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The transactions completed by PS Music during June 20Y5 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 in exchange for common stock 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 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 80 hours per month for a monthly fee of $3,600. Any additional hours beyond 80 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 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. 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, 20Y5. 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, 20Y5. 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. Paid dividends, $1,250. PS Music’s chart of accounts and the balance of accounts as of July 1, 20Y5 (all normal balances), are as follows: Instructions 1. Enter the July 1, 20Y5, 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, 20Y5.

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Financial And Managerial Accounting

15th Edition
WARREN + 1 other
Publisher: Cengage Learning,
ISBN: 9781337902663

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Chapter
Section
BuyFindarrow_forward

Financial And Managerial Accounting

15th Edition
WARREN + 1 other
Publisher: Cengage Learning,
ISBN: 9781337902663
Chapter 2, Problem 1CONP
Textbook Problem
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The transactions completed by PS Music during June 20Y5 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 in exchange for common stock 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 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 80 hours per month for a monthly fee of $3,600. Any additional hours beyond 80 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 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.

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, 20Y5.

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, 20Y5.

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. Paid dividends, $1,250.

PS Music’s chart of accounts and the balance of accounts as of July 1, 20Y5 (all normal balances), are as follows:

Chapter 2, Problem 1CONP, The transactions completed by PS Music during June 20Y5 were described at the end of Chapter 1. The

Instructions

1. Enter the July 1, 20Y5, 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, 20Y5.

(2) and (3)

To determine

Journalize the transactions of July in a two column journal beginning on page 18.

Explanation of Solution

Journal:

Journal is the book of original entry. Journal consists of the day today financial transactions in a chronological order. The journal has two aspects; they are debit aspect and the credit aspect.

Rules of debit and credit:

“An increase in an asset account, an increase in an expense account, a decrease in liability account, and a decrease in a revenue account should be debited.

Similarly, an increase in liability account, an increase in a revenue account and a decrease in an asset account, a decrease in an expenses account should be credited”.

Journalize the transactions of July in a two column journal beginning on page 1.

                                                   Journal                                           Page 1
DateDescriptionPost. RefDebit ($)Credit ($)
20Y5  Cash115,000 
July 1    Common stock31 5,000
  (To record the common stock)   
 
  1Office rent expense511,750 
      Cash11 1,750
  (To record the payment of rent for the month of July)   
      
  1Prepaid insurance152,700 
      Cash11 2,700
  (To record the payment of insurance premium)   
 
 2Cash111,000 
      Accounts receivable12 1,000
  (To record the receipt of cash from customers)   
 
 3Cash117,200 
  Unearned revenue23 7,200
  (To record the cash received for the service yet to be provide)   
 
 3Accounts payable21250 
       Cash11 250
  (To record the payment made to creditors on account)   
 
 4Miscellaneous expense59900 
      Cash11 900
  (To record the payment made for Miscellaneous expense)   
 
 5Office equipment  177,500 
      Accounts payable21 7,500
  (To record the purchase of equipment on account)   
 
 8Advertising expense55200 
       Cash11 200
  (To record the payment of advertising expense)  
 
 11Cash111,000 
       Fees earned41 1,000
  (To record the receipt of cash)   
 
 13Equipment rent expense52700 
      Cash11 700
  (To record the payment made to equipment)   
 
 14Wages expense501,200 
      Cash11 1,200
  (To record the payment of wages)   

Table (1)

                                                   Journal                                           Page 2
DateDescriptionPost...

(1) and (3)

To determine

Record the balance of each account in the appropriate balance column of a four-column account and post them to the ledger.

(4)

To determine

Prepare an unadjusted trial balance of Company PS Music at July 31, 20Y5.

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Chapter 2 Solutions

Financial And Managerial Accounting
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