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Accounting (Text Only)

26th Edition
Carl Warren + 2 others
ISBN: 9781285743615

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BuyFindarrow_forward

Accounting (Text Only)

26th Edition
Carl Warren + 2 others
ISBN: 9781285743615
Textbook Problem
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Journal entries and trial balance

On August 1, 2016, Bill Hudson established Heritage Realty, which completed the following transactions during the month

  1. a. Bill Hudson transferred cash from a personal bank account to an account to be used for the business, $30,000.
  2. b. Paid rent on office and equipment for the month, $3,250.
  3. c. Purchased supplies on account, $2,150.
  4. d. Paid creditor on account, $875.
  5. e. Earned sales commissions, receiving cash, $14,440.
  6. f. Paid automobile expenses (including rental charge) for month, $1,580, and miscellaneous expenses, $650.
  7. g. Paid office salaries, $3,000.
  8. h. Determined that the cost of supplies used was $1,300.
  9. i. Withdrew cash for personal use, $2,500.

Instructions

  1. 1. Journalize entries for transactions (a) through (i), using the following account titles: Cash; Supplies; Accounts Payable; Bill Hudson, Capital; Bill Hudson, Drawing; Sales Commissions; Rent Expense; Office Salaries Expense; Automobile Expense; Supplies Expense; Miscellaneous Expense. Explanations may be omitted.
  2. 2. Prepare T accounts, using the account titles in (1). Post the journal entries to these accounts, placing the appropriate letter to the left of each amount to identify the transactions. Determine the account balances, after all posting is complete. Accounts containing only a single entry do not need a balance.
  3. 3. Prepare an unadjusted trial balance as of August 31, 2016.
  4. 4. Determine the following:
    1. a. Amount of total revenue recorded in the ledger.
    2. b. Amount of total expenses recorded in the ledger.
    3. c. Amount of net income for August.
  5. 5. Determine the increase or decrease in owner’s equity for August.

1.

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

Trial balance:

A trial balance is the summary of all the ledger accounts. The trial balance is prepared to check the total balance of the debit column with the total of the balance of the credit column, which must be equal. The trial balance is usually prepared to check accuracy of ledger balances, and before the preparation of financial statements.

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 H Realty for the month of August.

Explanation

The transactions of H Realty for the month of August are as follows.

Date Description PostRef. Debit ($) Credit ($)
2016 a. Cash 30,000
August     Person BH’s Capital 30,000
(To record the owner’s capital)
 
b. Rent expense 3,250
    Cash 3,250
(To record the rent paid for the month)
 
c. Supplies 2,150
    Accounts payable 2,150
(To record the purchase of supplies on account)
 
d. Accounts payable 875
     Cash 875
(To record the payment of cash to creditors )
 
e. Cash 14,440
    Sales commissions 14,440
(To record the fees received from customers)
 
f...

2.

To determine

To prepare: The T accounts and post the respective journal entries.

3.

To determine

To prepare: An unadjusted trial balance of H Realty at August 31, 2016.

4.

a.

To determine

The amount of total revenue recorded in the ledger.

b.

To determine

The amount of total revenue recorded in the ledger.

c.

To determine

The amount of net income for August.

5.

To determine

The increase or decrease in owner’s equity for August.

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