Concept explainers
Analyzing the Effects of Transactions Using T-Accounts, Preparing an Unadjusted
Spicewood Stables, Inc. was established in Dripping Springs, Texas, on April 1. The company provides stables, care for animals, and grounds for riding and showing horses. You have been hired as the new assistant controller. The following transactions for April are provided for your review.
- 1. Received contributions from investors and issued $200,000 of common stock on April 1.
- 2. Built a barn and other buildings for $142,000. On April 2, the company paid half the amount in cash and signed a three-year note payable for the balance.
- 3. Provided $16,000 in animal care services for customers on April 3, all on credit.
- 4. Rented stables to customers who cared for their own animals; received cash of $13,000 on April 4 for rent earned this month.
- 5. On April 5, received $1,500 cash from a customer to board her horse in May, June, and July (record as Unearned Revenue).
- 6. Purchased hay and feed supplies on account on April 6 for $3,000.
- 7. Paid $1,700 on accounts payable on April 7 for previous purchases.
- 8. Received $1,000 from customers on April 8 on
accounts receivable . - 9. On April 9, prepaid a two-year insurance policy for $3,600 for coverage starting in May.
- 10. On April 28, paid $800 in cash for water and utilities used this month.
- 11. Paid $14,000 in wages on April 29 for work done this month.
- 12. Received an electric utility bill on April 30 for $1,200 for usage in April; the bill will be paid next month.
Required:
- 1. Record the effects of transactions (1) through (12) using
journal entries . - 2. If you are completing this requirement manually, set up appropriate T-accounts. All accounts begin with zero balances. Summarize the journal entries from requirement 1 in the T-accounts, referencing each transaction in the accounts with the transaction number. Show the unadjusted ending balances in the T-accounts. If you are using the GL tool in Connect, your answers to requirement 1 will have been posted automatically to general ledger accounts that are similar in appearance to Exhibit 2.9.
- 3. Prepare an unadjusted trial balance as of April 30. If you are using the GL tool in Connect, this requirement is completed automatically using your previous answers.
- 4. Refer to the revenues and expenses shown on the unadjusted trial balance. Based on this information, calculate preliminary net income and determine whether the net profit margin is better or worse than the 30.0 percent earned by a close competitor.
1.
To prepare: The journal entries for each transaction.
Explanation of Solution
Journal:
Journal is the book of original entry. Journal consists of the day today financial transactions in a chronological order. The journal has two aspects; they are debit aspect and the credit aspect.
Accounting Equation:
The accounting equation implies the relationship between the assets, liabilities, and the stockholders equity. The balance of both the assets and the liabilities, stockholders equity must be equally balanced. The accounting equation is as follows;
- 1. Journalize the issuance of common stock.
Date | Account Title and Explanation | Debit ($) | Credit ($) |
April, 1 | Cash (A+) | 200,000 | |
Common stock (SE+) | 200,000 | ||
(To record the issuance of common stock to investors) |
Table (1)
- Cash is an asset account. Thus, an increase in cash increases the asset account. Hence, debit cash account by $200,000.
- Common stock is a component of stockholder equity account. Thus, an increase in common stock increases the stockholders equity account. Hence, common stock account is being credited to increase its balance by $200,000.
- 2. Journalize the purchase of building partly on cash and partly on account by signing a note.
Date | Account Title and Explanation | Debit ($) | Credit ($) |
April, 2 | Buildings (A+) | 142,000 | |
Notes payable (L+) | 71,000 | ||
Cash (A–) | 71,000 | ||
(To record the purchase of building partly for cash and partly by signing a note ) |
Table (2)
- A building is an asset account. Thus, an increase in buildings account increases the asset account. Hence, debit buildings account by $142,000.
- Notes payable is a liability account. Thus, an increase in notes payable increases the liability account. Hence, notes payable account is being credited to increase its balance by $71,000.
- Cash is an asset account. Thus, a decrease in cash decreases the asset account. Hence, credit cash account by $71,000.
- 3. Journalize the service provided on account.
Date | Account Title and Explanation | Debit ($) | Credit ($) |
April, 3 | Accounts receivable (A+) | 16,000 | |
Service revenue (R+, SE+) | 16,000 | ||
(To record the service made on account ) |
Table (3)
- Accounts receivable is an asset account. Thus, an increase in accounts receivable increases the asset account. Hence, debit accounts receivable account by $16,000.
- Service revenue is a stockholder’s equity account. Thus, an increase in service revenue increases the stockholder’s equity account. Hence, service revenue account is being credited to increase its balance by $16,000.
- 4. Journalize the rent earned.
Date | Account Title and Explanation | Debit ($) | Credit ($) |
April, 4 | Cash (A+) | 13,000 | |
Rent revenue (R+, SE+) | 13,000 | ||
(To record the rent earned) |
Table (4)
- Cash is an asset account. Thus, an increase in cash increases the asset account. Hence, debit cash account by $13,000.
- Rent revenue is a stockholder’s equity account. Thus, an increase in rent revenue increases the stockholder’s equity account. Hence, rent revenue account is being credited to increase its balance by $13,000.
- 5. Journalize the cash received from customer for the service yet to provide.
Date | Account Title and Explanation | Debit ($) | Credit ($) |
April, 5 | Cash (A+) | 1,500 | |
Unearned revenue (L+) | 1,500 | ||
(To record the unearned revenue) |
Table (5)
- Cash is an asset account. Thus, an increase in cash increases the asset account. Hence, debit cash account by $1,500.
- Unearned revenue is a liability account. Thus, an increase in unearned revenue increases the liability account. Hence, unearned revenue account is being credited to increase its balance by $1,500.
- 6. Journalize the purchase of supplies on account.
Date | Account Title and Explanation | Debit ($) | Credit ($) |
April, 6 | Supplies (A+) | 3,000 | |
Accounts payable (L+) | 3,000 | ||
(To record the purchase of supplies on account) |
Table (6)
- A supply is an asset account. Thus, an increase in supplies increases the asset account. Hence, debit supplies account by $3,000.
- Accounts payable is a liability account. Thus, an increase in accounts payable increases the liability account. Hence, accounts payable account is being credited to increase its balance by $3,000.
- 7. Journalize the amount paid for the purchase made already.
Date | Account Title and Explanation | Debit ($) | Credit ($) |
April, 7 | Accounts payable (L–) | 1,700 | |
Cash (A–) | 1,700 | ||
(To record the amount paid for the purchases made already) |
Table (7)
- Accounts payable is a liability account. Thus, an increase in accounts payable increases the liability account. Hence, accounts payable account is being credited to increase its balance by $1,700.
- Cash is an asset account. Thus, a decrease in cash decreases the asset account. Hence, credit cash account by $1,700.
- 8. Journalize the amount received from customer.
Date | Account Title and Explanation | Debit ($) | Credit ($) |
April, 8 | Cash (A+) | 1,000 | |
Accounts receivable (A–) | 1,000 | ||
(To record the cash receipt for the service performed on account ) |
Table (8)
- Cash is an asset account. Thus, an increase in cash increases the asset account. Hence, debit cash account by $1,000.
- Accounts receivable is an asset account. Thus, a decrease in accounts receivable decreases the asset account. Hence, credit accounts receivable account by $1,000.
- 9. Journalize the prepaid insurance.
Date | Account Title and Explanation | Debit ($) | Credit ($) |
April, 9 | Prepaid insurance (A+) | 3,600 | |
Cash (A–) | 3,600 | ||
(To record the prepaid insurance) |
Table (9)
- Prepaid insurance is an asset account. Thus, an increase in prepaid insurance increases the asset account. Hence, debit prepaid insurance account by $3,600.
- Cash is an asset account. Thus, a decrease in cash decreases the asset account. Hence, credit cash account by $3,600.
- 10. Journalize the utilities expense.
Date | Account Title and Explanation | Debit ($) | Credit ($) |
April, 28 | Utilities expenses (E+, SE-) | 800 | |
Cash (A-) | 800 | ||
(To record the utilities expenses ) |
Table (10)
- Utilities expense is an expense account which comes under Retained earnings in stockholder’s equity. Thus, an increase in utilities expense account decreases the stockholder’s equity account. Hence, utilities expenses account is being debited to increase its balance by $800.
- Cash is an asset account. Thus, a decrease in cash account decreases the asset account. Hence, cash account is being credited to decrease its balance by $800.
- 11. Journalize the payment made for the wages.
Date | Account Title and Explanation | Debit ($) | Credit ($) |
April, 29 | Salaries and Wages Expense (E+, SE–) | 14,000 | |
Cash (A-) | 14,000 | ||
(To record the payment made for the repair charges) |
Table (11)
- Salaries and wages expense is an expense account which comes under Retained earnings in stockholder’s equity. Thus, an increase in salaries and wages expense account decreases the stockholder’s equity account. Hence, salaries and wages expense account is being debited to increase its balance by $14,000.
- Cash is an asset account. Thus, a decrease in cash account decreases the asset account. Hence, cash account is being credited to decrease its balance by $14,000.
- 12. Journalize the bill received for utility expenses incurred, and it will be paid later.
Date | Account Title and Explanation | Debit ($) | Credit ($) |
April, 30 | Utilities expenses (E+, SE-) | 1,200 | |
Accounts payable (L+) | 1,200 | ||
(To record the bill received for the utilities expenses incurred) |
Table (12)
- Utilities expense is an expense account which comes under Retained earnings in stockholder’s equity. Thus, an increase in utilities expense account decreases the stockholder’s equity account. Hence, utilities expenses account is being debited to increase its balance by $1,200.
- Accounts payable is a liability account. Thus, an increase in accounts payable increases the liability account. Hence, accounts payable account is being credited to increase its balance by $1,200.
2.
To show: The unadjusted ending balances in T-accounts.
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:
3.
To prepare: The unadjusted Trial balance at the end of April.
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.
The unadjusted Trial balance of Incorporation Sat the end of April is prepared as follows:
Incorporation S | ||
Unadjusted Trial Balance | ||
At April 30 | ||
Particulars | Debit | Credit |
Cash | $124,400 | |
Accounts Receivable | 15,000 | |
Supplies | 3,000 | |
Prepaid Insurance | 3,600 | |
Buildings | 142,000 | |
Accounts Payable | $2,500 | |
Unearned Revenue | 1,500 | |
Notes Payable | 71,000 | |
Common Stock | 200,000 | |
Service Revenue | 16,000 | |
Rent Revenue | 13,000 | |
Utilities Expense | 2,000 | |
Salaries and Wages Expense | 14,000 | |
Total | $304,000 | $304,000 |
Table (13)
The debit column and credit column of the unadjusted trial balance are agreed, both having balance of $304,000.
4.
To calculate: The preliminary net income and net profit margin and determine whether the net profit is better or worse than the competitor.
Explanation of Solution
Net income: Net income is the excess amount of revenue which arises after deducting all the expenses of a company. In simple terms, it is the difference between total revenue and total expenses of the company.
The preliminary net income of the company is determined as follows:
Particulars | Amount ($) | Amount ($) |
Revenues: | ||
Service Revenue | $16,000 | |
Rent Revenue | 13,000 | |
Total Revenues | 29,000 | |
Less: Expenses: | ||
Utilities Expense | 2,000 | |
Salaries and Wages Expense | 14,000 | |
Total Expenses | 16,000 | |
Net Income | $13,000 |
Table (8)
The net profit margin of the Company is determined as follows:
Incorporation S is performing better than its competitor with a net profit margin of 44.8%.
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Chapter 3 Solutions
Loose-leaf for Fundamentals of Financial Accounting with Connect
- Journal 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_forwardTransaction Analysis and Financial Statements Expert Consulting Services Inc. was organized on March 1 by two former college roommates. The corporation provides computer consulting services to small businesses. The following transactions occurred during the first month of operations: March 2: Received contributions of $20,000 from each of the two principal owners of the new business in exchange for shares of stock. March 7: Signed a two-year promissory note at the bank and received cash of $15,000. Interest, along with the $15,000, will be repaid at the end of the two years. March 12: Purchased $700 in miscellaneous supplies on account. The company has 30 days to pay for the supplies. March 19: Billed a client $4,000 for services rendered by Expert in helping to install a new computer system. The client is to pay 25% of the bill upon its receipt and the remaining balance within 30 days. March 20: Paid $1,300 bill from the local newspaper for advertising for the month of March. March 22: Received 25% of the amount billed to the client on March 19. March 26: Received cash of $2,800 for services provided in assisting a client in selecting software for its computer. March 29: Purchased a computer system for $8,000 in cash. March 30: Paid $3,300 of salaries and wages for March. March 31: Received and paid $1,400 in gas, electric, and water bills. Required Prepare a table to summarize the preceding transactions as they affect the accounting equation. Use the format in Exhibit 3-1. Identify each transaction with the date. Prepare an income statement for the month of March. Prepare a classified balance sheet at March 31. From reading the balance sheet you prepared in part (3), what events would you expect to take place in April? Explain your answer.arrow_forwardEFFECTS 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_forward
- Kelly 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_forwardJournal entries and trial balance On October 1, 20Y4, Jay Pryor established an interior decorating business, Pioneer Designs. During the month, Jay completed the following transactions related to the business: Oct. 1. Jay transferred cash from a personal bank account to an account to be used for the business in exchange for common stock, 18,000. 4. Paid rent for period of October 4 to end of month, 3,000. 10. Purchased a used truck for 23,750, paying 3,750 cash and giving a note payable for the remainder. 13. Purchased equipment on account, 10,500. 14. Purchased supplies for cash, 2,100. Oct. 15. Paid annual premiums on property and casualty insurance, 3,600. 15. Received cash for job completed, 8,950. Enter the following transactions on Page 2 of the two-column journal: 21. Paid creditor a portion of the amount owed for equipment purchased on October 13, 2,000. 24. Recorded jobs completed on account and sent invoices to customers, 14,150. 26. Received an invoice for truck expenses, to be paid in November, 700. 27. Paid utilities expense, 2,240. 27. Paid miscellaneous expenses, 1,100. 29. Received cash from customers on account, 7,600. 30. Paid wages of employees, 4,800. 31. Paid dividends, 3,500. Instructions 1. Journalize each transaction in a two-column journal beginning on Page 1, referring to the following chart of accounts in selecting the accounts to be debited and credited. (Do not insert the account numbers in the journal at this time.) Journal entry explanations may be omitted. 11 Cash 12 Accounts Receivable 13 Supplies 14 Prepaid Insurance 16 Equipment 18 Truck 21 Notes Payable 22 Accounts Payable 31 Common Stock 33 Dividends 41 Fees Earned 51 Wages Expense 53 Rent Expense 54 Utilities Expense 55 Truck Expense 59 Miscellaneous Expense 2. Post the journal to a ledger of four-column accounts, inserting appropriate posting references as each item is posted. Extend the balances to the appropriate balance columns after each transaction is posted. 3. Prepare an unadjusted trial balance for Pioneer Designs as of October 31, 20Y4. 4. Determine the excess of revenues over expenses for October. 5. Can you think of any reason why the amount determined in (4) might not be the net income for October?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_forward
- Using the income statement for Adventure Travel Service shown in Practice Exercise 1-4A, prepare a statement of owners equity for the year ended April 30, 2019. Jerome Foley, the owner, invested an additional 60,000 in the business during the year and withdrew cash of 40,000 for personal use. Jerome Foley, capital as of May 1, 2018, was 1,020,000.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_forwardANALYSIS OF TRANSACTIONS Charles Chadwick opened a business called Charlies Detective Service in January 20--. Set up T accounts for the following accounts: Cash; Accounts Receivable; Office Supplies; Computer Equipment; Office Furniture; Accounts Payable; Charles Chadwick, Capital; Charles Chadwick, Drawing; Professional Fees; Rent Expense; and Utilities Expense. The following transactions occurred during the first month of business. Record these transactions in T accounts. After all transactions are recorded, foot and balance the accounts if necessary. (a) Invested cash in the business, 30,000. (b) Bought office supplies for cash, 300. (c) Bought office furniture for cash, 5,000. (d) Purchased computer and printer on account, 8,000. (e) Received cash from clients for services, 3,000. (f) Paid cash on account for computer and printer purchased in transaction (d), 4,000. (g) Earned professional fees on account during the month, 9,000. (h) Paid cash for office rent for January, 1,500. (i) Paid utility bills for the month, 800. (j) Received cash from clients billed in transaction (g), 6,000. (k) Withdrew cash for personal use, 3,000. TRIAL BALANCE Based on the transactions recorded in Exercise 3-7A, prepare a trial balance for Charlies Detective Service as of January 31, 20--.arrow_forward
- During December of this year, G. Elden established Ginnys Gym. The following asset, liability, and owners equity accounts are included in the chart of accounts: During December, the following transactions occurred: a. Elden deposited 35,000 in a bank account in the name of the business. b. Bought exercise equipment for cash, 8,150, Ck. No. 1001. c. Bought advertising on account from Hazel Company, 105. d. Bought a display rack on account from Cyber Core, 790. e. Bought office equipment on account from Office Aids, 185. f. Elden invested her exercise equipment with a fair market value of 1,200 in the business. g. Made a payment to Cyber Core, 200, Ck. No. 1002. h. Sold services for the month of December for cash, 800. Required 1. Write the account classifications (Assets, Liabilities, Capital, Drawing, Revenue, Expense) in the fundamental accounting equation, as well as the plus and minus signs and Debit and Credit. 2. Write the account names on the T accounts under the classifications, place the plus and minus signs for each T account, and label the debit and credit sides of the T accounts 3. Record the amounts in the proper positions in the T accounts. Write the letter next to each entry to identify the transaction. 4. Foot and balance the accounts.arrow_forwardANALYSIS OF TRANSACTIONS Charles Chadwick opened a business called Charlies Detective Service in January 20--. Set up T accounts for the following accounts: Cash; Accounts Receivable; Office Supplies; Computer Equipment; Office Furniture; Accounts Payable; Charles Chadwick, Capital; Charles Chadwick, Drawing; Professional Fees; Rent Expense; and Utilities Expense. The following transactions occurred during the first month of business. Record these transactions in T accounts. After all transactions are recorded, foot and balance the accounts if necessary. (a) Invested cash in the business, 30,000. (b) Bought office supplies for cash, 300. (c) Bought office furniture for cash, 5,000. (d) Purchased computer and printer on account, 8,000. (e) Received cash from clients for services, 3,000. (f) Paid cash on account for computer and printer purchased in transaction (d), 4,000. (g) Earned professional fees on account during the month, 9,000. (h) Paid cash for office rent for January, 1,500. (i) Paid utility bills for the month, 800. (j) Received cash from clients billed in transaction (g), 6,000. (k) Withdrew cash for personal use, 3,000.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_forward
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