Concept explainers
Valley Realty acts as an agent in buying, selling, renting, and managing real estate. The unadjusted
The following business transactions were completed by Valley Realty during August 2019:
Aug. 1. Purchased office supplies on account, $3,150.
2. Paid rent on office for month, $7,200.
3. Received cash from clients on account, $83,900.
5. Paid insurance premiums, $12,000.
9. Returned a portion of the office supplies purchased on August 1, receiving full credit for their cost, $400.
Analyzing Transactions
Aug. 17. Paid advertising expense, $8,000.
23. Paid creditors on account, $13,750.
Enter the following transactions on Page 19 of the two-column journal:
29. Paid miscellaneous expenses, $1,700.
30. Paid automobile expense (including rental charges for an automobile), $2,500.
31. Discovered an error in computing a commission during July; received cash from the salesperson for the overpayment, $2,000.
31. Paid salaries and commissions for the month, $53,000.
31. Recorded revenue earned and billed to clients during the month, $183,500.
31. Purchased land for a future building site for $75,000, paying $7,500 in cash and giving a note payable for the remainder.
31. Withdrew cash for personal use, $1,000.
31. Rented land purchased on August 31 to a local university for use as a parking lot during football season (September, October, and November); received advance payment of $5,000.
Instructions
- 1. Record the August 1 balance of each account in the appropriate balance column of a four-column account, write Balance in the item section, and place a check mark (✓) in the Posting Reference column.
- 2. Journalize the transactions for August in a two-column journal beginning on Page 18.
Journal entry explanations may be omitted. - 3. Post to the ledger, extending the account balance to the appropriate balance column after each posting.
- 4. Prepare an unadjusted trial balance of the ledger as of August 31, 2019.
- 5. Assume that the August 31 transaction for Cindy Getman’s cash withdrawal should have been $10,000. (a) Why did the unadjusted trial balance in (4) balance? (b) Journalize the correcting entry. (c) Is this error a transposition or slide?
(2) and (3)
Journalize the transactions of August in a two column journal beginning on page 18.
Explanation of Solution
Journal:
Journal is the book of original entry. Journal consists of the day today financial transactions in a chronological order. The journal has two aspects; they are debit aspect and the credit aspect.
Rules of debit and credit:
“An increase in an asset account, an increase in an expense account, a decrease in liability account, and a decrease in a revenue account should be debited.
Similarly, an increase in liability account, an increase in a revenue account and a decrease in an asset account, a decrease in an expenses account should be credited”.
Journalize the transactions of August in a two column journal beginning on page 18.
Journal Page 18 | |||||
Date | Description | Post. Ref | Debit ($) | Credit ($) | |
2019 | Office supplies | 14 | 3,150 | ||
August | 1 | Accounts payable | 21 | 3,150 | |
(To record the purchase of supplies of account) | |||||
2. | Rent expense | 52 | 7,200 | ||
Cash | 11 | 7,200 | |||
(To record the payment of rent) | |||||
3 | Cash | 11 | 83,900 | ||
Accounts receivable | 12 | 83,900 | |||
(To record the receipt of cash from clients) | |||||
5 | Prepaid insurance | 13 | 12,000 | ||
Cash | 11 | 12,000 | |||
(To record the payment of insurance premium) | |||||
9 | Accounts payable | 21 | 400 | ||
Office supplies | 14 | 400 | |||
(To record the payment made to creditors on account) | |||||
17 | Advertising expense | 53 | 8,000 | ||
Cash | 11 | 8,000 | |||
(To record the payment of advertising expense) | |||||
23 | Accounts payable | 21 | 13,750 | ||
Cash | 11 | 13,750 | |||
(To record the payment made to creditors on account) |
Table (1)
Journal Page 19 | |||||
Date | Description | Post. Ref | Debit ($) | Credit ($) | |
2019 | 29 | Miscellaneous expense | 59 | 1,700 | |
August | Cash | 11 | 1,700 | ||
(To record the payment made for Miscellaneous expense) | |||||
30 | Automobile expense | 54 | 2,500 | ||
Cash | 11 | 2,500 | |||
(To record the payment made for automobile expense) | |||||
31 | Cash | 11 | 2,000 | ||
Salary and commission expense | 51 | 2,000 | |||
(To record the receipt of cash) | |||||
31 | Salary and commission expense | 51 | 53,000 | ||
Cash | 11 | 53,000 | |||
(To record the payment made for salary and commission expense) | |||||
31 | Accounts receivable | 12 | 183,500 | ||
Fees earned | 41 | 183,500 | |||
(To record the revenue earned and billed) | |||||
31 | Land | 16 | 75,000 | ||
Cash | 11 | 7,500 | |||
Notes payable | 23 | 67,500 | |||
(To record the purchase of land party for cash and party on signing a note) | |||||
31 | C’s Drawing | 32 | 1,000 | ||
Cash | 11 | 1,000 | |||
(To record the drawing made for personal use) | |||||
31 | Cash | 11 | 5,000 | ||
Unearned rent | 22 | 5,000 | |||
(To record the cash received for the service yet to be provide) |
Table (2)
(1) and (3)
Record the beginning balances of each accounts in the appropriate balance column of a four-column account, and post them to the ledger extending the account balance to the appropriate balance column after each posting.
Explanation of Solution
T-account:
An account is referred to as a T-account, because the alignment of the components of the account resembles the capital letter ‘T’. An account consists of the three main components which are as follows:
- The title of the account
- The left or debit side
- The right or credit side
Account: Cash Account no. 11 | |||||||
Date | Item | Post. Ref |
Debit ($) | Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2019 | |||||||
August | 1 | Balance | ✓ | 52,500 | |||
2 | 18 | 7,200 | 45,300 | ||||
3 | 18 | 83,900 | 129,200 | ||||
5 | 18 | 12,000 | 117,200 | ||||
17 | 18 | 8,000 | 109,200 | ||||
23 | 18 | 13,750 | 95,450 | ||||
29 | 19 | 1,700 | 93,750 | ||||
30 | 19 | 2,500 | 91,250 | ||||
31 | 19 | 2,000 | 93,250 | ||||
31 | 19 | 53,000 | 40,250 | ||||
31 | 19 | 7,500 | 32,750 | ||||
31 | 19 | 1,000 | 31,750 | ||||
31 | 19 | 5,000 | 36,750 |
Table (3)
Account: Accounts Receivable Account no. 12 | |||||||
Date | Item | Post. Ref |
Debit ($) | Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2019 | |||||||
August | 1 | Balance | ✓ | 100,100 | |||
3 | 18 | 83,900 | 16,200 | ||||
31 | 19 | 183,500 | 199,700 |
Table (4)
Account: Prepaid Insurance Account no. 13 | |||||||
Date | Item | Post. Ref |
Debit ($) | Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2019 | |||||||
August | 1 | Balance | ✓ | 12,600 | |||
5 | 18 | 12,000 | 24,600 |
Table (5)
Account: Office Supplies Account no. 14 | |||||||
Date | Item | Post. Ref |
Debit ($) | Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2019 | |||||||
August | 1 | Balance | ✓ | 2,800 | |||
1 | 18 | 3,150 | 5,950 | ||||
9 | 18 | 400 | 5,550 |
Table (6)
Account: Land Account no. 16 | |||||||
Date | Item | Post. Ref |
Debit ($) | Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2019 | |||||||
August | 31 | 19 | 75,000 | 75,000 |
Table (7)
Account: Accounts Payable Account no. 21 | |||||||
Date | Item | Post. Ref |
Debit ($) | Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2019 | |||||||
August | 1 | Balance | ✓ | 21,000 | |||
1 | 18 | 3,150 | 24,150 | ||||
9 | 18 | 400 | 23,750 | ||||
23 | 18 | 13,750 | 10,000 |
Table (8)
Account: Unearned Rent Account no. 22 | |||||||
Date | Item | Post. Ref |
Debit ($) | Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2019 | |||||||
August | 31 | 19 | 5,000 | 5,000 |
Table (9)
Account: Notes Payable Account no. 23 | |||||||
Date | Item | Post. Ref |
Debit ($) | Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2019 | |||||||
August | 31 | 19 | 67,500 | 67,500 |
Table (11)
Account: Capital Account no. 31 | |||||||
Date | Item | Post. Ref |
Debit ($) | Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2019 | |||||||
August | 1 | Balance | ✓ | 87,500 |
Table (12)
Account: Drawing Account no. 32 | |||||||
Date | Item | Post. Ref |
Debit ($) | Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2019 | |||||||
August | 1 | Balance | ✓ | 44,800 | |||
31 | 19 | 1,000 | 45,800 |
Table (13)
Account: Fees earned Account no. 41 | |||||||
Date | Item | Post. Ref |
Debit ($) | Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2019 | |||||||
August | 1 | Balance | ✓ | 591,500 | |||
31 | 19 | 183,500 | 775,000 |
Table (14)
Account: Salary and commission expense Account no. 51 | |||||||
Date | Item | Post. Ref |
Debit ($) | Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2019 | |||||||
August | 1 | Balance | ✓ | 385,000 | |||
31 | 19 | 2,000 | 383,000 | ||||
31 | 19 | 53,000 | 436,000 |
Table (15)
Account: Rent expense Account no. 52 | |||||||
Date | Item | Post. Ref |
Debit ($) | Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2019 | |||||||
August | 1 | Balance | ✓ | 49,000 | |||
2 | 18 | 7,200 | 56,200 |
Table (16)
Account: Advertising expense Account no. 53 | |||||||
Date | Item | Post. Ref |
Debit ($) | Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2019 | |||||||
August | 1 | Balance | ✓ | 32,200 | |||
17 | 18 | 8,000 | 40,200 |
Table (17)
Account: Automobile expense Account no. 54 | |||||||
Date | Item | Post. Ref |
Debit ($) | Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2019 | |||||||
August | 1 | Balance | ✓ | 15,750 | |||
30 | 19 | 2,500 | 18,250 |
Table (19)
Account: Miscellaneous expense Account no. 59 | |||||||
Date | Item | Post. Ref |
Debit ($) | Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2019 | |||||||
August | 1 | Balance | ✓ | 5,250 | |||
29 | 19 | 1,700 | 6,950 |
Table (20)
(4)
Prepare an unadjusted trial balance of Company V at August 31, 2019.
Explanation of Solution
Unadjusted trial balance:
The unadjusted trial balance is the summary of all the ledger accounts that appears on the ledger accounts before making adjusting journal entries.
Prepare an unadjusted trial balance of Company V at August 31, 2019 as follows:
Company V Unadjusted Trial Balance August 31, 2019 | |||
Particulars |
Account No. | Debit $ | Credit $ |
Cash | 11 | 36,750 | |
Accounts receivable | 12 | 199,700 | |
Prepaid insurance | 13 | 24,600 | |
Office supplies | 14 | 5,550 | |
Land | 16 | 75,000 | |
Accounts payable | 21 | 10,000 | |
Unearned rent | 22 | 5,000 | |
Notes payable | 23 | 67,500 | |
C’s Capital | 31 | 87,500 | |
C’s Drawings | 32 | 45,800 | |
Fees earned | 41 | 775,000 | |
Salaries and commission expense | 51 | 436,000 | |
Rent expense | 52 | 56,200 | |
Advertising expense | 53 | 40,200 | |
Automobile expense | 54 | 18,250 | |
Miscellaneous expense | 59 | 6,950 | |
Total | 945,000 | 945,000 |
Table (20)
The debit column and credit column of the unadjusted trial balance are agreed, both having balance of $945,000.
(5)
(A)
Explain whether the unadjusted trial balance in (4) balance
Explanation of Solution
The unadjusted trial balance in (4) would still balance, since the debit equalized the credit in the original journal entry.
(B)
Journalize the correcting entry
Explanation of Solution
The Correcting entry is as follows:
Journal Page 19 | |||||
Date | Description | Post. Ref | Debit ($) | Credit ($) | |
2019 | C’s drawing | 32 | 9,000 | ||
August | 31 | Cash | 11 | 9,000 | |
(To record the correcting entry) |
Table (21)
Working notes:
(C)
Identify whether the error made is a slide or transposition.
Explanation of Solution
Slide error: A slide error occurs, when the decimal point of an amount has been misplaced.
Transposition error: At the time of posting a transaction when two digits of numbers are transposed, in such case the transposition error occurs.
The drawings account balance recorded as $10,000 instead of $1,000 is a slide error. Since the decimal point of the amount has been misplaced.
Want to see more full solutions like this?
Chapter 2 Solutions
FINAN.ACCOUNTING-W/DGT ACCESS (LOOSE)
- On November 30, 2019, Davis Company and the following account balances: 1. Prepare general journal entries to record preceding transactions. 2. Post to general ledger T-accou11ts. 3. Prepare a year-end trial balance on a worksheet and complete the worksheet using the following information: (a) accrued salaries at year-end total $1,200; (b ) for simplicity, the building and equipment are being depreciated using the stright-line method over an estimated life of 20 years with no residual all c) supplies on hand at the end of the year total $630; (d ) bad debts expense for the year totals $830; and (e ) the income tax rate is 30%; income taxes are payable in the first quarter of 2020. 4. Prepare company's financial statements for 2019 . 5. Prepare 2019 (a) adjusting and (b) closing entries in the general journal.arrow_forwardCharles Whyte commenced business on May 1 2019, making up his accounts to September 30 annually. The statement of the Profit or Loss Account for the first 17 months ended September 30,2020 is as follows: Gross Profit Less: Repairs and maintenance. Local transport and travelling Salaries and wages Provision for bad debts Preliminary expenses Depreciation Bank interest and charges Legal and professional charges General expenses (Allowable) Clearing expense on motor vehicle Bad debt Amounts written off Loan to absconded employee (ii) (iii) (iv) (1) You are also given the following additional information. Bad debt £ (v) £'000 30/10/2018 1/1/2019 1/5/2019 1,500 2,450 6,500 1,350 960 1,630 1,520 1,380 1,870 685 2,800 Building Motor Vehicle Furniture and fittings Legal and professional charges were: Salaries and wages: The following qualifying capital expenditures were acquired on: Fines for contravention of the law Legal expenses for tax appeal Audit and accountancy charges £'000 19,300…arrow_forwardThe Beep-Beep Alarm Company provides security services in Bloomington, IL. At the year end 2019, afteradjusting entries have been made, the following list of account balances is prepared.Service Revenue $ 612,900Salaries Expense $ 148,250Rent Expense $ 27,600Utilities Expense $ 48,800Supplies Expense $ 51,900Income Tax Expense $ 30,800Retained Earnings $ 305,550Dividends $ 6,0001. Prepare the closing journal entry to close the revenue account on December 31st. Date Account Debit Credit2. Prepare the closing journal entry to close the expense account on December 31st. Date Account Debit Credit3. Income Summary is an account used to indicate consideration of all revenues and expenses as one value for a closing entry.Prepare the closing journal entry on December 31st to close Income Summary if the company used this as a single account ratherthan individually closing revenues and expenses. Hint: this means the company did not individually complete #1 and #2 but theoutcome should be the…arrow_forward
- The following are some of the transactions made by Luigi Gomez Cleaners during 2020: Apr. 1 Acquired cleaning supplies in the amount of P260,000. A count of the supplies on Dec. 31, 2020 Aug. 1 Received P360,000 from Cebu Manpower for cleaning janitorial uniforms over the next 3 years. Nov. 1 Paid P240,000 for annual rent. Required: 1. Assume that Gomez records these transactions using the following accounts, record the adjusting entries on Dec. 31, 2020: a. Office Supplies b. Prepaid Rent c. Unearned Cleaning Revenues 2. Now, assume that Gomez records these transactions using the following accounts, what will be the adjusting entries on Dec. 31, 2020? a. Office Supplies Expense b. Rent Expense c. Cleaning Revenues 3. If Gomez were to use reversing entries, which set of entries, (1) or (2), would have to be reversed? Why?arrow_forwardComprehensive On November 30, 2019. Davis Company had the following account balance. During the month of December, Davis entered into the following transactions: Required: a.Prepare generaljournal entries to record the preceding transactions. b.Post to general ledger T accoun c.Prepare a year-end trial balance on a worksheet and complete theworksheet using the following information: (a) accrued salaries at year-end total s1,200; (b) for simplicity, the building and equipment are being depreciated using the straight-line method over an estimated life of 20 yean with no residual value;(c) supplies on hand at the end of the year total $630; (d) bad debts expense for the year totals $830; and (e)the income tax rate is 30%; income taxes are payable in the first quarter of d.Prepare the companis financial statements for 2019. e.Prepare the 2019 (a) adjusting and (b) closing entries in the general journal.arrow_forwardDuring December 2019 Johnson Realty paid an insurance premiums, $6,000. Journalize the transaction using the rules of debit and credit.arrow_forward
- Marcellus Purse conduct cleaning business on the credit basis. He provides the collects the sccount receivable in 60 days. The Allowance October 2019 is $3,993. The following information is available Douchd D 1. The business uses aging of account receivable method to count the bad de 2. The accountant is required to update the balance of allowance of dosud des OURE at the end of each month 3. On 5 October 2019 a total of $1.997 ewed by Lucy Frone has been deemed w uncollectable and therefore written off 4. The total sales recorded during 1 October 2019 to 31 October 2019 is $812577 The balance in the Account receivable on 31 October 2019 is $198.300 5. 6. On 31 October 2019 the accountant estimates that 3% of the account receivable is estimated as doubtful. Q3 Required (a) Prepare the Accounting Entries for the transactions or events relating to bad debt for the month ended 31 October 2019, ignore GST ( (b) Prepare and balance the T-account for Allowance for Doubtful Debts accounts as…arrow_forwardCompound journal entries. The following transactions took place at the Cook Employment Agency during November 2019. Record the general journal entries that would be made for these transactions. Use a compound entry for each transaction. DATE Nov. in 5 18 23 TRANSACTIONS Performed services for Job Search, Inc., for $20,000; received $9,500 in cash and the client promised to pay the balance in 60 days. Purchased a graphing calculator for $450 and some supplies for $600 from Office Supply; issued Check 1008 for the total. Received Invoice 1602 for $2,500 from Automotive Technicians Repair for repairs to the firm's automobile; issued Check 1009 for half the amount and arranged to pay the other half in 30 days.arrow_forwardConsider the following items for Wolverine Properties during 2024. On December 1, 2024, Wolverine received $3,300 cash from a company renting office space from Wolverine. The payment, representing rent for December and January, was recorded to Deferred Revenue on December 1. Revenue for other rentals totaled $127,000. Wolverine purchases a one-year property insurance policy on July 1, 2024, for $12,360. The payment was recorded in Prepaid Insurance for the entire amount on July 1. Wolverine had $5,800 in insurance costs for the first six months of the year. Employee salaries of $2,300 for the month of December will be paid in early January 2025. Salaries paid for the first 11 months of the year total $44,000. On November 1, 2024, the company borrowed $11,500 from a bank. The loan requires principal and interest at 12% to be paid on October 30, 2025. Office supplies at the beginning of 2024 totaled $930. On August 15, Wolverine purchased an additional $2,700 of office supplies,…arrow_forward
- For each independent case listed below, answer the related question(s). You must show your calculations and provide explanations (i.e definitions, methods) where needed to support your answers.1. Caps company rents a building on March 1 2019 and starts the business on June 15, 2019. The company estimates a monthly income of OR 4,500 from selling taxable supplies. State when (i.e. date) and why, if at all, the company is liable to register for VAT.2. Taxpayer C earns a $ 310,000 annual salary and pays 17% income tax. If tax rates increase to 25% and taxpayer C would like to maintain his current standard of living, how he will respond to the tax rate increase: (a) in a manner consistent with income effect and (b) in a manner consistent with substitution effect.3. Laser Jet Company provides printing services to its customers. During May, the company provided customer A services for OR 1,500. According to VAT, how much customer A should pay to Laser Jet? And explain what type of VAT is…arrow_forwardMarsteller Properties Inc. owns apartments that it rents to university students. At December 31,2019, the following unadjusted account balances were available: The following information is available for adjusting entries:a. An analysis of apartment rental contracts indicates that $3,800 of apartment rent is unbilledand unrecorded at year end.b. A physical count of supplies reveals that $1,400 of supplies are on hand at December 31, 2019.c. Annual depreciation on the buildings is $204,250.d. An examination of insurance policies indicates that $12,000 of the prepaid insurance applies to coverage for 2019.e. Six months’ interest at 9% is unrecorded and unpaid on the notes payable. f. Wages in the amount of $6,100 are unpaid and unrecorded at December 31.g. Utilities costs of $300 are unrecorded and unpaid at December 31.h. Income taxes of $5,738 are unrecorded…arrow_forwardCepe A. Ko entered into the following transactions during December 2019: 1. Cepe A. Ko invested the following assets: Cash, P100,000 Office supplies, P1,500; Store equipment, P10,800. Store Furniture, P22,200 2. Paid business permits P3,800 2. Paid three months' rent on a lease rental contract, P27,000. One third of the space is use for the office and the rest is for the store. 3. Paid the premiums on property and casualty insurance policies, P2,700. 5. Purchased additional office equipment on account from Office Station Co., P31,200. Freight of P1,800 was paid by Cepe A. Ko. 6. Purchased P100,000 merchandise on account from BSA Co. Terms 2/10 n/30 FOB Shipping point. Freight of P2,000 was paid by BSA Co. 7. Sold P20,000 merchandise for cash. FOB Destination. Freight of P1,000 was paid by Cepe A. Ko. 8. P6,000 of the merchandise bought from BSA Co. were defective. Debit memo was given to BSA Co. and Credit memo was received in response. 10. Paid cash for a newspaper advertisement,…arrow_forward
- Financial AccountingAccountingISBN:9781337272124Author:Carl Warren, James M. Reeve, Jonathan DuchacPublisher:Cengage LearningCentury 21 Accounting Multicolumn JournalAccountingISBN:9781337679503Author:GilbertsonPublisher:Cengage
- Principles of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax CollegeIndividual Income TaxesAccountingISBN:9780357109731Author:HoffmanPublisher:CENGAGE LEARNING - CONSIGNMENT