Concept explainers
(1)
General journal refers to the entry for each transaction in the books of accounts using the debit and credit method. In the double entry system, each transaction is recorded twice, one account is debited, whereas, the other is credited.
To prepare the journal entries.
Answer to Problem 2PSA
Date | Particular | PR | Debit | Credit |
A | Cash Office equipment Drafting equipment Common stock (To received the assets from owner) |
101 163 164 307 |
100,000 5,000 60,000 |
165,000 |
B | Land Cash Note payable (To record the land purchase by cash and issue notes payable) |
172 101 250 |
49,000 | 6300 42700 |
C | Building Cash (To record the purchase building) |
170 101 |
55,000 | 55,000 |
D | Prepaid insurance Cash (To record the prepaid insurance in advance) |
108 101 |
3000 | 3000 |
E | Cash Account Receivable (To record the cash from the account receivable |
101 106 |
6200 | 6200 |
F | Drafting equipment Cash Notes payable (To record the purchase the drafting equipment) |
164 101 250 |
20,000 | 9500 10500 |
G | Accounts receivable Engineering fees earned (To record the accounts receivable) |
106 402 |
14000 | 14000 |
H | Office equipment Account payable |
163 201 |
1150 | 1150 |
I | Accounts receivable Engineering fees earned (The company sale service in the credit basis) |
106 402 |
22000 | 22000 |
J | Equipments rent expense Accounts payable (To the rent expense) |
602 201 |
1333 | 1333 |
K | Cash Accounts receivable (To record the money received from the old customer) |
101 106 |
7000 | 7000 |
I | Wages Cash (To record the wages payment) |
601 101 |
1200 | 1200 |
m. | Accounts payable Cash (To record the cash paid to accounts payable) |
201 101 |
1150 | 1150 |
N | Repair expense Cash (To record the repair expense) |
604 101 |
925 | 925 |
O | Dividend Cash (To record the dividend payment) |
319 101 |
9480 | 9480 |
P | Wages Cash (To record the wages payment) |
601 101 |
1200 | 1200 |
Q | Advertising expense cash (To record the Advertising payment) |
603 101 |
2500 | 2500 |
Explanation of Solution
All transaction should be recorded as per the explanation.
In the
(2)
Ledger is a book of financial statement. All types of journal entries are classified in these books. Ledger shows the accumulated transaction of a related item.
To prepare the ledger of each transaction.
Answer to Problem 2PSA
Cash Accounts no. 101:
Date | PR | Debit | Credit | Balance |
A | 307 | 100,000 | 100,000 | |
B | 172 | 6300 | 93700 | |
C | 170 | 55000 | 38700 | |
D | 108 | 3000 | 35700 | |
E | 106 | 6200 | 41900 | |
F | 164 | 9500 | 32400 | |
K | 106 | 7000 | 39400 | |
I | 601 | 1200 | 38200 | |
M | 201 | 1150 | 37050 | |
N | 604 | 925 | 36125 | |
O | 319 | 9480 | 26645 | |
P | 601 | 1200 | 25445 | |
Q | 603 | 2500 | 22945 |
Office Equipment Accounts no. 163:
Date | PR | Debit | Credit | Balance |
A | 307 | 5000 | 5000 | |
H | 201 | 1150 | 6150 | |
Drafting Equipment Accounts no. 164:
Date | PR | Debit | Credit | Balance |
A | 307 | 60,000 | 60,000 | |
F | 101250 | 950010500 | 80000 |
Common stock Accounts no. 307:
Date | PR | Debit | Credit | Balance |
A | 101 | 100,000 | ||
A | 163 | 5,000 | ||
A | 164 | 60,000 | 165000 |
Land Accounts no. 172:
Date | PR | Debit | Credit | Balance |
B | 101 | 6300 | ||
B | 250 | 42700 | 49000 |
Notes payable Accounts no. 250:
Date | PR | Debit | Credit | Balance |
B | 172 | 42700 | 42700 | |
F | 164 | 10500 | 53200 |
Building Accounts no. 170:
Date | PR | Debit | Credit | Balance |
B | 101 | 55,000 | 55,000 |
Prepaid insurance Accounts no. 108:
Date | PR | Debit | Credit | Balance |
D | 101 | 3000 | 3000 |
Account Receivable Accounts no. 106:
Date | PR | Debit | Credit | Balance |
E | 101 | 6200 | (6200) | |
G | 402 | 14000 | 7800 | |
I | 402 | 22000 | 29800 | |
K | 101 | 7000 | 22800 | |
Accounts payable Accounts no.201:
Date | PR | Debit | Credit | Balance |
H | 163 | 1150 | 1150 | |
J | 602 | 1333 | 2483 | |
M | 101 | 1150 | 1333 |
Engineering fees earned Accounts no. 402:
Date | PR | Debit | Credit | Balance |
G | 106 | 14000 | 14000 | |
I | 106 | 22000 | 36000 |
Equipments rent expense Accounts no. 602:
Date | PR | Debit | Credit | Balance |
J | 201 | 1333 | 1333 | |
Wages Accounts no. 601:
Date | PR | Debit | Credit | Balance |
I | 101 | 1200 | 1200 | |
P | 101 | 1200 | 2400 |
Repair Expense Accounts no. 604:
Date | PR | Debit | Credit | Balance |
N | 101 | 925 | 925 | |
Dividend Accounts no. 319:
Date | PR | Debit | Credit | Balance |
O | 101 | 9480 | 9480 |
Advertising expense Accounts no. 603:
Date | PR | Debit | Credit | Balance |
Q | 101 | 2500 | 2500 |
Explanation of Solution
In the ledger book, each transaction should be recorded separately.
A separate column should be prepared.
(3)
A
Trial balance statements show the end balance of each ledger. They have two columns, one is debited and the other is credited.
To prepare the Trial balance.
Answer to Problem 2PSA
Trial balance:
Particular | Number | Debit | Credit |
Cash | 101 | 22945 | |
Office equipment | 163 | 6150 | |
Drafting equipment | 164 | 80000 | |
Common stock | 307 | 165000 | |
Land | 172 | 49000 | |
Notes payable | 250 | 53200 | |
Building | 170 | 55000 | |
Prepaid insurance | 108 | 3000 | |
Account Receivable | 106 | 22800 | |
Account payable | 201 | 1333 | |
Engineering fees earned | 402 | 36000 | |
Equipments rent expense | 602 | 1333 | |
Wages | 601 | 2400 | |
Repair expense | 604 | 925 | |
Dividend | 319 | 9480 | |
Advertising expense | 603 | 2500 | |
Total | 255533 | 255533 |
Explanation of Solution
There are three types of trail balance:
- Unadjusted trail balance
- Adjusted trail balance
- Closing trial balance.
The abovementioned trial balance is the unadjusted trial balance, because no transaction has been adjusted in it.
This is a simple trial balance which shows the list of accounts with amount.
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Chapter D Solutions
MANAGERIAL ACCOUNTING W/CONNECT
- In 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_forwardFor each of the following situations write the principle, assumption, or concept that justifies or explains what occurred. A. A landscaper received a customers order and cash prepayment to install sod at a house that would not be ready for installation until March of next year. The owner should record the revenue from the customer order in March of next year, not in December of this year. B. A company divides its income statements into four quarters for the year. C. Land is purchased for $205,000 cash; the land is reported on the balance sheet of the purchaser at $205,000. D. Brandys Flower Shop is forecasting its balance sheet for the next five years. E. When preparing financials for a company, the owner makes sure that the expense transactions are kept separate from expenses of the other company that he owns. F. A company records the expenses incurred to generate the revenues reported.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. 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_forward
- Discuss how each of the following transactions for Watson, International, will affect assets, liabilities, and stockholders equity, and prove the companys accounts will still be in balance. A. An investor invests an additional $25,000 into a company receiving stock in exchange. B. Services are performed for customers for a total of $4,500. Sixty percent was paid in cash, and the remaining customers asked to be billed. C. An electric bill was received for $35. Payment is due in thirty days. D. Part-time workers earned $750 and were paid. E. The electric bill in C is paid.arrow_forwardDuring February of this year, H. Rose established Rose Shoe Hospital. The following asset, liability, and owners equity accounts are included in the chart of accounts: The following transactions occurred during the month of February: a. Rose deposited 25,000 cash in a bank account in the name of the business. b. Bought shop equipment for cash, 1,525, Ck. No. 1000. c. Bought advertising on account from Milland Company, 325. d. Bought store shelving on account from Inger Hardware, 750. e. Bought office equipment from Sharas Office Supply, 625, paying 225 in cash and placing the balance on account, Ck. No. 1001. f. Paid on account to Inger Hardware, 750, Ck. No. 1002. g. Rose invested his personal leather working tools with a fair market value of 800 in the business h. Sold services for the month of February for cash, 250. PART 1: The Accounting Cycle for a Service Business: Analyzing Business Transactions Required 1. Write the account classifications (Assets, Liabilities, Capital, Drawing, Revenue, Expense) in the fundamental accounting equation, as well as the plus and minus signs and Debit and Credit. 2. Write the account names on the T accounts under the classifications, place the plus and minus signs for each T account, and label the debit and credit sides of the T accounts. 3. Record the amounts in the proper positions in the T accounts. Write the letter next to each entry to identify the transaction. 4. Foot and balance the accounts.arrow_forwardA business has the following transactions: A. The business is started by receiving cash from an investor in exchange for common stock $10,000. B. Rent of $1,250 is paid for the first month. C. Office supplies are purchased for $375. D. Services worth $3,450 are performed. Cash is received for half. E. Customers pay $1,250 for services to be performed next month. F. $6,000 is paid for a one year insurance policy. G. We receive 25% of the money owed by customers in D. H. A customer has placed an order for $475 of services to be done this coming week. How much total revenue does the company have?arrow_forward
- The following information is provided for the first month of operations for Legal Services Inc.: A. The business was started by selling $100,000 worth of common stock. B. Six months rent was paid in advance, $4,500. C. Provided services in the amount of $1,000. The customer will pay at a later date. D. An office worker was hired. The worker will be paid $275 per week. E. Received $500 in payment from the customer in C. F. Purchased $250 worth of supplies on credit. G. Received the electricity bill. We will pay the $110 in thirty days. H. Paid the worker hired in D for one weeks work. I. Received $100 from a customer for services we will provide next week. J. Dividends in the amount of $1,500 were distributed. Prepare the necessary journal entries to record these transactions. If an entry is not required for any of these transactions, state this and explain why.arrow_forwardDuring December of this year, G. Elden established Ginnys Gym. The following asset, liability, and owners equity accounts are included in the chart of accounts: During December, the following transactions occurred: a. Elden deposited 35,000 in a bank account in the name of the business. b. Bought exercise equipment for cash, 8,150, Ck. No. 1001. c. Bought advertising on account from Hazel Company, 105. d. Bought a display rack on account from Cyber Core, 790. e. Bought office equipment on account from Office Aids, 185. f. Elden invested her exercise equipment with a fair market value of 1,200 in the business. g. Made a payment to Cyber Core, 200, Ck. No. 1002. h. Sold services for the month of December for cash, 800. Required 1. Write the account classifications (Assets, Liabilities, Capital, Drawing, Revenue, Expense) in the fundamental accounting equation, as well as the plus and minus signs and Debit and Credit. 2. Write the account names on the T accounts under the classifications, place the plus and minus signs for each T account, and label the debit and credit sides of the T accounts 3. Record the amounts in the proper positions in the T accounts. Write the letter next to each entry to identify the transaction. 4. Foot and balance the accounts.arrow_forwardJada Company had the following transactions during the year: Purchased a machine for $500,000 using a long-term note to finance it Paid $500 for ordinary repair Purchased a patent for $45,000 cash Paid $200,000 cash for addition to an existing building Paid $60,000 for monthly salaries Paid $250 for routine maintenance on equipment Paid $10,000 for major repairs Depreciation expense recorded for the year is $25,000 If all transactions were recorded properly, what is the amount of increase to the Property, Plant, and Equipment section of Jadas balance sheet resulting from this years transactions? What amount did Jada report on the income statement for expenses for the year?arrow_forward
- A business has the following transactions: The business is started by receiving cash from an investor in exchange for common stock $20,000 The business purchases supplies on account $500 The business purchases furniture on account $2,000 The business renders services to various clients on account totaling $9,000 The business pays salaries $2,000 The business pays this months rent $3,000 The business pays for the supplies purchased on account. The business collects from one of its clients for services rendered earlier in the month $1,500. What is total income for the month?arrow_forwardAnalyzing Transactions. Using the analytical framework, indicate the effect of the following related transactions of a firm. a. January 1: Issued 10,000 shares of common stock for 50,000. b. January 1: Acquired a building costing 35,000, paying 5,000 in cash and borrowing the remainder from a bank. c. During the year: Acquired inventory costing 40,000 on account from various suppliers. d. During the year: Sold inventory costing 30,000 for 65,000 on account. e. During the year: Paid employees 15,000 as compensation for services rendered during the year. f. During the year: Collected 45,000 from customers related to sales on account. g. During the year: Paid merchandise suppliers 28,000 related to purchases on account. h. December 31: Recognized depreciation on the building of 7,000 for financial reporting. Depreciation expense for income tax purposes was 10,000. i. December 31: Recognized compensation for services rendered during the last week in December but not paid by year-end of 4,000. j. December 31: Recognized and paid interest on the bank loan in Part b of 2,400 for the year. k. Recognized income taxes on the net effect of the preceding transactions at an income tax rate of 40%. Assume that the firm pays cash immediately for any taxes currently due to the government.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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