Question

Problem 1-1

The Coffee Can Accounting System In this problem you are the only owner. You are saving for a trip by putting your money into a coffee can. When it is time to take the trip, the coffee can is a little short of the cash you need for your trip. Your Grandma Smith and Grandma Jones loan the coffee can the additional cash you need for the trip. Your Grandmas do not charge any interest on the loans. After you return from your trip, you continue to put money into the coffee can from wages you earn from your summer job. You then pay your grandmas with cash from the coffee can. After paying off the loans there is some cash remaining in the coffee can, which you will use for a future trip. Use the forms in the Excel file Problem 1-1 Forms to complete this problem.

Requirement 1

A. Label the accounting equation above the “T” accounts.

B. You will utilize the following four accounts: Cash, Note Payable-Smith, Note Payable-Jones, and My Equity.. Label the four “T” accounts using these account names.

C. Put Dr and Cr Labels at the top of each “T” account.

D. Because you are just starting your Coffee Can system, put a beginning balance of zero in each account. Label these amounts as “Beg. Balance”

Requirement 2

For each of the following transactions make the required entries in the “T” accounts: The description of the transaction that you write in the “T” account should be very brief. For example the description for transaction

A. could be “I put in cash.” There are no right or wrong descriptions for the transactions. A. You put $75 into the Coffee Can.

B. You put $125 into the Coffee Can.

C. Grandma Smith loans $300 to the Coffee Can.

D. Grandma Jones loans $250 to the Coffee Can.

E. You take all of the money out of the Coffee Can and go on your trip. Hint: It is OK for the My Equity account to have a debit balance at this time.

F. You put $500 into the Coffee Can.

G. You put $375 into the Coffee Can.

H. You take cash out of the Can and pay off the total amount owed to Grandma Jones.

I. You take cash out of the Can and pay off the total amount owed to Grandma Smith.

Requirement 3

Compute an ending balance for each account.

Requirement 4

Prepare a Trial Balance.

Problem 1-1 -- The Coffee Can Accounting System + - Cash Dr Cr Beg Balance 0 Ending Balance Ending Balance Ending Balance Ending Balance Trial Balance Account Name Total

Answer 1

The Coffee can Accounting System

Assets = Liabilities + Equity

Details Beg. Bal I took cash My Equity Debit Credit 0 75 750 125 Details I put in cash I put in cash I put in cash I put in cash 500 375 Cash Details Debit Credit Details Beg. Bal 0 750 I took cash I put in cash 75 250 Paid to Jones I put in cash 125 300 Paid Smith Loan from Smith 300 Loan from Jones 250 I put in cash 500 I put in cash 375 End Bal. 325 Notes Payable-Smith Details Debit Credit Details Beg. Bal 0 300 cash loan Cash repaid 300 End Bal. 325 Details Notes Payable -Jones Debit Credit Details 0 250 Cash loan Beg. Bal Repaid loan 250 End Bal. 0 End Bal. 0

Trial Balance as on Debit Credit 325 Cash My Equity Total 325 325 325 Other two accounts are closed