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College Accounting (Book Only): A ...

12th Edition
Cathy J. Scott
ISBN: 9781305084087

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BuyFindarrow_forward

College Accounting (Book Only): A ...

12th Edition
Cathy J. Scott
ISBN: 9781305084087
Textbook Problem

The chart of accounts of Ethan Academy is shown here, followed by the transactions that took place during December of this year.

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Required

Record these transactions in the general journal, including a brief explanation for each entry. If you are using working papers, number the journal pages 31 and 32.

To determine

Prepare journal entries for the given transactions.

Explanation

Journal entry: Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.

Debit and credit rules:

  • ■ Debit an increase in asset account, increase in expense account, decrease in liability account, and decrease in stockholders’ equity accounts.
  • ■ Credit decrease in asset account, increase in revenue account, increase in liability account, and increase in stockholders’ equity accounts.

Prepare journal entries for the given transactions.

Transaction on December 1:

DateAccount Titles and ExplanationPost Ref.Debit ($)Credit ($)
December1Prepaid Insurance 2,260 
     Cash  2,260
  (Record payment of insurance in advance)   

Table (1)

Description:

  • ■ Prepaid Insurance is an asset account. Since insurance is paid in advance, it is recorded as asset until it is consumed. So, asset value is increased, and an increase in asset is debited.
  • ■ Cash is an asset account. Since cash is paid, asset account decreased, and a decrease in asset is credited.

Transaction on December 11:

DateAccount Titles and ExplanationsPost. Ref.Debit ($)Credit ($)
December11Advertising Expense 415 
   Accounts Payable  415
  (Record receipt of advertising expense bill)   

Table (2)

Description:

  • ■ Advertising Expense is an expense account. An increase in expense reduces the equity value, and a decrease in equity is debited.
  • ■ Accounts Payable is a liability account. Since the payable increased, the liability increased, and an increase in liability is credited.

Transaction on December 12:

DateAccount Titles and ExplanationsPost. Ref.Debit ($)Credit ($)
December12Rent Expense 1,850 
   Cash  1,850
  (Record payment of rent expense)   

Table (3)

Description:

  • ■ Rent Expense is an expense account. An increase in expense reduces the equity value, and a decrease in equity is debited.
  • ■ Cash is an asset account. Since cash is paid, asset account decreased, and a decrease in asset is credited.

Transaction on December 13:

DateAccount Titles and ExplanationsPost. Ref.Debit ($)Credit ($)
December13Repairs Expense 345 
   Accounts Payable  345
  (Record receipt of repairs expense bill)   

Table (4)

Description:

  • ■ Repairs Expense is an expense account. An increase in expense reduces the equity value, and a decrease in equity is debited.
  • ■ Accounts Payable is a liability account. Since the payable increased, the liability increased, and an increase in liability is credited.

Transaction on December 16:

DateAccount Titles and ExplanationPost Ref.Debit ($)Credit ($)
December16Cash 5,850 
   Tuition Income  5,850
  (Record revenue earned and received)   

Table (5)

Description:

  • ■ Cash is an asset account. Since cash is received, asset account increased, and an increase in asset is debited.
  • ■ Tuition Income is a revenue account. Since gains and revenues increase equity, and an increase in equity is credited, Tuition Income account is credited.

Transaction on December 17:

DateAccount Titles and ExplanationsPost. Ref.Debit ($)Credit ($)
December17Telephone Expense 305 
   Cash  305
  (Record payment of telephone expense)   

Table (6)

Description:

  • ■ Telephone Expense is an expense account. An increase in expense reduces the equity value, and a decrease in equity is debited.
  • ■ Cash is an asset account. Since cash is paid, asset account decreased, and a decrease in asset is credited.

Transaction on December 18:

DateAccount Titles and ExplanationsPost. Ref.Debit ($)Credit ($)
December18Furniture 1,625 
   Cash  625
   Accounts Payable  1,000
  (Record purchase of equipment)   

Table (7)

Description:

  • ■ Furniture is an asset account. Since furniture is bought, asset account increased, and an increase in asset is debited.
  • ■ Cash is an asset account. Since cash is paid, asset account decreased, and a decrease in asset is credited.
  • ■ Accounts Payable is a liability account. Since the payable increased, the liability increased, and an increase in liability is credited.

Transaction on December 20:

DateAccount Titles and ExplanationsPost. Ref.Debit ($)Credit ($)
December20Accounts Payable 415 
   Cash  415
  (Record cash paid on account)   

Table (8)

Description:

  • ■ Accounts Payable is a liability account. Since the payable decreased, the liability decreased, and a decrease in liability is debited.
  • ■ Cash is an asset account. Since cash is paid, asset account decreased, and a decrease in asset is credited.

Transaction on December 21:

DateAccount Titles and ExplanationsPost...

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