FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
5th Edition
ISBN: 9781266401879
Author: SPICELAND
Publisher: MCG
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Chapter 2, Problem 5PA

1.

To determine

Prepare the journal entry to record the transactions in the books of Person L.

1.

Expert Solution
Check Mark

Answer to Problem 5PA

Prepare the journal entry to record the transactions in the books of Person L.

DateAccount Title and ExplanationDebit($)Credit($)
July.3Repairs and maintenance expenses500
Accounts payable500
(To record the repairs and maintenance expenses on account)
July.6Accounts Receivable450
Service revenue450
(To record the repair services rendered on account)
July.9Accounts payable500
Cash500
(To record the cash paid for repairs and maintenance expense on account)
July.14Cash600
Notes Payable600
(To record the borrowing by signing a note)
July.18No entry
July.20Cash450
Accounts Receivable450
(To record cash received on account)
July.27Cash800
Service revenue800
(To record the revenue for the services rendered)
July.30Salaries expense300
Cash300
(To record the payment of salaries expense in cash)
July.31Notes Payable600
Cash600
(To record the cash paid on note)

Table (1)

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.

Accounting rules for Journal entries:

  • To record increase balance of account: Debit assets, expenses, losses and credit liabilities, capital, revenue and gains.
  • To record decrease balance of account: Credit assets, expenses, losses and debit liabilities, capital, revenue and gains.

Lawn services received on account on July 3:

  • Repairs and maintenance expense is an asset and increased by $500. Therefore, debit repairs and maintenance expense account with $500.
  • Accounts payable is a liability and increased by $500. Therefore, credit accounts payable account with $500.

Provided repair services on account on July 6:

  • Accounts Receivable is an asset and increased by $450. Therefore, debit accounts receivable account with $450.
  • Service Revenue is revenue and increased by $450. Therefore, credit service revenue account with $450.

Payment made for lawn services on account on July 9:

  • Account Payable is a liability and decreased by $500. Therefore, debit accounts payable account with $500.
  • Cash is an asset and decreased by $500. Therefore, credit cash account with $500.

Borrowed by signing a note on July 14:

  • Cash is an asset and increased by $600. Therefore, debit cash account with $600.
  • Notes payable is a liability and decreased by $600. Therefore, credit notes payable account with $600.

Purchased advertising in a newspaper on July 18:

Receipt of service revenue on account on July 20:

  • Cash is an asset and increased by $450. Therefore, debit cash account with $450.
  • Accounts Receivable is an asset and decreased by $450. Therefore, credit accounts receivable account with $450.

Receipt of revenue for services rendered on July 27:

  • Cash is an asset and increased by $800. Therefore, debit cash account with $800.
  • Service revenue is revenue and increased by $800. Therefore, credit service revenue account with $800.

Payment of employee salaries for the month on July 30:

  • Salaries Expense is an expense and increased by $300. Therefore, debit salaries expense account with $300.
  • Cash is an asset and decreased by $300. Therefore, credit cash account with $300.

Payment of cash on note on July 31:

  • Notes payable is a liability and decreased by $600. Therefore, debit Notes payable account with $600.
  • Cash is an asset and decreased by $600. Therefore, credit cash account with $600.

2.

To determine

Indicate the impact of each transaction on the accounting equation for each company.

2.

Expert Solution
Check Mark

Explanation of Solution

Indicate the impact of each transaction on the accounting equation for J Lawn Maintenance Company.

Lawn Maintenance Company J
Accounting Equation
DateAssets ($)=Liabilities ($)+Stockholders' Equity ($)
July.3500 0 500
    
July.60450(450)
    
July.950000
(500)
    
July.1460000
(600)
    
July.18(110)0(110)
    
July.20(450)(450)0
    
July.27000
    
July.30000
    
July.316000 0
(600)

Table (2)

Indicate the impact of each transaction on the accounting equation for Repair shop L.

Repair Shop L
Accounting Equation
DateAssets ($)=Liabilities ($)+

Stockholders'

Equity ($)

July.30=500=(500)
    
July.64500450
    
July.9(500)(500)0
    
July.146006000
    
July.18000
    
July.2045000
(450)
    
July.278000800
    
July.30(300)0(300)
    
July.31(600)6000

Table (3)

Accounting Equation:

Accounting equation is the mathematical representation of the relationship among the assets, liabilities, and stockholder’s equity at any given point of time. The components of the accounting equation include the assets, liabilities and stockholder’s Equity. In the accounting equation, the assets, which are placed on the left side of the equation, and the liabilities, and stockholder’s equity which are placed on the right side, must always balance. The accounting equation is as follows:

Assets = Liabilities + Stockholder's Equity

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Chapter 2 Solutions

FINANCIAL ACCOUNTING

Ch. 2 - Prob. 11SSQCh. 2 - 12. The payment for utilities of the current month...Ch. 2 - Prob. 13SSQCh. 2 - Prob. 14SSQCh. 2 - 15. A trial balance can best be explained as a...Ch. 2 - Applying Excel #2-1 A company has the following...Ch. 2 - Applying Excel #2-2 A company has the following...Ch. 2 - Prob. 1RQCh. 2 - Prob. 2RQCh. 2 - Prob. 3RQCh. 2 - Prob. 4RQCh. 2 - Prob. 5RQCh. 2 - 6. What is the normal balance (debit or credit) of...Ch. 2 - Prob. 7RQCh. 2 - Prob. 8RQCh. 2 - Prob. 9RQCh. 2 - Prob. 10RQCh. 2 - Prob. 11RQCh. 2 - 12. Provide the proper format for recording a...Ch. 2 - Prob. 13RQCh. 2 - Prob. 14RQCh. 2 - Prob. 15RQCh. 2 - Prob. 16RQCh. 2 - Prob. 17RQCh. 2 - Prob. 18RQCh. 2 - Prob. 19RQCh. 2 - Prob. 20RQCh. 2 - BE2-1 Below are the steps in the measurement...Ch. 2 - BE2-2 Using the notion that the accounting...Ch. 2 - BE2-3 Suppose a local company has the following...Ch. 2 - Prob. 4BECh. 2 - Prob. 5BECh. 2 - Prob. 6BECh. 2 - BE2-7 The following transactions occur for the...Ch. 2 - Prob. 8BECh. 2 - BE2-9 Consider the following T-account for...Ch. 2 - BE2-10 The following transactions occur for the...Ch. 2 - BE2-11 Using the following information, prepare a...Ch. 2 - BE2-12 Your study partner is having trouble...Ch. 2 - Prob. 1ECh. 2 - E2-2 Below are the external transactions for...Ch. 2 - Prob. 3ECh. 2 - E2-4 Boilermaker House Painting Company incurs the...Ch. 2 - Prob. 5ECh. 2 - Prob. 6ECh. 2 - Prob. 7ECh. 2 - E2-8 Terrapin Company engages in the following...Ch. 2 - Prob. 9ECh. 2 - Prob. 10ECh. 2 - E2-11 Bearcat Construction begins operations in...Ch. 2 - E2-12 Below are several transactions for Scarlet...Ch. 2 - Prob. 13ECh. 2 - Prob. 14ECh. 2 - E2-15 Consider the recorded transactions...Ch. 2 - Prob. 16ECh. 2 - Prob. 17ECh. 2 - E2-18 Below is the complete list of accounts of...Ch. 2 - Prob. 19ECh. 2 - Prob. 20ECh. 2 - Prob. 1PACh. 2 - Prob. 2PACh. 2 - Prob. 3PACh. 2 - Prob. 4PACh. 2 - Prob. 5PACh. 2 - Prob. 6PACh. 2 - Prob. 7PACh. 2 - Prob. 8PACh. 2 - Prob. 9PACh. 2 - P2-1B Below is a list of activities for Tigers...Ch. 2 - Prob. 2PBCh. 2 - Prob. 3PBCh. 2 - P2-4B Eli owns an insurance office, while Olivia...Ch. 2 - Prob. 5PBCh. 2 - Prob. 6PBCh. 2 - Prob. 7PBCh. 2 - Prob. 8PBCh. 2 - 4. prepare a trial balance as of November...Ch. 2 - Prob. 1APCh. 2 - Prob. 2APCh. 2 - Prob. 3APCh. 2 - American Eagle Outfitters, Inc. vs. The Buckle,...Ch. 2 - Prob. 5APCh. 2 - Prob. 6APCh. 2 - Prob. 7AP
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