Bundle: Accounting, Loose-Leaf Version, 27th + CengageNOWv2, 1 term Printed Access Card for Warren/Reeve/Duchac?s Financial Accounting, 15th
Bundle: Accounting, Loose-Leaf Version, 27th + CengageNOWv2, 1 term Printed Access Card for Warren/Reeve/Duchac?s Financial Accounting, 15th
27th Edition
ISBN: 9781337899451
Author: Carl S. Warren; James M. Reeve; Jonathan Duchac
Publisher: South-Western College Pub
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Chapter 2, Problem 1COP

The transactions completed by PS Music during June 2019 were described at the end of Chapter 1. The following transactions were completed during July, the second month of the business's operations:

July 1. Peyton Smith made an additional investment in PS Music by depositing $5,000 in PS Music's checking account.
1. Instead of continuing to share office space with a local real estate agency, Peyton decided to rent office space near a local music: store. Paid rent for July, $1,750.
1. Paid a premium of $2,700 for a comprehensive insurance policy covering liability, theft, and fire. The policy covers a one-year period.
2. Received $1,000 cash from customers on account.
3. On behalf of PS Music, Peyton signed a contract with a local radio station, KXMD, to provide guest spots for the next three months. The contract requires PS Music to provide a guest disc jockey for SO hours per month for a monthly fee of $3,600. Any additional hours beyond SO will be billed to KXMD at $40 per hour. In accordance with the contract, Peyton received $7,200 from KXMD as an advance payment for the first two months.
3. Paid $250 to creditors on account.
4. Paid an attorney $900 for reviewing the July 3 contract with KXMD. (Record as Miscellaneous Expense.)
5. Purchased office equipment on account from Office Mart, $7,500.
8. Paid for a newspaper advertisement, $200.
11. Received $1,000 for serving as a disc jockey for a party.
13. Paid $700 to a local audio electronics store for rental of digital recording equipment.
11. Paid wages of $1,200 to receptionist and part-time assistant.
Enter the following transactions on Page 2 of the two-column journal:
16. Received $2,000 for serving as a disc jockey for a wedding reception.
18. Purchased supplies on account, $850.
July 21. Paid $620 to Upload Music for use of its current music demos in making various music sets.
22. Paid $800 to a local radio station to advertise the services of PS Music twice daily for the remainder of July.
23. Served as disc jockey for a party for $2,500. Received $750, with the remainder due August 4, 2019.
27. Paid electric bill, $915.
28. Paid wages of $1,200 to receptionist and part-time assistant.
29. Paid miscellaneous expenses, $540.
30. Served as a disc jockey for a charity ball for $1,500. Received $500, with the remainder due on August 9, 2019.
31. Received $3,000 for serving as a disc jockey for a party.
31. Paid $1,400 royalties (music expense) to National Music Clearing for use of various artists' music during July.
31. Withdrew $l,250 cash from PS Music for personal use.

PS Music's chart of accounts and the balance of accounts as of July 1, 2019 (all normal balances), are as follows:

11 Cash $3,920
12 Accounts receivable 1,000
14 Supplies 170
15 Prepaid insurance
17 Office Equipment
21 Accounts payable 250
23 Unearned Revenue
31 Peyton smith, Drawing 4,000
32 Fees Earned 500
41 Wages Expense $6,200
50 Office Rent Expense 400
51 Equipment  Rent Expense 800
52 Utilities Expense 675
53 Supplies Expense 300
54 music Expense 1,590
55 Advertising Expense 500
56 Supplies Expense 180
59 Miscellaneous Expense 415

Instructions

1.    Enter the July 1, 2019, account balances in the appropriate balance column of a four-column account. Write Balance in the Item column and place a check mark (✓) in the Posting Reference column. (Hint: Verify the equality of the debit and credit balances in the ledger before proceeding with the next instruction.)

2.    Analyze and journalize each transaction in a two-column journal beginning on Page 1, omitting journal entry explanations.

3.    Post the journal to the ledger, extending the account balance to the appropriate balance column after each posting.

4.    Prepare an unadjusted trial balance as of July 31, 2019.

(2) and (3)

Expert Solution
Check Mark
To determine

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”.

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:

v The title of the account

v The left or debit side

v The right or credit side

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.

To journalize: The transactions of July in a two column journal beginning on page 18.

Explanation of Solution

Journalize the transactions of July in a two column journal beginning on page 18.

                                                   Journal                                           Page 1
Date Description Post. Ref Debit ($) Credit ($)
2019   Cash 11 5,000  
July  1     P’s Capital 31   5,000
    (To record the owner’s investment)      
 
   1 Rent expense 51 1,750  
        Cash 11   1,750
    (To record the payment of rent for the month of July)      
           
   1 Prepaid insurance 15 2,700  
        Cash 11   2,700
    (To record the payment of insurance premium)      
 
  2 Cash 11 1,000  
    Accounts receivable 12   1,000
    (To record the receipt of cash from customers)      
 
  3 Cash 11 7,200  
    Unearned revenue 23   7,200
    (To record the cash received for the service yet to be provide)      
 
  3 Accounts payable 21 250  
         Cash 11   250
    (To record the payment made to creditors on account)      
 
  4 Miscellaneous expense 59 900  
        Cash 11   900
    (To record the payment made for Miscellaneous expense)      
 
  5 Office equipment   17 7,500  
        Accounts payable 21   7,500
    (To record the purchase of equipment on account)      
 
  8 Advertising expense 55 200  
         Cash 11   200
    (To record the payment of advertising expense)    
 
  11 Cash 11 1,000  
         Fees earned 41   1,000
    (To record the receipt of cash)      
 
  13 Equipment rent expense 52 700  
        Cash 11   700
    (To record the payment made to equipment)      
 
  14 Wages expense 50 1,200  
        Cash 11   1,200
    (To record the payment of wages)      

Table (1)

                                                   Journal                                           Page 2
Date Description Post. Ref Debit ($) Credit ($)
2019 16 Cash 11 2,000  
July       Fees earned 41   2,000
    (To record the receipt of cash)      
 
  18 Supplies 14 850  
        Accounts payable 21   850
    (To record the purchase of supplies)      
 
  21 Music expense 54 620  
         Cash 11   620
    (To record the payment incurred for music)      
 
  22 Advertising expense 55 800  
         Cash 11   800
    (To record the payment of advertising expense)    
 
  23 Cash 11 750  
    Accounts receivable 12 1,750  
         Fees earned 41   2,500
    (To record the receipt of cash for the service performed party for cash and party on account)      
 
  27 Utilities expense 53 915  
      Cash  11   915
    (To record the payment of electricity)      
 
  28 Wages expense 50 1,200  
        Cash 11   1,200
    (To record the payment made for salary and commission expense)      
 
  29 Miscellaneous expense 59 540  
         Cash 11   540
    (To record the revenue earned and billed)      
 
  30 Cash 11 500  
    Accounts receivable 12 1,000  
         Fees earned 41   1,500
    (To record the purchase of land party for cash and party on signing a note)      
 
  31 Cash 11 3,000  
        Fees earned 41   3,000
    (To record the receipt of cash)      
 
  31 Music expense 54 1,400  
         Cash 11   620
    (To record the payment incurred for music)      
 
  31 P’s Drawing 32 1,250  
         Cash 11   1,250
    (To record the withdrawal of cash for personal use)      

Table (2)

(1) and (3)

Expert Solution
Check Mark
To determine

To record: The balance of each accounts in the appropriate balance column of a four-column account and post them to the ledger.

Explanation of Solution

Account:         Cash                                                              Account no. 11
Date Item Post. Ref

Debit

 ($)

Credit ($) Balance
Debit ($) Credit ($)
2019            
July 1 Balance ✓       3,920  
  1   1 5,000   8,920  
  1   1   1,750 7,170  
  1   1   2,700 4,470  
  2   1 1,000   5,470  
  3   1 7,200   12,670  
  3   1   250 12,420  
  4   1   900 11,520  
  8   1   200 11,320  
  11   1 1,000   12,320  
  13   1   700 11,620  
  14   1   1,200 10,420  
  16   2 2,000   12,420  
  21   2   620 11,800  
  22   2   800 11,000  
  23   2 750   11,750  
  27   2   915 10,835  
  28   2   1,200 9,635  
  29   2   540 9,095  
  30   2 500   9,595  
  31   2 3,000   12,595  
  31   2   1,400 11,195  
  31   2   1,250 9,945  

Table (3)

Account:    Accounts Receivable                                             Account no. 12
Date Item Post. Ref

Debit

 ($)

Credit ($) Balance
Debit ($) Credit ($)
2019            
July 1 Balance ✓       1,000  
  2   1   1,000
  23   2 1,750   1,750  
  30   2 1,000   2,750  

Table (4)

Account:          Supplies                                                         Account no. 14
Date Item Post. Ref

Debit

 ($)

Credit ($) Balance
Debit ($) Credit ($)
2019            
July 1 Balance ✓       170  
  18   2 850   1,020  

Table (5)

Account:    Prepaid Insurance                                             Account no. 15
Date Item Post. Ref

Debit

 ($)

Credit ($) Balance
Debit ($) Credit ($)
2019            
July 1   1 2,700   2,700  

Table (6)

Account:    Office equipment                                                Account no. 17
Date Item Post. Ref

Debit

 ($)

Credit ($) Balance
Debit ($) Credit ($)
2019            
July 5   1 7,500   7,500  

Table (7)

Account:     Accounts Payable                                                   Account no. 21
Date Item Post. Ref

Debit

 ($)

Credit ($) Balance
Debit ($) Credit ($)
2019            
July 1 Balance ✓         250
  3   1 250  
  5   1   7,500   7,500
  18   2   850   8,350

Table (8)

Account:          Unearned Revenue                                           Account no. 23
Date Item Post. Ref

Debit

 ($)

Credit ($) Balance
Debit ($) Credit ($)
2019            
July 3   1   7,200   7,200

Table (9)

Account:       Capital                                                                Account no. 31
Date Item Post. Ref

Debit

 ($)

Credit ($) Balance
Debit ($) Credit ($)
2019            
July 1 Balance ✓         4000
  1   1   5,000   9,000

Table (10)

Account:          Drawing                                                              Account no. 32
Date Item Post. Ref

Debit

 ($)

Credit ($) Balance
Debit ($) Credit ($)
2019            
July 1 Balance ✓       500  
  31   2 1,250   1,750  

Table (11)

Account:          Fees earned                                                         Account no. 41
Date Item Post. Ref

Debit

 ($)

Credit ($) Balance
Debit ($) Credit ($)
2019            
July 1 Balance ✓         6,200
  11   1   1,000   7,200
  16   2   2,000   9,200
  23   2   2,500   11,700
  30   2   1,500   13,200
  31   2   3,000   16,200

Table (12)

Account:   Wages expense                                                       Account no. 50
Date Item Post. Ref

Debit

 ($)

Credit ($) Balance
Debit ($) Credit ($)
2019            
July 1 Balance ✓       400  
  14   1 1,200   1,600  
  28   2 1,200   2,800  

Table (13)

Account:   Office rent expense                                                 Account no. 51
Date Item Post. Ref

Debit

 ($)

Credit ($) Balance
Debit ($) Credit ($)
2019            
July 1 Balance ✓       800  
  1   1 1,750   2,550  

Table (14)

Account:   Equipment rent expense                                            Account no. 52
Date Item Post. Ref

Debit

 ($)

Credit ($) Balance
Debit ($) Credit ($)
2019            
July 1 Balance ✓       675  
  13   1 700   1,375  

Table (15)

Account:   Utility expense                                                            Account no. 53
Date Item Post. Ref

Debit

 ($)

Credit ($) Balance
Debit ($) Credit ($)
2019            
July 1 Balance ✓       300  
  27   2 915   1,215  

Table (16)

Account:      Music expense                                                      Account no. 54
Date Item Post. Ref

Debit

 ($)

Credit ($) Balance
Debit ($) Credit ($)
2019            
July 1 Balance ✓       1,590  
  21   2 620   2,210  
  31   2 1,400   3,610  

Table (17)

Account:   Advertising expense                                                Account no. 55
Date Item Post. Ref

Debit

 ($)

Credit ($) Balance
Debit ($) Credit ($)
2019            
July 1 Balance ✓       500  
  8   1 200   700  
  22   2 800   1,500  

Table (18)

Account:   Supplies expense                                                     Account no. 56
Date Item Post. Ref

Debit

 ($)

Credit ($) Balance
Debit ($) Credit ($)
2019            
July 1 Balance ✓       180  

Table (19)

Account:   Miscellaneous expense                                                   Account no. 59
Date Item Post. Ref

Debit

 ($)

Credit ($) Balance
Debit ($) Credit ($)
2019            
July 1 Balance ✓       415  
  4   1 900   1,315  
  29   2 540   1,855  

Table (20)

(4)

Expert Solution
Check Mark
To determine

To prepare: An unadjusted trial balance of Company PS Music at July 31, 2019.

Explanation of Solution

Prepare an unadjusted trial balance of Company PS Music at July 31, 2019 as follows:

PS Music

Unadjusted Trial Balance

July 31, 2019

Particulars

Account

No.

Debit $ Credit $
Cash 11 9,945  
Accounts receivable 12 2,750  
Supplies 14 1,020  
Prepaid insurance 15 2,700  
Office Equipment 17 7,500
Accounts payable 21   8,350
Unearned revenue 23   7,200
P’s Capital 31   9,000
P’s Drawings 32 1,750  
Fees earned 41 16,200
Wages expense 50 2,800  
Office Rent expense 51 2,550  
Equipment Rent expense 52 1,375  
Utilities expense 53 1,215  
Music expense 54 3,610  
Advertising expense 55 1,500  
Supplies expense 56 180  
Miscellaneous expense 59 1,855  
Total 40,750 40,750

Table (21)

Conclusion

The debit column and credit column of the unadjusted trial balance are agreed, both having balance of $40,750.

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Chapter 2 Solutions

Bundle: Accounting, Loose-Leaf Version, 27th + CengageNOWv2, 1 term Printed Access Card for Warren/Reeve/Duchac?s Financial Accounting, 15th

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