Concept explainers
Analyzing, Recording, and Summarizing Business Activities and Adjustments
The following relates to a magazine company called My Style Mag (MSM). You will use your understanding of the relationships among (1) business activities, (2)
Required:
For each item (a)–(f) listed below, use the information provided to prepare and complete a four-part table similar to that shown above. Items (a)–(f) are independent of one another.
a.
Prepare a four part table by using the given information.
Explanation of Solution
Accounting equation: Accounting equation is an accounting tool expressed in the form of equation, by creating a relation between resources or assets of a business and claims on the resources by the creditors, and the owners.
Journal entry: Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.
T-account: The condensed form of a ledger is referred to as T-account. The left-hand side of this account is known as debit, and the right hand side is known as credit.
Prepare a four part table by using the given information as follows:
(1) | On January 22, 2018, MSM received $24,000 cash from customers for one–year subscriptions to the magazine for February 2018 – January 2019. | ||||||||||
(2) | Assets | = | Liabilities | + | Stockholders’ Equity | ||||||
Cash +$24,000 |
Deferred Revenue +$24,000 | ||||||||||
(3) | Account Names | Debit ($) | Credit ($) | ||||||||
Cash (+A) | 24,000 | ||||||||||
Deferred revenue (+R, +SE) | 24,000 | ||||||||||
(To record the deferred revenue) | |||||||||||
(4) | Cash account | Deferred revenue account | |||||||||
$24,000 | $24,000 | ||||||||||
Table (1)
b.
Prepare a four part table by using the given information.
Explanation of Solution
Prepare a four part table by using the given information as follows:
(1) | Company MSM received utilities services on account at a cost of $3,000. | ||||||||||
(2) | Assets | = | Liabilities | + | Stockholders’ Equity | ||||||
Accounts payable +$3,000 | Utilities expense (+E) -$3,000 | ||||||||||
(3) | Account Names | Debit ($) | Credit ($) | ||||||||
Utilities expense(+E, -SE) | 3,000 | ||||||||||
Accounts payable (+L) | 3,000 | ||||||||||
(To record the utilities expense) | |||||||||||
(4) | Accounts payable account | Utilities expense account | |||||||||
$3,000 | $3,000 | ||||||||||
Table (2)
c.
Prepare a four part table by using the given information.
Explanation of Solution
Prepare a four part table by using the given information as follows:
(1) | Company MSM provided $2,000 of subscriptions for which it had been received the payment previously. | ||||||||||
(2) | Assets | = | Liabilities | + | Stockholders’ Equity | ||||||
Deferred Revenue -$2,000 | Subscription revenue (+R) +$2,000 | ||||||||||
(3) | Account Names | Debit ($) | Credit ($) | ||||||||
Deferred revenue (-L) | 2,000 | ||||||||||
Subscription Revenue (+R, +SE) | 2,000 | ||||||||||
(To record the subscription revenue) | |||||||||||
(4) | Deferred revenue account | Subscription revenue account | |||||||||
$2,000 | $2,000 | ||||||||||
Table (3)
d.
Prepare a four part table by using the given information.
Explanation of Solution
Prepare a four part table by using the given information as follows:
(1) | On March 31, 2018, Company MSM recorded an adjusting entry for the month’s depreciation of $10,000. | ||||||||||||
(2) | Assets | = | Liabilities | + | Stockholders’ Equity | ||||||||
Accumulated | Depreciation | ||||||||||||
Depreciation–Equipment (+xA) –$10,000 | Expense (+E) –$10,000 | ||||||||||||
(3) | Account Names | Debit ($) | Credit ($) | ||||||||||
Depreciation Expense (+E, –SE) | 10,000 | ||||||||||||
Accumulated Depreciation–Equipment (+xA, –A) | 10,000 | ||||||||||||
(To record accumulated depreciation) | |||||||||||||
(4) | Accumulated Depreciation–Equipment account | Depreciation Expense account | |||||||||||
$10,000 | $10,000 |
Table (4)
e.
Prepare a four part table by using the given information.
Explanation of Solution
Prepare a four part table by using the given information as follows:
(1) | On April 1, Company MSM paid $5,000 rent in advance of obtaining its benefits. | ||||||||||
(2) | Assets | = | Liabilities | + | Stockholders’ Equity | ||||||
Cash –$5,000 | |||||||||||
Prepaid Rent +$5,000 | |||||||||||
(3) | Account Names | Debit ($) | Credit($) | ||||||||
Prepaid Rent (+A) | 5,000 | ||||||||||
Cash (–A) | 5,000 | ||||||||||
(To record prepaid rent) | |||||||||||
(4) | Cash account | Prepaid Rent account | |||||||||
$5,000 | $5,000 | ||||||||||
Table (5)
f.
Prepare a four part table by using the given information.
Explanation of Solution
Prepare a four part table by using the given information as follows:
(1) | On April 30, 2018, Company MSM billed customers for $10,000 of advertising services provided on account. | |||||||||
(2) | Assets | = | Liabilities | + | Stockholders’ Equity | |||||
Accounts | Service | |||||||||
Receivable +$10,000 | Revenue (+R) +$10,000 | |||||||||
(3) | Account Names | Debit ($) | Credit ($) | |||||||
Accounts Receivable (+A) | 10,000 | |||||||||
Service Revenue (+R, +SE) | 10,000 | |||||||||
(To record service revenue recognized on account) | ||||||||||
(4) | Accounts Receivable account | Service Revenue account | ||||||||
$10,000 | $10,000 | |||||||||
Table (6)
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Chapter 4 Solutions
Fundamentals Of Financial Accounting
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