Keetla
Jul 26th, 2008, 01:18 PM
Hi everyone!
I'm very sorry to post it here but I'm a little desperate. I am taking an long-distance Financial Accounting I Course and am doing some last minute studying. My exam is Monday (07/26). I'm having extreme difficulty understanding the logic of a set of problems (WebCT) and there are very slim chances that my "learning support" via email will see my help request before my exam! I know there are a lot of accountants and accounting students on here, so I'm hoping that somebody can explain this to me.
Here is the background information provided: (I apologize, it's hard to get tabled information across in a forum post)
An inexperienced bookkeeper prepared the following trial balance, which does not balance:
Yu Chen Limited
Trial Balance
December 31, 20XX
Account Title / Debit ($) / Credit ($)
Cash / $17,600 /
Prepaid Insurance / / 3,500
Accounts Payable / / 3,000
Unearned Revenue / 2,200 /
Common Shares / / 10,000
Retained Earnings / / 7,000
Dividends / / 4,500
Service Revenue / / 25,600
Salaries Expense / 18,600 /
Rent Expense / / 2,400
Income Tax Expense / 1,200 /
TOTAL / $39,600 / $56,000
The first thing I did was to correct the trial balance to the following:
Yu Chen Limited
Trial Balance
December 31, 20XX
Account Title / Debit ($) / Credit ($)
Cash / $17,600 /
Prepaid Insurance / 3,500 /
Accounts Payable / / 3,000
Unearned Revenue / / 2,200
Common Shares / / 10,000
Retained Earnings / / 7,000
Dividends / 4,500 /
Service Revenue / / 25,600
Salaries Expense / 18,600 /
Rent Expense / 2,400 /
Income Tax Expense / 1,200 /
TOTAL / $47,800 / $47,800
Here are the questions with the corresponding answers:
a) How much capital was invested in the practice on December 31, 20B?
Answer: $14,700
b) Assuming the December 31, 20B balance in the common stock account was $20,000, what would be the balance on December 31, 20C?
Answer: $27,500
c) Assuming the December 31, 20C balance in the common stock account was $22,200, was the value of Retained Earnings on December 31, 20C?
Answer: $7,300
d) Assuming the December 31, 20C balance in the Retained Earnings account was $22,200, how much net income was earned during 20C?
Answer: $40,200
e) What was the monthly rent expense for the business during 20C?
Answer: $100
I thought I had a good understanding of the material but now I'm just totally f*cked up.
I don't understand a single question from the Assignment! How did they get the capital amount of $14,700 (question #1)?
For Question #2, what do they mean by balance?? Where does the $27,500 come from?
For Question #3, if I add Cash & Prepaid Insurance (the only two ASSET accounts), I get a total of $21,100. This should be the amount of Shareholders' Equity + Liability. But how can the common stock account be higher than the total and Retained Earnings still be positive? Same thing for Question #4.
For Question #5, if Rent Expense is at $2,400 for the year, then how can the monthly rent be $100???
I have no idea what is going on anymore!
Some (ANY) help would be immensely appreciated.
I feel like the questions don't even match up the information that's given and I'm totally panicking!!
I'm very sorry to post it here but I'm a little desperate. I am taking an long-distance Financial Accounting I Course and am doing some last minute studying. My exam is Monday (07/26). I'm having extreme difficulty understanding the logic of a set of problems (WebCT) and there are very slim chances that my "learning support" via email will see my help request before my exam! I know there are a lot of accountants and accounting students on here, so I'm hoping that somebody can explain this to me.
Here is the background information provided: (I apologize, it's hard to get tabled information across in a forum post)
An inexperienced bookkeeper prepared the following trial balance, which does not balance:
Yu Chen Limited
Trial Balance
December 31, 20XX
Account Title / Debit ($) / Credit ($)
Cash / $17,600 /
Prepaid Insurance / / 3,500
Accounts Payable / / 3,000
Unearned Revenue / 2,200 /
Common Shares / / 10,000
Retained Earnings / / 7,000
Dividends / / 4,500
Service Revenue / / 25,600
Salaries Expense / 18,600 /
Rent Expense / / 2,400
Income Tax Expense / 1,200 /
TOTAL / $39,600 / $56,000
The first thing I did was to correct the trial balance to the following:
Yu Chen Limited
Trial Balance
December 31, 20XX
Account Title / Debit ($) / Credit ($)
Cash / $17,600 /
Prepaid Insurance / 3,500 /
Accounts Payable / / 3,000
Unearned Revenue / / 2,200
Common Shares / / 10,000
Retained Earnings / / 7,000
Dividends / 4,500 /
Service Revenue / / 25,600
Salaries Expense / 18,600 /
Rent Expense / 2,400 /
Income Tax Expense / 1,200 /
TOTAL / $47,800 / $47,800
Here are the questions with the corresponding answers:
a) How much capital was invested in the practice on December 31, 20B?
Answer: $14,700
b) Assuming the December 31, 20B balance in the common stock account was $20,000, what would be the balance on December 31, 20C?
Answer: $27,500
c) Assuming the December 31, 20C balance in the common stock account was $22,200, was the value of Retained Earnings on December 31, 20C?
Answer: $7,300
d) Assuming the December 31, 20C balance in the Retained Earnings account was $22,200, how much net income was earned during 20C?
Answer: $40,200
e) What was the monthly rent expense for the business during 20C?
Answer: $100
I thought I had a good understanding of the material but now I'm just totally f*cked up.
I don't understand a single question from the Assignment! How did they get the capital amount of $14,700 (question #1)?
For Question #2, what do they mean by balance?? Where does the $27,500 come from?
For Question #3, if I add Cash & Prepaid Insurance (the only two ASSET accounts), I get a total of $21,100. This should be the amount of Shareholders' Equity + Liability. But how can the common stock account be higher than the total and Retained Earnings still be positive? Same thing for Question #4.
For Question #5, if Rent Expense is at $2,400 for the year, then how can the monthly rent be $100???
I have no idea what is going on anymore!
Some (ANY) help would be immensely appreciated.
I feel like the questions don't even match up the information that's given and I'm totally panicking!!