Intermediate Accounting
3rd Edition
ISBN: 9780136912644
Author: Elizabeth A. Gordon; Jana S. Raedy; Alexander J. Sannella
Publisher: Pearson Education (US)
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Textbook Question
Chapter 4, Problem 4.1P
Transaction Analysis; Journal
- January 4: Owners invested $120,000 (the par value of the stock) in exchange for 20,000 shares of common stock.
- February 2: Jester took out a 10-year note payable in the amount of $80,000 to pay for operating expenses Interest payments are due every six months, and the balance of the note will be paid off in a lump-sum in 10 years. The interest rate is 10% annually, that is, 5% every six months
- February 16: Jester signed a rental lease for its operating facility and paid a year of rent up front in the amount of $60,000. The rental lease runs from March 1, 2018, through February 29, 2019.
- March 1: Jester purchased office supplies in the amount of $12,000 and paid in cash.
- March 12: Jester paid $18,000 cash for advertising expenses.
- April 1: Jester purchased a two-year insurance policy that runs from April 1, 2018, to March 31, 2020, in the amount of $40,000 and paid in full for the policy in cash.
- May 12: Jester negotiated a contract with a customer to provide entertainment services for a one-year period running from June 1, 2018, to May 31, 2019. The customer paid the contract in full on May 12 with cash in the amount of $64,000.
- June 16: Jester paid wages in the amount of $12,000 to employees in cash
- July 20: Jester negotiated a contract with a customer to provide entertainment services for a six-month period running from September 1, 2018, to February 28, 2019. The customer paid the contract in full on July 20 with cash in the amount of $42,000.
- August 2: Jester paid cash in the amount of $4,000 for the first interest payment on the note payable taken out on February 2.
- August 18: Jester received and paid a utilities bill in the amount of $7,000 in cash.
- September 10: Jester paid wages in the amount of $28,000 in cash.
- October 1: Jester negotiated a contract with a customer to provide entertainment services for a one-year period running from October 1, 2018, to September 30, 2019, in the amount of $420,000. The customer paid the contract in full on October 1.
- November 14: Jester purchased office supplies in the amount of $26,000 on account with the vendor.
- December 6: Jester received an advertising bill for $22,000. The services were provided in 2018 and the bill will be paid in January.
Note: At year-end, Jester had $18,000 of office supplies remaining on hand. Required
- a. Prepare the journal entries for the original transactions. Omit explanations.
- b. Show the
accounting equation effect of each of the original transactions. - c. Prepare any necessary year-end adjusting journal entries for these transactions.
- d. Show the accounting equation effect of each of the adjusting journal entries.
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Chapter 4 Solutions
Intermediate Accounting
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