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At the end of 20X1, a company had total assets of $22 billion and liabilities totaling $11 billion. Answer the following questions.

1. Write the companies accounting equation, and label each amount as a debit or a credit.

Asset: debit ($22 billion) = Liability: credit ($11 billion) + Owner’s Equity: credit ($11 billion)

2. The company had total revenues for 20X1  of $20 billion, and the total expenses for the year were $16 billion. How much was the companies net income (or net loss) for 20X1? Write the equation to compute the companies net income, and indicate which element is a debit and which is a credit. Does net income represent a net debit or a net credit? Does net loss represent a net debit or a net credit?

Revenues: credit ($ 20 billion) – Expenses: debit ($16 billion) = Net Income: net credit ($4 billion)
- Net income = net credit
- Net Loss = net debit

3. During 20X1, the owners of the company withdrew $2 billion in the form of dividends (same as owner Withdrawals). Did the dividends represent a debit or a credit?

Dividends = debit

Record the following transactions in the journal. Follow the pattern given for the December 1st transaction.

Dec. 1 Paid interest expense of $500

1 Interest Expense (? expense; debit)................ 500

Cash (? asset; credit).................................            500

5 Purchased office furniture on account, $800.

10 Performed service on account for a customer, $1,600.

12 Borrowed $7,000 cash, signing a note payable.

19 Sold for $29,000 land that had cost this same amount.

21 Purchased building for $140,000; signed a note payable.

27 Paid the liability from December 5.

Using the information from the previous example, do the following.

1. Open the following T-accounts with their December 1 balances: Cash, debit balance $3,000; Land, debit balance $29,000; Ken Elzinga, Capital, credit balance $32,000. Also, post the transactions of the previous example to the T-accounts affected. Use the dates as posting references. Start with December 1.

2. Compute the December 31 balance for each account, and prove the total debits equal total credits.

A company completed the following transactions during March 20X8, its first month of operations:

Mar. 1 Ray Hawk invested $70,000 of cash to start the business.

2 Purchased supplies of $200 on account

4 Paid $60,000 cash for a building to use for storage.

6 Performed service for customers and received cash, $3,000.

9 Paid $100 on accounts payable.

17 Performed service for customers on account, $1,600.

23 Received $1,200 cash from a customer on account.

31 Paid the following expenses: salary, $1,200; rent, $500.

Record the pending transactions in the journal for the company. Key transactions by date and include an explanation for each entry. Use the following accounts: Cash; Accounts Receivable; Supplies; Building; Accounts Payable; Ray Hawk; Capital; Service Revenue; Salary Expense; Rent Expense.

The trial balance of Harvey Spark, M.D., at March 31, 20X9, does not balance:

Cash...................................... $3,000

Accounts receivable...............  2,000

Supplies.................................     600

Land...................................... 66,000

Accounts Payable.................                  $21,500

Harvey Spark, capital............                   41,600

Service Revenue..................                      9,700

Salary expense.....................   1,700

Rent expense.......................      800

Utilities expense...................      300

Total.....................................  $74,400    $72,800

Investigation of the accounting record reveals that the bookkeeper.

a. Recorded a $400 cash revenue transaction by debiting Accounts Receivable. The credit entry was correct.

b. Posted a $1,000 credit to Accounts Payable as $100.

c. Did not record utilities expense or the related account payable in the amount of $200.

d. Understated Harvey Spark, Capital, by $700.

Prepare the correct trial balance at March 31.