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Accounting (Text Only)

26th Edition
Carl Warren + 2 others
ISBN: 9781285743615

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Accounting (Text Only)

26th Edition
Carl Warren + 2 others
ISBN: 9781285743615
Textbook Problem
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The transactions completed by PS Music during June 2016 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 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:
July 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, 2016.
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, 2016.
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 Music’s chart of accounts and the balance of accounts as of July 1, 2016 (all normal balances), are as follows:

Chapter 2, Problem 1COP, The transactions completed by PS Music during June 2016 were described at the end of Chapter 1. The

Instructions

  1. 1. Enter the July 1, 2016, 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. 2. Analyze and journalize each transaction in a two-column journal beginning on Page 1, omitting journal entry explanations.
  3. 3. Post the journal to the ledger, extending the account balance to the appropriate balance column after each posting.
  4. 4. Prepare an unadjusted trial balance as of July 31, 2016.

(2) and (3)

To determine

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”.

T-account:

An account is referred to as a T-account, because the alignment of the components of the account resembles the capital letter ‘T’. An account consists of the three main components which are as follows:

  • The title of the account
  • The left or debit side
  • The right or credit side

Unadjusted trial balance:

The unadjusted trial balance is the summary of all the ledger accounts that appears on the ledger accounts before making adjusting journal entries.

To journalize: The transactions of July in a two column journal beginning on page 18.

Explanation

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

                                                   Journal                                                            Page 1
Date Description Post. Ref Debit ($) Credit ($)
2016   Cash 11 5,000  
July  1     Person P’s Capital 31   5,000
    (To record the owner’s investment)      
 
   1 Office Rent expense 51 1,750  
        Cash 11   1,750
    (To record the payment of rent for the month of July)      
           
   1 Prepaid insurance 15 2,700  
        Cash 11   2,700
    (To record the payment of insurance premium)      
 
  2 Cash 11 1,000  
    Accounts receivable 12   1,000
    (To record the receipt of cash from customers)      
 
  3 Cash 11 7,200  
    Unearned revenue 23   7,200
    (To record the cash received for the service yet to be provide)      
 
  3 Accounts payable 21 250  
         Cash 11   250
    (To record the payment made to creditors on account)      
 
  4 Miscellaneous expense 59 900  
        Cash 11   900
    (To record the payment made for Miscellaneous expense)      
 
  5 Office equipment   17 7,500  
        Accounts payable 21   7,500
    (To record the purchase of equipment on account)      
 
  8 Advertising expense 55 200  
         Cash 11   200
    (To record the payment of advertising expense)    
 
  11 Cash 11 1,000  
         Fees earned 41   1,000
    (To record the receipt of cash)      
 
  13 Equipment rent expense 52 700  
        Cash 11   700
    (To record the payment made to equipment)      
 
  14 Wages expense 50 1,200  
        Cash 11   1,200
    (To record the payment of wages)      

Table (1)

                                                   Journal                                                            Page 2
Date Description Post...

(1) and (3)

To determine

To record: The balance of each accounts in the appropriate balance column of a four-column account and post them to the ledger.

(4)

To determine

To prepare: An unadjusted trial balance of Company PS Music at July 31, 2016.

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