FIANACIAL ACCOUNTING
FIANACIAL ACCOUNTING
5th Edition
ISBN: 9781266704444
Author: SPICELAND
Publisher: MCG
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Chapter 2, Problem 8PA

Requirement 1

To determine

Prepare the journal entry to record the transactions for Incorporation P.

Requirement 1

Expert Solution
Check Mark

Answer to Problem 8PA

Prepare the journal entry to record the transactions for Incorporation P.

DateAccount Title and ExplanationDebit ($)Credit ($)
September 1Cash4,700 
  Service revenue 4,700
 (To record the entry for providing service for cash)  
September 2Land6,400 
  Notes payable 6,400
 (To record the entry for purchase of land with note payable)  
September 4Advertising expense500 
  Accounts payable 500
 (To record the entry for receiving invoice for current advertising)  
September 8Accounts receivable6,000 
  Service Revenue 6,000
 (To record the entry for providing service on account )  
September 10Supplies1,100 
  Accounts payable 1,100
 (To record the entry for purchase of supplies on account)  
September 13Notes payables4,000 
  Cash 4,000
 (To record the entry for payment of long-term note)  
September 18Cash5,000 
  Accounts receivable 5,000
 (To record the entry for receiving cash from customer on account)  
September 20Rent expense900 
  Cash 900
 (To record the entry for payment of  rent for current month)  
September 30Utilities expense2,000 
  Cash 2,000
 (To record the entry for payment of utilities expense)  
September 30Salaries expense4,000 
  Cash 4,000
 (To record the entry for payment of salary expense)  
September 30Dividends1,100 
  Cash 1,100
 (To record the payment of dividend)  

Table (1)

Explanation of Solution

Journal:

Journal is the method of recording monetary business transactions in chronological order. It records the debit and credit aspects of each transaction to abide by the double-entry system.

September 1

  • Accounts receivable is an asset. There is an increase in the asset. So debit accounts receivable with $4,700.
  • Service revenue is a revenue account and it is the component of stockholders’ equity. There is an increase in the revenue account which increases the stockholders’ equity. So credit service revenue with $4,700.

September 2

  • Land is an asset. There is an increase in the asset. So debit land with $6,400.
  • Notes payable is a liability. There is an increase in the liability. So credit notes payable with $6,400.

September 4

  • Advertising expense is an expense account and it is the component of stockholders’ equity. There is an increase in the expense which reduces the stockholders’ equity.  So debit advertising expenses with $500.
  • Accounts payable is a liability. There is an increase in the liability. So credit accounts payable with $500.

September 8

  • Accounts receivable is an asset. There is an increase in the asset. So debit accounts receivable with $6,000.
  • Service revenue is a revenue account and it is the component of stockholders’ equity. There is an increase in the revenue account which increases the stockholders’ equity. So credit service revenue with $6,000.

September 10

  • Supplies are an asset. There is an increase in the asset. So debit supplies with $1,100.
  • Accounts payable is a liability. There is an increase in the liability. So credit accounts payable with $1,100.

September 13

  • Notes payable is a liability. There is a decrease in the liability. So debit notes payable with $4,000.
  • Cash is an asset. There is a decrease in the asset. So credit cash with $4,000.

September 18

  • Cash is an asset. There is an increase in the asset. So debit cash with $5,000.
  • Accounts receivable is an asset. There is a decrease in the asset. So credit accounts receivable with $5,000.

September 20

  • Rent expense is an expense account and it is a component of stockholders’ equity. There is an increase in the expense and it will decrease the stockholders’ equity. So debit rent expense with $900.
  • Cash is an asset. There is a decrease in the asset. So credit asset with $900.

September 30

  • Utility expense is an expense account and it is a component of stockholders’ equity. There is an increase in the expense and it will decrease the stockholders’ equity. So debit utilities expenses with $2,000.
  • Cash is an asset. There is a decrease in the asset. So credit cash with $2,000.

September 30

  • Salaries expense is an expense account and it is a component of stockholders’ equity. There is an increase in the expense and it will decrease the stockholders’ equity. So debit salaries expense with $4,000.
  • Cash is an asset. There is a decrease in the asset. So credit cash with $4,000.

September 30

  • Dividends are a component of stockholders’ equity. There is an increase in the dividend account and it will decrease the stockholders’ equity. So debit dividends with $1,100.
  • Cash is an asset. There is a decrease in the asset. So credit cash with $1,100.

Requirement 2, Requirement 3:

To determine

Calculate the ending balance of each account by posting the transaction to the T-account.

Requirement 2, Requirement 3:

Expert Solution
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Explanation of Solution

T-account:

T-account is the form of the ledger account, where the journal entries are posted to this account. It is referred to as the T-account, because the alignment of the components of the account resembles the capital letter ‘T’.

The components of the T-account are as follows:

a) The title of the account

b) The left or debit side

c) The right or credit side

Accounts receivable account:

Accounts receivable
Opening balance2,500
Service revenue6,000Cash5,000
Total8,500Total8,500
Balance September 303,500

Service revenue account:

Service revenue
Cash4,700
Accounts receivable6,000
Balance September 3010,700

Land account:

Land
Opening balance11,200
Notes payable6,400
Balance September 3017,600

Cash account:

Cash
Opening balance6,500Note payable4,000
Service revenue4,700Rent expense900
Account receivable5,000Utilities expense2,000
Salary expense4,000
Dividend1,100
Total16,200Total16,200
Balance September 304,200

Supplies account:

supplies
Opening balance7,600
Accounts payable1,100
Balance September 308,700

Accounts payable:

Accounts payable
Opening balance7,200
Advertising expense500
Supplies1,100
Balance September 309,100

Salaries expense account:

Salaries expense
Opening balance0
Cash4,000
Balance September 304,000

Advertising expense:

Advertising expense
Opening balance0
Accounts payable500
Balance September 30500

Rent expense account:

Rent expense
Opening balance0
Cash900
Balance September 30900

Utilities expense account:

Utilities expense
Opening balance0
Cash2,000
Balance September 302,000

Notes payable:

Notes payable
Cash4,000Opening balance3,000
Land6,400
Total9,400Total9,400
Balance September 305,400

Requirement 4:

To determine

Prepare a trial balance of Incorporation P.

Requirement 4:

Expert Solution
Check Mark

Explanation of Solution

Trial balance:

Trial balance is the summary of accounts, and their debit and credit balances at a given time. It is usually prepared at end of the accounting period. Debit balances are listed in left column and credit balances are listed in right column. The totals of debit and credit column should be equal. Trial balance is useful in the preparation of the financial statements.

Prepare the trial balance of Incorporation P:

Incorporation P
Trial balance
For the month end, September 30
AccountsDebit($)Credit($)
Cash4,200
Accounts receivable3,500
supplies8,700
Land17,600
Accounts payable9,100
Notes payable5,400
Common stock9,000
Retained earnings8,300
Dividends1,100
Service revenue10,700
Salaries expense4,000
Rent expense900
Advertising expense500
Utilities expense2,000
Total42,50042,500

Table (2)

Conclusion

Hence, the trial balance is prepared, and the debit column and credit column of the trial balance are agreed, both having balance of $42,500.

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Chapter 2 Solutions

FIANACIAL ACCOUNTING

Ch. 2 - Prob. 11SSQCh. 2 - 12. The payment for utilities of the current month...Ch. 2 - Prob. 13SSQCh. 2 - Prob. 14SSQCh. 2 - 15. A trial balance can best be explained as a...Ch. 2 - Applying Excel #2-1 A company has the following...Ch. 2 - Applying Excel #2-2 A company has the following...Ch. 2 - Prob. 1RQCh. 2 - Prob. 2RQCh. 2 - Prob. 3RQCh. 2 - Prob. 4RQCh. 2 - Prob. 5RQCh. 2 - 6. What is the normal balance (debit or credit) of...Ch. 2 - Prob. 7RQCh. 2 - Prob. 8RQCh. 2 - Prob. 9RQCh. 2 - Prob. 10RQCh. 2 - Prob. 11RQCh. 2 - 12. Provide the proper format for recording a...Ch. 2 - Prob. 13RQCh. 2 - Prob. 14RQCh. 2 - Prob. 15RQCh. 2 - Prob. 16RQCh. 2 - Prob. 17RQCh. 2 - Prob. 18RQCh. 2 - Prob. 19RQCh. 2 - Prob. 20RQCh. 2 - BE2-1 Below are the steps in the measurement...Ch. 2 - BE2-2 Using the notion that the accounting...Ch. 2 - BE2-3 Suppose a local company has the following...Ch. 2 - Prob. 4BECh. 2 - Prob. 5BECh. 2 - Prob. 6BECh. 2 - BE2-7 The following transactions occur for the...Ch. 2 - Prob. 8BECh. 2 - BE2-9 Consider the following T-account for...Ch. 2 - BE2-10 The following transactions occur for the...Ch. 2 - BE2-11 Using the following information, prepare a...Ch. 2 - BE2-12 Your study partner is having trouble...Ch. 2 - Prob. 1ECh. 2 - E2-2 Below are the external transactions for...Ch. 2 - Prob. 3ECh. 2 - E2-4 Boilermaker House Painting Company incurs the...Ch. 2 - Prob. 5ECh. 2 - Prob. 6ECh. 2 - Prob. 7ECh. 2 - E2-8 Terrapin Company engages in the following...Ch. 2 - Prob. 9ECh. 2 - Prob. 10ECh. 2 - E2-11 Bearcat Construction begins operations in...Ch. 2 - E2-12 Below are several transactions for Scarlet...Ch. 2 - Prob. 13ECh. 2 - Prob. 14ECh. 2 - E2-15 Consider the recorded transactions...Ch. 2 - Prob. 16ECh. 2 - Prob. 17ECh. 2 - E2-18 Below is the complete list of accounts of...Ch. 2 - Prob. 19ECh. 2 - Prob. 20ECh. 2 - Prob. 1PACh. 2 - Prob. 2PACh. 2 - Prob. 3PACh. 2 - Prob. 4PACh. 2 - Prob. 5PACh. 2 - Prob. 6PACh. 2 - Prob. 7PACh. 2 - Prob. 8PACh. 2 - Prob. 9PACh. 2 - P2-1B Below is a list of activities for Tigers...Ch. 2 - Prob. 2PBCh. 2 - Prob. 3PBCh. 2 - P2-4B Eli owns an insurance office, while Olivia...Ch. 2 - Prob. 5PBCh. 2 - Prob. 6PBCh. 2 - Prob. 7PBCh. 2 - Prob. 8PBCh. 2 - 4. prepare a trial balance as of November...Ch. 2 - Prob. 1APCh. 2 - Prob. 2APCh. 2 - Prob. 3APCh. 2 - American Eagle Outfitters, Inc. vs. The Buckle,...Ch. 2 - Prob. 5APCh. 2 - Prob. 6APCh. 2 - Prob. 7AP
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