FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
5th Edition
ISBN: 9781266401879
Author: SPICELAND
Publisher: MCG
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Chapter 2, Problem 7PA

1.

To determine

Prepare the journal entry to record the transaction of U Sewing machine for the month of March.

1.

Expert Solution
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Answer to Problem 7PA

Journalize the transactions of U Sewing machine for the month of March.

DateAccount Title and ExplanationDebit($)Credit($)
March 1Cash3,000 
Common Stock 3,000
 (To record common stock issued for cash)  
    
March 3Equipment2,700 
Notes Payable 2,700
 (To record purchase of equipment in exchange of accounts payable.)  
    
March 5Rent Expense600 
 Cash 600
 (To record the rent payment made.)  
    
March 7No entry  
    
March 12Supplies130 
Accounts Payable 130
 (To record purchase of supplies on account)  
    
March 15Cash800 
Service revenue 800
 (To record the payment received for the altered dresses.)  
    
March 19Cash700 
Deferred Revenue 700
 (To record the receipt of cash in advance.)  
    
March 25Deferred revenue700 
Service Revenue 700
 (To record the amount of unearned service revenue earned during the year)  
    
March 30Utility Expense95 
Cash 95
 (To record utility expense payment)  
    
March 31Dividends150 
Cash 150
 (To record the payment of dividends)  

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.

Issued Common stock for cash:

  • Cash is an asset account and the amount has increased because cash is invested in the business. Therefore, debit Cash account with $3,000.
  • Common Stock is a stockholders’ equity account and the amount has increased because of receipt of stock in exchange of cash. Therefore, credit Common Stock account with $3,000.

Purchased equipment of $2,700, by signing a note:

  • Equipment is an asset account and the amount has increased because equipment is purchased. Therefore, debit Equipment account with $2,700.
  • Notes payable is a liability account. The liability has increased because equipment is purchased. Therefore, credit Notes Payable account with $2,700.

Payment of rent for the month of March:

  • Rent Expense is an expense account. Expenses reduce the amount of stockholders’ equity. Therefore, debit Rent Expense account with $600.
  • Cash is an asset account. Since rent is paid, cash amount has decreased. Therefore, credit Cash account with $600.

Payment for alterations after the completion of work:

No entry required.

Purchase of supplies on account:

  • Supplies are an asset account and the amount has increased because supplies are purchased. Therefore, debit Supplies Inventory account with $130.
  • Accounts Payable is a liability account. Since the amount of supplies is due within a month, the amount to be paid has increased. Therefore, credit Accounts Payable account with $130.

Delivery of altered dresses and received payment:

  • Cash is an asset account and it increases by $800. Therefore, debit cash account by $800.
  • Service revenue increases the value of equity by $800. Therefore, credit service revenue account by $800.

Receipt of payment in advance:

  • Cash is an asset and increased due to receipt of cash in advance. Therefore, is debited.
  • Unearned revenue is a liability. There is a increase in liabilities, and therefore it is credited.

Delivery of altered dresses:

  • Unearned revenue is a liability. There is a decrease in liabilities, and therefore it is debited.
  • Service revenue is a component of Equity account. There is an increase in Equity, and therefore it is credited.

Payment made for the utilities:

  • Utility Expense is an expense account. Expenses reduce the amount of stockholders’ equity. Therefore, debit Consulting Expense account with $95.
  • Cash is an asset account. Since consulting expense is paid, cash amount has decreased. Therefore, credit Cash account with $95.

Payment of dividends:

  • Dividends are an expense and decrease the value of equity. Therefore, debit expense account with $150.
  • Cash is an asset and decreases the value of asset due to payment made. Therefore, credit Cash account with $150.

2. and 3.

To determine

Calculate the balance of each account at March 31 by posting each transaction to the T-accounts.

2. and 3.

Expert Solution
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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

Post the journal entries into T-accounts and determine the balance of each account.

Cash Account

Cash
DateDetailsDebit ($) DateDetailsCredit ($)
March 1Common stock3,000 March 6Rent expense600
March 15Service revenue800 March 30Utility expense95
March 19Unearned revenue700 March 31Dividends150
    March 31Balance c/d3,655
  4,5004,500
April 1Balance b/d3,655    

Table (2)

Common Stock Account

Common Stock
DateDetailsDebit ($) DateDetailsCredit ($)
March 31Balance c/d3,000 March 1Cash3,000
 Total3,000 Total3,000
    April 1Balance3,000

Table (3)

Equipment Account

Equipment
DateDetailsDebit ($) DateDetailsCredit ($)
March 3Notes Payable2,700 March 31Balance c/d2,700
 Total2,700  Total2,700
April 1Balance b/d2,700    

Table (4)

Supplies Account

Supplies
DateDetailsDebit ($) DateDetailsCredit ($)
March 12Accounts payable130 March 31Balance c/d130
 Total130 Total130
April 1Balance b/d130   

Table (5)

Accounts Payable Account

Accounts Payable
DateDetailsDebit ($) DateDetailsCredit ($)
March 31Balance c/d130 March 12Supplies130
 Total130  Total130
    April1Balance b/d130

Table (6)

Unearned Revenue Account

Unearned Revenue
DateDetailsDebit ($) DateDetailsCredit ($)
March 25Service Revenue700 March 15Cash700
 Total700  Total700

Table (7)

Service Revenue Account

Sales Revenue
DateDetailsDebit ($) DateDetailsCredit ($)
March 31Balance c/d1,500 March 15Cash800
    March 25Unearned Revenue700
 Total1,500  Total1,500
    April 1Balance b/d1,500

Table (8)

Notes Payable
DateDetailsDebit ($) DateDetailsCredit ($)
March 31Balance c/d2,700 March 3Equipment2,700
 Total2,700  Total2,700
    April1Balance b/d2,700

Table (9)

Utility Expense Account

Utility Expense
DateDetailsDebit ($) DateDetailsCredit ($)
March 30Cash95 March 31Balance c/d95
 Total95  Total95
April 1Balance b/d95    

Table (10)

Rent Expense Account

Utility Expense
DateDetailsDebit ($) DateDetailsCredit ($)
March 5Cash600 March 31Balance c/d600
 Total600  Total600
April 1Balance b/d600    

Table (11)

Dividends Account

Dividends
DateDetailsDebit ($) DateDetailsCredit ($)
March 31Cash150 March 31Balance c/d150
 Total150  Total150
April 1Balance b/d150    

Table (12)

4.

To determine

Prepare a trial balance as of March 31.

4.

Expert Solution
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Explanation of Solution

Trial balance:

A trial balance is the summary of all the ledger accounts. Debit balances are listed in left column and credit balances are listed in right column of the trial balance. The totals of debit and credit column should be equal. The trial balance is usually prepared to check the accuracy of ledger accounts balances, before the preparation of financial statements.

Prepare the trial balance of U Sewing machine for the month of March 31.

U Sewing Machine

Trial Balance

March 31

Account TitlesDebit ($)Credit ($)
Cash3,655 
Supplies130 
Equipment2,700 
Accounts payable 1300
Unearned revenue 0
Notes payable 2,700
Common stock 3,000
Dividends150 
Service revenue 1,500
Rent expense600 
Utilities expense95 
Total7,3307,330

Table (13)

Conclusion

Hence, the trial balance is prepared, and the debit column and credit column of the trial balance are agreed, both having balance of $7,330.

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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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