Chapter 2, Problem 4BP

1.

To determine

Prepare the journal entries for the given transactions.

Explanation of Solution

Journal entry:

Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.

Rules of Debit and Credit:

Following rules are followed for debiting and crediting different accounts while they occur in business transactions:

• Debit, all increase in assets, expenses and dividends, all decrease in liabilities, revenues and equities.
• Credit, all increase in liabilities, revenues, and equities, all decrease in assets, and expenses.

Prepare the journal entries for the given transactions as follows:

Date		Account Title and Explanation	Post Ref.	Debit	Credit
				($)	($)
	a.	Cash	101	35,000
		Office Equipment	163	11,000
		Common Stock	307		46,000
		(To record owner invested cash and equipment for stock)
	b.	Land	172	7,500
		Building	170	40,000
		Cash	101		15,000
		Notes Payable	250		32,500
		(To record purchase of  land and building in cash and on note payable)
	c.	Office supplies	108	500
		Accounts payable	201		500
		(To record office supplies purchased on account)
	d.	Automobiles	164	8,000
		Common stock	307		8,000
		(To record owner contribute automobile to business for stock)
	e.	Office Equipment	163	1,200
		Accounts Payable	201		1,200
		(To record equipment purchased on credit)
	f.	Salaries  Expense	601	1,000
		Cash	101		1,000
		(To record salaries expense paid in cash)
	g.	Cash	101	3,200
		Fees earned	402		3,200
		(To record fees earned from customers)
	h.	Utilities expense	602	540
		Cash	201		540
		(To record utilities expense paid in cash)
	i.	Accounts Payable	201	500
		Cash	101		500
		(To cash paid to supplier)
	j.	Office equipment	163	3,400
		Cash	101		3,400
		(To record office equipment purchased in cash)
	k.	Accounts receivable	106	4,200
		Fees earned	402		4,200
		(To record service performed on account)
	l.	Salaries  Expense	601	1,000
		Cash	101		1,000
		(To record salaries expense paid in cash)
	m.	Cash	101	2,200
		Accounts receivable	106		2,200
		(To record cash received from credit customer)
	n.	Dividends	319	1,100
		Cash	101		1,100
		(To record dividend paid to investors)

Table (1)

2.

To determine

Post the journal entries to the general ledger accounts.

Explanation of Solution

Posting transactions:

The process of transferring the journalized transactions into the accounts of the ledger is known as posting the transactions.

Post the journal entries to the general ledger accounts as follows:

Cash No. 101
Date	PR	Debit	Credit	Balance
		($)	($)	($)
(a)		35,000		35,000
(b)			15,000	20,000
(f)			1,000	19,000
(g)		3,200		22,200
(h)			540	21,660
(i)			500	21,160
(j)			3,400	17,760
(l)			1,000	16,760
(m)		2,200		18,960
(n)			1,100	17,860

Accounts Receivable No. 106
Date	PR	Debit	Credit	Balance
		($)	($)	($)
(k)		4,200		4,200
(m)			2,200	2,000

Office supplies  No. 108
Date	PR	Debit	Credit	Balance
		($)	($)	($)
(c)		500		500

Office equipment No. 163
Date	PR	Debit	Credit	Balance
		($)	($)	($)
(a)		11,000		11,000
(e)		1,200		12,200
(j)		3,400		15,600

Automobiles No. 164
Date	PR	Debit	Credit	Balance
		($)	($)	($)
(d)		8,000		8,000

Building No. 170
Date	PR	Debit	Credit	Balance
		($)	($)	($)
(b)		40,000		40,000

Land No. 172
Date	PR	Debit	Credit	Balance
		($)	($)	($)
(b)		7,500		7,500

Notes Payable No. 250
Date	PR	Debit	Credit	Balance
		($)	($)	($)
(b)			32,500	32,500

Common Stock No. 307
Date	PR	Debit	Credit	Balance
		($)	($)	($)
(a)			46,000	46,000
(d)			8,000	54,000

Dividends No. 319
Date	PR	Debit	Credit	Balance
		($)	($)	($)
(n)		1,100		1,100
Fees Earned No. 402
Date	PR	Debit	Credit	Balance
		($)	($)	($)
(g)			3,200	3,200
(k)			4,200	7,400

Salaries Expense No. 601
Date	PR	Debit	Credit	Balance
		($)	($)	($)
(f)		1,000		1,000
(l)		1,000		2,000

Utilities Expense No. 602
Date	PR	Debit	Credit	Balance
		($)	($)	($)
(h)		540		540

3.

To determine

Prepare a trial balance as of the end of June.

Explanation of Solution

Trial balance:

Trial balance is a summary of all the ledger accounts balances presented in a tabular form with two column, debit and credit. It checks the mathematical accuracy of the ledger postings and helps preparing the final accounts.

Prepare a trial balance as of the end of June as follows:

Company N
Trial Balance
June 30
Particulars	Debit ($)	Credit ($)
Cash	17,860
Accounts receivable	2,000
Office supplies	500
Office equipment	15,600
Automobiles	8,000
Building	40,000
Land	7,500
Accounts payable		1,200
Notes payable		32,500
Common stock		54,000
Dividends	1,100
Fees earned		7,400
Salaries expense	2,000
Utilities expense	540
Total	95,100	95,100

Table (2)

Therefore, the total of debit, and credit columns of a trial balance is $95,100 and agree.