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pri30597 SM ch03.qxd8/2/085:09 AMCHAPTERPage 233Chapter Opener:Thinking CriticallyFast FactsAnalyzing BusinessTransactions UsingT AccountsAnswers will vary, but students should recognize that a sale would have beenrecorded as revenue from goods or services sold on a T account. The sale wouldbe entered on the left (increase) side of an asset account. Approximately 70% of sales are derived from products/businesses thathave a #1 or #2 global market share positionAs portions of the company grew they were characteristically divided andeventually spun off into separate subsidiaries. Ortho, which began withone birth control product in the 1930s, became the Ortho PharmaceuticalCorporation.Johnson & Johnson is consistently recognized for having the bestcorporate reputation in America.The company is consistently recognized as a top company to work for,and has received numerous awards from minority organizations.Johnson & Johnson’s medical device companies develop, market and, sellmore medical devices than any other company in the world.ManagerialImplications:Thinking CriticallyAnswers will vary but could include the following:DiscussionQuestionsThese questions are designed to check students’ understanding of thenew terms, concepts, and procedures presented in the chapter. Cash is overstated and checks bounce.The credit rating of the business is affected.The business loses customers because payments on account are notrecorded properly.1. Debit: entry on the left side of an account. Credit: entry on the right side ofan account.2. Each transaction produces at least two effects.3. Payment of rent in advance affords the right to occupy the facility thenumber of months covered by the payment.4. Permanent account balances are carried forward to start a new accountingperiod. Temporary account balances are transferred to a summary account atthe end of the period and are zero at the start of a new accounting period.5. Additional accounts can be added when needed.6. Order in which they appear on financial statements. Balance sheetaccounts listed first, followed by income statement accounts.7. To provide a classified list of the names and numbers of a firm’s accounts.8. Adding the figures on both sides of the account and subtracting the smallertotal from the larger total.9. Written records for all assets, liabilities, and owner’s equity of a business.10. a. debit b. credit c. credit d. credit e. debit11. a, b, h, i, k: temporaryc, d, e, f, g, j, l: permanentCopyright 2009 The McGraw-Hill Companies, Inc. All rights reserved.Chapter 3 23
pri30597 SM ch03.qxd8/2/085:09 AMPage 24EXERCISE 3.1CashEquipment16,00032,000Accounts PayableFred Thompson, Capital12,00036,000EXERCISE 3.2CashEquipment(1)40,000 (2)10,000(3)4,000 (4)1,400(5)1,000(2)Fees Income(3)Supplies(5)10,000Advertising Expense4,000(4)1,400Lisa Morgan, Capital1,000(1)40,000EXERCISE 3.31. Credit5. Debit2. Debit6. Debit3. Credit7. Debit4. Credit8. Debit24 Chapter 3Copyright 2009 The McGraw-Hill Companies, Inc. All rights reserved.
pri30597 SM ch03.qxd8/2/085:09 AMPage 25EXERCISE 3.41. Credit, Credit, Debit2. Credit, Credit, Debit3. Debit, Debit, Credit4. Debit, Debit, Credit5. Credit, Credit, DebitEXERCISE 3.5Cash, 127,400 Dr.Susan Willis, Capital 160,000 Cr.Accounts Receivable, 6,000 Dr.Fees Income, 28,000 Cr.Supplies, 40,000, Dr.Telephone Expense, 600, Dr.Equipment, 60,000, Dr.Salaries Expense, 10,000, Dr.Accounts Payable, 60,000, Cr.Susan Willis, Drawing, 4,000, Dr.EXERCISE 3.6TIMELESS RESTORATIONSTrial BalanceDecember 31, 2010ACCOUNT NAMECashAccounts ReceivableDEBIT127 4 0 0 006 0 0 0 00Supplies40 0 0 0 00Equipment60 0 0 0 00Accounts Payable60 0 0 0 00Susan Willis, CapitalSusan Willis, Drawing160 0 0 0 004 0 0 0 00Fees IncomeSalaries ExpenseTelephone ExpenseTotalsCopyright 2009 The McGraw-Hill Companies, Inc. All rights reserved.CREDIT28 0 0 0 0010 0 0 0 006 0 0 00248 0 0 0 00248 0 0 0 00Chapter 3 25
pri30597 SM ch03.qxd8/2/085:09 AMPage 26EXERCISE 3.6 (continued)TIMELESS RESTORATIONSIncome StatementMonth Ended December 31, 2010RevenueFees Income28 0 0 0 00ExpensesSalaries Expense10 0 0 0 00Telephone Expense6 0 0 00Total Expenses10 6 0 0 00Net Income17 4 0 0 00EXERCISE 3.7TIMELESS RESTORATIONSStatement of Owner’s EquityMonth Ended December 31, 2010Susan Willis, Capital, December 1, 2010Net Income for DecemberLess Withdrawals for DecemberIncrease in CapitalSusan Willis, Capital, December 31, 201026 Chapter 3160 0 0 0 0017 4 0 0 004 0 0 0 0013 4 0 0 00173 4 0 0 00Copyright 2009 The McGraw-Hill Companies, Inc. All rights reserved.
pri30597 SM ch03.qxd8/2/085:09 AMPage 27EXERCISE 3.7 (continued)TIMELESS RESTORATIONSBalance SheetDecember 31, 2010AssetsLiabilitiesCash127 4 0 0 00Accounts ReceivableAccounts Payable60 0 0 0 006 0 0 0 00Supplies40 0 0 0 00Equipment60 0 0 0 00Total Assets233 4 0 0 00Owner’s EquitySusan Willis, Capital173 4 0 0 00Total Liabilities & Owner’s Equity233 4 0 0 00EXERCISE 3.8Zant Moving CompanyChart of AccountsAccount Number100–199Account NameASSETSAccount NumberAccount Name300–399OWNER’S EQUITY101Cash301Sue Zant, Capital111Accounts Receivable302Sue Zant, Drawing121Office Supplies131Prepaid Rent141Office ees IncomeEXPENSESLIABILITIES511Salaries ExpenseAccounts Payable514Utilities Expense517Telephone ExpenseCopyright 2009 The McGraw-Hill Companies, Inc. All rights reserved.Chapter 3 27
pri30597 SM ch03.qxd8/2/085:09 AMPage 28PROBLEM 3.1ACash1.Greta Davis, Capital 60,000 60,000Office Furniture2.Cash 16,000 16,000Office Equipment3.Accounts Payable 950 950Automobile4.Cash 16,000 16,000Cash5.Greta Davis, Capital 10,000 10,000Office Equipment6.Accounts Payable 3,000 3,000Accounts Payable7.Cash 950 950Greta Davis, Drawing8.Cash 4,000Analyze: 4,000All transactions affected asset accounts.PROBLEM 3.2ACash1.James Mitchell, Capital 8,000Equipment2. 8,000Cash 7,000Cash3. 7,000Equipment 600Office Equipment4. 600Accounts Payable 1,350Office Equipment5. 1,350Accounts Payable 5,100Mesia Davis, Drawing6. 5,100Cash 2,000Delivery Truck7. 2,000Accounts Payable 18,000Accounts Payable8. 18,000Cash 1,100Analyze:28 1,100Transactions 1 and 6 directly affect the owner’s equity account. Chapter 3Copyright 2009 The McGraw-Hill Companies, Inc. All rights reserved.
pri30597 SM ch03.qxd8/2/085:09 AMPage 29PROBLEM 3.3A1.Office SuppliesCash 2,0002.Cash 2,000Fees Income 21,0003. 21,000Rent ExpenseCash 4,0004.Accounts Receivable 4,000Fees Income 3,0005.Cash 3,000Accounts Receivable 1,0006. 1,000Salary ExpenseCash 3,6007. 3,600Telephone ExpenseCash 4808.Accounts Receivable 480Fees Income 2,0009.Office Supplies 2,000Accounts Payable 1,00010. 1,000Salary ExpenseCash 3,60011.Cash 3,600Accounts Receivable 2,00012.Cash 2,000Fees Income 8,100Copyright 2009 The McGraw-Hill Companies, Inc. All rights reserved. 8,100Chapter 3 29
pri30597 SM ch03.qxd8/2/085:09 AMPage 30PROBLEM 3.4ACashAccounts ReceivableOffice Equipment(a) 150,000 (b) 5,000(f) 13,000 (h) 6,500(g) 36,000(d) 7,200 (c) 15,720(n) 15,000 (o) 7,000(k) 30,000(h) 6,500 (e) 1,150Bal.(m) 13,500 (g) 12,000(o) 7,000 (i) 3,000(k) 15,000(l) 8,400(p) 2,400(q) 600(r) 1,120111,810 (s) 8,000Bal.Office Furniture(c) 15,720(j)14,500Bal.Accounts Payable 24,000 4,800(j) 4,80020,520(k) 15,000Bal.Bal.John Wilson, Drawing(s)Fees Income 8,000Utilities Expense 1,120(a)Rent Expense(d) 7,200(f) 13,000(m) 13,500(n) 15,000(b) 8,400Telephone Expense(e)Office Cleaning Expense(i)Analyze:30 3,000 5,00048,700Salaries Expense(I) 150,00041,400Bal.(r)John Wilson, Capital 2,400 (g)(p)66,000 1,150Copy Expense(q) 600The company owes 41,400 (accounts payable). Chapter 3Copyright 2009 The McGraw-Hill Companies, Inc. All rights reserved.
pri30597 SM ch03.qxd8/2/085:09 AMPage 31PROBLEM 3.5AJohn Wilson, Landscape ConsultantTrial BalanceJune 30, 2010ACCOUNT NAMEDEBITCashCREDIT111 8 1 0 00Accounts Receivable14 5 0 0 00Office Equipment66 0 0 0 00Office Furniture20 5 2 0 00Accounts Payable41 4 0 0 00John Wilson, Capital150 0 0 0 00John Wilson, Drawing8 0 0 0 00Fees Income48 7 0 0 00Copy Expense6 0 0 00Office Cleaning Expense3 0 0 0 00Rent Expense5 0 0 0 00Salaries Expense8 4 0 0 00Telephone Expense1 1 5 0 00Utilities Expense1 1 2 0 00Total240 1 0 0 00240 1 0 0 00John Wilson, Landscape ConsultantIncome StatementMonth Ended June 30, 2010RevenueFees Income48 7 0 0 00ExpensesCopy Expense6 0 0 00Office Cleaning Expense3 0 0 0 00Rent Expense5 0 0 0 00Salaries Expense8 4 0 0 00Telephone Expense1 1 5 0 00Utilities Expense1 1 2 0 00Total ExpensesNet IncomeCopyright 2009 The McGraw-Hill Companies, Inc. All rights reserved.19 2 7 0 0029 4 3 0 00Chapter 3 31
pri30597 SM ch03.qxd8/2/085:09 AMPage 32PROBLEM 3.5A (continued)John Wilson, Landscape ConsultantStatement of Owner’s EquityMonth Ended June 30, 2010John Wilson, Capital, June 1, 2010150 0 0 0 00Net Income for June29 4 3 0 00Less Withdrawals for June8 0 0 0 00Increase in Capital21 4 3 0 00John Wilson, Capital, June 30, 2010171 4 3 0 00John Wilson, Landscape ConsultantBalance SheetJune 30, 2010AssetsCash111 8 1 0 00Accounts Receivable14 5 0 0 00Office Equipment66 0 0 0 00Office Furniture20 5 2 0 00Total AssetsAnalyze:32Liabilities212 8 3 0 00Accounts Payable41 4 0 0 00Owner’s EquityJohn Wilson, Capital171 4 3 0 00Total Liabilities and Owner’s Equity212 8 3 0 00The net increase in owner’s equity during the month of June was 21,430. Chapter 3Copyright 2009 The McGraw-Hill Companies, Inc. All rights reserved.
pri30597 SM ch03.qxd8/2/085:09 AMPage 33PROBLEM 3.1BCash1.Joseph Tejan, Capital 20,0002. 20,000Shop EquipmentCash 1,8003.Store Equipment 1,800Accounts Payable 1,200 1,200Truck4.Cash 10,0005.Shop Equipment 10,000Joseph Tejan, Capital 3,0006.Store Equipment 3,000Accounts Payable 2,5007. 2,500Accounts PayableCash 4008. 400Joseph Tejan, DrawingCash 1,600Analyze: 1,600The transactions that affect the cash account are transactions 1, 2, 4, 7, and 8.PROBLEM 3.2B1.EquipmentCash 16,0002. 16,000Angie Carvajal, DrawingCash 4,0003.Cash 4,000Equipment 3,0004. 3,000Delivery TruckCash 12,0005. 12,000Accounts PayableCash 3,6006.Office Equipment 3,600Accounts Payable 5,0007.Cash 5,000Chuck Vinson, Capital 20,0008.Accounts Payable 1,500Analyze: 20,000Cash 1,500The transactions that affect the liability accounts are transactions 5, 6, and 8.Copyright 2009 The McGraw-Hill Companies, Inc. All rights reserved.Chapter 3 33
pri30597 SM ch03.qxd8/2/085:09 AMPage 34PROBLEM 3.3B1.Rent ExpenseCash 3,2002.Cash 3,200Fees Income 4,0003.Salary Expense 4,000Cash 4,8004.Accounts Receivable 4,800Fees Income 7,2005.Telephone Expense 7,200Cash 6006.Cash 600Accounts Receivable 2,0007.Cash 2,000Telephone Expense 1208.Accounts Receivable 120Fees Income 4,8009.Utilities Expense 4,800Cash 40010.Gasoline Expense 400Cash 88011.Cash 880Accounts Receivable 3,60012.Cash 7,200Analyze:34 3,600Fees Income 7,200The total cash collected on accounts receivable during the month was 5,600. Chapter 3Copyright 2009 The McGraw-Hill Companies, Inc. All rights reserved.
pri30597 SM ch03.qxd8/2/085:09 AMPage 35PROBLEM 3.4BCashAccounts ReceivableOffice Furniture(a) 120,000 (b) 6,400(f) 9,150 (h) 4,500(d) 8,000 (c) 36,000(n) 5,500 (p) 3,800(h) 4,500 (e) 1,600Bal.(m) 4,750 (i) 3,600(p) 3,800 (j) 1,300(k) 9,800(l) 13,700(k) 19,600(o) 796(q) 5,440(r) 800Bal.61,054 (s) 6,000Bal. 36,0006,350Accounts Payable(i)Kathryn Price, Drawing 3,600 (g) 5,600(k) 9,800(q) 5,440Auto Expense 1,600Rent Expense(d) 8,000(f) 9,150(m) 4,750(n) 5,500(r) 800Bal.(b) 1,300 6,40027,400Utilities Expense(j) 120,00017,240Bal.(e)(a)Fees Income 6,00025,040Kathryn Price, CapitalBal.(s) 5,600Office EquipmentAutomobile(c)(g)Salaries Expense(l) 13,7002,400Telephone Expense(o) 796Copyright 2009 The McGraw-Hill Companies, Inc. All rights reserved.Chapter 3 35
pri30597 SM ch03.qxd8/2/085:09 AMPage 36PROBLEM 3.5BKathryn Price, Counselor and Attorney-At-LawTrial BalanceApril 30, 2010ACCOUNT NAMEDEBITCashCREDIT61 0 5 4 00Accounts Receivable6 3 5 0 00Automobile36 0 0 0 00Office Equipment25 0 4 0 00Office Furniture5 6 0 0 00Accounts Payable17 2 4 0 00Kathryn Price, Capital120 0 0 0 00Kathryn Price, Drawing6 0 0 0 00Fees Income27 4 0 0 00Auto Expense2 4 0 0 00Rent Expense6 4 0 0 00Salaries Expense13 7 0 0 00Utilities Expense1 3 0 0 00Telephone Expense7 9 6 00Total164 6 4 0 00164 6 4 0 00Kathryn Price, Counselor and Attorney-At-LawIncome StatementMonth Ended April 30, 2010RevenueFees Income27 4 0 0 00ExpensesAuto Expense2 4 0 0 00Rent Expense6 4 0 0 00Salaries Expense13 7 0 0 00Utilities Expense1 3 0 0 00Telephone ExpenseTotal ExpensesNet Income36 Chapter 37 9 6 0024 5 9 6 002 8 0 4 00Copyright 2009 The McGraw-Hill Companies, Inc. All rights reserved.
pri30597 SM ch03.qxd8/2/085:09 AMPage 37PROBLEM 3.5B (continued)Kathryn Price, Counselor and Attorney-At-LawStatement of Owner’s EquityMonth Ended April 30, 2010Kathryn Price, Capital, April 1, 2010120 0 0 0 00Net Income for April2 8 0 4 00Less Withdrawals for April6 0 0 0 00Decrease in Capital(3 1 9 6 00)Kathryn Price, Capital, April 30, 2010116 8 0 4 00Kathryn Price, Counselor and Attorney-At-LawBalance SheetApril 30, 2010AssetsCashLiabilities61 0 5 4 00Accounts Receivable36 0 0 0 00Office Equipment25 0 4 0 00Total AssetsAnalyze:17 2 4 0 006 3 5 0 00AutomobileOffice FurnitureAccounts Payable5 6 0 0 00134 0 4 4 00Owner’s EquityKathryn Price, Capital116 8 0 4 00Total Liabilities and Owner’s Equity134 0 4 4 00 3,196 decrease.Copyright 2009 The McGraw-Hill Companies, Inc. All rights reserved.Chapter 3 37
pri30597 SM ch03.qxd8/2/085:09 AMPage 38CRITICAL THINKING PROBLEM 3.1CashAccounts ReceivableOffice Furniture(a) 15,000 (b) 1,000(f) 1,305 (i) 1,080(c) 2,000(d) 2,100 (c) 2,000(o) 2,100 (p) 600(j) 540(i) 1,080 (e) 187.50(m) 1,400 (g) 87.50(p) 600 (h) 325(k) 2,000(l) 270(n) 280(q) 1,75011,980 (r) 300Bal.Bal.Office Equipment(g) 287.501,725Bal.Accounts Payable(l)Helen Franz, Drawing(q) 200(j) 540 1,750Utilities Expense 280(a)Advertising Expense(d) 2,100(f) 1,305(m) 1,400(o) 2,100(b) 2,000 1,0006,905Salaries Expense(k) 15,000470Fees IncomeBal.(n)Helen Franz, Capital 270 (g)Bal.2,540Telephone Expense(e) 187.50Miscellaneous Expense(h) 325(r) 300Bal.38625 Chapter 3Copyright 2009 The McGraw-Hill Companies, Inc. All rights reserved.
pri30597 SM ch03.qxd8/2/085:09 AMPage 39CRITICAL THINKING PROBLEM 3.1 (continued)Helen Franz, ArchitectTrial BalanceJanuary 31, 2010ACCOUNT NAMEDEBITCashCREDIT11 9 8 0 00Accounts Receivable1 7 2 5 00Office Furniture2 5 4 0 00Office Equipment2 8 7 50Accounts Payable4 7 0 00Helen Franz, Capital15 0 0 0 00Helen Franz, Drawing1 7 5 0 00Fees Income6 9 0 5 00Advertising Expense1 0 0 0 00Utilities Expense2 8 0 00Salaries Expense2 0 0 0 00Telephone Expense1 8 7 50Miscellaneous Expense6 2 5 00Totals22 3 7 5 0022 3 7 5 00Helen Franz, ArchitectIncome StatementMonth Ended January 31, 2010RevenueFees Income6 9 0 5 00ExpensesAdvertising Expense1 0 0 0 00Utilities Expense2 8 0 00Salaries Expense2 0 0 0 00Telephone Expense1 8 7 50Miscellaneous Expense6 2 5 00Total ExpensesNet IncomeCopyright 2009 The McGraw-Hill Companies, Inc. All rights reserved.4 0 9 2 502 8 1 2 50Chapter 3 39
pri30597 SM ch03.qxd8/2/085:09 AMPage 40CRITICAL THINKING PROBLEM 3.1 (continued)Helen Franz, ArchitectStatement of Owner’s EquityMonth Ended January 31, 2010Helen Franz, Capital, January 1, 201015 0 0 0 00Net Income for January2 8 1 2 50Less Withdrawals for January1 7 5 0 00Increase in Capital1 0 6 2 50Helen Franz, Capital, January 31, 201016 0 6 2 50Helen Franz, ArchitectBalance SheetJanuary 31, 2010AssetsCash11 9 8 0 00Accounts Receivable1 7 2 5 00Office Furniture2 5 4 0 00Office EquipmentTotal AssetsAnalyze:40Liabilities2 8 7 5016 5 3 2 50Accounts Payable4 7 0 00Owner’s EquityHelen Franz, Capital16 0 6 2 50Total Liabilities and Owner’s Equity16 5 3 2 50Assets ( 16,532.50) Liabilities ( 470) Owner’s Equity ( 16,062.50) Chapter 3Copyright 2009 The McGraw-Hill Companies, Inc. All rights reserved.
pri30597 SM ch03.qxd8/2/085:09 AMPage 41CRITICAL THINKING PROBLEM 3.2CashAccounts Receivable3,0001,0006001,800500200Equipment and Tools1,1501,000500100Bal.500TruckTed Coe, Capital1,800Fees Income3,0006001,150500Bal.Salary Expense500Gasoline Expense2002,250Advertising Expense100Elegant Lawn CareIncome StatementThree Months Ended August 31, 2010RevenueFees Income2 2 5 0 00ExpensesSalary Expense5 0 0 00Gasoline Expense2 0 0 00Advertising Expense1 0 0 00Total ExpensesNet IncomeCopyright 2009 The McGraw-Hill Companies, Inc. All rights reserved.8 0 0 001 4 5 0 00Chapter 3 41
pri30597 SM ch03.qxd8/2/085:09 AMPage 42CRITICAL THINKING PROBLEM 3.2 (continued)Elegant Lawn CareStatement of Owner’s EquityThree Months Ended August 31, 2010Ted Coe, Capital, June 1, 20103 0 0 0 00Net Income for June–August1 4 5 0 00Ted Coe, Capital, August 31, 20104 4 5 0 00Elegant Lawn CareBalance SheetAugust 31, 2010AssetsCash42Liabilities5 0 0 00Accounts Receivable1 1 5 0 00Equipment/Tool1 0 0 0 00Truck1 8 0 0 00Ted Coe, Capital4 4 5 0 00Total Assets4 4 5 0 00Total Liabilities and Owner’s Equity4 4 5 0 00 Chapter 3Owner’s EquityCopyright 2009 The McGraw-Hill Companies, Inc. All rights reserved.
pri30597 SM ch03.qxd8/2/085:09 AMPage 43CRITICAL THINKING PROBLEM 3.2 (continued)Ted is better off than he would have been had he left his money in the savings account. He earned a profit of 1,450from his Elegant Lawn Care business, compared to approximately 45.00 in interest his money would have earnedover the three summer months (assuming a bank interest rate of 6%; 3,000 0.06 3/12).Ted needs to look beyond his current checking account balance of 500 and realize that this balance will increaseto 1,650 when he collects the 1,150 still owed to him. He also owns a truck and power mowers that he couldsell for additional cash.Business ConnectionsManagerial Focus:1. Provide summaries of(a) revenues and expenses,(b) assets, liabilities, and owner’s equity.2. Review of financial records containing cash available, amounts due and dates due.3. Reduce expenses; increase sales volume or raise prices.4. Net income (or net loss) for the period.Ethical Dilemma:Do not open the account New Expenses without approval from the controller. You must identify what expenseswill be put into that account. Personal expense of the Accounts Payable clerk could be entered.Streetwise:1. Permanent - Current Assets, Property & Equipment, Current Liabilities, Long-Term Debt & Other Long-TermLiabilities. Temporary – Net Sales, Cost of Sales, Selling, General & Administrative Operating Expenses,Depreciation & Amortization and Interest & Investment Income.2. Answer on file.Financial Statement Analysis:1. Financial data, operational information, plans for the future.2. 2,575,300 billion.3. Enterprise and Developer Solutions.4. Yes, in fiscal year 2007, revenue increased to 3,157,881 billion compared to revenue of 2,575,300 billion infiscal year 2006. Net Income in fiscal year 2007 increased to 728,807 million from 505,809 million in fiscal year 2006.5. Project Apollo, a universal client that enables rich Internet applications (RIAs) to run outside the browseracross multiple operating systems on desktop computers and other devices. Adobe Production Studio.Copyright 2009 The McGraw-Hill Companies, Inc. All rights reserved.Chapter 3 43
pri30597 SM ch03.qxd8/2/085:09 AMPage 44Extending the Thought:Answers will vary. Students should recognize that all organization systems share a commonality that groupsitems into classifications based on shared activities or relationships. For example, a company’s organizationchart groups reporting relationships that share a common interest or activity under one executive. Mostorganizations, for example, have a director of finance and administration where managers of accounting,budgets, human resources, payroll, and other financial-related functions report to a company chief.Business Communication:Students’ answers will vary, but should include the fact that the trial balance can help the accountant reveal avariety of errors that may have been made when transactions were recorded.Team Work:All companies would have a cash account and accounts payable. A plumbing service would have accountsreceivable whereas a clothing store would have a credit card receivable. Both grocery store and clothing storewould have inventory. All would have wages expense except the real estate would have sales commission.All would have office supplies expense. Depending on whether the company owned the building most wouldhave rent expense.Internet Connection:Honeywell is the most profitable. JC Penny has the most cash available. Honeywell has the most assets.Chapter 3 Practice Test Answer KeyPart A True-False1.2.3.4.5.6.7.8.9.10.11.12.13.14.15.44 Chapter 3TTTTTFFFFFTTTFTPart B Matching1.2.3.4.5.6.7.8.9.agehcidbfPart C Completion1.2.3.4.5.footingslidetranspositiontrial balancenormal balanceCopyright 2009 The McGraw-Hill Companies, Inc. All rights reserved.
The business loses customers because payments on account are not recorded properly. Discussion These questions are designed to check students' understanding of the . Analyzing Business Transactions Using T Accounts pri30597_SM_ch03.qxd 8/2/08 5:09 AM Page 23. 24 .
