Concept explainers
(a)
Journal:
Journal is referred as one of the books of accounts that record all the financial transactions of the business in a chronological order.
Rule of Debit and Credit:
Debit- Increase in all assets, expenses & dividends, and decrease in all liabilities and
Credit -Increase in all liabilities and stockholders’ equity, and decrease in all assets & expenses.
To record - The
(a)
Explanation of Solution
Record the transactions in journal for Company AQG.
Journal is referred as one of the books of accounts that record all the financial transactions of the business in a chronological order
Transaction -1
Date | Account Title and Description | Post Ref. |
Debit ($) |
Credit ($) |
June 1 | Prepaid Insurance | 1,800 | ||
Cash | 1,800 | |||
(To record the purchase of one year insurance policy) |
Table (1)
Description:
- Prepaid insurance is an asset, and increased by $1,800. So debit prepaid insurance with $1,800.
- Cash is an asset, and it is decreased by $1,800. So credit Cash by $1,800.
Transaction-2
Date | Account Titles and Description | Debit ($) | Credit ($) |
August 31 | Prepaid rent | 6,500 | |
Cash | 6,500 | ||
(To record the rent for 5 months in advance) |
Table (2)
Description:
- Prepaid rent is an asset, and increased by $6,500. So debit prepaid rent with $6,500.
- Cash is an asset, and it is decreased by $6,500. So credit cash by $6,500.
- Transaction-3
Date | Account Titles and Description | Debit ($) | Credit ($) |
September 4 | Cash | 3,600 | |
Unearned Service Revenue | 3,600 | ||
(To record the cash received in advance to render services for 9 months) |
Table (3)
Description:
- Cash is an asset, and increased by $3,600. So debit the cash account by $3,600.
- Unearned Service Revenue is a liability, and it is increased by $3,600. So credit unearned service revenue by $3,600.
Transaction-4
Date | Account Titles and Description | Debit ($) | Credit ($) |
November 30 | Prepaid Cleaning (1) | 2,000 | |
Cash | 2,000 | ||
(To record the cash paid in advance for 2 months cleaning) |
Table (4)
Description:
- Prepaid cleaning is an asset, and it is increased by $2,000. So debit prepaid cleaning by $2,000.
- Cash is an asset, and it is decreased by $2,000. So credit cash by 2,000.
Working note:
Calculate the amount of prepaid cleaning:
Transaction-5
Date | Account Titles and Description | Debit ($) | Credit ($) |
December 5 | Cash | 1,500 | |
Unearned Service Revenue | 1,500 | ||
(To record the cash received in advance from a club) |
Table (5)
Description:
- Cash is an asset, and it is increased by $1,500. So debit cash by $1,500.
- Unearned service revenue is a liability, and it is increased by $1,500. So credit unearned service revenue by $1,500.
(b)
Adjusting Entry:
To record- The adjusting entries on 31st December for company AQG.
(b)
Explanation of Solution
Solution:
Record the adjusting entries for company AQG
Adjusting entries indicates those entries, which are passed in the books of accounts at the end of one accounting period. These entries are passed in the books of accounts as per the revenue recognition principle and the expenses recognition principle to adjust the revenue, and the expenses of a business in the period of their occurrence.
Transaction -1
Date | Account Titles and Description | Debit ($) | Credit ($) |
December 31 | Insurance expenses (2) | 1,050 | |
Prepaid Insurance | 1,050 | ||
(To record the expiration of 7 months of insurance) |
Table (6)
Description:
- Insurance expense is stockholders’ equity, and it is decreased by $1,050. So debit insurance expenses by $1,050.
- Prepaid insurance is an asset, and it is decreased by $1,050. So credit prepaid insurance by $1.050.
Working notes:
Calculate the amount of Insurance Expired:
Transaction-2
Date | Account Titles and Description | Debit ($) | Credit ($) |
December 31 | Rent expenses (3) | 5,200 | |
Prepaid Rent | 5,200 | ||
(To record the expiration of 4 months of rent) |
Table (7)
Description:
- Rent expense is stockholders’ equity, and it is decreased by $5,200. So debit rent expenses by $5,200.
- Prepaid rent is an asset, and it is decreased by $5,200. So credit Prepaid rent by $5,200.
Working Notes:
Calculate the amount of Rent Expenses-
Transaction-3
Date | Account Titles and Description | Debit ($) | Credit ($) |
December 31 | Unearned Service Revenue | 1,600 | |
Service Revenue (4) | 1,600 | ||
(To record the service revenue for 4 month of services) |
Table (8)
Description:
- Unearned Service Revenue is a liability, and it is decreased by $1,600. So debit unearned service revenue by $1,600.
- Service Revenue is an income and it increases the stockholders’ equity by $1,600. So credit service revenue.
Working Notes:
Calculate the amount of service revenue to be recorded:
Transaction-4
Date | Account Titles and Description | Debit ($) | Credit ($) |
December 31 | Repairs and Maintenance Expenses | 1,000 | |
Prepaid Cleaning | 1,000 | ||
(To record the expenses for the month of December ) |
Table (9)
Description:
- Repairs and Maintenance expense is an expense and it decreases stockholders’ equity by $1,000. So debit repairs and maintenance expense by $1,000.
- Prepaid cleaning is an asset, and it is decreased by $1,000. So credit prepaid cleaning by $1,000.
Transaction-5
Date | Account Titles and Description | Debit ($) | Credit ($) |
December 31 | Unearned Service Revenue | 1,025 | |
Service Revenue (5) | 1,025 | ||
(To record the amount of services provided) |
Table (10)
Description:
- Unearned service revenue is a liability, and it is decreased by $1,025. So debit unearned service revenue by $1,025.
- Service revenue is an income and it is increased by $1,025. So credit service revenue with $1,025.
Working Notes:
Calculate the amount of Service Revenue:
(c)
T- Accounts:
T-account is an individual account, where the increases or decreases in the value of specific asset, liability, stockholder’s equity, revenue, and expenditure items are recorded. This account is known as T-account, because this account resembles the capital letter ‘T’.
To record: The posting of journal and adjusting entries to T-accounts
(c)
Explanation of Solution
The posting of journal and adjusting entries to T-accounts
T-account is an individual account, where the increases or decreases in the value of specific asset, liability, stockholder’s equity, revenue, and expenditure items are recorded. This account is known as T-account, because this account resembles the capital letter ‘T’
Prepaid Insurance
Prepaid Insurance | |||
June 1 | $1,800 | December 31 | $1,050 |
Bal. | $750 |
Prepaid Rent
Prepaid Rent | |||
August 31 | $6,500 | December 31 | $5,200 |
Bal. | $1,300 |
Unearned Service Revenue
Unearned Service Revenue | |||
December 31 | $1,800 | September 4 | $3,600 |
December 31 | $1,025 | September 5 | $1,500 |
Total | $5,100 | Total | $5,100 |
Bal. | $2,275 |
Prepaid Cleaning
Prepaid Cleaning | |||
November 30 | $2,000 | December 31 | $1,000 |
Bal. | $1,000 |
Insurance Expenses
Insurance Expenses | |||
December 31 | $1,050 | ||
Bal. | $1,050 |
Rent Expenses
Insurance Expenses | |||
December 31 | $5,200 | ||
Bal. | $5,200 |
Service Revenue
Unearned Service Revenue | |||
$1,800 | December 31 | $1,600 | |
$1,025 | December 31 | $1,025 | |
Bal. | $2,625 |
Repairs and Maintenance Expenses
Repairs and Maintenance Expenses | |||
December 31 | $1,000 | ||
Bal. | $1,000 |
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Chapter 4 Solutions
Financial Acct Print Ll W/ Wp
- The transactions completed by PS Music during June 2019 were described at the end of Chapter 1. The following transactions were completed during July, the second month of the businesss operations: July 1.Peyton Smith made an additional investment in PS Music by depositing 5,000 in PS Musics checking account. 1.Instead of continuing to share office space with a local real estate agency, Peyton decided to rent office space near a local music store. Paid rent for July, 1,750. 1.Paid a premium of 2,700 for a comprehensive insurance policy covering liability, theft, and fire. The policy covers a one-year period. 2.Received 1,000 cash from customers on account. 3.On behalf of PS Music, Peyton signed a contract with a local radio station, KXMD, to provide guest spots for the next three months. The contract requires PS Music to provide a guest disc jockey for 80 hours per month for a monthly fee of 3,600. Any additional hours beyond 80 will be billed to KXMD at 40 per hour. In accordance with the contract, Peyton received 7,200 from KXMD as an advance payment for the first two months. 3.Paid 250 to creditors on account. 4.Paid an attorney 900 for reviewing the July 3 contract with KXMD. (Record as Miscellaneous Expense.) 5.Purchased office equipment on account from Office Mart, 7,500. 8.Paid for a newspaper advertisement, 200. 11.Received 1,000 for serving as a disc jockey for a party. 13.Paid 700 to a local audio electronics store for rental of digital recording equipment. 14.Paid wages of 1,200 to receptionist and part-time assistant. Enter the following transactions on Page 2 of the two-column journal: 16.Received 2,000 for serving as a disc jockey for a wedding reception. 18.Purchased supplies on account, 850. July 21. Paid 620 to Upload Music for use of its current music demos in making various music sets. 22.Paid 800 to a local radio station to advertise the services of PS Music twice daily for the remainder of July. 23.Served as disc jockey for a party for 2,500. Received 750, with the remainder due August 4, 2019. 27.Paid electric bill, 915. 28.Paid wages of 1,200 to receptionist and part-time assistant. 29.Paid miscellaneous expenses, 540. 30.Served as a disc jockey for a charity ball for 1,500. Received 500, with the remainder due on August 9, 2019. 31.Received 3,000 for serving as a disc jockey for a party. 31.Paid 1,400 royalties (music expense) to National Music Clearing for use of various artists music during July. 31.Withdrew 1,250 cash from PS Music for personal use. PS Musics chart of accounts and the balance of accounts as of July 1, 2019 (all normal balances), are as follows: Instructions 1. Enter the July 1, 2019, account balances in the appropriate balance column of a four-column account. Write Balance in the Item column and place a check mark () in the Posting Reference column. (Hint: Verify the equality of the debit and credit balances in the ledger before proceeding with the next instruction.) 2. Analyze and journalize each transaction in a two-column journal beginning on Page 1, omitting journal entry explanations. 3. Post the journal to the ledger, extending the account balance to the appropriate balance column after each posting. 4. Prepare an unadjusted trial balance as of July 31, 2019.arrow_forwardThe transactions completed by PS Music during June 2019 were described at the end of Chapter 1. The following transactions were completed during July, the second month of the business's operations: July 1. Peyton Smith made an additional investment in PS Music by depositing 5,000 in PS Music's checking account. 1. Instead of continuing to share office space with a local real estate agency, Peyton decided to rent office space near a local music: store. Paid rent for July, 1,750. 1. Paid a premium of 2,700 for a comprehensive insurance policy covering liability, theft, and fire. The policy covers a one-year period. 2. Received 1,000 cash from customers on account. 3. On behalf of PS Music, Peyton signed a contract with a local radio station, KXMD, to provide guest spots for the next three months. The contract requires PS Music to provide a guest disc jockey for SO hours per month for a monthly fee of 3,600. Any additional hours beyond SO will be billed to KXMD at 40 per hour. In accordance with the contract, Peyton received 7,200 from KXMD as an advance payment for the first two months. 3. Paid 250 to creditors on account. 4. Paid an attorney 900 for reviewing the July 3 contract with KXMD. (Record as Miscellaneous Expense.) 5. Purchased office equipment on account from Office Mart, 7,500. 8. Paid for a newspaper advertisement, 200. 11. Received 1,000 for serving as a disc jockey for a party. 13. Paid 700 to a local audio electronics store for rental of digital recording equipment. 11. Paid wages of 1,200 to receptionist and part-time assistant. Enter the following transactions on Page 2 of the two-column journal: 16. Received 2,000 for serving as a disc jockey for a wedding reception. 18. Purchased supplies on account, 850. July 21. Paid 620 to Upload Music for use of its current music demos in making various music sets. 22. Paid 800 to a local radio station to advertise the services of PS Music twice daily for the remainder of July. 23. Served as disc jockey for a party for 2,500. Received 750, with the remainder due August 4, 2019. 27. Paid electric bill, 915. 28. Paid wages of 1,200 to receptionist and part-time assistant. 29. Paid miscellaneous expenses, 540. 30. Served as a disc jockey for a charity ball for 1,500. Received 500, with the remainder due on August 9, 2019. 31. Received 3,000 for serving as a disc jockey for a party. 31. Paid 1,400 royalties (music expense) to National Music Clearing for use of various artists' music during July. 31. Withdrew l,250 cash from PS Music for personal use. PS Music's chart of accounts and the balance of accounts as of July 1, 2019 (all normal balances), are as follows: 11 Cash 3,920 12 Accounts receivable 1,000 14 Supplies 170 15 Prepaid insurance 17 Office Equipment 21 Accounts payable 250 23 Unearned Revenue 31 Peyton smith, Drawing 4,000 32 Fees Earned 500 41 Wages Expense 6,200 50 Office Rent Expense 400 51 Equipment Rent Expense 800 52 Utilities Expense 675 53 Supplies Expense 300 54 music Expense 1,590 55 Advertising Expense 500 56 Supplies Expense 180 59 Miscellaneous Expense 415 Instructions 1.Enter the July 1, 2019, account balances in the appropriate balance column of a four-column account. Write Balance in the Item column and place a check mark () in the Posting Reference column. (Hint: Verify the equality of the debit and credit balances in the ledger before proceeding with the next instruction.) 2.Analyze and journalize each transaction in a two-column journal beginning on Page 1, omitting journal entry explanations. 3.Post the journal to the ledger, extending the account balance to the appropriate balance column after each posting. 4.Prepare an unadjusted trial balance as of July 31, 2019.arrow_forwardOn October 31, the Vermillion Igloos Hockey Club received 800,000 in cash in advance for season tickets for eight home games. The transaction was recorded as a debit to Cash and a credit to Unearned Admissions. By December 31, the end of the fiscal year, the team had played three home games and received an additional 450,000 cash admissions income at the gate. a. Journalize the adjusting entry as of December 31. b. 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