Chapter 2, Problem 17AP

a.

To determine

Prepare journal entries and record the above transactions in T-account.

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.

Accounting rules for Journal entries:

• To record increase balance of account: Debit assets, expenses, losses and credit liabilities, capital, revenue and gains.
• To record decrease balance of account: Credit assets, expenses, losses and debit liabilities, capital, revenue and gains.

T-account:

T-account is the form of the ledger account, where the journal entries are posted to this account. It is referred to as the T-account, because the alignment of the components of the account resembles the capital letter ‘T’.

Record the journal entries for the month of May date from May 1 to May 15.

Date	Account Title and Explanation			Debit ($)	Credit ($)
May 1	Cash			15,500
		Common Stock			15,500
			( To record the issue of
			Common stock.)

Table (1)

Date	Account Title and Explanation			Debit ($)	Credit ($)
May 2	Equipment			4,200
		Accounts Payable			4,200
			(To record the purchase of
			Equipment on account.)

Table (2)

Date	Account Title and Explanation			Debit ($)	Credit ($)
May 3	Accounts Payable			1,200
		Equipment			1,200
			(To record the return of
			Equipment.)

Table (3)

Date	Account Title and Explanation			Debit ($)	Credit ($)
May 4	Supplies			860
		Accounts Payable			860
			(To record the purchase of
			Supplies on account.)

Table (4)

Date	Account Title and Explanation			Debit ($)	Credit ($)
May 5	Truck			9,500
		Cash			7,000
		Note Payable			2,500
			(To record the purchase of
			Cash and note payable.)

Table (5)

Date	Account Title and Explanation			Debit ($)	Credit ($)
May 6	Rent			875
		Cash			875
			( To record the payment
			Of rent.)

Table (6)

Date	Account Title and Explanation			Debit ($)	Credit ($)
May 7	Truck expense			$90
		Cash			$90
			( To record the expense
			of fuel cost made for the
			Truck.)

Table (7)

Date	Account Title and Explanation			Debit ($)	Credit ($)
May 8	Accounts Receivable			13,700
		Service Revenue			13,700
			(To record the billing made
			For the services rendered.)

Table (8)

Date	Account Title and Explanation			Debit ($)	Credit ($)
May 9	Accounts Payable			3,000
		Cash			3,000
			(To record the payment for
			the purchase of
			Equipment.)

Table (9)

Date	Account Title and Explanation			Debit ($)	Credit ($)
May 10	Utilities expense			210
		Cash			210
			(To record the utilities
			Expense.)

Table (10)

Date	Account Title and Explanation			Debit ($)	Credit ($)
May 11	Advertising Expense			350
		Accounts Payable			350
			( To record the advertising
			expense to be paid on
			June.)

Table (11)

Date	Account Title and Explanation			Debit ($)	Credit ($)
May 12	Employee Wages			3,350
		Cash			3,350
			( To record the payment
			Of employee wages.)

Table (12)

Date	Account Title and Explanation			Debit ($)	Credit ($)
May 13	Cash			8,600
		Account Receivables			8,600
			(To record the collection
			Of account receivables.)

Table (13)

Date	Account Title and Explanation			Debit ($)	Credit ($)
May 14	Dividends			1,500
		Cash			1,500
			(To record the payment of
			Dividends amount.)

Table (14)

Date	Account Title and Explanation			Debit ($)	Credit ($)
May 15	Interest Expenses			30
		Cash			30
			(To record the payment
			Of interest expenses.)

Table (15)

Record the above transactions in to T-accounts:

Figure (1)

Figure (2)

Figure (3)

Figure (4)

Figure (5)

b.

To determine

Prepare trial balance of Person J.

Explanation of Solution

Trial balance:

Trial balance is the summary of accounts, and their debit and credit balances at a given time.  It is usually prepared at end of the accounting period.  Debit balances are listed in left   column and credit balances are listed in right column.  The totals of debit and credit column should be equal.  Trial balance is useful in the preparation of the financial statements.

Person J
Trial Balance as of May 31
Particulars	Amount ($)	Amount ($)
Cash	8,045
Accounts Receivable	5,100
Supplies	860
Equipment	3,000
Truck	9,500
Accounts Payable		1,210
Notes Payable		2,500
Common Stock		15,500
Dividends	1,500
Service Revenue		13,700
Rent Expense	875
Wage Expense	3,350
Utilities Expense	210
Truck Expense	90
Advertising Expense	350
Interest Expense	30
Total	32,910	32,910