Chapter 3, Problem 1BP

a and b.

To determine

Record the journal entries and post the transactions in general ledger.

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.

Record the journal entries and post the transactions in general ledger.

Date	Account title and explanation	Debit	Credit
June 1	Cash	7,500
	Common stock		7,500
	(To record the issuance of common stock in exchange of cash)
June 2	Equipment	2,750
	Cash		750
	Accounts payable		2,000
	(To record the purchase of equipment)
June 3	Prepaid rent	3,450
	Cash		3,450
	(To record the payment of 6 month rent)
June 4	Prepaid insurance	876
	Cash		876
	(To record the payment of 1 year insurance policy)
June 5	Advertising expense	225
	Cash		225
	(To record the payment for advertising expense)
June 6	Accounts receivable	2,200
	Karate fees earned		2,200
	(To record the fees earned on account)
June 7	Cash	555
	Unearned Karate fees		555
	(To record the receipt of advance)
June 8	Cash	1,800
	Accounts receivable		1,800
	(To record the collection of cash on account)
June 9	Repairs expense	275
	Cash		275
	(To record the repairs expense)
June 10	Accounts receivable	2,000
	Karate fees earned		2,000
	(To record the fees earned on account)
June 11	Wages expense	650
	Cash		650
	(To record the wages expense)

Table (1)

General ledger:

General ledger is a ledger which is used to summarize all the entries of the subsidiary ledger. The general ledger is used to record the correcting, adjusting and closing entries.

Post the transactions in general ledger.

c.

To determine

Prepare an unadjusted trial balance as of June 30.

Explanation of Solution

Unadjusted trial balance:

Unadjusted trial balance is a statement which contains complete list of accounts with their unadjusted balances, after journal entries are made but before all relevant adjustments have been made. This statement is prepared at the end of every financial period.

Prepare an unadjusted trial balance as of June 30.

Unadjusted Trial Balance
Cash	3,629
Accounts receivable	2,400
Prepaid rent	3,450
Prepaid insurance	876
Equipment	2,750
Accounts payable		2,000
Unearned Karate fees		555
Common stock		7,500
Karate fees earned		4,200
Repairs expense	275
Advertising expense	225
Wages expense	650
Totals	14,255	14,255

Table (2)

d.

To determine

Record the adjusting entries and post the transactions in general ledger.

Explanation of Solution

Adjusting entries: Adjusting entries are those entries which are recorded at the end of the year, to update the income statement accounts (revenue and expenses) and balance sheet accounts (assets, liabilities, and stockholders’ equity) to maintain the records according to accrual basis principle.

Record the adjusting entries.

Date	Account title and explanation	Debit	Credit
June 30	Depreciation expense-Equipment	50
	Accumulated Depreciation -Equipment		50
	(To record the depreciation on Equipment)
June 30	Utilities expense	120
	Utilities payable		120
	(To record the estimated utilities expense)
June 30	Rent expense (3,450/6)	575
	Prepaid rent		575
	(To record the rent expense of the month)
June 30	Insurance expense (876/12)	73
	Prepaid insurance		73
	(To record the insurance expense of the month)
June 30	Unearned Karate fees	185
	Karate fees earned		185
	(To record the unearned fees earned)

Table (3)

Post the adjusting entries to the respective accounts.