Chapter 2, Problem 2PSB

1.

To determine

To prepare: journal entry for September transactions.

Explanation of Solution

Journal entries to record the transactions

a.

Date	Account Title and Explanation	Post. ref	Debit ($)	Credit ($)
	Cash		65,000
	Office equipment		5,750
	Computer equipment		30,000
	Capital account			100,750
	( Being Cash and equipment has been invested by the owner.)

Table (1)

• Cash is an asset account. Here, asset balance has increased. Hence cash account is debited.
• Office Equipment is an asset account. Here, asset balance has increased. Hence office equipment account is debited.
• Computer Equipment is an asset account. Here, asset balance has increased. Hence computer equipment account is debited
• As the equity is raised by investing cash and equipment resulted in increased equity so increased in equity account is credited.

b.

Date	Account Title and Explanation	Post. ref	Debit ($)	Credit ($)
	Land		22,000
	Cash			5,000
	Notes payable			17,000
	( Being land has been purchased for cash and by issuing notes payable.)

Table (2)

• Land belongs to asset accounts it has been debited as their purchase resulted in increase in assets.
• Cash is an asset account it has been credited for the purchase of land as it resulted in decrease in asset account.
• Notes payable are the part of liabilities they have been credited which signifies increase in liabilities so credited.

c.

Date	Account Title and Explanation	Post. ref	Debit ($)	Credit ($)
	Building		2,000
	Cash			2,000
	( Being building has been purchased for cash.)

Table (3)

• Building belongs to asset accounts it has been debited as their purchase resulted in increase in assets.
• Cash is an asset account it has been credited for the purchase of building as it resulted in decrease in asset account.

d.

Date	Account Title and Explanation	Post. ref	Debit ($)	Credit ($)
	Prepaid Insurance		5,000
	Cash			5,000
	( Being premium for insurance has been paid in advance)

Table (4)

• Prepaid expense belongs to asset account so there is an increase in asset account so it is debited.
• While cash is also a part of asset account it is credited because there is decrease in cash account for the payment of premium.

e.

Date	Account Title and Explanation	Post. ref	Debit ($)	Credit ($)
	Cash		4,600
	Services fees earned			4,600
	( Being cash earned for providing services.)

Table (5)

• Cash is belongs to current asset account so providing services in cash causes increase in asset account so debited.
• Services have been provided so it will be credited as they will decrease the stock account.

f.

Date	Account Title and Explanation	Post. ref	Debit ($)	Credit ($)
	Computer Equipment		4,500
	Cash			800
	Notes Payable			3,700
	( Being computer equipment has been purchased for cash and by issuing notes payable.)

Table (6)

• Computer equipment belongs to asset accounts it has been debited as their purchase resulted in increase in assets.
• Cash is an asset account it has been credited for the purchase of computer equipment as it resulted in decrease in asset account.
• Notes payable are the part of liabilities they have been credited which signifies increase in liabilities.

g.

Date	Account Title and Explanation	Post. ref	Debit ($)	Credit ($)
	Accounts receivable		4,250
	Service fees earned			4,250
	( Being amount is going to receive later on.)

Table (7)

• Account receivable is belonging to asset account so providing services causes increase in asset account so debited.
• Services have been provided so it recorded in credited account as they will decrease the stock account.

h.

Date	Account Title and Explanation	Post. ref	Debit ($)	Credit ($)
	Office equipment		950
	Accounts payable			950
	( Being purchased on credit.)

Table (8)

• Equipment belongs to asset account they increase the asset account so debited.
• While accounts payable is a current liability account so purchasing supplies on credit will increase them so credited.

i.

Date	Account Title and Explanation	Post. ref	Debit ($)	Credit ($)
	Accounts receivables		10,200
	Services fees earned			10,200
	( Being billed client for completed work.)

Table (9)

• Accounts receivable is an asset account as the amount due and not received so it causes increase in asset account so debited.
• Services have been provided so it recorded in credited account as they will decrease the stock account.

j.

Date	Account Title and Explanation	Post. ref	Debit ($)	Credit ($)
	Equipment rental expense		580
	Accounts payable			580
	( Being rented on credit.)

Table (10)

• Equipment rent belongs to current asset account they increase the asset account so debited.
• While accounts payable is a liability account so renting equipment on credit will increase them so credited.

k.

Date	Account Title and Explanation	Post. ref	Debit ($)	Credit ($)
	Cash		5,100
	Account Receivable			5,100
	( Being cash for previously provided services)

Table (11)

• Cash account is a current asset account. Since cash is earned, so it is to be increased. Therefore, cash account is to be debited.
• Account receivable is also belongs to asset account so receiving cash will decrease it so credited.

l.

Date	Account Title and Explanation	Post. ref	Debit ($)	Credit ($)
	Wages expense		1,800
	Cash			1,800
	( Being wages paid on cash.)

Table (12)

• Wages expense account is an expense account. Since wages expense is increased, expense is to be increased. So, debit the wages expense account.
• Cash account is an asset account. Since cash is shrinked, so it is to be reduced. Therefore, cash account is to be credited.

m.

Date	Account Title and Explanation	Post. ref	Debit ($)	Credit ($)
	Accounts payable		950
	Cash			950
	( Being amount paid due.)

Table (13)

• Accounts payable is a current liability account so payment of amount due will increase the liability account so debited.
• Cash belongs to current asset account. Since cash is shrinked, so it is to be reduced. Therefore, cash account is to be credited.

n.

Date	Account Title and Explanation	Post. ref	Debit ($)	Credit ($)
	Repairs expense		608
	Cash			608
	( Being wages paid on cash.)

Table (14)

• Repairs expense account is an expense account. Since repairs expense is increased, expense is to be increased. So, debit the wages expense account.
• Cash account is an asset account. Since cash is shrinked, so it is to be reduced. Therefore, cash account is to be credited.

o.

Date	Account Title and Explanation	Post. ref	Debit ($)	Credit ($)
	Dividends		6,230
	Cash			6,230
	( Being cash is paid in form of dividend..)

Table (15)

• Since dividends has been paid which will increase equity so debited.
• Cash is credited as dividends have been paid in cash which decrease the cash account so credited.

Date	Account Title and Explanation	Post. ref	Debit ($)	Credit ($)
	Wages expense		1,800
	Cash			1,800
	( Being wages paid on cash.)

Table (16)

• Wages expense account is an expense account. Since wages expense is increased, expense is to be increased. So, debit the wages expense account.
• Cash account is an asset account. Since cash is shrinked, so it is to be reduced. Therefore, cash account is to be credited.

q.

Date	Account Title and Explanation	Post. ref	Debit ($)	Credit ($)
	Advertising expense		750
	Cash			750
	( Being advertising expense paid on cash.)

Table (17)

• Advertising expense account is an expense account. Since wages expense is increased, expense is to be increased. So, debit the wages expense account.
• Cash account is an asset account. Since cash is shrinked, so it is to be reduced. Therefore, cash account is to be credited.

2.

To determine

To prepare: ledger account.

Explanation of Solution

Cash No.101
Date	Account Title and Explanation	Post ref	Debit ($)	Credit ($)	Balance ($)
	Capital		65,000		65,000
	Land			5,000	60,000
	Building			34,500	25,500
	Prepaid Insurance			5,000	20,500
	Fees earned		4,600		25,100
	Computer equipment			800	24,300
	Accounts receivable		5,100		29,400
	Wages			1,800	27,600
	Accounts payable			950	26,650
	Repair expense			608	26.042
	Dividends			6,230	19,812
	Wages			1,800	18,012
	Advertising expense			750	17,262

Table (18)

So the ending balance is $17,262.

Account receivable No.106
Date	Account Title and Explanation	Post ref	Debit ($)	Credit ($)	Balance ($)
	Fees earned		4,250		4,250
	Fees earned		10,200		14,450
	Cash			5,100	9,350

Table (19)

So the ending balance is $9,350

Prepaid Insurance No.108
Date	Account Title and Explanation	Post ref	Debit ($)	Credit ($)	Balance ($)
	Accounts payable		5,000		5,000

Table (20)

So the ending balance is $5,000.

Office Equipment No.163
Date	Account Title and Explanation	Post ref	Debit ($)	Credit ($)	Balance ($)
	Capital account		5,750		5,750
	Accounts payable		950		6.700

Table (21)

So the ending balance is $6,700.

Computer Equipment No.164
Date	Account Title and Explanation	Post ref	Debit ($)	Credit ($)	Balance ($)
	Cash		30,000		30,000
	Cash		4,500		34,500

Table (22)

So the ending balance is $34,500.

Building No.170
Date	Account Title and Explanation	Post ref	Debit ($)	Credit ($)	Balance ($)
	Cash		34,500		34,500

Table (23)

So the ending balance is $34,500.

Land No.172
Date	Account Title and Explanation	Post ref	Debit ($)	Credit ($)	Balance ($)
	Cash		22,000		22,000

Table (24)

So the ending balance is $22,000.

Accounts payable No.201
Date	Account Title and Explanation	Post ref	Debit ($)	Credit ($)	Balance ($)
	Office Equipment		950		950
	Equipment rental expense		580		1,530
	Cash			950	580

Table (25)

So the ending balance is $580.

Notes payable No.250
Date	Account Title and Explanation	Post ref	Debit ($)	Credit ($)	Balance ($)
	Land		17,000		17,000
	Computer equipment		3,700		20,700

Table (26)

So the ending balance is $20,700.

Capital No.307
Date	Account Title and Explanation	Post ref	Debit ($)	Credit ($)	Balance ($)
	Cash			101,750	101,750

Table (27)

So the ending balance is $101,750.

Dividends No.319
Date	Account Title and Explanation	Post ref	Debit ($)	Credit ($)	Balance ($)
	Cash		6,230		6,230

Table (28)

So the ending balance is $6,230.

Fees Earned No.402
Date	Account Title and Explanation	Post ref	Debit ($)	Credit ($)	Balance ($)
	Cash		4,600		4,600
	Accounts receivable		4,250		8,850
	Accounts receivable		10,200		19,050

Table (29)

So the ending balance is $19,050.

Equipment Rental Expense .602
Date	Account Title and Explanation	Post ref	Debit ($)	Credit ($)	Balance ($)
	Accounts payable		580		580

Table (27)

So the ending balance is $580.

Wages expense No.601
Date	Account Title and Explanation	Post ref	Debit ($)	Credit ($)	Balance ($)
	Cash		1,800		1,800
	Cash		1,800		3,600

Table (28)

So the ending balance is $3,600.

Repair expense No.604
Date	Account Title and Explanation	Post ref	Debit ($)	Credit ($)	Balance ($)
	Cash		608		608

Table (29)

So the ending balance is $608.

Advertising expense No.106
Date	Account Title and Explanation	Post ref	Debit ($)	Credit ($)	Balance ($)
	Cash		750		750

Table (30)

So the ending balance is $750.

3.

To determine

To prepare: Trial balance.

Explanation of Solution

S Works
Trial Balance
April 30, 20XX
Accounts Title	Amount ($)	Amount ($)
Cash	17,262
Accounts payable		580
Accounts receivable	9,350
Computer equipment	34,500
Office equipment	6,700
Notes payable		20,700
Building	34,500
Land	22,000
Equipment rental expense	580
Capital		100,750
Dividends	6,230
Fees earned		19,050
Salaries expenses	3,600
Repair expenses	608
Advertising expense	750
Prepaid insurance	5,000
Totals	141,080	141,080

Table (29)

So, total trial balance is $141,080.