalse.

A. Anumberofindividualbalancesheetitemsmayappearononeaccount
page,aslongastheyareshownseparately.

B. Manyaccountantsusetheequationanalysissheetinsteadoftheledger.

C. Thereisapageintheledgerforthetotalassetsfigure.

D. Taccountsareidealforsmallbusinesses.

E. Thefirstdollaramountrecordedinanaccountisplacedonthesameside
asitappearsonasimplebalancesheet.

F. Thereisnoaccountforcapitalbecauseitcanalwaysbefoundby
subtractingthetotalassetsfromthetotalliabilities.

G. Atransactionanalysissheetisapermanentaccountingrecord.

H. Foreverytransaction,thereisalwaysonedebitamountandonecredit
amount,whichareequal.

I. Abalancedaccountingentryisacorrectaccountingentry.

J. Thebalanceofanaccountthatisnotzeromustbeeitheradebitora
credit.

K. TheJ.R.DahlaccountintheledgerofC.Jacobiseitheranaccountpayable
oranaccountreceivable.

L. EricLaisaccounthasacreditbalance,thismeansthathepurchasedour
servicesoncredit.

M. Anexceptionalbalanceisoppositetowhatwouldbenormal.

N. Acustomerisgivenarefundbecauseofunsatisfactoryservice.The
accountofthiscustomerwillnowhaveanexceptionalbalance.

O. Aledgercontainsanexceptionalbalance.Atrialbalancecannotbetaken
untiltheexceptionalitemistransferredtoanotherpartoftheledger.

P. Atrialbalancethatisinbalanceprovesthattherearenoerrorsinthe
accounts.
Q. Thebusinessbuyssuppliesandpayscash.Theaccountingentrymadein
theaccountsisDrBankandCrSupplies.Thiscausestheledgertobeout
ofbalance.

True

False

2. Asaresultofoneerror,thetrialbalancepreparedbyyourcompanyattheendofthemonthdid
notbalance.Inreviewingtheentriesforthemonth,theaccountantnoticedthatoneofthe
transactions,forthepurchaseoffurnitureandfixtures,wasrecordedasadebittoFurniture
andFixtures,$500,andadebittoBank,$500.

Answerthefollowingquestionsaboutthistransaction.

A. WastheBankaccountoverstated,understated,orcorrectlystatedonthetrialbalance?
Ifoverstatedorunderstated,showbyhowmuch.

B. Wasthetotalofthedebitcolumnofthetrialbalanceoverstated,understated,or
correctlystated?Ifoverstatedorunderstated,showbyhowmuch.

C. Wasthetotalofthecreditcolumnofthetrialbalanceoverstated,understated,or
correctlystated?Ifoverstatedorunderstated,statebyhowmuch.

3. TheaccountantforM.Finney,ownerofajanitorialservicebusinessinWhitehorse,Yukon
Territory,preparedatrialbalanceattheendofDecember.WhenMs.Finneyexaminedthetrial
balance,shenoticedthattheS.PearsonCo.hadadebitbalanceof$375.Ms.Finney
remembereddepositingachequereceivedfromPearsonforthatamount.Shewantstoknow
whyadebitbalancestillexistsontherecords.

Givethreedifferentexplanationsofhowthiscouldhappen.

4. Statewhetherthefollowingerrorswouldcauseatrialbalancetobeoutofbalanceand,ifso,by
howmuch.Explainwhyorwhynot.

A. Theentrytorecordthepurchaseofdeliveryequipmentfor$1,500wasomittedfrom
theDeliveryEquipmentaccount.

B. Anewdeskwaspurchasedforcash.BankwascreditedbutOfficeSupplieswasdebited
insteadofOfficeEquipment.Thecostthedeskwas$400.

C. Cashof$100wasreceivedfromaclientforservicesperformed.Bankwasdebitedfor
$100andCapitalwascreditedfor$10.

D. Cashof$500wasborrowedfromthebank.Bankwascreditedfor$500andBankLoan
wasdebited$500.

5. A.Hollybrookisasignpainterandtruckletterer.Herbusinesshasthefollowingassetsand
liabilities:
Assets
Bank
A/RG.Anymore
A/RN.Onlyme
OfficeSupplies

Liabilities
$2216 A/P Convenient
Supply
357 A/P NewWave
Furniture
402 BankLoan
2980 LoanPayable,A.
Hollybrook
4120
5090
20000

$1375
2951
6500
11980

PaintingSupplies
OfficeFurniture
Automobile

A.SetupA.HollybrooksfinancialpositioninTaccounts.Includetheequityaccount.

B.Forthetransactionslistedbelow,recordtheaccountingentriesinTaccounts.Ifitishelpfulto
you,useatransactionanalysissheet.

TRANSACTIONS
1. Received$200cashfromacustomerforpaintingasign.
2. Paid$500toConvenientSupply.
3. Received$402cashfromN.Onlyme.
4. Soldanextraofficedesk(whichisincludedintheOfficeFurniturefigureat$450)toH.Brains
atapriceof$250.Brainspaid$100cashandowedthebalance.
5. Reducedthebankloanby$1,000.
6. Paidtheregularmonthlybankloanpayment,$
500.
7. PaidthebalanceowingtoConvenientSupply.

A. Calculatetheaccountbalancesandbalancetheledgerbytakingoffatrialbalancedated
May30,20__.

6. AnywhereRealEstateisabusinessownedbyI.Cansell.Theaccountsofthebusinessareas
follows:

Assets

Liabilities

Bank
$1056 AccountsPayable

AccountsReceivable
TuckCorporation
$1520
D.Murray
1351 BankLoan
19000
A.Niemi
2516

OfficeSupplies
1115

FurnitureandEquipment
11916

PropertiesOwned
18042 Equity

Automobile
27965 I.Cansell,Capital

ThefinancialpositionofAnywhereRealEstateistobesetupinTaccounts.Forthetransactions
listedbelow,recordtheaccountingentriesinTaccounts.Useatransactionanalysissheetif
necessary.CalculateandrecordthebalancesintheaccountsandtakeoffatrialbalancedateJuly
31,20__.

Transactions
a.

Received$516bychequefromA.Niemi.

b.

SoldahomeforV.Morris.Forthisservice,Morrisowes$4,150toAnywhereRealEstate.

c.

Paid$95cashforofficesupplies.

d.

Received$20,000cashforthesaleofaproperty.ThepropertyisincludedintheProperties
Ownedfigureat$15,000.

e.

Paid$15,000cashtothebanktoreducetheamountofthebankloan.

f.

Paid$520bychequetoTuckCorporation.

g.

Paid$40cashforanewheadlightfortheautomobile.

h.

Received$800cashfromD.Murray.

i.

Theownerwithdrew$500forherpersonaluse.

j.

Received$2,000cashfromV.Morris.

k.

PaidthebalanceofthedebttoTuckCorporationbycheque.

l.

Purchasedanewofficedeskatacostof$600fromPioneerFurniturebutdidnotpayforit
rightaway.

m. SoldahometoA.McIntosh.McIntoshpaidAnywhereRealEstate$5,100bychequeforthe
service.

7. Grade11studentYolandaFonagysatinMr.Voyteksaccountingclass,frustratedandconfused.
Shefeltcertainthatsheknewthebasicsofdebitingandcreditingaccounts.Furthermore,her
textbookclearlyshowedthatassetaccounts,suchasBank,areincreasedbydebiting.However,
whenshemadeherlastbankdeposit,shediscoveredthatthetellerhadincreasedherbank
balancebycreditinghersavingsaccount!

Shewascertainthateitherthetextbook,herteacher,orherbanktellerhadmadeaserious
error.

Questions

1.WasYolandacorrectinassumingthatanerrorhadbeenmade?Defendyourposition.

2.Checkthepassbookthatyouhavereceivedfromyourbank.Hasthebankalsoincreased
yourbankbalancebycreditingyouraccount?

3.WriteashortparagraphexplainingtoYolandawhyheraccountwasincreasedbyacredit
entry.

8. YouarealoansofficerwiththeReliableTrustCompanyinRedDeer,Alberta.OnMarch30,
20__,ayoungbusinessman,GaryMarsden,comestoyouinthehopeofborrowing$75,000fora
businessventure.Whenyouinquireabouthispersonalfinancialstatus,hepresentsyouwith
thebalancesheetshownbelow.

GaryMarsden
BalanceSheet
March20,20__
Assets

Liabilities

Bank
$2000 AccountsPayable
$5300
AccountsReceivable
1500 MortgagePayable
80000
Furniture
9000 TotalLiabilities
$85300
Supplies
1300
Truck
17000 OwnersEquity
BuildingLot
175000 G.Marsden,Capital
120500
TotalAssets
$205800 TotalLiabilitiesandEquity
$205800

Whenexaminingthisstatement,youbecomeconcernedabouttheitemBuildingLotfor$175,000.
YouhavelivedinRedDeerforseveralyearsandyouknowthattherearenotmanypropertiesin
townthatareworththatmuchmoney.

Garyinformsyouthatheboughtthepropertyonemonthagofor$80,000andthatheborrowedthe
entiresumfromhisfather.ThisisshownproperlyonthestatementasMortgagePayable.

YourconversationwithGaryindicatesthathetrulybelievesthatthepropertywillincreaseinvalue
inthenearfutureandthathehaslisteditastheamountheexpectstosellitfor.Whenyoufindout
thelocationoftheproperty,yourealizethatitisapieceoflandthattookovertwoyearstosell.

Questions

1.Whatisyouropinionaboutlistingthepropertyat$175,000?WhatGAAPisaffected?

2.WriteoutwhatyouwouldsaytoGaryonthissubject.

3.WouldyoulendGarythemoneyonthebasisofonlythefinancialdatagiventoyou?Composea
letter,usingproperformat,givingyouranswerandyourreasons.

9. Belowareshownthebalancesheetsoftwocompanies.Assumethateachofthetwocompanies
hasbeenforcedoutofbusinessandmustsellitsassetsforcashinordertopayitsdebts.

CompanyA
CompanyB
Assets
Bank
$21500
$700
AccountsReceivable
3000
59500
Supplies
1300
2500
Equipment
15600
42400
LandandBuilding
54000
150000
TotalAssets
$95000
$255100

LiabilitiesandEquity

AccountsPayable
$22800
$45900
MortgagePayable
22000
128000
OwnersEquity
50600
81200
TotalLiabilitiesandEquity
$95400
$255100

Questions

1.Arethevaluesshownnecessarilythevaluesyoucouldget?Explain.

2.Arethereanyproblemsassociatedwithsellingtheassets?Explainanyproblemsyouseeand
whytheyoccur.

3.Whichcompanywouldbebettertoown?Writeashortreport(threetofourparagraphs)
explainingyourposition.