Concept explainers
This serial problem began in Chapter 1 and continues through most of the book. If previous chapter segments were not completed, the serial problem can begin at this point.
SP 5 Santana Rey created Business Solutions on October 1, 2019. The company has been successful, and its list of customers has grown. To accommodate the growth, the accounting system is modified to set up separate accounts for each customer. The following chart of accounts includes the account number used for each account and any balance as of December 31, 2019. Santana Rey decided to add a fourth digit with a decimal point to the 106 account number that had been used for the single
In response to requests from customers, S. Rey will begin sell1ng computer software. The company will extend credit terms of 1/10, n/30, FOB shipping point, to all customers who purchase this merchandise. However, no cash discount is available on consulting fees. Additional accounts (Nos. 119, 413, 414, 415, and 502) are added to its general ledger to accommodate the company's new merchandising activities. Its transactions for January through March follow.
The following additional facts are available for preparing adjustments on March 31 prior to financial statement preparation.
- a. The March 31 amount of computer supplies still available totals $2,005.
- b. Prepaid insurance coverage of $555 expired during this three-month period.
- c. Lyn Addie has not been paid for seven days of work at the rate of $125 per day.
- d. Prepaid rent of $2,475 expired during this three-month period.
- e.
Depreciation on the computer equipment for January 1 through March 31 is $1,250. - f. Depreciation on the office equipment for January 1 through March 31 is $400.
- g. The March 31 amount of merchandise inventory still available totals $704.
Required
- 1. Prepare
journal entries to record each of the January through March transactions. - 2. Post the journal entries in part 1 to the accounts in the company's general ledger. Note: Begin with the ledger’s post-closing adjusted balances as of December 31,2019.
- 3. Prepare a 6-column work sheet (similar to the one shown in Exhibit 3.13) that includes the unadjusted
trial balance , the March 31 adjustments (a) through (g), and the adjusted trial balance. Do not prepare closing entries and do not journalize the adjustments or post them to the ledger. - 4. Prepare an income statement (from the adjusted trial balance in part 3) for the three months ended March 31, 2020. (a) Use a single-step format. List all expenses without differentiating between selling expenses and general and administrative expenses. (b) Use a multiple-step format that begins with gross sales (service revenues plus gross product sales) and includes separate categories for net sales, cost of goods sold, selling expenses, and general and administrative expenses. Categorize the following accounts as selling expenses: Wages Expense, Mileage Expense, and Advertising Expense. Categorize the remaining expenses as general and administrative.
- 5. Prepare a statement of owner’s equity (from the adjusted trial balance in part 3) for the three months ended March 31, 2020.
- 6. Prepare a classified balance sheet (from the adjusted trial balance) as of March 3 1, 2020.
Prepare journal entries to record the transactions from January to March.
Explanation of Solution
Journal entry: Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.
Prepare journal entries to record the transactions from January to March.
Date | Account title and explanation | PR | Amount | |
Debit | Credit | |||
2020 | ||||
4-Jan | Wages Expense | 623 | $125 | |
Wages Payable | 210 | $500 | ||
Cash | 101 | $625 | ||
(To record the Paid employee) | ||||
5-Jan | Cash | 101 | $25,000 | |
Person R, Capital | 301 | $25,000 | ||
(To record the Additional investment by owner.) | ||||
7-Jan | Merchandise Inventory | 119 | $5,800 | |
Accounts Payable - Corporation K | 201 | $5,800 | ||
(To record the Purchase of merchandise on credit) | ||||
9-Jan | Cash | 101 | $2,668 | |
Accounts Receivable— Company G | 106.6 | $2,668 | ||
(To record the Collected accounts receivable) | $5,500 | |||
11-Jan | Accounts Receivable—Company AE | 106.1 | $5,500 | |
Unearned Computer Services Revenue | 236 | $1,500 | ||
Computer Services Revenue | 403 | $7,000 | ||
( To record the Completed work on project) | ||||
13-Jan | Accounts Receivable—Corporation L | 106.5 | $5,200 | |
Sales | 413 | $5,200 | ||
(To record the merchandise sold on credit.) | ||||
13-Jan | Cost of Goods Sold | 502 | $3,560 | |
Merchandise Inventory | 119 | $3,560 | ||
( To Record the cost of January 13 sale) | ||||
15-Jan | Merchandise Inventory | 119 | $600 | |
Cash | 101 | $600 | ||
( To record the freight paid on incoming merchandise) | ||||
16-Jan | Cash | 101 | $4,000 | |
Computer Services Revenue | 403 | $4,000 | ||
(To record the cash collected revenue from customer) | ||||
Jan. 17 | Accounts Payable - Corporation K | 201 | $5,800 | |
Merchandise Inventory | 119 | $58 | ||
Cash | 101 | $5,742 | ||
(To record the payment of account payable within discount period) | ||||
20-Jan | Sales Returns and Allowances | 414 | $500 | |
Accounts Receivable—Corporation L | 106.5 | $500 | ||
( To record the defective goods returned from customers) | ||||
22-Jan | Cash | 101 | $4,653 | |
Sales Discounts | 415 | $47 | ||
Accounts Receivable—Corporation L | 106.5 | $4,700 | ||
(To record the Collections from accounts receivable) | ||||
24-Jan | Accounts Payable | 201 | $496 | |
Merchandise Inventory | 119 | $496 | ||
(To record the return of merchandise for credit) | ||||
26-Jan | Merchandise Inventory | 119 | $9,000 | |
Accounts Payable - Corporation K | 201 | $9,000 | ||
( To record the purchase of merchandise for resale) | ||||
26-Jan | Accounts Receivable—Incorporation KC | 106.8 | $5,800 | |
Sales | 413 | $5,800 | ||
(To record the merchandise sold on credit) | ||||
26-Jan | Cost of Goods Sold | 502 | $4,640 | |
Merchandise Inventory | 119 | $4,640 | ||
( To record the cost of January 26 sales) | ||||
31-Jan | Wages Expense | 623 | $1,250 | |
Cash | 101 | $1,250 | ||
( To record the payment of employee wages) | ||||
1-Feb | Prepaid Rent | 131 | $2,475 | |
Cash | 101 | $2,475 | ||
( To record the payment of three months’ rent in advance) | ||||
3-Feb | Accounts Payable | 201 | $8,504 | |
Merchandise Inventory | 119 | $90 | ||
Cash | 101 | $8,414 | ||
(To record the payment of account payable within discount period) | ||||
5-Feb | Advertising Expense | 655 | $600 | |
Cash | 101 | $600 | ||
( To record the payment for advertising expense) | ||||
11-Feb | Cash | 101 | $5,500 | |
Accounts Receivable—Alex’s Eng. Co. | 106.1 | $5,500 | ||
( To record the collection of cash from customers) | ||||
15-Feb | Person R, Withdrawals | 302 | $4,800 | |
Cash | 101 | $4,800 | ||
(To record the withdrawals of owner) | ||||
23-Feb | Accounts Receivable—Corporation D | 106.7 | $3,220 | |
Sales | 413 | $3,220 | ||
( To record the sale of merchandise on credit) | ||||
23-Feb | Cost of Goods Sold | 502 | $2,660 | |
Merchandise Inventory | 119 | $2,660 | ||
( To record the cost of February 23 sales) | ||||
26-Feb | Wages Expense | 623 | $1,000 | |
Cash | 101 | $1,000 | ||
( To record the payment of wages to employee) | ||||
27-Feb | Mileage Expense | 676 | $192 | |
Cash | 101 | $192 | ||
(To record the Reimbursement of business mileage) | ||||
8-Mar | Computer Supplies | 126 | $2,730 | |
Accounts Payable-Company H | 201 | $2,730 | ||
( To record the purchase of supplies on credit) | ||||
9-Mar | Cash | 101 | $3,220 | |
Accounts Receivable—Corporation D | 106.7 | $3,220 | ||
( To record the collection of accounts receivable) | ||||
11-Mar | Repairs Expense–Computer | 684 | $960 | |
Cash | 101 | $960 | ||
(To record the payment for computer repairs) | ||||
16-Mar | Cash | 101 | $5,260 | |
Computer Services Revenue | 403 | $5,260 | ||
( To record the collection cash revenue from customer) | ||||
19-Mar | Accounts Payable | 201 | $3,830 | |
Cash | 101 | $3,830 | ||
( To record the payment of accounts payable ($1,100 + $2,730)) | ||||
24-Mar | Accounts Receivable—Company EL | 106.3 | $9,047 | |
Computer Services Revenue | 403 | $9,047 | ||
(To record the billed customer for services) | ||||
25-Mar | Accounts Receivable—Company WS | 106.2 | $2,800 | |
Sales | 413 | $2,800 | ||
( To record the sale of merchandise on credit) | ||||
25-Mar | Cost of Goods Sold | 502 | $2,002 | |
Merchandise Inventory | 119 | $2,002 | ||
( To record the cost of sales of March 25 ) | ||||
30-Mar | Accounts Receivable—Company IFM | 106.4 | $2,220 | |
Sales | 413 | $2,220 | ||
( To record the sale of merchandise on credit) | ||||
30-Mar | Cost of Goods Sold | 502 | $1,048 | |
Merchandise Inventory | 119 | $1,048 | ||
( To record the cost of sales of March 30 ) | ||||
31-Mar | Mileage Expense | 676 | $128 | |
Cash | 101 | $128 | ||
(To record the Reimbursement of business mileage) |
Table (1)
2.
Post the journal entries to the accounts in the general ledger of Company BS.
Explanation of Solution
Account: A record, that documents or records the change in assets, liabilities, or equity for a particular period, is referred to as an account.
Cash No. 101 | |||||
Date | PR | Debit | Credit | Balance | |
31-Dec | $48,372 | ||||
4-Jan | $625 | $47,747 | |||
5-Jan | $25,000 | $72,747 | |||
9-Jan | $2,668 | $75,415 | |||
15-Jan | $600 | $74,815 | |||
16-Jan | $4,000 | $78,815 | |||
17-Jan | $5,742 | $73,073 | |||
22-Jan | $4,653 | $77,726 | |||
31-Jan | $1,250 | $76,476 | |||
1-Feb | $2,475 | $74,001 | |||
3-Feb | $8,414 | $65,587 | |||
5-Feb | $600 | $64,987 | |||
11-Jan | $5,500 | $70,487 | |||
15-Feb | $4,800 | $65,687 | |||
26-Feb | $1,000 | $64,687 | |||
27-Feb | $192 | $64,495 | |||
9-Mar | $3,220 | $67,715 | |||
11-Mar | $960 | $66,755 | |||
16-Mar | $5,260 | $72,015 | |||
19-Mar | $3,830 | $68,185 | |||
31-Mar | $128 | $68,057 | |||
Accounts Receivable—Company AE No. 106.1 | |||||
Date | PR | Debit | Credit | Balance | |
31-Dec | Balance | $0 | |||
11-Jan | $5,500 | $5,500 | |||
11-Feb | $5,500 | $0 | |||
Accounts Receivable—Company WS No. 106.2 | |||||
Date | PR | Debit | Credit | Balance | |
31-Dec | Balance | $0 | |||
25-Mar | $2,800 | $2,800 | |||
Accounts Receivable—Company EL No. 106.3 | |||||
Date | PR | Debit | Credit | Balance | |
31-Dec | Balance | $0 | |||
24-Mar | $9,047 | $9,047 | |||
Accounts Receivable—Company IFM No. 106.4 | |||||
Date | PR | Debit | Credit | Balance | |
31-Dec | Balance | $3,000 | |||
30-Mar | $2,220 | $5,220 | |||
Accounts Receivable—Corporation L No. 106.5 | |||||
Date | PR | Debit | Credit | Balance | |
31-Dec | Balance | $0 | |||
13-Jan | $5,200 | $5,200 | |||
20-Jan | $500 | $4,700 | |||
22-Jan | $4,700 | $0 | |||
Accounts Receivable—Company G 106.6 | |||||
Date | PR | Debit | Credit | Balance | |
31-Dec | Balance | $2,668 | |||
9-Jan | $2,668 | $0 | |||
Accounts Receivable—Company D No. 106.7 | |||||
Date | PR | Debit | Credit | Balance | |
31-Dec | Balance | $0 | |||
23-Feb | $3,220 | $3,220 | |||
9-Mar | $3,220 | $0 | |||
Accounts Receivable—Incorporation KC No. 106.8 | |||||
Date | PR | Debit | Credit | Balance | |
31-Dec | Balance | $0 | |||
26-Jan | $5,800 | $0 | $5,800 | ||
Accounts Receivable—Incorporation D No. 106.8 | |||||
Date | PR | Debit | Credit | Balance | |
31-Dec | Balance | $0 | |||
Merchandise inventory—Incorporation D No. 119 | |||||
Date | PR | Debit | Credit | Balance | |
31-Dec | Balance | $0 | |||
7-Jan | $5,800 | $5,800 | |||
13-Jan | $3,560 | $2,240 | |||
15-Jan | $600 | $2,840 | |||
17-Jan | $58 | $2,782 | |||
24-Jan | $496 | $2,286 | |||
26-Jan | $9,000 | $11,286 | |||
26-Jan | $4,640 | $6,646 | |||
3-Feb | $90 | $6,556 | |||
23-Feb | $2,660 | $3,896 | |||
25-Mar | $2,002 | $1,894 | |||
30-Mar | $1,048 | $846 | |||
Compute supplies No. 126 | |||||
Date | PR | Debit | Credit | Balance | |
31-Dec | Balance | $580 | |||
8-Mar | Balance | $2,730 | $3,310 | ||
Prepaid Insurance No. 128 | |||||
Date | PR | Debit | Credit | Balance | |
31-Dec | Balance | $1,665 | |||
Prepaid Rent No. 131 | |||||
Date | PR | Debit | Credit | Balance | |
31-Dec | Balance | $825 | |||
1-Feb | $2,475 | $3,300 | |||
Office equipment No. 163 | |||||
Date | PR | Debit | Credit | Balance | |
31-Dec | Balance | $8,000 | |||
Accumulated depreciation- Office equipment No. 164 | |||||
Date | PR | Debit | Credit | Balance | |
31-Dec | Balance | $400 | |||
Computer equipment No. 167 | |||||
Date | PR | Debit | Credit | Balance | |
31-Dec | Balance | $20,000 | |||
Accumulated depreciation- Computer equipment No. 168 | |||||
Date | PR | Debit | Credit | Balance | |
31-Dec | Balance | $1,250 | |||
Accounts payable No. 201 | |||||
Date | PR | Debit | Credit | Balance | |
31-Dec | Balance | $1,100 | |||
7-Jan | Balance | $5,800 | $6,900 | ||
17-Jan | Balance | $5,800 | $1,100 | ||
24-Jan | Balance | $496 | $604 | ||
26-Jan | Balance | $9,000 | $9,604 | ||
3-Feb | Balance | $8,504 | $1,100 | ||
8-Mar | Balance | $2,730 | $3,830 | ||
9-Mar | Balance | $3,830 | $0 | ||
Wages payable No. 210 | |||||
Date | PR | Debit | Credit | Balance | |
31-Dec | Balance | $500 | |||
4-Jan | $500 | $0 | |||
Unearned computer services revenue No. 236 | |||||
Date | PR | Debit | Credit | Balance | |
31-Dec | Balance | $1,500 | |||
11-Jan | $1,500 | $0 | |||
Person R, Capital No. 301 | |||||
Date | PR | Debit | Credit | Balance | |
31-Dec | Balance | $80,360 | |||
5-Jan | $25,000 | $105,360 | |||
Person R, Withdrawals No. 302 | |||||
Date | PR | Debit | Credit | Balance | |
15-Feb | $4,800 | $4,800 | |||
Computer services revenue No. 403 | |||||
Date | PR | Debit | Credit | Balance | |
11-Jan | $7,000 | $7,000 | |||
16-Jan | $4,000 | $11,000 | |||
16-Mar | $5,260 | $16,260 | |||
24-Mar | $9,047 | $25,307 | |||
Sales No. 413 | |||||
Date | PR | Debit | Credit | Balance | |
13-Jan | $5,200 | $5,200 | |||
26-Jan | $5,800 | $11,000 | |||
23-Feb | $3,220 | $14,220 | |||
25-Mar | $2,800 | $17,020 | |||
30-Mar | $2,220 | $19,240 | |||
Sales returns and allowances No. 414 | |||||
Date | PR | Debit | Credit | Balance | |
20-Jan | $500 | $500 | |||
Sales discounts No. 415 | |||||
Date | PR | Debit | Credit | Balance | |
20-Jan | $47 | $0 | $47 | ||
Cost of goods sold No. 502 | |||||
Date | PR | Debit | Credit | Balance | |
13-Jan | $3,560 | $3,560 | |||
26-Jan | $4,640 | $8,200 | |||
23-Feb | $2,660 | $10,860 | |||
25-Mar | $2,002 | $12,862 | |||
30-Mar | $1,048 | $13,910 | |||
Depreciation expense - Office equipment No. 612 | |||||
Date | PR | Debit | Credit | Balance | |
Depreciation expense - Computer equipment No. 613 | |||||
Date | PR | Debit | Credit | Balance | |
Wages expense No. 623 | |||||
Date | PR | Debit | Credit | Balance | |
4-Jan | $125 | $125 | |||
31-Jan | $1,250 | $1,375 | |||
26-Feb | $1,000 | $2,375 | |||
Insurance expense No. 637 | |||||
Date | PR | Debit | Credit | Balance | |
Rent expense No. 640 | |||||
Date | PR | Debit | Credit | Balance | |
Computer supplies expense No. 652 | |||||
Date | PR | Debit | Credit | Balance | |
Advertising expense No. 655 | |||||
Date | PR | Debit | Credit | Balance | |
5-Feb | $600 | $600 | |||
Mileage expense No. 676 | |||||
Date | PR | Debit | Credit | Balance | |
27-Feb | $192 | $192 | |||
31-Mar | $128 | $320 | |||
Miscellaneous Expenses No. 677 | |||||
Date | PR | Debit | Credit | Balance | |
Repairs Expense—Computer No. 684 | |||||
Date | PR | Debit | Credit | Balance | |
11-Mar | $960 | $960 |
3.
Prepare a partial worksheet of Company BS for the three months ended March 31, 2020.
Explanation of Solution
Worksheet: A worksheet is the summarized form of accounting information which is made in order to ensure that the accounts are made properly.
Prepare a partial worksheet of Company BS for the three months ended March 31, 2020.
Table (2)
4.
Prepare a single step income statement of Company BS for the three months ended March 31, 2020.
Explanation of Solution
Income statement: The financial statement which reports revenues and expenses from business operations and the result of those operations as net income or net loss for a particular time period is referred to as income statement.
Single-step income statement: This statement displays the total revenues as one line item from which the total expenses including cost of goods sold is subtracted to arrive at the net profit /net loss for the period.
Prepare a statement of income of Company BS for the three months ended March 31, 2020.
Company BS | ||
Statement of Income | ||
For the three months ended March 31, 2020 | ||
Particulars | Amount | Amount |
Revenues | ||
Computer services revenue | $25,307 | |
Net sales () | $18,693 | |
Total revenues | $44,000 | |
Expenses | ||
Cost of goods sold | $14,052 | |
Depreciation expense—Office equipment | $400 | |
Depreciation expense—Computer equipment | $1,250 | |
Wages expense | $3,250 | |
Insurance expense | $555 | |
Rent expense | $2,475 | |
Computer supplies expense | $1,305 | |
Advertising expense | $600 | |
Mileage expense | $320 | |
Repairs expense—Computer | $960 | |
Total expenses | ($25,167) | |
Net income | $18,833 |
Table (3)
The net income of Company BS for the three months ended March 31, 2020 is $18,833.
5.
Prepare a statement of owner’s equity of Company BS for the three months ended March 31, 2020.
Explanation of Solution
Prepare a statement of owner’s equity of Company BS for the three months ended March 31, 2020.
Company BS | ||
Statement of owner’s equity | ||
For the three months ended March 31, 2020 | ||
Particulars | Amount | Amount |
Person R, Capital, December 31, 2019 | $80,360 | |
Add: Investments by owner | 25,000 | |
Net income | 18,833 | |
$124,193 | ||
Less: Withdrawals by owner | ($4,800) | |
Person R, Capital, as on March 31, 2020 | $119,393 |
Table (4)
The owner’s equity of Company BS for the three months ended March 31, 2020 is $119,393.
6.
Prepare a classified balance sheet of Company BS as of March 31, 2020.
Explanation of Solution
Classified balance sheet: The main elements of balance sheet assets, liabilities, and stockholders’ equity are categorized or classified further into sections in a classified balance sheet. Assets are further classified as current assets, long-term investments, property, plant, and equipment (PPE), and intangible assets.
Prepare a classified balance sheet as of March 31, 2020.
Company BS | ||
Balance sheet | ||
As of March 31, 2020 | ||
Assets | Amount | Amount |
Current assets | ||
Cash | $68,057 | |
Accounts receivable | $22,867 | |
Merchandise inventory | $704 | |
Computer supplies | $2,005 | |
Prepaid insurance | $1,110 | |
Prepaid rent | $825 | |
Total current assets | $95,568 | |
Plant assets | ||
Office equipment | $8,000 | |
Accumulated depreciation—Office equipment | ($800) | $7,200 |
Computer equipment | $20,000 | |
Accumulated depreciation—Computer equipment | ($2,500) | $17,500 |
Total plant assets | $24,700 | |
Total assets | $120,268 | |
Liabilities and Stockholder's Equity | ||
Liabilities | ||
Current liabilities | ||
Wages payable | $875 | |
Stockholders’ Equity | ||
Person R, Capital | $119,393 | |
Total liabilities and equity | $120,268 |
Table (5)
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Chapter 5 Solutions
Principles of Financial Accounting.
- 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_forwardKelly Pitney began her consulting business, Kelly Consulting, on April 1, 2019. 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: Instructions 1. The chart of accounts for Kelly Consulting is shown in Exhibit 9, and the post-closingtrial balance as of April 30, 2019, 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, 2019, and place a check mark () in the Posting Reference column. Journalize each of the May transactions in a twocolumn 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 statement of owners equity, and a balance sheet. 9. Prepare and post the closing entries. Record the closing entries on Page 8 of the journal. Indicate closed accounts by inserting a line in both Balance columns opposite the closing entry. 10. Prepare a post-closing trial balance.arrow_forward
- Kelly 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_forwardKelly Pitney began her consulting business, Kelly Consulting, on April 1, 2016. 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: Instructions 1. The chart of accounts for Kelly Consulting is shown in Exhibit 9, and the post-closing trial balance as of April 30, 2016, 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, 2016, 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 statement of owners equity, and a balance sheet. 9.Prepare and post the closing entries. Record the closing entries on Page 8 of the journal. (Income Summary is account #33 in the 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_forwardFor the past several years, Jeff Horton has operated a part-time consulting business from his home. As of April 1, 2016, Jeff decided to move to rented quarters and to operate the business, which was to be known as Rosebud Consulting, on a full-time basis. Rosebud Consulting entered into the following transactions during April: Instructions 1.Journalize each transaction in a two-column journal starting on Page 1, referring to the following chart of accounts in selecting the accounts to be debited and credited. (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 April, the following adjustment data were assembled. Analyze and use these data to complete parts (5) and (6). a. Insurance expired during April is 350. b. Supplies on hand on April 30 are 1,225. c. Depreciation of office equipment for April is 400. d. Accrued receptionist salary on April 30 is 275. e. Rent expired during April is 2,000. f. Unearned fees on April 30 are 2,350. 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 3 of the journal. 7.Prepare an adjusted trial balance. 8.Prepare an income statement, a statement of owners equity, and a balance sheet. 9.Prepare and post the closing entries. Record the closing entries on Page 4 of the journal. (Income Summary is account #33 in the 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
- The transactions completed by PS Music during June 2018 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 Musk in exchange for common stock 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 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 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 lage 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. 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, 2018. 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, 2018. 31. Received 3,000 for serving as a disc jockey for a party. July 31. Paid 1,400 royalties (music expense) to National Music Clearing for use of various artists music during July. 31. Paid dividends, 1,250. PS Musics chart of accounts and the balance of accounts as of July 1, 2018 (all normal balances), are as follows: 11 Cash 3,920 41 Fees Earned 6,200 12 Accounts Receivable 1,000 50 Wages Expense 400 14 Supplies 170 51 Office Rent Expense 800 15 Prepaid Insurance 52 Equipment Rent Expense 675 17 Office Equipment 53 Utilities Expense 300 21 Accounts Payable 250 54 Music Expense 1,590 23 Unearned Revenue 55 Advertising Expense 500 31 Common Stock 4,000 56 Supplies Expense 180 33 Dividends 500 59 Miscellaneous Expense 415 Instructions 1. Enter the July 1, 2018, 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, 2018.arrow_forwardSage Learning Centers was established on July 20, 2016, to provide educational services. The services provided during the remainder of the month are as follows: Instructions 1. Journalize the transactions for July, using a single-column revenue journal and a two-column general journal. Post to the following customer accounts in the accounts receivable ledger, and insert the balance immediately after recording each entry: D. Chase; J. Dunlop; F. Mintz; T. Quinn; K. Tisdale. 2. Post the revenue journal and the general journal to the following accounts in the general ledger, inserting the account balances only after the last postings: 3. a. What is the sum of the balances of the customer accounts in the subsidiary ledger at July 31? b. What is the balance of the accounts receivable controlling account at July 31? 4. Assume Sage Learning Centers began using a computerized accounting system to record the sales transactions on August 1. What are some of the benefits of the computerized system over the manual system?arrow_forwardFor the past several years, Steffy Lopez has operated a part-time consulting business from his home. As of July 1, 2016, Steffy decided to move to rented quarters and to operate the business, which was to be known as Diamond Consulting, on a full-time basis. Diamond Consulting entered into the following transactions during July: Instructions 1.Journalize each transaction in a two-column journal starting on Page 1, referring to the following chart of accounts in selecting the accounts to be debited and credited. (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 July, the following adjustment data were assembled. Analyze and use these data to complete parts (5) and (6). a. Insurance expired during July is 375. b. Supplies on hand on July 31 are 1,525. c. Depreciation of office equipment for July is 750. d. Accrued receptionist salary on July 31 is 175. e. Rent expired during July is 2,400. f. Unearned fees on July 31 are 2,750. 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 3 of the journal. 7.Prepare an adjusted trial balance. 8.Prepare an income statement, a statement of owners equity, and a balance sheet. 9.Prepare and post the closing entries. (Income Summary is account #33 in the chart of accounts.) Record the closing entries on Page 4 of the journal. 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
- 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 (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_forwardLavender Company started its business on April 1, 2019. The following are the transactions that happened during the month of April. Prepare the journal entries in the journal on Page 1. A. The owners invested $7,500 from their personal account to the business account. B. Paid rent $600 with check #101. C. Initiated a petty cash fund $250 check #102. D. Received $350 cash for services rendered. E. Purchased office supplies for $125 with check #103. F. Purchased computer equipment $1,500, paid $500 with check #104, and will pay the remainder in 30 days. G. Received $750 cash for services rendered. H. Paid wages $375, check #105. I. Petty cash reimbursement Office Supplies $50, Maintenance Expense $80, Miscellaneous Expense $60. Cash on hand $8. Check #106. J. Increased Petty Cash by $70, check #107.arrow_forward
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