Financial Accounting
Financial Accounting
3rd Edition
ISBN: 9780078025549
Author: J. David Spiceland, Wayne M Thomas, Don Herrmann
Publisher: McGraw-Hill Education
Question
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Chapter 2, Problem 2.1APCP

1.

To determine

To Record: Each transaction of Company GA for the month of July.

1.

Expert Solution
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Answer to Problem 2.1APCP

Journalize the transactions of Company GA for the month of July.

Date Account Title and Explanation Debit($) Credit($)
July 1, 2015 Cash 10,000  
Common Stock   10,000
  (To record the issue of common stock to Person S)    
       
July 1, 2015 Cash 10,000  
Common Stock   10,000
  (To record the issue of common stock to Person T)    
       
July 1, 2015 Prepaid Insurance 4,800
  Cash 4,800
  (To record the purchase of insurance policy)    
       
July 2, 2015 Legal Fees Expense 1,500
Cash 1,500
  (To record the payment of legal fees for incorporation)    
       
July 4, 2015 Office Supplies 1,800  
Accounts Payable   1,800
  (To record the purchase of supplies on account)    
       
July 7, 2015 Advertising Expense 300  
Cash   300
  (To record the payment for advertising )    
       
July 8, 2015 Equipment–Bikes 12,000  
Cash   12,000
  (To record the purchase of mountain bikes)    
       
July 15, 2015 Cash 2,000  
  Service Revenue   2,000
  (To record the collection of cash for services mountain bikes clinic)    
       
July 22, 2015 Cash 2,300  
  Service Revenue   2,300
  (To record the collection of cash for services mountain bikes clinic)    
       
July 22, 2015 Advertising Expense 700  
Cash   700
  (To record the payment of salary expenses)    
       
July 30, 2015 Cash 4,000  
Deferred Revenue   4,000
  (To record the receipt of cash in advance for K clinic)    

Table (1)

Explanation of Solution

Journal entry:

Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.

Accounting rules for Journal entries:

  • To record increase balance of account: Debit assets, expenses, losses and credit liabilities, capital, revenue and gains.
  • To record decrease balance of account: Credit assets, expenses, losses and debit liabilities, capital, revenue and gains.

2. and 3.

To determine

To Calculate: The balance of each account by posting each transaction to the appropriate T-accounts.

2. and 3.

Expert Solution
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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

Post the journal entries into T-accounts and determine the balance of each account.

Cash Account

Cash Account
Date Details

Debit

($)

  Date Details

Credit

($)

July 1, 2015 Beginning balance 0 July 1, 2015

Prepaid insurance

(Transaction 3)

4,800
July 1, 2015

Common stock

(Transaction 1)

10,000 July 2, 2015

Legal fees expense

(Transaction 4)

1,500
July 1, 2015

Common stock

(Transaction 2)

10,000 July 7, 2015

Advertising expense

(Transaction 6)

300
July 15, 2015

Service revenue

(Transaction 8)

2,000 July 8, 2015

Equipment

Transaction 7)

12,000
July 22, 2015

Service revenue

(Transaction 9)

2,300   July 24, 2015

Advertising expense

(Transaction 10)

700
July 30, 2015

Unearned revenue

(Transaction 11)

4,000        
  Total 28,300     Total 19,300
July 31, 2015 Ending Balance 9,000      

Table (2)

Prepaid Insurance Account

Prepaid Insurance Account
Date Details

Debit

($)

  Date Details

Credit

($)

July 1, 2015 Beginning balance 0     -
July 1, 2015

Cash

(Transaction 3)

4,800     -
  Total 4,800     Total -
July 31, 2015 Ending Balance 4,800      

Table (3)

Office Supplies Account

Office Supplies Account
Date Details

Debit

($)

  Date Details

Credit

($)

July 1, 2015 Beginning balance 0     -
July 4, 2015

Accounts Payable

(Transaction 5)

1,800     -
  Total 1,800     Total -
July 31, 2015 Ending Balance 1,800      

Table (4)

Equipment Account

Equipment Account
Date Details

Debit

($)

  Date Details

Credit

($)

July 1, 2015 Beginning balance 0     -
July 8, 2015

Cash

(Transaction 7)

12,000     -
  Total 12,000     Total -
July 31, 2015 Ending Balance 12,000      

Table (5)

Accounts Payable

Accounts Payable Account
Date Details

Debit

($)

  Date Details

Credit

($)

    July 1, 2015 Beginning balance 0
    July 4, 2015 Office Supplies (Transaction 5) 1,800
      Total 1,800
      July 31, 2015 Ending Balance 1,800

Table (6)

Unearned Revenue

Unearned Revenue Account
Date Details

Debit

($)

  Date Details

Credit

($)

    - July 1, 2015 Beginning balance 0
    July 30, 2015

Cash

(Transaction 11)

4,000
  Total -   Total 4,000
      July 31, 2015 Ending Balance 4,000

Table (7)

Common Stock

Common Stock Account
Date Details

Debit

($)

  Date Details

Credit

($)

      July 1, 2015 Beginning balance 0
      July 1, 2015 Cash (Transaction 1) 10,000
      July 1, 2015 Cash (Transaction 1) 10,000
      Total 20,000
      July 31, 2015 Ending Balance 20,000

Table (8)

Service Revenue

Service Revenue Account
Date Details

Debit

($)

  Date Details

Credit

($)

    July 1, 2015 Beginning balance 0
      July 15, 2015

Cash

(Transaction 8)

2,000
        July 22, 2015

Cash

(Transaction 9)

2,300
        Total 4,300
      July 31, 2015 Ending Balance 4,300

Table (9)

Advertising Expense

Advertising Expense Account
Date Details

Debit

($)

  Date Details

Credit

($)

July 1, 2015 Beginning balance 0      
July 7, 2015

Cash

(Transaction 6)

300      
July 24, 2015

Cash

(Transaction 10)

700      
  Total 1,000      
July 31, 2015 Ending Balance 1,000        

Table (10)

Legal Fees Expense

Legal Fee Expense Account
Date Details

Debit

($)

  Date Details

Credit

($)

July 1, 2015 Beginning balance 0      
July 2, 2015

Cash

(Transaction 4)

1,500      
  Total 1,500      
July 31, 2015 Ending Balance 1,500        

Table (11)

4.

To determine

To Prepare: A trial balance as of July.

4.

Expert Solution
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Explanation of Solution

Trial balance:

A trial balance is the summary of all the ledger accounts. Debit balances are listed in left column and credit balances are listed in right column of the trial balance. The totals of debit and credit column should be equal. The trial balance is usually prepared to check the accuracy of ledger accounts balances, before the preparation of financial statements.

Prepare the trial balance of Company GA.

Company GA

Trial Balance

July 31, 2015

Particulars Debit ($) Credit ($)
Cash 9,000  
Prepaid Insurance 4,800  
Office Supplies 1,800  
Equipment 12,000  
Accounts Payable   1,800
Unearned Revenue   4,000
Common Stock   20,000
Service Revenue   4,300
Advertising Expense 1,000
Legal Fees Expense 1,500  
Total 30,100 30,100

Table (12)

Conclusion

Hence, the trial balance is prepared, and the debit column and credit column of the trial balance are agreed, both having balance of $30,100.

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Chapter 2 Solutions

Financial Accounting

Ch. 2 - 11.What is a journal? What is a journal entry?Ch. 2 - Prob. 12RQCh. 2 - Prob. 13RQCh. 2 - Prob. 14RQCh. 2 - 15.Describe the events that correspond to the...Ch. 2 - 16.What does a T-account represent? What is the...Ch. 2 - Prob. 17RQCh. 2 - Prob. 18RQCh. 2 - Prob. 19RQCh. 2 - 20.If total debits equal total credits in the...Ch. 2 - List steps in the measurement process (LO21) Below...Ch. 2 - Balance the accounting equation (LO22) Using the...Ch. 2 - Suppose a local company has the following balance...Ch. 2 - Analyze the Impact of transactions on the...Ch. 2 - Understand the effect of debits and credits on...Ch. 2 - Prob. 2.6BECh. 2 - Record transactions (LO24) The following...Ch. 2 - Prob. 2.8BECh. 2 - Analyze T-accounts (LO25) Consider the following...Ch. 2 - Prob. 2.10BECh. 2 - Prob. 2.11BECh. 2 - Correct a trial balance (LO26) Your study partner...Ch. 2 - Listed below are several terms and phrases...Ch. 2 - Prob. 2.2ECh. 2 - Analyze the Impact of transactions on the...Ch. 2 - Analyze the Impact of transactions on the...Ch. 2 - Understand the components of retained earnings...Ch. 2 - Indicate the debit or credit balance of accounts...Ch. 2 - Associate debits and credits with external...Ch. 2 - Prob. 2.8ECh. 2 - Identify transactions (LO24) Below are recorded...Ch. 2 - Prob. 2.10ECh. 2 - Record transactions (LO24) Bearcat Construction...Ch. 2 - Correct recorded transactions (LO24) Below are...Ch. 2 - Correct recorded transactions (LO24) Below are...Ch. 2 - Prob. 2.14ECh. 2 - Post transactions to T-accounts (LO25) Consider...Ch. 2 - Identify transaction (LO25) Below are T-accounts....Ch. 2 - Prob. 2.17ECh. 2 - Prepare o trial balance (LO26) Below is the...Ch. 2 - Prob. 2.19ECh. 2 - Prob. 2.20ECh. 2 - Below is a list of activities for Jayhawk...Ch. 2 - Prob. 2.2APCh. 2 - Prob. 2.3APCh. 2 - Prob. 2.4APCh. 2 - Refer to the transactions described in P24A. Keep...Ch. 2 - Prob. 2.6APCh. 2 - Prob. 2.7APCh. 2 - Prob. 2.8APCh. 2 - Prob. 2.9APCh. 2 - Analyze the impact of transactions on the...Ch. 2 - Prob. 2.2BPCh. 2 - Prob. 2.3BPCh. 2 - Record transactions (LO24) Flip Side of P25B Eli...Ch. 2 - Prob. 2.5BPCh. 2 - Prob. 2.6BPCh. 2 - Prob. 2.7BPCh. 2 - Prob. 2.8BPCh. 2 - Prob. 2.9BPCh. 2 - Prob. 2.1APCPCh. 2 - Prob. 2.2APFACh. 2 - Prob. 2.3APFACh. 2 - Prob. 2.4APCACh. 2 - Prob. 2.5APECh. 2 - Prob. 2.6APIRCh. 2 - Prob. 2.7APWC
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