Concept explainers
Problem 2-603 Journalizing and Posting Transactions
Findlay Testing Inc. provides water testing and maintenance services for owners of hot tubs and swimming pool. During September the following transactions occurred:
Sept. 1 Issued common stock for $20,000.
2 Purchased chemical supplies for $1,880 cash.
5 Paid office rent for October, November, and December; the rent is $800 per month.
8 Purchased $12.90 of advertising for September on account.
13 Billed the city of Bellefontaine $2,100 for testing the water in the city’s outdoor pools during September,
18 Received $3250 from Alexander Blanchard upon completion of overhaul of his swimming pool water circulation system. Since the job was completed and collected for on the same day, no bill was sent, to Blanchard.
Sept. 25 Received $835 from the city of Bellefontaine for water testing that was previously billed.
30 Recorded and paid September salaries of $3,970.
Required:
1. Prepare a
2.
Journal Entries:
Journal entries are medium of recording business transactions. A business enterprise must record all the business transaction to evaluate net income or loss and analyze the financial performance of a company during a specified accounting period.
Requirement: 1
Journalize the each transaction.
Answer to Problem 60BPSB
Journal entries in the books of Findlay Testing Inc. for the month of September
Date | Account and Explanation | Debit | Credit |
Sept. | |||
1 | Cash | $20,000 | |
Common Stock | $20,000 | ||
2 | Supplies | 1,880 | |
Cash | 1,880 | ||
5 | Prepaid Rent | 2,400 | |
Cash | 2,400 | ||
8 | Advertising Expense | 1,290 | |
Cash | 1,290 | ||
13 | Accounts Receivable | 2,100 | |
Service Revenue | 2,100 | ||
18 | Cash | 8,250 | |
Service Revenue | 8,250 | ||
25 | Cash | 835 | |
Accounts Receivable | 835 | ||
30 | Wages Expense | 3,970 | |
Cash | 3,970 | ||
Explanation of Solution
Date | Assets | Liabilities | Stockholders’ Equity |
Sept. | |||
1 | Increase (Cash) | Increase (Common Stock) | |
2 | Increase (Supplies) | ||
Decrease (Cash) | |||
5 | Increase (Prepaid Rent) | ||
Decrease (Cash) | |||
8 | Decrease (Cash) | Decrease (Advertising Expense) | |
13 | Increase (Accounts Receivable) | Increase (Service Revenue) | |
18 | Increase (Cash) | Increase (Service Revenue) | |
25 | Increase (Cash) | ||
Decrease (Accounts Receivable) | |||
30 | Decrease (Cash) | Decrease (Wages Expense) |
Introduction:
T-accounts as its name derived from shape of the account, is representation of business transaction in their respective account. It helps in organizing and analyzing the transaction according to their similar nature of account.
Requirement 2
Posting the journal entries into their concerned T-accounts
Answer to Problem 60BPSB
Accounts | Amount |
Cash | $20,835 |
Accounts Receivable | 1,265 |
Supplies | 1,880 |
Prepaid Rent | 2,400 |
Accounts Payable | 1,290 |
Common Stock | 20,000 |
Service Revenue | 10,350 |
Wages Expense | 3,970 |
Advertising Expense | 1,290 |
Explanation of Solution
Cash
Sept. 1 20,000 18 8,250 25 835 | Sept. 2 1,880 5 2,400 30 3,970 |
Bal. 20,835 |
Accounts Receivable
Sept. 13 2,100 | Sept. 25 835 |
Bal. 1,265 |
Supplies
Sept. 3 1,880 | |
Bal. 1,880 |
Prepaid Rent
Sept. 5 2,400 | |
Bal. 2,400 |
Accounts Payable
Sept. 8 1,290 | |
Bal. 1,290 |
Common Stock
Sept. 1 20,000 | |
Bal. 20,000 |
Service Revenue
Sept. 13 2,100 18 8,250 | |
Bal. 10,350 |
Wages Expense
Sept. 30 3,970 | |
Bal. 3,970 |
Advertising Expense
Sept. 8 1,290 | |
Bal. 1,290 |
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