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.
- a. Received contributions from investors and issued $200,000 of common stock on April 1.
- b. Acquired a barn for $142,000. On April 2, the company paid half the amount in cash and signed a three-year note payable for the balance.
- c. Provided $16,000 in animal care services for customers on April 3, all on credit.
- d. Rented stables to customers who cared for their own animals; received cash of $13,000 on April 4 for rent earned this month.
- e. On April 5, received $1,500 cash from a customer to board her horse in May, June, and July (record as Deferred Revenue).
- f. Purchased and received hay and feed supplies on account on April 6 for $3,000.
- g. Paid $1,700 on accounts payable on April 7 for previous purchases.
- h. Received $1,000 from customers on April 8 on
accounts receivable . - i. On April 9, prepaid a two-year insurance policy for $3,600 for coverage starting in May.
- j. On April 28, paid $800 in cash for water and utilities used this month.
- k. Paid $14,000 in wages on April 29 for work done this month.
- l. Received an electric utility bill on April 30 for $1,200 for usage in April; the bill will be paid next month.
Required:
- 1. Record the effects of transactions (a) through (l) using
journal entries . - 2. If you are completing this requirement manually, set up appropriate T-accounts. All accounts begin with zero balances. Summarize the journal entries from requirement 1 in the T-accounts, referencing each transaction in the accounts with the transaction number. Show the unadjusted ending balances in the T-accounts. If you are using the general ledger tool in Connect, your answers to requirement 1 will have been posted automatically to general ledger accounts that are similar in appearance to Exhibit 2.9.
- 3. Prepare an unadjusted trial balance as of April 30. If you are using the general ledger tool in Connect, this requirement is completed automatically using your previous answers.
- 4. Refer to the revenues and expenses shown on the unadjusted trial balance. Based on this information, calculate preliminary net income and determine whether the net profit margin is better or worse than the 30.0 percent earned by a close competitor.
1.
Prepare journal entries for each transaction.
Explanation of Solution
Journal entry: Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.
Accounting Equation:
The accounting equation implies the relationship between the assets, liabilities, and the stockholders equity. The balance of both the assets and the liabilities, stockholders equity must be equally balanced. The accounting equation is as follows;
- a. Journalize the issuance of common stock.
Date | Account Title and Explanation | Debit ($) | Credit ($) |
April, 1 | Cash (A+) | 200,000 | |
Common stock (SE+) | 200,000 | ||
(To record the issuance of common stock) |
Table (1)
- Cash is an asset account. Thus, an increase in cash increases the value of 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 value of stockholders equity account. Hence, common stock account is being credited to increase its balance by $200,000.
- b. Journalize the purchase of building partly on cash and partly on account by signing a note.
Date | Account Title and Explanation | Debit ($) | 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 value of asset account. Hence, debit buildings account by $142,000.
- Notes payable is a liability account. Thus, an increase in notes payable increases the value of 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 value of asset account. Hence, credit cash account by $71,000.
- c. Journalize the service provided on account.
Date | Account Title and Explanation | Debit ($) | Credit ($) |
April, 3 | Accounts receivable (A+) | 16,000 | |
Service revenue (R+, SE+) | 16,000 | ||
(To record the service provided on account) |
Table (3)
- Accounts receivable is an asset account. Thus, an increase in accounts receivable increases the value of 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 value of stockholder’s equity account. Hence, service revenue account is being credited to increase its balance by $16,000.
- d. Journalize the rent earned.
Date | Account Title and Explanation | Debit ($) | Credit ($) |
April, 4 | Cash (A+) | 13,000 | |
Rent revenue (R+, SE+) | 13,000 | ||
(To record the receipt of rent) |
Table (4)
- Cash is an asset account. Thus, an increase in cash increases the value of 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 value of stockholder’s equity account. Hence, rent revenue account is being credited to increase its balance by $13,000.
- e. Journalize the cash received from customer for the service yet to provide.
Date | Account Title and Explanation | Debit ($) | Credit ($) |
April, 5 | Cash (A+) | 1,500 | |
Deferred revenue (L+) | 1,500 | ||
(To record the receipt of cash for the service yet to provide ) |
Table (5)
- Cash is an asset account. Thus, an increase in cash increases the value of asset account. Hence, debit cash account by $1,500.
- Deferred revenue is a liability account. Thus, an increase in deferred revenue increases the value of liability account. Hence, deferred revenue account is being credited to increase its balance by $1,500.
- f. Journalize the purchase of supplies on account.
Date | Account Title and Explanation | Debit ($) | 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 value of asset account. Hence, debit supplies account by $3,000.
- Accounts payable is a liability account. Thus, an increase in accounts payable increases the value of liability account. Hence, accounts payable account is being credited to increase its balance by $3,000.
- g. Journalize the amount paid for the purchase made already.
Date | Account Title and Explanation | Debit ($) | Credit ($) |
April, 7 | Accounts payable (L–) | 1,700 | |
Cash (A–) | 1,700 | ||
(To record the payment of cash for the purchases made already) |
Table (7)
- Accounts payable is a liability account. Thus, an increase in accounts payable increases the value of 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 value of asset account. Hence, credit cash account by $1,700.
- h. Journalize the amount received from customer.
Date | Account Title and Explanation | Debit ($) | 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 value of asset account. Hence, debit cash account by $1,000.
- Accounts receivable is an asset account. Thus, a decrease in accounts receivable decreases the value of asset account. Hence, credit accounts receivable account by $1,000.
- i. Journalize the prepaid insurance.
Date | Account Title and Explanation | Debit ($) | 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 value of asset account. Hence, debit prepaid insurance account by $3,600.
- Cash is an asset account. Thus, a decrease in cash decreases the value of asset account. Hence, credit cash account by $3,600.
- j. Journalize the utilities expense.
Date | Account Title and Explanation | Debit ($) | 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 value of 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 value of asset account. Hence, cash account is being credited to decrease its balance by $800.
- k. Journalize the payment made for the wages.
Date | Account Title and Explanation | Debit ($) | 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 value of 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 value of asset account. Hence, cash account is being credited to decrease its balance by $14,000.
- l. Journalize the bill received for utility expenses incurred, and it will be paid later.
Date | Account Title and Explanation | Debit ($) | Credit ($) |
April, 30 | Utilities expenses (E+, SE-) | 1,200 | |
Accounts payable (L+) | 1,200 | ||
(To record the receipt of bill 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 value of 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 value of liability account. Hence, accounts payable account is being credited to increase its balance by $1,200.
2.
Summarize the journal entries from requirement 1 in the T-accounts and 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:
Cash (A) | |||
Beginning Balance | $0 | b. | $71,000 |
a. | $200,000 | g. | $1,700 |
e. | $13,000 | i. | $3,600 |
e. | $1,500 | j. | $800 |
h. | $1,000 | k. | $14,000 |
Total | $215,500 | Total | $91,100 |
Ending Balance | $124,400 |
Supplies (A) | |||
Beginning Balance | $0 | ||
f. | 3,000 | ||
Ending Balance | $3,000 |
Accounts Receivable (A) | |||||||
Beginning Balance | $0 | ||||||
c. | 16,000 | h. | $1,000 | ||||
Ending Balance | $15,000 | ||||||
Prepaid insurance (A) | |||||||
Beginning Balance | $0 | ||||||
i. | $3,600 | ||||||
Ending Balance | $3,600 | ||||||
Buildings (A) | |||||||
Beginning Balance | $0 | ||||||
b. | $142,000 | ||||||
Ending Balance | $142,000 | ||||||
Utilities expense (E) | |||||||
Beginning Balance | $0 | ||||||
i. | 800 | ||||||
j. | $1,200 | ||||||
Ending Balance | $2,000 |
Salaries and Wages expense (E) | |||
Beginning Balance | $0 | ||
k. | $14,000 | ||
Ending Balance | $14,000 |
Accounts Payable (L) | |||
Beginning Balance | $0 | ||
g. | $1,700 | f. | $3,000 |
l. | $1,200 | ||
Ending Balance | $2,500 | ||
Common Stock (SE) | |||
Beginning Balance | $0 | ||
a. | $200,000 | ||
Ending Balance | $200,000 | ||
Deferred revenue (L) | |||
Beginning Balance | $0 | ||
e. | $1,500 | ||
Ending Balance | $1,500 | ||
Notes payable (L) | |||
Beginning Balance | $0 | ||
b. | $71,000 | ||
Ending Balance | $71,000 |
Rent revenue (R) | |||
Beginning Balance | $0 | ||
d. | $13,000 | ||
Ending Balance | $13,000 |
Service Revenue (R) | |||
Beginning Balance | $ | ||
c. | $16,000 | ||
Ending Balance | $16,000 |
3.
Prepare the unadjusted trial balance at the end of April, 30.
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 S at 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 | |
Deferred 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 $304,000.
4.
Calculate the preliminary net income and net profit margin and describe whether the net profit is better or worse than the competitor.
Explanation of Solution
Net income: Net income is the excess amount of revenue which arises after deducting all the expenses of a company. In simple terms, it is the difference between total revenue and total expenses of the company.
Compute the preliminary net income of the company as follows:
Particulars | Amount ($) | 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 (14)
Compute the net profit margin of the Company:
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
- 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_forwardJournal Entries, Trial Balance, and Financial Statements Neveranerror Inc. was organized on June 2 by a group of accountants to provide accounting and tax services to small businesses. The following transactions occurred during the first month of business: June 2: Received contributions of $10,000 from each of the three owners of the business in exchange for shares of stock. June 5: Purchased a computer system for $12,000. The agreement with the vendor requires a down payment of $2,500 with the balance due in 60 days. June 8: Signed a two-year promissory note at the bank and received cash of $20,000. June 15: Billed $12,350 to clients for the first half of June. Clients are billed twice a month for services performed during the month, and the bills are payable within ten days. June 17: Paid a $900 bill from the local newspaper for advertising for the month of June. June 23: Received the amounts billed to clients for services performed during the first half of the month. June 28: Received and paid gas, electric, and water bills. The total amount is $2,700. June 29: Received the landlords bill for $2,200 for rent on the office space that Neveranerror leases. The bill is payable by the 10th of the following month. June 30: Paid salaries and wages for June. The total amount is $5,670. June 30: Billed $18,400 to clients for the second half of June. June 30: Declared and paid dividends in the amount of $6,000. Required Prepare journal entries on the books of Neveranerror Inc. to record the transactions entered into during the month. Ignore depreciation expense and interest expense. Prepare a trial balance at June 30. Prepare the following financial statements: Income statement for the month of June Statement of retained earnings for the month of June Classified balance sheet at June 30 Assume that you have just graduated from college and have been approached to join this company as an accountant. From your reading of the financial statements for the first month, would you consider joining the company? Explain your answer. Limit your answer to financial considerations only.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
- In March, K. Haas, M.D., established the Haas Sports Injury Clinic. The clinics account headings are presented below. Transactions completed during the month of March follow. a. Haas deposited 48,000 in a bank account in the name of the business. b. Paid the rent for the month, 2,200, Ck. No. 1000 (Rent Expense). c. Bought supplies for cash from Medco Co., 2,138. d. Bought professional equipment on account from Med-Tech Company, 18,000. e. Bought office equipment on account from Equipment Depot, 1,955. f. Sold professional services for cash, 8,960 (Professional Fees). g. Paid on account to Med-Tech Company, 3,000, Ck. No. 1001. h. Received and paid the bill for utilities, 472, Ck. No. 1002 (Utilities Expense). i. Paid the salary of the assistant, 1,738, Ck. No. 1003 (Salary Expense). j. Sold professional services for cash, 10,196 (Professional Fees). k. Haas withdrew cash for personal use, 3,500, Ck. No. 1004. 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 revenue, expenses, or a withdrawal. 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_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_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_forward
- In March, K. Haas, M.D., established the Haas Sports Injury Clinic. The clinics account headings are presented below. Transactions completed during the month of March follow. a. Haas deposited 48,000 in a bank account in the name of the business. b. Paid the rent for the month, 2,200, Ck. No. 1000. c. Bought supplies for cash from Medco Co., 2,138. d. Bought professional equipment on account from Med-Tech Company, 18,000. e. Bought office equipment on account from Equipment Depot, 1,955. f. Sold professional services for cash, 8,960. g. Paid on account to Med-Tech Company, 3,000, Ck. No. 1001. h. Received and paid the bill for utilities, 472, Ck. No. 1002. i. Paid the salary of the assistant, 1,738, Ck. No. 1003. j. Sold professional services for cash, 10,196. k. Haas withdrew cash for personal use, 3,500, Ck. No. 1004 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_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_forwardT ACCOUNTS AND TRIAL BALANCE Sue Jantz started a business in August 20-- called Jantz Plumbing Service. Jantz hired a part-time college student as an administrative assistant. Jantz has decided to use the following accounts: The following transacrions occurred during August: (a) Invested cash in the business, 30,000. (b) Purchased a used van for cash, 8,000. (c) Purchased plumbing equipment on account, 4,000. (d) Received cash for services rendered, 3,000. (e) Paid cash on account owed from transaction (c), 1,000. (f) Paid rent for the month, 700. (g) Paid phone bill, 100. (h) Earned revenue on account, 4,000. (i) Purchased office supplies for cash, 300. (j) Paid wages to student, 500. (k) Purchased a one-year insurance policy, 800. (l) Received cash from services performed in transaction (h), 3,000. (m) Paid cash for advertising expense, 2,000. (n) Purchased additional plumbing equipment for 2,000, paying 500 cash and spreading the remaining payments over the next six months. (o) Earned revenue from services for the remainder of the month of 2,800: 1,100 in cash and 1,700 on account. (p) Withdrew cash at the end of the month, 3,000. REQUIRED 1. Enter the transactions in T accounts, identifying each transaction with its responding letter. 2. Foot and balance the accounts where necessary. 3. Prepare a trial balance as of August 31, 20--.arrow_forward
- Journal 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_forwardOn July 1 of this year, R. Green established the Green Rehab Clinic. The organizations account headings are presented below. Transactions completed during the month of July follow. a. Green deposited 30,000 in a bank account in the name of the business. b. Paid the office rent for the month, 1,800, Ck. No. 2001 (Rent Expense). c. Bought supplies for cash, 362, Ck. No. 2002. d. Bought professional equipment on account from Rehab Equipment Company, 18,000. e. Bought office equipment from Hi-Tech Computers, 2,890, paying 890 in cash and placing the balance on account, Ck. No. 2003. f. Sold professional services for cash, 4,600 (Professional Fees). g. Paid on account to Rehab Equipment Company, 700, Ck. No. 2004. h. Received and paid the bill for utilities, 367, Ck. No. 2005 (Utilities Expense). i. Paid the salary of the assistant, 1,150, Ck. No. 2006 (Salary Expense). j. Sold professional services for cash, 3,868 (Professional Fees). k. Green withdrew cash for personal use, 1,800, Ck. No. 2007. 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_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_forward
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