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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

Valley Realty acts as an agent in buying, selling, renting, and managing real estate. The unadjusted trial balance on July 31, 2016, follows:

Chapter 2, Problem 2.4BPR, Journal entries and trial balance Valley Realty acts as an agent in buying, selling, renting, and

The following business transactions were completed by Valley Realty during August 2016:

Aug. 1. Purchased office supplies on account, $3, 150.
2. Paid rent on office for month, $7,200.
3. Received cash from clients on account, $83,900.
Aug. 5. Paid insurance premiums, $12,000.
9. Returned a portion of the office supplies purchased on August 1, receiving full credit for their cost, $400.
17. Paid advertising expense, $8,000.
23. Paid creditors on account, $13,750.
Enter the following transactions on Page 19 of the two-column journal:
29. Paid miscellaneous expenses, $1,700.
30. Paid automobile expense (including rental charges for an automobile), $2,500.
31. Discovered an error in computing a commission during July; received cash from the salesperson for the overpayment, $ 2,000.
31. Paid salaries and commissions for the month, $53,000.
31. Recorded revenue earned and billed to clients during the month, $183,500.
31. Purchased land for a future building site for $75,000, paying $7,500 in cash and giving a note payable for the remainder.
31. Withdrew cash for personal use, $1,000.
31. Rented land purchase on August 31 to a local university for use as a parking lot during football season (September, October, and November); received advance payment of $5,000.

Instructions

  1. 1. Record the August 1 balance of each account in the appropriate balance column of a four-column account, write Balance in the item section, and place a check mark (✓) in the Posting Reference column.
  2. 2. Journalize the transactions for August in a two-column journal beginning on Page 18. Journal entry explanations may be omitted.
  3. 3. Post to the ledger, extending the account balance to the appropriate balance column after each posting.
  4. 4. Prepare an unadjusted trial balance of the ledger as of August 31, 2016.
  5. 5. Assume that the August 31 transaction for Cindy Getman’s cash withdrawal should have been $10,000. (a) Why did the unadjusted trial balance in (4) balance? (b) Journalize the correcting entry. (c) Is this error a transposition or slide?

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.

Slide error:

A slide error occurs, when the decimal point of an amount has been misplaced.

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

Explanation

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

                                                   Journal                                           Page 18
Date Description Post. Ref Debit ($) Credit ($)
2016 Office supplies 14 3,150
August 1     Accounts payable 21 3,150
(To record the purchase of supplies of account)
 
2 Rent expense 52 7,200
    Cash 11 7,200
(To record the payment of rent)
3 Cash 11 83,900
Accounts receivable 12 83,900
(To record the receipt of cash from clients)
 
5 Prepaid insurance 13 12,000
    Cash 11 12,000
(To record the payment of insurance premium)
 
9 Accounts payable  21 400
   Office supplies 14 400
(To record the payment made to creditors on account)
 
17 Advertising expense 53 8,000
     Cash 11 8,000
(To record the payment of advertising expense)
 
23 Accounts payable 21 13,750
    Cash 11 13,750
(To record the payment made to creditors on account)

Table (1)

                                                   Journal                                           Page 19
Date Description Post...
To determine

1 and 3:

To record: The beginning balances of each accounts in the appropriate balance column of a four-column account, and post them to the ledger extending the account balance to the appropriate balance column after each posting.

4.

To determine

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

5. (a)

To determine

To explain: The reason behind the unadjusted trial balance in (4) balance.

(b)

To determine

To journalize: The correcting entry.

(c)

To determine

To identify: Whether the error made is a slide or transposition.

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