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Chapter 2: Q8SE (page 92)

Preparing a trial balance

Smithson Floor Coverings reported the following summarized data at December 31, 2018. Accounts appear in no particular order, and all have normal balances.

Service Revenue \( 26,000 Salaries Payable \) 25,000

Equipment 36,000 Salaries Expense 1,600

Rent Expense 17,000 Cash 7,000

Common Stock 24,000 Accounts Receivable 3,600

Accounts Payable 2,200 Interest Payable 6,000

Dividends 16,100 Utilities Expense 1,900

Prepare the trial balance of Smithson Floor Coverings at December 31, 2018

Short Answer

Expert verified

The required trial balance is prepared with a total of $83,200.

Step by step solution

01

Definition of Trial Balance

The Trial Balance is a worksheet prepared with the balance of all ledgers transferred on the debit or credit side.

02

Preparation of trial balance

Smithson Floor Coverings

Trial Balance

Particulars

Debit ($)

Credit ($)

Cash

7,000

Accounts Receivables

3,600

Equipment

36,000

Accounts Payable

2,200

Salaries Payable

25,000

Interest Payable

6,000

Common Stock

24,000

Dividends

16,100

Service Revenue

26,000

Rent Expense

17,000

Salaries Expense

1,600

Utility Expense

1,900

Total

83,200

83,200

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Most popular questions from this chapter

Journalizing transactions, posting journal entries to T-accounts, and preparing a trial balance

Beth Stewart started her practice as a design consultant on November 1, 2018. During the first month of operations, the business completed the following transactions:

Nov. 1 Received \(41,000 cash and issued common stock to Stewart.

4 Purchased office supplies, \)1,200, and furniture, \(2,300, on account.

6 Performed services for a law firm and received \)2,100 cash.

7 Paid \(27,000 cash to acquire land to be used in operations.

10 Performed services for a hotel and received its promise to pay the \)800 within one week.

14 Paid for the furniture purchased on November 4 on account.

15 Paid assistant鈥檚 semimonthly salary, \(1,470.

17 Received cash on account, \)500.

20 Prepared a design for a school on account, \(680.

25 Received \)1,900 cash for design services to be performed in December.

28 Received \(3,100 cash for consulting with Plummer & Gordon.

29 Paid \)840 cash for a 12-month insurance policy starting on December 1.

30 Paid assistant鈥檚 semimonthly salary, \(1,470. 30 Paid monthly rent expense, \)650.

30 Received a bill for utilities, \(650. The bill will be paid next month.

30 Paid cash dividends of \)2,800.

Requirements 1. Record each transaction in the journal using the following account titles: Cash; Accounts Receivable; Office Supplies; Prepaid Insurance; Land; Furniture; Accounts Payable; Utilities Payable; Unearned Revenue; Common Stock; Dividends; Service Revenue; Salaries Expense; Rent Expense; and Utilities Expense. Explanations are not required.

If total debits equal total credits on the trial balance, is the trial balance error-free? Explain your answer.

Better Days Ahead, a charitable organization, has a standing agreement with First National Bank. The agreement allows Better Days Ahead to overdraw its cash balance at the bank when donations are running low. In the past, Better Days Ahead managed funds wisely and rarely used this privilege. Jacob Henson has recently become the president of Better Days Ahead. To expand operations, Henson acquired office equipment and spent large amounts on fundraising. During Henson鈥檚 presidency, Better Days Ahead has maintained a negative bank balance of approximately $10,000.

What is the ethical issue in this situation, if any?

State why you approve or disapprove of Henson鈥檚 management of Better Days Ahead鈥檚 funds.

Question:Roy Akins was the accounting manager at Zelco, a tire manufacturer, and he played golf with Hugh Stallings, the CEO, who was something of a celebrity in the community. The CEO stood to earn a substantial bonus if Zelco increased net income by year-end. Roy was eager to get into Hugh鈥檚 elite social circle; he boasted to Hugh that he knew some accounting tricks that could increase company income by simply revising a few journal entries for rental payments on storage units. At the end of the year, Roy changed the debits from 鈥渞ent expense鈥� to 鈥減repaid rent鈥� on several entries. Later, Hugh got his bonus, and the deviations were never discovered.

Requirements 2. Who gained and who lost as a result of these actions?

What is the purpose of the chart of accounts? Explain the numbering typically associated with the accounts.
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