Chapter 2, Problem 2BP

1.

To determine

Prepare the journal entries for the given transactions.

Explanation of Solution

Journal entry:

Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.

Rules of Debit and Credit:

Following rules are followed for debiting and crediting different accounts while they occur in business transactions:

• Debit, all increase in assets, expenses and dividends, all decrease in liabilities, revenues and equities.
• Credit, all increase in liabilities, revenues, and equities, all decrease in assets, and expenses.

Prepare the journal entries for the given transactions as follows:

Date		Account Title and Explanation	Post Ref.	Debit ($)	Credit ($)
	a.	Cash	101	65,000
		Office Equipment	163	5,750
		Computer Equipment	164	3,000
		Common Stock	307		100,750
		(To record owner invested cash and equipment for stock)
	b.	Land	172	22,000
		Cash	101		5,000
		Notes Payable	250		17,000
		(To record purchase of  land in cash and on note payable)
	c.	Building	170	34,500
		Cash	101		34,500
		(To record building purchased in cash)
	d.	Prepaid Insurance	108	5,000
		Cash	101		5,000
		(To record 24-month insurance policy purchased in cash)
	e.	Cash	101	4,600
		Fees Earned	402		4,600
		(To record  fees earned from customer)
	f.	Computer Equipment	164	4,500
		Cash	101		800
		Notes Payable	250		3,700
		(To record purchase of computer equipment in cash and on note payable)
	g.	Accounts Receivable	106	4,250
		Fees Earned	402	.	4,250
		(To record service performed on account)
	h.	Office Equipment	163	950
		Accounts Payable	201		950
		(To record equipment purchased on credit)
	i.	Accounts Receivable	106	10,200
		Fees Earned	402		10,200
		(To record service performed on account)
	j.	Computer Rental Expense	602	580
		Accounts Payable	201		580
		(To record computer rental expense on account)
	k.	Cash	101	5,100
		Accounts Receivable	106		5,100
		(To record cash received from credit customer)
	l.	Wages Expense	601	1,800
		Cash	101		1,800
		(To record wages expense paid in cash)
	m.	Accounts Payable	201	950
		Cash	101		950
		(To cash paid to supplier)
	n.	Repairs Expense	604	608
		Cash	101		608
		(To record repair expense paid in cash)
	o.	Dividends	319	6,230
		Cash	101		6,230
		(To record dividend paid to investors)
	p.	Wages Expense	601	1,800
		Cash	101		1,800
		(To record  assistant’s wages paid in cash)
	q.	Advertising Expense	603	750
		Cash	101		750
		(To record advertising expense paid in cash)

Table (1)

2.

To determine

Post the journal entries to the general ledger accounts.

Explanation of Solution

Posting transactions:

The process of transferring the journalized transactions into the accounts of the ledger is known as posting the transactions.

Post the journal entries to the general ledger accounts as follows:

Cash No. 101
Date	PR	Debit ($)	Credit ($)	Balance  ($)
(a)		65,000		65,000
(b)			5,000	60,000
(c)			34,500	25,500
(d)			5,000	20,500
(e)		4,600		25,100
(f)			800	24,300
(k)		5,100		29,400
(l)			1,800	27,600
(m)			950	26,650
(n)			608	26,042
(o)			6,230	19,812
(p)			1,800	18,012
(q)			750	17,262

Accounts Receivable No. 106
Date	PR	Debit ($)	Credit ($)	Balance  ($)
(g)		4,250		4,250
(i)		10,200		14,450
(k)			5,100	9,350

Prepaid Insurance No. 108
Date	PR	Debit ($)	Credit ($)	Balance  ($)
(d)		5,000		5,000

Office Equipment No. 163
Date	PR	Debit ($)	Credit ($)	Balance  ($)
(a)		5,750		5,750
(h)		950		6,700

Computer Equipment No. 164
Date	PR	Debit ($)	Credit ($)	Balance  ($)
(a)		30,000		30,000
(f)		4,500		34,500

Building No. 170
Date	PR	Debit ($)	Credit ($)	Balance  ($)
(c)		34,500		34,500

Land No. 172
Date	PR	Debit ($)	Credit ($)	Balance  ($)
(b)		22,000		22,000

Accounts Payable No. 201
Date	PR	Debit ($)	Credit ($)	Balance  ($)
(h)			950	950
(j)			580	1,530
(m)		950		580

Notes Payable No. 250
Date	PR	Debit ($)	Credit ($)	Balance  ($)
(b)			17,000	17,000
(f)			3,700	20,700

Common Stock No. 307
Date	PR	Debit ($)	Credit ($)	Balance  ($)
(a)			100,750	100,750

Dividends No. 319
Date	PR	Debit ($)	Credit ($)	Balance  ($)
(o)		6,230		6,230

Fees Earned No. 402
Date	PR	Debit ($)	Credit ($)	Balance  ($)
(e)			4,600	4,600
(g)			4,250	8,850
(i)			10,200	19,050

Wages Expense No. 601
Date	PR	Debit ($)	Credit ($)	Balance  ($)
(l)		1,800		1,800
(p)		1,800		3,600

Computer  Rental Expense No. 602
Date	PR	Debit ($)	Credit ($)	Balance  ($)
(j)		580		580

Advertising Expense No. 603
Date	PR	Debit ($)	Credit ($)	Balance  ($)
(q)		750		750

Repairs Expense No. 604
Date	PR	Debit ($)	Credit ($)	Balance  ($)
(n)		608		608

3.

To determine

Prepare a trial balance as of the end of April.

Explanation of Solution

Trial balance:

Trial balance is a summary of all the ledger accounts balances presented in a tabular form with two column, debit and credit. It checks the mathematical accuracy of the ledger postings and helps preparing the final accounts.

Prepare a trial balance as of the end of April as follows:

Company S
Trial Balance
April 30
Particulars	Debit ($)	Credit ($)
Cash	17,262
Accounts receivable	9,350
Prepaid insurance	5,000
Office equipment	6,700
Computer equipment	34,500
Building	34,500
Land	22,000
Accounts payable		580
Notes payable		20,700
Common stock		100,750
Dividends	6,230
Fees earned		19,050
Wages expense	3,600
Computer rental expense	580
Advertising expense	750
Repairs expense	608
Totals	141,080	141,080

Table (2)

Therefore, the total of debit, and credit columns of a trial balance is $141,080 and agree.