Concept explainers
1.
To Record: The given transactions.
1.
Explanation of Solution
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.
Record the given transactions.
Date | Account Title | Debit | Credit |
June 2 | Cash | $19,000 | |
Notes payable | $19,000 | ||
(To record the cash borrowed from bank) | |||
June 3 | Rent expense | $1,200 | |
Cash | $1,200 | ||
(To record the payment of rent) | |||
June 7 | Cash | $5,200 | |
$3,500 | |||
Service revenue | 8700 | ||
(To record the services provided to customers) | |||
June 11 | Equipment | $8,400 | |
Cash | $8,400 | ||
(To record the purchase of equipment) | |||
June 17 | Cash | $6,500 | |
Salaries Expense | $6,500 | ||
(To record the payment of salaries) | |||
June 22 | Dividends | $1,550 | |
Cash | $1,550 | ||
(To record the dividends issued) | |||
June 25 | Cash | $2,100 | |
Deferred Revenue | $2,100 | ||
(To record the service revenue collected in advance) | |||
June 28 | Utilities Expense | $3,300 | |
Cash | $3,300 | ||
(To record the utilities expenses) | |||
June 30 | Salaries Expense | $6,500 | |
Salaries payable | $6,500 | ||
(To record the salaries payable) |
Table (1)
2.
To Identify: The transactions involving cash.
2.
Answer to Problem 4.5BP
All the transactions are cash transactions except the Salaries payable on June 30th.
Explanation of Solution
The transactions in which the cash is involved either as receipt or payment are alone recorded as cash transactions. The transactions in which no cash is involved include the salaries which are outstanding for the employees.
3.
To Post: The given cash transactions to Cash T-Account and compute the closing cash balance.
3.
Answer to Problem 4.5BP
Cash Account | |||||
Date | Particulars | Amount | Date | Particulars | Amount |
June 01 | Opening cash balance | $14,700 | June 03 | Rent Expenses | $1,200 |
June 02 | Notes payable | $19,000 | June 11 | Equipment | $8,400 |
June 07 | Service revenue | $5,200 | June 17 | Salaries Expenses | $6,500 |
June 25 | Deferred Revenue | $2,100 | June 22 | Dividends | $1,550 |
June 28 | Utilities Expenses | $3,300 | |||
$20,050 |
Explanation of Solution
T-account:
T-account is the form of the ledger account, where the journal entries are posted to this account. It is referred to as the T-account, because the alignment of the components of the account resembles the capital letter ‘T’.
The components of the T-account are as follows:
a) The title of the account
b) The left or debit side
c) The right or credit side
4.
To Prepare: The statement of cash flows for the month of June for H Bound.
4.
Answer to Problem 4.5BP
H Bound | ||
Statement of Cash Flows | ||
For the month ended June 30 | ||
Particulars | Amount ($) | Amount ($) |
Cash flows from Operating Activities | ||
From Customers | $7,300 | |
Rent Expenses | ($1,200) | |
Utilities Expenses | ($3,300) | |
Salaries expense | ($6,500) | |
Net cash flow from Operating Activities | ($3,700) | |
Cash flows from Investing Activities | ||
Purchase of equipment | ($8,400) | |
Net cash flow from Investing Activities | ($8,400) | |
Cash flows from Financing Activities | ||
Borrowed from bank | $19,000 | |
Payment of dividends | ($1,550) | |
Net cash flow from Financing Activities | $17,450 | |
Net increase in cash | $5,350 | |
Cash at the beginning of the month | $14,700 | |
Cash at the end of the month | $20,050 |
Table (2)
Explanation of Solution
Statement of cash flows: This statement reports all the cash transactions which are responsible for inflow and outflow of cash, and result of these transactions is reported as ending balance of cash at the end of reported period.
5.
To Verify: The net cash flows reported in the statement of cash flows equal the change in the cash balance for the month.
5.
Answer to Problem 4.5BP
The net cash flows reported in the statement of cash flows for the month is $5,350.
Explanation of Solution
Calculate the net cash flows reported in the statement of cash flows equal the change in the cash balance for the month of June.
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