Financial Accounting
Financial Accounting
5th Edition
ISBN: 9781259914898
Author: SPICELAND
Publisher: MCG
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Chapter 2, Problem 5PB

1.

To determine

Prepare the journal entry to record the transaction for Maintenance Services O.

1.

Expert Solution
Check Mark

Explanation of Solution

Prepare the journal entry to record the transaction for Maintenance Services O.

DateAccount Title and ExplanationDebit($)Credit($)
May 2Prepaid insurance300
Cash300
(To record the prepaid insurance)
May 5Accounts Receivable425
Service revenue425
(To record the maintenance services rendered on account)
May 7Notes receivable500
Cash500
(To record the loan provided by signing a note)
May 14Supplies200
Cash200
(To record the purchase of maintenance supplies)
May 19Cash425
Accounts Receivable425
(To record cash received on account)
May 25No entry
May 28Insurance expense300
Prepaid insurance300
(To record the revenue for the services rendered)
May 31Cash500
Notes receivable500
(To record the cash received on note)

Table (1)

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.

Paid advance insurance on May 2:

  • Prepaid Insurance is an asset and increased by $300. Therefore, debit Prepaid Insurance account with $300.
  • Cash is an asset and decreased by $300. Therefore, credit Cash account with $300.

Rendered service on account on May 5:

  • Accounts Receivable is an asset and increased by $425. Therefore, debit accounts receivable account with $425.
  • Service Revenue is revenue and increased by $425. Therefore, credit service revenue account with $425.

Loaned cash to E Insurance Service by receiving notes receivable on May 7:

  • Notes Receivable is an asset and increased by $500. Therefore, debit Notes Receivable account with $500.
  • Cash is an asset and decreased by $500. Therefore, credit cash account with $500.

O Maintenance Service purchased supplies from S Corporation on May 14:

  • Supplies are an asset and increased by $200. Therefore, debit office supplies account with $200.
  • Cash is an asset and decreased by $200. Therefore, credit cash account with $200.

Cash received from clients for service rendered May 19:

  • Cash is an asset and increased by $425. Therefore, debit cash account with $425.
  • Accounts Receivable is an asset and decreased by $425. Therefore, credit accounts receivable account with $425.

E Insurance Services paid monthly Utilities on May 25:

No entry.

Received service paid in advance on May 28:

  • Insurance Expense is an expense. There is an increase in the expenses, and therefore it is debited.
  • Prepaid Insurance is an asset. There is a decrease in assets, and therefore it is credited.

Cash received from E Insurance Services for the note on May 31:

  • Cash is an asset and increased by $500. Therefore, debit cash account with $500.
  • Notes Receivable is an asset and decreased by $500. Therefore, credit Notes Receivable account with $500.

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 ($)

 May 2300 300 0
    
 May 50425425
    
 May 75005000
    
May 14000
    
 May 19(425)(425)0
    
 May 25(135) (135)
    
 May 280(300)(300)
    
 May 31(500)(500)0
   

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 ($)

 May 30 500 (500)
    
 May 64500450
    
 May 9(500)(500)0
    
 May 146006000
    
 May 18000
    
 May 2045000
(450)
    
 May 278000800
    
 May 30(300)0(300)
    
 May 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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