Concept explainers
(a)
T-account:
T-account refers to an individual account, where the increases or decreases in the value of specific asset, liability,
This account is referred to as the 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:
- (a) The title of the account
- (b) The left or debit side
- (c) The right or credit side
To prepare: The T-accounts to enter the opening balances of Company BB as on August 31, 2017.
(a)
Explanation of Solution
Prepare the T-account to enter the opening balances of Company BB as follows:
Cash | |||
Aug, 1 | $6,040 | ||
Bal. | $6,040 |
| |||
Aug, 1 | $2,910 | ||
Bal. | $2,910 | ||
Note receivable | |||
Aug, 1 | $4,000 | ||
Bal. | $4,000 |
Building | |||
Aug, 1 | $1,030 | ||
Bal. | $1,030 |
Equipment | |||
Aug, 1 | $10,000 | ||
Bal. | $10,000 |
Accumulated | |||
Aug, 1 | $600 | ||
Bal. | $600 |
Accounts payable | |||
Aug, 1 | $2,300 | ||
Bal. | $2,300 |
Unearned service revenue | |||
Aug, 1 | $1,260 | ||
Bal. | $1,260 |
Salaries and wages payable | |||
Aug, 1 | $1,420 | ||
Bal. | $1,420 |
Common stock | |||
Aug, 1 | $12,000 | ||
Bal. | $12,000 |
| |||
Aug, 1 | $6,400 | ||
Bal. | $6,400 |
(b)
Journal:
Journal is the method of recording monetary business transactions in chronological order. It records the debit and credit aspects of each transaction to abide by the double-entry system.
Rules of Debit and Credit:
Following rules are followed for debiting and crediting different accounts while they occur in business transactions:
- Debit, all increase in assets, expenses and dividends, all decrease in liabilities, revenues and stockholders’ equities.
- Credit, all increase in liabilities, revenues, and stockholders’ equities, all decrease in assets, expenses.
To journalize: The transaction as given in the book of Company BB for the month of August.
(b)
Explanation of Solution
The
Date | Account Title and Description | Debit ($) | Credit ($) |
Aug 1, 2017 | Prepaid advertising | 620 | |
Cash | 1,220 | ||
(To record the prepaid expenses for advertising) | |||
Aug 3, 2017 | Rent | 380 | |
Cash | 380 | ||
(To record the rent paid in cash) | |||
Aug 5, 2017 | Cash | 1,200 | |
Accounts receivable | 1,200 | ||
(To record the cash received from customer) | |||
Aug 10, 2017 | Salaries and wages payable | 1,420 | |
Salaries and wages expense | 1,700 | ||
Cash | 3,120 | ||
(To record salary paid to employee) | |||
Aug 12, 2017 | Cash | 2,800 | |
Service revenue | 2,800 | ||
(To record service performance to customer) | |||
Aug 15, 2017 | Equipment | 2,000 | |
Account payable | 2,000 | ||
(To record equipment purchased on account) | |||
Aug 20, 2017 | Accounts payable | 2,000 | |
Cash | 2,000 | ||
(To record the cash paid to creditors) | |||
Aug 22, 2017 | Supplies | 800 | |
Accounts payable | 800 | ||
(To record the supplies purchased on account) | |||
Aug 25, 2017 | Salaries and wages expense | 2,900 | |
Cash | 2,900 | ||
(To record salaries paid to employee) | |||
Aug 27, 2017 | Accounts receivable | 3,760 | |
Service revenue | 3,760 | ||
(To record the service performed to customer on account) | |||
Aug 29, 2017 | Cash | 780 | |
Unearned service revenue | 780 | ||
(To record advance cash received from customer) |
Table (1)
(c)
T-account:
T-account refers to 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 referred to as the 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:
- (a) The title of the account
- (b) The left or debit side
- (c) The right or credit side
To post: The journal transactions to T-account of Company BB
(c)
Explanation of Solution
Post the transactions to T-account of company BB as follows:
Cash | |||
Aug, 1 | $6,040 | Aug, 1 | $400 |
Aug,5 | $1,200 | Aug, 3 | $380 |
Aug, 12 | $2,800 | Aug, 10 | $3,120 |
Aug, 29 | $780 | Aug, 20 | $2,000 |
Aug, 25 | $2,900 | ||
Total | $10,820 | Total | $8,800 |
Bal. | $2,020 |
Equipment | |||
Aug, 1 Aug, 15 |
$10,000 $2,000 | ||
Bal. | $12,000 |
Accounts receivable | |||
Aug, 1 | $2,910 | Aug, 5 | $1,200 |
Aug, 27 | $3,760 | ||
Total | $6,670 | Total | $1,200 |
Bal. | $5,470 |
Supplies | |||
Aug, 1 | $1,030 | ||
Aug, 22 | $800 | ||
Bal. | $1,830 | ||
Accounts payable | |||
Aug, 20 | $2,000 | Aug, 1 | $2,300 |
Aug, 15 Aug, 22 |
$2,000 $800 | ||
Total | $2,000 | Total | $5,100 |
Bal. | $3,100 |
Unearned service revenue | |||
Aug, 1 | $1,260 | ||
Aug, 29 | $780 | ||
Bal. | 1,240 |
Salaries and wages payable | |||
Aug, 8 | $1,420 | Aug, 1 | $1,420 |
Total | $1,420 | Total | $1,420 |
Bal. | 0 |
Service revenue | |||
Aug, 12 Aug, 27 |
$2,800 $3,760 | ||
Bal. | $6,560 |
Salaries and wages expense | |||
Aug, 10 | $1,700 | ||
Aug, 25 | $2,900 | ||
Bal. | $4,600 |
Rent expense | |||
Aug, 3 | $380 | ||
Bal. | $380 |
(d)
To prepare: The
(d)
Explanation of Solution
Trial balance of Company BB on August 31, 2017 is as follows:
Company BB | ||
Trial balance | ||
August 31, 2017 | ||
Particulars | Debit $ | Credit $ |
Cash | 2,020 | |
Accounts receivable | 5,470 | |
Notes receivable | 4,000 | |
Supplies | 1,830 | |
Prepaid advertising | 400 | |
Equipment | 12,000 | |
Accumulated depreciation-Equipment | 600 | |
Accounts payable | 3,100 | |
Unearned rent revenue | 2,040 | |
Common stock | 12,000 | |
Retained earnings | 6,400 | |
Service revenue | 6,560 | |
Interest revenue | ||
Salaries and wages expense | 4,600 | |
Rent expense | 380 | |
30,700 | 30,700 |
Table (2)
Thus, the total of debit, and credit columns of a trial balance is $30,700 and agreed.
(e)
Adjusting entries refers to the entries that are made at the end of an accounting period in accordance with revenue recognition principle, and expenses recognition principle. The purpose of adjusting entries is to adjust the revenue, and the expenses during the period in which they actually occurs.
To journalize: The adjusting transactions as given in the books of Company BB, and
(e)
Explanation of Solution
The adjusting journal entries in the book of Company BB at the end of the August month are as follows:
1. An adjusting entry for Supplies expenses:
In this case, Company BB recognized the supplies expenses at the end of the August month. So, the necessary adjusting entry that the Company BB should record to recognize the supplies expense is as follows:
Date | Account Titles and Description | Debit ($) | Credit ($) |
Aug 31, 2017 | Supplies expenses (1) | 870 | |
Supplies | 870 | ||
(To record the supplies expenses incurred at the end of the August) |
Table (3)
Working note:
Calculate the value of supplies expense at end of the August month
Description:
- Supplies expense decreases the value of stockholders’ equity by $870; hence debit the supplies expenses for $870.
- Supplies are an asset, and it decreases the value of asset by $870, hence credit the supplies for $870.
2. An adjusting entry for salaries and wages payable:
In this case, Company BB incurred the salaries and wages expense but cash is not yet paid. So, the necessary adjusting entry that the Company BB should record to recognize the accrued expense is as follows:
Date | Account Title and Description |
Debit ($) |
Credit ($) |
Aug 31, 2017 | Salaries and wages expense | 1,540 | |
Salaries and wages payable | 1,540 | ||
(To record the salaries and wages expense incurred at the end of the month) |
Table (4)
Description:
- Salaries and wages expense decreases the value of stockholders’ equity by $1,540 hence, debit the salaries and wages expense for $1,540.
- Salaries and wages payable is a liability, and it increases the value of liability by $1,540, hence credit the salaries and wages payable for $1,540.
3. An adjusting entry for depreciation expense:
In this case, Company BB recognized the depreciation expense at end of the August month. So, the necessary adjusting entry that the Company BB should make to record the depreciation expense at end of the month is as follows:
Date | Account Titles and Description | Debit ($) | Credit ($) |
Aug 31, 2017 | Depreciation expense | 320 | |
Accumulated depreciation-Equipment | 320 | ||
(To record the depreciation expenses allocated at end of the month) |
Table (5)
Description:
- Depreciation expense decreases the value of stockholders’ equity by $320; hence debit the depreciation expense for $320.
- Accumulated depreciation is a contra asset account, and it decreases the value of asset by $320 hence, credit the accumulated depreciation for $320.
4. An adjusting entry for unearned service revenue:
In this case, Company BB received cash in advance before the service performed to customer. So, the necessary adjusting entry that the Company BB should record for the unearned service revenue at end of the August month is as follows:
Date | Account Title and Description |
Debit ($) |
Credit ($) |
Aug 31, 2017 | Unearned service revenue | 800 | |
Service revenue | 800 | ||
(To record the unearned service revenue at end of the month) |
Table (6)
Description:
- Unearned service revenue is a liability, and it decreases the value of liability by $800, hence debit the unearned rent revenue for $800.
- Service revenue increases the value of stockholders’ equity by $800; hence credit the service revenue for $800.
5. An adjusting entry for advertising expense:
In this case, Company BB recognized the insurance expenses at the end of the August month. So, the necessary adjusting entry that the Company BB should record to recognize the advertising expense is as follows:
Date | Account Titles and Description | Debit ($) | Credit ($) |
Aug 31, 2017 | Advertising expense | 200 | |
Prepaid advertising | 200 | ||
(To record the advertising expenses incurred at the end of the August month) |
Table (7)
Description:
- Advertising expense decreases the value of stockholders’ equity by $200 hence debit the advertising expense for $200.
- Prepaid advertising is an asset, and it decreases the value of asset by $200, hence credit the prepaid advertising for $200.
6. An adjusting entry for interest revenue:
In this case, Company BB recognized the interest revenue at the end of the August month. So, the necessary adjusting entry that the Company BB should record to recognize the accrued revenue is as follows:
Date | Account Titles and Description | Debit ($) | Credit ($) |
Aug 31, 2017 | Interest receivable (2) | 20 | |
Interest revenue | 20 | ||
(To record the interest revenue incurred at the end of the month) |
Table (8)
Calculate the value of interest revenue at end of the August month
Description:
- Interest revenue is an asset, and it increases the value of asset by $20, hence debit the interest revenue for $20.
- Interest revenue increases the value of stockholders’ equity by $20; hence credit the interest revenue for $20.
Post the adjusting transactions to T-accounts of Company BB on August 31, 2017 as follows:
Supplies | |||
Aug, 31 Bal. | $1,830 | Aug, 31 | $870 |
Bal. | $960 |
Supplies expense | |||
Aug, 31 | $870 | ||
Bal. | $870 |
Salaries and wages expense | |||
Aug, 31 Bal. | $4,600 | ||
Aug, 31 | $1,540 | ||
Bal. | $6,140 |
Salaries and wages payable | |||
Aug, 31 | $1,540 | ||
Bal. | $1,540 |
Depreciation expense | |||
Aug, 31 | $320 | ||
Bal. | $320 |
Accumulated depreciation | |||
Aug, 1 Bal. Aug, 31 |
$600 $320 | ||
Bal. | $920 |
Unearned service revenue | |||
Aug, 1 Bal. Aug, 31 |
$1,260 $780 | ||
Bal. | $1,240 |
Service revenue | |||
Aug, 1 Bal. Aug, 31 |
$6,560 $800 | ||
Bal. | $7,360 |
Advertising expense | |||
Aug, 31 | $200 | ||
Bal. | $200 |
Prepaid advertising | |||
Aug, 1 Bal. | $400 | Aug, 31 | $200 |
Bal. | $200 |
Interest revenue | |||
Aug, 31 | $20 | ||
Bal. | $20 |
Interest receivable | |||
Aug, 31 | $20 | ||
Bal. | $20 |
(f)
Adjusted trial balance:
Adjusted trial balance is a summary of all the ledger accounts, and it contains the balances of all the accounts after the adjustment entries are journalized, and posted.
To prepare: The adjusted trial balance of Company BB on August 31, 2017
(f)
Explanation of Solution
Adjusted trial balance of Company BB on August 31, 2017 is as follows:
Company BB | ||
Adjusted trial balance | ||
August 31, 2017 | ||
Particulars | Debit $ | Credit $ |
Cash | 2,020 | |
Accounts receivable | 5,470 | |
Notes receivable | 4,000 | |
Interest receivable | 20 | |
Supplies | 960 | |
Prepaid advertising | 200 | |
Equipment | 12,000 | |
Accumulated depreciation-Equipment | 920 | |
Accounts payable | 3,100 | |
Unearned rent revenue | 1,240 | |
Salaries and wages payable | 1,540 | |
Common stock | 12,000 | |
Retained earnings | 6,400 | |
Service revenue | 7,360 | |
Interest revenue | 20 | |
Salaries and wages expense | 6,140 | |
Supplies expense | 870 | |
Depreciation expense | 320 | |
Advertising expense | 200 | |
Rent expense | 380 | |
32,580 | 32,580 |
Table (9)
Thus, the total of debit, and credit columns of a trial balance is $32,580 and agreed.
(g)
To prepare: The income statement, statement of retained earnings, and classified balance sheet of Company BB.
(g)
Explanation of Solution
The income statement of Company BB for the month ended August 31, 2017 is as follows:
Company BB | ||
Income Statement | ||
For the month ended August 31, 2017 | ||
Particulars | $ | $ |
Revenue: | ||
Service revenue | 7,360 | |
Interest revenue | 20 | |
Total revenue (A) | 7,380 | |
Less: Expenses | ||
Salaries and wages expenses | 6,140 | |
Supplies expense | 870 | |
Rent expense | 380 | |
Depreciation expense | 320 | |
Advertising expense | 200 | |
Total Expenses (B) | 7,910 | |
Net loss | -530 |
Table (10)
Hence, the net loss of Hotel M for the month ended August 31, 2017 is $530.
The retained earnings statement of Company BB for the month ended August 31, 2017 is as follows:
Company BB | ||
Retained earnings statement | ||
For the month ended August31, 2017 | ||
Particulars | $ | |
Retained earnings at August, 1 | 6,400 | |
Less: Net loss | 530 | |
5,870 | ||
Less: Dividend paid | - | |
Retained earnings at August, 31 | 5,870 |
Table (11)
Hence, retained earnings of Company BB for the month ended August 31, 2017 are $5,870.
The classified balance sheet at August 31, 2017 is as follows:
Company BB | |||
Classified Balance sheet Statement | |||
As at August 31, 2017 | |||
Assets | $ | $ | $ |
Current assets: | |||
Cash | 2,020 | ||
Accounts receivable | 5,470 | ||
Notes receivable | 4,000 | ||
Interest receivable | 20 | ||
Supplies | 960 | ||
Prepaid advertising | 200 | ||
Total of current assets (X) | 12,670 | ||
Other assets: | |||
Equipment | 12,000 | ||
Less: Accumulated depreciation-Equipment | 920 | 11,080 | |
Total of other assets (Y) | 11,080 | ||
Total assets
| 23,750 | ||
Liabilities and Stockholders' equity | $ | $ | $ |
Current liabilities: | |||
Accounts payable | 3,100 | ||
Salaries and wages payable | 1,540 | ||
Unearned rent revenue | 1,240 | ||
Total current liabilities (A) | 5,880 | ||
Stockholders' equity: | |||
Common stock | 12,000 | ||
Retained earnings | 5,870 | ||
Total stockholders' equity (B) | 17,870 | ||
Total liabilities and stockholders' equity
| 23,750 |
Table (12)
Hence, the total assets of Hotel M are $23,750, and the total liabilities and stockholders’ equity are $23,750.
(h)
Closing entries:
Closing entries are those journal entries, which are passed to transfer the final balances of temporary accounts, (all revenues account, all expenses account and dividend) to the income summary account. Closing entries produce a zero balance in each temporary account.
To prepare: The closing journal entries of Company BB, and post it to T-accounts.
(h)
Explanation of Solution
The closing entries of Company BB at August 31, 2017 are as follows:
Date | Account Title and Description |
Post Ref. |
Debit ($) |
Credit ($) |
Aug 31, 2017 | Service revenue | 7,360 | ||
Interest revenue | 20 | |||
Income summary | 7,380 | |||
(To close all revenue account) | ||||
Aug 31, 2017 | Income summary | 7,910 | ||
Salaries and wages expense | 6,140 | |||
Supplies expense | 870 | |||
Rent expense | 380 | |||
Depreciation expense | 320 | |||
Advertising expense | 200 | |||
(To close all the expenses account) | ||||
Aug 31, 2017 | Retained earnings | 530 | ||
Income summary (3) | 530 | |||
(To close the income summary account) |
Table (13)
Working note:
Calculate the balance amount of income summary account for the month ended August 31, 2017:
Therefore, balance of income summary account is $530 (debit).
Description:
Closing entry for revenue account:
In this closing entry, the service revenue account is closed by transferring the amount of service revenue to the income summary account in order to bring the revenue accounts balance to zero. Hence, debit the service revenue account for $7380, and credit the income summary account for $7,380.
Closing entry for expenses account:
In this closing entry, salaries and wages expense, maintenance and repair expense, and income tax expense are closed by transferring the amount of all expenses to the income summary account in order to bring all the expense accounts balance to zero. Hence, debit the income summary account for $7,910, and credit all the expenses account for $7,910.
Closing entry for income summary account:
In this closing entry, the income summary account is closed by transferring the amount of net income to the retained earnings in order to bring the income summary balance to zero. Hence, debit the retained earnings for $530, and credit the income summary account for $530.
Post the closing transactions to T-accounts of Company BB on August 31, 2017 as follows:
Service revenue | |||
Aug, 31 | $7,360 | Aug, 31 Bal. | $7,360 |
Bal. | 0 | ||
Interest revenue | |||
Aug, 31 | $20 | Aug, 31 Bal. | $20 |
Bal. | 0 |
Salaries and wages expense | |||
Aug, 31 Bal. | $6,140 | Aug, 31 | $6,140 |
Bal. | 0 |
Supplies expense | |||
Aug, 31 Bal. | $870 | Aug, | $870 |
Bal. | 0 |
Rent expense | |||
Aug, 31 Bal. | $380 | Aug, 31 | $380 |
Bal. | 0 |
Depreciation expense | |||
Aug, 31 Bal. | $320 | Aug, 31 | $320 |
Bal. | 0 |
Advertising expense | |||
Aug, 31 Bal. | $200 | Aug, 31 | $200 |
Bal. | 0 | ||
Income summary account | |||
Aug, 31 | $6,140 | Aug, 31 | $7,380 |
Aug, 31 | $870 | Aug, 31 | $530 |
Aug, 31 | $380 | ||
Aug, 31 | $320 | ||
Aug, 31 | $200 | ||
Total | $7,910 | Total | $7,910 |
Bal. | 0 |
(i)
Post closing trial balance:
The post closing trial balance is a summary of all ledger accounts, and it shows the debit and the credit balances after the closing entries are journalized and posted. The post-closing trial balance contains only permanent (balance sheet) accounts, and the debit and the credit balances of permanent accounts should agree.
To prepare: The post-closing trial balance of Company BB on August 31, 2017
(i)
Explanation of Solution
The post-closing trial balance of Company BB on August 31, 2017 is as follows:
Company BB | ||
Post-closing trial balance | ||
August 31, 2017 | ||
Particulars | Debit $ | Credit $ |
Cash | 2,020 | |
Accounts receivable | 5,470 | |
Notes receivable | 4,000 | |
Interest receivable | 20 | |
Supplies | 960 | |
Prepaid advertising | 200 | |
Equipment | 12,000 | |
Accumulated depreciation-Equipment | 920 | |
Accounts payable | 3,100 | |
Unearned rent revenue | 1,240 | |
Salaries and wages payable | 1,540 | |
Common stock | 12,000 | |
Retained earnings | 5,870 | |
24,670 | 24,670 |
Thus, the total of debit, and credit columns of a trial balance is $24,670 and agreed.
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Chapter 4 Solutions
FINANCIAL ACCT.:TOOLS...(LL)-W/ACCESS
- In 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_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_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_forward
- Review the following transactions and prepare any necessary journal entries. A. On January 5, Bunnet Co. purchases 350 aprons (Supplies) at $25 per apron from a supplier, on credit. Terms of the purchase are 3/10, n/30 from the invoice date of January 5. B. On February 18, Melon Construction receives advance cash payment from a client for construction services in the amount of $20,000. Melon had yet to provide construction services as of February 18. C. On March 21, Noonan Smoothies sells 875 smoothies for $4 cash per smoothie. The sales tax rate is 6.5%. D. On June 7, Organic Methods paid a portion of their noncurrent note in the amount of $9,340 cash.arrow_forwardIn October, A. Nguyen established an apartment rental service. The account headings are presented below. Transactions completed during the month of October follow. a. Nguyen deposited 25,000 in a bank account in the name of the business. b. Paid the rent for the month, 1,200, Ck. No. 2015. c. Bought supplies on account, 225. d. Bought a truck for 18,000, paying 1,000 in cash and placing the remainder on account e. Bought Insurance for the truck for the yean 1,400, Ck. No. 2016. f. Sold services on account 5,000. g. Bought office equipment on account from Henry Office Supply, 2,300. h. Sold services for cash for the first half of the month, 6,050. i. Received and paid the bill for utilities, 150, Ck. No. 2017. j. Received a bill for gas and oil for the truck. 80. k. Paid wages to the employees, 1,400, Ck Nos. 20182020. l. Sold services for cash for the remainder of the month, 4,200. m. Nguyen withdrew cash for personal use, 2,000, Ck. No. 2021. 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, reanalyze each transaction.arrow_forwardOn July 1, K. Resser opened Ressers Business Services. Ressers accountant listed the following chart of accounts: The following transactions were completed during July: a. Resser deposited 25,000 in a bank account in the name of the business. b. Bought tables and chairs for cash, 725, Ck. No. 1200. c. Paid the rent for the current month, 1,750, Ck. No. 1201. d. Bought computers and copy machines from Ferber Equipment, 15,700, paying 4,000 in cash and placing the balance on account, Ck. No. 1202. e. Bought supplies on account from Wigginss Distributors, 535. f. Sold services for cash, 1,742. g. Bought insurance for one year, 1,375, Ck. No. 1203. h. Paid on account to Ferber Equipment, 700, Ck. No. 1204. i. Received and paid the electric bill, 438, Ck. No. 1205. j. Paid on account to Wigginss Distributors, 315, Ck. No. 1206. k. Sold services to customers for cash for the second half of the month, 820. l. Received and paid the bill for the business license, 75, Ck. No. 1207. m. Paid wages to an employee, 1,200, Ck. No. 1208. n. Resser withdrew cash for personal use, 700, Ck. No. 1209. Required 1. Record the owners name in the Capital and Drawing T accounts. 2. Correctly place the plus and minus signs for each T account and label the debit and credit sides of the accounts. 3. Record the transactions in the T accounts. Write the letter of each entry to identify the transaction. 4. Foot the T accounts and show the balances. 5. Prepare a trial balance as of July 31, 20--. 6. Prepare an income statement for July 31, 20--. 7. Prepare a statement of owners equity for July 31, 20--. 8. Prepare a balance sheet as of July 31, 20--. LO 1, 2, 3, 4, 5, 6arrow_forward
- On March 1 of this year, B. Gervais established Gervais Catering Service. The account headings are presented below. Transactions completed during the month follow. a. Gervais deposited 25,000 in a bank account in the name of the business. b. Bought a truck from Kelly Motors for 26,329, paying 8,000 in cash and placing the balance on account, Ck. No. 500. c. Bought catering equipment on account from Luigis Equipment, 3,795. d. Paid the rent for the month, 1,255, Ck. No. 501. e. Bought insurance for the truck for one year, 400, Ck. No. 502. f. Sold catering services for cash for the first half of the month, 3,012. g. Bought supplies for cash, 185, Ck. No. 503. h. Sold catering services on account, 4,307. i. Received and paid the heating bill, 248, Ck. No. 504. j. Received a bill from GC Gas and Lube for gas and oil for the truck, 128. k. Sold catering services for cash for the remainder of the month, 2,649. l. Gervais withdrew cash for personal use, 1,550, Ck. No. 505. m. Paid the salary of the assistant, 1,150, Ck. No. 506. 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_forwardIn October, A. Nguyen established an apartment rental service. The account headings are presented below. Transactions completed during the month of October follow. a. Nguyen deposited 25,000 in a bank account in the name of the business. b. Paid the rent for the month, 1,200, Ck. No. 2015 (Rent Expense). c. Bought supplies on account, 225. d. Bought a truck for 18,000, paying 1,000 in cash and placing the remainder on account. e. Bought insurance for the truck for the year, 1,400, Ck. No. 2016. f. Sold services on account, 5,000 (Service Income). g. Bought office equipment on account from Henry Office Supply, 2,300. h. Sold services for cash for the first half of the month, 6,050 (Service Income). i. Received and paid the bill for utilities, 150, Ck. No. 2017 (Utilities Expense). j. Received a bill for gas and oil for the truck, 80 (Gas and Oil Expense). k. Paid wages to the employees, 1,400, Ck. Nos. 20182020 (Wages Expense). l. Sold services for cash for the remainder of the month, 4,200 (Service Income). m. Nguyen withdrew cash for personal use, 2,000, Ck. No. 2021. 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_forwardThe following transactions were completed by Hammond Auto Supply during January, which is the first month of this fiscal year. Terms of sale are 2/10, n/30. The balances of the accounts as of January 1 have been recorded in the general ledger in your Working Papers or in CengageNow. Hammond Auto Supply does not track cash sales by customer. Jan. 2Issued Ck. No. 6981 to JSS Management Company for monthly rent, 775. 2J. Hammond, the owner, invested an additional 3,500 in the business. 4Bought merchandise on account from Valencia and Company, invoice no. A691, 2,930; terms 2/10, n/30; dated January 2. 4Received check from Vega Appliance for 980 in payment of 1,000 invoice less discount. 4Sold merchandise on account to L. Paul, invoice no. 6483, 850. 6Received check from Petty, Inc., 637, in payment of 650 invoice less discount. 7Issued Ck. No. 6982, 588, to Fischer and Son, in payment of invoice no. C1272 for 600 less discount. 7Bought supplies on account from Doyle Office Supply, invoice no. 1906B, 108; terms net 30 days. 7Sold merchandise on account to Ellison and Clay, invoice no. 6484, 787. 9Issued credit memo no. 43 to L. Paul, 54, for merchandise returned. 11Cash sales for January 1 through January 10, 4,863.20. 11Issued Ck. No. 6983, 2,871.40, to Valencia and Company, in payment of 2,930 invoice less discount. 14Sold merchandise on account to Vega Appliance, invoice no. 6485, 2,050. Jan. 18Bought merchandise on account from Costa Products, invoice no. 7281D, 4,854; terms 2/10, n/60; dated January 16; FOB shipping point, freight prepaid and added to the invoice, 147 (total 5,001). 21Issued Ck. No. 6984, 194, to M. Miller for miscellaneous expenses not recorded previously. 21Cash sales for January 11 through January 20, 4,591. 23Issued Ck. No. 6985 to Forbes Freight, 96, for freight charges on merchandise purchased on January 4. 23Received credit memo no. 163, 376, from Costa Products for merchandise returned. 29Sold merchandise on account to Bruce Supply, invoice no. 6486, 1,835. 31Cash sales for January 21 through January 31, 4,428. 31Issued Ck. No. 6986, 53, to M. Miller for miscellaneous expenses not recorded previously. 31Recorded payroll entry from the payroll register: total salaries, 6,200; employees federal income tax withheld, 872; FICA Social Security tax withheld, 384.40, FICA Medicare tax withheld, 89.90. 31Recorded the payroll taxes: Social Security tax, 384.40, FICA Medicare tax, 89.90; state unemployment tax, 334.80; federal unemployment tax, 37.20. 31Issued Ck. No. 6987, 4,853.70, for salaries for the month. 31J. Hammond, the owner, withdrew 1,000 for personal use, Ck. No. 6988. Required 1. Record the transactions for January using a sales journal, page 73; a purchases journal, page 56; a cash receipts journal, page 38; a cash payments journal, page 45; and a general journal, page 100. Assume the periodic inventory method is used. 2. Post daily all entries involving customer accounts to the accounts receivable ledger. 3. Post daily all entries involving creditor accounts to the accounts payable ledger. 4. Post daily those entries involving the Other Accounts columns and the general journal to the general ledger. Write the owners name in the Capital and Drawing accounts. 5. Add the columns of the special journals and prove the equality of the debit and credit totals. 6. Post the appropriate totals of the special journals to the general ledger. 7. Prepare a trial balance. 8. Prepare a schedule of accounts receivable and a schedule of accounts payable. Do the totals equal the balances of the related controlling accounts?arrow_forward
- The following transactions were completed by Hammond Auto Supply during January, which is the first month of this fiscal year. Terms of sale are 2/10, n/30. The balances of the accounts as of January 1 have been recorded in the general ledger in your Working Papers or in CengageNow. Hammond Auto Supply does not track cash sales by customer. Jan. 2Issued Ck. No. 6981 to JSS Management Company for monthly rent, 775. 2J. Hammond, the owner, invested an additional 3,500 in the business. 4Bought merchandise on account from Valencia and Company, invoice no. A691, 2,930; terms 2/10, n/30; dated January 2. 4Received check from Vega Appliance for 980 in payment of 1,000 invoice less discount. 4Sold merchandise on account to L. Paul, invoice no. 6483, 850. 6Received check from Petty, Inc., 637, in payment of 650 invoice less discount. 7Issued Ck. No. 6982, 588, to Fischer and Son, in payment of invoice no. C1272 for 600 less discount. 7Bought supplies on account from Doyle Office Supply, invoice no. 1906B, 108; terms net 30 days. 7Sold merchandise on account to Ellison and Clay, invoice no. 6484, 787. 9Issued credit memo no. 43 to L. Paul, 54, for merchandise returned. 11Cash sales for January 1 through January 10, 4,863.20. 11Issued Ck. No. 6983, 2,871.40, to Valencia and Company, in payment of 2,930 invoice less discount. 14Sold merchandise on account to Vega Appliance, invoice no. 6485, 2,050. Jan. 18Bought merchandise on account from Costa Products, invoice no. 7281D, 4,854; terms 2/10, n/60; dated January 16; FOB shipping point, freight prepaid and added to the invoice, 147 (total 5,001). 21Issued Ck. No. 6984, 194, to M. Miller for miscellaneous expenses not recorded previously. 21Cash sales for January 11 through January 20, 4,591. 23Issued Ck. No. 6985 to Forbes Freight, 96, for freight charges on merchandise purchased on January 4. 23Received credit memo no. 163, 376, from Costa Products for merchandise returned. 29Sold merchandise on account to Bruce Supply, invoice no. 6486, 1,835. 31Cash sales for January 21 through January 31, 4,428. 31Issued Ck. No. 6986, 53, to M. Miller for miscellaneous expenses not recorded previously. 31Recorded payroll entry from the payroll register: total salaries, 6,200; employees federal income tax withheld, 872; FICA Social Security tax withheld, 384.40, FICA Medicare tax withheld, 89.90. 31Recorded the payroll taxes: Social Security tax, 384.40, FICA Medicare tax, 89.90; state unemployment tax, 334.80; federal unemployment tax, 37.20. 31Issued Ck. No. 6987, 4,853.70, for salaries for the month. 31J. Hammond, the owner, withdrew 1,000 for personal use, Ck. No. 6988. Required 1. Record the transactions in the general journal for January. If you are using Working Papers, start with page 1 in the journal. Assume the periodic inventory method is used. The chart of accounts is as follows: 2. Post daily all entries involving customer accounts to the accounts receivable ledger. 3. Post daily all entries involving creditor accounts to the accounts payable ledger. 4. Post daily the general journal entries to the general ledger. Write the owners name in the Capital and Drawing accounts. 5. Prepare a trial balance. 6. Prepare a schedule of accounts receivable and a schedule of accounts payable. Do the totals equal the balances of the related controlling accounts?arrow_forwardIn July of this year, M. Wallace established a business called Wallace Realty. The account headings are presented below. Transactions completed during the month follow. a. Wallace deposited 24,000 in a bank account in the name of the business. b. Paid the office rent for the current month, 650, Ck. No. 1000. c. Bought office supplies for cash, 375, Ck. No. 1001. d. Bought office equipment on account from Dellos Computers, 6,300. e. Received a bill from the City Crier for advertising, 455. f. Sold services for cash, 3,944. g. Paid on account to Dellos Computers, 1,500, Ck. No. 1002. h. Received and paid the bill for utilities, 340, Ck. No. 1003. i. Paid on account to the City Crier, 455, Ck. No. 1004. j. Paid truck expenses, 435, Ck. No. 1005. k. Wallace withdrew cash for personal use, 1,500, Ck. No. 1006. 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_forwardOn March 1 of this year, B. Gervais established Gervais Catering Service. The account headings are presented below. Transactions completed during the month follow. a. Gervais deposited 25,000 in a bank account in the name of the business. b. Bought a truck from Kelly Motors for 26,329, paying 8,000 in cash and placing the balance on account, Ck. No. 500. c. Bought catering equipment on account from Luigis Equipment, 3,795. d. Paid the rent for the month, 1,255, Ck. No. 501 (Rent Expense). e. Bought insurance for the truck for one year, 400, Ck. No. 502. f. Sold catering services for cash for the first half of the month, 3,012 (Catering Income). g. Bought supplies for cash, 185, Ck. No. 503. h. Sold catering services on account, 4,307 (Catering Income). i. Received and paid the heating bill, 248, Ck. No. 504 (Utilities Expense). j. Received a bill from GC Gas and Lube for gas and oil for the truck, 128 (Gas and Oil Expense). k. Sold catering services for cash for the remainder of the month, 2,649 (Catering Income). l. Gervais withdrew cash for personal use, 1,550, Ck. No. 505. m. Paid the salary of the assistant, 1,150, Ck. No. 506 (Salary Expense). 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
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