Financial Accounting
Financial Accounting
15th Edition
ISBN: 9781337272124
Author: Carl Warren, James M. Reeve, Jonathan Duchac
Publisher: Cengage Learning
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Chapter 2, Problem 4PA

Elite Realty acts as an agent in buying, selling, renting, and managing real estate. The unadjusted trial balance on March 31, 2019, follows:

Chapter 2, Problem 4PA, Elite Realty acts as an agent in buying, selling, renting, and managing real estate. The unadjusted

The following business transactions were completed by Elite Realty during April 2019:

Apr. 1. Paid rent on office for month, $6,500.

2.    Purchased office supplies on account, $2,300.

5.    Paid insurance premiums, $6,000.

10.    Received cash from clients on account, $52,300.

15.    Purchased land for a future building site for $200,000, paying $30,000 in cash and giving a note payable for the remainder.

17.    Paid creditors on account, $6,450.

20.    Returned a portion of the office supplies purchased on April 2, receiving full credit for their cost, $325.

23.    Paid advertising expense, $4,300.

Enter the following transactions on Page 19 of the two-column journal:

27.    Discovered an error in computing a commission; received cash from the salesperson for the overpayment, $2,500.

28.    Paid automobile expense (including rental charges for an automobile), $1,500.

29.    Paid miscellaneous expenses, $1,400.

30.    Recorded revenue earned and billed to clients during the month, $57,000.

30.    Paid salaries and commissions for the month, $11,900.

30.    Withdrew cash for personal use, $4,000.

30.    Rented land purchased on April 15 to local merchants association for use as a parking lot in May and June, during a street rebuilding program; received advance payment of $10,000.

Instructions

  1. 1. Record the April 1, 2019, 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 (✓) in the Posting Reference column.
  2. 2. Journalize the transactions for April in a two-column journal beginning on Page 18. Journal entry explanations may be omitted.
  3. 3. Post to the ledger, extending the account balance to the appropriate balance column after each posting.
  4. 4. Prepare an unadjusted trial balance of the ledger as of April 30, 2019.
  5. 5. Assume that the April 30 transaction for salaries and commissions should have been $19,100. (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)

Expert Solution
Check Mark
To determine

Journalize the transactions of April in a two column journal beginning on page 18.

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 the transactions of April in a two column journal beginning on page 18.

                                                   Journal                                           Page 18
DateDescriptionPost. RefDebit ($)Credit ($)
2019 Rent expense526,500 
April 1    Cash11 6,500
  (To record the payment of rent)   
 
  2Office supplies142,300 
      Accounts payable21 2,300
  (To record the purchase of supplies of account)   
 
  5Prepaid insurance136,000 
      Cash11 6,000
  (To record the payment of insurance premium)   
 
 10Cash1152,300 
  Accounts receivable12 52,300
  (To record the receipt of cash from clients)   
 
 15Land16200,000 
       Cash11 30,000
       Notes payable23 170,000
  (To record the purchase of land party for cash and party on signing a note)   
 
 17Accounts payable216,450 
      Cash11 6,450
  (To record the payment made to creditors on account)   
 
 20Accounts payable 21325 
   Office supplies14 325
  (To record the payment made to creditors on account)   
 
 23Advertising expense534,300 
       Cash11 4,300
  (To record the payment of advertising expense)   

Table (1)

                                                   Journal                                           Page 19
DateDescriptionPost. RefDebit ($)Credit ($)
2019 Cash522,500 
April27    Salary and commission expense11 2,500
  (To record the receipt of cash)   
 
 28Automobile expense541,500 
      Cash11 1,500
  (To record the payment made for automobile expense)   
 
 29Miscellaneous expense591,400 
      Cash11 1,400
  (To record the payment made for Miscellaneous expense)   
 
 30Accounts receivable1257,000 
  Fees earned41 57,000
  (To record the revenue earned and billed)   
 
 30Salary and commission expense5111,900 
      Cash11 11,900
  (To record the payment made for salary and commission expense)   
 
 30L’s Drawing324,000 
        Cash11 4,000
  (To record the drawing made for personal use)   
 
 30Cash1110,000 
  Unearned rent22 10,000
  (To record the cash received for the service yet to be provide)   

Table (2)

(1) and (3)

Expert Solution
Check Mark
To determine

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

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.
Account:         Cash                                                              Account no. 11
DateItemPost. Ref

Debit

 ($)

Credit ($)Balance
Debit ($)Credit ($)
2019      
April1Balance ✓    26,300 
 1 18 6,50019,800 
 5 18 6,00013,800 
 10 1852,300 66,100 
 15 18 30,00036,100 
 17 18 6,45029,650 
 23 18 4,30025,350 
 27 192,500 27,850 
 28 19 1,50026,350 
 29 19 1,40024,950 
 30 19 11,90013,050 
 30 19 4,0009,050 
 30 1910,000 19,050 

Table (3)

Account:    Accounts Receivable                                             Account no. 12
DateItemPost. Ref

Debit

 ($)

Credit ($)Balance
Debit ($)Credit ($)
2019      
April1Balance ✓    61,500 
 10 18 52,3009,200 
 30 1957,000 66,200 

Table (4)

Account:    Prepaid Insurance                                             Account no. 13
DateItemPost. Ref

Debit

 ($)

Credit ($)Balance
Debit ($)Credit ($)
2019      
April1Balance ✓    3,000 
 5 186,000 9,000 

Table (5)

Account:    Office Supplies                                             Account no. 14
DateItemPost. Ref

Debit

 ($)

Credit ($)Balance
Debit ($)Credit ($)
2019      
April1Balance ✓    1,800 
 2 182,300 4,100 
 20 18 3253,775 

Table (6)

Account:    Land                                                               Account no. 16
DateItemPost. Ref

Debit

 ($)

Credit ($)Balance
Debit ($)Credit ($)
2019      
April15 18200,000 200,000 

Table (7)

Account:     Accounts Payable                                                      Account no. 21
DateItemPost. Ref

Debit

 ($)

Credit ($)Balance
Debit ($)Credit ($)
2019      
April1Balance ✓     14,000
 2 18 2,300 16,300
 17 186,450  9,850
 20 18325  9,525

Table (8)

Account:          Unearned Rent                                                   Account no. 22
DateItemPost. Ref

Debit

 ($)

Credit ($)Balance
Debit ($)Credit ($)
2019      
April30 19 10,000 10,000

Table (9)

Account:   Notes Payable                                                       Account no. 23
DateItemPost. Ref

Debit

 ($)

Credit ($)Balance
Debit ($)Credit ($)
2019      
April15 18 170,000 170,000

Table (10)

Account:          Capital                                                         Account no. 31
DateItemPost. Ref

Debit

 ($)

Credit ($)Balance
Debit ($)Credit ($)
2019      
April1Balance ✓     46,000

Table (11)

Account:          Drawing                                                              Account no. 32
DateItemPost. Ref

Debit

 ($)

Credit ($)Balance
Debit ($)Credit ($)
2019      
April1Balance ✓    2,000 
 30 194,000 6,000 

Table (12)

Account:          Fees earned                                                         Account no. 41
DateItemPost. Ref

Debit

 ($)

Credit ($)Balance
Debit ($)Credit ($)
2019      
April1Balance ✓     240,000
 30 19 57,000 297,000

Table (13)

Account:   Salary and commission expense                                Account no. 51
DateItemPost. Ref

Debit

 ($)

Credit ($)Balance
Debit ($)Credit ($)
2019      
April1Balance ✓    148,200 
 27 19 2,500145,700 
 30 1911,900 157,600 

Table (14)

Account:   Rent expense                                                              Account no. 52
DateItemPost. Ref

Debit

 ($)

Credit ($)Balance
Debit ($)Credit ($)
2019      
April1Balance ✓    30,000 
 1 186,500 36,500 

Table (15)

Account:   Advertising expense                                                     Account no. 53
DateItemPost. Ref

Debit

 ($)

Credit ($)Balance
Debit ($)Credit ($)
2019      
April1Balance ✓    17,800 
 23 184,300 22,100 

Table (16)

Account:   Automobile expense                                                     Account no. 54
DateItemPost. Ref

Debit

 ($)

Credit ($)Balance
Debit ($)Credit ($)
2019      
April1Balance ✓    5,500 
 28 191,500 7,000 

Table (17)

Account:   Miscellaneous expense                                                   Account no. 59
DateItemPost. Ref

Debit

 ($)

Credit ($)Balance
Debit ($)Credit ($)
2019      
April1Balance ✓    3,900 
 29 191,400 5,300 

Table (18)

(4)

Expert Solution
Check Mark
To determine

Prepare an unadjusted trial balance of Company E at April 30, 2019.

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 Company E at April 30, 2019 as follows:

Company E

Unadjusted Trial Balance

April 30, 2019

Particulars

Account

No.

Debit $Credit $
Cash1119,050 
Accounts receivable1266,200 
Prepaid insurance139,000 
Office supplies143,775 
Land16200,000 
Accounts payable21 9,525
Unearned rent22 10,000
Notes payable23 170,000
Capital31 46,000
Drawings326,000 
Fees earned41297,000
Salaries and commission expense51157,600 
Rent expense5236,500 
Advertising expense5322,100 
Automobile expense547,000 
Miscellaneous expense5953,000 
Total 532,525532,525

Table (19)

Conclusion

The debit column and credit column of the unadjusted trial balance are agreed, both having balance of $532,525.

(5)

(A)

Expert Solution
Check Mark
To determine

Explain whether the 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.

(B)

Expert Solution
Check Mark
To determine

Journalize the correcting entry.

Explanation of Solution

The Correcting entry is as follows:

                                                   Journal                                           Page 19
DateDescriptionPost. RefDebit ($)Credit ($)
2019 Salary and commission expense517,200 
April30    Cash11 7,200
  (To record the correcting entry)   

Table (20)

Working notes:

  Correcting entry =$19,100$11,900=$7,200

(C)

Expert Solution
Check Mark
To determine

Identify whether the error made is a slide or transposition.

Explanation of Solution

Transposition error: At the time of posting a transaction when two digits of numbers are transposed, in such case the transposition error occurs.

Slide error: A slide error occurs, when the decimal point of an amount has been misplaced.

The account balance recorded as $11,900 instead of $19,100 is a transposition error. Since the two digits of the numbers are transposed.

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Chapter 2 Solutions

Financial Accounting

Ch. 2 - State for each account whether it is likely to...Ch. 2 - State for each account whether it is likely to...Ch. 2 - Prepare a journal entry for the purchase of office...Ch. 2 - Prob. 2PEBCh. 2 - Prepare a journal entry on April 30 for fees...Ch. 2 - Prepare a journal entry on August 13 for cash...Ch. 2 - Prepare a journal entry on December 23 for the...Ch. 2 - Prepare a journal entry on June 30 for the...Ch. 2 - Prob. 5PEACh. 2 - On August 1, the supplies account balance was...Ch. 2 - For each of the following errors, considered...Ch. 2 - For each of the following errors, considered...Ch. 2 - The following errors took place in journalizing...Ch. 2 - The following errors took place in journalizing...Ch. 2 - Prob. 8PEACh. 2 - Prob. 8PEBCh. 2 - The following accounts appeared in recent...Ch. 2 - Oak Interiors is owned and operated by Fred Biggs,...Ch. 2 - Outdoor Leadership School is a newly organized...Ch. 2 - The following table summarizes the rules of debit...Ch. 2 - During the month, Midwest Labs Co. has a...Ch. 2 - Identify each of the following accounts of...Ch. 2 - Concrete Consulting Co. has the following accounts...Ch. 2 - On September 18, 2019, Afton Company purchased...Ch. 2 - The following selected transactions were completed...Ch. 2 - During the month, Warwick Co. received 515,000 in...Ch. 2 - a. During February, 186,500 was paid to creditors...Ch. 2 - As of January 1, Terrace Waters, Capital had a...Ch. 2 - National Park Tours Co. is a travel agency. The...Ch. 2 - Based upon the T accounts in Exercise 2-13,...Ch. 2 - Based upon the data presented in Exercise 2-13,...Ch. 2 - The accounts in the ledger of Hickory Furniture...Ch. 2 - Indicate which of the following errors, each...Ch. 2 - The following preliminary unadjusted trial balance...Ch. 2 - The following errors occurred in posting from a...Ch. 2 - Identify the errors in the following trial...Ch. 2 - The following errors took place in journalizing...Ch. 2 - The following errors took place in journalizing...Ch. 2 - The following data (in millions) are taken from...Ch. 2 - The following data (in millions) were taken from...Ch. 2 - Connie Young, an architect, opened an office on...Ch. 2 - On January 1, 2019, Sharon Matthews established...Ch. 2 - On June 1, 2019, Kris Storey established an...Ch. 2 - Elite Realty acts as an agent in buying, selling,...Ch. 2 - The Colby Group has the following unadjusted trial...Ch. 2 - Ken Jones, an architect, opened an office on April...Ch. 2 - Prob. 2PBCh. 2 - On October 1, 2019, Jay Pryor established an...Ch. 2 - Valley Realty acts as an agent in buying, selling,...Ch. 2 - Tech Support Services has the following unadjusted...Ch. 2 - The transactions completed by PS Music during June...Ch. 2 - Buddy Dupree is the accounting manager for On-Time...Ch. 2 - Prob. 5CPCh. 2 - The following discussion took place between Tony...Ch. 2 - Prob. 7CP
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