Concept explainers
No | Account Title | Debit | Credit |
101 | Cash | $38,264 | |
106 | Accounts receivable | 12,618 | |
126 | Computer supplies | 2,545 | |
128 | Prepaid insurance | 2,220 | |
131 | Prepaid rent | 3,300 | |
163 | Office equipment | 8,000 | |
164 | $ 0 | ||
167 | Computer equipment | 20,000 | |
168 | Accumulated depreciation—Computer equipment | 0 | |
201 | Accounts payable | 0 | |
210 | Wages payable | 0 | |
236 | Unearned computer services revenue | 0 | |
307 | Common stock | 73,000 | |
318 | 0 | ||
319 | Dividends | 5,600 | |
403 | Computer services revenue | 25,659 | |
612 | Depreciation expense—Office equipment | 0 | |
613 | Depreciation expense—Computer equipment | 0 | |
623 | Wages expense | 2,625 | |
637 | Insurance expense | 0 | |
640 | Rent expense | 0 | |
652 | Computer supplies expense | 0 | |
655 | Advertising expense | 1,728 | |
676 | Mileage expense | 704 | |
677 | Miscellaneous expenses | 250 | |
684 | Repairs expense—Computer | 805 | |
Total | $98,659 | $98,659 | |
The following additional facts are collected for use in making
- The December 31 inventory count of computer supplies shows $580 still available.
- Three months have expired since the 12-month insurance premium was paid in advance.
- As of December 31, Lyn Addie has not been paid for four days of work at $125 per day.
- The computer system, acquired on October 1, is expected to have a four-year life with no salvage value.
- The office equipment, acquired on October 1, is expected to have a five-year life with no salvage value.
- Three of the four months’ prepaid rent have expired.
Required
- Prepare
journal entries to record each of the December transactions and events for Business Solutions - Prepare adjusting entries to record each of the December
1.
To prepare: Journal entries to record December transaction and posting them to ledger account.
Explanation of Solution
Preparing journal entries:
Paid $1,025 for advertising cost:
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) | |
December 2 | Advertising Expense | 1,025 | |||
Cash | 1,025 | ||||
(Being cash paid for advertising expense) | |||||
Table (1) |
- Advertising Expense is an expense. Since, expense reduces equity, debit advertising expense account.
- Cash is an asset. Since, cash is used to pay expense, asset is reduced. Hence, credit cash account.
Cash paid for minor repairs of the company’s computer:
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) | |
December 3 | Repair Expense | 500 | |||
Cash | 500 | ||||
(Being cash spend on repairs) | |||||
Table (2) |
- Repair Expense is an expense. Since, expense reduces equity, debit repair expense account.
- Cash is an asset. Since, cash is used to pay expense, asset is reduced. Hence, credit cash account.
Cash received against the accounts receivable of November month:
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) | |
December 4 | Cash | 3,950 | |||
Accounts receivable | 3,950 | ||||
(Being money received against accounts receivable ) | |||||
Table (3) |
- Cash is an asset. Since, cash is received, it increases asset. Hence debit cash account
- Accounts receivable is an asset. Since, money is received, it reduces asset. Hence, credit accounts receivable account.
Paid cash for six days of work:
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) | |
December 10 | Wages Expense | 750 | |||
Cash | 750 | ||||
(Being Wages paid for six days of work) | |||||
Table (4) |
- Wages Expense is an expense. Since, expense reduces equity, debit wages expense account.
- Cash is an asset. Since, cash is used to pay expense, asset is reduced. Hence, credit cash account.
Working notes:
Calculation of six days of wages,
Cash received in advance for a project:
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) | |
December 14 | Cash | 1,500 | |||
Unearned computer service revenue | 1,500 | ||||
(Being money received but not earned yet ) | |||||
Table (5) |
- Cash is an asset. Since, cash is received, it increases asset. Hence debit cash account
- Unearned computer service revenue is a liability. Since, money is received but not earned yet, it increases liability. Hence, credit unearned computer service revenue account.
Purchased computer supplies on credit:
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) | |
December 15 | Computer supplies | 1,100 | |||
Accounts payable | 1,100 | ||||
(Being computer supplies purchased on credit ) | |||||
Table (6) |
- Computer supplies are an asset. Since, computer supplies is purchased, it increases asset. Hence debit computer supplies account.
- Accounts payable is a liability. Since, computer supplies is purchased but not paid yet, it increases liability. Hence, credit accounts payable account.
Sent a reminder to G. Company for payment of fees:
No entry, because it is just a reminder and no quantitative transaction occurred.
Cash received as a payment of a project:
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) | |
December 20 | Cash | 5,625 | |||
Computer service revenue | 5,625 | ||||
(Being money received on completion of a project ) | |||||
Table (7) |
- Cash is an asset. Since, cash is received, it increases asset. Hence debit cash account.
- Computer service revenue is an income. Since, money is received and earned, it increases income. Hence, credit computer service revenue account.
Took the week off for holidays:
No entry, because business was close due to holidays and no quantitative transaction occurred.
Cash received against the accounts receivable:
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) | |
December 28 | Cash | 3,000 | |||
Accounts receivable | 3,000 | ||||
(Being money received against accounts receivable ) | |||||
Table (8) |
- Cash is an asset. Since, cash is received, it increases asset. Hence debit cash account
- Accounts receivable is an asset. Since, money is received, it reduces asset. Hence, credit accounts receivable account.
Reimbursed S.R for business automobile mileage:
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) | |
December 29 | Mileage expense | 192 | |||
Cash | 192 | ||||
(Being dividends paid using cash) | |||||
Table (9) |
- Mileage expense is an expense. Since, expense reduces equity, debit mileage expense account.
- Cash is an asset. Since, cash is used to pay mileage expense, asset is reduced. Hence, credit cash account.
Working notes:
Calculation of mileage expense,
Company paid $1,500 cash as dividends:
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) | |
December 31 | Dividends | 1,500 | |||
Cash | 1,500 | ||||
(Being dividends paid using cash) | |||||
Table (10) |
- Dividend is distributed among shareholders. Since, it reduces equity, debit dividends account
- Cash is an asset. Since, cash is used to pay dividend, asset is reduced. Hence, credit cash account.
Post journal entries to ledger account:
Cash Acct. No. 101 | |||||
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) | Balance ($) |
December 1 | Balance b/f | 38,264 | 38,264 | ||
December 2 | Advertising expense | 1,025 | 37,239 | ||
December 3 | Repairs expense | 500 | 36,739 | ||
December 4 | Accounts receivable | 3,950 | 40,689 | ||
December 10 | Salary expense | 750 | 39,939 | ||
December 14 | Unearned computer service revenue | 1,500 | 41,439 | ||
December 20 | Computer service revenue | 5,625 | 47,064 | ||
December 28 | Accounts receivable | 3,000 | 50,064 | ||
December 29 | Mileage expense | 192 | 49,872 | ||
December 31 | Dividends | 1,500 | 48,372 | ||
Table (11) |
The ending balance is $48,372.
Accounts Receivable Acct. No. 106 | |||||
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) | Balance ($) |
December 1 | Balance b/f | 12,618 | 12,618 | ||
December 4 | Cash | 3,950 | 8,668 | ||
December 28 | Cash | 3,000 | 5,668 | ||
Table (12) |
The ending balance is $5,668.
Computer Supplies Acct. No. 126 | |||||
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) | Balance ($) |
December 1 | Balance b/f | 2,545 | 2,545 | ||
December 15 | Accounts payable | 1,100 | 3,645 | ||
Table (13) |
The ending balance is $3,645.
Prepaid Insurance Acct. No. 128 | |||||
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) | Balance ($) |
December 1 | Balance b/f | 2,220 | 2,220 | ||
Table (14) |
The ending balance is $2,220.
Prepaid Rent Acct. No. 131 | |||||
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) | Balance ($) |
December 1 | Balance b/f | 3,300 | 3,300 | ||
Table (15) |
The ending balance is $3,300.
Office Equipment Acct. No. 163 | |||||
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) | Balance ($) |
December 1 | Balance b/f | 8,000 | 8,000 | ||
Table (16) |
The ending balance is $8,000.
Accumulated depreciation Office Equipment Acct. No. 164 | |||||
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) | Balance ($) |
December 1 | Balance b/f | 0 | 0 | ||
Table (17) |
The ending balance is $0.
Computer Equipment Acct. No. 167 | |||||
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) | Balance ($) |
December 1 | Balance b/f | 20,000 | 20,000 | ||
Table (18) |
The ending balance is $20,000.
Accumulated depreciation Computer Equipment Acct. No. 168 | |||||
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) | Balance ($) |
December 1 | Balance b/f | 0 | 0 | ||
Table (19) |
The ending balance is $0.
Accounts Payable Acct. No. 201 | |||||
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) | Balance ($) |
December 1 | Balance b/f | 0 | 0 | ||
December 15 | Computer supplies | 1,100 | 1,100 | ||
Table (20) |
The ending balance is $1,100.
Wages Payable Acct. No. 210 | |||||
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) | Balance ($) |
December 1 | Balance b/f | 0 | 0 | ||
Table (21) |
The ending balance is $0.
Unearned computer service revenue account Acct. No. 236 | |||||
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) | Balance ($) |
December 1 | Balance b/f | 0 | 0 | ||
December 14 | Cash | 1,500 | 1,500 | ||
Table (22) |
The ending balance is $1,500.
Common Stock Acct. No. 307 | |||||
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) | Balance ($) |
December 1 | Balance b/f | 73,000 | 73,000 | ||
Table (23) |
The ending balance is $73,000.
Retained Earnings Acct. No. 318 | |||||
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) | Balance ($) |
December 1 | Balance b/f | 0 | 0 | ||
Table (24) |
The ending balance is $0.
Dividends Acct. No. 319 | |||||
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) | Balance ($) |
December 1 | Balance b/f | 5,600 | 5,600 | ||
December 31 | Cash | 1,500 | 4,100 | ||
Table (25) |
The ending balance is $4,100.
Computer service revenue Acct. No. 403 | |||||
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) | Balance ($) |
December 1 | Balance b/f | 25,659 | 25,659 | ||
December 20 | Cash | 5,625 | 31,284 | ||
Table (26) |
The ending balance is $31,284.
Depreciation Expense Office equipment Acct. No. 612 | |||||
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) | Balance ($) |
December 1 | Balance b/f | 0 | 0 | ||
Table (27) |
The ending balance is $0.
Depreciation Expense Computer equipment Acct. No. 613 | |||||
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) | Balance ($) |
December 1 | Balance b/f | 0 | 0 | ||
Table (28) |
The ending balance is $0.
Wages Expense Acct. No. 623 | |||||
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) | Balance ($) |
December 1 | Balance b/f | 2,625 | 2,625 | ||
December 10 | Cash | 750 | 3,375 | ||
Table (29) |
The ending balance is $3,375.
Insurance Expense Acct. No. 637 | |||||
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) | Balance ($) |
December 1 | Balance b/f | 0 | 0 | ||
Table (30) |
The ending balance is $0.
Rent Expense Acct. No. 640 | |||||
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) | Balance ($) |
December 1 | Balance b/f | 0 | 0 | ||
Table (31) |
The ending balance is $0.
Computer Supplies Expense Acct. No. 652 | |||||
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) | Balance ($) |
December 1 | Balance b/f | 0 | 0 | ||
Table (32) |
The ending balance is $0.
Advertising Expense Acct. No. 655 | |||||
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) | Balance ($) |
December 1 | Balance b/f | 1,728 | 1,728 | ||
December 2 | Cash | 1,025 | 2,753 | ||
Table (33) |
The ending balance is $2,753.
Mileage Expense Acct. No. 684 | |||||
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) | Balance ($) |
December 1 | Balance b/f | 704 | 704 | ||
December 29 | Cash | 192 | 896 | ||
Table (34) |
The ending balance is $896.
Miscellaneous Expense Acct. No. 684 | |||||
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) | Balance ($) |
December 1 | Balance b/f | 250 | 250 | ||
Table (35) |
The ending balance is $250.
Repairs Expense- Computer Acct. No. 684 | |||||
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) | Balance ($) |
December 1 | Balance b/f | 805 | 0 | ||
December 3 | Cash | 500 | 1305 | ||
Table (36) |
The ending balance is $1,305.
2.
To prepare: Adjusting entries.
Explanation of Solution
a.
Date | Particulars | Post ref | Debit ($) | Credit ($) | |
December 31 | Computer Supplies Expense | 3,065 | |||
Computer Supplies | 3,065 | ||||
(Being $3,065 worth of computer Supplies got exhausted) | |||||
Table (37) |
- Computer supplies expense is an expense. Since, expense reduces equity, debit computer supplies expense account.
- Computer supplies are an asset. Since, some of asset used up, it reduces asset. Hence, credit computer supply account.
Working note:
Calculation of computer supply expense,
b.
Date | Particulars | Post ref | Debit ($) | Credit ($) | |
December 31 | Insurance Expense | 555 | |||
Prepaid Insurance | 555 | ||||
(Being insurance coverage worth $555has expired) | |||||
Table (38) |
- Insurance expense is a expense. Since, expense reduces equity, debit insurance expense account.
- Prepaid Insurance is an asset. Since, some of the insurance is used up, it reduces asset. Hence, credit prepaid insurance account.
Working Note:
Calculation of Insurance expense,
c.
Date | Particulars | Post ref | Debit ($) | Credit ($) | |
December 31 | Wages Expense | 500 | |||
Wages Payable | 500 | ||||
(Being salaries worth $600 due to be paid) | |||||
Table (39) |
- Wages expense is a expense. Since, expense reduces equity, debit wages expense account.
- Wages Payable is a liability. Since, expense has occurred but not paid yet, it increases liability. Hence, credit wages payable account.
Working note:
Calculation of salary expense,
d.
To prepare: Adjusting entry.
Explanation of Solution
Date | Particulars | Post ref | Debit ($) | Credit ($) | |
December 31 | Depreciation Expense-Computer Equipment | 1,250 | |||
Accumulated Depreciation-Computer Equipment | 1,250 | ||||
(Being depreciation is recorded) | |||||
Table (40) |
- Depreciation Expense is an expense. Since, expense reduces equity, debit depreciation expense-computer equipment account.
- Accumulated Depreciation-Computer equipment is a Contra asset. Since, it has a normal credit balance. Hence, credit accumulated depreciation-computer equipment account.
Working note:
Calculation of depreciation expense,
e.
Date | Particulars | Post ref | Debit ($) | Credit ($) | |
December 31 | Depreciation Expense-Office Equipment | 400 | |||
Accumulated Depreciation- Office Equipment | 400 | ||||
(Being depreciation is recorded) | |||||
Table (41) |
- Depreciation Expense is an expense. Since, expense reduces equity, debit depreciation expense-office equipment account.
- Accumulated Depreciation-Office equipment is a Contra asset. Since, it has a normal credit balance. Hence, credit accumulated depreciation-office equipment account.
Working note:
Calculation of depreciation expense,
f.
Date | Particulars | Post ref | Debit ($) | Credit ($) | |
December 31 | Rent Expense | 2,475 | |||
Prepaid Rent | 2,475 | ||||
(Being insurance coverage worth $2,475has expired) | |||||
Table (42) |
- Rent expense is a expense. Since, expense reduces equity, debit rent expense account.
- Prepaid rent is an asset. Since, some of the rent is used up, it reduces asset. Hence, credit prepaid rent account.
Working note:
Calculation of rent expense,
Post adjusting entries to ledger account:
Cash Acct. No. 101 | |||||
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) | Balance ($) |
December 1 | Balance b/f | 38,264 | 38,264 | ||
December 2 | Advertising expense | 1,025 | 37,239 | ||
December 3 | Repairs expense | 500 | 36,739 | ||
December 4 | Accounts receivable | 3,950 | 40,689 | ||
December 10 | Salary expense | 750 | 39,939 | ||
December 14 | Unearned computer service revenue | 1,500 | 41,439 | ||
December 20 | Computer service revenue | 5,625 | 47,064 | ||
December 28 | Accounts receivable | 3,000 | 50,064 | ||
December 29 | Mileage expense | 192 | 49,872 | ||
December 31 | Dividends | 1,500 | 48,372 | ||
Table (43) |
The ending balance is $48,372.
Accounts Receivable Acct. No. 106 | |||||
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) | Balance ($) |
December 1 | Balance b/f | 12,618 | 12,618 | ||
December 4 | Cash | 3,950 | 8,668 | ||
December 28 | Cash | 3,000 | 5,668 | ||
Table (45) |
The ending balance is $5,668.
Computer Supplies Acct. No. 126 | |||||
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) | Balance ($) |
December 1 | Balance b/f | 2,545 | 2,545 | ||
December 15 | Accounts payable | 1,100 | 3,645 | ||
December 31 | Computer supplies expense | 3065 | 580 | ||
Table (46) |
The ending balance is $580.
Prepaid Insurance Acct. No. 128 | |||||
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) | Balance ($) |
December 1 | Balance b/f | 2,220 | 2,220 | ||
December 31 | Insurance expense | 555 | 1,665 | ||
Table (47) |
The ending balance is $1,665.
Prepaid Rent Acct. No. 131 | |||||
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) | Balance ($) |
December 1 | Balance b/f | 3,300 | 3,300 | ||
December 31 | Rent expense | 2,475 | 825 | ||
Table (48) |
The ending balance is $825.
Office Equipment Acct. No. 163 | |||||
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) | Balance ($) |
December 1 | Balance b/f | 8,000 | 8,000 | ||
Table (49) |
The ending balance is $8,000.
Accumulated depreciation Office Equipment Acct. No. 164 | |||||
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) | Balance ($) |
December 1 | Balance b/f | 0 | 0 | ||
December 31 | Depreciation expense-Office equipment | 400 | 400 | ||
Table (50) |
The ending balance is $400.
Computer Equipment Acct. No. 167 | |||||
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) | Balance ($) |
December 1 | Balance b/f | 20,000 | 20,000 | ||
Table (51) |
The ending balance is $20,000.
Accumulated depreciation Computer Equipment Acct. No. 168 | |||||
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) | Balance ($) |
December 1 | Balance b/f | 0 | 0 | ||
December 31 | Depreciation expense-computer equipment | 1,250 | 1,250 | ||
Table (52) |
The ending balance is $1,250.
Accounts Payable Acct. No. 201 | |||||
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) | Balance ($) |
December 1 | Balance b/f | 0 | 0 | ||
December 15 | Computer supplies | 1,100 | 1,100 | ||
Table (53) |
The ending balance is $1,100.
Wages Payable Acct. No. 210 | |||||
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) | Balance ($) |
December 1 | Balance b/f | 0 | 0 | ||
December 31 | Wages expense | 500 | 500 | ||
Table (54) |
The ending balance is $600.
Unearned computer service revenue account Acct. No. 236 | |||||
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) | Balance ($) |
December 1 | Balance b/f | 0 | 0 | ||
December 14 | Cash | 1,500 | 1,500 | ||
Table (55) |
The ending balance is $1,500.
Common Stock Acct. No. 307 | |||||
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) | Balance ($) |
December 1 | Balance b/f | 73,000 | 73,000 | ||
Table (56) |
The ending balance is $73,000.
Retained Earnings Acct. No. 318 | |||||
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) | Balance ($) |
December 1 | Balance b/f | 0 | 0 | ||
Table (57) |
The ending balance is $0.
Dividends Acct. No. 319 | |||||
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) | Balance ($) |
December 1 | Balance b/f | 5,600 | 5,600 | ||
December 31 | Cash | 1,500 | 7,100 | ||
Table (58) |
The ending balance is $7,100.
Computer service revenue Acct. No. 403 | |||||
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) | Balance ($) |
December 1 | Balance b/f | 25,659 | 25,659 | ||
December 20 | Cash | 5,625 | 31,284 | ||
Table (59) |
The ending balance is $31,284.
Depreciation Expense Office equipment Acct. No. 612 | |||||
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) | Balance ($) |
December 1 | Balance b/f | 0 | 0 | ||
December 31 | Accumulated depreciation-Office Equipment | 400 | 400 | ||
Table (60) |
The ending balance is $400.
Depreciation Expense Computer equipment Acct. No. 613 | |||||
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) | Balance ($) |
December 1 | Balance b/f | 0 | 0 | ||
December 31 | Accumulated depreciation-Computer Equipment | 1,250 | 1,250 | ||
Table (61) |
The ending balance is $1,250.
Wages Expense Acct. No. 623 | |||||
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) | Balance ($) |
December 1 | Balance b/f | 2,625 | 2,625 | ||
December 10 | Cash | 750 | 3,375 | ||
December 31 | Wages payable | 500 | 3,875 | ||
Table (62) |
The ending balance is $3,875.
Insurance Expense Acct. No. 637 | |||||
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) | Balance ($) |
December 1 | Balance b/f | 0 | 0 | ||
December 31 | Prepaid insurance | 555 | 555 | ||
Table (63) |
The ending balance is $555.
Rent Expense Acct. No. 640 | |||||
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) | Balance ($) |
December 1 | Balance b/f | 0 | 0 | ||
December 31 | Prepaid rent | 2,475 | 2,475 | ||
Table (64) |
The ending balance is $2,475.
Computer Supplies Expense Acct. No. 652 | |||||
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) | Balance ($) |
December 1 | Balance b/f | 0 | 0 | ||
December 31 | Computer supplies | 3,065 | 3,065 | ||
Table (65) |
The ending balance is $3,065.
Advertising Expense Acct. No. 655 | |||||
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) | Balance ($) |
December 1 | Balance b/f | 1,728 | 1,728 | ||
December 2 | Cash | 1,025 | 2,753 | ||
Table (66) |
The ending balance is $2,753.
Mileage Expense Acct. No. 684 | |||||
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) | Balance ($) |
December 1 | Balance b/f | 704 | 704 | ||
December 29 | Cash | 192 | 896 | ||
Table (67) |
The ending balance is $896.
Miscellaneous Expense Acct. No. 684 | |||||
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) | Balance ($) |
December 1 | Balance b/f | 250 | 250 | ||
Table (68) |
The ending balance is $250.
Repairs Expense- Computer Acct. No. 684 | |||||
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) | Balance ($) |
December 1 | Balance b/f | 805 | 0 | ||
December 3 | Cash | 500 | 1,305 | ||
Table (69) |
The ending balance is $1,305.
3.
To prepare: An adjusted trial balance.
Explanation of Solution
B.S. Company | |||||
Adjusted Trial Balance | |||||
For the three month ended December 31, 2017 | |||||
Particulars | Debit ($) | Credit ($) | |||
Cash | 48,372 | ||||
Accounts Receivable | 5,668 | ||||
Computer Supplies | 580 | ||||
Prepaid Insurance | 1,665 | ||||
Prepaid Rent | 825 | ||||
Office equipment | 8,000 | ||||
Accumulated Depreciation- Office equipment | 400 | ||||
Computer equipment | 20,000 | ||||
Accumulated Depreciation- Computer equipment | 1,250 | ||||
Accounts payable | 1,100 | ||||
Wages Payable | 500 | ||||
Unearned computer service revenue | 1,500 | ||||
Common Stock | 73,000 | ||||
Retained earnings | 0 | ||||
Dividends | 7,100 | ||||
Computer service revenue | 31,284 | ||||
Depreciation Expense- Office equipment | 400 | ||||
Depreciation Expense- Computer equipment | 1,250 | ||||
Wages Expenses | 3,875 | ||||
Insurance Expense | 555 | ||||
Rent Expenses | 2,475 | ||||
Computer Supply Expense | 3,065 | ||||
Advertising Expense | 2,753 | ||||
Mileage expense | 896 | ||||
Miscellaneous Expense | 250 | ||||
Repairs expense | 1,305 | ||||
Total | 109,034 | 109,034 | |||
Table (70) |
Thus, the total of adjusted trial balance on 31thDecember, 2017 is $109,034.
4.
To prepare: Income statement.
Explanation of Solution
B.S. Company | |||||
Income Statement | |||||
For the three month ended December 31, 2017 | |||||
Particulars | Amount ($) | Amount ($) | |||
Revenue: | |||||
Service Revenue | 31,284 | ||||
Total Revenue | 31,284 | ||||
Expenses: | |||||
Depreciation Expense- Office equipment | 400 | ||||
Depreciation Expense- Computer equipment | 1,250 | ||||
Wages Expenses | 3,875 | ||||
Insurance Expense | 555 | ||||
Rent Expenses | 2,475 | ||||
Computer Supply Expense | 3,065 | ||||
Advertising Expense | 2,753 | ||||
Mileage expense | 896 | ||||
Miscellaneous Expense | 250 | ||||
Repairs expense | 1,305 | 16,824 | |||
Net income | 14,460 | ||||
Table (71) |
Thus, net income of B.S. Company is $14,460.
5.
To prepare: Retained Earnings Statement.
Explanation of Solution
B.S. Company | |||||
Retained Earnings Statement | |||||
For the three month ended December 31, 2017 | |||||
Particulars | Amount ($) | ||||
Opening balance | 0 | ||||
Net income | 14,460 | ||||
Dividends | (7,100) | ||||
Retained earnings | 7,360 | ||||
Table (72) |
Therefore, retained earnings of B.S. Company are $7,360.
5.
To prepare: Balance sheet.
Explanation of Solution
B.S. Company | |||||
Balance sheet | |||||
December 31, 2017 | |||||
Particulars | Amount ($) | ||||
Assets | |||||
Cash | 48,372 | ||||
Accounts Receivable | 5,668 | ||||
Computer Supplies | 580 | ||||
Prepaid Insurance | 1,665 | ||||
Prepaid Rent | 825 | ||||
Office equipment | 8,000 | ||||
Accumulated Depreciation- Office equipment | (400) | 7,600 | |||
Computer equipment | 20,000 | ||||
Accumulated Depreciation- Computer equipment | (1,250) | 18,750 | |||
Total Assets | 83,460 | ||||
Liabilities and Stockholder’s Equity | |||||
Liabilities | |||||
Accounts payable | 1,100 | ||||
Wages Payable | 500 | ||||
Unearned computer service revenue | 1,500 | ||||
Stockholder’s Equity | |||||
Common Stock | 73,000 | ||||
Retained earnings | 7,360 | ||||
Total stockholders’ equity | 80,360 | ||||
Total Liabilities and Stockholder’s equity | 83,460 | ||||
Table (73) |
Thus, the balance sheet total is $83,460.
7.
To prepare: Closing entries.
Explanation of Solution
Service Revenue transfer to income summary account for closing.
Date | Particulars | Post ref | Debit ($) | Credit ($) | |
July 31 | Service Revenue | 31,284 | |||
Income Summary | 31,284 | ||||
(Being service revenue transfer to income summary account) | |||||
Table (74) |
- Service revenue is revenue account. Since, revenue is transferred to income summary account, it reduces revenue. Hence, debit service revenue account.
- Income summary is a temporary account. Since, it is used for closing revenue account. Hence, credit income summary account.
All expenses transfer to income summary account for closing.
Date | Particulars | Post ref | Debit ($) | Credit ($) | |
July 31 | Income summary | 16,824 | |||
Depreciation Expense- Office equipment | 400 | ||||
Depreciation Expense- Computer equipment | 1,250 | ||||
Wages Expenses | 3,875 | ||||
Insurance Expense | 555 | ||||
Rent Expenses | 2,475 | ||||
Computer Supply Expense | 3,065 | ||||
Advertising Expense | 2,753 | ||||
Mileage expense | 896 | ||||
Miscellaneous Expense | 250 | ||||
Repairs expense | 1,305 | ||||
(Being all expenses transfer to income summary account) | |||||
Table (75) |
- Income summary is a temporary account. Since, it is used for closing expense account. Hence, debit income summary account.
- All expenses are expenses. Since, expenses are transferred to income summary account, expenses is reduced. Hence, credit all expenses account
Income Summary transfer to income summary account for closing.
Date | Particulars | Post ref | Debit ($) | Credit ($) | |
July 31 | Income Summary | 14,460 | |||
Retained Earning | 14,460 | ||||
(Being net income transfer to retained earnings) | |||||
Table (76) |
- Income summary is a temporary account. Since, it is used for transferring net income summary to retained account. Hence, debit income summary account.
- Retained earnings come under stockholder’s equity. Since, retained earning has increased. Hence, credit retained earning account.
Deduct dividend from retained earnings.
Date | Particulars | Post ref | Debit ($) | Credit ($) | |
July 31 | Retained Earning | 7,100 | |||
Dividend | 7,100 | ||||
(Being dividend distributed) | |||||
Table (77) |
- Retained earnings come under stockholder’s equity. Since, retained earnings is used to pay dividend, retained earnings has decreased. Hence, debit retained earnings account.
- Dividend is distributed from profit. Since it reduces retained earnings. Hence, credit dividend account.
Post closing entries to ledger account:
Cash Acct. No. 101 | |||||
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) | Balance ($) |
December 1 | Balance b/f | 38,264 | 38,264 | ||
December 2 | Advertising expense | 1,025 | 37,239 | ||
December 3 | Repairs expense | 500 | 36,739 | ||
December 4 | Accounts receivable | 3,950 | 40,689 | ||
December 10 | Salary expense | 750 | 39,939 | ||
December 14 | Unearned computer service revenue | 1,500 | 41,439 | ||
December 20 | Computer service revenue | 5,625 | 47,064 | ||
December 28 | Accounts receivable | 3,000 | 50,064 | ||
December 29 | Mileage expense | 192 | 49,872 | ||
December 31 | Dividends | 1,500 | 48,372 | ||
Table (78) |
The ending balance is $48,372.
Accounts Receivable Acct. No. 106 | |||||
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) | Balance ($) |
December 1 | Balance b/f | 12,618 | 12,618 | ||
December 4 | Cash | 3,950 | 8,668 | ||
December 28 | Cash | 3,000 | 5,668 | ||
Table (79) |
The ending balance is $5,668.
Computer Supplies Acct. No. 126 | |||||
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) | Balance ($) |
December 1 | Balance b/f | 2,545 | 2,545 | ||
December 15 | Accounts payable | 1,100 | 3,645 | ||
December 31 | Computer supplies expense | 3065 | 580 | ||
Table (80) |
The ending balance is $580.
Prepaid Insurance Acct. No. 128 | |||||
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) | Balance ($) |
December 1 | Balance b/f | 2,220 | 2,220 | ||
December 31 | Insurance expense | 555 | 1,665 | ||
Table (81) |
The ending balance is $1,665.
Prepaid Rent Acct. No. 131 | |||||
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) | Balance ($) |
December 1 | Balance b/f | 3,300 | 3,300 | ||
December 31 | Rent expense | 2,475 | 825 | ||
Table (82) |
The ending balance is $825.
Office Equipment Acct. No. 163 | |||||
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) | Balance ($) |
December 1 | Balance b/f | 8,000 | 8,000 | ||
Table (83) |
The ending balance is $8,000.
Accumulated depreciation Office Equipment Acct. No. 164 | |||||
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) | Balance ($) |
December 1 | Balance b/f | 0 | 0 | ||
December 31 | Depreciation expense-Office equipment | 400 | 400 | ||
Table (84) |
The ending balance is $400.
Computer Equipment Acct. No. 167 | |||||
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) | Balance ($) |
December 1 | Balance b/f | 20,000 | 20,000 | ||
Table (85) |
The ending balance is $20,000.
Accumulated depreciation Computer Equipment Acct. No. 168 | |||||
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) | Balance ($) |
December 1 | Balance b/f | 0 | 0 | ||
December 31 | Depreciation expense-computer equipment | 1,250 | 1,250 | ||
Table (86) |
The ending balance is $1,250.
Accounts Payable Acct. No. 201 | |||||
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) | Balance ($) |
December 1 | Balance b/f | 0 | 0 | ||
December 15 | Computer supplies | 1,100 | 1,100 | ||
Table (87) |
The ending balance is $1,100.
Wages Payable Acct. No. 210 | |||||
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) | Balance ($) |
December 1 | Balance b/f | 0 | 0 | ||
December 31 | Wages expense | 500 | 500 | ||
Table (88) |
The ending balance is $600.
Unearned computer service revenue account Acct. No. 236 | |||||
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) | Balance ($) |
December 1 | Balance b/f | 0 | 0 | ||
December 14 | Cash | 1,500 | 1,500 | ||
Table (89) |
The ending balance is $1,500.
Common Stock Acct. No. 307 | |||||
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) | Balance ($) |
December 1 | Balance b/f | 73,000 | 73,000 | ||
Table (90) |
The ending balance is $73,000.
Retained Earnings Acct. No. 318 | |||||
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) | Balance ($) |
December 1 | Balance b/f | 0 | 0 | ||
December 31 | Income summary | 14,460 | |||
December 31 | Dividends | 7,100 | 7,360 | ||
Table (91) |
The ending balance is $7,360.
Dividends Acct. No. 319 | |||||
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) | Balance ($) |
December 1 | Balance b/f | 5,600 | 5,600 | ||
December 31 | Cash | 1,500 | 7,100 | ||
December 31 | Retained earnings | 7,100 | 0 | ||
Table (92) |
The ending balance is $0.
Computer service revenue Acct. No. 403 | |||||
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) | Balance ($) |
December 1 | Balance b/f | 25,659 | 25,659 | ||
December 20 | Cash | 5,625 | 31,284 | ||
December 31 | Income summary | 31,284 | 0 | ||
Table (93) |
The ending balance is $0.
Depreciation Expense Office equipment Acct. No. 612 | |||||
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) | Balance ($) |
December 1 | Balance b/f | 0 | 0 | ||
December 31 | Accumulated depreciation-Office Equipment | 400 | 400 | ||
December 31 | Income summary | 400 | 0 | ||
Table (94) |
The ending balance is $0.
Depreciation Expense Computer equipment Acct. No. 613 | |||||
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) | Balance ($) |
December 1 | Balance b/f | 0 | 0 | ||
December 31 | Accumulated depreciation-Computer Equipment | 1,250 | 1,250 | ||
December 31 | Income summary | 1,250 | 0 | ||
Table (95) |
The ending balance is $0.
Wages Expense Acct. No. 623 | |||||
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) | Balance ($) |
December 1 | Balance b/f | 2,625 | 2,625 | ||
December 10 | Cash | 750 | 3,375 | ||
December 31 | Wages payable | 500 | 3,875 | ||
December 31 | Income summary | 3,875 | 0 | ||
Table (96) |
The ending balance is $0.
Insurance Expense Acct. No. 637 | |||||
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) | Balance ($) |
December 1 | Balance b/f | 0 | 0 | ||
December 31 | Prepaid insurance | 555 | 555 | ||
December 31 | Income summary | 555 | 0 | ||
Table (97) |
The ending balance is $0.
Rent Expense Acct. No. 640 | |||||
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) | Balance ($) |
December 1 | Balance b/f | 0 | 0 | ||
December 31 | Prepaid rent | 2,475 | 2,475 | ||
December 31 | Income summary | 2,475 | 0 | ||
Table (98) |
The ending balance is $0.
Computer Supplies Expense Acct. No. 652 | |||||
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) | Balance ($) |
December 1 | Balance b/f | 0 | 0 | ||
December 31 | Computer supplies | 3,065 | 3,065 | ||
December 31 | Income summary | 3,065 | 0 | ||
Table (99) |
The ending balance is $0.
Advertising Expense Acct. No. 655 | |||||
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) | Balance ($) |
December 1 | Balance b/f | 1,728 | 1,728 | ||
December 2 | Cash | 1,025 | 2,753 | ||
December 31 | Income summary | 2,753 | 0 | ||
Table (100) |
The ending balance is $0.
Mileage Expense Acct. No. 684 | |||||
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) | Balance ($) |
December 1 | Balance b/f | 704 | 704 | ||
December 29 | Cash | 192 | 896 | ||
December 31 | Income summary | 896 | 0 | ||
Table (101) |
The ending balance is $0.
Miscellaneous Expense Acct. No. 684 | |||||
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) | Balance ($) |
December 1 | Balance b/f | 250 | 250 | ||
December 31 | Income summary | 250 | 0 | ||
Table (102) |
The ending balance is $0.
Repairs Expense- Computer Acct. No. 684 | |||||
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) | Balance ($) |
December 1 | Balance b/f | 805 | 0 | ||
December 3 | Cash | 500 | 1,305 | ||
December 31 | Income summary | 1,305 | 0 | ||
Table (103) |
The ending balance is $0.
8.
To prepare: Post closing trial balance.
Explanation of Solution
B.S. Company | |||||
Post Closing Trial Balance | |||||
For the three month ended December 31, 2017 | |||||
Particulars | Debit ($) | Credit ($) | |||
Cash | 48,372 | ||||
Accounts Receivable | 5,668 | ||||
Computer Supplies | 580 | ||||
Prepaid Insurance | 1,665 | ||||
Prepaid Rent | 825 | ||||
Office equipment | 8,000 | ||||
Accumulated Depreciation- Office equipment | 400 | ||||
Computer equipment | 20,000 | ||||
Accumulated Depreciation- Computer equipment | 1,250 | ||||
Accounts payable | 1,100 | ||||
Wages Payable | 500 | ||||
Unearned computer service revenue | 1,500 | ||||
Common Stock | 73,000 | ||||
Retained earnings | 7,360 | ||||
Dividends | 0 | ||||
Computer service revenue | 0 | ||||
Depreciation Expense- Office equipment | 0 | ||||
Depreciation Expense- Computer equipment | 0 | ||||
Wages Expenses | 0 | ||||
Insurance Expense | 0 | ||||
Rent Expenses | 0 | ||||
Computer Supply Expense | 0 | ||||
Advertising Expense | 0 | ||||
Mileage expense | 0 | ||||
Miscellaneous Expense | 0 | ||||
Repairs expense | 0 | ||||
Total | 85,110 | 85,110 | |||
Table (104) |
Thus, the total of post closing trial balance on December 31, 2017 is $85,110.
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Chapter 3 Solutions
CONNECT PLUS-FINANCIAL & MANAGERIAL AC
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