Solution Manual For Accounting 7th Edition Horngren Harrison

Chapter 2

Recording Business Transactions

√ Quick Check

Answers:

1. a
3. b
5. d
7. d 9. c
2. c
4. c
6. a
8. a
10. b

Explanations:

3. b. Owner’s equity is $130,000 ($50,000 + $60,000 + $200,000 – $80,000 – $100,000).

7. d. Supplies balance is $1,200 ($500 + $700). The payment of accounts payable does not affect supplies.

9. c. Ending equity is $70,000, computed as follows: Beginning owner’s equity……..

$ 50,000
Add: Net income:

Revenues………………..
$110,000

Less: Expenses………. (30,000)

Net income……………...

80,000
Less: Withdrawals……………,

(60,000)
Ending owner’s equity…………

$ 70,000

√ Short Exercises

(5 min.) S 2-1

Debits are increases for the following types of accounts:
Assets
Withdrawals
Expenses

Debits are decreases for these types of accounts:
Liabilities
Capital
Revenues

Credits are increases for these types of accounts:
Liabilities
Capital
Revenues

Credits are decreases for these types of accounts:
Assets
Withdrawals
Expenses

(5 min.) S 2-2

“The basic summary device in accounting is the account. The left side is calld the debit side, and the right side is called the credit side. We record transactions first in a journal. Then we post (copy the data) to the ledger. It is helpful to list all the accounts with their balances on a trial balance.”

(10 min.) S 2-3

J 1. Capital
A.
Record of transactions

C 2. Debit
B.
An asset

F 3. Expense
C.
Left side of an account

H 4. Net income
D
Side of an account where increases are recorded

I 5. Ledger
E.
Copying data from the journal to the ledger

E 6. Posting
F.
Using up assets in the course of operating a business

D 7. Normal balance
G.
Always a liability

G 8. Payable
H.
Revenues − Expenses

A 9. Journal
I.
Book of accounts

B
10. Receivable
J.
Owner’s equity
(5 min.) S 2-4

Normal Balance

Assets……………………………....
Debit

Liabilities…………………………..

Credit

Owner’s