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College Accounting (Book Only): A ...

13th Edition
Scott + 1 other
ISBN: 9781337280570

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BuyFindarrow_forward

College Accounting (Book Only): A ...

13th Edition
Scott + 1 other
ISBN: 9781337280570
Textbook Problem

Lara’s Landscaping Service has the following chart of accounts:

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The following transactions were completed by Lara’s Landscaping Service:

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Required

  1. 1. Journalize the transactions in the general journal. Provide a brief explanation for each entry.
  2. 2. If you are using working papers, write the name of the owner on the Capital and Drawing accounts. (Skip this step if you are using CLGL.)
  3. 3. Post the journal entries to the general ledger accounts. (Skip this step if you are using CLGL.)
  4. 4. Prepare a trial balance dated March 31, 20–.

*If you are using CLGL, use the year 2020 when recording transaction! and preparing reports.

1.

To determine

Prepare journal entries for the given transactions.

Explanation

Journal entry: Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.

Debit and credit rules:

  • ■ Debit an increase in asset account, increase in expense account, decrease in liability account, and decrease in stockholders’ equity accounts.
  • ■ Credit decrease in asset account, increase in revenue account, increase in liability account, and increase in stockholders’ equity accounts.

Prepare journal entries for the given transactions.

Transaction on March 1:

DateAccount Titles and ExplanationsPost. Ref.Debit ($)Credit ($)
March1Cash11135,000 
   JL, Capital311 35,000
  (Record cash invested in the business by JL)   

Table (1)

Description:

  • ■ Cash is an asset account. Since cash is invested in the business, asset account increased, and an increase in asset is debited.
  • ■ JL, Capital is an equity account. Since cash is contributed as capital by the owner, equity value increased, and an increase in equity is credited.

Transaction on March 4:

DateAccount Titles and ExplanationsPost. Ref.Debit ($)Credit ($)
March4Equipment1241,325 
   JL, Capital311 1,325
  (Record equipment invested in the business by JL)   

Table (2)

Description:

  • ■ Equipment is an asset account. Since equipment is invested in the business, asset account increased, and an increase in asset is debited.
  • ■ JL, Capital is an equity account. Since equipment is contributed as capital by the owner, equity value increased, and an increase in equity is credited.

Transaction on March 6:

DateAccount Titles and ExplanationsPost. Ref.Debit ($)Credit ($)
March6Equipment124915 
   Accounts Payable221 915
  (Record purchase of equipment)   

Table (3)

Description:

  • ■ Equipment is an asset account. Since equipment is bought, asset account increased, and an increase in asset is debited.
  • ■ Accounts Payable is a liability account. Since the payable increased, the liability increased, and an increase in liability is credited.

Transaction on March 7:

DateAccount Titles and ExplanationsPost. Ref.Debit ($)Credit ($)
March7Rent Expense512950 
   Cash111 950
  (Record payment of rent expense)   

Table (4)

Description:

  • ■ Rent Expense is an expense account. An increase in expense reduces the equity value, and a decrease in equity is debited.
  • ■ Cash is an asset account. Since cash is paid, asset account decreased, and a decrease in asset is credited.

Transaction on March 9:

DateAccount Titles and ExplanationsPost. Ref.Debit ($)Credit ($)
March9Equipment1245,300 
   Cash111 3,000
   Accounts Payable221 2,300
  (Record purchase of equipment)   

Table (5)

Description:

  • ■ Equipment is an asset account. Since equipment is bought, asset account increased, and an increase in asset is debited.
  • ■ Cash is an asset account. Since cash is paid, asset account decreased, and a decrease in asset is credited.
  • ■ Accounts Payable is a liability account. Since the payable increased, the liability increased, and an increase in liability is credited.

Transaction on March 10:

DateAccount Titles and ExplanationPost Ref.Debit ($)Credit ($)
March10Prepaid Insurance1171,800 
     Cash111 1,800
  (Record payment of insurance in advance)   

Table (6)

Description:

  • ■ Prepaid Insurance is an asset account. Since insurance is paid in advance, it is recorded as asset until it is consumed. So, asset value is increased, and an increase in asset is debited.
  • ■ Cash is an asset account. Since cash is paid, asset account decreased, and a decrease in asset is credited.

Transaction on March 13:

DateAccount Titles and ExplanationPost Ref.Debit ($)Credit ($)
March13Accounts Receivable1132,832 
   Landscaping Income411 2,832
  (Record services performed on account)   

Table (7)

Description:

  • ■ Accounts Receivable is an asset account. The amount is increased because amount to be received increased, and an increase in asset is debited.
  • ■ Landscaping Income is a revenue account. Since gains and revenues increase equity, and an increase in equity is credited, Landscaping Income account is credited.

Transaction on March 14:

DateAccount Titles and ExplanationsPost. Ref.Debit ($)Credit ($)
March14Supplies113380 
   Accounts Payable411 380
  (Record supplies bought on account)   

Table (8)

Description:

  • ■ Supplies is an asset account. Since store supplies are bought, asset account increased, and an increase in asset is debited.
  • ■ Accounts Payable is a liability account. Since the payable increased, the liability increased, and an increase in liability is credited.

Transaction on March 15:

DateAccount Titles and ExplanationPost Ref...

2.

To determine

Indicate the names of owner above the Capital and Drawing accounts.

3.

To determine

Post the journalized transactions in the ledger accounts.

4.

To determine

Prepare the trial balance for L’s Landscaping Service as at March 31, 20--.

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