Concept explainers
(a)
Journal:
Journal is the book of original entry. Journal consists of the day-to-day financial transactions in a chronological order. The journal has two aspects; they are debit aspect and the credit aspect.
T-Accounts:
T-accounts are referred as T-account because its format represents the letter “T”. The T-accounts consists of the following:
- The title of accounts.
- The debit side (Dr) and,
- The credit side (Cr).
A trial balance is the list of all the ledger accounts. The trial balance is prepared to check the total balance of the debit with the total of the balance of the credit, which must be equal. The trial balance is usually prepared to check accuracy of ledger balances. In trial balance the debit balance are listed in the left column, and credit balance are listed in the right column.
To journalize: The issuance of common stock, the security consultant hired, the rent paid for building, the equipment purchased party for cash and party on account, The payment for advertisement, The bill received for repairing equipment, The service provided on account, The purchase of supply on account, The payment of due for the purchase of equipment, The utility bill received and paid, The cash received for the service rendered, The salaries and wages paid to employees.
(a)
Explanation of Solution
Journalize the issuance of common stock in exchange of cash.
Date | Account Title and Explanation | Debit ($) | Credit ($) |
October 1 | Cash | 66,000 | |
Common stock | 66,000 | ||
(To record the issuance of common stock ) |
Journalize the security consultant hired to work from October 15.
Date | Account Title and Explanation | Debit ($) | Credit ($) |
October 2 | No entry is required. | ||
Journalize the payment of rent paid for the building.
Date | Account Title and Explanation | Debit ($) | Credit ($) |
October 4 | Rent expenses | 2,000 | |
Cash | 2,000 | ||
(To record the rent paid for the building) |
Journalize the purchase of equipment party for cash and party on account.
Date | Account Title and Explanation | Debit ($) | Credit ($) |
October 7 | Equipment | 18,000 | |
Cash | 4,000 | ||
Accounts Payable | 14,000 | ||
(To record the purchase of equipment partly on cash and partly on account) |
Journalize the payment of advertisement.
Date | Account Title and Explanation | Debit ($) | Credit ($) |
October 8 | Advertising expense | 500 | |
Cash | 500 | ||
(To record the payment for advertisement) |
Journalize the bill received for the repair of equipments.
Date | Account Title and Explanation | Debit ($) | Credit ($) |
October 10 | Repair expenses | 390 | |
Account payable | 390 | ||
(To record the repair expenses of equipment on account) |
Journalize the service provided for an event on account.
Date | Account Title and Explanation | Debit ($) | Credit ($) |
October 12 |
| 3,200 | |
Service Revenue | 3,200 | ||
(To record the service rendered on account) |
Journalize the supplies purchased on account.
Date | Account Title and Explanation | Debit ($) | Credit ($) |
October 16 | Supplies | 410 | |
Accounts payable | 410 | ||
(To record the purchase of supplies on account) |
Journalize the payment of due for the purchase of equipment on October 7.
Date | Account Title and Explanation | Debit ($) | Credit ($) |
October 21 | Accounts payable | 14,000 | |
Cash | 14,000 | ||
(To record the payment of balance due on equipment, purchased on October 7) |
Journalize the payment of utility bill received.
Date | Account Title and Explanation | Debit ($) | Credit ($) |
October 24 | Utilities expense | 148 | |
Cash | 148 | ||
(To record the payment of utilities bill received) |
Journalize the cash received from customer for the service performed on October 12.
Date | Account Title and Explanation | Debit ($) | Credit ($) |
October 27 | Cash | 3,200 | |
Accounts Receivable | 3,200 | ||
(To record the receipt of cash for the service rendered on October 12 ) |
Journalize the payment of salaries and wages to the employees.
Date | Account Title and Explanation | Debit ($) | Credit ($) |
October 31 | Salaries and Wages Expenses | 5,100 | |
Cash | 5,100 | ||
(To record the salaries and wages paid to employees ) |
(b)
To
(b)
Explanation of Solution
(1)
Prepare T-accounts for the Cash account:
Cash | |||
Oct. 1 | $66,000 | Oct. 4 | $2,000 |
27 | $ 3,200 | 7 | $4,000 |
8 | $500 | ||
21 | $14,000 | ||
24 | $148 | ||
31 | $5,100 | ||
Total | 69,200 | Total | 25748 |
Bal. | $ 43,452 |
Table (1)
(2)
Prepare T-accounts for the Common Stock account:
Common Stock Account | |||
Oct.1 | $66,000 | ||
Bal. | $66,000 |
Table (2)
(3)
Prepare T-accounts for the Rent Expenses account:
Rent Expenses Account | |||
Oct. 4 | $2,000 | ||
Bal. | $ 2,000 |
Table (3)
(4)
Prepare T-accounts for the Equipment account:
Equipment Account | |||
Oct. 7 | $ 4,000 | ||
7 | $14,000 | ||
Bal. | $ 18,000 |
Table (4)
(5)
Prepare T-accounts for the Accounts Payable account:
Accounts Payable Account | |||
Oct. 21 | $14,000 | Oct. 7 | $14,000 |
10 | $ 390 | ||
16 | $ 410 | ||
Total | 14,000 | Total | 14,800 |
Bal. | $ 800 |
Table (5)
(6)
Prepare T-accounts for the Advertising Expenses account:
Advertising Expenses Account | |||
Oct. 8 | $ 500 | ||
Bal. | $ 500 |
Table (6)
(7)
Prepare T-accounts for the Supplies account:
Supplies | |||
Oct. 16 | $ 410 | ||
Bal. | $ 410 |
Table (7)
(8)
Prepare T-accounts for the Repairs Expenses account:
Repair Expenses Account | |||
Oct. 10 | $ 390 | ||
Bal. | $ 390 |
Table (8)
(9)
Prepare T-accounts for the Utilities Expenses account:
Utilities Expenses Account | |||
Oct. 24 | $ 148 | ||
Bal. | $ 148 |
Table (9)
(10)
Prepare T-accounts for the Accounts Receivables account:
Accounts Receivable | |||
Oct. 12 | $ 3,200 | Oct. 27 | $3,200 |
Bal. | $ 0 |
Table (10)
(11)
Prepare T-accounts for the Salaries and Wages Expenses account:
Salaries and wages expenses | |||
Oct. 31 | $ 5,100 | ||
Bal. | $ 5,100 |
Table (11)
(12)
Prepare T-accounts for the Service Revenue account:
Service Revenue Account | |||
Oct.12 | $3,200 | ||
Bal. | $3,200 |
Table (12)
(c)
To Prepare: The trial balance.
(c)
Answer to Problem 3.18E
Table (1)
Explanation of Solution
The total of the debit side should be equal to the total of the credit side of the trial balance. The accounts payable account, common stock account, and service revenue account are placed in the credit column because; it shows a normal credit balance. Similarly, cash account, supplies account, equipment account, advertisement expense account, salaries and wages account, and rent expense account are placed in the debit column because it shows a normal debit balance.
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Chapter 3 Solutions
FINANCIAL ACCOUNTING: TOOLS WP ACCESS
- A business has the following transactions: A. The business is started by receiving cash from an investor in exchange for common stock $10,000. B. Rent of $1,250 is paid for the first month. C. Office supplies are purchased for $375. D. Services worth $3,450 are performed. Cash is received for half. E. Customers pay $1,250 for services to be performed next month. F. $6,000 is paid for a one year insurance policy. G. We receive 25% of the money owed by customers in D. H. A customer has placed an order for $475 of services to be done this coming week. How much total revenue does the company have?arrow_forwardIn March, T. Carter established Carter Delivery Service. The account headings are presented below. Transactions completed during the month of March follow. a. Carter deposited 25,000 in a bank account in the name of the business. b. Bought a used truck from Degroot Motors for 15,140, paying 5,140 in cash and placing the remainder on account. c. Bought equipment on account from Flemming Company, 3,450. d. Paid the rent for the month, 1,000, Ck. No. 3001. e. Sold services for cash for the first half of the month, 6,927. f. Bought supplies for cash, 301, Ck. No. 3002. g. Bought insurance for the truck for the year, 1,200, Ck. No. 3003. h. Received and paid the bill for utilities, 349, Ck. No. 3004. i. Received a bill for gas and oil for the truck, 218. j. Sold services on account, 3,603. k. Sold services for cash for the remainder of the month, 4,612. l. Paid wages to the employees, 3,958, Ck. Nos. 30053007. m. Carter withdrew cash for personal use, 1,250, Ck. No. 3008. Required 1. Record the transactions and the balance after each transaction 2. Total the left side of the accounting equation (left side of the equal sign), then total the right side of the accounting equation (right side of the equal sign). If the two totals are not equal, check the addition and subtraction. If you still cannot find the error, re-analyze each transaction.arrow_forwardOn March 1 of this year, B. Gervais established Gervais Catering Service. The account headings are presented below. Transactions completed during the month follow. a. Gervais deposited 25,000 in a bank account in the name of the business. b. Bought a truck from Kelly Motors for 26,329, paying 8,000 in cash and placing the balance on account, Ck. No. 500. c. Bought catering equipment on account from Luigis Equipment, 3,795. d. Paid the rent for the month, 1,255, Ck. No. 501. e. Bought insurance for the truck for one year, 400, Ck. No. 502. f. Sold catering services for cash for the first half of the month, 3,012. g. Bought supplies for cash, 185, Ck. No. 503. h. Sold catering services on account, 4,307. i. Received and paid the heating bill, 248, Ck. No. 504. j. Received a bill from GC Gas and Lube for gas and oil for the truck, 128. k. Sold catering services for cash for the remainder of the month, 2,649. l. Gervais withdrew cash for personal use, 1,550, Ck. No. 505. m. Paid the salary of the assistant, 1,150, Ck. No. 506. Required 1. Record the transactions and the balance after each transaction. 2. Total the left side of the accounting equation (left side of the equal sign), then total the right side of the accounting equation (right side of the equal sign). If the two totals are not equal, check the addition and subtraction. If you still cannot find the error, re-analyze each transaction.arrow_forward
- Prepare journal entries to record the following transactions for the month of November: A. on first day of the month, issued common stock for cash, $20,000 B. on third day of month, purchased equipment for cash, $10,500 C. on tenth day of month, received cash for accounting services, $14,250 D. on fifteenth day of month, paid miscellaneous expenses, $3,200 E. on last day of month, paid employee salaries, $8,600arrow_forwardIn March, T. Carter established Carter Delivery Service. The account headings are presented below. Transactions completed during the month of March follow. a. Carter deposited 25,000 in a bank account in the name of the business. b. Bought a used truck from Degroot Motors for 15,140, paying 5,140 in cash and placing the remainder on account. c. Bought equipment on account from Flemming Company, 3,450. d. Paid the rent for the month, 1,000, Ck. No. 3001 (Rent Expense). e. Sold services for cash for the first half of the month, 6,927 (Service Income). f. Bought supplies for cash, 301, Ck. No. 3002. g. Bought insurance for the truck for the year, 1,200, Ck. No. 3003. h. Received and paid the bill for utilities, 349, Ck. No. 3004 (Utilities Expense). i. Received a bill for gas and oil for the truck, 218 (Gas and Oil Expense). j. Sold services on account, 3,603 (Service Income). k. Sold services for cash for the remainder of the month, 4,612 (Service Income). l. Paid wages to the employees, 3,958, Ck. Nos. 30053007 (Wages Expense). m. Carter withdrew cash for personal use, 1,250, Ck. No. 3008. Required 1. In the equation, write the owners name above the terms Capital and Drawing. 2. Record the transactions and the balance after each transaction. Identify the account affected when the transaction involves revenues or expenses. 3. Write the account totals from the left side of the equals sign and add them. Write the account totals from the right side of the equals sign and add them. If the two totals are not equal, check the addition and subtraction. If you still cannot find the error, re-analyze each transaction.arrow_forwardIn July of this year, M. Wallace established a business called Wallace Realty. The account headings are presented below. Transactions completed during the month follow. a. Wallace deposited 24,000 in a bank account in the name of the business. b. Paid the office rent for the current month, 650, Ck. No. 1000. c. Bought office supplies for cash, 375, Ck. No. 1001. d. Bought office equipment on account from Dellos Computers, 6,300. e. Received a bill from the City Crier for advertising, 455. f. Sold services for cash, 3,944. g. Paid on account to Dellos Computers, 1,500, Ck. No. 1002. h. Received and paid the bill for utilities, 340, Ck. No. 1003. i. Paid on account to the City Crier, 455, Ck. No. 1004. j. Paid truck expenses, 435, Ck. No. 1005. k. Wallace withdrew cash for personal use, 1,500, Ck. No. 1006. Required 1. Record the transactions and the balance after each transaction. 2. Total the left side of the accounting equation (left side of the equal sign), then total the right side of the accounting equation (right side of the equal sign). If the two totals are not equal, check the addition and subtraction. If you still cannot find the error, re-analyze each transaction.arrow_forward
- P. Schwartz, Attorney at Law, opened his office on October 1. The account headings are presented below. Transactions completed during the month follow. a. Schwartz deposited 25,000 in a bank account in the name of the business. b. Bought office equipment on account from QuipCo, 9,670. c. Schwartz invested his personal law library, which cost 2,800. d. Paid the office rent for the month, 1,700, Ck. No. 2000. e. Bought office supplies for cash, 418, Ck. No. 2001. f. Bought insurance for two years, 944, Ck. No. 2002. g. Sold legal services for cash, 8,518. h. Paid the salary of the part-time receptionist, 1,820, Ck. No. 2003. i. Received and paid the telephone bill, 388, Ck. No. 2004. j. Received and paid the bill for utilities, 368, Ck. No. 2005. k. Sold legal services for cash, 9,260. l. Paid on account to QuipCo, 2,670, Ck. No. 2006. m. Schwartz withdrew cash for personal use, 2,500, Ck. No. 2007. Required 1. Record the transactions and the balance after each transaction. 2. Total the left side of the accounting equation (left side of the equal sign), then total the right side of the accounting equation (right side of the equal sign). If the two totals are not equal, check the addition and subtraction. If you still cannot find the error, re-analyze each transaction.arrow_forwardJournalize for Harper and Co. each of the following transactions or state no entry required and explain why. Be sure to follow proper journal writing rules. A. A corporation is started with an investment of $50,000 in exchange for stock. B. Equipment worth $4,800 is ordered. C. Office supplies worth $750 are purchased on account. D. A part-time worker is hired. The employee will work 15–20 hours per week starting next Monday at a rate of $18 per hour. E. The equipment is received along with the invoice. Payment is due in three equal monthly installments, with the first payment due in sixty days.arrow_forwardKrespy Corp. has a cash balance of $7,500 before the following transactions occur: A. received customer payments of $965 B. supplies purchased on account $435 C. services worth $850 performed, 25% is paid in cash the rest will be billed D. corporation pays $275 for an ad in the newspaper E. bill is received for electricity used $235. F. dividends of $2,500 are distributed What is the balance in cash after these transactions are journalized and posted?arrow_forward
- On March 1 of this year, B. Gervais established Gervais Catering Service. The account headings are presented below. Transactions completed during the month follow. a. Gervais deposited 25,000 in a bank account in the name of the business. b. Bought a truck from Kelly Motors for 26,329, paying 8,000 in cash and placing the balance on account, Ck. No. 500. c. Bought catering equipment on account from Luigis Equipment, 3,795. d. Paid the rent for the month, 1,255, Ck. No. 501 (Rent Expense). e. Bought insurance for the truck for one year, 400, Ck. No. 502. f. Sold catering services for cash for the first half of the month, 3,012 (Catering Income). g. Bought supplies for cash, 185, Ck. No. 503. h. Sold catering services on account, 4,307 (Catering Income). i. Received and paid the heating bill, 248, Ck. No. 504 (Utilities Expense). j. Received a bill from GC Gas and Lube for gas and oil for the truck, 128 (Gas and Oil Expense). k. Sold catering services for cash for the remainder of the month, 2,649 (Catering Income). l. Gervais withdrew cash for personal use, 1,550, Ck. No. 505. m. Paid the salary of the assistant, 1,150, Ck. No. 506 (Salary Expense). Required 1. In the equation, write the owners name above the terms Capital and Drawing. 2. Record the transactions and the balance after each transaction. Identify the account affected when the transaction involves revenues or expenses. 3. Write the account totals from the left side of the equals sign and add them. Write the account totals from the right side of the equals sign and add them. If the two totals are not equal, check the addition and subtraction. If you still cannot find the error, re-analyze each transaction.arrow_forwardOn July 1, K. Resser opened Ressers Business Services. Ressers accountant listed the following chart of accounts: The following transactions were completed during July: a. Resser deposited 25,000 in a bank account in the name of the business. b. Bought tables and chairs for cash, 725, Ck. No. 1200. c. Paid the rent for the current month, 1,750, Ck. No. 1201. d. Bought computers and copy machines from Ferber Equipment, 15,700, paying 4,000 in cash and placing the balance on account, Ck. No. 1202. e. Bought supplies on account from Wigginss Distributors, 535. f. Sold services for cash, 1,742. g. Bought insurance for one year, 1,375, Ck. No. 1203. h. Paid on account to Ferber Equipment, 700, Ck. No. 1204. i. Received and paid the electric bill, 438, Ck. No. 1205. j. Paid on account to Wigginss Distributors, 315, Ck. No. 1206. k. Sold services to customers for cash for the second half of the month, 820. l. Received and paid the bill for the business license, 75, Ck. No. 1207. m. Paid wages to an employee, 1,200, Ck. No. 1208. n. Resser withdrew cash for personal use, 700, Ck. No. 1209. Required 1. Record the owners name in the Capital and Drawing T accounts. 2. Correctly place the plus and minus signs for each T account and label the debit and credit sides of the accounts. 3. Record the transactions in the T accounts. Write the letter of each entry to identify the transaction. 4. Foot the T accounts and show the balances. 5. Prepare a trial balance as of July 31, 20--. 6. Prepare an income statement for July 31, 20--. 7. Prepare a statement of owners equity for July 31, 20--. 8. Prepare a balance sheet as of July 31, 20--. LO 1, 2, 3, 4, 5, 6arrow_forwardA business has the following transactions: The business is started by receiving cash from an investor in exchange for common stock $20,000 The business purchases supplies on account $500 The business purchases furniture on account $2,000 The business renders services to various clients on account totaling $9,000 The business pays salaries $2,000 The business pays this months rent $3,000 The business pays for the supplies purchased on account. The business collects from one of its clients for services rendered earlier in the month $1,500. What is total income for the month?arrow_forward
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