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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, 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?

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Financial And Managerial Accounting

15th Edition
WARREN + 1 other
Publisher: Cengage Learning,
ISBN: 9781337902663

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Chapter
Section
BuyFindarrow_forward

Financial And Managerial Accounting

15th Edition
WARREN + 1 other
Publisher: Cengage Learning,
ISBN: 9781337902663
Chapter 2, Problem 4PB
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, 20Y8, follows:

Chapter 2, Problem 4PB, 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 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?

(2) and (3)

To determine

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

Explanation of Solution

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”.

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

                                                   Journal                                           Page 18
DateDescriptionPost. RefDebit ($)Credit ($)
20Y8 Office supplies143,150 
August 1    Accounts payable21 3,150
  (To record the purchase of supplies of account)   
 
  2.Rent expense527,200 
      Cash11 7,200
  (To record the payment of rent)   
      
 3Cash1183,900 
  Accounts receivable12 83,900
  (To record the receipt of cash from clients)   
 
  5Prepaid insurance1312,000 
      Cash11 12,000
  (To record the payment of insurance premium)   
 
 9Accounts payable 21400 
   Office supplies14 400
  (To record the payment made to creditors on account)   
 
 17Advertising expense538,000 
       Cash11 8,000
  (To record the payment of advertising expense)   
 
 23Accounts payable2113,750 
      Cash11 13,750
  (To record the payment made to creditors on account)

(1) and (3)

To determine

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

Prepare an unadjusted trial balance of Company V at August 31, 20Y8.

(5) (a)

To determine

Explain the reason for unadjusted trial balance in (4) is balanced.

(5) (b)

To determine

Journalize the correcting entry

(5) (c)

To determine

Identify whether the error made is a slide or transposition.

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Chapter 2 Solutions

Financial And Managerial Accounting
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