Concept explainers
1.
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.
To Record: Each transaction of T Cat Services for the month of December.
1.
Explanation of Solution
Journalize the transactions of T Cat Services for the month of December.
Date | Account Title and Explanation | Debit($) | Credit($) |
December 1 | Cash | 27,400 | |
Service Revenue | 27,400 | ||
(To record the service revenue for cash) | |||
December 4 | Pet Supplies | 2,900 | |
Accounts Payable | 2,900 | ||
(To record the purchase of office supplies on Accounts Payable) | |||
December 8 | Advertising Expenses | 3,200 | |
Accounts Payable | 3,200 | ||
(To record the advertising expenses on account) | |||
December 9 | Accounts payable | 2,900 | |
Cash | 2,900 | ||
(To record the payment of cash ) | |||
December 12 | Cash | 5,000 | |
Common Stock | 5,000 | ||
(To record the issuance of common stock) | |||
December 9 | Accounts payable | 6,300 | |
Cash | 6,300 | ||
(To record the payment of cash ) | |||
December 19 | Equipment | 7,700 | |
Cash | 7,700 | ||
(To record the purchase of equipment) | |||
December 22 | Utilities expenses | 4,500 | |
Cash | 4,500 | ||
(To record the payment of utility expenses) | |||
December 24 | Cash | 2,300 | |
Deferred Revenue | 2,300 | ||
(To record the receipt of cash in advance for deferred service revenue) | |||
December 27 | No entry | ||
December 30 | Salaries Expense | 7,000 | |
Cash | 7,000 | ||
(To record the payment of salary expenses) | |||
December 31 | Dividends | 3,000 | |
Cash | 3,000 | ||
(To record the payment of cash dividends) |
Table (1)
2. and 3.
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
To Calculate: The balance of each account by posting each transaction to the appropriate T-accounts.
2. and 3.
Explanation of Solution
Cash Account
Cash Account | ||||||
Date | Details | Debit ($) | Date | Details | Credit ($) | |
December 1 | Beginning Balance | 19,400 | December 8 | Advertising | 3,200 | |
December 1 | Cash Sales | 27,400 | December 9 | Accounts payable | 2,900 | |
December 12 | Common stock | 5,000 | December 16 | Accounts payable | 6,300 | |
December 24 | Cash collection | 2,300 | December 19 | Equipment | 7,700 | |
December 22 | Utilities | 4,500 | ||||
December 30 | Salaries | 7,000 | ||||
December 31 | Dividends | 3,000 | ||||
December 31 | Closing balance | 19,500 | ||||
Total | 54,100 | Total | 54,100 | |||
December 31 | Balance | 19,500 |
Table (2)
Supplies
Supplies Account | ||||||
Date | Details | Debit ($) | Date | Details | Credit ($) | |
December 1 | Beginning balance | 1,500 | December 31 | Closing balance | 4,400 | |
December 4 | Accounts payable | 2,900 | ||||
Total | 4,400 | Total | 4,400 | |||
December 31 | Balance | 4,400 |
Table (3)
Prepaid Rent
Prepaid Rent Account | ||||||
Date | Details |
Debit ($) | Date | Details |
Credit ($) | |
December 1 | Beginning Balance | 7,200 | December 31 | Closing Balance | 7,200 | |
July 31 | Total | 7,200 | Total | 7,200 |
Table (4)
Equipment
Equipment Account | ||||||
Date | Details |
Debit ($) | Date | Details |
Credit ($) | |
December 1 | Beginning balance | 83,700 | December 31 | Closing Balance | 91,400 | |
December 19 | Cash | 7,700 | ||||
December 31 | Total | 91,400 | Total | 91,400 |
Table (5)
Building
Building Account | ||||||
Date | Details | Debit ($) | Date | Details | Credit ($) | |
December 1 | Beginning balance | 240,000 | December 31 | Closing balance | 240,000 | |
Total | 240,000 | Total | 240,000 | |||
December 31 | Balance | 240,000 |
Table (6)
Accounts Payable
Accounts Payable Account | ||||||
Date | Details | Debit ($) | Date | Details | Credit ($) | |
December 9 | Cash paid | 2,900 | December 1 | Beginning Balance | 9,800 | |
December 16 | Cash paid | 6,300 | December 4 | Supplies | 2,900 | |
December 31 | Closing balance | 3,500 | ||||
Total | 12,700 | Total | 12,700 | |||
December 31 | Balance | 3,500 |
Table (7)
Unearned Service revenue
Unearned Service revenue Account | ||||||
Date | Details |
Debit ($) | Date | Details |
Credit ($) | |
June 30 | Closing Balance | 4,300 | December 1 | Beginning balance | 2,000 | |
December 24 | Cash | 2,300 | ||||
Total | 4,300 | Total | 4,300 |
Table (8)
Common Stock
Common Stock Account | ||||||
Date | Details | Debit ($) | Date | Details | Credit ($) | |
December 31 | Closing balance | 130,000 | December 1 | Beginning balance | 125,000 | |
December 12 | Issued | 5,000 | ||||
Total | 130,000 | Total | 130,000 | |||
December 31 | Balance | 130,000 |
Table (9)
Retained earnings Account | ||||||
Date | Details | Debit ($) | Date | Details | Credit ($) | |
December 31 | Closing balance | 75,500 | December 1 | Beginning balance | 75,500 | |
Total | 75,500 | Total | 75,500 | |||
December 31 | Balance | 75,500 |
Table (10)
Dividends
Dividends Account | ||||||
Date | Details | Debit ($) | Date | Details | Credit ($) | |
December 1 | Beginning balance | 9,000 | December 31 | Closing balance | 12,000 | |
December 31 | Cash | 3,000 | ||||
Total | 12,000 | Total | 12,000 | |||
December 31 | Balance | 12,000 |
Table (11)
Service revenue
Service revenue | ||||||
Date | Details | Debit ($) | Date | Details | Credit ($) | |
December 31 | Closing balance | 291,400 | December 1 | Beginning balance | 264,000 | |
December 1 | Cash | 27,400 | ||||
Total | 291,400 | Total | 291,400 | |||
December 31 | Balance | 291,400 |
Table (12)
Salaries Expense
Salaries Expense Account | ||||||||
Date | Details | Debit ($) | Date | Details | Credit ($) | |||
December 1 | Beginning balance | 65,000 | December 31 | Closing balance | 72,000 | |||
December 31 | Cash | 7,000 | ||||||
Total | 72,000 | Total | 72,000 | |||||
December 31 | Balance | 72,000 |
Table (13)
Advertising Expense
Advertising Expense Account | ||||||
Date | Details | Debit ($) | Date | Details | Credit ($) | |
December 1 | Beginning balance | 18,200 | December 31 | Closing balance | 21,400 | |
December 8 | cash | 3,200 | ||||
Total | 21,400 | Total | 21,400 | |||
December 31 | Balance | 21,400 |
Table (14)
Utilities Expense
Utilities Expense Account | ||||||
Date | Details | Debit ($) | Date | Details | Credit ($) | |
December 1 | Beginning balance | 32,300 | December 31 | Closing balance | 36,800 | |
December 31 | Cash | 4,500 | ||||
Total | 36,800 | Total | 36,800 | |||
December 31 | Balance | 36,800 |
Table (15)
4.
A trial balance is the summary of all the ledger accounts. Debit balances are listed in left column and credit balances are listed in right column of the trial balance. The totals of debit and credit column should be equal. The trial balance is usually prepared to check the accuracy of ledger accounts balances, before the preparation of financial statements.
To Prepare: A trial balance as of December.
4.
Explanation of Solution
Prepare the trial balance of T Cat Services for the month of December.
T Cat Services | ||
Trial Balance | ||
For the Month Ended December 31 | ||
Accounts | Debit ($) | Credit ($) |
Cash | 19,500 | |
Prepaid Rent | 4,400 | |
Supplies | 7,200 | |
Equipment | 91,400 | |
Building | 240,000 | |
Accounts Payable | 3,500 | |
Unearned Service Revenue | 4,300 | |
Common Stock | 130,000 | |
Retained Earnings | 75,500 | |
Dividends | 12,000 | |
Service Revenue | 291,400 | |
Salaries Expense | 72,000 | |
Advertising Expense | 21,400 | |
Utilities Expense | 36,800 | |
Total | 504,700 | 504,700 |
Table (16)
Hence, the trial balance is prepared, and the debit column and credit column of the trial balance are agreed, both having balance of $504,700.
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Chapter 2 Solutions
FINANCIAL ACCOUNTING W/ACCESS >CI<
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- 7. Using the appropriate window for Computerized Accounting with QuickBooks 2021, record the following transactions for April 2022. The company file was 'CH2 Lynn's Music Studio.QBW.' Apr.2 Received bill for rent of the month of April from Viewhill Realty, $600, paid immediately, Check No.1. Do not print check. Apr.2 Received a bill for a one-year insurance policy on account from Mutual Insurance Company, Invoice No. 1257, $2,500, Net 30 Days. Apr.5 Purchased furniture on account from Mills Family Furniture, Invoice No. 1257, $2,500, Net 30 Days. Apr.6 Purchased a computer system on account from Computer Town, Invoice No. X234, $3,000, Net 15 Days. Apr.9 Purchased music suppliers on account from Strings, Sheets, & Such, Invoice No. 1290, $500, Net 15 Days.arrow_forwardThe transactions completed by PS Music during June 2019 were described at the end of Chapter 1. The following transactions were completed during July, the second month of the businesss operations: July 1.Peyton Smith made an additional investment in PS Music by depositing 5,000 in PS Musics 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 cash from customers 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 to creditors 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. July 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, 2019. 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, 2019. 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 Musics chart of accounts and the balance of accounts as of July 1, 2019 (all normal balances), are as follows: Instructions 1. Enter the July 1, 2019, 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, 2019.arrow_forwardThe transactions completed by PS Music during June 2019 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 cash from customers 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 SO hours per month for a monthly fee of 3,600. Any additional hours beyond SO 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 to creditors 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. 11. 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. July 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, 2019. 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, 2019. 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 l,250 cash from PS Music for personal use. PS Music's chart of accounts and the balance of accounts as of July 1, 2019 (all normal balances), are as follows: 11 Cash 3,920 12 Accounts receivable 1,000 14 Supplies 170 15 Prepaid insurance 17 Office Equipment 21 Accounts payable 250 23 Unearned Revenue 31 Peyton smith, Drawing 4,000 32 Fees Earned 500 41 Wages Expense 6,200 50 Office Rent Expense 400 51 Equipment Rent Expense 800 52 Utilities Expense 675 53 Supplies Expense 300 54 music Expense 1,590 55 Advertising Expense 500 56 Supplies Expense 180 59 Miscellaneous Expense 415 Instructions 1.Enter the July 1, 2019, account balances in the appropriate balance column of a four-column account. 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