Concept explainers
1.
A journal records a transaction by debiting one account and giving credit to another account. All the transactions affecting the business entity are passed through the journal recording.
To Prepare:
Journal entries to record the transactions that occurred for April in the books of AE.
1.
Answer to Problem 2PSA
When assets are invested into the business, all assets are debited, and the capital account is credited.
Asset purchase on cash requires the asset accounts to be debited and the cash account is credited.
Expenses paid in advance before they are accrued represents asset and hence debited and cash is credited.
Income earned in cash requires the cash account to be debited and income or revenue account is credited. Similarly, for income earned but not received in cash, an asset for receivable is debited and revenue is credited.
For asset purchase on credit, the asset account is debited, and the liability account is credited.
When trade payable is settled through payment, liability account is debited, and cash account is credited.
When cash is collected from the receivable asset, cash is debited, and the receivable is credited.
In case the owner withdraws cash from the business, the withdrawals account is debited, and cash is credited.
For expenses paid in cash, the expense account is debited, and cash is credited.
Explanation of Solution
AE | ||||
Journal | ||||
Sr. No. | Account Titles & Explanations | Account No. | Debit | Credit |
a | Cash | 101 | $100,000 | |
Office Equipment | 163 | $5,000 | ||
Drafting Equipment | 164 | $60,000 | ||
JA, Capital | 301 | $165,000 | ||
(to record cash &equipment invested into the business) | ||||
b | Land | 172 | $49,000 | |
Cash | 101 | $6,300 | ||
Notes Payable | 250 | $42,700 | ||
(To record land purchased partly by cash payment and | ||||
signing a note payable) | ||||
c | Building | 170 | $55,000 | |
Cash | 101 | $55,000 | ||
(To record building purchased for cash) | ||||
d | Prepaid Insurance | 108 | $3,000 | |
Cash | 101 | $3,000 | ||
(to record insurance paid for 18 months in advance) | ||||
e | Cash | 101 | $6,200 | |
Engineering Fees Earned | 402 | $6,200 | ||
(To record services rendered in cash) | ||||
f | Drafting Equipment | 201 | $20,000 | |
Cash | 101 | $9,500 | ||
Notes Payable | 250 | $10,500 | ||
(To record equipment purchased by cash and issuinga note payable) | ||||
g | 106 | $14,000 | ||
Engineering Fees Earned | 402 | $14,000 | ||
(To record services rendered on credit) | ||||
h | Office Equipment | 163 | $1,150 | |
Accounts Payable | 201 | $1,150 | ||
(To record equipment purchased on credit) | ||||
i | Accounts Receivable | 106 | $22,000 | |
Engineering Fees Earned | 402 | $22,000 | ||
(To record services rendered on credit) | ||||
j | Equipment Rental Expense | 602 | $1,333 | |
Accounts Payable | 201 | $1,333 | ||
(To record rental expense accrued) | ||||
k | Cash | 101 | $7,000 | |
Accounts Receivable | 106 | $7,000 | ||
(To record cash collection in part payment) | ||||
l | Wages Expense | 601 | $1,200 | |
Cash | 101 | $1,200 | ||
(to record wages paid in cash) | ||||
m | Accounts Payable | 201 | $1,150 | |
Cash | 101 | $1,150 | ||
(To record cash paid to settle dues) | ||||
n | Repairs Expense | 604 | $925 | |
Cash | 101 | $925 | ||
(To record cash paid for maintenance) | ||||
o | JA, Withdrawals | 201 | $9,480 | |
Cash | 101 | $9,480 | ||
(To record cash withdrawn for personal use) | ||||
p | Wages Expense | 601 | $1,200 | |
Cash | 101 | $1,200 | ||
(To record wages paid in cash) | ||||
q | Advertising Expense | 603 | $2,500 | |
Cash | 101 | $2,500 | ||
(To record cash paid for advertisement) |
Under the date column, the transaction date is entered. In account titles and explanations tab, the respective accounts are recorded and the corresponding amount in debit or credit is entered in their respective column. Account numbers are maintained to identify a particular account.
2.
After the journal entries are passed, the accounts are posted to the ledger and the balances in each ledger arecalculated. Ledger preparation can have different formats depending on the business needs.
To Post:
Journal entries to the ledger accounts and computation of balances for each of those ledger accounts.
2.
Answer to Problem 2PSA
When the journal entries are posted to the ledger accounts, the following balances will appear:
Cash: $22,945
Accounts Receivable: $29,000
Prepaid Insurance: $3,000
Office Equipment: $6,150
Drafting Equipment: $80,000
Building: $55,000
Land: $49,000
Accounts Payable: $1,333
Notes Payable: $53,200
JA, Capital: $165,000
JA, Withdrawals: $9,480
Engineering Fees Earned: $42,200
Wages Expense: $2,400
Equipment Rental Expense: $1,333
Advertising Expense: $2,500
Repairs Expense: $925
Explanation of Solution
Cash | Account No: 101 | ||||
Sr. No. | Debit | Credit | Balance | ||
a | $100,000 | $100,000 | |||
b | $6,300 | $93,700 | |||
c | $55,000 | $38,700 | |||
d | $3,000 | $35,700 | |||
e | $6,200 | $41,900 | |||
f | $9,500 | $32,400 | |||
k | $7,000 | $39,400 | |||
l | $1,200 | $38,200 | |||
m | $1,150 | $37,050 | |||
n | $925 | $36,125 | |||
o | $9,480 | $26,645 | |||
p | $1,200 | $25,445 | |||
q | $2,500 | $22,945 | |||
Accounts Receivable | Account No: 106 | ||||
Sr. No. | Debit | Credit | Balance | ||
g | $14,000 | $14,000 | |||
i | $22,000 | $36,000 | |||
k | $7,000 | $29,000 | |||
Prepaid Insurance | Account No: 108 | ||||
Sr. No. | Debit | Credit | Balance | ||
d | $3,000 | $3,000 | |||
Office Equipment | Account No: 163 | ||||
Sr. No. | Debit | Credit | Balance | ||
a | $5,000 | $5,000 | |||
h | $1,150 | $6,150 | |||
Drafting Equipment | Account No: 164 | ||||
Sr. No. | Debit | Credit | Balance | ||
a | $60,000 | $60,000 | |||
f | $20,000 | $80,000 | |||
Building | Account No: 170 | ||||
Sr. No. | Debit | Credit | Balance | ||
c | $55,000 | $55,000 | |||
Land | Account No: 172 | ||||
Sr. No. | Debit | Credit | Balance | ||
b | $6,300 | $6,300 | |||
B | $42,700 | $49,000 | |||
Wages Expense | Account No: 601 | ||||
Sr. No. | Debit | Credit | Balance | ||
l | $1,200 | $1,200 | |||
p | $1,200 | $2,400 | |||
Equipment Rental Expense | Account No: 602 | ||||
Sr. No. | Debit | Credit | Balance | ||
j | $1,333 | $1,333 | |||
Advertising Expense | Account No: 603 | ||||
Sr. No. | Debit | Credit | Balance | ||
q | $2,500 | $2,500 | |||
Repairs Expense | Account No: 604 | ||||
Sr. No. | Debit | Credit | Balance | ||
n | $925 | $925 | |||
JA, Withdrawals | Account No: 302 | ||||
Sr. No. | Debit | Credit | Balance | ||
o | $9,480 | $9,480 | |||
Accounts Payable | Account No: 201 | ||||
Sr.No. | Debit | Credit | Balance | ||
h | $1,150 | $1,150 | |||
J | $1,333 | $2,483 | |||
M | $1,150 | $1,333 | |||
Notes Payable | Account No: 250 | ||||
Sr. No. | Debit | Credit | Balance | ||
b | $42,700 | $42,700 | |||
f | $10,500 | $53,200 | |||
JA, Capital | Account No: 301 | ||||
Sr. No. | Debit | Credit | Balance | ||
a | $165,000 | $165,000 | |||
Engineering Fees Earned | Account No: 402 | ||||
Sr. No. | Debit | Credit | Balance | ||
e | $6,200 | $6,200 | |||
g | $14,000 | $20,200 | |||
I | $22,000 | $42,200 |
Ledger entries are recorded in accordance with the journal chronologically and at each date balances are drawn.
3.
A trial balance is prepared to show the arithmetical accuracy of the ledgers so posted. However, this does not guarantee that accounts are prepared correctly. The trial balance serves as the prima facie document to show that the ledger balances are properly recorded from the journal.
To Prepare:
A trial balance as at June 30.
3.
Answer to Problem 2PSA
The debit and credit side of the trial balance are matched with the amount of $261,733.
Explanation of Solution
AE Trial Balance As at June 30 | |||
Cash | 101 | $22,945 | |
Accounts Receivable | 106 | $29,000 | |
Prepaid Insurance | 108 | $3,000 | |
Office Equipment | 163 | $6,150 | |
Drafting Equipment | 164 | $80,000 | |
Building | 170 | $55,000 | |
Land | 172 | $49,000 | |
Accounts Payable | 201 | $1,333 | |
Notes Payable | 250 | $53,200 | |
JA, Capital | 301 | $165,000 | |
JA, Withdrawals | 302 | $9,480 | |
Engineering Fees Earned | 402 | $42,200 | |
Wages Expense | 601 | $2,400 | |
Equipment Rental Expense | 602 | $1,333 | |
Advertising Expense | 603 | $2,500 | |
Repairs Expense | 604 | $925 | |
Total | $261,733 | $261,733 |
The total of the debit side must be equal to the total of the credit side to prove the arithmetical accuracy of the ledger accounts posted.
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Chapter 2 Solutions
FINANCIAL ACCOUNTING FUNDAMENTALS
- Journal entries and trial balance On October 1, 20Y4, Jay Pryor established an interior decorating business, Pioneer Designs. During the month, Jay completed the following transactions related to the business: Oct. 1. Jay transferred cash from a personal bank account to an account to be used for the business in exchange for common stock, 18,000. 4. Paid rent for period of October 4 to end of month, 3,000. 10. Purchased a used truck for 23,750, paying 3,750 cash and giving a note payable for the remainder. 13. Purchased equipment on account, 10,500. 14. Purchased supplies for cash, 2,100. Oct. 15. Paid annual premiums on property and casualty insurance, 3,600. 15. Received cash for job completed, 8,950. Enter the following transactions on Page 2 of the two-column journal: 21. Paid creditor a portion of the amount owed for equipment purchased on October 13, 2,000. 24. Recorded jobs completed on account and sent invoices to customers, 14,150. 26. Received an invoice for truck expenses, to be paid in November, 700. 27. Paid utilities expense, 2,240. 27. Paid miscellaneous expenses, 1,100. 29. Received cash from customers on account, 7,600. 30. Paid wages of employees, 4,800. 31. Paid dividends, 3,500. Instructions 1. Journalize each transaction in a two-column journal beginning on Page 1, referring to the following chart of accounts in selecting the accounts to be debited and credited. (Do not insert the account numbers in the journal at this time.) Journal entry explanations may be omitted. 11 Cash 12 Accounts Receivable 13 Supplies 14 Prepaid Insurance 16 Equipment 18 Truck 21 Notes Payable 22 Accounts Payable 31 Common Stock 33 Dividends 41 Fees Earned 51 Wages Expense 53 Rent Expense 54 Utilities Expense 55 Truck Expense 59 Miscellaneous Expense 2. Post the journal to a ledger of four-column accounts, inserting appropriate posting references as each item is posted. Extend the balances to the appropriate balance columns after each transaction is posted. 3. Prepare an unadjusted trial balance for Pioneer Designs as of October 31, 20Y4. 4. Determine the excess of revenues over expenses for October. 5. Can you think of any reason why the amount determined in (4) might not be the net income for October?arrow_forwardBrief Exercise 2-30 Transaction Analysis Galle Inc. entered into the following transactions during January. Borrowed $50,000 from First Street Bank by signing a new payable. Purchased $25,000 of equipment for cash. (Continued) Paid $500 to landlord for rent for January. Performed services for customers on account, $10,000. Collected $31000 from customers for services performed in Transaction d. Paid salaries of $2,500 for the current month. Required: Show the effect of each transaction using the following model.arrow_forwardEntries into T accounts and trial balance Marjorie Knaus, an architect, organized Knaus Architects on January 1, 20Y4. During the month, Knaus Architects completed the following transactions: a. Issued common stock to Marjorie Knaus in exchange for 30,000. b. Paid January rent for office and workroom, 2,500. c. Purchased used automobile for 28,500, paying 6,000 cash and giving a note payable for the remainder. d. Purchased office and computer equipment on account, 8,000. e. Paid cash for supplies, 2,100. f. Paid cash for annual insurance policies, 3,600. g. Received cash from client for plans delivered, 9,000. h. Paid cash for miscellaneous expenses, 2,600. i. Paid cash to creditors on account, 4,000. j. Paid installment due on note payable, 1,875. k. Received invoice for blueprint service, due in February, 5,500. l. Recorded fees earned on plans delivered, payment to be received in February, 31,400. m. Paid salary of assistants, 6,000. n. Paid gas, oil, and repairs on automobile for January, 1,300. Instructions 1. Record these transactions directly in the following T accounts, without journalizing: Cash, Accounts Receivable, Supplies, Prepaid Insurance, Automobiles, Equipment, Notes Payable, Accounts Payable, Common Stock, Professional Fees, Salary Expense, Blueprint Expense, Rent Expense, Automobile Expense, Miscellaneous Expense. To the left of the amount entered in the accounts, place the appropriate letter to identify the transaction. 2. Determine account balances of the T accounts. Accounts containing a single entry only (such as Prepaid Insurance) do not need a balance. 3. Prepare an unadjusted trial balance for Knaus Architects as of January 31, 20Y4. 4. Determine the net income or net loss for January.arrow_forward
- Journal entries and trial balance Elite Realty acts as an agent in buying, selling, renting, and managing real estate. The unadjusted trial balance on March 31, 20Y3, follows: The following business transactions were completed by Elite Realty during April 20Y3: Apr. 1. Paid rent on office for month, 6,500. 2. Purchased office supplies on account, 2,300. 5. Paid insurance premiums, 6,000. 10. Received cash from clients on account, 52,300. 15. Purchased land for a future building site for 200,000, paying 30,000 in cash and giving a note payable for the remainder. 17. Paid creditors on account, 6,450. 20. Returned a portion of the office supplies purchased on April 2, receiving full credit for their cost, 325. 23. Paid advertising expense, 4,300. Enter the following transactions on Page 19 of the two-column journal: 27. Discovered an error in computing a commission; received cash from the salesperson for the overpayment, 2,500. 28. Paid automobile expense (including rental charges for an automobile), 1,500. 29. Paid miscellaneous expenses, 1,400. 30. Recorded revenue earned and billed to clients during the month, 57,000. 30. Paid salaries and commissions for the month, 11,900. 30. Paid dividends, 4,000. 30. Rented land purchased on April 15 to local merchants association for use as a parking lot in May and June, during a street rebuilding program; received advance payment of 10,000. Instructions 1. Record the April 1, 20Y3, 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. Journalize the transactions for April in a two-column journal beginning on Page 18. Journal entry explanations may be omitted. 3. Post to the ledger, extending the account balance to the appropriate balance column after each posting. 4. Prepare an unadjusted trial balance of the ledger as of April 30, 20Y3. 5. Assume that the April 30 transaction for salaries and commissions should have been 19,100. (a) Why did the unadjusted trial balance in (4) balance? (b) Journalize the correcting entry. (c) Is this error a transposition or slide? The following business transactions were completed by Elite Realty during April 20Y3: Apr. 1. Paid rent on office for month, 6,500. 2. Purchased office supplies on account, 2,300. 5. Paid insurance premiums, 6,000. 10. Received cash from clients on account, 52,300. 15. Purchased land for a future building site for 200,000, paying 30,000 in cash and giving a note payable for the remainder. 17. Paid creditors on account, 6,450. 20. Returned a portion of the office supplies purchased on April 2, receiving full credit for their cost, 325. 23. Paid advertising expense, 4,300. Enter the following transactions on Page 19 of the two-column journal: 27. Discovered an error in computing a commission; received cash from the salesperson for the overpayment, 2,500. 28. Paid automobile expense (including rental charges for an automobile), 1,500. 29. Paid miscellaneous expenses, 1,400. 30. Recorded revenue earned and billed to clients during the month, 57,000. 30. Paid salaries and commissions for the month, 11,900. 30. Paid dividends, 4,000. 30. Rented land purchased on April 15 to local merchants association for use as a parking lot in May and June, during a street rebuilding program; received advance payment of 10,000. Instructions 1. Record the April 1, 20Y3, 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. Journalize the transactions for April in a two-column journal beginning on Page 18. Journal entry explanations may be omitted. 3. Post to the ledger, extending the account balance to the appropriate balance column after each posting. 4. Prepare an unadjusted trial balance of the ledger as of April 30, 20Y3. 5. Assume that the April 30 transaction for salaries and commissions should have been 19,100. (a) Why did the unadjusted trial balance in (4) balance? (b) Journalize the correcting entry. (c) Is this error a transposition or slide?arrow_forwardT ACCOUNTS AND TRIAL BALANCE Sue Jantz started a business in August 20-- called Jantz Plumbing Service. Jantz hired a part-time college student as an administrative assistant. Jantz has decided to use the following accounts: The following transacrions occurred during August: (a) Invested cash in the business, 30,000. (b) Purchased a used van for cash, 8,000. (c) Purchased plumbing equipment on account, 4,000. (d) Received cash for services rendered, 3,000. (e) Paid cash on account owed from transaction (c), 1,000. (f) Paid rent for the month, 700. (g) Paid phone bill, 100. (h) Earned revenue on account, 4,000. (i) Purchased office supplies for cash, 300. (j) Paid wages to student, 500. (k) Purchased a one-year insurance policy, 800. (l) Received cash from services performed in transaction (h), 3,000. (m) Paid cash for advertising expense, 2,000. (n) Purchased additional plumbing equipment for 2,000, paying 500 cash and spreading the remaining payments over the next six months. (o) Earned revenue from services for the remainder of the month of 2,800: 1,100 in cash and 1,700 on account. (p) Withdrew cash at the end of the month, 3,000. REQUIRED 1. Enter the transactions in T accounts, identifying each transaction with its responding letter. 2. Foot and balance the accounts where necessary. 3. Prepare a trial balance as of August 31, 20--.arrow_forwardExercise 2-40 Transaction Analysis Amanda Webb opened a home health care business under the name Home Care Inc. During its first month of operations. the business had the following transactions: Issued common stock to Ms. Webb and other stockholders in exchange for $30,000 cash. Paid $18,500 cash for a parcel of land on which the business will eventually build an office building. Purchased supplies for $2350 on credit. Used the supplies purchased in Transaction c. Paid rent for the month on office space and equipment. $800 cash. Performed services for clients in exchange for $3,910 cash. Paid salaries for the month. $1,100. Paid $650 cash for advertising in the current month. Paid $1,900 on account for supplies purchased in Transaction c. Performed services for clients on credit in the amount of 51,050. Paid a $600 dividend to stockholders Required: Prepare an analysis of the effects of these transactions on the accounting equation of the business. Use the format below.arrow_forward
- 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, 20Y8, follows: The following business transactions were completed by Valley Realty during August 20Y8: 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. 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. Paid dividends, 1,000. 31. Rented land purchased 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. 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. Journalize the transactions for August in a two-column journal beginning on Page 18. Journal entry explanations may be omitted. 3. Post to the ledger, extending the account balance to the appropriate balance column after each posting. 4. Prepare an unadjusted trial balance of the ledger as of August 31, 20Y8. 5. Assume that the August 31 transaction for dividends 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?arrow_forwardBrief Exercise 2-32 Journalize Transactions Galle Inc. entered into the following transactions during January. January, 1: Borrowed $50,000 from First Street Bank by signing a note payable. January, 4: Purchased $25,000 of equipment for cash. January, 6: Paid $500 to landlord for rent for January. January, 15: Performed services for customers on account. $10,000. January, 25: Collected $3,000 from customers for services performed in Transaction d. January, 30: Paid salaries of $2,500 for the current month. Required: Prepare journal entries for the transactions.arrow_forwardComprehensive problem 1 Kelly Pitney began her consulting business, Kelly Consulting, on April 1, 2016. The accounting cycle for Kelly Consulting for April, including financial statements, was illustrated in this chapter. During May, Kelly Consulting entered into the following transactions: May 3. Received cash from clients as an advance payment for services to be provided and recorded it as unearned fees, 4,500. 5. Received cash from clients on account, 2,450. 9. Paid cash for a newspaper advertisement. 225. 13. Paid Office Station Co. for part of the debt incurred on April 5, 640. 15. Recorded services provided on account for the period May 1-15; 9,180. 16. Paid part-time receptionist for two weeks salary including the amount owed on April 30, 750. 17. Recorded cash from cash clients for fees earned during the period May 1-16, 8,360. Record the following transactions on Page 6 of the journal: 20. Purchased supplies on account, 735. 21. Recorded services provided on account for the period May 16-20, 4,820. 25. Recorded cash from cash clients for fees earned for the period May 17-23, 7,900. 27. Received cash from clients on account, 9,520. 28. Paid part-time receptionist for two weeks salary, 750. 30. Paid telephone bill for May, 260. 31. Paid electricity bill for May, 810. 31. Recorded cash from cash clients for fees earned for the period May 26-31, 3,300. 31. Recorded services provided on account for the remainder of May, 2,650. 31. Paid dividends, 10,500. Instructions 1. The chart of accounts for Kelly Consulting is shown in Exhibit 9, and the post-closing trial balance as of April 30, 2016, is shown in Exhibit 17. For each account in the post-closing trial balance, enter the balance in the appropriate Balance column of a four-column account. Date the balances May 1, 2016, and place a check mark () in the Posting Reference column. Journalize each of the May transactions in a two- column journal starting on Page 5 of the journal and using Kelly Consultings chart of accounts. (Do not insert the account numbers in the journal at this time.) 2. Post the journal to a ledger of four-column accounts. 3. Prepare an unadjusted trial balance. 4. At the end of May, the following adjustment data were assembled. Analyze and use these data to complete parts (5) and (6). a. Insurance expired during May is 275. b. Supplies on hand on May 31 are 715. c. Depreciation of office equipment for May is 330. d. Accrued receptionist salary on May 31 is 325. e. Rent expired during May is 1,600. f. Unearned fees on May 31 are 3,210. 5. (Optional) Enter the unadjusted trial balance on an end-of-period spreadsheet and complete the spreadsheet. 6. Journalize and post the adjusting entries. Record the adjusting entries on Page 7 of the journal. 7. Prepare an adjusted trial balance. 8. Prepare an income statement, a retained earnings statement, and a balance sheet. 9. Prepare and post the closing entries. Record the closing entries on Page 8 of the journal. (Income Summary is account 34 in the chart of accounts.) Indicate closed accounts by inserting a line in both the Balance columns opposite the closing entry. 10. Prepare a post-closing trial balance.arrow_forward
- Brief Exercise 2-2? Events and Transactions Several events are listed below. Paid $30,000 for land. Purchased office supplies for cash. Perfumed consulting services for a client with the amount to be collected in 30 days. Signed a contract to perform consulting services over the next 6 months. Required: For each of the events, identify which ones qualify for recognition in the financial statements. If an event does not qualify for recognition, explain why.arrow_forwardJournal entries and trial balance On October 1, 20Y6, Jay Crowley established Affordable Realty, which completed the following transactions during the month: a. Jay Crowley transferred cash from a personal bank account to an account to be used for the business in exchange for common stock, 40,000. b. Paid rent on office and equipment for the month, 4,800. c. Purchased supplies on account, 2,150. d. Paid creditor on account, 1,100. e. Earned sales commissions, receiving cash, 18,750. f. Paid automobile expenses (including rental charge) for month, 1,580, and miscellaneous expenses, 800. g. Paid office salaries, 3,500. h. Determined that the cost of supplies used was 1,300. i. Paid dividends, 1,500. Instructions 1. Journalize entries for transactions (a) through (i), using the following account titles: Cash, Supplies, Accounts Payable, Common Stock, Dividends, Sales Commissions, Rent Expense, Office Salaries Expense, Automobile Expense, Supplies Expense, Miscellaneous Expense. Explanations may be omitted. 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. Prepare an unadjusted trial balance as of October 31, 20Y6. 4. Determine the following: a. Amount of total revenue recorded in the ledger. b. Amount of total expenses recorded in the ledger. c. Amount of net income for October. 5. Determine the increase or decrease in retained earnings for October.arrow_forwardKelly Pitney began her consulting business, Kelly Consulting, on April 1, 2016. The accounting cycle for Kelly Consulting for April, including financial statements, was illustrated in this chapter. During May, Kelly Consulting entered into the following transactions: May 3. Received cash from clients as an advance payment for services to be provided and recorded it as unearned fees, 4,500. 5. Received cash from clients on account, 2,450. 9. Paid cash for a newspaper advertisement, 225. 13. Paid Office Station Co. for part of the debt incurred on April 5, 640. 15. Recorded services provided on account for the period May 115, 9,180. 16. Paid part-time receptionist for two weeks' salary including the amount owed on April 30, 750. 17. Recorded cash from cash clients for fees earned during the period May 116, 8,360. Record the following transactions on Page 6 of the journal: 20. Purchased supplies on account, 735. 21. Recorded services provided on account for the period May 1620, 4,820. 25. Recorded cash from cash clients for fees earned for the period May 1723, 7,900. 27. Received cash from clients on account, 9,520. 28. Paid part-time receptionist for two weeks' salary, 750. 30. Paid telephone bill for May, 260. 31. Paid electricity bill for May, 810. 31. Recorded cash from cash clients for fees earned for the period May 2631, 3,300. 31. Recorded services provided on account for the remainder of May, 2,650. 31. Kelly withdrew 10,500 for personal use. Instructions 1. The chart of accounts for Kelly Consulting is shown in Exhibit 9, and the post-closing trial balance as of April 30, 2016, is shown in Exhibit 17. For each account in the post-closing trial balance, enter the balance in the appropriate Balance column of a four-column account. Date the balances May 1, 2016, and place a check mark () in the Posting Reference column. Journalize each of the May transactions in a two-column journal starting on Page 5 of the journal and using Kelly Consultings chart of accounts. (Do not insert the account numbers in the journal at this time.) 2. Post the journal to a ledger of four-column accounts. 3. Prepare an unadjusted trial balance. 4. At the end of May, the following adjustment data were assembled. Analyze and use these data to complete parts (5) and (6). a. Insurance expired during May is 275. b. Supplies on hand on May 31 are 715. c. Depreciation of office equipment for May is 330. d. Accrued receptionist salary on May 31 is 325. e. Rent expired during May is 1,600. f. Unearned fees on May 31 are 3,210. 5. (Optional) Enter the unadjusted trial balance on an end-of-period spreadsheet and complete the spreadsheet. 6. Journalize and post the adjusting entries. Record the adjusting entries on Page 7 of the journal. 7. Prepare an adjusted trial balance. 8. Prepare an income statement, a statement of owners equity, and a balance sheet. 9. Prepare and post the closing entries. Record the closing entries on Page 8 of the journal. (Income Summary is account #33 in the chart of accounts.) Indicate closed accounts by inserting a line in both the Balance columns opposite the closing entry. 10. Prepare a post-closing trial balance.arrow_forward
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