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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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BuyFindarrow_forward

Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Accounts Payable

Sleek Ride, a company providing limo services, has a December 31 year-end date. For Sleek Ride, the following transactions occurred during the first 10 days of June:

a. Purchased, on credit, space for classified advertisements in the New York Times for $1,950. The advertising was run the day the space was purchased.

b. Purchased office supplies from Office Max on credit in the amount of $475.

c. One of Sleek Ride’s sales staff signed a $20,000 contract to provide exclusive limo services for a large company for the remainder of the month. The salesperson’s commission is 10% of service revenue. The commission will be paid July 10. ( Note: Concern yourself only with the commission.)

d. Received electric bill for May. The bill is $4,200 and is due June 15.

e. Received a bill for $970 from Harry’s Auto. Harry’s repaired 10 limos for Sleek Ride in late May.

Payment is due June 18.

Required:

Prepare journal entries for the above transactions.

To determine

Concept introduction:

Liabilities:

Liabilities are the obligation of the business or amount payable by the business. Liabilities can current or long term. Current liabilities are liabilities payable within the short term or business cycle of the company, for example Accounts payable for purchases and utilities payable. Long term liabilities are liabilities payable in a long period/ years, for example long term loan.

To prepare:

The journal entries for the given liabilities transactions.

Explanation

The journal entries for the given liabilities transactions are explained as follows:

Sleek Ride
Journal Entries
# Account Titles Debit Credit
a. Advertising Expense $ 1,950
Advertising Payable $ 1,950
(Being Advertisement Purchased on account)
b. Supplies Expense $ 475
Accounts Payable $ 475
(Being Supplies Purchased on account)
c...

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