Concept explainers
On June 1, 2019, Raquel Ramirez established her own advertising firm. Selected transactions for the first few days of June follow.
- 1. Record the transactions on page 1 of the general journal. Omit descriptions. Assume that the firm initially records prepaid expenses as assets and unearned income as a liability.
- 2. Record the
adjusting journal entries that must be made on June 30, 2019, on page 2 of the general journal. Omit descriptions.
Analyze: At the end of calendar year 2019, how much of the rent paid on June 1 will have been charged to expense?
1.
Pass the journal entries as on June 1.
Explanation of Solution
Journal entry: Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.
Debit: A debit, is an accounting term that refers to the left side of an account. The term debit is be denoted by (Dr). The recording amount on the left side of the account is known as debiting.
Credit: A credit, is an accounting term that refers to the right side of an account. The term credit is denoted as (Cr). The recording amount on the right side of the account is known as crediting.
Rules of Debit and Credit: Following rules are followed for debiting and crediting different accounts while they occur in business transactions:
- Debit, all the increase in the assets, the expenses and the dividends, all the decrease in liabilities, revenues and the stockholders’ equities.
- Credit, all the increase in the liabilities, the revenues, and the stockholders’ equities, and all decreases in the assets, and the expenses.
Pass the journal entries for the given transactions:
General Journal | Page - 1 | |||
Date | Description | Post | Debit | Credit |
2019 | ||||
June 1 | Prepaid Rent | $15,000 | ||
Cash | $15,000 | |||
(To record the rent paid in advance with check 101) | ||||
June 1 | Cash | $17,550 | ||
Prepaid Interest | $450 | |||
Notes Payable | $18,000 | |||
(To record the interest paid in advance) |
Table (1)
General Journal | Page - 1 | |||
Date | Description | Post Ref. | Debit | Credit |
2019 | ||||
June 1 | Cash | $78,000 | ||
Unearned Advertising Fee | $78,000 | |||
(To record the fees received in advance) | ||||
June 1 | Office Equipment | $17,200 | ||
Notes Payable | $17,200 | |||
(To record equipment purchased on account) | ||||
June 1 | Prepaid Insurance | $1,680 | ||
Cash | $1,680 | |||
(To record insurance paid in advance using the check 102) | ||||
June 3 | Office Furniture | $17,400 | ||
Cash | $10,000 | |||
Accounts payable | $7,400 | |||
(To record furniture purchased on account after making a part payment using the check 103) | ||||
June 5 | Office Supplies | $1,910 | ||
Cash | $1,910 | |||
(To record the purchase of supplies using the check 104) |
Table (2)
2.
Pass the adjusting entries as on June 30, and compute the amount of rent expensed by the year end.
Explanation of Solution
Adjusting entries: Adjusting entries are those entries which are recorded at the end of the year, to update the income statement accounts (revenue and expenses) and balance sheet accounts (assets, liabilities, and stockholders’ equity) to maintain the records according to accrual basis principle.
Pass the adjusting entries for the given transactions:
General Journal | Page - 2 | |||
Date | Description | Post Ref. | Debit | Credit |
2019 | ||||
June 30 | Rent expense | $1,250 | ||
Prepaid Rent | $1,250 | |||
(To record the prepaid rent) | ||||
June 30 | Interest expense | $150 | ||
Prepaid Interest | $150 | |||
(To record the prepaid interest) | ||||
June 30 | Unearned Advertising Fees | $6,500 | ||
Advertising Fees | $6,500 | |||
(To record the Advertising fees earned) | ||||
June 30 | Interest expense | $86 | ||
Interest Payable | $86 | |||
(To record the interest payable) | ||||
June 30 | Depreciation Expense - Office Equipment | $270 | ||
Accumulated Depreciation - Office Equipment | $270 | |||
(To record the depreciation on equipment) | ||||
June 30 | Insurance expense | $140 | ||
Prepaid Insurance | $140 | |||
(To record the prepaid insurance) |
Table (3)
General Journal | Page - 2 | |||
Date | Description | Post Ref. | Debit | Credit |
2019 | ||||
June 30 | Depreciation Expense - Office Furniture | $270 | ||
Accumulated Depreciation - Office Furniture | $270 | |||
(To record the depreciation on furniture) | ||||
June 30 | Office Supplies Expense | $1,060 | ||
Office Supplies | $1,060 | |||
(To record the supplies) |
Table (4)
The amount of rent expensed or charged to the Rent Expense Account will be $8,750 by the end of the year.
Working note:
Calculate the amount of rent expensed:
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Chapter 12 Solutions
COLLEGE ACCOUNTING W/CONNECT
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In accordance with the contract, Peyton received 7,200 from KXMD as an advance payment for the first two months. 3.Paid 250 to creditors on account. 4.Paid an attorney 900 for reviewing the July 3 contract with KXMD. (Record as Miscellaneous Expense.) 5.Purchased office equipment on account from Office Mart, 7,500. 8.Paid for a newspaper advertisement, 200. 11.Received 1,000 for serving as a disc jockey for a party. 13.Paid 700 to a local audio electronics store for rental of digital recording equipment. 14.Paid wages of 1,200 to receptionist and part-time assistant. Enter the following transactions on Page 2 of the two-column journal: 16.Received 2,000 for serving as a disc jockey for a wedding reception. 18.Purchased supplies on account, 850. July 21. Paid 620 to Upload Music for use of its current music demos in making various music sets. 22.Paid 800 to a local radio station to advertise the services of PS Music twice daily for the remainder of July. 23.Served as disc jockey for a party for 2,500. Received 750, with the remainder due August 4, 2019. 27.Paid electric bill, 915. 28.Paid wages of 1,200 to receptionist and part-time assistant. 29.Paid miscellaneous expenses, 540. 30.Served as a disc jockey for a charity ball for 1,500. Received 500, with the remainder due on August 9, 2019. 31.Received 3,000 for serving as a disc jockey for a party. 31.Paid 1,400 royalties (music expense) to National Music Clearing for use of various artists music during July. 31.Withdrew 1,250 cash from PS Music for personal use. PS Musics chart of accounts and the balance of accounts as of July 1, 2019 (all normal balances), are as follows: Instructions 1. Enter the July 1, 2019, account balances in the appropriate balance column of a four-column account. Write Balance in the Item column and place a check mark () in the Posting Reference column. (Hint: Verify the equality of the debit and credit balances in the ledger before proceeding with the next instruction.) 2. Analyze and journalize each transaction in a two-column journal beginning on Page 1, omitting journal entry explanations. 3. Post the journal to the ledger, extending the account balance to the appropriate balance column after each posting. 4. Prepare an unadjusted trial balance as of July 31, 2019.arrow_forwardThe transactions completed by PS Music during June 2019 were described at the end of Chapter 1. The following transactions were completed during July, the second month of the business's operations: July 1. Peyton Smith made an additional investment in PS Music by depositing 5,000 in PS Music's checking account. 1. Instead of continuing to share office space with a local real estate agency, Peyton decided to rent office space near a local music: store. Paid rent for July, 1,750. 1. Paid a premium of 2,700 for a comprehensive insurance policy covering liability, theft, and fire. The policy covers a one-year period. 2. Received 1,000 cash from customers on account. 3. On behalf of PS Music, Peyton signed a contract with a local radio station, KXMD, to provide guest spots for the next three months. The contract requires PS Music to provide a guest disc jockey for SO hours per month for a monthly fee of 3,600. Any additional hours beyond SO will be billed to KXMD at 40 per hour. In accordance with the contract, Peyton received 7,200 from KXMD as an advance payment for the first two months. 3. Paid 250 to creditors on account. 4. Paid an attorney 900 for reviewing the July 3 contract with KXMD. (Record as Miscellaneous Expense.) 5. Purchased office equipment on account from Office Mart, 7,500. 8. Paid for a newspaper advertisement, 200. 11. Received 1,000 for serving as a disc jockey for a party. 13. Paid 700 to a local audio electronics store for rental of digital recording equipment. 11. Paid wages of 1,200 to receptionist and part-time assistant. Enter the following transactions on Page 2 of the two-column journal: 16. Received 2,000 for serving as a disc jockey for a wedding reception. 18. Purchased supplies on account, 850. July 21. Paid 620 to Upload Music for use of its current music demos in making various music sets. 22. Paid 800 to a local radio station to advertise the services of PS Music twice daily for the remainder of July. 23. Served as disc jockey for a party for 2,500. Received 750, with the remainder due August 4, 2019. 27. Paid electric bill, 915. 28. Paid wages of 1,200 to receptionist and part-time assistant. 29. Paid miscellaneous expenses, 540. 30. Served as a disc jockey for a charity ball for 1,500. Received 500, with the remainder due on August 9, 2019. 31. Received 3,000 for serving as a disc jockey for a party. 31. Paid 1,400 royalties (music expense) to National Music Clearing for use of various artists' music during July. 31. Withdrew l,250 cash from PS Music for personal use. PS Music's chart of accounts and the balance of accounts as of July 1, 2019 (all normal balances), are as follows: 11 Cash 3,920 12 Accounts receivable 1,000 14 Supplies 170 15 Prepaid insurance 17 Office Equipment 21 Accounts payable 250 23 Unearned Revenue 31 Peyton smith, Drawing 4,000 32 Fees Earned 500 41 Wages Expense 6,200 50 Office Rent Expense 400 51 Equipment Rent Expense 800 52 Utilities Expense 675 53 Supplies Expense 300 54 music Expense 1,590 55 Advertising Expense 500 56 Supplies Expense 180 59 Miscellaneous Expense 415 Instructions 1.Enter the July 1, 2019, account balances in the appropriate balance column of a four-column account. 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