Concept explainers
Journal entries and
Valley Realty acts as an agent in buying, selling, renting, and managing real estate. The unadjusted trial balance on July 31, 2018, follows:
The following business transactions were completed by Valley Realty during August 2018:
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. |
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. | Paid dividends, $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 (*0 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, 2018.
- 5. Assume that the August 31 transaction for dividends should have been $10,000. (A) Why did the unadjusted trial balance in (4) balance? (B) Journalize the correcting entry. (C) Is this error a transposition or slide?
(2) and (3)
Journal:
Journal is the book of original entry. Journal consists of the day today financial transactions in a chronological order. The journal has two aspects; they are debit aspect and the credit aspect.
Rules of debit and credit:
“An increase in an asset account, an increase in an expense account, a decrease in liability account, and a decrease in a revenue account should be debited.
Similarly, an increase in liability account, an increase in a revenue account and a decrease in an asset account, a decrease in an expenses account should be credited”.
T-account:
An account is referred to as a T-account, because the alignment of the components of the account resembles the capital letter ‘T’. An account consists of the three main components which are as follows:
- The title of the account
- The left or debit side
- The right or credit side
Unadjusted trial balance:
The unadjusted trial balance is the summary of all the ledger accounts that appears on the ledger accounts before making adjusting journal entries.
Slide error:
A slide error occurs, when the decimal point of an amount has been misplaced.
To journalize: The transactions of August in a two column journal beginning on page 18.
Explanation of Solution
Journalize the transactions of August in a two column journal beginning on page 18.
Journal Page 18 | |||||
Date | Description | Post. Ref | Debit ($) | Credit ($) | |
2018 | Office supplies | 14 | 3,150 | ||
August | 1 | Accounts payable | 21 | 3,150 | |
(To record the purchase of supplies of account) | |||||
2. | Rent expense | 52 | 7,200 | ||
Cash | 11 | 7,200 | |||
(To record the payment of rent) | |||||
3 | Cash | 11 | 83,900 | ||
Accounts receivable | 12 | 83,900 | |||
(To record the receipt of cash from clients) | |||||
5 | Prepaid insurance | 13 | 12,000 | ||
Cash | 11 | 12,000 | |||
(To record the payment of insurance premium) | |||||
9 | Accounts payable | 21 | 400 | ||
Office supplies | 14 | 400 | |||
(To record the payment made to creditors on account) | |||||
17 | Advertising expense | 53 | 8,000 | ||
Cash | 11 | 8,000 | |||
(To record the payment of advertising expense) | |||||
23 | Accounts payable | 21 | 13,750 | ||
Cash | 11 | 13,750 | |||
(To record the payment made to creditors on account) |
Table (1)
Journal Page 19 | |||||
Date | Description | Post. Ref | Debit ($) | Credit ($) | |
2018 | 29 | Miscellaneous expense | 59 | 1,700 | |
August | Cash | 11 | 1,700 | ||
(To record the payment made for Miscellaneous expense) | |||||
30 | Automobile expense | 54 | 2,500 | ||
Cash | 11 | 2,500 | |||
(To record the payment made for automobile expense) | |||||
31 | Cash | 11 | 2,000 | ||
Salary and commission expense | 51 | 2,000 | |||
(To record the receipt of cash) | |||||
31 | Salary and commission expense | 51 | 53,000 | ||
Cash | 11 | 53,000 | |||
(To record the payment made for salary and commission expense) | |||||
31 | Accounts receivable | 12 | 183,500 | ||
Fees earned | 41 | 183,500 | |||
(To record the revenue earned and billed) | |||||
31 | Land | 16 | 75,000 | ||
Cash | 11 | 7,500 | |||
Notes payable | 23 | 67,500 | |||
(To record the purchase of land party for cash and party on signing a note) | |||||
31 | Dividends | 33 | 1,000 | ||
Cash | 11 | 1,000 | |||
(To record the drawing made for personal use) | |||||
31 | Cash | 11 | 5,000 | ||
Unearned rent | 22 | 5,000 | |||
(To record the cash received for the service yet to be provide) |
Table (2)
(1) and (3)
To record: The beginning balances of each accounts in the appropriate balance column of a four-column account, and post them to the ledger extending the account balance to the appropriate balance column after each posting.
Explanation of Solution
Solution:
Account: Cash Account no. 11 | |||||||
Date | Item | Post. Ref |
Debit ($) |
Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2018 | |||||||
August | 1 | Balance | ✓ | 52,500 | |||
2 | 18 | 7,200 | 45,300 | ||||
3 | 18 | 83,900 | 129,200 | ||||
5 | 18 | 12,000 | 117,200 | ||||
17 | 18 | 8,000 | 109,200 | ||||
23 | 18 | 13,750 | 95,450 | ||||
29 | 19 | 1,700 | 93,750 | ||||
30 | 19 | 2,500 | 91,250 | ||||
31 | 19 | 2,000 | 93,250 | ||||
31 | 19 | 53,000 | 40,250 | ||||
31 | 19 | 7,500 | 32,750 | ||||
31 | 19 | 1,000 | 31,750 | ||||
31 | 19 | 5,000 | 36,750 |
Table (3)
Account: Accounts Receivable Account no. 12 | |||||||
Date | Item | Post. Ref |
Debit ($) |
Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2018 | |||||||
August | 1 | Balance | ✓ | 100,100 | |||
3 | 18 | 83,900 | 16,200 | ||||
31 | 19 | 183,500 | 199,700 |
Table (4)
Account: Prepaid Insurance Account no. 13 | |||||||
Date | Item | Post. Ref |
Debit ($) |
Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2018 | |||||||
August | 1 | Balance | ✓ | 12,600 | |||
5 | 18 | 12,000 | 24,600 |
Table (5)
Account: Office Supplies Account no. 14 | |||||||
Date | Item | Post. Ref |
Debit ($) |
Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2018 | |||||||
August | 1 | Balance | ✓ | 2,800 | |||
1 | 18 | 3,150 | 5,950 | ||||
9 | 18 | 400 | 5,550 |
Table (6)
Account: Land Account no. 16 | |||||||
Date | Item | Post. Ref |
Debit ($) |
Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2018 | |||||||
August | 31 | 19 | 75,000 | 75,000 |
Table (7)
Account: Accounts Payable Account no. 21 | |||||||
Date | Item | Post. Ref |
Debit ($) |
Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2018 | |||||||
August | 1 | Balance | ✓ | 21,000 | |||
1 | 18 | 3,150 | 24,150 | ||||
9 | 18 | 400 | 23,750 | ||||
23 | 18 | 13,750 | 10,000 |
Table (8)
Account: Unearned Rent Account no. 22 | |||||||
Date | Item | Post. Ref |
Debit ($) |
Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2018 | |||||||
August | 31 | 19 | 5,000 | 5,000 |
Table (9)
Account: Notes Payable Account no. 23 | |||||||
Date | Item | Post. Ref |
Debit ($) |
Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2018 | |||||||
August | 31 | 19 | 67,500 | 67,500 |
Table (11)
Account: Common stock Account no. 31 | |||||||
Date | Item | Post. Ref |
Debit ($) |
Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2018 | |||||||
August | 1 | Balance | ✓ | 17,500 |
Table (12)
Account: Retained earnings Account no. 32 | |||||||
Date | Item | Post. Ref |
Debit ($) |
Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2018 | |||||||
August | 1 | Balance | ✓ | 70,000 |
Table (13)
Account: Dividends Account no. 33 | |||||||
Date | Item | Post. Ref |
Debit ($) |
Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2018 | |||||||
August | 1 | Balance | ✓ | 44,800 | |||
31 | 19 | 1,000 | 45,800 |
Table (13)
Account: Fees earned Account no. 41 | |||||||
Date | Item | Post. Ref |
Debit ($) |
Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2018 | |||||||
August | 1 | Balance | ✓ | 591,500 | |||
31 | 19 | 183,500 | 775,000 |
Table (14)
Account: Salary and commission expense Account no. 51 | |||||||
Date | Item | Post. Ref |
Debit ($) |
Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2018 | |||||||
August | 1 | Balance | ✓ | 385,000 | |||
31 | 19 | 2,000 | 383,000 | ||||
31 | 19 | 53,000 | 436,000 |
Table (15)
Account: Rent expense Account no. 52 | |||||||
Date | Item | Post. Ref |
Debit ($) |
Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2018 | |||||||
August | 1 | Balance | ✓ | 49,000 | |||
2 | 18 | 7,200 | 56,200 |
Table (16)
Account: Advertising expense Account no. 53 | |||||||
Date | Item | Post. Ref |
Debit ($) |
Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2018 | |||||||
August | 1 | Balance | ✓ | 32,200 | |||
17 | 18 | 8,000 | 40,200 |
Table (17)
Account: Automobile expense Account no. 54 | |||||||
Date | Item | Post. Ref |
Debit ($) |
Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2018 | |||||||
August | 1 | Balance | ✓ | 15,750 | |||
30 | 19 | 2,500 | 18,250 |
Table (19)
Account: Miscellaneous expense Account no. 59 | |||||||
Date | Item | Post. Ref |
Debit ($) |
Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
2018 | |||||||
August | 1 | Balance | ✓ | 5,250 | |||
29 | 19 | 1,700 | 6,950 |
Table (20)
(4)
To prepare: An unadjusted trial balance of Company V at August 31, 2018.
Explanation of Solution
Prepare an unadjusted trial balance of Company V at August 31, 2018 as follows:
Company V Unadjusted Trial Balance August 31, 2018 |
|||
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 | |
Common stock | 31 | 17,500 | |
Retained earnings | 32 | 70,000 | |
Dividends | 33 | 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)
To explain: Whetherthe 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.
Want to see more full solutions like this?
Chapter 2 Solutions
CengageNOWv2, 2 terms Printed Access Card for Warren/Reeve/Duchac’s Financial & Managerial Accounting, 14th
Additional Business Textbook Solutions
Managerial Accounting
Financial Accounting, Student Value Edition (4th Edition)
Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
Managerial Accounting: Creating Value in a Dynamic Business Environment
Horngren's Accounting (12th Edition)
Advanced Financial Accounting
- Prepare journal entries to record the following transactions that occurred in March: A. on first day of the month, purchased building for cash, $75,000 B. on fourth day of month, purchased inventory, on account, $6,875 C. on eleventh day of month, billed customer for services provided, $8,390 D. on nineteenth day of month, paid current month utility bill, $2,000 E. on last day of month, paid suppliers for previous purchases, $2,850arrow_forwardJournal entries and trial balanceElite Realty acts as an agent in buying, selling, renting, and managingreal estate. The unadjusted trial balance on March 31, 2019, follows: (attached) The attached business transactions were completed by Elite Realtyduring April 2019: Instructions1. Record the April 1, 2019, balance of each account in the appropriatebalance column of a four-column account, write Balance in the itemsection, and place a check mark () in the Posting Reference column. 2. Journalize the transactions for April in a two-column journalbeginning on Page 18. Journal entry explanations may be omitted.3. Post to the ledger, extending the account balance to the appropriatebalance column after each posting.4. Prepare an unadjusted trial balance of the ledger as of April 30, 2019. 5. Assume that the April 30 transaction for salaries and commissionsshould have been $19,100. (a) Why did the unadjusted trial balance in (4)balance? (b) Journalize the correcting entry. (c) Is this error…arrow_forwardRecord the following transactions for the Scott Company: Transactions: Nov. 4 Received a $6,500, 90-day, 6% note from Tim’s Co. in payment of the account. Dec. 31 Accrued interest on the Tim’s Co. note. Feb. 2 Received the amount due from Tim’s Co. on the note. Required: Journalize the above transactions. Refer to the Chart of Accounts for exact wording of account titles. Round your answers to two decimal places. Assume a 360-day year when calculating interest. CHART OF ACCOUNTS Scott Company General Ledger ASSETS 110 Cash 111 Petty Cash 121 Accounts Receivable-Batson Co. 122 Accounts Receivable-Bynum Co. 123 Accounts Receivable-Calahan Inc. 124 Accounts Receivable-Dodger Co. 125 Accounts Receivable-Fronk Co. 126 Accounts Receivable-Miracle Chemical 127 Accounts Receivable-Solo Co. 128 Accounts Receivable-Tim’s Co. 129 Allowance for Doubtful Accounts 131 Interest Receivable 132 Notes Receivable-Tim’s Co. 141…arrow_forward
- Refer to RE6-8. On April 23, 2020, McKinncy Co. receives a check, from Mangold Corporation for 8,500. Prepare the journal entry for McKinncy to record the collection of the account previously written off.arrow_forwardWorking Backward: Rent Receivable Randys Rentals reported the following on its year-end balance sheets: Randys rents space to a number of tenants, all of whom pay their monthly rent on the 10th of the following month. Randys reported rent revenue for 2016 of $64,200. Required How much cash did Randys collect from its tenants during 2016? Explain your answer.arrow_forwardReview the following transactions and prepare any necessary journal entries for Lands Inc. A. On December 10, Lands Inc. contracts with a supplier to purchase 450 plants for its merchandise inventory, on credit, for $12.50 each. Credit terms are 4/15, n/30 from the invoice date of December 10. B. On December 28, Lands pays the amount due in cash to the supplier.arrow_forward
- Notes Receivable Crowne Cleaning provides cleaning services for Amber Inc., a business with four buildings. Crowne assigned different cleaning charges for each building based on the amount of square feet to be cleaned. The charges for the four buildings are $55,200, $49,800, $69,600, and $30,000. Amber secured this amount by signing a note bearing 10% Interest on June 1. Required: 1. Prepare the journal entry to record the sale on June 1. If an amount box does not require an entry, leave it blank. 188 2. Determine how much interest Crowne will receive if the note is repaid on December 1. 3. Prepare Crowne's journal entry to record the cash received to pay off the note and interest on December 1. If an amount box does not require an entry, leave it blank. EDarrow_forwardJournal Entries for Accounts and Notes ReceivableLancaster, Inc., began business on January 1. Certain transactions for the year follow: Jun.8 Received a $15,000, 60 day, eight percent note on account from R. Elliot. Aug.7 Received payment from R. Elliot on her note (principal plus interest). Sep.1 Received a $18,000, 120 day, nine percent note from B. Shore Company on account. Dec.16 Received a $14,400, 45 day, ten percent note from C. Judd on account. Dec.30 B. Shore Company failed to pay its note. Dec.31 Wrote off B. Shore’s account as uncollectible. Lancaster, Inc., uses the allowance method of providing for credit losses. Dec.31 Recorded expected credit losses for the year by an adjusting entry. Accounts written off during this first year have created a debit balance in the Allowance for Doubtful Accounts of $22,600. An analysis of aged receivables indicates that the desired balance of the allowance account should be $19,500. Dec.31 Made the…arrow_forwardJournal Entries for Accounts and Notes ReceivableLancaster, Inc., began business on January 1. Certain transactions for the year follow: Jun.8 Received a $18,000, 60 day, eight percent note on account from R. Elliot. Aug.7 Received payment from R. Elliot on her note (principal plus interest). Sep.1 Received a $21,000, 120 day, nine percent note from B. Shore Company on account. Dec.16 Received a $17,000, 45 day, ten percent note from C. Judd on account. Dec.30 B. Shore Company failed to pay its note. Dec.31 Wrote off B. Shore's account as uncollectible. Lancaster, Inc., uses the allowance method of providing for credit losses. Dec.31 Recorded expected credit losses for the year by an adjusting entry. Accounts written off during this first year have created a debit balance in the Allowance for Doubtful Accounts of $25,600. An analysis of aged receivables indicates that the desired balance of the allowance account should be $22,500. Dec.31 Made the…arrow_forward
- Journal Entries for Accounts and Notes ReceivableLancaster, Inc., began business on January 1. Certain transactions for the year follow: Jun.8 Received a $18,000, 60 day, eight percent note on account from R. Elliot. Aug.7 Received payment from R. Elliot on her note (principal plus interest). Sep.1 Received a $21,000, 120 day, nine percent note from B. Shore Company on account. Dec.16 Received a $17,000, 45 day, ten percent note from C. Judd on account. Dec.30 B. Shore Company failed to pay its note. Dec.31 Wrote off B. Shore's account as uncollectible. Lancaster, Inc., uses the allowance method of providing for credit losses. Dec.31 Recorded expected credit losses for the year by an adjusting entry. Accounts written off during this first year have created a debit balance in the Allowance for Doubtful Accounts of $25,600. An analysis of aged receivables indicates that the desired balance of the allowance account should be $22,500. Dec.31 Made the…arrow_forwardJournal Entries for Accounts and Notes ReceivableLancaster, Inc., began business on January 1. Certain transactions for the year follow: Jun.8 Received a $18,000, 60 day, eight percent note on account from R. Elliot. Aug.7 Received payment from R. Elliot on her note (principal plus interest). Sep.1 Received a $21,000, 120 day, nine percent note from B. Shore Company on account. Dec.16 Received a $17,000, 45 day, ten percent note from C. Judd on account. Dec.30 B. Shore Company failed to pay its note. Dec.31 Wrote off B. Shore's account as uncollectible. Lancaster, Inc., uses the allowance method of providing for credit losses. Dec.31 Recorded expected credit losses for the year by an adjusting entry. Accounts written off during this first year have created a debit balance in the Allowance for Doubtful Accounts of $25,600. An analysis of aged receivables indicates that the desired balance of the allowance account should be $22,500. Dec.31 Made the…arrow_forwardOn June 7,2019, Dilby Mechanical Corp completed $50,00 of servicing work for a client and billed them for that amount plus a GST of $2,500 and PST of $3,50; terms are N20. Required: a. Prepare the journal entry as it would appear in Dilby's accounting records. b. Assume the receivable established on June 7 was collected on June 27. Record the entry.arrow_forward
- Century 21 Accounting Multicolumn JournalAccountingISBN:9781337679503Author:GilbertsonPublisher:CengageCornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage Learning
- Principles of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax CollegeIntermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage LearningFinancial AccountingAccountingISBN:9781337272124Author:Carl Warren, James M. Reeve, Jonathan DuchacPublisher:Cengage Learning