Concept explainers
1
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.
To record: The transactions for Incorporation BE.
1
Answer to Problem 2.8BP
Date | Account Title and Explanation | Debit ($) | Credit ($) | |
November 1 | Cash | 13,000 | ||
Common stock | 13,000 | |||
(To record the entry for issue of common stock for cash) | ||||
November 2 | Equipment | 3,500 | ||
Notes payable | 3,500 | |||
(To record the entry for purchase of land with note payable) | ||||
November 4 | Supplies | 1,000 | ||
Accounts payable | 1,000 | |||
(To record the entry for purchase of supplies on account) | ||||
November 10 | Accounts receivable | 9,000 | ||
Service Revenue | 9,000 | |||
(To record the entry for providing service on account ) | ||||
November 15 | Accounts payable | 1,100 | ||
Cash | 1,100 | |||
(To record the entry for payment made to creditors) | ||||
November 20 | Salaries expense | 3,000 | ||
Cash | 3,000 | |||
(To record the entry for payment of salaries expenses) | ||||
November 22 | Cash | 11,000 | ||
Service revenue | 11,000 | |||
(To record the entry for providing service on account) | ||||
November 24 | Notes payable | 1,400 | ||
Cash | 1,400 | |||
(To record the entry for payment of notes payable) | ||||
November 26 | Cash | 7,000 | ||
Accounts receivable | 7,000 | |||
(To record the entry for receiving cash on account) | ||||
November 28 | utilities expense | 1,100 | ||
Cash | 1,100 | |||
(To record the entry for payment of utility expense) | ||||
November 30 | Rent expense | 5,000 | ||
Cash | 5,000 | |||
(To record the payment of rent expense) |
Table (1)
Explanation of Solution
November 1
Description:
- Cash is an asset. There is an increase in the asset. So debit the cash account with $13,000.
- Common stock is a component of
stockholders’ equity. There is an increase in the common stock which increases the stockholders’ equity. So credit the common stock with $13,000.
November 2
Description:
- Equipment is an asset. There is an increase in the asset. So debit the equipment account with.$3,500
- Notes payable is a liability. There is an increase in the liability. So credit the cash account with $3,500.
November 4
Description:
- Supplies are an asset. There is an increase in the asset. So debit supplies account with $1,000.
- Accounts payable is a liability. There is an increase in the liability. So credit accounts payable account with $1,000.
November 10
Description:
- Accounts receivable is an asset. There is an increase in the asset. So debit accounts receivable with $9,000.
- Service revenue is a revenue account and it is the component of stockholders’ equity. There is an increase in the revenue account which increases the stockholders’ equity. So credit service revenue with $9,000.
November 15
Description:
- Accounts payable is a liability. There is an increase in the liability. So debit accounts payable with $1,100.
- Cash is an asset. There is a decrease in the asset. So credit cash account with $1,100.
November 20
Description:
- Salaries expenses are an expense account and it is a component of the stockholders’ equity. There is an increase in expenses which reduces the stockholders’ equity. So debit salaries expense account with $3,000.
- Cash is an asset. There is a decrease in the asset. So credit cash account with $3,000.
November 22
Description:
- Cash is an asset. There is an increase in the asset. So debit cash account with $11,000.
- Service revenue is a revenue account and it is a component of stockholders’ equity. There is an increase in the revenue account which increases the stockholders’ equity. So credit service revenue account with $11,000.
November 24
Description:
- Notes payable is a liability. There is a decrease in the liability. So debit notes payable with $1,400.
- Cash is an asset. There is a decrease in the asset. So credit cash account with $1,400.
November 26
Description:
- Cash is an asset account. There is an increase in the asset. So debit cash account with $7,000.
- Accounts receivable is an asset. There is a decrease in the asset. So credit accounts receivable with $7,000.
November 28
Description:
- Utilities expense is an expense account and it is a component of stockholders’ equity. There is an increase in the expense and it will decrease the stockholders’ equity. So debit utilities expense with $1,100.
- Cash is an asset. There is a decrease in the asset. So credit cash account with $1,100.
November 30
Description:
- Rent expense is an expense account and it is a component of stockholders’ equity. There is an increase in the expense and it will decrease the stockholders’ equity. So debit rent expense with $5,000.
- Cash is an asset. There is a decrease in the asset. So credit cash account with $5,000.
2, 3
T-account:
T-account is the form of the ledger account, where the
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
To calculate: The ending balance of each account by
2, 3
Explanation of Solution
Prepare T-account:
Accounts receivable account:
Accounts receivable | |||
Opening balance | 6,000 | ||
Service revenue | 9,000 | Cash | 7,000 |
Total | 15,000 | Total | 15,000 |
Balance November 30 | 2,600 |
Service revenue account:
Service revenue | |||
Accounts receivable | 9,000 | ||
cash | 11,000 | ||
Balance November 30 | 20,000 | ||
Equipment account:
Equipment | |||
Opening balance | 9,400 | ||
Notes payable | 3,500 | ||
Balance November 30 | 12,900 |
Cash account:
Cash | |||
Opening balance | 3,200 | Accounts payable | 1,100 |
Common stock | 13,000 | salaries expense | 3,000 |
Service revenue | 11,000 | Notes payable | 1,400 |
utilities expense | 1,100 | ||
Rent expense | 5,000 | ||
Total | 34,200 | Total | 34,200 |
Balance November 30 | 22,600 |
Supplies account:
supplies | |||
Opening balance | 700 | ||
Accounts payable | 1,000 | ||
Balance November 30 | 1,700 |
Accounts payable:
Accounts payable | |||
Opening balance | 2,000 | ||
Cash | 1,100 | Supplies | 1,000 |
Balance November 30 | 1,900 |
Salaries expense account:
Salaries expense | |||
Opening balance | 0 | ||
Cash | 3,000 | ||
Balance November 30 | 3,000 |
Rent expense:
Rent expense | |||
Opening balance | 0 | ||
cash | 5,000 | ||
Balance November 30 | 5,000 |
Notes payable account:
Notes payable | |||
Opening balance | 4,000 | ||
Cash | 1,400 | Equipment | 3,500 |
Total | 7,500 | Total | 7,500 |
Balance November 30 | 6,100 |
Common stock account:
Common stock | |||
Opening balance | 7,000 | ||
Cash | 13,000 | ||
Balance November 30 | 20,000 |
Retained earnings account | |||
Opening balance | 900 | ||
Balance November 30 | 900 |
4
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.
To prepare: The trial balance of Incorporation BE.
4
Explanation of Solution
Prepare the trial balance of Incorporation BE:
Incorporation BE | ||
Trial balance | ||
At the end of November | ||
Accounts | Debit($) | Credit($) |
Cash | 22,600 | |
Accounts receivable | 2,600 | |
supplies | 1,700 | |
Equipment | 12,900 | |
Accounts payable | 1,900 | |
Notes payable | 6,100 | |
Common stock | 20,000 | |
Retained earnings | 900 | |
Service revenue | 20,000 | |
Salaries expense | 3,000 | |
Rent expense | 5,000 | |
Utilities expense | 1,100 | |
Total | 48,900 | 48,900 |
Table (2)
Hence, the trial balance is prepared, and the debit column and credit column of the trial balance are agreed, both having balance of $48,900.
Want to see more full solutions like this?
Chapter 2 Solutions
Financial accounting
- On January 1, 2021, the general ledger of Big Bles: Fireworks includes the following account balances: Accounts Cash Debit Credit $ 23, 308 48, e0e Accounts Receivable Allowance for Uncollectible Accounts $ 4, 580 37, eee Inventory Land 72,100 Accounts Payable Notes Payable (6%, duc in 3 years) 28,98e 37,eee 63,0ee 39,8ee Comnon Stock Retained Earnings Totals $172,400 $172, 400 The $37,000 beginning belance of inventory consists of 370 units, each costing $100. During January 2021, Big Blast Fireworks had the following inventory transactions: January 3 Purchase 1,680 units for $168,89e on account ($185 cach). January 8 Purchase 1,78e units for $187, e0e on account ($110 each). January 12 Purchase 1,88e units for $207, B00 on account ($115 cach). January 15 Return 135 of the units purchased on January 12 because of defects. January 19 Sell 5,2ee units on account for $788, eee. The cost of the units sold is deternined using a FIFO perpetual inventory syston. January 22 Receive $753, eee…arrow_forwardFinancial statement data for the years ended December 31 for Parker Corporation are as follows: Sales Accounts receivable: Beginning of year End of year Current Year Current Year $2,595,600 Current Year 390,000 434,000 a. Determine the accounts receivable turnover for each year. Round your answers to one decimal place. Accounts Receivable Turnover times times Prior Year $2,409,500 400,000 390,000 Prior Year b. Determine the days' sales in receivables for each year. Round your answers to nearest day. Assume 365 days per year. Number of Days' Sales in Receivables days days Prior Year c. Does the change in accounts receivable turnover and days' sales in receivables from the first year to the second year indicate a favorable or unfavorable change?arrow_forwardRequired Information On January 1, 2024, the general ledger of TNT Fireworks includes the following account balances: Accounts Cash Accounts Receivable Debit Credit $ 58,800 25,200 Allowance for Uncollectible Accounts $ 2,300 Inventory 36,400 Notes Receivable (5%, due in 2 years) 13,200 156,000 Common Stock 14,900 221,800 51,488 Land Accounts Payable Retained Earnings Totals $ 289,600 $ 289,600 During January 2024, the following transactions occur: January 1 Purchase equipment for $19,600. The company estimates a residual value of $1,608 and a six-year service life. January 4 Pay cash on accounts payable, $9,600. January 8 Purchase additional inventory on account, $83,980. January 15 Receive cash on accounts receivable, $22,100. January 19 Pay cash for salaries, $29,900. January 28 Pay cash for January utilities, $16,500. January 30 Firework sales for January total $221,088. All of these sales are on account. The cost of the units sold is $115,500. Information for adjusting entries: a.…arrow_forward
- The details of the accounts receivable of AA Corporation as December 31, 2022 shows the following: Beginning balance P3,450,000 Sales on account made to customers 2,800,000 Collection of accounts receivable during the year 4,200,000 Accounts written off as uncollectible 90,000 The following transactions were included in the recorded transactions during the year: 1. Invoice dated December 28, 2022 for P350,000 was shipped and received by the buyer on December 31, 2022, this invoice was recorded in the book at P35,000. 2. Invoice dated and recorded on November 30, 2022 was erroneously priced at P32 per unit. There were 11,000 units of goods delivered which were received on December 10, 2022. The agreed price should be at P22 per unit only. AA's policy is to provide 5% of the outstanding balance of accounts receivable as uncollectible and there is beginning balance of allowance for bad debts of P40,000. Statement 1: The amount of bad debt expense in 2022 is P158,250. Statement 2: The…arrow_forwardThe dates of importance in connection with a cash dividend of $61,000 on a corporation’s common stock are January 15 and March 15. Required: Journalize the entries required on each date. Refer to the Chart of Accounts for exact wording of account titles. If no entry is required, simply skip to the next transaction. CHART OF ACCOUNTS General Ledger ASSETS 110 Cash 120 Accounts Receivable 131 Notes Receivable 132 Interest Receivable 141 Merchandise Inventory 145 Supplies 151 Prepaid Insurance 181 Land 191 Buildings 192 Accumulated Depreciation-Building 193 Equipment 194 Accumulated Depreciation-Equipment LIABILITIES 210 Accounts Payable 221 Notes Payable 226 Interest Payable 231 Cash Dividends Payable 236 Stock Dividends Distributable 241 Salaries Payable 261 Mortgage Note Payable EQUITY 311 Preferred Stock 312 Paid-In Capital in Excess of Par-Preferred Stock 321 Common Stock 322…arrow_forwardRequired Information On January 1, 2024, the general ledger of TNT Fireworks includes the following account balances: Accounts Cash Accounts Receivable Debit $ 58,800 25,200 Credit Allowance for Uncollectible Accounts $ 2,300 Inventory 36,400 Notes Receivable (5%, due in 2 years) 13,200 Land 156,000 Accounts Payable Common Stock 14,900 221,000 51,400 $ 289,600 $ 289,608 Retained Earnings Totals During January 2024, the following transactions occur. January 1 Purchase equipment for $19,680. The company estimates a residual value of $1,600 and a six-year service life. January 4 Pay cash on accounts payable, $9,600. January 8 Purchase additional inventory on account, $83,980. January 15 Receive cash on accounts receivable, $22,100. January 19 Pay cash for salaries, $29,980. January 28 Pay cash for January utilities, $16,500. January 38 Firework sales for January total $221,008. All of these sales are on account. The cost of the units sold is $115,580. Information for adjusting entries: a.…arrow_forward
- The declaration, record, and payment dates in connection with a cash dividend of $101,600 on a corporation’s common stock are January 12, March 13, and April 12. Journalize the entries required on each date. If no entry is required, simply skip to the next transaction. Refer to the Chart of Accounts for exact wording of account titles. CHART OF ACCOUNTS General Ledger ASSETS 110 Cash 120 Accounts Receivable 131 Notes Receivable 132 Interest Receivable 141 Merchandise Inventory 145 Office Supplies 151 Prepaid Insurance 181 Land 193 Equipment 194 Accumulated Depreciation-Equipment LIABILITIES 210 Accounts Payable 221 Notes Payable 226 Interest Payable 231 Cash Dividends Payable 236 Stock Dividends Distributable 241 Salaries Payable 261 Mortgage Note Payable EQUITY 311 Common Stock 312 Paid-In Capital in Excess of Par-Common Stock 315 Treasury Stock 321 Preferred Stock 322 Paid-In Capital in Excess…arrow_forwardThe dates of importance in connection with a cash dividend of $81,000 on a corporation’s common stock are January 15 and March 15. Required: Journalize the entries required on each date. Refer to the Chart of Accounts for exact wording of account titles. If no entry is required, simply skip to the next transaction.\ CHART OF ACCOUNTS General Ledger ASSETS 110 Cash 120 Accounts Receivable 131 Notes Receivable 132 Interest Receivable 141 Merchandise Inventory 145 Supplies 151 Prepaid Insurance 181 Land 191 Buildings 192 Accumulated Depreciation-Building 193 Equipment 194 Accumulated Depreciation-Equipment LIABILITIES 210 Accounts Payable 221 Notes Payable 226 Interest Payable 231 Cash Dividends Payable 236 Stock Dividends Distributable 241 Salaries Payable 261 Mortgage Note Payable EQUITY 311 Preferred Stock 312 Paid-In Capital in Excess of Par-Preferred Stock 321 Common Stock 322…arrow_forwardOn January 1, 2021, the general ledger of Big Blast Fireworks includes the following account balances: Accounts Debit Credit Cash $ 23,300 Accounts Receivable Allowance for Uncollectible Accounts 40,000 $ 4,500 Inventory Land 37,000 72,100 Accounts Payable Notes Payable (6%, due in 3 years) Common Stock 28,900 37,000 63,000 39, 000 Retained Earnings Totals $172,480 $172,400 The $37,000 beginning balance of Inventory consists of 370 units, each costing $100. During January 2021, Big Blast Fireworks had the following Inventory transactions: January 3 Purchase 1,600 units for $168,000 on account ($105 each). January 8 Purchase 1,700 units for $187,000 on account ($110 each). January 12 Purchase 1,800 units for $207,000 on account ($115 each). January 15 Return 135 of the units purchased on January 12 because of defects. January 19 Sell 5, 200 units on account for $78e, e00. The cost of the units sold is determined using a FIFO perpetual inventory system. January 22 Receive $753,800 from…arrow_forward
- On January 1, 2021, the general ledger of Big Blest Fireworks includes the following account balances: Accounts Debit Credit Cash Accounts Receivable Allowance for Uncollectible Accounts $ 23, 300 48, e00 $ 4, 580 Inventory Land Accounts Payable Notes Payable (6%, due in 3 ycars) 37, 200 72,188 28,980 37,000 63, 0ee 39, 0ee Common Stock Retained Earnings Totals $172,400 $172,480 The $37,000 beginning balance of inventory consists of 370 units, eoch costing $100. During Janusry 2021, Big Blast Fireworks had the following inventory transections: January 3 Purchase 1,62e units for $168, 800 on account ($1es cach). January 8 Purchase 1,7e8 units for $187,800 on account ($118 cach). January 12 Purchase 1,88e units for $207, 8ee on account ($115 cach). January 15 Return 135 of the units purchased on January 12 because of defects. January 19 Sell 5,200 units on account for $780,eee. The cost of the units sold is deternined using a FIFO perpetual inventory systen. January 22 Receive $753, eee…arrow_forwardOn January 1, 2021, the general ledger of Big Blast Fireworks includes the following account balances: Debit $ 23, 300 40, e0e Accounts Credit Cash Accounts Receivable Allowance for Uncollectible Accounts $ 4, 5e0 Inventory Land Accounts Payable Notes Payable (6%, due in 3 ycars) 37,e00 72,100 28,98e 37, eee 63, 0ee Common Stock Retained Earnings 39. eee Totals $172,488 $172,488 The $37,000 beginning balance of inventory consists of 370 units, each costing $100. During Janusry 2021, Big Blast Fireworks had the following inventory transections: January 3 Purchase 1,680 units for $168,888 on account ($18s cach). January 8 Purchase 1,78e units for $187,800 on account ($110 cach). January 12 Purchase 1,88e units for $207, Bee on account ($115 cach). January 15 Return 135 of the units purchased on January 12 because of defects. January 19 Sell 5,200 units on account for $780,8ee. The cost of the units sold is deternined using a FIFD perpetual inventory systen. January 22 Receive $753,eee…arrow_forward3 American Laser, Incorporated, reported the following account balances on January 1. Debit $5,000 Accounts Receivable Accumulated Depreciation Additional Paid-in Capital Allowance for Doubtful Accounts Bonds Payable Buildings Cash Common Stock, 10,eee shares of $1 par Notes Payable (long-term) Retained Earnings Treasury Stock TOTALS Requirement General Journal 247,000 10,000 General Ledger $ 262,000 Credit $ 30,000 90,000 2,000 e The company entered into the following transactions during the year. January 15 Issued 5,000 shares of $1 par common stock for $50,000 cash. January 31 Collected $3,000 from customers on account. February 15 Reacquired 3,000 shares of $1 par common stock into treasury for $33,eee cash. March 15 Reissued 2,000 shares of treasury stock for $24,000 cash. August 15 Reissued 600 shares of treasury stock for $4,600 cash. September 15 Declared (but did not yet pay) a $1 cash dividend on each outstanding share of common stock. October 1 Issued 100, 10-year, $1,000…arrow_forward
- Financial And Managerial AccountingAccountingISBN:9781337902663Author:WARREN, Carl S.Publisher:Cengage Learning,Century 21 Accounting Multicolumn JournalAccountingISBN:9781337679503Author:GilbertsonPublisher:Cengage
- Financial AccountingAccountingISBN:9781305088436Author:Carl Warren, Jim Reeve, Jonathan DuchacPublisher:Cengage LearningManagerial Accounting: The Cornerstone of Busines...AccountingISBN:9781337115773Author:Maryanne M. Mowen, Don R. Hansen, Dan L. HeitgerPublisher:Cengage LearningFinancial AccountingAccountingISBN:9781337272124Author:Carl Warren, James M. Reeve, Jonathan DuchacPublisher:Cengage Learning