Financial accounting
Financial accounting
3rd Edition
ISBN: 9780077506902
Author: David J Spieceland Wayne Thomas Don Herrmann
Publisher: Mcgraw-Hill
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Chapter 2, Problem 2.20E

1

To determine

To record: The transactions for Company BHP.

1

Expert Solution
Check Mark

Answer to Problem 2.20E

Date Account Title and Explanation Debit($) Credit($)
1. Accounts receivable 20,000
Service revenue 20,000
(To record the entry for providing painting service on account)

2.

21,000
Equipment
Cash 21,000
(To record the entry for purchasing painting equipment)

3.

3,500
supplies

Accounts payable

3,500
(To record the entry for purchase of supplies on account)

4.

4,200
Salaries expense
Cash 4,200
(To record the entry for payment of salary for current month)

5.

1,000
Advertising expense
Cash 1,000
(To record the entry for payment of advertising for the current month)

6.

5,400
Rent expense
  Cash 5,400
(To record the entry for payment of rent for current month)

7.

15,000
Cash
Accounts receivable 15,000
(To record the entry for received cash on account)

8.

6,000
Cash
Deferred revenue 6,000
(To record the entry for receiving cash in advance for painting)

Explanation of Solution

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.

1.

  • 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.

2.

  • 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.

3.

  • 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.

4.

  • 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.

5.

  • 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.

6.

  • 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.

7.

  • 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.

8.

  • 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

To determine

To compute: the ending balance of each account by posting the transaction to the T-account.

2

Expert Solution
Check Mark

Explanation of Solution

T-account:

T-account is the form of the ledger account, where the journal entries are posted to this account. It is referred to as the T-account, because the alignment of the components of the account resembles the capital letter ‘T’.

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

Prepare T-account:

Accounts receivable account:

Accounts receivable
Opening balance 1,700
Service revenue 20,000 Cash 15,000
Ending balance 6,700

Service revenue account:

Service revenue
Opening balance 0
Accounts receivable 20,000
Ending balance 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
Unearned 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

Unearned revenue account:

Unearned 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 9,500
Ending balance 9,500

3

To determine

To prepare: The trail balance of Company BPH.

3

Expert Solution
Check Mark

Explanation of Solution

Trial balance:

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.

Prepare the trial balance of Company BPH:

Company BPH
Trial balance
Accounts Debit($) Credit($)
Cash 15,500
Accounts receivable 6,700
supplies 4,000
Equipment 28,400
Accounts payable 4,700
Unearned revenue 6,000
Common stock 25,000
Retained earnings 29,500
Service revenue 20,000
Salaries expense 4,200
Rent expense 1,000
Advertising expense 5,400
Total 65,200 65,200
Conclusion

Hence, the trial balance is prepared, and the debit column and credit column of the trial balance are agreed, both having balance of $65,200.

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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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