Concept explainers
Journal entries and
On October 1, 20Y4, Jay Pryor established an interior decorating business, Pioneer Designs. During the month, Jay completed the following transactions related to the business:
Oct. 1. Jay transferred cash from a personal bank account to an account to be used for the business in exchange for common stock, $18,000.
4. Paid rent for period of October 4 to end of month, $3,000.
10. Purchased a used truck for $23,750, paying $3,750 cash and giving a note payable for the remainder.
13. Purchased equipment on account, $10,500.
14. Purchased supplies for cash, $2,100.
Oct. 15. Paid annual premiums on property and casualty insurance, $3,600. 15. Received cash for job completed, $8,950.
Enter the following transactions on Page 2 of the two-column journal:
21. Paid creditor a portion of the amount owed for equipment purchased on October 13, $2,000.
24. Recorded jobs completed on account and sent invoices to customers, $14,150.
26. Received an invoice for truck expenses, to be paid in November, $700.
27. Paid utilities expense, $2,240.
27. Paid miscellaneous expenses, $1,100.
29. Received cash from customers on account, $7,600.
30. Paid wages of employees, $4,800.
31. Paid dividends, $3,500.
Instructions
1. Journalize each transaction in a two-column journal beginning on Page 1, referring to the following chart of accounts in selecting the accounts to be debited and credited. (Do not insert the account numbers in the journal at this time.)
11 Cash
12 Accounts Receivable
13 Supplies
14 Prepaid Insurance
16 Equipment
18 Truck
21 Notes Payable
22 Accounts Payable
31 Common Stock
33 Dividends
41 Fees Earned
51 Wages Expense
53 Rent Expense
54 Utilities Expense
55 Truck Expense
59 Miscellaneous Expense
2. Post the journal to a ledger of four-column accounts, inserting appropriate posting references as each item is posted. Extend the balances to the appropriate balance columns after each transaction is posted.
3. Prepare an unadjusted trial balance for Pioneer Designs as of October 31, 20Y4.
4. Determine the excess of revenues over expenses for October.
5. Can you think of any reason why the amount determined in (4) might not be the net income for October?
1.
Journalize the transactions in a two column journal beginning on Page 1.
Explanation of Solution
Journal:
Journal is the book of original entry. Journal consists of the day today financial transactions in a chronological order. The journal has two aspects; they are debit aspect and the credit aspect.
Rules of debit and credit:
“An increase in an asset account, an increase in an expense account, a decrease in liability account, and a decrease in a revenue account should be debited.
Similarly, an increase in liability account, an increase in a revenue account and a decrease in an asset account, a decrease in an expenses account should be credited”.
Journalize each transaction in a two column journal beginning on Page 1.
Journal Page1 | |||||
Date | Description | Post. Ref | Debit ($) | Credit ($) | |
20Y4 | Cash | 11 | 18,000 | ||
October | 1 | Common stock | 31 | 18,000 | |
(To record the transfer of cash from personal bank account to business account in exchange for common stock) | |||||
4 | Rent expense | 53 | 3,000 | ||
Cash | 11 | 3,000 | |||
(To record the payment of rent for the month of June) | |||||
10 | Truck | 18 | 23,750 | ||
Cash | 11 | 3,750 | |||
Notes payable | 21 | 20,000 | |||
(To record the purchase of truck by cash and on account) | |||||
13 | Equipment | 16 | 10,500 | ||
Accounts payable | 22 | 10,500 | |||
(To record the purchase of equipment on account) | |||||
14 | Supplies | 13 | 2,100 | ||
Cash | 11 | 2,100 | |||
(To record the purchase of supplies) | |||||
15 | Prepaid insurance | 14 | 3,600 | ||
Cash | 11 | 3,600 | |||
(To record the payment made for insurance premiums) | |||||
15 | Cash | 11 | 8,950 | ||
Fees earned | 41 | 8,950 | |||
(To record the receipt of cash for the completed job) |
Table (1)
Journal Page 2 | |||||
Date | Description | Post. Ref | Debit ($) | Credit ($) | |
20Y4 | 21 | Accounts payable | 22 | 2,000 | |
October | Cash | 11 | 2,000 | ||
(To record the payment made to creditor on account) | |||||
24 | Accounts receivable | 12 | 14,150 | ||
Fees earned | 41 | 14,150 | |||
(To record the invoices sent to customers for the jobs completed) | |||||
26 | Truck expense | 55 | 700 | ||
Accounts payable | 22 | 700 | |||
(To record the receipt of invoices for truck expenses) | |||||
27 | Utilities expense | 54 | 2,240 | ||
Cash | 11 | 2,240 | |||
(To record the payment of utilities expense) | |||||
27 | Miscellaneous expense | 59 | 1,100 | ||
Cash | 11 | 1,100 | |||
(To record the payment of miscellaneous expense) | |||||
29 | Cash | 11 | 7,600 | ||
Accounts receivable | 12 | 7,600 | |||
(To record the receipt of cash from customers on account) | |||||
30 | Wages expense | 51 | 4,800 | ||
Cash | 11 | 4,800 | |||
(To record the payment of wages expense) | |||||
31 | Dividends | 33 | 3,500 | ||
Cash | 11 | 3,500 | |||
(To record the withdrawal of cash for personal use) |
Table (2)
2.
Post the journal to a ledger of four-column accounts with appropriate post references, and the balances after each transaction is posted.
Explanation of Solution
General ledger: General ledger is a record of all accounts of assets, liabilities, and stockholders’ equity, necessary to prepare financial statements.
General Ledger
Account: Cash Account no. 11 | |||||||
Date | Item | Post. Ref |
Debit ($) | Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
20Y4 | |||||||
October | 1 | 1 | 18,000 | 18,000 | |||
4 | 1 | 3,000 | 15,000 | ||||
10 | 1 | 3,750 | 11,250 | ||||
14 | 1 | 2,100 | 9,150 | ||||
15 | 1 | 3,600 | 5,550 | ||||
15 | 1 | 8,950 | 14,500 | ||||
21 | 2 | 2,000 | 12,500 | ||||
27 | 2 | 2,240 | 10,260 | ||||
27 | 2 | 1,100 | 9,160 | ||||
29 | 2 | 7,600 | 16,760 | ||||
30 | 2 | 4,800 | 11,960 | ||||
31 | 2 | 3,500 | 8,460 |
Table (3)
Account: Accounts Receivable Account no. 12 | |||||||
Date | Item | Post. Ref |
Debit ($) | Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
20Y4 | |||||||
October | 24 | 2 | 11,900 | 14,150 | |||
29 | 2 | 7,600 | 6,550 |
Table (4)
Account: Supplies Account no. 13 | |||||||
Date | Item | Post. Ref |
Debit ($) | Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
20Y4 | |||||||
October | 14 | 1 | 2,100 | 2,100 |
Table (5)
Account: Prepaid Insurance Account no. 14 | |||||||
Date | Item | Post. Ref |
Debit ($) | Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
20Y4 | |||||||
October | 15 | 1 | 3,600 | 3,600 |
Table (6)
Account: Equipment Account no. 16 | |||||||
Date | Item | Post. Ref |
Debit ($) | Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
20Y4 | |||||||
October | 13 | 1 | 10,500 | 10,500 |
Table (7)
Account: Truck Account no. 18 | |||||||
Date | Item | Post. Ref |
Debit ($) | Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
20Y4 | |||||||
October | 10 | 1 | 23,750 | 23,750 |
Table (8)
Account: Notes Payable Account no. 21 | |||||||
Date | Item | Post. Ref |
Debit ($) | Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
20Y4 | |||||||
October | 10 | 1 | 20,000 | 20,000 |
Table (9)
Account: Accounts Payable Account no. 22 | |||||||
Date | Item | Post. Ref |
Debit ($) | Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
20Y4 | |||||||
October | 13 | 1 | 10,500 | 10,500 | |||
21 | 2 | 2,000 | 8,500 | ||||
26 | 2 | 700 | 9,200 |
Table (10)
Account: Common Stock Account no. 31 | |||||||
Date | Item | Post. Ref |
Debit ($) | Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
20Y4 | |||||||
October | 1 | 1 | 18,000 | 18,000 |
Table (11)
Account: Dividends Account no. 33 | |||||||
Date | Item | Post. Ref |
Debit ($) | Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
20Y4 | |||||||
October | 31 | 2 | 3,500 | 3,500 |
Table (12)
Account: Fees earned Account no. 41 | |||||||
Date | Item | Post. Ref |
Debit ($) | Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
20Y4 | |||||||
October | 15 | 1 | 8,950 | 8,950 | |||
24 | 2 | 14,150 | 23,100 |
Table (13)
Account: Wages expense Account no. 51 | |||||||
Date | Item | Post. Ref |
Debit ($) | Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
20Y4 | |||||||
October | 30 | 2 | 4,800 | 4,800 |
Table (14)
Account: Rent expense Account no. 53 | |||||||
Date | Item | Post. Ref |
Debit ($) | Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
20Y4 | |||||||
October | 4 | 1 | 3,000 | 3,000 |
Table (15)
Account: Utilities expense Account no. 54 | |||||||
Date | Item | Post. Ref |
Debit ($) | Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
20Y4 | |||||||
October | 27 | 2 | 2,240 | 2,240 |
Table (16)
Account: Truck expense Account no. 55 | |||||||
Date | Item | Post. Ref |
Debit ($) | Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
20Y4 | |||||||
October | 26 | 2 | 700 | 700 |
Table (17)
Account: Miscellaneous expense Account no. 59 | |||||||
Date | Item | Post. Ref |
Debit ($) | Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
20Y4 | |||||||
October | 27 | 2 | 1,100 | 1,100 |
Table (18)
3.
Prepare an unadjusted trial balance for Company PD for the year ended October 31, 20Y4.
Explanation of Solution
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.
Prepare an unadjusted trial balance of P Designs as of October 31, 20Y4 as follows:
P Designs Unadjusted Trial Balance October 31, 20Y4 | |||
Particulars |
Account No. |
Debit $ | Credit $ |
Cash | 11 | 8,460 | |
Accounts receivable | 12 | 6,550 | |
Supplies | 13 | 2,100 | |
Prepaid insurance | 14 | 3,600 | |
Equipment | 16 | 10,500 | |
Truck | 18 | 23,750 | |
Notes payable | 21 | 20,000 | |
Accounts payable | 22 | 9,200 | |
Common stock | 31 | 18,000 | |
Dividends | 33 | 3,500 | |
Fees earned | 41 | 23,100 | |
Wages expense | 51 | 4,800 | |
Rent expense | 53 | 3,000 | |
Utilities expense | 54 | 2,240 | |
Van expense | 55 | 700 | |
Miscellaneous expense | 59 | 1,100 | |
Total | 70,300 | 70,300 |
Table (19)
The debit column and credit column of the unadjusted trial balance are agreed, both having balance of $70,300.
4.
Determine the excess of revenues over expenses for the month of October.
Answer to Problem 3PB
The excess of revenues over expenses for the month of October is $11,260.
Explanation of Solution
Revenues: Revenues are earnings from operations of a business. The operating activities are sale of goods and services, and rent revenue.
Expenses: Expenses are costs incurred for the operations of a business. The costs incurred for generating revenues are rent expense, depreciation expense, general and administrative expenses, selling expenses, and utilities expense.
Working note:
Calculate the excess of revenues over expenses.
Hence, the excess of revenues over expenses for the month of October is $11,260.
5.
Discuss the reason behind the amount determined in (4) might not be the net income for October.
Explanation of Solution
The amount determined in (4) might not be the net income for October, because adjusting entries for supplies used, insurance expired, and depreciation should be passed at the end of the accounting period in order to bring the accounts up to date.
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Chapter 2 Solutions
Financial And Managerial Accounting
- Journal entries and trial balance On August 1, 20Y7, Rafael Masey established Planet Realty, which completed the following transactions during the month: a. Rafael Masey transferred cash from a personal bank account to an account to be used for the business in exchange for common stock, 17,500. b. Purchased supplies on account, 2,300. c. Earned sales commissions, receiving cash, 13,300. d. Paid rent on office and equipment for the month, 3,000. e. Paid creditor on account, 1,150. f. Paid dividends, 1,800. g. Paid automobile expenses (including rental charge) for month, 1,500, and miscellaneous expenses, 400. h. Paid office salaries, 2,800. i. Determined that the cost of supplies used was 1,050. Instructions 1. Journalize entries for transactions (a) through (i), using the following account titles: Cash, Supplies, Accounts Payable, Common Stock, Dividends, Sales Commissions, Rent Expense, Office Salaries Expense, Automobile Expense, Supplies Expense, Miscellaneous Expense. Journal entry explanations may be omitted. 2. Prepare T accounts, using the account titles in (1). Post the journal entries to these accounts, placing the appropriate letter to the left of each amount to identify the transactions. Determine the account balances, after all posting is complete. Accounts containing only a single entry do not need a balance. 3. Prepare an unadjusted trial balance as of August 31, 20Y7. 4. Determine the following: a. Amount of total revenue recorded in the ledger. b. Amount of total expenses recorded in the ledger. c. Amount of net income for August. 5. Determine the increase or decrease in retained earnings for August.arrow_forwardJournal entries and trial balance On October 1, 20Y6, Jay Crowley established Affordable Realty, which completed the following transactions during the month: a. Jay Crowley transferred cash from a personal bank account to an account to be used for the business in exchange for common stock, 40,000. b. Paid rent on office and equipment for the month, 4,800. c. Purchased supplies on account, 2,150. d. Paid creditor on account, 1,100. e. Earned sales commissions, receiving cash, 18,750. f. Paid automobile expenses (including rental charge) for month, 1,580, and miscellaneous expenses, 800. g. Paid office salaries, 3,500. h. Determined that the cost of supplies used was 1,300. i. Paid dividends, 1,500. Instructions 1. Journalize entries for transactions (a) through (i), using the following account titles: Cash, Supplies, Accounts Payable, Common Stock, Dividends, Sales Commissions, Rent Expense, Office Salaries Expense, Automobile Expense, Supplies Expense, Miscellaneous Expense. Explanations may be omitted. 2. Prepare T accounts, using the account titles in (1). Post the journal entries to these accounts, placing the appropriate letter to the left of each amount to identify the transactions. Determine the account balances after all posting is complete. Accounts containing only a single entry do not need a balance. 3. Prepare an unadjusted trial balance as of October 31, 20Y6. 4. Determine the following: a. Amount of total revenue recorded in the ledger. b. Amount of total expenses recorded in the ledger. c. Amount of net income for October. 5. Determine the increase or decrease in retained earnings for October.arrow_forwardEntries into T accounts and trial balance Marjorie Knaus, an architect, organized Knaus Architects on January 1, 20Y4. During the month, Knaus Architects completed the following transactions: a. Issued common stock to Marjorie Knaus in exchange for 30,000. b. Paid January rent for office and workroom, 2,500. c. Purchased used automobile for 28,500, paying 6,000 cash and giving a note payable for the remainder. d. Purchased office and computer equipment on account, 8,000. e. Paid cash for supplies, 2,100. f. Paid cash for annual insurance policies, 3,600. g. Received cash from client for plans delivered, 9,000. h. Paid cash for miscellaneous expenses, 2,600. i. Paid cash to creditors on account, 4,000. j. Paid installment due on note payable, 1,875. k. Received invoice for blueprint service, due in February, 5,500. l. Recorded fees earned on plans delivered, payment to be received in February, 31,400. m. Paid salary of assistants, 6,000. n. Paid gas, oil, and repairs on automobile for January, 1,300. Instructions 1. Record these transactions directly in the following T accounts, without journalizing: Cash, Accounts Receivable, Supplies, Prepaid Insurance, Automobiles, Equipment, Notes Payable, Accounts Payable, Common Stock, Professional Fees, Salary Expense, Blueprint Expense, Rent Expense, Automobile Expense, Miscellaneous Expense. To the left of the amount entered in the accounts, place the appropriate letter to identify the transaction. 2. Determine account balances of the T accounts. Accounts containing a single entry only (such as Prepaid Insurance) do not need a balance. 3. Prepare an unadjusted trial balance for Knaus Architects as of January 31, 20Y4. 4. Determine the net income or net loss for January.arrow_forward
- On March 1 of this year, B. Gervais established Gervais Catering Service. The account headings are presented below. Transactions completed during the month follow. a. Gervais deposited 25,000 in a bank account in the name of the business. b. Bought a truck from Kelly Motors for 26,329, paying 8,000 in cash and placing the balance on account, Ck. No. 500. c. Bought catering equipment on account from Luigis Equipment, 3,795. d. Paid the rent for the month, 1,255, Ck. No. 501 (Rent Expense). e. Bought insurance for the truck for one year, 400, Ck. No. 502. f. Sold catering services for cash for the first half of the month, 3,012 (Catering Income). g. Bought supplies for cash, 185, Ck. No. 503. h. Sold catering services on account, 4,307 (Catering Income). i. Received and paid the heating bill, 248, Ck. No. 504 (Utilities Expense). j. Received a bill from GC Gas and Lube for gas and oil for the truck, 128 (Gas and Oil Expense). k. Sold catering services for cash for the remainder of the month, 2,649 (Catering Income). l. Gervais withdrew cash for personal use, 1,550, Ck. No. 505. m. Paid the salary of the assistant, 1,150, Ck. No. 506 (Salary Expense). Required 1. In the equation, write the owners name above the terms Capital and Drawing. 2. Record the transactions and the balance after each transaction. Identify the account affected when the transaction involves revenues or expenses. 3. Write the account totals from the left side of the equals sign and add them. Write the account totals from the right side of the equals sign and add them. If the two totals are not equal, check the addition and subtraction. If you still cannot find the error, re-analyze each transaction.arrow_forwardIn March, T. Carter established Carter Delivery Service. The account headings are presented below. Transactions completed during the month of March follow. a. Carter deposited 25,000 in a bank account in the name of the business. b. Bought a used truck from Degroot Motors for 15,140, paying 5,140 in cash and placing the remainder on account. c. Bought equipment on account from Flemming Company, 3,450. d. Paid the rent for the month, 1,000, Ck. No. 3001 (Rent Expense). e. Sold services for cash for the first half of the month, 6,927 (Service Income). f. Bought supplies for cash, 301, Ck. No. 3002. g. Bought insurance for the truck for the year, 1,200, Ck. No. 3003. h. Received and paid the bill for utilities, 349, Ck. No. 3004 (Utilities Expense). i. Received a bill for gas and oil for the truck, 218 (Gas and Oil Expense). j. Sold services on account, 3,603 (Service Income). k. Sold services for cash for the remainder of the month, 4,612 (Service Income). l. Paid wages to the employees, 3,958, Ck. Nos. 30053007 (Wages Expense). m. Carter withdrew cash for personal use, 1,250, Ck. No. 3008. Required 1. In the equation, write the owners name above the terms Capital and Drawing. 2. Record the transactions and the balance after each transaction. Identify the account affected when the transaction involves revenues or expenses. 3. Write the account totals from the left side of the equals sign and add them. Write the account totals from the right side of the equals sign and add them. If the two totals are not equal, check the addition and subtraction. If you still cannot find the error, re-analyze each transaction.arrow_forwardIn March, T. Carter established Carter Delivery Service. The account headings are presented below. Transactions completed during the month of March follow. a. Carter deposited 25,000 in a bank account in the name of the business. b. Bought a used truck from Degroot Motors for 15,140, paying 5,140 in cash and placing the remainder on account. c. Bought equipment on account from Flemming Company, 3,450. d. Paid the rent for the month, 1,000, Ck. No. 3001. e. Sold services for cash for the first half of the month, 6,927. f. Bought supplies for cash, 301, Ck. No. 3002. g. Bought insurance for the truck for the year, 1,200, Ck. No. 3003. h. Received and paid the bill for utilities, 349, Ck. No. 3004. i. Received a bill for gas and oil for the truck, 218. j. Sold services on account, 3,603. k. Sold services for cash for the remainder of the month, 4,612. l. Paid wages to the employees, 3,958, Ck. Nos. 30053007. m. Carter withdrew cash for personal use, 1,250, Ck. No. 3008. Required 1. Record the transactions and the balance after each transaction 2. Total the left side of the accounting equation (left side of the equal sign), then total the right side of the accounting equation (right side of the equal sign). If the two totals are not equal, check the addition and subtraction. If you still cannot find the error, re-analyze each transaction.arrow_forward
- In April, J. Rodriguez established an apartment rental service. The account headings are presented below. Transactions completed during the month of April follow. a. Rodriguez deposited 70,000 in a bank account in the name of the business. b. Paid the rent for the month, 2,000, Ck. No. 101 (Rent Expense). c. Bought supplies on account, 150. d. Bought a truck for 23,500, paying 2,500 in cash and placing the remainder on account. e. Bought insurance for the truck for the year, 2,400, Ck. No. 102. f. Sold services on account, 4,700. g. Bought office equipment on account from Stern Office Supply, 1,250. h. Sold services for cash for the first half of the month, 8,250. i. Received and paid the bill for utilities, 280, Ck. No. 103. j. Received a bill for gas and oil for the truck, 130. k. Paid wages to the employees, 2,680, Ck. Nos. 104106. l. Sold services for cash for the remainder of the month, 3,500. m. Rodriguez withdrew cash for personal use, 4,000, Ck. No. 107. Required 1. Record the transactions and the balance after each transaction. 2. Total the left side of the accounting equation (left side of the equal sign), then total the right side of the accounting equation (right side of the equal sign). If the two totals are not equal, check the addition and subtraction. If you still cannot find the error, re-analyze each transaction.arrow_forwardANALYSIS OF TRANSACTIONS Charles Chadwick opened a business called Charlies Detective Service in January 20--. Set up T accounts for the following accounts: Cash; Accounts Receivable; Office Supplies; Computer Equipment; Office Furniture; Accounts Payable; Charles Chadwick, Capital; Charles Chadwick, Drawing; Professional Fees; Rent Expense; and Utilities Expense. The following transactions occurred during the first month of business. Record these transactions in T accounts. After all transactions are recorded, foot and balance the accounts if necessary. (a) Invested cash in the business, 30,000. (b) Bought office supplies for cash, 300. (c) Bought office furniture for cash, 5,000. (d) Purchased computer and printer on account, 8,000. (e) Received cash from clients for services, 3,000. (f) Paid cash on account for computer and printer purchased in transaction (d), 4,000. (g) Earned professional fees on account during the month, 9,000. (h) Paid cash for office rent for January, 1,500. (i) Paid utility bills for the month, 800. (j) Received cash from clients billed in transaction (g), 6,000. (k) Withdrew cash for personal use, 3,000.arrow_forwardEFFECTS OF TRANSACTIONS (BALANCE SHEET ACCOUNTS) Jon Wallace started a business. During the first month (March 20--), the following transactions occurred. Show the effect of each transaction on the accounting equation: Assets= Liabilities + Owners Equity. After each transaction, show the new account totals. (a) Invested cash in the business, 30,000. (b) Bought office equipment on account, 4,500. (c) Bought office equipment for cash, 1,600. (d) Paid cash on account to supplier in transaction (b), 2,000. EFFECTS OF TRANSACTIONS (REVENUE, EXPENSE, WITHDRAWALS) This exercise is an extension of Exercise 2-3B. Lets assume Jon Wallace completed the following additional transactions during March. Show the effect of each transaction on the basic elements of the expanded accounting equation: Assets = Liabilities + Owners Equity (Capital Drawing + Revenues Expenses). After transaction (k), report the totals for each element. Demonstrate that the accounting equation has remained in balance. (e) Performed services and received cash, 3,000. (f) Paid rent for March, 1,000. (g) Paid March phone bill, 68. (h) Jon Wallace withdrew cash for personal use, 800. (i) Performed services for clients on account, 900. (j) Paid wages to part-time employee, 500. (k) Received cash for services performed on account in transaction (i), 500.arrow_forward
- Complete accounting cycle For the past several years, Steffy Lopez has operated a part-time consulting business from his home. As of July 1, 20Y2, Steffy decided to move to rented quarters and to operate the business, which was to be known as Diamond Consulting, on a full-time basis. Diamond entered into the following transactions during July: Record the following transactions on Page 2 of the journal: Instructions 1. Journalize each transaction in a two-column journal starting on Page 1, referring to the following chart of accounts in selecting the accounts to be debited and credited. (Do not insert the account numbers in the journal at this time.) 2. Post the journal to a ledger of four-column accounts. 3. Prepare an unadjusted trial balance. 4. At the end of July, the following adjustment data were assembled. Analyze and use these data to complete parts (5) and (6). (a) Insurance expired during July is 375. (b) Supplies on hand on July 31 are 1,525. (c) Depreciation of office equipment for July is 750. (d) Accrued receptionist salary on July 31 is 175. (e) Rent expired during July is 2,400. (f) Unearned fees on July 31 are 2,750. 5. (Optional) Enter the unadjusted trial balance on an end-of-period spreadsheet and complete the spreadsheet. 6. Journalize and post the adjusting entries. Record the adjusting entries on Page 3 of the journal. 7. Prepare an adjusted trial balance. 8. Prepare an income statement, a statement of stockholders equity, and a balance sheet. 9. Prepare and post the closing entries. Record the closing entries on Page 4 of the journal. Indicate closed accounts by inserting a line in both the Balance columns opposite the closing entry. 10. Prepare a post-closing trial balance.arrow_forwardJournal Entries, Trial Balance, and Financial Statements Neveranerror Inc. was organized on June 2 by a group of accountants to provide accounting and tax services to small businesses. The following transactions occurred during the first month of business: June 2: Received contributions of $10,000 from each of the three owners of the business in exchange for shares of stock. June 5: Purchased a computer system for $12,000. The agreement with the vendor requires a down payment of $2,500 with the balance due in 60 days. June 8: Signed a two-year promissory note at the bank and received cash of $20,000. June 15: Billed $12,350 to clients for the first half of June. Clients are billed twice a month for services performed during the month, and the bills are payable within ten days. June 17: Paid a $900 bill from the local newspaper for advertising for the month of June. June 23: Received the amounts billed to clients for services performed during the first half of the month. June 28: Received and paid gas, electric, and water bills. The total amount is $2,700. June 29: Received the landlords bill for $2,200 for rent on the office space that Neveranerror leases. The bill is payable by the 10th of the following month. June 30: Paid salaries and wages for June. The total amount is $5,670. June 30: Billed $18,400 to clients for the second half of June. June 30: Declared and paid dividends in the amount of $6,000. Required Prepare journal entries on the books of Neveranerror Inc. to record the transactions entered into during the month. Ignore depreciation expense and interest expense. Prepare a trial balance at June 30. Prepare the following financial statements: Income statement for the month of June Statement of retained earnings for the month of June Classified balance sheet at June 30 Assume that you have just graduated from college and have been approached to join this company as an accountant. From your reading of the financial statements for the first month, would you consider joining the company? Explain your answer. Limit your answer to financial considerations only.arrow_forwardOn March 1 of this year, B. Gervais established Gervais Catering Service. The account headings are presented below. Transactions completed during the month follow. a. Gervais deposited 25,000 in a bank account in the name of the business. b. Bought a truck from Kelly Motors for 26,329, paying 8,000 in cash and placing the balance on account, Ck. No. 500. c. Bought catering equipment on account from Luigis Equipment, 3,795. d. Paid the rent for the month, 1,255, Ck. No. 501. e. Bought insurance for the truck for one year, 400, Ck. No. 502. f. Sold catering services for cash for the first half of the month, 3,012. g. Bought supplies for cash, 185, Ck. No. 503. h. Sold catering services on account, 4,307. i. Received and paid the heating bill, 248, Ck. No. 504. j. Received a bill from GC Gas and Lube for gas and oil for the truck, 128. k. Sold catering services for cash for the remainder of the month, 2,649. l. Gervais withdrew cash for personal use, 1,550, Ck. No. 505. m. Paid the salary of the assistant, 1,150, Ck. No. 506. Required 1. Record the transactions and the balance after each transaction. 2. Total the left side of the accounting equation (left side of the equal sign), then total the right side of the accounting equation (right side of the equal sign). If the two totals are not equal, check the addition and subtraction. If you still cannot find the error, re-analyze each transaction.arrow_forward
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