1.
To analyze: The effects of the January transaction on the
1.
Explanation of Solution
The accounting equation implies the relationship between the assets, liabilities, and the
The effects of the accounting equation for the September events using a table are indicated as follows:
Table (1)
Note:
SE refers to Stockholder’s equity.
E refers to Expenses.
R refers to Revenues.
2.
To prepare:
2.
Explanation of Solution
Journal:
Journal is the book of original entry. Journal consists of the day today financial transactions in a chronological order. The journal has two aspects; they are debit aspect and the credit aspect.
Journal entries for September events are prepared as follows:
Date |
Account Title and Explanation | Debit ($) | Credit ($) | |
1. | Cash (A+) | 50,000 | ||
Accounts Receivable (A–) | 50,000 | |||
(To record the cash receipt from customer for the service rendered already) | ||||
2. | Equipment (A+) | 33,500 | ||
Cash (A–) | 10,000 | |||
Notes Payable (L+) | 23,500 | |||
(To record the purchase of equipment partly for cash and partly by signing a note) | ||||
3. | Advertising Expense | 10,000 | ||
Cash (A–) | 10,000 | |||
(To record the payment made for advertising expenses) | ||||
4. | Supplies (A+) | 3,000 | ||
Accounts Payable (L+) | 3,000 | |||
(To record the supplies purchased on accounts) | ||||
5. | Cash (A+) | 170,000 | ||
Service Revenue (R+, SE+) | 170,000 | |||
(To record cash received for the service provided on account ) | ||||
6. | Accounts Payable (L–) | 3,000 | ||
Cash (A–) | 3,000 | |||
(To record the payment made for the supplies purchased on account) | ||||
7. | Cash (A+) | 112,500 | ||
Accounts Receivable (A+) | 112,500 | |||
Service Revenue (R+, SE+) | 225,000 | |||
(To record the sales made partly for cash and partly on account ) | ||||
8. | Salaries and Wages Expense (E+, SE–) | 378,000 | ||
Cash (A–) | 378,000 | |||
(To record the payment of wages expenses to employees) | ||||
9. | Utilities Expense (E+, SE–) | 5.350 | ||
Accounts Payable (L+) | 5.350 | |||
(To record the utilities expenses incurred which are to be paid later) |
Table (2)
3.
To create: The T accounts for the balance sheet accounts and
3.
Explanation of Solution
T-account:
An account is referred to as a 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:
- The title of the account
- The left or debit side
- The right or credit side
The posting of the journal entries to the T accounts are as follows:
4.
To prepare: An unadjusted
4.
Explanation of Solution
Unadjusted trial balance:
Unadjusted trial balance is that statement which contains complete list of accounts with their unadjusted balances. This statement is prepared at the end of every financial period.
An unadjusted trial balance of corporation V for the month ended January 31, 2015 is prepared as follows:
Corporation V | ||
Unadjusted Trial Balance | ||
At January 31, 2015 | ||
Particulars | Debit ($) | Credit ($) |
Cash | $1,431,500 | |
Accounts Receivable | 212,500 | |
Supplies | 17,700 | |
Equipment | 908,000 | |
Building | 422,000 | |
Land | 1,200,000 | |
Accounts Payable | $113,350 | |
Unearned Revenue | 73,500 | |
Notes Payable | 83,500 | |
Common Stock | 2,500,000 | |
1,419,700 | ||
Service Revenue | 395,000 | |
Salaries and Wages Expense | 378,000 | |
Advertising Expense | 10,000 | |
Utilities Expense | 5,350 | |
Total | $4,585,050 | $4,585,050 |
Table (3)
The debit column and credit column of the unadjusted trial balance are agreed, both having balance of $4,585,050.
5.
To prepare: An income statement of corporation V for the year ended January 31, 2015.
5.
Explanation of Solution
Income statement:
The financial statement which reports revenues and expenses from business operations and the result of those operations as net income or net loss for a particular time period is referred to as income statement.
An income statement of corporation V for the year ended December 31is prepared as follows:
Corporation V Income Statement For the yearEnded January 31, 2015 |
||
Particulars | Amount ($) | Amount ($) |
Revenues: | ||
Service Revenue | $395,000 | |
Total Revenues | 395,000 | |
Less: Expenses: |
||
Salaries and Wages Expense | 378,000 | |
Advertising Expense | 10,000 | |
Utilities Expense | 5,350 | |
Total Expenses | 393,350 | |
Net Loss | $1,650 |
Table (4)
6.
To prepare: The statement of retained earnings of Corporation Vfor the year ended January 31, 2015.
6.
Explanation of Solution
Statement of Retained Earnings:
Statement of retained earnings shows, the changes in the retained earnings, and the income left in the company after payment of the dividends, for the accounting period.
The statement of retained earnings of Corporation Vfor the year ended January 31, 2015 is prepared as follows.
Corporation V | |
Statement of Retained Earnings | |
For the Year Ended January 31, 2015 | |
Particulars | $ |
Retained Earnings, January 1, 2015 | 1,419,700 |
Less: Net Loss | 1,650 |
Dividends | 0 |
Retained Earnings, December 31 | 1,421,350 |
Table (5)
7.
To create: A classified balance sheet of Corporation V for the year ended January 31, 2015.
7.
Explanation of Solution
Classified balance sheet:
This is the financial statement of a company which shows the grouping of similar assets and liabilities under subheadings.
A classified balance sheet of Corporation V for the year ended January 31, 2015 is prepared as follows:
Corporation V | ||
Balance Sheet | ||
At January 31, 2015 | ||
Assets: | $ | $ |
Current Assets | ||
Cash | $1,431,500 | |
Accounts Receivable | 212,500 | |
Supplies | 17,700 | |
Total Current Assets | 1,661,700 | |
Equipment | 908,000 | |
Building | 422,000 | |
Land | 1,200,000 | |
Total Assets | $4,191,700 | |
Liabilities: | ||
Current Liabilities | ||
Accounts Payable | $113,350 | |
Unearned Revenue | 73,500 | |
Total Current Liabilities | 186,850 | |
Notes Payable | 83,500 | |
Total Liabilities | 270,350 | |
Stockholders’ Equity | ||
Common Stock | 2,500,000 | |
Retained Earnings | 1,421,350 | |
Total Stockholders’ Equity | 3,921,350 | |
Total Liabilities and Stockholders’ Equity | $4,191,700 |
Table (6)
8.
To calculate: The net profit margin of the company.
8.
Explanation of Solution
The net profit margin of the Company is determined as follows:
Want to see more full solutions like this?
Chapter 3 Solutions
FUND.OF FIN.ACCT.-ACCESS >CUSTOM<
- please answer within the format by providing formula the detailed workingPlease provide answer in text (Without image)Please provide answer in text (Without image)Please provide answer in text (Without image) Scenario: Dalton McDonald owns and operates D Mac Trucking Ltd but has no accounting personal to prepare his financial information and has approached your group for assistance. The company’s financial year end is December 31 each year. They have provided the following information and transactions for 2022: Jan 1. Balances from 2021 – Cash $400,000; Accounts Receivable $250,000; Supplies $205,000; Furniture and Equipment $600,000; Other Creditors $218,000; and Capital $1,237,000. Jan 2. The following assets were received from Dalton McDonald in exchange for capital in the company: cash - $200,000, accounts receivable - $61,000, supplies - $90,000, and furniture- $400,000. Feb 1. Paid fifteen (15) months’ rent on a lease rental contract, $450,000. Mar 30. Paid the premiums on…arrow_forwardIn addition to the above accounts, VGC’s chart of accounts includes the following: Service Revenue, Salaries and Wages Expense, Advertising Expense, and Utilities Expense. The January transactions are shown below: Received $50,000 cash from customers on 1/1 for subscriptions that had already been earned in 2017. Purchased 10 new computer servers for $33,500 on 1/2; paid $10,000 cash and signed a three-year note for the remainder owed. Paid $10,000 for an Internet advertisement run on 1/3. On January 4, purchased and received $3,000 of supplies on account. Received $170,000 cash on 1/5 from customers for service revenue earned in January. Paid $3,000 cash to a supplier on January 6. On January 7, sold 15,000 subscriptions at $15 each for services provided during January. Half was collected in cash and half was sold on account. Paid $378,000 in wages to employees on 1/30 for work done in January. On January 31, received an electric and gas utility bill for $5,350 for January utility…arrow_forwardPrepare general journal entries to record the following transactions for XYZ Group that occurred during January 2018. Date occurred Transactions 3 January 2018 A bill for utilities used was received $990 10 January 2018 Rent for the current month was paid by cheque $2,000 15 January 2018 A salary of $1,900 was paid by cheque 21 January 2018 Interest income accrued but not recorded $5,000 27 January 2018 Installation of furniture fitted to the client’s premises for cash $4,500 If you make profit in your business, will you expect to see equity increasing or decreasing? Why?arrow_forward
- account_circle Business FinanceQ&A LibraryCase Analysis: Analyse the case and find out if Joe Razon was able to compute the total assets and total owner‟s equity of the business as of the quarter ended December 30, 2018 correctly? Show the solutions. Joe Razon, the sole proprietor of the photocopying business that opened October 1, 2018. For the quarter ended December 30, 2018, the business was able to make revenues of ₱50,000 (all in cash) and it was able to incur expenses of ₱35,000 (all in cash). As the end of the quarter, total liabilities amounted to ₱50,000. Joe Razon wants to know the business total assets and total owner‟s equity. With the help of his friend who is an accountant, he arrived at ₱75,000 total assets and ₱25,000 total owner‟s equity. Moreover, Joe Razon had a Cash investment of ₱45,000 cash and Equipment amounting to ₱30,000. Case Analysis: Analyse the case and find out if Joe Razon was able to compute the total assets and total owner‟s equity…arrow_forwardIncome Statement and Balance Sheet Fort Worth Corporation began business in January 2016 as a commercial carpet-cleaning and drying service. Shares of stock were issued to the owners in exchange for cash. Equipment was purchased by making a down payment in cash and signing a note payable for the balance. Services are performed for local restaurants and office buildings on open account, and customers are given 15 days to pay their accounts. Rent for office and storage facilities is paid at the beginning of each month. Salaries and wages are paid at the end of the month. The following amounts are from the records of Fort Worth Corporation at the end of its first month of operations: Required Prepare an income statement for the month ended January 31, 2016. Prepare a balance sheet at January 31, 2016. What information would you need about Notes Payable to fully assess Fort Worths longterm viability? Explain your answer.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_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 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_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
- The 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 business's operations: July 1. Peyton Smith made an additional investment in PS Music 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 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 SO hours per month for a monthly fee of 3,600. Any additional hours beyond SO 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. 11. 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 l,250 cash from PS Music for personal use. PS Music's chart of accounts and the balance of accounts as of July 1, 2019 (all normal balances), are as follows: 11 Cash 3,920 12 Accounts receivable 1,000 14 Supplies 170 15 Prepaid insurance 17 Office Equipment 21 Accounts payable 250 23 Unearned Revenue 31 Peyton smith, Drawing 4,000 32 Fees Earned 500 41 Wages Expense 6,200 50 Office Rent Expense 400 51 Equipment Rent Expense 800 52 Utilities Expense 675 53 Supplies Expense 300 54 music Expense 1,590 55 Advertising Expense 500 56 Supplies Expense 180 59 Miscellaneous Expense 415 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_forwardJournal Entries Recorded Directly in T Accounts Record each of the following transactions directly in T accounts using the numbers preceding the transactions to identify them in the accounts. Each account needs a separate T account. Received contribution of $6,500 from each of the three principal owners of We-Go Delivery Service in exchange for shares of stock. Purchased office supplies for cash of $130. Purchased a van for $15,000 on an open account. The company has 25 days to pay for the van. Provided delivery services to residential customers for cash of $125. Billed a local business $200 for delivery services. The customer is to pay the bill within 15 days. Paid the amount due on the van. Received the amount due from the local business billed in (5).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_forward
- College Accounting, Chapters 1-27AccountingISBN:9781337794756Author:HEINTZ, James A.Publisher:Cengage Learning,Financial Accounting: The Impact on Decision Make...AccountingISBN:9781305654174Author:Gary A. Porter, Curtis L. NortonPublisher:Cengage LearningPrinciples of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax College
- Financial AccountingAccountingISBN:9781305088436Author:Carl Warren, Jim Reeve, Jonathan DuchacPublisher:Cengage LearningSurvey of Accounting (Accounting I)AccountingISBN:9781305961883Author:Carl WarrenPublisher:Cengage LearningFinancial AccountingAccountingISBN:9781337272124Author:Carl Warren, James M. Reeve, Jonathan DuchacPublisher:Cengage Learning