Concept explainers
1
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.
To record: The transactions for Company BHP.
1
Answer to Problem 2.20E
Date | Account Title and Explanation | Debit($) | Credit($) | |
September 3 | Accounts receivable | 20,000 | ||
Service revenue | 20,000 | |||
(To record the entry for providing painting service on account) | ||||
September 8 | 21,000 | |||
Equipment | ||||
Cash | 21,000 | |||
(To record the entry for purchasing painting equipment) | ||||
September 12 | 3,500 | |||
supplies | ||||
Accounts payable | 3,500 | |||
(To record the entry for purchase of supplies on account) | ||||
September 15 | 4,200 | |||
Salaries expense | ||||
Cash | 4,200 | |||
(To record the entry for payment of salary for current month) | ||||
September 19 | 1,000 | |||
Advertising expense | ||||
Cash | 1,000 | |||
(To record the entry for payment of advertising for the current month) | ||||
September 22 | 5,400 | |||
Rent expense | ||||
Cash | 5,400 | |||
(To record the entry for payment of rent for current month) | ||||
September 26 | 15,000 | |||
Cash | ||||
Accounts receivable | 15,000 | |||
(To record the entry for received cash on account) | ||||
September 30 | 6,000 | |||
Cash | ||||
Deferred revenue | 6,000 | |||
(To record the entry for receiving cash in advance for painting) |
Explanation of Solution
September 3
Explanation:
- Accounts receivable is an asset account. There is an increase in the asset account. So debit accounts receivable with $20,000.
- Service revenue is a revenue account which is a component of
stockholders’ equity. There is an increase in revenue account this in turns increases stockholders’ equity. So credit revenue account with $20,000.
September 8
Explanation:
- Equipment is an asset account. There is an increase in the asset account. So debit equipment account with $21,000.
- Cash is an asset account. There is a decrease in the asset account. So credit account with $21,000.
September 12
Explanation:
- Supplies are an asset account. There is an increase in the asset account. So debit supplies account with $3,500.
- Accounts payable is a liability account. There is a decrease in the liability account. So credit accounts payable with $3,500.
September 15
Explanation:
- Salaries expense is an expense account which is a component of stockholders’ equity. There is an increase in the expense this in turns decreases stockholders’ equity. So debit salaries expense with $4,200.
- Cash is an asset account. There is a decrease in the asset account. So credit cash account with $4,200.
September 19
Explanation:
- Advertising expense is an expense account which is a component of stockholders’ equity. There is an increase in the expense this in turns decreases stockholders’ equity. So debit advertising expense with $1,000.
- Cash is an asset account. There is a decrease in the asset account. So credit cash account with $1,000.
September 22
Explanation:
- Rent expense is an expense account which is a component of stockholders’ equity. There is an increase in the expense this in turns decreases stockholders’ equity. So debit rent expense with $5,400.
- Cash is an asset account. There is a decrease in the asset account. So credit cash account with $5,400.
September 26
Explanation:
- Cash is an asset account. There is an increase in the asset account. So debit cash account with $15,000.
- Accounts receivable is an asset account. There is a decrease in the asset account. So credit accounts receivable with $15,000.
September 19
Explanation:
- Cash is an asset account. There is an increase in the asset account. So debit cash account with $6,000.
- Deferred revenue is a liability account. There is a decrease in the liability account. So credit deferred revenue with $6,000.
2
T-account:
T-account is the form of the ledger account, where the
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
To compute: the ending balance of each account by
2
Explanation of Solution
Prepare T-account:
Accounts receivable account:
Accounts receivable | |||
Opening balance | 1,700 | ||
Service revenue | 20,000 | Cash | 15,000 |
Total | 21,700 | Total | |
Ending balance | 6,700 |
Service revenue account:
Service revenue | |||
Opening balance | 0 | ||
Accounts receivable | 20,000 | ||
Equipment account:
Equipment | |||
Opening balance | 7,400 | ||
cash | 21,000 | ||
Ending balance | 28,400 |
Cash account:
Cash | |||
Opening balance | 46,100 | Equipment | 21,000 |
Accounts receivable | 15,000 | Salary | 4,200 |
Deferred revenue | 6,000 | Advertisement | 1,000 |
Office rent | 5,400 | ||
Total | 67,100 | Total | 67,000 |
Ending balance | 35,500 |
Supplies account:
supplies | |||
Opening balance | 500 | ||
Accounts payable | 3,500 | ||
Ending balance | 4,000 |
Accounts payable account:
Accounts payable | |||
Opening balance | 1,200 | ||
Purchase | 3,500 | ||
Ending balance | 4,700 |
Salaries expense account:
Salaries expense | |||
Opening balance | 0 | ||
Cash | 4,200 | ||
Ending balance | 4,200 |
Advertising expense account:
Advertising expense | |||
Opening balance | 0 | ||
Cash | 1,000 | ||
Ending balance | 1,000 |
Rent expense account:
Rent expense | |||
Opening balance | 0 | ||
Cash | 5,400 | ||
Ending balance | 5,400 |
Deferred revenue account:
Deferred revenue | |||
Opening balance | 0 | ||
cash | 6,000 | ||
Ending balance | 6,000 |
Common stock account:
Common stock | |||
Opening balance | 25,000 | ||
Ending balance | 25,000 |
Retained earnings account:
Retained earnings | |||
Opening balance | 29,500 | ||
Ending balance | 29,500 |
3
Trial balance is the summary of accounts, and their debit and credit balances at a given time. It is usually prepared at end of the accounting period. Debit balances are listed in left column and credit balances are listed in right column. The totals of debit and credit column should be equal. Trial balance is useful in the preparation of the financial statements.
To prepare: The trail balance of Company BPH.
3
Explanation of Solution
Prepare the trial balance of Company BPH:
Company BPH | ||
Trial balance | ||
At the end of September | ||
Accounts | Debit($) | Credit($) |
Cash | 35,500 | |
Accounts receivable |
6,700 | |
supplies | 4,000 | |
Prepaid rent | 3,000 | |
Equipment | 28,400 | |
Accounts payable | 4,700 | |
Deferred revenue | 6,000 | |
Common stock | 25,000 | |
Retained earnings | 29,500 | |
Service revenue | 20,000 | |
Salaries expense | 4,200 | |
Rent expense | 5,400 | |
Advertising expense | 1,000 | |
Total | 85,200 | 85,200 |
Hence, the trial balance is prepared, and the debit column and credit column of the trial balance are agreed, both having balance of $85,200.
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Chapter 2 Solutions
Financial Accounting
- 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 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_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 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_forwardOswego Clay Pipe Company provides services of $46,000 to Southeast Water District #45 on April 12 of the current year with terms 1/15, n/60. What would Oswego record on April 23, assuming the customer made the correct payment on that date? A. Cash Sales Revenue Accounts Receivable B. Cash Sales Discounts Accounts Receivable Interest Revenue C. 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