Concept explainers
The unadjusted
Unadjusted Trial Balance July 31. 2016 |
||
Debit Balances | Credit Balances | |
Cash | 9,945 | |
Accounts Receivable | 2,750 | |
Supplies | 1,020 | |
Prepaid Insurance | 2,700 | |
Office Equipment | 7,500 | |
Accounts Payable | 8,350 | |
Unearned Revenue | 7,200 | |
Common Stock | 9,000 | |
Dividends | 1,750 | |
Fees Earned | 16,200 | |
Music Expense | 3,610 | |
Wages Expense | 2.800 | |
Office Rent Expense | 2.SS0 | |
Advertising Expense | 1,500 | |
Equipment Rent Expense | 1,375 | |
Utilities Expense | 1,215 | |
Supplies Expense | 180 | |
Miscellaneous Expense | 1,855 | |
40,750 | 40,750 |
The data needed to determine adjustments are as follows:
- a. During July. PS Music provided guest disc jockeys for KXMD for a total of 115 hours, for information on the amount of the accrued revenue to be billed to KXMD, see the contract described in the July 3, 2016, transaction at the end of Chapter 2.
- b. Supplies on hand at July 31, $275.
- c. The balance of the prepaid insurance account relates to the July 1. 2016, transaction at the end of Chapter 2.
- d.
Depreciation of the office equipment is $50. - e. The balance of the unearned revenue account relates to the contract between PS Music and KXMD, described in the July 3, 2016, transaction at the end of Chapter 2.
- f. Accrued wages as of July 31, 2016, were $140.
Instructions
- 1. Prepare adjusting
journal entries. You will need the following additional accounts:
18 | Accumulated Depreciation—Office Equipment |
22. | Wages Payable |
57. | Insurance Expense |
58. | Depreciation Expense |
- 2.
Post the adjusting entries , inserting balances in the accounts affected. - 3. Prepare an adjusted trial balance.
1.
Adjusting entries:
Adjusting entries refers to the entries that are made at the end of an accounting period in accordance with revenue recognition principle, and expenses recognition principle. All adjusting entries affect at least one income statement account (revenue or expense), and one balance sheet account (asset or liability).
Rules of Debit and Credit:
Following rules are followed for debiting and crediting different accounts while they occur in business transactions:
- Debit, all increase in assets, expenses and dividends, all decrease in liabilities, revenues and owners’ equities.
- Credit, all increase in liabilities, revenues, and owners’ equities, all decrease in assets, expenses.
T-account:
T-account refers to an individual account, where the increases or decreases in the value of specific asset, liability, stockholder’s equity, revenue, and expenditure items are recorded.
This account is referred to as the T-account, because the alignment of the components of the account resembles the capital letter ‘T’.’ An account consists of the three main components which are as follows:
- (a) The title of the account
- (b) The left or debit side
- (c) The right or credit side
Adjusted trial balance:
Adjusted trial balance is a summary of all the ledger accounts, and it contains the balances of all the accounts after the adjustment entries are journalized, and posted.
To prepare: The adjusting entries in the books of Company PS at the end of the July 31, 2016.
Explanation of Solution
The adjusting entries in the books of Company PS are as follows:
Journal Page 18 | |||||
Date | Description | Post. Ref | Debit ($) | Credit ($) | |
2016 | Accounts receivable | 12 | 1,400 | ||
July | 31 | Fees earned (1) | 41 | 1,400 | |
(To record the fees earned at the end of July) | |||||
31 | Supplies expense (2) | 56 | 745 | ||
Supplies | 14 | 745 | |||
(To record supplies expense incurred at the end of the July) | |||||
31 | Insurance expense (3) | 57 | 225 | ||
Prepaid insurance | 15 | 225 | |||
(To record insurance expense incurred at the end of the July) | |||||
31 | Depreciation expense | 58 | 50 | ||
Accumulated depreciation-Office equipment | 18 | 50 | |||
(To record depreciation expense incurred at the end of the July) | |||||
31 | Unearned revenue (4) | 23 | 3,600 | ||
Fees earned | 41 | 3,600 | |||
(To record the service performed to the customer at the end of the July) | |||||
31 | Wages expense | 50 | 140 | ||
Wages payable | 22 | 140 | |||
(To record wages expense incurred at the end of the July) |
Table (1)
Working notes:
Calculate the value of accrued fees during the July
Calculate the value of supplies expense
Calculate the value of insurance expense
Calculate the value of unearned fees at the end of the July
Therefore, the adjusting entries of the Company PS are recorded.
2.
To post: The adjusting entries to the ledger in the books of Company PS.
Explanation of Solution
Post the adjusting entries to the ledger account as follows:
Account: Cash Account no. 11 | |||||||
Date | Item | Post. Ref |
Debit ($) |
Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2016 | |||||||
July | 1 |
|
✓ | 3,920 | |||
1 | 1 | 5,000 | 8,920 | ||||
1 | 1 | 1,750 | 7,170 | ||||
1 | 1 | 2,700 | 4,470 | ||||
2 | 1 | 1,000 | 5,470 | ||||
3 | 1 | 7,200 | 12,670 | ||||
3 | 1 | 250 | 12,420 | ||||
4 | 1 | 900 | 11,520 | ||||
8 | 1 | 200 | 11,320 | ||||
11 | 1 | 1,000 | 12,320 | ||||
13 | 1 | 700 | 11,620 | ||||
14 | 1 | 1,200 | 10,420 | ||||
16 | 2 | 2,000 | 12,420 | ||||
21 | 2 | 620 | 11,800 | ||||
22 | 2 | 800 | 11,000 | ||||
23 | 2 | 750 | 11,750 | ||||
27 | 2 | 915 | 10,835 | ||||
28 | 2 | 1,200 | 9,635 | ||||
29 | 2 | 540 | 9,095 | ||||
30 | 2 | 500 | 9,595 | ||||
31 | 2 | 3,000 | 12,595 | ||||
31 | 2 | 1,400 | 11,195 | ||||
31 | 2 | 1,250 | 9,945 |
Table (2)
Account: Accounts Receivable Account no. 12 | |||||||
Date | Item | Post. Ref |
Debit ($) |
Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2016 | |||||||
July | 1 |
|
✓ | 1,000 | |||
2 | 1 | 1,000 | |||||
23 | 2 | 1,750 | 1,750 | ||||
30 | 2 | 1,000 | 2,750 | ||||
31 | Adjusting | 3 | 1,400 | 4,150 |
Table (3)
Account: Supplies Account no. 14 | |||||||
Date | Item | Post. Ref |
Debit ($) |
Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2016 | |||||||
July | 1 |
|
✓ | 170 | |||
18 | 850 | 1,020 | |||||
31 | Adjusting | 745 | 275 |
Table (4)
Account: Prepaid Insurance Account no. 15 | |||||||
Date | Item | Post. Ref |
Debit ($) |
Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2016 | |||||||
July | 1 | 1 | 2,700 | 2,700 | |||
31 | Adjusting | 3 | 225 | 2,475 |
Table (5)
Account: Office equipment Account no. 17 | |||||||
Date | Item | Post. Ref |
Debit ($) |
Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2016 | |||||||
July | 5 | 1 | 7,500 | 7,500 |
Table (6)
Account: Accumulated Depreciation Account no. 18 | |||||||
Date | Item | Post. Ref |
Debit ($) |
Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2016 | |||||||
July | 31 | Adjusting | 3 | 50 | 50 |
Table (7)
Account: Accounts Payable Account no. 21 | |||||||
Date | Item | Post. Ref |
Debit ($) |
Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2016 | |||||||
July | 1 |
|
✓ | 250 | |||
3 | 1 | 250 | |||||
5 | 1 | 7,500 | 7,500 | ||||
18 | 2 | 850 | 8,350 |
Table (8)
Account: Wages Payable Account no. 22 | |||||||
Date | Item | Post. Ref |
Debit ($) |
Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2016 | |||||||
July | 31 | Adjusting | 3 | 140 | 140 |
Table (9)
Account: Unearned revenue Account no. 23 | |||||||
Date | Item | Post. Ref |
Debit ($) |
Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2016 | |||||||
July | 1 | 1 | 7,200 | 7,200 | |||
31 | Adjusting | 3 | 3,600 | 3,600 |
Table (10)
Account: Common stock Account no. 31 | |||||||
Date | Item | Post. Ref |
Debit ($) |
Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2016 | |||||||
July | 1 |
|
✓ | 4,000 | |||
1 | 1 | 5,000 | 9,000 |
Table (11)
Account: Dividends Account no. 32 | |||||||
Date | Item | Post. Ref |
Debit ($) |
Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2016 | |||||||
July | 1 |
|
✓ | 500 | |||
31 | 2 | 1,250 | 1,750 |
Table (12)
Account: Fees earned Account no. 41 | |||||||
Date | Item | Post. Ref |
Debit ($) |
Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2016 | |||||||
July | 1 |
|
✓ | 6,200 | |||
11 | 1 | 1,000 | 7,200 | ||||
16 | 2 | 2,000 | 9,200 | ||||
23 | 2 | 2,500 | 11,700 | ||||
30 | 2 | 1,500 | 13,200 | ||||
31 | 2 | 3,000 | 16,200 | ||||
31 | Adjusting | 3 | 1,400 | 17,600 | |||
31 | Adjusting | 3 | 3,600 | 21,200 |
Table (13)
Account: Wages expense Account no. 50 | |||||||
Date | Item | Post. Ref |
Debit ($) |
Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2016 | |||||||
July | 1 |
|
✓ | 400 | |||
14 | 1 | 1,200 | 1,600 | ||||
28 | 2 | 1,200 | 2,800 | ||||
31 | Adjusting | 3 | 140 | 2,940 |
Table (14)
Account: Office rent expense Account no. 51 | |||||||
Date | Item | Post. Ref |
Debit ($) |
Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2016 | |||||||
July | 1 |
|
✓ | 800 | |||
1 | 1 | 1,750 | 2,550 |
Table (15)
Account: Equipment rent expense Account no. 52 | |||||||
Date | Item | Post. Ref |
Debit ($) |
Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2016 | |||||||
July | 1 |
|
✓ | 675 | |||
13 | 1 | 700 | 1,375 |
Table (16)
Account: Utilities expense Account no. 53 | |||||||
Date | Item | Post. Ref |
Debit ($) |
Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2016 | |||||||
July | 1 |
|
✓ | 300 | |||
27 | 2 | 915 | 1,215 |
Table (17)
Account: Music expense Account no. 54 | |||||||
Date | Item | Post. Ref |
Debit ($) |
Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2016 | |||||||
July | 1 |
|
✓ | 1,590 | |||
21 | 2 | 620 | 2,210 | ||||
31 | 2 | 1,400 | 3,610 |
Table (18)
Account: Advertising expense Account no. 55 | |||||||
Date | Item | Post. Ref |
Debit ($) |
Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2016 | |||||||
July | 1 |
|
✓ | 500 | |||
8 | 1 | 200 | 700 | ||||
22 | 2 | 800 | 1,500 |
Table (19)
Account: Supplies expense Account no. 56 | |||||||
Date | Item | Post. Ref |
Debit ($) |
Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2016 | |||||||
July | 1 |
|
✓ | 180 | |||
31 | Adjusting | 3 | 745 | 925 |
Table (20)
Account: Insurance expense Account no. 57 | |||||||
Date | Item | Post. Ref |
Debit ($) |
Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2016 | |||||||
July | 31 | Adjusting | 3 | 225 | 225 |
Table (21)
Account: Depreciation expense Account no. 58 | |||||||
Date | Item | Post. Ref |
Debit ($) |
Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2016 | |||||||
July | 31 | Adjusting | 3 | 50 | 50 |
Table (22)
Account: Miscellaneous expense Account no. 59 | |||||||
Date | Item | Post. Ref |
Debit ($) |
Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2016 | |||||||
July | 1 |
|
✓ | 415 | |||
4 | 900 | 1,315 | |||||
29 | 540 | 1,855 |
Table (23)
3.
To prepare: An adjusted trial balance of Company PS at July 31, 2016.
Explanation of Solution
Prepare an adjusted trial balance of Company PS at July 31, 2016 as follows:
Company PS | ||
Adjusted Trial Balance | ||
July 31, 2016 | ||
Particulars | Debit $ | Credit $ |
Cash | 9,945 | |
Accounts receivable | 4,150 | |
Supplies | 275 | |
Prepaid insurance | 2,475 | |
Office equipment | 7,500 | |
Accumulated depreciation-Equipment | 50 | |
Accounts payable | 8,350 | |
Wages payable | 140 | |
Unearned revenue | 3,600 | |
Common stock | 9,000 | |
Dividends | 1750 | |
Fees earned | 21,200 | |
Wages expense | 2,940 | |
Office rent expense | 2,550 | |
Equipment rent expense | 1,375 | |
Utilities expense | 1,215 | |
Music expense | 3,610 | |
Advertising expense | 1,500 | |
Supplies expense | 925 | |
Insurance expense | 225 | |
Depreciation expense | 50 | |
Miscellaneous expense | 1,855 | |
42,340 | 42,340 |
Table (24)
The debit column and credit column of the adjusted trial balance are agreed, both having the balance of $42,340.
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Chapter 3 Solutions
Financial & Managerial Accounting
- The transactions completed by PS Music during June 2018 were described at the end of Chapter 1. The following transactions were completed during July, the second month of the businesss operations: July 1. Peyton Smith made an additional investment in PS Musk in exchange for common stock by depositing 5,000 in PS Music s checking account. 1. Instead of continuing to share office space with a local real estate agency, Peyton decided to rent office space near a local music store. Paid rent for July, 1,750. 1. Paid a premium of 2,700 for a comprehensive insurance policy covering liability, theft, and fire. The policy covers a one-year period. 2. Received 1,000 on account. 3. On behalf of PS Music, Peyton signed a contract with a local radio station, KXMD, to provide guest spots for the next three months. The contract requires PS Music to provide a guest disc jockey for 80 hours per month for a monthly fee of 3,600. Any additional hours beyond 80 will be billed to KXMD at 40 per hour. In accordance with the contract, Peyton received 7,200 from KXMD as an advance payment for the first two months. 3. Paid 250 on account. 4. Paid an attorney 900 for reviewing the July 3 contract with KXMD. (Record as Miscellaneous Expense.) 5. Purchased office equipment on account from Office Mart, 7,500. 8. Paid for a newspaper advertisement, 200. 11. Received 1,000 for serving as a disc jockey for a party. 13. Paid 700 to a local audio electronics store for rental of digital recording equipment. 14. Paid wages of 1,200 to receptionist and part-time assistant. Enter the following transactions on lage 2 of the two-column journal: 16. Received 2,000 for serving as a disc jockey for a wedding reception. 18. Purchased supplies on account, 850. 21. Paid 620 to Upload Music for use of its current music demos in making various music sets. 22. Paid 800 to a local radio station to advertise the services of PS Music twice daily for the remainder of July. 23. Served as disc jockey for a party for 2,500. Received 750, with the remainder due August 4, 2018. 27. Paid electric bill, 915. 28. Paid wages of 1,200 to receptionist and part-time assistant. 29. Paid miscellaneous expenses, 540. 30. Served as a disc jockey for a charity ball for 1,500. Received 500, with the remainder due on August 9, 2018. 31. Received 3,000 for serving as a disc jockey for a party. July 31. Paid 1,400 royalties (music expense) to National Music Clearing for use of various artists music during July. 31. Paid dividends, 1,250. PS Musics chart of accounts and the balance of accounts as of July 1, 2018 (all normal balances), are as follows: 11 Cash 3,920 41 Fees Earned 6,200 12 Accounts Receivable 1,000 50 Wages Expense 400 14 Supplies 170 51 Office Rent Expense 800 15 Prepaid Insurance 52 Equipment Rent Expense 675 17 Office Equipment 53 Utilities Expense 300 21 Accounts Payable 250 54 Music Expense 1,590 23 Unearned Revenue 55 Advertising Expense 500 31 Common Stock 4,000 56 Supplies Expense 180 33 Dividends 500 59 Miscellaneous Expense 415 Instructions 1. Enter the July 1, 2018, account balances in the appropriate balance column of a four-column account. Write Balance in the Item column, and place a check mark () in the Posting Reference column. {Hint: Verify the equality of the debit and credit balances in the ledger before proceeding with the next instruction.) 2. Analyze and journalize each transaction in a two-column journal beginning on Page 1, omitting journal entry explanations. 3. Post the journal to the ledger, extending the account balance to the appropriate balance column after each posting. 4. Prepare an unadjusted trial balance as of July 31, 2018.arrow_forwardKelly Pitney began her consulting business, Kelly Consulting, on April 1, 2018. 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 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 cl1art of accounts for Kelly Consulting is shown in Exhibit 9, and the post-closing trial balance as of April 30, 2018, 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, 2018, 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 d1e journal. (Income Summary is account #34 in d1e 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_forwardElite Realty acts as an agent in buying, selling, renting, and managing real estate. The unadjusted trial balance on March 31, 2016, follows: The following business transactions were completed by Elite Realty during April 2016: Instructions 1. Record the April 1, 2016, 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, 2016. 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_forward
- Olivias Apple Orchard had the following transactions during the month of September, the first month in business. Complete the chart to determine the ending balances. As an example, the first transaction has been completed. Note: Negative amounts should be indicated with minus signs and unaffected should be noted as $0. (Hints: 1. each transaction will involve two financial statement elements; 2. the net impact of the transaction may be $0.)arrow_forwardJournal entries and trial balance On August 1, 20Y7, Rafael Masey established Planet Realty, which completed the following transactions during the month: a. Rafael Masey transferred cash from a personal bank account to an account to be used for the business in exchange for common stock, 17,500. b. Purchased supplies on account, 2,300. c. Earned sales commissions, receiving cash, 13,300. d. Paid rent on office and equipment for the month, 3,000. e. Paid creditor on account, 1,150. f. Paid dividends, 1,800. g. Paid automobile expenses (including rental charge) for month, 1,500, and miscellaneous expenses, 400. h. Paid office salaries, 2,800. i. Determined that the cost of supplies used was 1,050. 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. Journal entry 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 August 31, 20Y7. 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 August. 5. Determine the increase or decrease in retained earnings for August.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_forward
- EFFECTS OF TRANSACTIONS (BALANCE SHEET ACCOUNTS) Jon Wallace started a business. During the first month (March 20--), the following transactions occurred. Show the effect of each transaction on the accounting equation: Assets= Liabilities + Owners Equity. After each transaction, show the new account totals. (a) Invested cash in the business, 30,000. (b) Bought office equipment on account, 4,500. (c) Bought office equipment for cash, 1,600. (d) Paid cash on account to supplier in transaction (b), 2,000. EFFECTS OF TRANSACTIONS (REVENUE, EXPENSE, WITHDRAWALS) This exercise is an extension of Exercise 2-3B. Lets assume Jon Wallace completed the following additional transactions during March. Show the effect of each transaction on the basic elements of the expanded accounting equation: Assets = Liabilities + Owners Equity (Capital Drawing + Revenues Expenses). After transaction (k), report the totals for each element. Demonstrate that the accounting equation has remained in balance. (e) Performed services and received cash, 3,000. (f) Paid rent for March, 1,000. (g) Paid March phone bill, 68. (h) Jon Wallace withdrew cash for personal use, 800. (i) Performed services for clients on account, 900. (j) Paid wages to part-time employee, 500. (k) Received cash for services performed on account in transaction (i), 500.arrow_forwardThe transactions completed by PS Music during June 2016 were described at the end of Chapter 1. The following transactions were completed during July, the second month of the businesss operations: Enter the following transactions on Page 2 of the two-column journal: PS Musics chart of accounts and the balance of accounts as of July 1, 2016 (all normal balances), are as follows: Instructions 1. Enter the July 1, 2016, account balances in the appropriate balance column of a four-column account. Write Balance in the Item column, and place a check mark () in the Posting Reference column. (Hint: Verify the equality of the debit and credit balances in the ledger before proceeding with the next instruction.) 2. Analyze and journalize each transaction in a two-column journal beginning on Page 1, omitting journal entry explanations. 3. Post the journal to the ledger, extending the account balance to the appropriate balance column after each posting. 4. Prepare an unadjusted trial balance as of July 31, 2016.arrow_forwardMateos Maple Syrup had the following transactions during the month of February, its first month in business. Complete the chart to determine the ending balances. As an example, the first transaction has been completed. Note: negative amounts should be indicated with minus signs . (Hints: 1. each transaction will involve two financial statement elements; 2. the net impact of the transaction may be $0.)arrow_forward
- The unadjusted trial balance of PS Music as of July 31, 2018, along with the adjustment data for the two months ended July 31, 2018, are shown in Chapter 3. Based upon the adjustment data, the following adjusted trial balance was prepared: PS Music Adjusted Trial Balance July 31, 2018 Account No. Debit Balances Credit Balances Cash................................................. 11 9,945 Accounts Receivable................................... 12 4,150 Supplies.............................................. 14 275 Prepaid Insurance..................................... 15 2,475 Office Equipment..................................... 17 7,500 Accumulated DepreciationOffice Equipment.......... 18 50 Accounts Payable..................................... 21 8,350 Wages Payable........................................ 22 140 Unearned Revenue.................................... 23 3,600 Common Stock....................................... 31 9,000 Dividends............................................ 33 1,750 Fees Earned........................................... 41 21,200 Music Expense........................................ 54 3,610 Wages Expense....................................... 50 2,940 Office Rent Expense................................... 51 2,550 Advertising Expense................................... 55 1,500 Equipment Rent Expense.............................. 52 1,375 Utilities Expense...................................... 53 1,215 Supplies Expense...................................... 56 925 Insurance Expense.................................... 57 225 Depreciation Expense................................. 58 50 Miscellaneous Expense................................ 59 1,855 42,340 42,340 Instructions 1. (Optional) Using the data from Chapter 3, prepare an end-of-period spreadsheet. 2. Prepare an income statement, a retained earnings statement, and a balance sheet. 3. Journalize and post the closing entries. The retained earnings account is #33 and the income summary account is #34 in the ledger of PS Music. Indicate closed accounts by inserting a line in both Balance columns opposite the closing entry. 4. Prepare a post-dosing trial balance.arrow_forwardEffects of transactions on Accounting equation On Time Delivery Service had the following selected transactions during November: 1. Received cash from issuance of common stock, $75,000. 2. Paid rent for November, $5000. 3. Paid advertising expense, $3,000. 4. Received cash for providing delivery services, $34,500. 5. Borrowed $10,000 from Second National Bank to finance its operations. 6. Purchased a delivery van for cash, $25,000. 7. Paid interest on note from Second National Bank, $75. 8. Paid salaries and wages for November, $10,000. 9. Paid dividends, $2,000. Indicate the effect of each transaction on the accounting equation by listing the numbers identifying the transactions, (1) through (9), in a vertical column, and inserting at the right of each number the appropriate letter from he following list: a. Increase in an asset, decrease in another asset. h. Increase in an asset, increase in a liability. c. Increase in an asset, increase in stockholders’ equity. d. Decrease in an asset, decrease in a liability. e. Decrease in an asset, decrease in stockholders equity.arrow_forwardThe transactions completed by PS Music during June 2019 were described at the end of Chapter 1. The following transactions were completed during July, the second month of the businesss operations: July 1.Peyton Smith made an additional investment in PS Music by depositing 5,000 in PS Musics checking account. 1.Instead of continuing to share office space with a local real estate agency, Peyton decided to rent office space near a local music store. Paid rent for July, 1,750. 1.Paid a premium of 2,700 for a comprehensive insurance policy covering liability, theft, and fire. The policy covers a one-year period. 2.Received 1,000 cash from customers on account. 3.On behalf of PS Music, Peyton signed a contract with a local radio station, KXMD, to provide guest spots for the next three months. The contract requires PS Music to provide a guest disc jockey for 80 hours per month for a monthly fee of 3,600. Any additional hours beyond 80 will be billed to KXMD at 40 per hour. In accordance with the contract, Peyton received 7,200 from KXMD as an advance payment for the first two months. 3.Paid 250 to creditors on account. 4.Paid an attorney 900 for reviewing the July 3 contract with KXMD. (Record as Miscellaneous Expense.) 5.Purchased office equipment on account from Office Mart, 7,500. 8.Paid for a newspaper advertisement, 200. 11.Received 1,000 for serving as a disc jockey for a party. 13.Paid 700 to a local audio electronics store for rental of digital recording equipment. 14.Paid wages of 1,200 to receptionist and part-time assistant. Enter the following transactions on Page 2 of the two-column journal: 16.Received 2,000 for serving as a disc jockey for a wedding reception. 18.Purchased supplies on account, 850. July 21. Paid 620 to Upload Music for use of its current music demos in making various music sets. 22.Paid 800 to a local radio station to advertise the services of PS Music twice daily for the remainder of July. 23.Served as disc jockey for a party for 2,500. Received 750, with the remainder due August 4, 2019. 27.Paid electric bill, 915. 28.Paid wages of 1,200 to receptionist and part-time assistant. 29.Paid miscellaneous expenses, 540. 30.Served as a disc jockey for a charity ball for 1,500. Received 500, with the remainder due on August 9, 2019. 31.Received 3,000 for serving as a disc jockey for a party. 31.Paid 1,400 royalties (music expense) to National Music Clearing for use of various artists music during July. 31.Withdrew 1,250 cash from PS Music for personal use. PS Musics chart of accounts and the balance of accounts as of July 1, 2019 (all normal balances), are as follows: Instructions 1. Enter the July 1, 2019, account balances in the appropriate balance column of a four-column account. Write Balance in the Item column and place a check mark () in the Posting Reference column. (Hint: Verify the equality of the debit and credit balances in the ledger before proceeding with the next instruction.) 2. Analyze and journalize each transaction in a two-column journal beginning on Page 1, omitting journal entry explanations. 3. Post the journal to the ledger, extending the account balance to the appropriate balance column after each posting. 4. Prepare an unadjusted trial balance as of July 31, 2019.arrow_forward
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